Term sheet
To prospectus dated November 7, 2014,
prospectus supplement dated November 7, 2014 and
product supplement no. 4a-I dated November 7, 2014
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Term sheet to
Product Supplement No. 4a-I
Registration Statement No. 333-199966
Dated May 4, 2015; Rule 433
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Structured
Investments
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$
Review Notes Linked to the Common Stock of Apple Inc. due May .25, 2016
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General
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·
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The notes are designed for investors who seek early exit prior to maturity at a premium if, (i) with respect to any Review Date (other than the final Review Date), the closing price of one share of the common stock of Apple Inc. on that Review Date is at or above the Call Level or (ii) with respect to the final Review Date, the Final Stock Price is at or above the Call Level. If the notes are not automatically called and the Final Stock Price is less than the Initial Stock Price by more than the Contingent Buffer Amount of 20%, investors will lose more than 20% of their principal amount at maturity and may lose all of their principal amount at maturity.
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·
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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.
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The earliest date on which an automatic call may be initiated is August 20, 2015†.
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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.
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
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Key Terms
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Reference Stock:
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The common stock, par value $0.00001 per share, of Apple Inc. (Bloomberg ticker: AAPL). We refer to Apple Inc. as “Apple.”
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Automatic Call:
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If, (i) with respect to any Review Date (other than the final Review Date), the closing price of one share of the Reference Stock on that Review Date is greater than or equal to the Call Level or, (ii) with respect to the final Review Date, the Final Stock Price is greater than or equal to the Call Level, the notes will be automatically called for a cash payment per note that will vary depending on the applicable Review Date and call premium that will be payable on the applicable Call Settlement Date.
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Call Level:
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100% of the Initial Stock Price for each Review Date
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Payment if Called:
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For every $1,000 principal amount note, you will receive one payment of $1,000 plus a call premium amount, calculated as follows:
• 4.6625% ×$1,000 if automatically called on the first Review Date
• 9.3250% × $1,000 if automatically called on the second Review Date
• 13.9875% × $1,000 if automatically called on the third Review Date
• 18.6500% × $1,000 if automatically called on the final Review Date
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Payment at Maturity:
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If the notes are not automatically called and the Final Stock Price is less than the Initial Stock Price by up to 20%, you will receive the principal amount of your notes at maturity.
If the notes are not automatically called and the Final Stock Price is less than the Initial Stock Price by more than 20%, you will lose 1% of the principal amount of your notes for every 1% that the Final Stock Price is less than the Initial Stock Price. Under these circumstances, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Stock Return)
If the notes are not automatically called and the Final Stock Price is less than the Initial Stock Price by more than 20%, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity
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Contingent Buffer Amount:
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20%
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Stock Return:
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(Final Stock Price – Initial Stock Price)
Initial Stock Price
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Initial Stock Price:
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The closing price of one share of the Reference Stock on the Pricing Date
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Final Stock Price:
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The arithmetic average of closing prices of one share of the Reference Stock on the Ending Averaging Dates
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Stock Adjustment Factor
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The Stock Adjustment Factor is referenced in determining the closing price of one share of the Reference Stock and is set equal to 1.0 on the Pricing Date. The Stock Adjustment Factor is subject to adjustment upon the occurrence of certain corporate events affecting the Reference Stock. 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.
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Review Dates†:
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August 20, 2015, November 19, 2015, February 18, 2016 and May 20, 2016 (final Review Date)
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Call Settlement Dates†:
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August 25, 2015, November 24, 2015, February 23, 2016 and the Maturity Date, each of which is the third business day after the applicable Review Date specified above, except that the final Call Settlement Date is the Maturity Date
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Pricing Date:
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On or about May 8, 2015
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Original Issue Date (Settlement Date):
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On or about May 13, 2015
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Ending Averaging Dates†:
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May 16, 2016, May 17, 2016, May 18, 2016, May 19, 2016 and the final Review Date
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Maturity Date†:
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May .25, 2016
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CUSIP:
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48125URC8
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† 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 — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “Description of Notes — Postponement of a Payment Date” in the accompanying product supplement no. 4a-I
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Issuer
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Per note
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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See “Supplemental Use of Proceeds” in this term sheet for information about the components of the price to public of the notes.
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(2)
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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.
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·
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Product supplement no. 4a-I dated November 7, 2014:
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·
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Prospectus supplement and prospectus, each dated November 7, 2014:
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JPMorgan Structured Investments —
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TS-1
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Review Notes Linked to the Common Stock of Apple Inc.
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Review Dates Prior to the Final Review Date
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Final Review Date
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||||||
Closing Price
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Stock
Appreciation/
Depreciation at
Review Date
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Total
Return at First
Call Settlement Date
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Total
Return at
Second
Call Settlement Date
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Total
Return at
Third
Call Settlement Date
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Final Stock Price
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Stock Return
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Total Return
at
Maturity
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$234.000
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80.00%
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4.6625%
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9.3250%
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13.9875%
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$234.000
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80.00%
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18.6500%
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$221.000
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70.00%
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4.6625%
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9.3250%
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13.9875%
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$221.000
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70.00%
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18.6500%
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$208.000
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60.00%
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4.6625%
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9.3250%
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13.9875%
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$208.000
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60.00%
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18.6500%
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$195.000
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50.00%
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4.6625%
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9.3250%
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13.9875%
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$195.000
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50.00%
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18.6500%
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$182.000
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40.00%
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4.6625%
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9.3250%
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13.9875%
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$182.000
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40.00%
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18.6500%
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$169.000
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30.00%
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4.6625%
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9.3250%
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13.9875%
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$169.000
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30.00%
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18.6500%
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$156.000
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20.00%
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4.6625%
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9.3250%
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13.9875%
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$156.000
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20.00%
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18.6500%
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$143.000
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10.00%
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4.6625%
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9.3250%
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13.9875%
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$143.000
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10.00%
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18.6500%
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$130.000
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0.00%
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4.6625%
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9.3250%
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13.9875%
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$130.000
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0.00%
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18.6500%
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$129.870
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-0.10%
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N/A
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N/A
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N/A
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$129.870
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-0.10%
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0.000%
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$123.500
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-5.00%
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N/A
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N/A
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N/A
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$123.500
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-5.00%
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0.000%
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$117.000
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-10.00%
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N/A
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N/A
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N/A
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$117.000
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-10.00%
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0.000%
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$104.000
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-20.00%
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N/A
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N/A
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N/A
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$104.000
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-20.00%
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0.000%
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$103.987
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-20.01%
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N/A
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N/A
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N/A
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$103.987
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-20.01%
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-20.010%
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$91.000
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-30.00%
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N/A
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N/A
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N/A
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$91.000
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-30.00%
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-30.000%
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$78.000
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-40.00%
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N/A
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N/A
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N/A
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$78.000
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-40.00%
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-40.000%
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$65.000
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-50.00%
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N/A
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N/A
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N/A
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$65.000
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-50.00%
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-50.000%
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$52.000
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-60.00%
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N/A
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N/A
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N/A
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$52.000
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-60.00%
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-60.000%
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$39.000
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-70.00%
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N/A
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N/A
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N/A
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$39.000
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-70.00%
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-70.000%
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$26.000
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-80.00%
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N/A
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N/A
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N/A
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$26.000
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-80.00%
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-80.000%
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$13.000
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-90.00%
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N/A
|
N/A
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N/A
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$13.000
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-90.00%
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-90.000%
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$0.000
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-100.00%
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N/A
|
N/A
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N/A
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$0.000
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-100.00%
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-100.000%
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JPMorgan Structured Investments —
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TS-2
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Review Notes Linked to the Common Stock of Apple Inc.
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APPRECIATION POTENTIAL — If, (a) with respect to any Review Date (other than the final Review Date), the closing price of one share of the Reference Stock is greater than or equal to the Call Level on that Review Date or, (b) with respect to the final Review Date, the Final Stock Price is greater than or equal to the Call Level, your investment will yield a payment per $1,000 principal amount note of $1,000 plus: (i) 4.6625% × $1,000 if automatically called on the first Review Date, (ii) 9.3250% × $1,000 if automatically called on the second Review Date, (iii) 13.9875% × $1,000 if automatically called on the third Review Date or (iv) 18.6500% × $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.
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POTENTIAL EARLY EXIT WITH APPRECIATION AS A RESULT OF AUTOMATIC CALL FEATURE — While the original term of the notes is just over one year the notes will be automatically called before maturity if, (i) with respect to any Review Date (other than the final Review Date), the closing price of one share of the Reference Stock on that Review Date is at or above the Call Level or, (ii) with respect to the final Review Date, the Final Stock Price is at or above the Call Level. You will be entitled to the applicable payment corresponding to that Review Date as set forth on the cover of this term sheet.
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LIMITED PROTECTION AGAINST LOSS — If the notes are not automatically called and the Final Stock Price is less than the Initial Stock Price by up to the Contingent Buffer Amount of 20%, you will be entitled to the full repayment of your principal at maturity. If the Final Stock Price is less than the Initial Stock Price by more than the Contingent Buffer Amount, for every 1% that the Final Stock Price is less than the Initial Stock Price, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity.
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RETURN LINKED TO A SINGLE REFERENCE STOCK— The return on the notes is linked to the performance of a single Reference Stock, which is the common stock of Apple. For additional information see “The Reference Stock” in this term sheet.
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CAPITAL GAINS TAX TREATMENT — You should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4a-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
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JPMorgan Structured Investments —
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TS-3
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Review Notes Linked to the Common Stock of Apple Inc.
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·
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. If the notes are not automatically called, the return on the notes at maturity is linked to the performance of the Reference Stock and will depend on whether, and the extent to which, the Stock Return is positive or negative. If the Final Stock Price is less than the Initial Stock Price by more than the Contingent Buffer Amount of 20%, the benefit provided by the Contingent Buffer Amount will terminate and for every 1% that the Final Stock Price is less than the Initial Stock Price, you will lose an amount equal to 1% of the principal amount of your notes. Under these circumstances, you will lose more than 20% of your principal amount at maturity and may lose all of your principal amount at maturity.
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·
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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.
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·
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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.
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·
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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 Reference Stock, which may be significant. Because the closing price of one share of the Reference Stock at various times during the term of the notes could be higher than on the Review Dates, you may receive a lower payment if automatically called or at maturity, as the case may be, than you would have if you had invested directly in the Reference Stock.
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·
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REINVESTMENT RISK — If your notes are automatically called early, the term of the notes may be reduced to as short as approximately three months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the notes at a comparable return for a similar level of risk in the event the notes are automatically called prior to the Maturity Date.
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·
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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.
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·
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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.
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·
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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.
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JPMorgan Structured Investments —
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TS-4
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Review Notes Linked to the Common Stock of Apple Inc.
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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.
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·
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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).
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·
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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.
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·
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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 price of one share of the Reference Stock , including:
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·
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any actual or potential change in our creditworthiness or credit spreads;
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·
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customary bid-ask spreads for similarly sized trades;
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·
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secondary market credit spreads for structured debt issuances;
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·
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the actual and expected volatility in the price of the Reference Stock;
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·
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the time to maturity of the notes;
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·
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the likelihood of an automatic call being triggered;
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·
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the dividend rate on the Reference Stock;
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·
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interest and yield rates in the market generally;
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·
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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; and
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·
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a variety of other economic, financial, political, regulatory and judicial events.
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·
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NO OWNERSHIP OR DIVIDEND 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 issuer of the Reference Stock 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.
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·
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NO AFFILIATION WITH THE REFERENCE STOCK ISSUER — We are not affiliated with the issuer of the Reference Stock. We have not independently verified any of the information about the Reference Stock issuer contained in this term sheet. You should undertake your own investigation into the Reference Stock and its issuer. We are not responsible for the Reference Stock issuer’s public disclosure of information, whether contained in SEC filings or otherwise.
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·
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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.
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·
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NO INTEREST PAYMENTS — As a holder of the notes, you will not receive any interest payments.
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·
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VOLATILITY RISK — Greater expected volatility with respect to the Reference Stock indicates a greater likelihood as of the Pricing Date that the closing price of one share of the Reference stock or the Final Stock Price, as applicable, could be below the Call Level or that the Final Stock Price could be below the Initial Stock Price by more than the Contingent Buffer Amount. The Reference Stock’s volatility, however, can change
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JPMorgan Structured Investments —
|
TS-5
|
Review Notes Linked to the Common Stock of Apple Inc.
|
|
significantly over the term of the notes. The price of one share of the Reference Stock could fall sharply between the Pricing Date and the Ending Averaging Dates, which could result in a significant loss of principal.
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·
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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.
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·
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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.
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·
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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, JPMS’s estimated value will be provided in the pricing supplement and may be as low as the minimum for JPMS’s estimated value 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.
|
JPMorgan Structured Investments —
|
TS-6
|
Review Notes Linked to the Common Stock of Apple Inc.
|
The Reference Stock
|
JPMorgan Structured Investments —
|
TS-7
|
Review Notes Linked to the Common Stock of Apple Inc.
|
JPMorgan Structured Investments —
|
TS-8
|
Review Notes Linked to the Common Stock of Apple Inc.
|
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