Term sheet
To prospectus dated November 7, 2014, |
Term Sheet
Product Supplement No. 4a-I |
prospectus supplement dated November 7, 2014 and |
Registration Statement No. 333-199966 |
product supplement no. 4a-I dated November 7, 2014, |
Dated November 12, 2014 |
|
Rule 433 |
|
Structured
Investments |
|
$
9.55%†
per annum Upside Auto Callable Single Observation Reverse Exchangeable Notes due December 2, 2015 Linked to the Common Stock
of Ford Motor Company
|
|
|
†The
actual interest rate will be provided in the pricing supplement and will not be less than 9.55% per annum. |
General
• | | The notes are designed for investors who seek a higher interest rate than either the
current dividend yield on the Reference Stock or the yield on a conventional debt security with the same maturity issued by us.
Investors should be willing to forgo the potential to participate in the appreciation of the Reference Stock, to accept the risks
of owning equities in general and the common stock of Ford Motor Company, in particular, to assume the risk that the notes will
be automatically called and the investors will receive less interest than if the notes are not automatically called and, if the
notes are not automatically called, to lose some or all of their principal at maturity. |
• | | The notes will pay interest quarterly at a rate of at least 9.55% per annum interest
over the term of the notes, assuming no automatic call. However, the notes do not guarantee any return of principal at maturity.
Instead, if the notes are not automatically called, the payment at maturity will be based on whether the Final Share Price of
the Reference Stock is less than the Initial Share Price by more than the Buffer Amount closing level as described below. If the
notes are automatically called, you will receive, for each $1,000 principal amount note, $1,000 plus accrued and unpaid
interest. |
• | | 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. |
• | | If the notes are not automatically called, payment at maturity for each $1,000 principal
amount note will be either a cash payment of $1,000 or delivery of shares of the Reference Stock (or, at our election, the Cash
Value thereof), in each case, together with any accrued and unpaid interest, as described below. |
• | | Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof |
Key Terms
Reference Stock: |
The common stock, par value $0.01 per share, of Ford Motor Company (Bloomberg ticker symbol: “F”). We refer to Ford Motor Company as “Ford Motor.” |
Interest Rate: |
At least 9.55% per annum if the notes are not automatically called, payable at a rate of 2.3875% per quarter. The actual interest rate will be provided in the pricing supplement and will not be less than 9.55% per annum. |
Automatic Call: |
If on any of the Call Dates, the closing price of the Reference Stock is equal to or greater than the Initial Share Price, the notes will be automatically called on that Call Date. |
Payment if Called:
|
If the notes are automatically called, on the applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest to but excluding that Call Settlement Date. |
Buffer Amount: |
An amount that represents 15.00% of the Initial Share Price, subject to adjustments |
Pricing Date: |
On or about November 12, 2014 |
Original Issue Date
(Settlement Date): |
On or about November 17, 2014 |
Call Dates*: |
February 26, 2015 (first Call Date), May 28, 2015 (second Call Date) and August 27, 2015 (final Call Date) |
Call Settlement Dates*: |
With respect to each Call Date, the first Interest Payment Date occurring after that Call Date |
Observation Date*: |
November 27, 2015 |
Maturity Date*: |
December 2, 2015 |
CUSIP: |
48127DV62 |
Interest Payment Dates*: |
March 3, 2015, June 2, 2015, September 1, 2015 and the Maturity Date (each such date, an “Interest Payment Date”). See “Selected Purchase Considerations — Quarterly Interest Payments” in this term sheet for more information. |
Payment at Maturity: |
If the notes are not automatically called, the payment at maturity, in excess of any accrued and unpaid interest, will be based on the performance of the Reference Stock. If the notes are not automatically called, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest at maturity, unless the Final Share Price is less than the Initial Share Price by more than the Buffer Amount. If the notes are not automatically called and the Final Share Price is less than the Initial Share Price by more than the Buffer Amount, at maturity you will receive, in addition to any accrued and unpaid interest, instead of the principal amount of your notes, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof). Fractional shares will be paid in cash. The market value of the Physical Delivery Amount or the Cash Value thereof will most likely be substantially less than the principal amount of your notes, and may be zero. |
Physical Delivery Amount: |
The number of shares of the Reference Stock per $1,000 principal amount note, equal to $1,000 divided by the Initial Share Price, subject to adjustments |
Cash Value: |
The product of (1) $1,000 divided by the Initial Share Price and (2) the Final Share Price, subject to adjustments |
Initial Share Price: |
The closing price of one share of the Reference Stock on the Pricing Date |
Final Share Price: |
The closing price of the Reference Stock on the Observation Date |
Stock Adjustment Factor: |
The Stock Adjustment Factor is referenced in determining the closing price of one share of the Reference Stock. The Stock Adjustment Factor is subject to adjustment upon the occurrence of certain events affecting the Reference Stock and is set equal to 1.0 on the Pricing Date. See “The Underlyings — Reference Stocks — Anti-Dilution Adjustments” and “The Underlyings — Reference Stocks — Reorganization Events” in the accompanying product supplement no. 4a-I for further information. |
* | | Subject to postponement in the event of certain market disruption events and as described
under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to a Single Underlying”
and “General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I. |
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-8 of the accompanying product supplement no. 4a-I and “Selected Risk Considerations”
beginning on page TS-2 of this term sheet.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
term sheet or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary is
a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
Per note |
$1,000 |
$ |
$ |
Total |
$ |
$ |
$ |
(1) | | See “Supplemental Use of Proceeds” in this
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. |
If the notes priced today, the estimated value of the notes as
determined by JPMS would be approximately $978.70 per $1,000 principal amount note. JPMS’s estimated value of the notes,
when the terms of the notes are set, will be provided by JPMS in the pricing supplement and will not be less than $968.70 per $1,000
principal amount note. See JPMS’s Estimated Value of the Notes in this term sheet for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
November 12, 2014
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has filed a registration statement (including
a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the prospectus
in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the
SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by
visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating
in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. 4a-I and this term
sheet if you so request by calling toll-free 866-535-9248.
You may revoke your offer to purchase the notes at any time prior
to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject
any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify
you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in
which case we may reject your offer to purchase.
You should read this term sheet together with the prospectus dated
November 7, 2014 as supplemented by the prospectus supplement dated November 7, 2014 relating to our Series E medium-term notes
of which these notes are a part, and the more detailed information contained in product supplement no. 4a-I dated November 7, 2014.
This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or
contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence,
trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours.
You should carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product
supplement no. 4a-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 19617. As used
in this term sheet, the “Company,” “we,” “us” and “our” refer to JPMorgan Chase
& Co.
Selected Purchase Considerations
• | | THE NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD
ON DEBT SECURITIES OF COMPARABLE MATURITY ISSUED BY US — The notes will pay interest at the Interest Rate specified
on the cover of this term sheet, which is higher than the yield currently available on debt securities of comparable maturity
issued by us. Because the notes are our unsecured and unsubordinated obligations, any interest payment or any payment at maturity
is subject to our ability to pay our obligations as they become due. |
• | | QUARTERLY INTEREST PAYMENTS — The
notes offer quarterly interest payments as specified on the cover of this term sheet. Interest will be payable to the holders
of record at the close of business on the business day immediately preceding the applicable Interest Payment Date or applicable
Call Settlement Date. If an Interest Payment Date is not a business day, payment will be made on the next business day immediately
following such day, but no additional interest will accrue as a result of the delayed payment. |
• | | POTENTIAL EARLY EXIT AS A RESULT OF THE AUTOMATIC
CALL FEATURE — If the closing price of the Reference Stock is equal to or greater than the Initial Share Price
on any of the Call Dates, your notes will be automatically called prior to the maturity date. Under these circumstances, on the
applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus accrued and unpaid
interest to but excluding the applicable Call Settlement Date. |
• | | THE NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL
IF THE NOTES ARE NOT AUTOMATICALLY CALLED — If the notes are not automatically called, we will pay you your principal
back at maturity so long as the Final Share Price is not less than the Initial Share Price by more than the Buffer Amount on the
Observation Date. However, if the notes are not automatically called and if the Final Share Price is less than the Initial
Share Price by more than the Buffer Amount, you could lose the entire principal amount of your notes. |
• | | TAX TREATMENT AS A UNIT COMPRISING A PUT OPTION AND
A DEPOSIT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences”
in the accompanying product supplement no. 4a-I. Based on current market conditions, in determining our reporting responsibilities
we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x) a Put Option written by you that
is terminated if an Automatic Call occurs and that, if not terminated, requires you to purchase the Reference Stock (or, at our
option, receive the Cash Value thereof) from us at maturity under circumstances where the payment due at maturity is the Physical
Delivery Amount and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential obligation under the Put
Option. By purchasing the notes, you agree (in the absence of an administrative determination or judicial ruling to the contrary)
to follow this treatment and the allocation described in the following paragraph. However, there are other reasonable treatments
that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing and character of any
income or loss on the notes could be materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice
requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses on a number of issues, the most relevant of which for investors in the notes are the character of income or
loss (including whether the Put Premium might be currently included as ordinary income) and the degree, if any, to which income
realized by non-U.S. investors should be subject to withholding tax. While it is not clear whether the notes would be viewed as
similar to the typical prepaid forward contract described in the notice, it is possible that any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the notes, possibly with retroactive effect. |
| | We will determine the portion of each interest payment
on the notes that we will allocate to interest on the Deposit and to Put Premium, respectively, and will provide that allocation
in the pricing supplement for the notes. If the notes had priced on November 12, 2014 and assuming an Interest Rate of 9.55% per
annum, we would have allocated approximately 6.18% of each interest payment to interest on the Deposit and the remainder to Put
Premium. The actual allocation that we will |
JPMorgan Structured Investments | TS-1 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
determine for the notes may differ from this hypothetical allocation, and will depend upon
a variety of factors, including actual market conditions and our borrowing costs for debt instruments of comparable maturities
on the Pricing Date. Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected,
amounts treated as interest on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account
prior to sale or settlement, including a settlement following an Automatic Call.
You should consult your tax adviser regarding all aspects of the U.S. federal income tax consequences
of an investment in the notes, including possible alternative treatments and the issues presented by the 2007 notice. Purchasers
who are not initial purchasers of notes at the issue price should also consult their tax advisers with respect to the tax consequences
of an investment in the notes, including possible alternative treatments, as well as the allocation of the purchase price of the
notes between the Deposit and the Put Option.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference Stock. These risks are explained in more detail in the “Risk
Factors” section of the accompanying product supplement no. 4a-I dated November 7, 2014.
• | | 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 payment at maturity
will be based on whether the Final Share Price is less than the Initial Share Price by more than the Buffer Amount. Under certain
circumstances, you will receive at maturity a predetermined number of shares of the Reference Stock (or, at our election, the
Cash Value thereof). The market value of those shares of the Reference Stock or the Cash Value thereof will most likely be less
than the principal amount of each note and may be zero. Accordingly, you could lose up to the entire principal amount of your
notes. |
• | | THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL
EARLY EXIT — The notes will be automatically called before maturity if the closing price of the Reference Stock
is equal to or greater than the Initial Share Price on any of the Call Dates. Under these circumstances, the amount of interest
payable on the notes will be less than the full amount of interest that would have been payable if the notes were held to maturity,
and, for each $1,000 principal amount note, you will receive $1,000 plus accrued and unpaid interest to but excluding the
applicable Call Settlement Date. |
• | | THE BENEFIT PROVIDED BY THE BUFFER AMOUNT MAY TERMINATE
ON THE. OBSERVATION DATE — If the notes are not automatically called and the closing price of the Reference Stock on
the Observation Date (i.e., the Final Share Price) is less than the Initial Share Price minus the Buffer Amount, you will
be fully exposed to any depreciation in the Reference Stock. Because the Final Share Price will be determined based on the closing
price on a single trading day near the end of the term of the notes, the price of the Reference Stock at the maturity date or
at other times during the term of the notes could be at a level above the Initial Share Price minus the Buffer Amount. This difference
could be particularly large if there is a significant decrease in the price of the Reference Stock during the later portion of
the term of the notes or if there is significant volatility in the price of the Reference Stock during the term of the notes,
especially on dates near the Observation Date. |
• | | 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. |
We and/or our affiliates may also currently or from time to time engage in business with Ford
Motor, including extending loans to, or making equity investments in, Ford Motor or providing advisory services to Ford Motor.
In addition, one or more of our affiliates may publish research reports or otherwise express opinions with respect to Ford Motor,
and these reports may or may not recommend that investors buy or hold the Reference Stock. As a prospective purchaser of the notes,
you should undertake an independent investigation of Ford Motor as in your judgment is appropriate to make an informed decision
with respect to an investment in the notes.
• | | REINVESTMENT RISK — If your notes are automatically
called early, the term of the notes may be reduced to as short as three months and you will not receive interest payments after
the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment
in the notes at a comparable return and/or with a comparable interest rate for a similar level of risk in the event the notes
are automatically called prior to the Maturity Date. |
• | | SINGLE STOCK RISK — The price of
the Reference Stock can fall sharply due to factors specific to the Reference Stock and its issuer, such as stock price volatility,
earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events,
as well as general market factors, such as general stock market volatility and levels, interest rates and economic and political
conditions. |
• | | 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, |
JPMorgan Structured Investments | TS-2 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
| | 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.
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 have an adverse effect on the
terms of the notes and any secondary market prices of the notes. See “JPMS’s Estimated Value of the Notes” in
this term sheet. |
• | | 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. |
The notes are not designed to be short-term trading instruments. Accordingly, you should be
able and willing to hold your notes to maturity. See “— Lack of Liquidity” below.
• | | 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 closing price of one share of the Reference Stock, 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 in the price of the Reference Stock; |
• | | the time to maturity of the notes; |
• | | whether the closing price of one share of the Reference Stock has been, or is expected
to be, less than the Initial Share Price by more than the Buffer Amount during the Monitoring Period; |
• | | the dividend rate on the Reference Stock; |
• | | the occurrence of certain events affecting the issuer of the Reference Stock that
may or may not require an adjustment to the Stock Adjustment Factor, including a merger or acquisition; |
• | | interest and yield rates in the market generally; and |
• | | a variety of other economic, financial, political, regulatory and judicial events. |
Additionally, independent pricing vendors and/or third party broker-dealers may publish a
price for the notes, which may also be reflected on customer account statements. This price may be different (higher or lower)
than the price of the notes, if any, at which JPMS may be willing to purchase your notes in the secondary market.
• | | BUFFER AMOUNT APPLIES ONLY IF YOU HOLD THE NOTES
TO MATURITY — Assuming the notes are not automatically called, we will pay you your principal back at maturity
only if the Final Share Price is not below the Initial Share Price by more than the Buffer Amount. If the notes are not automatically
called and the Final Share Price is less than the Initial Share Price by more than the Buffer Amount the benefit provided by the
Buffer Amount will be eliminated and you will be fully exposed at maturity to any decline in the market price of the Reference
Stock. |
• | | VOLATILITY RISK — Greater expected
volatility with respect to the Reference Stock indicates a greater likelihood as of the Pricing Date that the Reference Stock
could close below the Initial Share Price by more than the Buffer Amount on the Observation Date. The Reference Stock’s
volatility, however, can change significantly over the term of the notes. The closing price of one share of the Reference Stock
could fall sharply on the Observation Date, which could result in a significant loss of principal. |
• | | YOUR RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL
AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF THE REFERENCE STOCK — If the notes are not
automatically called, unless the Final Share Price is less than the Initial Share Price by more than the Buffer Amount, for each
$1,000 principal amount note, you will receive $1,000 at maturity plus any accrued and unpaid interest, regardless of any
appreciation in the value of the Reference Stock, which may be significant. If the notes are automatically called, for each $1,000
principal amount note, you will receive $1,000 on the applicable Call Settlement Date plus any accrued and unpaid interest,
regardless of the appreciation in the value of the Reference Stock, which may be significant. Accordingly, the return on the notes
may be significantly less than the return on a direct investment in the Reference Stock during the term of the notes. |
• | | NO OWNERSHIP RIGHTS IN THE REFERENCE STOCK —
As a holder of the notes, you will not have any ownership interest or rights in the Reference Stock, such as voting rights
or dividend payments. In addition, the Reference Stock issuer will not have any obligation to consider your interests as a holder
of the notes in taking any corporate action that might affect the value of the Reference Stock and the notes. |
• | | NO AFFILIATION WITH FORD MOTOR —
We are not affiliated with Ford Motor. We have not independently verified any of the information about Ford Motor contained in
this term sheet. You should undertake your own investigation into the Reference Stock and Ford Motor. We are not responsible for
Ford Motor’s public disclosure of information, whether contained in SEC filings or otherwise. |
• | | 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 |
JPMorgan Structured Investments | TS-3 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
| | 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 ANTI-DILUTION PROTECTION FOR THE REFERENCE STOCK
IS LIMITED AND MAY BE DISCRETIONARY — The calculation agent will make adjustments to the Stock Adjustment Factor
for certain corporate events affecting the Reference Stock. However, the calculation agent will not make an adjustment in response
to all events that could affect the Reference Stock. If an event occurs that does not require the calculation agent to make an
adjustment, the value of the notes 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 notes in making these determinations. |
• | | THE 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
Interest Rate will be provided in the pricing supplement and each may be as low as the applicable minimums set forth on the cover
of this term sheet. Accordingly, you should consider your potential investment in the notes based on the minimum for JPMS’s
estimated value and the Interest Rate. |
JPMorgan Structured Investments | TS-4 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
Examples of Hypothetical Payments at Maturity
or Upon Automatic Call for Each $1,000 Principal Amount Note
The following table illustrates hypothetical payments at maturity
or upon an automatic call on a $1,000 investment in the notes, based on a range of hypothetical Final Share Prices and closing
prices on any of the Call Dates. The numbers appearing in the following table and examples have been rounded for ease of analysis.
For this table of hypothetical payments at maturity, we have also assumed the following:
• |
the Initial Share Price: $14.37 |
• |
the Buffer Amount (in U.S. dollars): $2.16 |
• |
the Interest Rate: 9.55% per annum if the note is held to maturity |
|
2.3875% (equivalent to 9.55% per annum) if the note is automatically called on the first Call Date |
|
4.775% (equivalent to 9.55% per annum) if the note is automatically called on the second Call Date |
|
7.1625% (equivalent to 9.55% per annum) if the note is automatically called on the final Call Date |
Hypothetical Highest Closing Price on any of the Call Dates |
Hypothetical Final Share Price |
Hypothetical Final Share Price expressed as a percentage of Initial Share Price |
Payment at Maturity** |
Payment on the applicable Call Settlement Date** |
Total Value of Payment Received at Maturity or on the applicable Call Settlement Date** |
$28.74 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
$21.56 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
$17.96 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
$15.09 |
N/A |
N/A |
N/A |
$1,000.00 |
$1,000.00 |
$14.37 |
$14.37 |
100.00% |
$1,000.00 |
N/A |
$1,000.00 |
$14.37 |
$13.65 |
95.00% |
$1,000.00 |
N/A |
$1,000.00 |
$13.65 |
$12.93 |
90.00% |
$1,000.00 |
N/A |
$1,000.00 |
$12.21 |
$9.34 |
65.00% |
69 shares of the Reference Stock or the Cash Value thereof |
N/A |
$649.97 |
$9.34 |
$7.19 |
50.00% |
69 shares of the Reference Stock or the Cash Value thereof |
N/A |
$500.35 |
$7.19 |
$3.59 |
25.00% |
69 shares of the Reference Stock or the Cash Value thereof |
N/A |
$249.83 |
$3.59 |
$0.00 |
0.00% |
69 shares of the Reference Stock or the Cash Value thereof |
N/A |
$0.00 |
** Note that you will receive at maturity or on the applicable Call
Settlement Date, as applicable, accrued and unpaid interest in cash, in addition to (1) at maturity, either shares of the Reference
Stock (or, at our election, the Cash Value thereof) or the principal amount of your note in cash or (2) on the applicable Call
Settlement Date, $1,000 in cash. Also note that if you receive the Physical Delivery Amount at maturity, the total value of the
payment received at maturity shown in the table above includes the value of any fractional shares, which will be paid in cash.
The following examples illustrate how the total value of a payment
received at maturity or on the applicable Call Settlement Date, as applicable, set forth in the table above is calculated.
Example 1: The closing price of the Reference Stock on the
first Call Date is $17.96. Because the closing price of the Reference Stock of $17.96 on the first Call Date is greater than
the Initial Share Price of $14.37, the notes are automatically called and you will receive a payment on the first Call Settlement
Date of $1,000 per $1,000 principal amount note.
Example 2: The highest closing price of the Reference Stock
on any of the Call Dates was $13.65 and the Final Share Price is $12.93. Because the highest closing price of the Reference
Stock of $13.65 on any of the Call Dates is not equal to or greater than the Initial Share Price of $14.37, the notes are
not automatically called. Because the Final Share Price of $12.93 is less than the Initial Share Price of $14.37, by not
more than the Buffer Amount, you will receive at maturity a payment of $1,000 per $1,000 principal amount note.
Example 3: The highest closing price of the Reference Stock
on any of the Call Dates was $12.21, and the Final Share Price is $9.34, a decline of more than the Buffer Amount from the Initial
Share Price. Because the highest closing price of the Reference Stock of $12.21 on any of the Call Dates is not equal to or
greater than the Initial Share Price of $14.37, the notes are not automatically called. Because the Final Share Price of $9.34
is less than the Initial Share Price of $14.37 by more than the Buffer Amount, you will receive the Physical Delivery Amount, or,
at our election, the Cash Value thereof, at maturity. Because the Final Share Price of the Reference Stock is $9.34, the total
value of your final payment at maturity, whether in cash or shares of the Reference Stock, is $649.97.
Regardless of the performance of the Reference Stock, you will
receive interest payments, for each $1,000 principal amount note, in the aggregate amount of (1), if the notes are held to maturity,
$95.50 over the term of the notes or (2) if the notes are automatically called: (i) $23.875 if called on the first Call Date from
the issue date to but excluding the first Call Settlement Date; (ii) $47.75 if called on the second Call Date from the issue date
to but excluding the second Call Settlement Date; (iii) $71.625 if called on the final Call Date from the issue date to but excluding
the final Call Settlement Date. The actual interest rate will be provided in the pricing supplement and will not be less than 9.55%.
If the notes are held to maturity, the actual number of shares of the Reference Stock, or the Cash Value thereof, you may receive
at maturity and the actual Buffer Amount applicable to your notes may be more or less than the amounts displayed in this hypothetical
and will depend in part on the Initial Share Price.
The hypothetical returns and hypothetical payments on the notes
shown above apply only if you hold the notes for their entire term or until called. These hypotheticals do not reflect fees
or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical
returns and hypothetical payments shown above would likely be lower.
JPMorgan Structured Investments | TS-5 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
The Reference Stock
Public Information
All information contained herein on the Reference Stock and
on Ford Motor is derived from publicly available sources, without independent verification. According to its publicly available
filings with the SEC, Ford Motor designs, develops, manufactures, and services cars and trucks worldwide. The common stock, par
value $0.01 per share, of Ford Motor (Bloomberg ticker: F), is registered under the Securities Exchange Act of 1934, as amended,
which we refer to as the Exchange Act, and is listed on the New York Stock Exchange, which we refer to as the relevant exchange
for purposes of Ford Motor in the accompanying product supplement no. 20-I. Information provided to or filed with the SEC by Ford
Motor pursuant to the Exchange Act can be located by reference to SEC file number 001-03950, and can be accessed through www.sec.gov.
We do not make any representation that these publicly available documents are accurate or complete.
Historical Information Regarding the Reference
Stock
The following graph sets forth the historical performance of the
Reference Stock based on the weekly closing price (in U.S. dollars) of one share of the Reference Stock from January 2, 2009 through
November 7, 2014. The closing price of one share of the Reference Stock on November 11, 2014 was $14.37. We obtained the closing
prices below from Bloomberg Financial Markets, without independent verification. The closing prices may be adjusted by Bloomberg
Financial Markets for corporate actions such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings
and bankruptcy.
Since its inception, the Reference Stock has experienced significant
fluctuations. The historical performance of the Reference Stock should not be taken as an indication of future performance, and
no assurance can be given as to the closing price of one share of the Reference Stock on the Call Dates or the Observation Date.
We cannot give you assurance that the performance of the Reference Stock will result in the return of any of your initial investment.
We make no representation as to the amount of dividends, if any, that Ford Motor will pay in the future. In any event, as an investor
in the notes, you will not be entitled to receive dividends, if any, that may be payable on the Reference Stock.
Historical Performance of Ford Motor Company
Source: Bloomberg
|
JPMorgan Structured Investments | TS-6 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |
JPMS’s Estimated Value of the Notes
JPMS’s estimated value of the notes set forth on the cover
of this term sheet is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component
with the same maturity as the notes, valued using our internal funding rate for structured debt described below, and (2) the derivative
or derivatives underlying the economic terms of the notes. JPMS’s estimated value does not represent a minimum price at which
JPMS would be willing to buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in
the determination of 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. For additional information, see “Selected Risk Considerations — JPMS’s Estimated Value Is Not Determined
by Reference to Credit Spreads for Our Conventional Fixed-Rate Debt.” The value of the derivative or derivatives underlying
the economic terms of the notes is derived from JPMS’s internal pricing models. 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, JPMS’s estimated value of the notes is determined when the terms of the notes are
set based on market conditions and other relevant factors and assumptions existing at that time. See “Selected Risk Considerations
— 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 will be lower than the
original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the
original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. We or one or more of our affiliates will retain any profits realized in hedging our obligations under
the notes. See “Selected Risk Considerations — JPMS’s Estimated Value of the Notes Will Be Lower Than the Original
Issue Price (Price to Public) of the Notes” in this term sheet.
Secondary Market Prices of the Notes
For information about factors that will impact any secondary market
prices of the notes, see “Selected Risk Considerations — Secondary Market Prices of the Notes Will Be Impacted by Many
Economic and Market Factors” in this term sheet. In addition, we generally expect that some of the costs included in the
original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in
an amount that will decline to zero over an initial predetermined period that is intended to be the shorter of six months and one-half
of the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates
expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs
are incurred, as determined by JPMS. See “Selected Risk Considerations — The Value of the Notes as Published by JPMS
(and Which May Be Reflected on Customer Account Statements) May Be Higher Than JPMS’s Then-Current Estimated Value of the
Notes for a Limited Time Period.”
Supplemental Use of Proceeds
The notes are offered to meet investor demand for products that reflect
the risk-return profile and market exposure provided by the notes. See “Examples of Hypothetical Payments at Maturity or
Upon Automatic Call for Each $1,000 Principal Amount Note” in this term sheet for an illustration of the risk-return profile
of the notes and “The Reference Stock” in this term sheet for a description of the market exposure provided by the
notes.
The original issue price of the notes is equal to JPMS’s estimated
value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected
profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes,
plus the estimated cost of hedging our obligations under the notes.
JPMorgan Structured Investments | TS-7 |
Upside Auto Callable Single Observation Reverse Exchangeable
Notes Linked to the Common Stock of Ford Motor Company |