Supplemental
Term
Sheet†
To prospectus dated December 1, 2005, prospectus supplement dated October 12, 2006 and product supplement no. 34-VI dated February 28, 2008 |
Supplemental
Term Sheet to
Product
Supplement No. 34-VI
Registration
Statement No. 333-130051
Dated
July 21, 2008; Rule
433
|
Structured
Investments |
JPMorgan
Chase & Co.
$
Reverse
Exchangeable Notes due January 30, 2009
Each
Linked to the Common Stock of a Different Single Reference Stock
Issuer
|
·
|
This
supplemental term sheet relates to two (2) separate note offerings.
Each
issue of offered notes is linked to one, and only one, Reference
Stock.
You may participate in either of the two (2) note offerings or,
at your
election, in both of the offerings. This supplemental term sheet
does not,
however, allow you to purchase a note linked to a basket of both
of the
Reference Stocks described below.
|
·
|
The
notes are
designed for investors who seek an interest rate that is higher
than the
current dividend yield on the applicable Reference Stock or the
yield on a
conventional debt security with the same maturity issued by us
or an
issuer with a comparable credit rating. Investors should be willing
to
forgo the potential to participate in the appreciation of the applicable
Reference Stock, be willing to accept the risks of owning the common
stock
of the applicable Reference Stock issuer, and be willing to lose
some or
all of their principal at maturity.
|
·
|
Investing
in
the notes is not equivalent to investing in the shares of an issuer
of
either of the Reference Stocks.
|
·
|
Each
issue of
offered notes will pay interest monthly at the fixed rate specified
for
that issue below. However, the
notes do not guarantee any return of principal at
maturity.
Instead,
the payment at maturity will be based on the Final Share Price
of the
applicable Reference Stock and whether the closing price of the
applicable
Reference Stock has declined from the applicable Initial Share
Price by
more than the applicable Protection Amount during the Monitoring
Period,
as described below.
|
·
|
Payment
at
maturity for each $1,000 principal amount note will be either a
cash
payment of $1,000 or delivery of shares of the applicable Reference
Stock
(or, at our election, the Cash Value thereof), in each case, together
with
any accrued and unpaid interest, as described
below.
|
·
|
Minimum
denominations of $1,000 and integral multiples
thereof.
|
Payment
at
Maturity:
|
The
payment
at maturity, in excess of any accrued and unpaid interest, is based
on the
performance of the applicable Reference Stock. You will receive $1,000
for
each $1,000 principal amount note, plus any accrued and unpaid interest
at
maturity, unless:
(1)
the
applicable Final Share Price is less than the applicable Initial
Share
Price; and
(2)
on
any day
during the Monitoring Period, the closing
price
of the
applicable Reference Stock has declined, as compared to the applicable
Initial Share Price, by more than the applicable Protection Amount.
If
the
conditions described in both (1) and (2) are satisfied, at maturity
you
will receive, in addition to any accrued and unpaid interest, instead
of
the principal amount of your notes, the number of shares of the applicable
Reference Stock equal to the applicable Physical Delivery Amount
(or, at
our election, the Cash Value thereof). Fractional shares will be
paid in
cash. The
market value of the Physical Delivery Amount or the Cash Value thereof
will most likely be substantially less than the principal amount
of your
notes, and may be zero.
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Maturity
Date:
|
January 30, 2009*
|
Pricing
Date:
|
On
or about
July 28, 2008
|
Settlement
Date:
|
On
or about
July 31, 2008
|
Observation
Date:
|
January
27,
2009*
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Interest
Payment Dates:
|
Interest
on
the notes will be payable monthly in arrears on the last calendar
day of
each month (each such date, an “Interest Payment Date”), commencing August
31, 2008, to and including the Interest Payment Date corresponding
to the
Maturity Date. See “Selected Purchase Considerations — Monthly Interest
Payments” in this supplemental term sheet for more
information.
|
Monitoring
Period:
|
The
period
from the Pricing Date to and including the Observation Date.
|
Physical
Delivery Amount:
|
The
number of
shares of the applicable Reference Stock, per $1,000 principal amount
note, equal to $1,000 divided by the applicable Initial Share Price,
subject to adjustments.
|
Cash
Value:
|
For
each
Reference Stock, the amount in cash equal to the product of (1) $1,000
divided by the Initial Share Price of such Reference Stock and (2)
the
Final Share Price of such Reference Stock, subject to
adjustments.
|
Initial
Share
Price:
|
The
closing
price of the applicable Reference Stock on the Pricing Date. The
Initial
Share Price is subject to adjustments in certain circumstances. See
“Description of Notes — Payment at Maturity” and “General Terms of Notes —
Anti-dilution Adjustments” in the accompanying product supplement no.
34-VI for further information about these adjustments.
|
Final
Share
Price:
|
The
closing
price of the applicable Reference Stock on the Observation
Date.
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Approximate
Tax Allocation of
Monthly
Coupon††
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||||||||||
Page
Number
|
Ticker
Symbol
|
Principal
Amount
|
Interest
Rate
|
Protection
Amount
|
Initial
Share Price
|
CUSIP
|
Approximate
Monthly Coupon
|
Interest
on Deposit
|
Put
Premium
|
|
Intel
Corporation
|
TS-3
|
INTC
|
5.00%
(equivalent to 10.00% per annum)
|
30.00%
of the
Initial Share Price
|
48123LET7
|
$8.33
|
30.30%
|
69.70%
|
||
National-Oilwell
Varco
Inc.
|
TS-5
|
NOV
|
6.00%
(equivalent to 12.00% per annum)
|
40.00%
of the
Initial Share Price
|
48123LEU4
|
$10.00
|
25.25%
|
74.75%
|
*
|
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. 34-VI.
|
†
|
This
supplemental term sheet supplements the term sheet dated July 9,
2008 to
product supplement no. 34-VI but does not supersede the term
sheet.
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††
|
Based
on one
reasonable treatment of the notes, as described herein under “Selected
Purchase Considerations —
Tax
Treatment
as a Unit Comprising a Put Option and a Deposit” and in the accompanying
product supplement no. 34-VI under “Certain U.S. Federal Income Tax
Consequences” on page PS-28. The allocations presented herein were
determined as of July 8, 2008; the actual allocations will be determined
as of the Pricing Date and may
differ.
|
of Proceeds” in product supplement no. 34-VI, the information in the footnotes (1) and (2) below controls. | |||
Price
to Public (1)
|
Fees
and Commissions (2)
|
Proceeds
to Us
|
|
Per
note
|
$
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1)
|
The
price to
the public includes the estimated cost of hedging our obligations
under
the notes through one or more of our
affiliates.
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(2)
|
In
no event
will the fees and commissions received by J.P. Morgan Securities
Inc.,
which we refer to as JPMSI, which include concessions to be allowed
to
other dealers, exceed $60.00 per $1,000 principal amount note for
either
of the two (2) offerings listed above. For more detailed information
about
fees, commissions and concessions, please see “Supplemental Underwriting
Information” on the last page of this supplemental term
sheet.
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·
|
Product
supplement no. 34-VI dated February
28,
2008:
|
·
|
Prospectus
supplement dated October 12, 2006:
|
·
|
Prospectus
dated December 1, 2005:
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·
|
THE
NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD ON DEBT SECURITIES
OF
COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT
RATING —
The
notes
will pay interest at an Interest Rate depending upon the applicable
Reference Stock, as indicated on the cover of this supplemental term
sheet. We believe that the applicable Interest Rate is higher than
the
yield received on debt securities of comparable maturity issued by
us or
an issuer with a comparable credit rating. Because the notes are
our
senior unsecured obligations, any interest payment or any payment
at
maturity is subject to our ability to pay our obligations as they
become
due.
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·
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MONTHLY
INTEREST PAYMENTS —
The
notes offer monthly interest payments at the applicable Interest
Rate set
forth on the cover of this supplemental
term
sheet. Interest will be payable monthly in arrears on the last
calendar day of each month (each such date, an “Interest Payment Date”),
commencing August 31, 2008, to
and
including the Interest Payment Date corresponding to the Maturity
Date,
to the holders of record at the close of business on the date 15
calendar
days prior to the applicable Interest Payment Date. If an Interest
Payment
Date is not a business day, payment will be made on the next business
day
immediately following such day, but no additional interest will accrue
as
a result of the delayed payment. For example, the monthly interest
payment
due in August 2008 shall be payable on September 1, 2008.
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·
|
THE
NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL —
Your
return
of principal at maturity is protected if the applicable Final Share
Price
does not decline from the applicable Initial Share Price or the closing
price of the applicable Reference Stock does not decline, as compared
to
the applicable Initial Share Price, by more than the applicable Protection
Amount on any day during the Monitoring Period. However,
if the applicable Final Share Price declines from the applicable
Initial
Share Price and the closing price of the applicable Reference Stock
on any
day during the Monitoring Period has declined by more than the applicable
Protection Amount, you could lose the entire principal amount of
your
notes.
|
·
|
TAX
TREATMENT AS A UNIT COMPRISING A PUT OPTION AND A DEPOSIT —
You
should
review carefully the section entitled “Certain U.S. Federal Income Tax
Consequences” in the accompanying product supplement no. 34-VI.
We
and you
agree (in the absence of an administrative determination or judicial
ruling to the contrary)
to treat the
notes as units comprising a Put Option and a Deposit for U.S. federal
income tax purposes. We will determine the portion of each coupon
payment
that we will allocate to interest on the Deposit and to Put Premium,
respectively, and will provide that allocation in the pricing supplement
for the notes. If the notes had priced on July 8, 2008, of each coupon
payment, we would have treated the percentages specified on the cover
of
this supplemental term sheet as interest on the Deposit and as Put
Premium, respectively. The actual allocation that we will determine
for
the notes may differ from this hypothetical allocation, and will
depend
upon a variety of factors, including actual market conditions and
our
borrowing costs for debt instruments of comparable maturities on
the
Pricing Date. Assuming this characterization is respected, amounts
treated
as interest on the Deposit will be taxed as ordinary income while
the Put
Premium will not be taken into account prior to maturity or sale.
However,
there are other reasonable treatments that the Internal Revenue Service
(the “IRS”) or a court may adopt, in which case the timing and character
of any income or loss on the notes could be significantly and adversely
affected. In addition, on December 7, 2007, Treasury and the IRS
released
a notice requesting comments on the U.S. federal income tax treatment
of
“prepaid forward contracts” and similar instruments. While it is not clear
whether the notes would be viewed as similar to the typical prepaid
forward contract described in the notice, it is possible that any
Treasury
regulations or other guidance promulgated after consideration of
these
issues could materially and adversely affect the tax consequences
of an
investment in the notes, possibly with retroactive effect. The notice
focuses on a number of issues, the most relevant of which for holders
of
the notes are the character of income or loss (including whether
the Put
Premium might be currently included as ordinary income) and the degree,
if
any, to which income realized by Non-U.S. Holders should be subject
to
withholding tax. Both U.S. and Non-U.S. Holders should consult their
tax
advisers regarding all aspects of the U.S. federal income tax consequences
of an investment in the notes, including possible alternative treatments
and the issues presented by this notice. Purchasers who are not initial
purchasers of notes at the issue price should also consult their
tax
advisers with
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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. The payment at maturity
will be
based on the applicable Final Share Price and whether the closing
price of
the applicable Reference Stock has declined from the applicable Initial
Share Price by more than the applicable Protection Amount on any
day
during the Monitoring Period. Under certain circumstances, you will
receive at maturity a predetermined number of shares of the applicable
Reference Stock (or, at our election, the Cash Value thereof). The
market
value of those shares of the applicable Reference Stock or the Cash
Value
thereof will most likely be less than the principal amount of each
note
and may be zero. Accordingly,
you could lose up to the entire principal amount of your
notes.
|
·
|
YOUR
PROTECTION MAY TERMINATE ON ANY DAY DURING THE TERM OF THE NOTES
—
If,
on any
day during the Monitoring Period, the closing price of the applicable
Reference Stock declines below the applicable Initial Share Price
minus
the applicable Protection Amount, you will at maturity be fully exposed
to
any depreciation in the applicable Reference Stock. We refer to this
feature as a contingent buffer. Under these circumstances, and
if the
applicable Final Share Price is less than the applicable Initial
Share
Price, you will receive at maturity a predetermined number of shares
of
the applicable Reference Stock (or, at our election, the Cash Value
thereof) and, consequently, you will lose 1% of the principal amount
of
your investment for every 1% decline in the applicable Final Share
Price
compared to the applicable Initial Share Price. You will be subject
to
this potential loss of principal even if the price of the applicable
Reference Stock subsequently recovers such that the applicable Final
Share
Price is above its Initial Share Price minus its Protection Amount.
If
these notes had a non-contingent buffer feature, under the same scenario,
you would have received the full principal amount of your notes plus
accrued and unpaid interest at maturity. As a result, your investment
in
the notes may not perform as well as an investment in a security
with a
return that includes a non-contingent
buffer.
|
·
|
YOUR
RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL AMOUNT PLUS ACCRUED
INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF THE APPLICABLE
REFERENCE STOCK —
Unless
(i)
the applicable Final Share Price is less than the applicable Initial
Share
Price and (ii) on any day during the Monitoring Period, the closing
price
of the applicable Reference Stock has declined, as compared to the
applicable Initial Share Price, by more than the applicable Protection
Amount, for each $1,000 principal amount note, you will receive $1,000
at
maturity plus any accrued and unpaid interest, regardless of any
appreciation in the value of the applicable Reference Stock, which
may be
significant. Accordingly, the return on the notes may be significantly
less than the return on a direct investment in the applicable Reference
Stock during the term of the notes.
|
·
|
NO
OWNERSHIP RIGHTS IN THE APPLICABLE REFERENCE STOCK —
As
a holder
of the notes, you will not have any ownership interest or rights
in the
applicable Reference Stock, such as voting rights or dividend payments.
In
addition, the applicable Reference Stock issuer 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 applicable
Reference Stock and the notes.
|
·
|
NO
AFFILIATION WITH THE REFERENCE STOCK ISSUERS —
We
are not
affiliated with the issuers of the Reference Stocks. We assume no
responsibility for the adequacy of the information about the Reference
Stock issuers contained in this supplemental term sheet or in product
supplement no. 34-VI. You should make your own investigation into
the
Reference Stocks and their issuers. We are not responsible for the
Reference Stock issuers’ public disclosure of information, whether
contained in SEC filings or
otherwise.
|
·
|
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 supplemental 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 referred to
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. 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. We and/or our affiliates may also currently or from time to
time
engage in business with the Reference Stock issuers, including extending
loans to, or making equity investments in, such Reference Stock issuer(s)
or providing advisory services to such Reference Stock issuer(s).
In
addition, one or more of our affiliates may publish research reports
or
otherwise express opinions with respect to the Reference Stock issuers
and
these reports may or may not recommend that investors buy or hold
the
Reference Stock(s). As a prospective purchaser of the notes, you
should
undertake an independent investigation of the applicable Reference
Stock
issuer that in your judgment is appropriate to make an informed decision
with respect to an investment in the notes.
|
·
|
HEDGING
AND TRADING IN THE REFERENCE STOCKS —
While
the
notes are outstanding, we or any of our affiliates may carry out
hedging
activities related to the notes, including in the Reference Stocks
or
instruments related to such Reference Stock(s). We or our affiliates
may
also trade in the Reference Stocks or instruments related to Reference
Stock(s) from time to time. Any of these hedging or trading activities
as
of the Pricing Date and during the term of the notes could adversely
affect our payment to you at
maturity.
|
·
|
MANY
ECONOMIC AND MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES
—
In
addition
to the value of the applicable Reference Stock and interest rates
on any
trading 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
and which are set out in more detail in product supplement no. 34-VI.
|
·
the
Initial Share Price:
|
$21.00
|
·
|
the
Protection Amount (in U.S. dollars): $6.30
|
·
the
Interest Rate:
|
5.00%
(equivalent to 10.00% per annum)
|
·
|
the
Protection Amount: 30.00%
|
Hypothetical
lowest closing price during the Monitoring Period
|
Hypothetical
lowest closing price expressed as a percentage of Initial Share Price
during the Monitoring Period
|
Hypothetical
Final Share Price
|
Hypothetical
Final Share Price expressed as a percentage of Initial Share
Price
|
Payment
at Maturity
|
Total
Value of Payment Received at Maturity**
|
$21.00
|
100%
|
$42.00
|
200%
|
$1,000.00
|
$1,000.00
|
$10.50
|
50%
|
$22.05
|
105%
|
$1,000.00
|
$1,000.00
|
$21.00
|
100%
|
$21.00
|
100%
|
$1,000.00
|
$1,000.00
|
$14.70
|
70%
|
$14.70
|
70%
|
$1,000.00
|
$1,000.00
|
$10.50
|
50%
|
$19.95
|
95%
|
47
shares of
the Reference Stock or the Cash Value thereof
|
$950.00
|
$10.50
|
50%
|
$10.50
|
50%
|
47
shares of
the Reference Stock or the Cash Value thereof
|
$500.00
|
$5.25
|
25%
|
$5.25
|
25%
|
47
shares of
the Reference Stock or the Cash Value thereof
|
$250.00
|
$0.00
|
0%
|
$0.00
|
0%
|
47
shares of
the Reference Stock or the Cash Value thereof
|
$0.00
|
**
|
Note
that you
will receive at maturity any accrued and unpaid interest in cash,
in
addition to either shares of the Reference Stock (or, at our election,
the
Cash Value thereof) or the principal amount of your note in cash.
Also
note that if you receive the Physical Delivery Amount, the total
value of
payment received at maturity shown in the table above includes the
value
of any fractional shares, which will be paid in
cash.
|
·
the
Initial Share Price:
|
$80.00
|
·
|
the
Protection Amount (in U.S. dollars): $32.00
|
·
the
Interest Rate:
|
6.00%
(equivalent to 12.00% per annum)
|
·
|
the
Protection Amount: 40.00%
|
Hypothetical
lowest closing price during the Monitoring Period
|
Hypothetical
lowest closing price expressed as a percentage of Initial Share Price
during the Monitoring Period
|
Hypothetical
Final Share Price
|
Hypothetical
Final Share Price expressed as a percentage of Initial Share
Price
|
Payment
at Maturity
|
Total
Value of Payment Received at Maturity**
|
$80.00
|
100%
|
$160.00
|
200%
|
$1,000.00
|
$1,000.00
|
$40.00
|
50%
|
$84.00
|
105%
|
$1,000.00
|
$1,000.00
|
$80.00
|
100%
|
$80.00
|
100%
|
$1,000.00
|
$1,000.00
|
$48.00
|
60%
|
$48.00
|
60%
|
$1,000.00
|
$1,000.00
|
$40.00
|
50%
|
$76.00
|
95%
|
12
shares of
the Reference Stock or the Cash Value thereof
|
$950.00
|
$40.00
|
50%
|
$40.00
|
50%
|
12
shares of
the Reference Stock or the Cash Value thereof
|
$500.00
|
$20.00
|
25%
|
$20.00
|
25%
|
12
shares of
the Reference Stock or the Cash Value thereof
|
$250.00
|
$0.00
|
0%
|
$0.00
|
0%
|
12
shares of
the Reference Stock or the Cash Value thereof
|
$0.00
|
**
|
Note
that you
will receive at maturity any accrued and unpaid interest in cash,
in
addition to either shares of the Reference Stock (or, at our election,
the
Cash Value thereof) or the principal amount of your note in cash.
Also
note that if you receive the Physical Delivery Amount, the total
value of
payment received at maturity shown in the table above includes the
value
of any fractional shares, which will be paid in
cash.
|