Term
sheet
To
prospectus dated December 1, 2005,
prospectus supplement dated October 12, 2006 and product supplement no. 132-I dated April 25, 2008 |
Term
Sheet to
Product
Supplement No. 132-I
Registration
Statement No. 333-130051
Dated
June 10, 2008; Rule 433
|
Structured
Investments |
JPMorgan
Chase & Co.
$ Return Notes Linked to the JPMorgan Core Commodity Investable Global Asset Rotator
Conditional Long-Short Index due June 18,
2010
|
· |
The
notes are
designed for investors who seek to participate in the appreciation
of the
JPMorgan Core Commodity Investable Global Asset Rotator Conditional
Long-Short Index as described below. Investors should be willing
to forgo
interest payments and, if the Ending Underlying Value declines
from the
Initial Underlying Value by more than 4.0%*,
be willing
to lose up to 96.0% of their
principal.
|
· |
Senior
unsecured obligations of JPMorgan Chase & Co. maturing June 18,
2010†.
|
· |
Minimum
denominations of $20,000 and integral multiples of $1,000 in
excess
thereof.
|
· |
The
notes are
expected to price on or about June 17, 2008††
and are
expected to settle on or about June 20,
2008.
|
Underlying:
|
JPMorgan
Core
Commodity Investable Global Asset Rotator Conditional Long-Short
Index
(the “Core Commodity-IGAR Conditional 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:
|
$1,000
x (1 +
Underlying Return) + Additional Amount
provided
that your
final payment at maturity will not be less than the Additional
Amount.
|
|
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 $40*.
*
The actual Additional Amount will be set on the pricing date
and will not
be less than $40.
|
Underlying
Return:
|
Ending
Underlying Value - Initial Underlying Value
Initial
Underlying Value
|
Initial
Underlying Value:
|
The
arithmetic average of the Underlying closing values on each of
the five
Initial Averaging Dates. All of the five Initial Averaging Dates
will
occur after the pricing date; as a result, the
Initial Underlying Value will not be determined until after the
pricing
date.
|
Ending
Underlying Value:
|
The
arithmetic average of the Underlying closing value on each of
the five
Ending Averaging Dates.
|
Initial
Averaging Dates†:
|
June
19,
2008, June 26, 2008, July 3, 2008, July 10, 2008 and July 17,
2008
|
Ending
Averaging Dates†:
|
June
7, 2010,
June 8, 2010, June 9, 2010, June 10, 2010 and June 11, 2010
|
Maturity
Date:
|
June
18,
2010†
|
CUSIP:
|
48123LBT0
|
† |
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.
132-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.”
|
Price
to Public
|
Fees
and Commissions (1)
|
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.
|
(2) |
J.P.
Morgan Securities Inc., which we refer to as JPMSI, acting as
agent for
JPMorgan Chase & Co., will receive a commission that 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
will include structuring and development fees, exceed $35.00 per
$1,000 principal amount note. See
“Underwriting” beginning on page PS-38 of the accompanying product
supplement no. 132-I.
|
· |
Product
supplement no. 132-I dated April 25,
2008:
|
· |
Prospectus
supplement dated October 12,
2006:
|
· |
Prospectus
dated December 1, 2005:
|
Ending
Underlying
Value
|
Underlying
Return |
$1,000
x
(1
+
Underlying
Return)
|
|
Additional
Amount
|
|
Payment
at
Maturity
|
261.00
|
80.00%
|
$1,800
|
+
|
$40
|
=
|
$1,840
|
246.50
|
70.00%
|
$1,700
|
+
|
$40
|
=
|
$1,740
|
232.00
|
60.00%
|
$1,600
|
+
|
$40
|
=
|
$1,640
|
217.50
|
50.00%
|
$1,500
|
+
|
$40
|
=
|
$1,540
|
203.00
|
40.00%
|
$1,400
|
+
|
$40
|
=
|
$1,440
|
188.50
|
30.00%
|
$1,300
|
+
|
$40
|
=
|
$1,340
|
174.00
|
20.00%
|
$1,200
|
+
|
$40
|
=
|
$1,240
|
159.50
|
10.00%
|
$1,100
|
+
|
$40
|
=
|
$1,140
|
152.25
|
5.00%
|
$1,050
|
+
|
$40
|
=
|
$1,090
|
145.00
|
0.00%
|
$1,000
|
+
|
$40
|
=
|
$1,040
|
130.50
|
-10.00%
|
$900
|
+
|
$40
|
=
|
$940
|
116.00
|
-20.00%
|
$800
|
+
|
$40
|
=
|
$840
|
101.50
|
-30.00%
|
$700
|
+
|
$40
|
=
|
$740
|
87.00
|
-40.00%
|
$600
|
+
|
$40
|
=
|
$640
|
72.50
|
-50.00%
|
$500
|
+
|
$40
|
=
|
$540
|
58.00
|
-60.00%
|
$400
|
+
|
$40
|
=
|
$440
|
43.50
|
-70.00%
|
$300
|
+
|
$40
|
=
|
$340
|
29.00
|
-80.00%
|
$200
|
+
|
$40
|
=
|
$240
|
14.50
|
-90.00%
|
$100
|
+
|
$40
|
=
|
$140
|
0.00
|
-100.00%
|
$0
|
+
|
$40
|
=
|
$40
|
· |
INVESTMENT
EXPOSURE TO THE CORE COMMODITY-IGAR CONDITIONAL LONG-SHORT
—
The
notes
provide the opportunity to participate in the appreciation of
the Core
Commodity-IGAR Conditional Long-Short and enhance returns by
providing an
additional payment of at least $40* at maturity. 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.
|
· |
RETURN
LINKED TO DYNAMIC BASKET OF SUB-INDICES REPRESENTING CERTAIN
SUB-ASSET
CLASSES OF THE GLOBAL COMMODITY MARKET —
The
return
on the notes is linked to the performance of the JPMorgan Core
Commodity
Investable Global Asset Rotator Conditional Long-Short Index.
The Core
Commodity-IGAR Conditional Long-Short references the value of
a synthetic
portfolio drawn from certain constituents of the S&P GSCITM
using an
investment strategy that is generally known as momentum investing.
The
rebalancing method therefore seeks to capitalize on positive
or negative
trends in the U.S. dollar level of the constituents on the assumption
that
if particular constituents performed well in the past, they will
continue
to perform well in the future. See “The JPMorgan Core Commodity Investable
Global Asset Rotator Conditional Long-Short Index” in the accompanying
product supplement no. 132-I.
|
· |
CAPITAL
GAINS TAX TREATMENT —
You
should review carefully the section entitled “Certain U.S. Federal Income
Tax Consequences” in the accompanying product supplement no. 132-I. The
pricing of the notes is subject to delivery of an opinion of
our special
tax counsel, Davis Polk & Wardwell, that it is reasonable to treat
your purchase and ownership of the notes as an “open transaction” for U.S.
federal income tax purposes. The opinion will be subject to the
limitations described in the section entitled “Certain U.S. Federal Income
Tax Consequences” in the accompanying product supplement no. 132-I and
will be based on certain factual representations to be received
from us on
or prior to the pricing date. Assuming this characterization
is respected,
your gain or loss on the notes should be treated as long-term
capital gain
or loss if you hold the notes for more than a year, whether or
not you are
an initial purchaser of notes at the issue price. However, the
Internal
Revenue Service (the “IRS”) or a court may not respect this
characterization or treatment of the notes, 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,
such as the notes. The notice focuses in particular on whether
to require
holders of these instruments to accrue income over the term of
their
investment. It also asks for comments on a number of related
topics,
including the character of income or loss with respect to these
instruments; the relevance of factors such as the nature of the
underlying
property to which the instruments are linked; the degree, if
any, to which
income (including any mandated accruals) realized by Non-U.S.
Holders
should be subject to withholding tax; and whether these instruments
are or
should be subject to the “constructive ownership” regime, which very
generally can operate to recharacterize certain long-term capital
gain as
ordinary income that is subject to an interest charge. While
the notice
requests comments on appropriate transition rules and effective
dates, 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. Both
U.S. and Non-U.S. Holders
should consult their
tax advisers
regarding the U.S.
federal income tax consequences of an investment in
the notes, including possible alternative treatments
and the issues
presented by
this notice.
|
· |
YOUR
INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
The
notes
do not guarantee any return of principal (other than the
Additional
Amount). The return on the notes is linked to the performance
of the
Underlying, and will depend on whether, and the extent
to which, the
Underlying Return is positive or negative. Your investment
will be fully
exposed to any decline in the Ending Underlying Value,
as compared to the
Initial Underlying Value, provided that the final payment
at maturity will
not be less than zero, and that in all cases you will receive
the
Additional Amount at maturity.
|
· |
NO
PROTECTION AGAINST LOSS —
If
the
Underlying Return is negative, at maturity, you will receive
less than the
principal amount of your investment. For each 1% that the
Ending
Underlying Value declines relative to the Initial Underlying
Value, you
will lose 1% of your investment in the notes, although
in all cases you
will receive the Additional Amount at
maturity.
|
· |
THE
INITIAL UNDERLYING VALUE WILL BE DETERMINED AFTER THE PRICING
DATE OF THE
NOTES —
The
Initial Underlying Value will be determined based on the
arithmetic
average of the Underlying closing values on the five Initial
Averaging
Dates. However, all of the five Initial Averaging Dates
will occur
following the pricing date of the notes. As a result, the
Initial
Underlying Value will not be determined, and you will therefore
not know
the Initial Underlying Value, until after the pricing date.
Any increase
in the Underlying closing values on the Initial Averaging
Dates (relative
to the Underlying closing values before the pricing date)
may establish a
higher level that the Commodity-IGAR Conditional Long-Short
must achieve
for you to obtain a positive return on your investment
or avoid a loss of
principal at maturity.
|
· |
INVESTMENTS
RELATED TO THE VALUE OF COMMODITIES TEND TO BE MORE VOLATILE
THAN
TRADITIONAL SECURITIES INVESTMENTS —
The
market
values of commodities tend to be highly volatile. Commodity
market values
are not related to the value of a future income or earnings
stream, as
tends to be the case with fixed-income and equity investments,
but are
subject to variables of specific application to commodities
markets. These
variables include changes in supply and demand relationships,
governmental
programs and policies, national and international monetary,
trade,
political and economic events, changes in interest and
exchange rates,
speculation and trading activities in commodities and related
contracts,
weather, and agricultural, trade, fiscal and exchange control
policies.
These factors may have a larger impact on commodity prices
and
commodity-linked instruments than on traditional fixed-income
and equity
securities. These variables may create additional investment
risks that
cause the value of the notes to be more volatile than the
values of
traditional securities. These and other factors may affect
the levels of
the constituents included from time to time in the Core
Commodity-IGAR
Conditional Long-Short, and thus the value of your notes,
in unpredictable
or unanticipated ways. The Core Commodity-IGAR Conditional
Long-Short
provides one avenue for exposure to commodities. The high
volatility and
cyclical nature of commodity markets may render these investments
inappropriate as the focus of an investment portfolio.
|
· |
OWNING
THE NOTES INVOLVES THE RISKS ASSOCIATED WITH THE CORE COMMODITY-IGAR
CONDITIONAL LONG-SHORT’S MOMENTUM INVESTMENT STRATEGY —
The
Core
Commodity-IGAR Conditional Long-Short employs a mathematical
model
intended to implement what is generally known as a momentum
investment
strategy, which seeks to capitalize on consistent positive
and negative
market price trends based on the supposition that consistent
positive and
negative market price trends may continue. This strategy
is different from
a strategy that seeks long-term exposure to a portfolio
consisting of
constant components. The Core Commodity-IGAR Conditional
Long-Short
strategy may fail to realize gains that could occur as
a result of holding
a commodity that has experienced price declines, but after
which
experiences a sudden price spike, or has experienced price
increases, but
after which experiences a sudden price decline. Further,
the rules of the
Core Commodity-IGAR Conditional Long-Short limit exposure
to rapidly
appreciating or depreciating constituents. This is because
the Core
Commodity-IGAR Conditional Long-Short rebalances its exposure
to
constituents each month so that the exposure to any one
constituent does
not exceed one-seventh of the total long or short synthetic
portfolio as
of the time of a monthly rebalancing. By contrast, a synthetic
portfolio
that does not rebalance monthly in this manner could see
greater
compounded gains over time through exposure to a consistently
and rapidly
appreciating or depreciating constituent. Because the rules
of the Core
Commodity-IGAR Conditional Long-Short limit the synthetic
portfolio to
holding only to constituents that have shown consistent
positive or
negative price appreciation, the synthetic portfolio may
experience
periods where it holds few or no constituents, and therefore
is unlikely
during such periods to achieve returns that exceed the
returns realized by
other investment strategies, or to be able to capture gains
from other
appreciating or depreciating assets in the market that
are not included in
the universe of constituents.
|
· |
OWNING
THE NOTES IS NOT THE SAME AS OWNING ANY COMPONENTS OF THE
S&P GSCI™ /
CONSTITUENTS OF THE CORE COMMODITY-IGAR CONDITIONAL LONG-SHORT
OR
COMMODITIES CONTRACTS —
The
return
on your
notes will not reflect the return you would realize if
you actually
held
or sold
short the commodity contracts replicating the constituents
of the Core
Commodity-IGAR Conditional Long-Short. The Commodity-IGAR
Long-Short
synthetic portfolio is a hypothetical construct that does
not hold any
underlying assets of any kind. As a result, a holder of
the notes will not
have any direct or indirect rights to any commodity contracts
or interests
in the constituents. Furthermore, the Core Commodity-IGAR
Conditional
Long-Short synthetic portfolio is subject to monthly rebalancing
and the
assessment of a monthly index calculation fee that will
reduce its value
relative to the value of the
constituents.
|
· |
THE
NOTES MAY BE SUBJECT TO INCREASED VOLATILITY DUE TO THE
USE OF LEVERAGE
—
The
Core
Commodity-IGAR Conditional Long-Short employs a technique
generally known
as “long-short” strategy. As part of this strategy, if the short leg of
the Core Commodity-IGAR Conditional Long-Short is not de-activated,
the
sum of the absolute values of the conditional long-short
target weights
may be greater than 1 and, consequently, the Core Commodity-IGAR
Conditional Long-Short may include leverage. Where the
synthetic portfolio
is leveraged, any price movements in the commodity contracts
replicating
the constituents may result in greater changes in the value
of the Core
Commodity-IGAR Conditional Long-Short than if leverage
was not used, which
in turn could cause you to receive a lower payment at maturity
than you
would otherwise receive.
|
· |
BECAUSE
THE CORE COMMODITY-IGAR CONDITIONAL LONG-SHORT MAY INCLUDE
NOTIONAL SHORT
POSITIONS, THE CORE COMMODITY-IGAR CONDITIONAL LONG-SHORT
MAY BE SUBJECT
TO ADDITIONAL RISKS —
The
Core
Commodity-IGAR Conditional Long-Short employs a technique
generally known
as “long-short” strategy. This means the Core Commodity-IGAR Conditional
Long-Short could include a number of notional long positions
and a number
of notional short positions. Unlike long positions, short
positions are
subject to unlimited risk of loss because there is no limit
on the amount
by which the price that the relevant asset may appreciate
before the short
position is closed. Although the minimum payment at maturity
is $40, it is
possible that any notional short position included in the
Core
Commodity-IGAR Conditional Long-Short may appreciate substantially
with an
adverse impact on the Core Commodity-IGAR Conditional Long-Short
value and
your notes.
|
· |
THE
CORE COMMODITY-IGAR CONDITIONAL LONG-SHORT LACKS AN OPERATING
HISTORY
—
The
Core
Commodity-IGAR Conditional Long-Short was established on
April 15, 2008,
and therefore lacks historical performance. Back-testing
or similar
analysis in respect of the Core Commodity-IGAR Conditional
Long-Short must
be considered illustrative only and may be based on estimates
or
assumptions not used by the calculation agent when determining
the Core
Commodity-IGAR Conditional Long-Short
values.
|
· |
NO
INTEREST PAYMENTS —
As
a holder
of the notes, you will not receive any interest
payments.
|
· |
LACK
OF LIQUIDITY —
The
notes
will not be listed on any securities exchange. J.P. Morgan
Securities
Inc., which we refer to as 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.
|
· |
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, 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. The notes are not designed
to be short-term
trading instruments. Accordingly, you should be able and
willing to hold
your notes to maturity.
|
· |
POTENTIAL
CONFLICTS —
We
and our
affiliates play a variety of roles in connection with the
issuance of the
notes, including acting as Index Calculation Agent -
the
entity
that calculates the Core Commodity-IGAR Conditional Long-Short
values -
and acting as calculation agent and hedging our obligations
under the
notes. In performing these duties, the economic interests
of the Index
Calculation Agent, 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 AFFECT THE VALUE OF THE
NOTES
—
In
addition
to the Underlying closing value 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 in the Underlying and its
constituents;
|
· |
the
time to
maturity of the notes;
|
· |
the
market
price of the physical commodities upon which the futures
contracts that
compose the constituents are based;
|
· |
interest
and
yield rates in the market
generally;
|
· |
economic,
financial, political, regulatory, geographical, agricultural,
meteorological or judicial events that affect the commodities
underlying
the constituents or markets generally and which may affect
the value of
the commodity futures contracts, and thus the closing levels
of the
constituents; and
|
· |
our
creditworthiness, including actual or anticipated downgrades
in our credit
ratings.
|
· |
THE
OFFERING OF THE NOTES MAY BE TERMINATED BEFORE PRICING
—
This term sheet has not been reviewed by our special tax
counsel, Davis
Polk & Wardwell, and the pricing of the offering of the notes
is
subject to delivery by them of an opinion regarding the
tax treatment of
the notes as described under “Selected Purchase Considerations — Capital
Gains Tax Treatment” above. If our special tax counsel does not deliver
this opinion prior to pricing, the offering of the notes
will be
terminated.
|