Term sheet
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011,
product supplement no. 21-II dated April 2, 2013 and
underlying supplement no. 1-I dated November 14, 2011 |
Term Sheet to
Product Supplement No. 21-II
Registration Statement No. 333-177923
Dated September 19, 2014; Rule 433 |
|
Structured
Investments |
|
$
Review Notes Linked to the Lesser Performing of
the S&P 500® Index and the Russell 2000® Index
due October 4, 2017
|
General
· | | The notes are designed for
investors who seek early exit prior to maturity at a premium if, on any Review Date, the Index closing level of each of the S&P
500® Index and the Russell 2000® Index is at or above its Call Level. If the notes have not been
automatically called, investors will receive their principal back at maturity if the Ending Index Level of each Index is less
than its Initial Index Level by up to the Buffer Amount. Investors will lose some or all of their principal if the Ending Index
Level of either Index is less than its Initial Index Level by more than the Buffer Amount and the notes have not been automatically
called. 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. Any payment on the notes
is subject to the credit risk of JPMorgan Chase & Co. |
· | | The first Review Date, and
therefore the earliest date on which an automatic call may be initiated, is October 5, 2015*. |
· | | Unsecured and unsubordinated
obligations of JPMorgan Chase & Co. maturing October 4, 2017* |
· | | The payment at maturity is
not linked to a basket composed of the Indices. The payment at maturity is linked to the performance of each of
the Indices individually, as described below. |
· | | Minimum denominations of $1,000
and integral multiples thereof |
· | | The notes are expected to
price on or about September 29, 2014 and are expected to settle on or about October 2, 2014. |
Key
Terms
Indices: |
The S&P 500® Index (Bloomberg ticker: SPX) and the Russell 2000® Index (Bloomberg ticker: RTY) (each, an “Index” and collectively, the “Indices”) |
Automatic Call: |
If the Index closing level of each Index on any Review Date is greater than or equal to the applicable Call Level, the notes will be automatically called for a cash payment per $1,000 principal amount note, payable on the applicable Call Settlement Date, that will vary depending on the applicable Review Date and call premium. |
Call Level: |
With respect to each Index, an amount that represents 100% of its Initial Index Level for each Review Date |
Payment if Called: |
For every $1,000 principal amount note, you will receive one payment
of $1,000 plus a call premium amount, calculated as follows:
• between 9.60% and 10.60%† ×
$1,000 if automatically called on the first Review Date
• between 19.20% and 21.20%† ×
$1,000 if automatically called on the second Review Date
• between 28.80% and 31.80%† ×
$1,000 if automatically called on the final Review Date
† The actual call premiums applicable to each Review
Date will be provided in the pricing supplement and will not be less than the low end or greater than the high end of the applicable
range specified above. |
Payment at Maturity: |
If the notes have not been automatically called and the Ending Index
Level of each Index is less than its Initial Index Level by up to the Buffer Amount, you will receive the principal amount of your
notes at maturity.
If the notes have not been automatically called and the Ending Index
Level of either Index is less than its Initial Index Level by more than the Buffer Amount, you will lose 1% of the principal
amount of your notes for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level
by more than 10%, and your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + [$1,000 × (Lesser Performing Index
Return + 10%)]
If the notes have not been automatically called and the Ending
Index Level of either Index is less than its Initial Index Level by more than the Buffer Amount of 10%, you will lose more than
10% of your principal amount and could lose up to $900 per $1,000 principal amount note at maturity. |
Buffer Amount: |
10% |
Initial Index Level |
With respect to each Index, the Index closing level of that Index on the pricing date. |
Review Dates*: |
October 5, 2015 (first Review Date), September 29, 2016 (second Review Date) and September 29, 2017 (final Review Date) |
Call Settlement Dates*: |
The third business day after the applicable Review Date, except that the final Call Settlement Date is the Maturity Date |
Original Issue Date (Settlement Date): |
On or about October 2, 2014 |
Maturity Date†: |
October 4,
2017 |
CUSIP: |
48127DC63 |
Other Key Terms: |
See “Additional Key Terms” in this term sheet |
* | | Subject to postponement in the event of a market disruption event and as described
under “Description of Notes — Postponement of a Review Date” and “Description of Notes — Payment
at Maturity” in the accompanying product supplement no. 21-II |
Investing in the Review Notes involves a number of risks.
See “Risk Factors” beginning on page PS-11 of the accompanying product supplement no. 21-II, “Risk Factors”
beginning on page US-1 of the accompanying underlying supplement no. 1-I and “Selected Risk Considerations” beginning
on page TS-3 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, underlying supplement, prospectus supplement and prospectus. Any representation
to the contrary is a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
Per note |
$1,000 |
$ |
$ |
Total |
$ |
$ |
$ |
| (1) | See “Supplemental Use of Proceeds” in this 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 $2.50 per $1,000 principal amount note. See “Plan of Distribution (Conflicts
of Interest)” beginning on page PS-61 of the accompanying product supplement no. 21-II. |
If the notes priced today, the estimated value of the notes
as determined by JPMS would be approximately $950.30 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 $940.00 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 and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
September 19, 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. 21-II, underlying supplement no. 1-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 14, 2011, as supplemented by the prospectus supplement dated
November 14, 2011 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. 21-II dated April 2, 2013 and underlying supplement no. 1-I dated November 14, 2011. 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. 21-II and “Risk Factors” in the accompanying underlying supplement no. 1-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.
Additional
Key Terms
Index Return: |
With respect to each Index:
(Ending Index Level – Initial
Index Level)
Initial Index Level |
Ending Index Level: |
With respect to each Index, the Index closing level of that Index on the final Review Date |
Lesser Performing Index: |
The Index with the Lesser Performing Index Return |
Lesser Performing Index Return: |
The lower of the Index Returns of the Indices |
Supplemental
Terms of the Notes
Notwithstanding
anything to the contrary in the accompanying product supplement no. 21-II, the “Index closing level” of the Russell
2000® Index or any relevant successor index (as defined in the accompanying product supplement no.
21-II) on any relevant day will equal the closing level of the Russell 2000® Index or that successor index, as
applicable, as published by Bloomberg Financial Markets with respect to that day. Currently, Bloomberg Financial Markets publishes
the closing level of the Russell 2000® Index to three decimal places, whereas Russell Investment Group (“Russell”),
the index sponsor of the Russell 2000® Index, publishes the official closing level of the Russell 2000®
Index to six decimal places. As a result, the closing level of the Russell 2000® Index published by Bloomberg
Financial Markets will likely be slightly different from the official closing level of the Russell 2000® Index
published by Russell.
JPMorgan Structured Investments
|
TS-1 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
Selected
Purchase Considerations
· | | FIXED APPRECIATION POTENTIAL
— If the Index closing level of each Index is greater than or equal to the applicable Call Level on any Review Date,
your investment will yield a payment per $1,000 principal amount note of $1,000 plus: (i) between 9.60% and 10.60%* ×
$1,000 if automatically called on the first Review Date, (ii) between 19.20% and 21.20%* × $1,000 if automatically called
on the second Review Date or (iii) between 28.80% and 31.80%* × $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. |
* The
actual call premiums applicable to each Review Date will be provided in the pricing supplement and will not be less than the low
end or greater than the high end of the applicable range specified above.
· | | Potential
Early Exit With Appreciation As a Result of Automatic Call Feature
— While the original term of the notes is approximately three years, the notes will be automatically called before maturity
if the Index closing level of each Index is at or above the applicable Call Level on any Review Date and 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 have not been automatically called, we will pay you your principal back at maturity if the Ending
Index Level of each Index is less than its Initial Index Level by up to the Buffer Amount. If the notes have not been automatically
called and the Ending Index Level of either Index is less than its Initial Index Level by more than the Buffer Amount of 10%,
you will lose more than 10% of your principal amount and could lose up to $900 per $1,000 principal amount note at maturity. |
· | | EXPOSURE TO EACH OF THE
INDICES — The return on the notes is linked to the Lesser Performing Index, which will be either the S&P 500®
Index or the Russell 2000® Index. |
The
S&P 500® Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S.
equity markets. For additional information about the S&P 500® Index, see the information set forth under “Equity
Index Descriptions — The S&P 500® Index” in the accompanying underlying supplement no. 1-I.
The
Russell 2000® Index consists of the middle 2,000 companies included in the Russell 3000E™ Index and, as a
result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell 3000®
Index. The Russell 2000® Index is designed to track the performance of the small capitalization segment of the
U.S. equity market. For additional information about the Russell 2000® Index, see the information set forth under
“Equity Index Descriptions — The Russell 2000® Index” in the accompanying underlying supplement
no. 1-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. 21-II.
The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel,
Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes. |
Based
on current market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions”
that are not debt instruments for U.S. federal income tax purposes. Assuming this treatment is respected, the gain or loss on
your notes should be treated as long-term capital gain or loss if you hold your notes for more than
a year, whether or not you are an initial purchaser of notes at the issue price. However, the Internal Revenue Service (the “IRS”)
or a court may not respect this treatment, in which case the timing and character of any income or loss on the notes could be
materially and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S.
federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular
on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors
such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including
any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and
whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can
operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice
requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes,
possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an
investment in the notes, including possible alternative treatments and the issues presented by this notice.
Notwithstanding
the discussion under “Material U.S. Federal Income Tax Consequences—Tax Consequences to Non-U.S. Holders—Tax
Consequences if Treated as Debt Instruments” in the accompanying product supplement, withholding under legislation commonly
referred to as “FATCA”
JPMorgan Structured Investments
|
TS-2 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
may
(if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the notes, as
well as to the payment of gross proceeds of a sale of a note after December 31, 2016 (including redemption at maturity).
You should consult your tax adviser regarding the potential application of FATCA to the notes.
Non-U.S.
Holders should also note that recently proposed Treasury regulations could impose a 30% (or lower treaty rate) withholding tax
on amounts paid or deemed paid after December 31, 2015 that are treated as attributable to U.S.-source dividends on equities underlying
financial instruments such as the notes. While it is not clear whether or in what form these regulations will be finalized, under
recent Treasury guidance, these regulations would not apply to the notes. Non-U.S. Holders should consult their tax advisers regarding
the potential application of these proposed regulations.
Selected
Risk Considerations
An investment
in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in either or both of the
Indices or any of the equity securities included in the Indices. These risks are explained in more detail in the “Risk Factors”
section of the accompanying product supplement no. 21-II dated April 2, 2013 and in the “Risk Factors” section of
the accompanying underlying supplement no. 1-I dated November 14, 2011.
· | | YOUR INVESTMENT IN THE
NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. If the notes
have not been automatically called, the return on the notes at maturity is linked to the performance of the Least Performing Index
and will depend on the extent to which the Lesser Performing Index Return is negative. If the notes have not been automatically
called and the Ending Index Level of either Index is less than its Initial Index Level by more than the Buffer Amount of 10%,
for every 1% that the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level, you will lose an
amount equal to 1% of the principal amount of your notes. Accordingly, under these circumstances, you will lose more than 10%
of your principal amount and could lose up to $900 per $1,000 principal amount note 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. |
· | | 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 value of any Index, which may be significant. The Index
closing level of any 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 the notes were automatically called or at maturity, as the case may be, than you would have if you had invested
directly in any Index. |
· | | 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 the Notes Generally” in the accompanying product supplement
no. 21-II for additional information about these risks. |
We
are also currently one of the companies that make up the S&P 500® Index. We 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 S&P 500®
Index and the notes.
· | | YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX — Your
return on the notes and any payment on the notes is not linked to a basket consisting of the Indices. If the notes have not been
automatically called, your payment at maturity is contingent upon the performance of each individual Index such that you will
be equally exposed to the risks related to either of the Indices. The performance of the Indices may not be correlated.
Poor performance by either of the Indices over the term of the notes could result in the notes not being automatically called
on a Review Date, may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by
the other Index. Accordingly, your investment is subject to the risk of decline in the Index closing level of each Index. |
JPMorgan Structured Investments
|
TS-3 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
· | | THE BENEFIT PROVIDED BY THE BUFFER AMOUNT MAY TERMINATE ON THE FINAL REVIEW DATE
— If the notes have not been automatically called and the Ending Index Level of either Index is less than its Initial
Index Level by more than the Buffer Amount, the benefit provided by the Buffer Amount will terminate and you will be fully exposed
to any depreciation in the Lesser Performing Index. The Ending Index Level of each Index will be determined based on the applicable
Index closing level on a single day near the end of the term of the notes. In addition, the Index closing level of an Index at
other times during the term of the notes could be greater than or equal to its Initial Index Level or less than its Initial Index
Level by up to the Buffer Amount. This difference could be particularly large if there is a significant decrease in the Index
closing level of either or both Indices during the later portion of the term of the notes, especially on dates near the final
Review Date. |
· | | YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING INDEX —
Because the payment at maturity will be determined based on the performance of the Lesser Performing Index, you will not benefit
from the performance of the other Index. Accordingly, if the notes are not automatically called and the Ending Index Level of
either Index is less than its Initial Index Level by more than the Buffer Amount, you will lose more than 10% of your principal
amount and could lose up to $900 per $1,000 principal amount note at maturity, even if the Ending Index Level of the other Index
is greater than or equal to its Initial Index Level. |
· | | REINVESTMENT RISK —
If your notes are automatically called early, the term of the notes may be reduced to as short as approximately one year. 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. |
· | | 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 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 |
JPMorgan Structured Investments
|
TS-4 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
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 levels of the Indices, 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 levels of the Indices; |
· | | 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 Indices; |
· | | the actual and expected positive
or negative correlation between the Indices, or the actual or expected absence of any such correlation; |
· | | 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.
· | | 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 the securities included
in the Indices would have. |
· | | an
investment in the notes is subject to risks associated with small capitalization stocks with respect to the russell 2000®
Index — The stocks that constitute the Russell
2000® Index are issued by companies with relatively small market capitalization. The stock prices of smaller companies
may be more volatile than stock prices of large capitalization companies. Small capitalization companies may be less able to withstand
adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization companies are less
likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits downward stock price
pressure under adverse market conditions. |
· | | 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 premiums 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 premiums. |
JPMorgan Structured Investments
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TS-5 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
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Hypothetical
Examples of Amount Payable upon Automatic Call or at Maturity
The following
table illustrates the hypothetical simple total return (i.e., not compounded) on the notes that could be realized with
respect to the applicable Review Date for a range of movements in the Lesser Performing Index as shown under the column “Lesser
Performing Index Appreciation/Depreciation at Review Date.” Each hypothetical total return or payment set forth below
assumes that the Lesser Performing Index is the Russell 2000® Index. We make no representation or warranty
as to which of the Indices will be the Lesser Performing Index for purposes of calculating your actual payment at maturity, if
any, or as to what the Index closing level of any Index will be on any Review Date. In addition, the following table and examples
assume an Initial Index Level and a Call Level for the Lesser Performing Index of 1,200 and that the call premiums used to calculate
the call premium amount applicable to the first, second and final Review Dates are 9.60%, 19.20% and 28.80%, respectively, and
reflect the Buffer Amount of 10%. The actual call premiums applicable to the first, second and final Review Dates will be determined
on the pricing date and will not be less than 9.60%, 19.20% and 28.80%, respectively, or greater than 10.60%, 21.20% and 31.80%,
respectively. There will be only one payment on the notes whether called or at maturity. An entry of “N/A” indicates
that the notes would not be called on the applicable Review Date and no payment would be made on the applicable Call Settlement
Date. Each hypothetical total return or payment on the notes set forth below is for illustrative purposes only and may not be
the actual total return or payment on the notes applicable to a purchaser of the notes.
Lesser Performing Index Closing Level at Review Date |
Lesser Performing Index Appreciation/
Depreciation at Review Date |
Total Return at First Review Date |
Total Return at Second Review Date |
Total Return at Final Review
Date (1) |
2,160.00 |
80.00% |
9.60% |
19.20% |
28.80% |
2,040.00 |
70.00% |
9.60% |
19.20% |
28.80% |
1,920.00 |
60.00% |
9.60% |
19.20% |
28.80% |
1,800.00 |
50.00% |
9.60% |
19.20% |
28.80% |
1,680.00 |
40.00% |
9.60% |
19.20% |
28.80% |
1,560.00 |
30.00% |
9.60% |
19.20% |
28.80% |
1,440.00 |
20.00% |
9.60% |
19.20% |
28.80% |
1,320.00 |
10.00% |
9.60% |
19.20% |
28.80% |
1,200.00 |
0.00% |
9.60% |
19.20% |
28.80% |
1,140.00 |
-5.00% |
N/A |
N/A |
0.00% |
1,080.00 |
-10.00% |
N/A |
N/A |
0.00% |
1,079.88 |
-10.01% |
N/A |
N/A |
-0.01% |
1,020.00 |
-15.00% |
N/A |
N/A |
-5.00% |
960.00 |
-20.00% |
N/A |
N/A |
-10.00% |
900.00 |
-25.00% |
N/A |
N/A |
-15.00% |
840.00 |
-30.00% |
N/A |
N/A |
-20.00% |
720.00 |
-40.00% |
N/A |
N/A |
-30.00% |
600.00 |
-50.00% |
N/A |
N/A |
-40.00% |
480.00 |
-60.00% |
N/A |
N/A |
-50.00% |
360.00 |
-70.00% |
N/A |
N/A |
-60.00% |
240.00 |
-80.00% |
N/A |
N/A |
-70.00% |
120.00 |
-90.00% |
N/A |
N/A |
-80.00% |
0.00 |
-100.00% |
N/A |
N/A |
-90.00% |
(1) If the
notes have not been automatically called and the Ending Index Level of either Index is less than its Initial Index Level by more
than the Buffer Amount of 10%, you will lose more than 10% of your principal amount and could lose up to $900 per $1,000 principal
amount note at maturity.
The following
examples illustrate how the payment on the notes in different hypothetical scenarios is calculated.
Example
1: The Index closing level of the Lesser Performing Index increases from the Initial Index Level of 1,200 to an Index closing
level of 1,320 on the first Review Date. Because the Index closing level of the Lesser Performing Index on the first Review
Date of 1,320 is greater than the corresponding Call Level of 1,200, the notes are automatically called, and the investor receives
a single payment of $1,096 per $1,000 principal amount note on the first Call Settlement Date.
Example
2: The Index closing level of the Lesser Performing Index decreases from the Initial Index Level of 1,200 to an Index closing
level of 1,140 on the first Review Date and 1,080 on the second Review Date and increases to an Index closing level of 1,440 on
the final Review Date. Because the Index closing level of the Lesser Performing Index on each of the first and second Review
Dates (1,140 and 1,080) is less than the corresponding Call Level of 1,200, the notes are not automatically called on these Review
Dates. However, because the Index closing level of the Lesser Performing Index on the final Review Date of 1,440 is greater than
the corresponding Call Level of 1,200, the notes are automatically called on the final Review Date, and the investor receives
a single payment of $1,288 per $1,000 principal amount note on
JPMorgan Structured Investments
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Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
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the Maturity
Date. This represents the maximum total payment an investor may receive over the term of the notes.
Example
3: The Index closing level of the Lesser Performing Index decreases from the Initial Index Level of 1,200 to an Index closing
level of 720 on the first Review Date, 1,080 on the second Review Date and 1,140 on the final Review Date. Because (a) the
Index closing level of the Lesser Performing Index on each of the Review Dates (720, 1,080 and 1,140) is less than the corresponding
Call Level of 1,200 and (b) the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by up to
the Buffer Amount of 10%, the notes are not automatically called and the payment at maturity is the principal amount of $1,000
per $1,000 principal amount note.
Example
4: The Index closing level of the Lesser Performing Index decreases from the Initial Index Level of 1,200 to an Index closing
level of 1,140 on the first Review Date, 1,080 on the second Review Date and 720 on the final Review Date. Because (a) the
Index closing level of the Lesser Performing Index on each of the Review Dates (1,140, 1,080 and 720) is less than the corresponding
Call Level of 1,200 and (b) the Ending Index Level of the Lesser Performing Index is less than its Initial Index Level by more
than the Buffer Amount of 10%, the notes are not automatically called and the investor receives a payment at maturity that is
less than the principal amount for each $1,000 principal amount note, calculated as follows:
$1,000 +
[$1,000 × (-40% + 10%)] = $700
The hypothetical
returns and hypothetical payments on the notes shown above apply only if you hold the notes for their entire term or until
automatically 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
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TS-7 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
Historical
Information
The following
graphs show the historical weekly performance of the S&P 500® Index and the Russell 2000® Index
from January 2, 2009 through September 12, 2014. The Index closing level of the S&P 500® Index on September
18, 2014 was 2,011.36. The Index closing level of the Russell 2000® Index on September 18, 2014 was 1,159.274.
We obtained
the various Index closing levels of the Indices below from Bloomberg Financial Markets, without independent verification. Although
Russell publishes the official closing levels of the Russell 2000® Index to six decimal places, Bloomberg Financial
Markets publishes the closing levels of the Russell 2000® Index to only three decimal places. The historical levels
of each Index should not be taken as an indication of future performance, and no assurance can be given as to the Index closing
level of either Index on the pricing date or any Review Date. We cannot give you assurance that the performance of the Indices
will result in the return of any of your principal in excess of $100 per $1,000 principal amount note.
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
JPMorgan Structured Investments
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TS-8 |
Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
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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.
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. A portion of the profits realized in hedging
our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of our affiliates
will retain any remaining hedging profits. 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 net
proceeds we receive from the sale of the notes will be used for general corporate purposes and, in part, by us or one or more
of our affiliates in connection with hedging our obligations under the notes.
The notes
are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the notes.
See “Hypothetical Examples of Amount Payable upon Automatic Call or at Maturity” in this term sheet for an illustration
of the risk-return profile of the notes and “Selected Purchase Considerations — Exposure to Each of the Indices”
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.
For purposes
of the notes offered by this term sheet, the first and second paragraphs of the section entitled “Use of Proceeds and Hedging”
on page PS-35 of the accompanying product supplement no. 21-II are deemed deleted in their entirety. Please refer instead to the
discussion set forth above.
JPMorgan Structured Investments
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Review Notes Linked to the Lesser Performing of the S&P 500® Index and the Russell
2000® Index |
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