Term sheet
To prospectus dated November 14, 2011,
prospectus supplement dated November 14, 2011,
product supplement no. 4-I dated November 14, 2011 and
underlying supplement no. 1-I dated November 14, 2011
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Term Sheet to
Product Supplement No. 4-I
Registration Statement No. 333-177923
Dated April 1, 2013; Rule 433
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Structured
Investments
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$
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index due April 23, 2014
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·
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The notes are designed for investors who seek a return of 1.5 times the appreciation of the MSCI EAFE® Index, up to a maximum return that will not be less than 10.275% at maturity. Investors should be willing to forgo interest and dividend payments and, if the arithmetic average of the Index closing levels on five trading days near the end of the term of the notes is less than the Initial Index Level by more than 10%, be willing to lose some or all of their principal. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
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Unsecured and unsubordinated obligations of JPMorgan Chase & Co. maturing April 23, 2014†
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof
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The notes are expected to price on or about April 5, 2013 and are expected to settle on or about April 10, 2013.
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Index:
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The MSCI EAFE® Index (“MXEA”) (the “Index”)
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Upside Leverage Factor:
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1.5
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Payment at Maturity:
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If the Ending Index Level is greater than the Initial Index Level, at maturity you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Index Return multiplied by 1.5, subject to the Maximum Return. Accordingly, if the Ending Index Level is greater than the Initial Index Level, your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + [$1,000 × (Index Return × 1.5)], subject to the Maximum Return
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If the Ending Index Level is equal to or less than the Initial Index Level by up to 10%, you will receive the principal amount of your notes at maturity.
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If the Ending Index Level is less than the Initial Index Level by more than 10%, you will lose 1.1111% of the principal amount of your notes for every 1% that the Ending Index Level is less than the Initial Index Level by more than 10%, and your payment at maturity per $1,000 principal amount note will be calculated as follows:
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$1,000 + [$1,000 × (Index Return + 10%) × 1.1111]
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If the Ending Index Level is less than the Initial Index Level by more than 10%, you will lose some or all of your initial investment.
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Maximum Return:
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At least 10.275%. For example, assuming the Maximum Return is 10.275%, if the Index Return is equal to or greater than 6.85%, you will receive the Maximum Return of 10.275%, which entitles you to a maximum payment at maturity of $1,102.75 per $1,000 principal amount note that you hold. The actual Maximum Return will be determined on the pricing date and will not be less than 10.275%. Accordingly, the actual maximum payment at maturity per $1,000 principal amount note will not be less than $1,102.75.
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Buffer Amount:
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10%
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Index Return:
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Ending Index Level – Initial Index Level
Initial Index Level
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Initial Index Level:
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The Index closing level on the pricing date
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Ending Index Level:
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The arithmetic average of the Index closing levels on each of the Ending Averaging Dates
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Ending Averaging Dates†:
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April 11, 2014, April 14, 2014, April 15, 2014, April 16, 2014 and April 17, 2014 (the “Final Ending Averaging Date”)
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Maturity Date†:
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April 23, 2014
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CUSIP:
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48126DK99
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†
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Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Payment at Maturity” and “Description of Notes —Postponement of a Determination Date—A. Notes Linked to a Single Component” in the accompanying product supplement no. 4-I
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Price to Public (1)
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Fees and Commissions (2)
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Proceeds to Us
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Per note
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$
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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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The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates, which includes our affiliates’ expected cost of providing such hedge as well as the profit our affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge. For additional related information, please see “Use of Proceeds and Hedging” beginning on page PS-48 of the accompanying product supplement no. 4-I.
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(2)
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Please see “Supplemental Plan of Distribution” in this term sheet for information about fees and commissions.
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Product supplement no. 4-I dated November 14, 2011:
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Underlying supplement no. 1-I dated November 14, 2011:
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Prospectus supplement dated November 14, 2011:
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Prospectus dated November 14, 2011:
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-1
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Ending Index Level
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Index Return
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Total Return on Notes
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Payment at Maturity
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3,060.00
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80.00%
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10.275%
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$1,102.75.00
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2,890.00
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70.00%
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10.275%
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$1,102.75.00
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2,720.00
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60.00%
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10.275%
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$1,102.75.00
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2,550.00
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50.00%
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10.275%
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$1,102.75.00
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2,210.00
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30.00%
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10.275%
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$1,102.75.00
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2,040.00
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20.00%
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10.275%
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$1,102.75.00
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1,955.00
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15.00%
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10.275%
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$1,102.75.00
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1,870.00
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10.00%
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10.275%
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$1,102.75.00
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1,828.35
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6.85%
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10.275%
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$1,102.75.00
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1,785.00
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5.00%
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7.500%
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$1,075.00
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1,717.00
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1.00%
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1.500%
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$1,015.00
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1,700.00
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0.00%
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0.000%
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$1,000.00
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1,615.00
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-5.00%
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0.000%
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$1,000.00
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1,530.00
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-10.00%
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0.000%
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$1,000.00
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1,445.00
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-15.00%
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-5.556%
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$944.45
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1,190.00
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-30.00%
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-22.222%
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$777.78
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1,020.00
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-40.00%
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-33.333%
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$666.67
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850.00
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-50.00%
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-44.444%
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$555.56
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680.00
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-60.00%
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-55.556%
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$444.45
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510.00
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-70.00%
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-66.667%
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$333.34
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340.00
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-80.00%
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-77.778%
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$222.23
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170.00
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-90.00%
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-88.889%
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$111.12
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0.00
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-100.00%
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-100.000%
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$0.00
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-2
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-3
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CAPPED APPRECIATION POTENTIAL — The notes provide the opportunity to enhance equity returns by multiplying a positive Index Return by 1.5, up to the Maximum Return. The actual Maximum Return will be set on the pricing date and will not be less than 10.275%. Accordingly, the actual maximum payment at maturity will not be less than $1,102.75 per $1,000 principal amount note. 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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LIMITED PROTECTION AGAINST LOSS — We will pay you your principal back at maturity if the Ending Index Level is not less than the Initial Index Level by more than 10%. If the Ending Index Level is less than the Initial Index Level by more than 10%, you will lose some or all of your initial investment at maturity.
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RETURN LINKED TO THE MSCI EAFE® INDEX — The return on the notes is linked to the MSCI EAFE® Index. The MSCI EAFE® Index is a free float-adjusted market capitalization index intended to measure the equity market performance of certain developed markets. The MSCI EAFE® Index is calculated daily in U.S. dollars and published in real time every 15 seconds during market trading hours. As of April 1 2013, the MSCI EAFE® Index consisted of 22 developed market country indices. See “Equity Index Descriptions — The MSCI Indices” in the accompanying underlying supplement no. 1-I.
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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. 4-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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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of the principal. The return on the notes at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the Index Return is positive or negative. Your investment will be exposed to loss on a leveraged basis if the Ending Index Level is less than the Initial Index Level by more than 10%. For every 1% that the Ending Index Level is less than the Initial Index Level by more than 10%, you will lose an amount equal to 1.1111% of the principal amount of your notes. Accordingly, you could lose some or all of your initial investment at maturity.
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YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN — If the Ending Index Level is greater than the Initial Index Level, for each $1,000 principal amount note, you will receive at maturity $1,000 plus an additional return that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the Index, which may be significant. We refer to this predetermined percentage as the Maximum Return, which will be set on the pricing date and will not be less than 10.275%.
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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, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged 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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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 hedging our obligations under the notes. 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 could result in substantial returns for us or our affiliates while the value of your notes declines. Please refer to “Risk Factors — Risks Relating to the Notes Generally” in the accompanying product supplement no. 4-I for additional
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-4
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information about these risks.
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THE AVERAGING CONVENTION USED TO CALCULATE THE ENDING INDEX LEVEL COULD LIMIT RETURNS — Your investment in the notes may not perform as well as an investment in an instrument that measures the point-to-point performance of the Index from the pricing date to the Final Ending Averaging Date. Your ability to participate in the appreciation of the Index may be limited by the 5-day-end-of-term averaging used to calculate the Ending Index Level, especially if there is a significant increase in the closing level of the Index on the Final Ending Averaging Date. Accordingly, you may not receive the benefit of the full appreciation of the Index between the pricing date and the Final Ending Averaging Date.
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CERTAIN BUILT-IN COSTS ARE LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY — While the payment at maturity, if any, described in this term sheet is based on the full principal amount of your notes, the original issue price of the notes includes the agent’s commission and the estimated cost of hedging our obligations under the notes. As a result, and as a general matter, the price, if any, at which J.P. Morgan Securities LLC, which we refer to as JPMS, will be willing to purchase notes from you in secondary market transactions, if at all, will likely be lower than the original issue price and any sale prior to the maturity date could result in a substantial loss to you. This secondary market price will also be affected by a number of factors aside from the agent’s commission and hedging costs, including those set forth under “Many Economic and Market Factors Will Impact the Value of the Notes” below.
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities composing the Index would have.
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NON-U.S. SECURITIES RISK — The equity securities that compose the Index have been issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental intervention in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than about U.S. companies that are subject to the reporting requirements of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable to U.S. reporting companies. The prices of securities in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
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THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK — Because the prices of the equity securities that compose the Index are converted into U.S. dollars for purposes of calculating the level of the Index, holders of the notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities that compose the Index 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 the equity securities that compose the Index denominated in each of those currencies. If, taking into account the relevant weighting, the U.S. dollar strengthens against those currencies, the level of the Index will be adversely affected and the payment at maturity, if any, may be reduced. Of particular importance to potential currency exchange risk are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments in the issuing countries of those currencies and the United States and between each country and its major trading partners;
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political, civil or military unrest in the issuing countries of those currencies and the United States; and
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the extent of governmental surplus or deficit in the member nations of the issuing countries of those currencies and the United States.
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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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MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES — In addition to the level of the Index on any day, the value of the notes will be impacted by a number of economic and market factors that may either offset or magnify each other, including:
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the actual and expected volatility of the Index;
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the time to maturity of the notes;
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the dividend rates on the equity securities underlying the Index;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory and judicial events;
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and the currencies in which the index stocks are traded and the correlation between those rates and the closing levels of the index; and;
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-5
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JPMorgan Structured Investments —
Capped Buffered Return Enhanced Notes Linked to the MSCI EAFE® Index
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TS-6
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