July 23, 2015
JPMorgan Chase & Co.
Structured Investments
Auto Callable Yield Notes Linked to the Lesser
Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF due February 1, 2017
|
· |
The notes are designed
for investors who seek a higher interest rate than the yield on a conventional debt security with the same maturity issued
by us. The notes will pay at least 5.30% per annum interest over the term of the notes, assuming no automatic call,
payable at a rate of at least 0.44167% per month. |
|
· |
The notes will be automatically
called if the closing value of each Underlying on any Review Date (other than the final Review Date) is greater than or equal
to its Initial Value. |
|
· |
Investors in the notes should
be willing to accept the risk of losing some or all of their principal. |
|
· |
Investors should also be willing
to forgo dividend payments, in exchange for Interest Payments. |
|
· |
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. |
|
· |
Payments on the notes are not
linked to a basket composed of the Underlyings. Payments on the notes are linked to the performance of each of
the Underlyings individually, as described below. |
|
· |
Minimum denominations of $1,000
and integral multiples thereof |
|
· |
The notes are expected to price
on or about July 27, 2015 and are expected to settle on or about July 30, 2015 |
|
· |
CUSIP:
48125UD25 |
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, “Risk Factors” beginning on
page US-2 of the accompanying underlying supplement no. 1a-I and “Selected Risk Considerations” beginning on page
TS-4 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. If the notes priced today, the selling commissions would be approximately
$2.50 per $1,000 principal amount note and in no event will these selling commissions exceed $5.00 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 $986.00 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 $960.00 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, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Term sheet to product supplement no. 4a-I dated
November 7, 2014, underlying supplement no. 1a-I dated November 7, 2014
and the prospectus and prospectus supplement, each dated November 7, 2014
Registration Statement No. 333-199966; Rule 433
Key
Terms
Underlyings:
The Russell 2000® Index (Bloomberg ticker:
RTY) (the “Index”) and the iShares® MSCI EAFE ETF (Bloomberg ticker: EFA) (the “Fund”)
Interest Payments:
If the notes have not been automatically called, you
will receive on the applicable Interest Payment Date for each $1,000 principal amount note an Interest Payment equal to
at least $4.4167 (equivalent to an Interest Rate of at least 5.30% per annum, payable at a rate of at least 0.44167% per
month) (to be provided in the pricing supplement).
Interest
Rate: At least 5.30% per annum, payable at a rate of at least
0.44167% per month (to be provided in the pricing supplement)
Buffer
Amount: 20.00%
Downside
Leverage Factor: 1.25
Pricing
Date: On or about July 27, 2015
Original
Issue Date (Settlement Date): On or about July 30, 2015
Review
Dates*: January 27, 2016, April 27, 2016, July 27, 2016, October
27, 2016, and January 27, 2017 (final Review Date)
Interest
Payment Dates*: September 1, 2015, October 1, 2015, October
30, 2015, December 2, 2015, December 31, 2015, February 1, 2016, March 3, 2016, March 31, 2016, May 2, 2016, June 2, 2016,
June 30, 2016, August 1, 2016, September 1, 2016, September 30, 2016, November 1, 2016, December 1, 2016, December 30,
2016 and the Maturity Date
Maturity
Date*: February 1, 2017
Call
Settlement Date*: If the notes are automatically called on any Review Date
(other than the final Review Date), the first Interest Payment Date immediately following that Review Date
* Subject to postponement in the event of
a market disruption event and as described under “General Terms of Notes — Postponement of a Determination
Date — Notes Linked to a Single Underlying — Notes Linked to Multiple Underlyings” and “General
Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I
|
Automatic Call:
If the closing value of each Underlying on any Review
Date (other than the final Review Date) is greater than or equal to its Initial Value, the notes will be automatically
called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Interest Payment for
the Interest Payment Date occurring on the applicable Call Settlement Date, payable on that Call Settlement Date. No further
payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final
Value of each Underlying is greater than or equal to its Initial Value or less than its Initial Value by up to the Buffer Amount,
you will receive a cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Interest Payment
applicable to the Maturity Date.
If the
notes have not been automatically called and the Final Value of either Underlying is less than its Initial Value by more
than the Buffer Amount, your payment at maturity per $1,000 principal amount note,
in addition to the Interest Payment applicable to the Maturity Date, will be calculated as follows:
$1,000 + [$1,000 × (Lesser
Performing Underlying Return + Buffer Amount) × Downside Leverage Factor]
If the notes have
not been automatically called and the Final Value of either Underlying is less than its Initial Value by more than the
Buffer Amount, you will lose some or all of your principal amount at maturity.
Lesser
Performing Underlying: The Underlying with the Lesser Performing
Underlying Return
Lesser
Performing Underlying Return: The lower of the Underlying
Returns of the Underlyings
Underlying
Return: With respect to each Underlying,
(Final Value – Initial
Value)
Initial Value
Initial
Value: With respect to each Underlying, the closing value
of that Underlying on the Pricing Date
Final
Value: With respect to each Underlying, the closing value
of that Underlying on the final Review Date
Share
Adjustment Factor: The Share Adjustment Factor is referenced
in determining the closing value of the Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor
is subject to adjustment upon the occurrence of certain events affecting the Fund. See “The Underlyings —
Funds — Anti-Dilution Adjustments” in the accompanying product supplement no. 4a-I for further information.
|
TS-1 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
Supplemental
Terms of the Notes
All references in this term sheet to the closing
value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references in
this term sheet to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payments in Connection with Review Dates
Preceding the Final Review Date
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Interest Payments
The table below illustrates the hypothetical
total Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Interest Rate of 5.30%
per annum, depending on how many Interest Payments are made prior to automatic call or maturity. If the notes have not been automatically
called, the hypothetical total Interest Payments per $1,000 principal amount note over the term of the notes will be equal to
the maximum amount shown in the table below. The actual Interest Rate will be provided in the pricing supplement and will be at
least 5.30% per annum.
Number of Interest Payments |
Total Interest Payments |
15 |
$66.2505 |
12 |
$53.0004 |
9 |
$39.7503 |
TS-2 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
Number of Interest Payments |
Total Interest Payments |
6 |
$26.5002 |
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical underlyings, assuming a range of performances for the Lesser Performing Underlying on the
Review Dates. Each hypothetical payment set forth below assumes that the closing value of the Underlying that is not the Lesser
Performing Underlying on each Review Date is greater than or equal to its Initial Value.
In addition, the hypothetical payments set forth
below assume the following:
| · | an Initial Value
for the Lesser Performing Underlying of 100.00; |
| · | a Buffer Amount
of 20.00%; |
| · | a Downside Leverage
Factor of 1.25; and |
| · | an Interest Rate
of 5.30% per annum (payable at a rate of 0.44167% per month). |
The hypothetical Initial Value of the Lesser
Performing Underlying of 100.00 has been chosen for illustrative purposes only and may not
represent a likely actual Initial Value of either
Underlying. The actual Initial Value of each Underlying will be the closing value of that Underlying on the Pricing Date and will
be provided in the pricing supplement. For historical data regarding the actual closing values of each Underlying, please see
the historical information set forth under “The Underlyings” in this term sheet.
Each hypothetical payment set forth below is
for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing
in the following examples have been rounded for ease of analysis.
Example 1 — Notes are automatically
called on the first Review Date.
Date |
Closing Value of Lesser Performing Underlying |
|
First
Review Date |
105.00 |
Notes
are automatically called |
|
Total Payment |
$1,0026.5002 (2.65002% return) |
Because the closing value of each Underlying
on the first Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,004.4167 (or $1,000 plus the Interest Payment applicable to the corresponding
Interest Payment Date), payable on the applicable Call Settlement Date. When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,026.5002.
No further payments will be made on the notes.
Example 2 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Initial Value by up to the Buffer Amount.
Date |
Closing Value of Lesser Performing Underlying |
|
First
Review Date |
95.00 |
Notes
NOT automatically called |
Second Review Date |
90.00 |
Notes NOT automatically called |
Third Review Date |
85.00 |
Notes NOT automatically called |
Final Review Date |
80.00 |
Final Value of Lesser Performing
Underlying is less than its Initial Value by up to the Buffer Amount |
|
Total Payment |
$1,066.2505 (6.62505% return) |
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Initial Value by up to the Buffer Amount,
the payment at maturity, for each $1,000 principal amount note, will be $1,004.4167 (or $1,000 plus the Interest Payment
applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment Dates,
the total amount paid, for each $1,000 principal amount note, is $1,066.2505.
TS-3 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Initial Value by more than the Buffer Amount.
Date |
Closing Value of Lesser Performing Underlying |
|
First
Review Date |
80.00 |
Notes
NOT automatically called |
Second Review Date |
70.00 |
Notes NOT automatically called |
Third Review Date |
60.00 |
Notes NOT automatically called |
Final Review Date |
50.00 |
Final Value of Lesser Performing
Underlying is less than its Initial Value by more than the Buffer Amount |
|
Total Payment |
$629.4167 (-37.05833% return) |
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Underlying is less than its Initial Value by more than the Buffer Amount and
the Lesser Performing Underlying Return is -50.00%, the payment at maturity will be $629.4167 per $1,000 principal amount note,
calculated as follows:
$1,000 + [$1,000 × (-50.00% + 20.00%)
× 1.25] + $4.4167 = $629.4167
When added to the Interest Payments received
with respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $691.2505.
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 the 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.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” sections of the accompanying product supplement
and underlying supplement.
| · | 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 and the Final Value of either Underlying is less than its Initial
Value by more than the Buffer Amount, you will lose 1.25% of the principal amount of your notes for every 1% that the Final Value
of the Lesser Performing Underlying is less than its Initial Value by more than the Buffer Amount. Accordingly, under these circumstances,
you will lose some or all of your principal amount at maturity.
| · | CREDIT
RISK OF JPMORGAN CHASE & CO. — |
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.
| · | THE
APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID
OVER THE TERM OF THE NOTES, |
regardless of any appreciation in
the value of either Underlying, which may be significant. You will not participate in any appreciation in the value of either
Underlying.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our economic interests are potentially adverse to your interests
as an investor in 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.
| · | YOU
ARE EXPOSED TO THE RISK OF DECLINE IN THE VALUE OF EACH UNDERLYING — |
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor performance
by either of the Underlyings over the term of the notes may result in the notes not being
TS-4 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
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
Underlying.
| · | YOUR
PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING. |
| · | THE
AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT — |
If your notes are automatically called,
the term of the notes may be reduced to as short as approximately six months and you will not receive any 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.
| · | YOU
WILL NOT RECEIVE DIVIDENDS ON THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER
UNDERLYING OR HAVE ANY RIGHTS WITH RESPECT TO THE FUND OR THOSE SECURITIES. |
| · | AN
INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS
WITH RESPECT TO THE INDEX — |
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.
| · | THERE
ARE RISKS ASSOCIATED WITH THE FUND — |
The Fund is subject to management
risk, which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is
subject to a number of constraints, may not produce the intended results. These constraints could adversely affect the market
price of the shares of the Fund and, consequently, the value of the notes.
| · | DIFFERENCES
BETWEEN THE FUND AND THE UNDERLYING INDEX — |
The Fund does not fully replicate
the Underlying Index (as defined under “The Underlyings” below) and may hold securities not included in the Underlying
Index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not included in the
calculation of the Underlying Index. Furthermore, because the shares of the Fund are traded on a securities exchange and are subject
to market supply and investor demand, the market value of one share of the Fund may differ from the net asset value per share
of the Fund. All of these factors may lead to a lack of correlation between the Fund and the Underlying Index.
| · | NON-U.S.
SECURITIES RISK WITH RESPECT TO THE FUND— |
The equity securities held by the
Fund have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities
involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities.
Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about
U.S. companies that are subject to the reporting requirements of the SEC.
| · | THE
NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND— |
Because the prices of the equity
securities held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the Fund, holders
of the notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities
held by the Fund trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the
U.S. dollar and the relative weight of equity securities held by the Fund denominated in each of those currencies. If, taking
into account the relevant weighting, the U.S. dollar strengthens against those currencies, the price of the Fund will be adversely
affected and any payment on the notes may be reduced.
| · | THE
ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED — |
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will not make
an adjustment in response to all events that could affect the shares of the Fund. 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.
TS-5 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
The notes will not be listed on any
securities exchange. Accordingly, 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. You may not be able to sell your 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.
| · | THE
FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT — |
You should consider your potential
investment in the notes based on the minimums for JPMS’s estimated value and the Interest Rate.
| · | 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 — |
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. 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 the 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.
| · | 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 values of the Underlyings.
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. See “Risk
TS-6 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
Factors — Risks Relating to
the Estimated Value of Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many
economic and market factors” in the accompanying product supplement.
The
Underlyings
The 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 Index is designed to track the performance of the small capitalization
segment of the U.S. equity market. For additional information about the Index, see “Equity Index Descriptions — The
Russell Indices” in the accompanying underlying supplement.
The Fund is an exchange-traded fund of iShares®
Trust, a registered investment company, which seeks to track the investment results of an index composed of large and mid-capitalization
developed market equities, excluding the United States and Canada, which we refer to as the Underlying Index with respect to the
Fund. The Underlying Index for the Fund is currently the MSCI EAFE® Index. The MSCI EAFE® Index
is a free float-adjusted market capitalization index intended to measure the equity market performance of the developed equity
markets in Europe, Asia, Australia and New Zealand. For additional information about the iShares® MSCI EAFE ETF,
see “Fund Descriptions — The iShares® MSCI EAFE ETF” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 8, 2010 through July 17, 2015. The closing
value of the Index on July 22, 2015 was 1,258.350. The closing value of the Fund on July 22, 2015 was $64.77. We obtained the
closing values above and below from the Bloomberg Professional® service (“Bloomberg”), without independent
verification. Although Russell publishes the official closing levels of the Index to six decimal places, Bloomberg publishes the
closing levels of the Index to only three decimal places. The closing values of the Fund above and below may have been adjusted
by Bloomberg for actions taken by the Fund, such as stock splits.
TS-7 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of either Underlying
on the Pricing Date or any Review Date. We cannot give you assurance that the performance of the Underlyings will result in the
return of any of your principal amount.
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. Based on the advice
of Davis Polk & Wardwell LLP, our special tax counsel, and 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, in circumstances where the payment due at maturity is less
than $1,000 (excluding accrued and unpaid interest) requires you to pay us an amount equal to the product of (1) 1.25 and (2)
the absolute value of the Lesser Performing Underlying Return plus its Buffer Amount and (y) a Deposit of $1,000 per $1,000 principal
amount note to secure your potential obligation under the Put Option, as more fully described in “Material U.S. Federal
Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Units Each Comprising a Put Option and
a Deposit” in the accompanying product supplement no. 4a-I, and in particular in the subsection thereof entitled “—Notes
with a Term of More than One Year.” 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
TS-8 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
reasonable treatments that 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 July 23, 2015, we would have allocated approximately
22.64% of each interest payment to interest on the Deposit and the remainder to Put Premium. The actual allocation that we will
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.
Withholding under legislation commonly referred
to as “FATCA” will apply to amounts treated as interest or other “fixed or determinable annual or periodical”
income for U.S. federal income tax purposes paid with respect to the notes, and (if they are treated, in whole or in part, as
debt instruments) could also apply to the payment of gross proceeds of a sale of a note occurring after December 31, 2016 (including
redemption at maturity). You should consult your tax adviser regarding the potential application of FATCA to the notes.
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.
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. 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.
JPMS’s estimated value does not represent
future values of the notes and may differ from others’ estimates. 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.
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, if any, realized in hedging our obligations under the
TS-9 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
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 “Risk Factors — Risks Relating to the Estimated Value and Secondary
Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors”
in the accompanying product supplement. 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. 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. This initial
predetermined time period 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 “How the Notes Work”
and “Hypothetical Payout Examples” in this term sheet for an illustration of the risk-return profile of the notes
and “The Underlyings” 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.
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,
underlying supplement no. 1a-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, as supplemented by the prospectus supplement, each 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 and underlying supplement no. 1a-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 and “Risk Factors”
in the accompanying underlying supplement no. 1a-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.
TS-10 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
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, “we,” “us” and “our” refer to JPMorgan Chase & Co.
TS-11 | Structured Investments Auto Callable Yield Notes Linked to the Lesser Performing of the Russell 2000® Index and the iShares® MSCI EAFE ETF | |
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