Term
sheet To prospectus dated December 1, 2005, prospectus supplement dated October 12, 2006 and product supplement no. 142-I dated June 11, 2008 |
Term
Sheet to
Product
Supplement No. 142-I
Registration
Statement No. 333-130051
Dated
June 11, 2008; Rule 433
|
Structured
Investments |
JPMorgan
Chase & Co.
$
8.00%
(equivalent to 16.00% per annum) Bearish Reverse Exchangeable Notes
due
December 31, 2008 Linked
to the Common Stock of United States Steel
Corporation
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·
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The
notes are
designed for investors who seek a higher interest rate than the current
dividend yield on the 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 fluctuations in the Reference Stock,
be
willing to accept the risks of expressing a bearish view towards
equities
in general and the common stock of United States Steel Corporation,
in
particular, and be willing to lose some or all of their principal
at
maturity if, on any day during the Monitoring Period the closing
price of
the Reference Stock has increased, as compared to the Initial Share
Price,
by more than the Upside Protection Amount.
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·
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The
notes
will pay 8.00% (equivalent to 16.00% per annum) interest over the
term of
the notes. 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
Reference Stock and whether the closing price of the Reference Stock
has
increased from the Initial Share Price by more than the Upside Protection
Amount during the Monitoring Period, as described
below.
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·
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Senior
unsecured obligations of JPMorgan Chase & Co. maturing December 31,
2008*.
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·
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Payment
at
maturity for each $1,000 principal amount note will be either a cash
payment of $1,000 or a cash payment equal to $1,000 minus an
amount
equal to the product of $1,000 and the Share Return, in each case,
together with any accrued and unpaid interest, as described
below.
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·
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Minimum
denominations of $1,000 and integral multiples
thereof.
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Reference
Stock:
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The
common
stock, par value $1.00 per share, of United States Steel Corporation
(New
York Stock Exchange Symbol “X”). We refer to United States Steel
Corporation as “U.S. Steel.”
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Interest
Rate:
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8.00%
(equivalent to 16.00% per annum) during the term of the
notes,
paid
monthly and calculated on a 30/360 basis.
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Upside
Protection Amount:
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An
amount that represents at least 40.0% of the Initial Share Price,
subject
to adjustments.
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Maturity
Date:
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December
31,
2008*
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Pricing
Date:
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On
or about
June 25, 2008
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Settlement
Date:
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On
or about
June 30, 2008
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Observation
Date:
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December
26,
2008*
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CUSIP:
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48123LAT1
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Interest
Payment Dates:
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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 July
31, 2008, to and including the Interest Payment Date corresponding
to the
Maturity Date. See “Selected Purchase Considerations — Monthly Interest
Payments” in this term sheet for more information.
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Payment
at
Maturity:
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The
payment
at maturity, in excess of any accrued and unpaid interest, is based
on the
performance of the Reference Stock. You will receive $1,000 for each
$1,000 principal amount note, plus any accrued and unpaid interest
at
maturity, unless:
(i)
the
Final Share Price is greater than the Initial Share Price;
and
(ii)
on any
day during the Monitoring Period, the closing price of the Reference
Stock
has increased, as compared to the Initial Share Price, by more than
the
Upside Protection Amount.
If
the
conditions described in both (i) and (ii) are satisfied, at maturity
you
will receive, in addition to any accrued and unpaid interest, instead
of
the principal amount of your notes, a cash payment per $1,000 principal
amount note calculated as follows:
$1,000
-
($1,000 x Share Return)
Notwithstanding
the foregoing, in no event will the cash payment you receive in lieu
of
the principal amount be less than $0.
If
the
conditions described in (i) and (ii) are both satisfied, you will
lose 1%
of the principal amount of your notes for every 1% that the Final
Share
Price increases above the Initial Share Price.
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Share
Return:
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Final
Share
Price — Initial
Share
Price
Initial
Share
Price
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Monitoring
Period:
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The
period
from the Pricing Date to and including the Observation Date.
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Initial
Share
Price:
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The
closing
price of the Reference Stock on the Pricing Date divided by the Stock
Adjustment Factor.
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Final
Share
Price:
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The
closing
price of the Reference Stock on the Observation Date.
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Stock
Adjustment Factor:
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1.0
on the
Pricing date and subject to adjustment under certain circumstances.
See
“General Terms of Notes — Payment at Maturity” and “General Terms of Notes
— Anti-Dilution Adjustments” in the accompanying product supplement no.
142-I for further information about these
adjustments.
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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” in the accompanying product supplement no.
142-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.
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(2)
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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 $39.70 per $1,000 principal amount note and would
use a
portion of that commission to allow selling concessions to other
dealers
of approximately $27.35 per $1,000 principal amount note. The selling
concessions to other dealers of approximately $27.35 include concessions
to be allowed to selling dealers and concessions to be allowed to
any
arranging dealer. The actual commission received by JPMSI may be
more or
less than $39.70 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 $60.00 per $1,000 principal amount note.
See
“Underwriting” beginning on page PS-36 of the accompanying product
supplement no. 142-I.
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The
total
aggregate principal amount of notes being offered by this term sheet
may
not be purchased by investors in the offering. Under these circumstances,
JPMSI will retain the unsold portion of the offering and has agreed
to
hold such notes for investment for a period of at least 30 days.
The
unsold portion of notes will not exceed 15% of the aggregate principal
amount of notes. Any unsold portion may affect the supply of the
notes
available for secondary trading and, therefore, could adversely affect
the
price of the notes in the secondary market. Circumstances may occur
in
which our interests or those of our affiliates could be in conflict
with
your interests.
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·
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Product
supplement no. 142-I dated June 11, 2008:
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·
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Prospectus
supplement dated October 12, 2006:
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·
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Prospectus
dated December 1, 2005:
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·
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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 8.00% (equivalent to 16.00% per annum) interest over the
term of
the notes, which we believe 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 a rate of 8.00% (equivalent
to
16.00% per annum) over the term of the notes. Interest will be payable
monthly in arrears on the
last
calendar
day of each month (each such date, an “Interest Payment Date”), commencing
July 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.
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·
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THE
NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL —
Your
return
of principal at maturity is protected so long as the Final Share
Price
does not increase from the Initial Share Price or the closing price
of the
Reference Stock does not increase, as compared to the Initial Share
Price,
by more than the Upside Protection Amount on any day during the Monitoring
Period. However,
if the Final Share Price increases from the Initial Share Price and
the
closing price of the Reference Stock on any day during the Monitoring
Period has increased by more than the Upside Protection
Amount,
you could
lose the entire principal amount of your
notes.
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·
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TAX
TREATMENT AS A UNIT COMPRISING A CALL OPTION AND A DEPOSIT
—
You
should
review carefully the section entitled “Certain U.S. Federal Income Tax
Consequences” in the accompanying product supplement no. 142-I. 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 Call 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 Call Premium,
respectively, and will provide that allocation in the pricing supplement
for the notes. If the notes had priced on June 10, 2008, we would
have
treated approximately 19.38% of each coupon payment as interest on
the
Deposit and the remainder as Call Premium. 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 Call 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 Call 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
respect to the tax consequences of an investment in the notes, including
possible alternative characterizations, as well as the allocation
of the
purchase price of the notes between the Deposit and the Call
Option.
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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 Final Share Price and whether the closing
price
of the
Reference Stock has increased
from the
Initial Share Price by more than the Upside Protection Amount on
any day
during the Monitoring Period. If the Final Share Price exceeds the
Initial
Share Price and the closing price of the Reference Stock on any day
during
the Monitoring Period exceeds the Initial Share Price by more than
the
Upside Protection Amount, you will receive at maturity a cash payment
per
$1,000 principal amount note equal to $1,000 minus
an amount
equal to the product of $1,000 and the Share Return, plus accrued
and
unpaid interest. Under these circumstances, you will lose 1% of the
principal amount of your notes for every 1% that the Final Share
Price
appreciates above the Initial Share Price. Accordingly,
appreciation in the share price of the Reference Stock may lead to
a loss
of some or all of your investment at
maturity.
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·
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YOUR
UPSIDE 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 Reference
Stock
increases
above
the
Initial Share Price plus the Upside Protection Amount, you will be
fully
exposed, on an inverse basis, to any appreciation in the closing
price of
the Reference Stock. We refer to this feature as a contingent buffer.
Under these circumstances, and
if the Final
Share Price is greater than the Initial Share Price, you will lose
1% of
the principal amount of your investment for every 1% increase in
the Final
Share Price above the Initial Share Price. You will be subject to
this
potential loss of principal even if the price of the Reference Stock
subsequently declines such that the Final Share Price is less than
the
Initial Share Price plus the Upside 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.
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·
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YOUR
RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL AMOUNT PLUS THE ACCRUED
INTEREST REGARDLESS OF ANY APPRECIATION OR DEPRECIATION IN THE VALUE
OF
THE REFERENCE STOCK —
Unless
(i)
the Final Share Price is greater than the Initial Share Price and
(ii) on
any day during the Monitoring Period, the closing price of the Reference
Stock has increased, as compared to the Initial Share Price, by more
than
the Upside Protection Amount, for each $1,000 principal amount note,
you
will receive $1,000 at maturity plus accrued and unpaid interest,
regardless of any appreciation or depreciation in the value of the
Reference Stock, which may be significant. Under certain circumstances,
appreciation in the value of the Reference Stock may even result
in the
loss of some or all of the principal amount of your notes at maturity.
Accordingly, the return on the notes may be significantly less than
the
return on a direct investment in the Reference Stock during the term
of
the notes.
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·
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NO
OWNERSHIP RIGHTS IN THE REFERENCE STOCK —
As
a holder
of the notes, you will not have any ownership interest or rights
in U.S.
Steel, such as voting rights, dividend payments or other distributions.
In
addition, U.S. Steel 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 Reference Stock and the notes.
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·
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NO
AFFILIATION WITH U.S. STEEL —
We
are not
affiliated with U.S. Steel. We assume no responsibility for the adequacy
of the information about U.S. Steel contained in this term sheet
or in
product supplement no. 142-I. You should make your own investigation
into
the Reference Stock and U.S. Steel. We are not responsible for U.S.
Steel’s public disclosure of information, whether contained in SEC filings
or otherwise.
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CERTAIN
BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT 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 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.
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·
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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.
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·
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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. 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 U.S. Steel, including extending loans to,
or
making equity investments in, U.S. Steel or providing advisory services
to
U.S. Steel. In addition, one or more of our affiliates may publish
research reports or otherwise express opinions with respect to U.S.
Steel,
and these reports may or may not recommend that investors buy or
hold the
Reference Stock. As a prospective purchaser of the notes, you should
undertake an independent investigation of U.S. Steel as in your judgment
is appropriate to make an informed decision with respect to an investment
in the notes.
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·
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HEDGING
AND TRADING IN THE REFERENCE STOCK —
While
the
notes are outstanding, we or any of our affiliates may carry out
hedging
activities related to the notes, including in the Reference Stock
or
instruments related to the Reference Stock. We or our affiliates
may also
trade in the Reference Stock or instruments related to the Reference
Stock
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.
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·
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MANY
ECONOMIC AND MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES
— In
addition
to the value of the 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.
142-I.
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·
the
Initial
Share Price:
|
$176.00
|
●
the
Upside Protection Amount: $70.40
|
·
Interest:
|
8.00% (equivalent to 16.00% per annum) |
Hypothetical
highest closing price during the Monitoring
Period
|
Hypothetical
highest 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*
|
$176.00
|
100%
|
$88.00
|
50%
|
$1,000.00
|
$264.00
|
150%
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$167.20
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95%
|
$1,000.00
|
$176.00
|
100%
|
$176.00
|
100%
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$1,000.00
|
$246.40
|
140%
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$246.40
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140%
|
$1,000.00
|
$264.00
|
150%
|
$184.80
|
105%
|
$950.00
|
$264.00
|
150%
|
$264.00
|
150%
|
$500.00
|
$308.00
|
175%
|
$308.00
|
175%
|
$250.00
|
$352.00
|
200%
|
$352.00
|
200%
|
$0.00
|
$369.60
|
210%
|
$369.60
|
210%
|
$0.00
|
** |
Note
that you
will receive at maturity, in addition to the cash payment as indicated
herein, any accrued and unpaid interest in
cash.
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