Term sheet |
Term Sheet to Product Supplement No. 138-I Registration Statement No. 333-130051 Dated May 22, 2008; Rule 433 |
Structured |
JPMorgan
Chase & Co. $ Return Notes Linked to the JPMorgan Core Commodity Investable Global Asset Rotator Long-Short Index due May 31, 2011 |
General
Key Terms
Underlying: |
JPMorgan Core Commodity Investable Global Asset Rotator Long-Short Index (the Core Commodity-IGAR Long-Short or the Underlying). |
Payment at Maturity: |
Payment at maturity will reflect the performance of the Underlying plus the Additional Amount. The principal amount of your notes will be fully exposed to any decline in the Ending Underlying Value, as compared to the Initial Underlying Value, provided that your final payment at maturity will not be less than zero and except that in all cases you will receive the Additional Amount at maturity. Accordingly, at maturity, you will receive an amount per $1,000 principal amount note calculated as follows: |
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$1,000 x (1 + Underlying Return) + Additional Amount |
provided that your final payment at maturity will not be less than the Additional Amount. | |
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You may lose some or all of your investment (other than the Additional Amount) if the Ending Underlying Value declines from the Initial Underlying Value. |
Additional Amount |
At least $92.50*. |
* The actual Additional Amount will be set on the pricing date and will not be less than $92.50. | |
Underlying Return: |
Ending Underlying Value Initial
Underlying Value |
Initial Underlying Value: |
The Underlying closing value on the pricing date. |
Ending Underlying Value: |
The Underlying closing value on the Observation Date. |
Observation Date: |
May 23, 2011 |
Maturity Date: |
May 31, 2011 |
CUSIP: |
48123M4Y5 |
| Subject to postponement in the event of a market disruption event and as described under Description of Notes Payment at Maturity in the accompanying product supplement no. 138-I. | |
| The pricing of the notes is subject to our special tax counsel delivering to us their opinion as described under Selected Purchase Considerations Capital Gains Tax Treatment. |
Investing in the Return Notes involves a number of risks. See Risk Factors beginning on page PS-4 of the accompanying product supplement no. 138-I and Selected Risk Considerations beginning on page TS-3 of this term sheet.
Neither the Securities and Exchange Commission 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 prospectus supplements and prospectus. Any representation to the contrary is a criminal offense.
To the extent the information contained in footnotes (1) and (2) below differs from or conflicts with the disclosure set forth under "Use of Proceeds" in product supplement no. 138-I, the information in the footnotes (1) and (2) below controls.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(1) | The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
(2) | If the notes priced today, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $28.00 per $1,000 principal amount note. The actual commission received by JPMSI may be more or less than $28.00 and will depend on market conditions on the pricing date. This commission will include the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes. In no event will that commission, which may include concessions to be allowed to other dealers, exceed $35.00 per $1,000 principal amount note. See "Underwriting" beginning on page PS-37 of the accompanying product supplement no. 138-I. |
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
JPMorgan
May 22, 2008
Additional Terms Specific to the Notes
You should read this term sheet together with the prospectus dated December 1, 2005, as supplemented by the prospectus supplement dated October 12, 2006 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. 138-I dated May 22, 2008. 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. 138-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or 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, each prospectus supplement, product supplement no. 138-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.
What Is the Payment at Maturity on the Notes Assuming a Range of Performance for the Core Commodity-IGAR Long-Short?
The following table illustrates the hypothetical payment at maturity on the notes. The hypothetical payment at maturity set forth below assume an Initial Underlying Value of 140 and an Additional Amount of $92.50. The hypothetical payment at maturity set forth below are for illustrative purposes only and may not be the actual payment at maturity applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
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Ending Underlying |
Underlying |
$1,000 x |
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Additional |
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Payment at |
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252.00 |
80.00% |
$1,800 |
+ |
$92.50 |
= |
$1,892.50 |
238.00 |
70.00% |
$1,700 |
+ |
$92.50 |
= |
$1,792.50 |
224.00 |
60.00% |
$1,600 |
+ |
$92.50 |
= |
$1,692.50 |
210.00 |
50.00% |
$1,500 |
+ |
$92.50 |
= |
$1,592.50 |
196.00 |
40.00% |
$1,400 |
+ |
$92.50 |
= |
$1,492.50 |
182.00 |
30.00% |
$1,300 |
+ |
$92.50 |
= |
$1,392.50 |
168.00 |
20.00% |
$1,200 |
+ |
$92.50 |
= |
$1,292.50 |
154.00 |
10.00% |
$1,100 |
+ |
$92.50 |
= |
$1,192.50 |
147.00 |
5.00% |
$1,050 |
+ |
$92.50 |
= |
$1,142.50 |
140.00 |
0.00% |
$1,000 |
+ |
$92.50 |
= |
$1,092.50 |
126.00 |
-10.00% |
$900 |
+ |
$92.50 |
= |
$992.50 |
112.00 |
-20.00% |
$800 |
+ |
$92.50 |
= |
$892.50 |
98.00 |
-30.00% |
$700 |
+ |
$92.50 |
= |
$792.50 |
84.00 |
-40.00% |
$600 |
+ |
$92.50 |
= |
$692.50 |
70.00 |
-50.00% |
$500 |
+ |
$92.50 |
= |
$592.50 |
56.00 |
-60.00% |
$400 |
+ |
$92.50 |
= |
$492.50 |
42.00 |
-70.00% |
$300 |
+ |
$92.50 |
= |
$392.50 |
28.00 |
-80.00% |
$200 |
+ |
$92.50 |
= |
$292.50 |
14.00 |
-90.00% |
$100 |
+ |
$92.50 |
= |
$192.50 |
0.00 |
-100.00% |
$0 |
+ |
$92.50 |
= |
$92.50 |
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JPMorgan
Structured Investments |
TS-1 |
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total returns set forth in the table on the previous page are calculated.
Example 1: The Ending Underlying Value increases from the Initial Underlying Value of 140 to an Ending Underlying Value of 147. Because the Ending Underlying Value of 147 is greater than the Initial Underlying Value of 140, the investor receives a payment at maturity of $1,092.50 per $1,000 principal amount note, calculated as follows:
$1,000 x (1 + 5%) + $92.50 = $1,092.50
Example 2: The Ending Underlying Value decreases from the Initial Underlying Value of 140 to an Ending Underlying Value of 112. Because the Ending Underlying Value of 112 is less than the Initial Underlying Value of 140, the investor receives a payment at maturity of $892.50 per $1,000 principal amount note, calculated as follows:
$1,000 x (1 + -20%) + $92.50 = $892.50
Example 3: The Ending Underlying Value decreases from the Initial Underlying Value of 140 to an Ending Underlying Value of 0. Because the Ending Underlying Value of 0 is less than the Initial Underlying Value of 140, the investor receives a payment at maturity of $45 per $1,000 principal amount note, which reflects the Additional Amount, calculated as follows:
$1,000 x (1 + -100%) + $92.50 = $92.50
JPMorgan Core Commodity Investable Global Asset Rotator Long-Short Index
The JPMorgan Core Commodity Investable Global Asset Rotator Long-Short Index (the Core Commodity-IGAR Long-Short or the Underlying).
The Core Commodity-IGAR Long-Short was developed and is maintained by J.P. Morgan Securities Ltd. to implement a momentum-based algorithmic strategy for commodity allocations. The Core Commodity-IGAR Long-Short references the value of a synthetic portfolio selected from a limited universe of commodity constituents, each of which is a component of the S&P GSCITM Index (S&P GSCITM) and is intended to serve as a benchmark value for a particular commodity.
Historical performance data for each constituent is run through the Core Commodity-IGAR Long-Short algorithms on a monthly basis. The algorithms test each constituents performance and consistency. The performance algorithm tests the year-over-year performance for each constituent, and the consistency tests filter out constituents that have not demonstrated consistent positive or negative monthly performance over a one-year period, attributing greater weight to more recent monthly periods.
Up to seven constituents that are ranked with the strongest positive performance and successfully pass the long consistency test are assigned a long-short target weight of one-seventh (1/7) in the synthetic portfolio until the next monthly rebalancing. The weighting of one-seventh will apply to each of the strongest constituents even if their number is less than seven. Up to seven constituents that are ranked with the weakest negative performance (i.e., the weakest performance) and successfully pass the short consistency test are assigned a long-short target weight of minus one-seventh (-1/7) in the synthetic portfolio until the next monthly rebalancing. The weighting of minus one-seventh (-1/7) will apply to each of the weakest constituents even if their number is less than seven. The remaining constituents are assigned a weight of zero percent (0%). The value of the Core Commodity-IGAR Long-Short is the value of the synthetic portfolio, less a deemed calculation agency fee deducted daily at an annual rate of 0.96%.
The value of the Core Commodity-IGAR Long-Short is published each trading day under the Bloomberg ticker symbol CMDULSER.
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-2 |
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in S&P GSCITM constituents, in any of the commodities whose futures contracts determine the levels of S&P GSCITM constituents or the constituents of the Core Commodity-IGAR Long-Short, or in any contracts relating to such commodities for which there is an active secondary market. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 138-I dated May 22, 2008.
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JPMorgan
Structured Investments |
TS-3 |
Hypothetical Back-tested Data
The following graph sets forth the hypothetical back-tested performance of the Underlying based on the hypothetical back-tested daily Underlying closing values from January 1, 1991 through May 19, 2008, and the historical performance of the Underlying based on the daily Underlying closing values from May 20, 2008 through May 21, 2008. The Underlying was established on May 20, 2008. The Underlying closing value on May 21, 2008 was 138.8493. We obtained the Underlying closing values below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.
The hypothetical back-tested and historical values of the Underlying should not be taken as an indication of future performance, and no assurance can be given as to the Underlying closing value on the Observation Date. We cannot give you assurance that the performance of the Underlying will result in the return of any of your initial investment in excess of the Additional Amount of $92.50 per $1,000 principal amount note. The actual Additional Amount will be set on the pricing date and will not be less than $92.50. The data for the hypothetical back-tested performance of the Core Commodity-IGAR Long-Short set forth in the following graph was calculated on materially the same basis on which the performance of the Core Commodity-IGAR Long-Short is now calculated, but the number of S&P GSCITM constituents, and thus the universe of potential constituents, has changed over time. For example, in January 1991, there were only 17 S&P GSCITM components. There are currently 24 S&P GSCITM components, of which 14 S&P GSCITM components are eligible as potential components of the Core Commodity-IGAR Long-Short. Hypothetical daily performance data for the Core Commodity-IGAR Long-Short is net of index calculation costs of 0.96% per annum.
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JPMorgan
Structured Investments |
TS-4 |