Term
sheet
To
prospectus dated December 1, 2005,
prospectus supplement dated October 12, 2006 and product supplement no. 115-I dated February 4, 2008 |
Term
Sheet to
Product
Supplement No. 115-I
Registration
Statement No. 333-130051
Dated
March 12, 2008; Rule 433
|
Structured
Investments |
JPMorgan
Chase & Co.
$
Principal
Protected Notes Linked to a Weighted Basket Consisting of Three
Commodities and Two
Commodity
Indices due March 26,
2012
|
· |
Senior
unsecured obligations of JPMorgan Chase & Co. maturing March 26,
2012*.
|
· |
Cash
payment
at maturity of principal plus the Additional Amount, as described
below.
|
·
|
The
notes are
designed for investors who seek exposure to any appreciation
of a weighted
diversified basket of commodities and commodity indices composed
of
Crude Oil, Copper, Aluminum, the S&P GSCI™
Precious Metals Index Excess Return and the S&P GSCI™
Agriculture Index Excess Return
over the
term of the notes. Investors should be willing to forgo interest
payments
while seeking full principal protection at
maturity.
|
· |
Minimum
denominations of $1,000 and integral multiples
thereof.
|
· |
The
notes are
expected to price on or about March 19, 2008 and are expected
to settle on
or about March 25,
2008.
|
Basket:
|
The
notes are linked to a weighted Basket consisting of WTI
Crude Oil
(“Crude Oil,” Bloomberg symbol “CL1”), Copper Grade A (“Copper,” Bloomberg
symbol “LOCADY”), Primary Aluminum (“Aluminum,” Bloomberg symbol “LOAHDY”)
(each a “Basket Commodity,” and together, the “Basket
Commodities”),
the S&P GSCI™
Precious Metals Index Excess Return (“S&P GSCI™ Precious
Metals,” Bloomberg symbol “SPGCPMP”) and the S&P GSCI™
Agriculture Index Excess Return (“S&P GSCI™ Agriculture,”
Bloomberg symbol “SPGCAGP”), (each a “Basket Index,” and together, the
“Basket Indices”) (each Basket Commodity and each Basket Index, a “Basket
Component,” and together, the “Basket Components”).
|
Component
Weightings:
|
The
Crude Oil
Weighting is 40%, the Copper Weighting is 20%, the Aluminum Weighting
is
15%, the Precious
Metals Weighting is 15%
and
the Agriculture
Weighting is 10% (each a “Component Weighting,” and collectively, the
“Component Weightings”).
|
Payment
at
Maturity:
|
At
maturity,
you will receive a cash payment, for each $1,000 principal amount
note, of
$1,000 plus the Additional Amount, which may be zero.
|
Additional
Amount:
|
The
Additional Amount per $1,000 principal amount note paid at maturity
will
equal $1,000 x the Basket Return x the Participation Rate; provided
that the
Additional Amount will not be less than zero.
|
Participation
Rate:
|
At
least
105%. The
actual
Participation Rate will be determined on the pricing date and will
not be
less than 105%.
|
Basket
Return:
|
Ending
Basket
Level —
Starting
Basket Level
Starting
Basket Level
|
Starting
Basket Level:
|
Set
equal to
100 on the pricing date, which is expected to be on or about March
19,
2008.
|
Ending
Basket
Level:
|
The
Basket
Closing Level on the Observation Date.
|
Basket
Closing Level:
|
The
Basket
Closing Level on any trading day will be calculated as follows:
|
100
x [1 +
(Crude Oil Return * Crude Oil Weighting) + (Copper Return * Copper
Weighting) + (Aluminum Return * Aluminum Weighting) + (Precious Metals
Return * Precious Metals Weighting) + (Agriculture Return * Agriculture
Weighting)]
|
|
The
returns
set forth in the formula above reflect the performance of each Basket
Component from the relevant settlement price or closing level on
the
pricing date to the relevant settlement price or closing level on
such
trading day. For more information on the calculation of the returns
for
the Basket Components, see “Selected Purchase Considerations —
Component
Returns” in this term sheet.
|
|
Observation
Date:
|
March
16,
2012*
|
Maturity
Date:
|
March
26,
2012*
|
CUSIP:
|
48123MTB8
|
* |
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. 115-I.
|
Price
to Public
|
Fees
and Commissions (1)
|
Proceeds
to Us
|
|
Per
note
|
$
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) |
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 $25.00 per $1,000 principal amount note and may
use a
portion of that commission to pay selling concessions to other
dealers of
approximately $22.50 per $1,000 principal amount note. The other
dealers
may forgo, in their sole discretion, some or all of their selling
concessions. The actual commission received by JPMSI may be more
or less
than $25.00 and will depend on market conditions on the pricing
date. In
no event will the commission received by JPMSI, which includes
concessions
that may be allowed to other dealers, exceed $35.00 per $1,000
principal
amount note. See “Underwriting” beginning on page PS-63 of the
accompanying product supplement no.
115-I.
|
· |
Product
supplement no. 115-I dated February 4, 2008:
|
·
|
Prospectus
supplement dated October 12, 2006:
|
·
|
Prospectus
dated December 1, 2005:
|
·
|
PRESERVATION
OF CAPITAL AT MATURITY —
You
will
receive at least 100% of the principal amount of your notes if
you hold
the notes to maturity, regardless of the performance of the Basket.
Because the notes are our senior unsecured obligations, payment
of any
amount at maturity is subject to our ability to pay our obligations
as
they become due.
|
·
|
APPRECIATION
POTENTIAL —
At
maturity, in addition to your principal, for each $1,000 principal
amount
note you will receive a payment equal to $1,000 x the Basket Return
x the
Participation Rate†,
provided
that
this
payment (the Additional Amount) will not be less than
zero.
|
·
|
BASKET
COMPONENT RETURNS —
The
Crude
Oil Return reflects the performance of Crude Oil, expressed as
a
percentage, from the official U.S. dollar cash buyer settlement
price per
barrel of the first nearby WTI light sweet crude oil futures contract
quoted by the New York Mercantile Exchange (the “NYMEX”) on the pricing
date to the official U.S. dollar cash buyer settlement price per
barrel of
the first nearby WTI light sweet crude oil futures contract quoted
by the
NYMEX on the Observation Date. Each of the Copper Return and the
Aluminum
Return reflects the performance of the relevant Basket Commodity,
expressed as a percentage, from the official U.S. dollar cash buyer
settlement price per metric ton quoted by the London Metal Exchange
(the
“LME”) on the pricing date for such Basket Commodity to the official
U.S.
dollar cash buyer settlement price per metric ton quoted by the
LME for
such Basket Commodity on the Observation Date. Each of the Precious
Metals
Return and Agriculture Return reflects the performance of the S&P
GSCI™
Precious
Metals Index Excess Return and the S&P GSCI™
Agriculture
Index Excess Return, respectively, expressed as a percentage, from
the
closing level of the relevant Basket Index on the pricing date
to the
closing level of such Basket Index on the Observation Date. For
additional
information, see “Description of Notes — Payment at Maturity” in the
accompanying product supplement no.
115-I.
|
·
|
DIVERSIFICATION
OF THE BASKET COMPONENTS —
Because
Crude Oil makes up 40% of the Basket, we expect that generally
the market
value of your notes and your payment at maturity will depend significantly
on the performance of Crude Oil.
|
·
|
TAXED
AS CONTINGENT PAYMENT DEBT INSTRUMENTS —
You
should
review carefully the section entitled “Certain U.S. Federal Income Tax
Consequences” in the accompanying product supplement no. 115-I. Subject to
the limitations described therein, in the opinion of our special
tax
counsel, Davis Polk & Wardwell, the notes will be treated for U.S.
federal income tax purposes as “contingent payment debt instruments.” You
will generally be required to recognize interest income in each
year at
the “comparable yield,” as determined by us, although we may not make any
payments with respect to the notes until maturity. Interest included
in
income will increase your basis in the notes. Generally, amounts
received
at maturity or earlier sale or disposition in excess of your basis
will be
treated as additional interest income while any loss will be treated
as an
ordinary loss to the extent of all previous inclusions with respect
to the
notes, which will be deductible against other income (e.g.,
employment
and interest income), with the balance treated as capital loss,
which may
be subject to limitations. Purchasers who are not initial purchasers
of
notes at the issue price should consult their tax advisers with
respect to
the tax consequences of an investment in the notes, including the
treatment of the difference, if any, between their basis in the
notes and
the notes’ adjusted issue price.
|
·
|
COMPARABLE
YIELD AND PROJECTED PAYMENT SCHEDULE —
We
will
determine the comparable yield for the notes and will provide that
comparable yield, and the related projected payment schedule, in
the
pricing supplement for the notes, which we will file with the SEC.
If the
notes had priced on March 11, 2008 and we had determined the comparable
yield on that date, it would have been an annual rate of 2.95%,
compounded
semi-annually. The actual comparable yield that we will determine
for the
notes may be more or less than 2.95%, and will depend upon a variety
of
factors, including actual market conditions and our borrowing costs
for
debt instruments of comparable maturities. Neither
the comparable yield nor the projected payment schedule constitutes
a
representation by us regarding the actual amount, if any, that
we will pay
on the notes.
|
·
|
MARKET
RISK —
The return on the notes at maturity is linked to the performance
of the
Basket, and will depend on whether, and the extent to which, the
Basket
Return is positive. YOU WILL RECEIVE NO MORE THAN THE FULL PRINCIPAL
AMOUNT OF YOUR NOTES AT MATURITY IF THE BASKET RETURN IS ZERO OR
NEGATIVE.
|
·
|
THE
NOTES MIGHT NOT PAY MORE THAN THE PRINCIPAL AMOUNT —
You may receive a lower payment at maturity than you would have
received
if you had invested in the Basket Indices individually, the commodities
related to the Basket Indices or the commodities futures contracts
underlying the Basket Indices. If the Ending Basket Level does
not exceed
the Starting Basket Level, the Additional Amount will be zero.
This will
be true even if the value of the Basket was higher than the Starting
Basket Level at some time during the term of the notes but falls
below the
Starting Basket Level on the Observation
Date.
|
·
|
CHANGES
IN THE VALUE OF THE BASKET COMPONENTS MAY OFFSET EACH OTHER —
Price
movements in the Basket Components may not correlate with each
other. At a
time when the value of one or more of the Basket Components increases,
the
value of the other Basket Components may not increase as much or
may even
decline in value. Therefore, in calculating the Ending Basket Level,
increases in the value of one or more of the Basket Components
may be
moderated, or more than offset, by lesser increases or declines
in the
level of the other Basket Components, particularly if the Basket
Component
or Components that appreciate are of relatively low weight in the
Basket.
There can be no assurance that the Ending Basket Level will be
greater
than the Starting Basket Level. If the Basket Return is negative
or zero,
you will only receive the principal amount of your notes at
maturity.
|
·
|
INVESTMENTS
RELATED TO THE VALUE OF THE BASKET COMPONENTS MAY BE MORE VOLATILE
THAN
TRADITIONAL SECURITIES INVESTMENTS — The
value of
each Basket Component is subject to variables that may be less
significant
to the values of traditional securities such as stocks and bonds,
and
where the return on the securities is not related to commodities
or
commodities futures contracts. Variables such as changes in supply
and
demand relationships, governmental programs and policies, national
and
international political and economic events, changes in interest
and
exchange rates, trading activities in commodities and related contracts,
weather, trade, fiscal, monetary and exchange control policies
may have a
larger impact on commodity prices and commodity-linked indices
than on
traditional securities. These additional variables may create additional
investment risks that cause the value of the notes to be more volatile
than the values of traditional securities and may cause the levels
of the
Basket Components to move in unpredictable and unanticipated directions
and at unpredictable or unanticipated
rates.
|
·
|
THE
MARKET PRICE OF OIL WILL AFFECT THE VALUE OF THE NOTES
—
Because the Crude Oil futures contract makes up 40% of the Basket,
we
expect that generally the market value of the notes will depend
in part on
the market price of oil. Crude oil prices are generally more volatile
and
subject to dislocation than prices of other commodities. Prices
can change
rapidly due to crude oil supply disruptions stemming from world
events, or
domestic problems such as refinery or pipeline outages. Crude oil
prices
are determined with significant influence by the Organization of
Petroleum
Exporting Countries (“OPEC”). OPEC has the potential to influence oil
prices worldwide because its members possess a significant portion
of the
world’s oil supply.
|
·
|
NO
INTEREST OR VOTING RIGHTS IN THE BASKET COMMODITIES, OR THE
COMMODITIES UPON WHICH THE FUTURES CONTRACTS THAT COMPOSE THE BASKET
INDICES ARE BASED OR CERTAIN OTHER COMMODITY-RELATED CONTRACTS
—
As
a holder
of the notes, you will not receive any interest payments, and you
will not
have any rights that owners of the Basket Commodities or the commodities
upon which the futures contracts that compose the Basket Indices
are based
or holders of forward or futures contracts on or other instruments
linked
to the Basket Commodities or such commodities have. The return
on your
notes will not reflect the return you would realize if you actually
purchased the Basket Commodities or the commodities upon which
the futures
contracts that compose the Basket Indices are based, or exchange-traded
or
over-the-counter instruments based on any of the Basket Components.
|
· |
CHANGES
IN THE COMPOSITION AND VALUATION OF THE S&P GSCI™
MAY
ADVERSELY AFFECT THE PAYMENT AT MATURITY AND/OR THE MARKET VALUE
OF THE
NOTES —
The
composition of the S&P GSCI™
and its
sub-indices (including the Basket Indices) may change over time,
as
additional futures contracts satisfy the eligibility criteria
or futures
contracts currently included in the S&P GSCI™
fail to
satisfy such criteria. The weighting factors applied to each
commodity
included in the Basket Indices change annually, based on changes
in
commodity production statistics. In addition, S&P, in consultation
with its Advisory Panel, may modify the methodology for determining
the
composition and weighting of the Basket Indices and for calculating
their
value in order to assure that the Basket Indices represent a
measure of
the performance over time of the markets for the underlying commodities.
A
number of modifications to the methodology for determining the
contracts
to be included in the Basket Indices, and for valuing Basket
Indices, have
been made in the past several years and further modifications
may be made
in the future. Such changes could adversely affect the payment
at maturity
and/or the market value of the
notes.
|
·
|
EACH
OF THE BASKET INDICES MAY BE MORE VOLATILE AND SUSCEPTIBLE TO PRICE
FLUCTUATIONS OF COMMODITIES THAN A BROADER COMMODITIES INDEX
—
Each of the Basket Indices may be more volatile and susceptible
to price
fluctuations than a broader commodities index, such as the S&P
GSCI™.
In contrast to the S&P GSCI™,
which includes contracts on the principal physical commodities
that are
actively traded, each of the Basket Indices is comprised of contracts
on
only a portion of such physical commodities. As a result, price
volatility
in the contracts included in the S&P GSCI™
will likely have a greater impact on each Basket Index than it
would on
the broader S&P GSCI™,
and each Basket Index individually will be more susceptible to
fluctuations and declines in value of the physical commodities
included in
such Basket Index. In addition, because each of the Basket Indices
omit
principal market sectors comprising the S&P GSCI™,
they may be less representative of the economy and commodity markets
as a
whole and might therefore not serve as a reliable benchmark for
commodity
market performance generally.
|
·
|
CERTAIN
BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE
NOTES PRIOR
TO MATURITY —
While the payment at maturity 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 cost of hedging our obligations
under the notes through one or more of our affiliates. As a result,
and as
a general matter, the price, if any, at which JPMSI 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.
|
·
|
LACK
OF LIQUIDITY —
The
notes
will not be listed on any securities exchange. JPMSI 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 JPMSI is willing to buy the notes.
|
·
|
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, the economic interests
of the
calculation agent and other affiliates of ours are potentially
adverse to
your interests as an investor in the notes.
|
·
|
MANY
ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES
—
In
addition
to the level of the Basket on any day, the value of the notes will
be
affected by a number of economic and market factors that may either
offset
or magnify each other, including:
|
· |
the
volatility, frequency and magnitude of changes in the value of
the Basket
Components;
|
· |
supply
and
demand trends for each Basket Component at any
time;
|
· |
the
market
price of the Basket Commodities and the physical commodities
upon which
the futures contracts that compose the Basket Indices
are based or the
exchange traded futures contracts on such
commodities;
|
· |
a
variety of
economic, financial, political and regulatory, geographical,
meteorological or judicial events;
|
· |
interest
and
yield rates in the market generally;
|
· |
the
time
remaining to the maturity of the notes;
and
|
· |
our
creditworthiness, including actual or anticipated downgrades in
our credit
ratings.
|
Ending
Basket
Level
|
Basket
Return
|
Basket
Return
x
Upside
Participation
Rate
(105%)
|
Additional
Amount
|
|
Principal
|
|
Payment
at
Maturity
|
180
|
80.00%
|
84.00%
|
$840.00
|
+
|
$1,000
|
=
|
$1,840.00
|
170
|
70.00%
|
73.50%
|
$735.00
|
+
|
$1,000
|
=
|
$1,735.00
|
160
|
60.00%
|
63.00%
|
$630.00
|
+
|
$1,000
|
=
|
$1,630.00
|
150
|
50.00%
|
52.50%
|
$525.00
|
+
|
$1,000
|
=
|
$1,525.00
|
140
|
40.00%
|
42.00%
|
$420.00
|
+
|
$1,000
|
=
|
$1,420.00
|
130
|
30.00%
|
31.50%
|
$315.00
|
+
|
$1,000
|
=
|
$1,315.00
|
120
|
20.00%
|
21.00%
|
$210.00
|
+
|
$1,000
|
=
|
$1,210.00
|
115
|
15.00%
|
15.75%
|
$157.50
|
+
|
$1,000
|
=
|
$1,157.50
|
110
|
10.00%
|
10.50%
|
$105.00
|
+
|
$1,000
|
=
|
$1,105.00
|
100
|
0.00%
|
0.00%
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
90
|
-10.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
80
|
-20.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
70
|
-30.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
60
|
-40.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
50
|
-50.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
40
|
-60.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
30
|
-70.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|
20
|
-80.00%
|
N/A
|
$0.00
|
+
|
$1,000
|
=
|
$1,000.00
|