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Registration
Statement 333-130051
Filed
Pursuant to Rule 433
Structured Notes Building Blocks Securities (including mutual funds) are not bank deposits and are not FDIC insured, nor are they obligations of or guaranteed by JPMorgan Chase Bank, J.P. Morgan Trust Company, N.A. or any of their affiliates. Securities (including mutual funds) involve investment risks, including the possible loss of the principal amount invested. Please read important information at the end of this presentation. CONFIDENTIAL |
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The discussion contained in the following pages is for educational and
illustrative purposes only. The final terms of securities offered by JPMorgan
Chase & Co. may be different from those set forth in any illustrative investment
ideas contained herein and any such final terms will depend on, among other
things, market conditions on the applicable pricing date for such securities.
Any information relating to performance contained in these materials is
illustrative and no assurance is given that any indicated returns, performance
or results, whether historical or hypothetical, will be achieved. Investment
ideas are subject to change, and JPMorgan undertakes no duty to update these
materials, including any investment ideas, or to supply corrections. This
material shall be amended, superseded and replaced in its entirety by a
subsequent preliminary or final term sheet and/or pricing supplement, and the
documents referred to therein, which will be filed with the Securities and
Exchange Commission, or SEC. In the event of any inconsistency between the
materials presented in the following pages and any such preliminary or final
term sheet or pricing supplement, such preliminary or final term sheet or
pricing supplement shall govern.
In the event that JPMorgan Chase & Co. were to offer structured products and you
were to purchase any such securities, JPMorgan Chase & Co. and each of its
affiliates participating in such distribution, if any, will not act as a
financial advisor or a fiduciary to, or an agent of, you or any other person
with respect to any offering of such securities (including in connection with
determining the terms of the offering). Additionally, neither JPMorgan Chase &
Co. nor any of its affiliates will act as adviser to you or any other person as
to any legal, tax, investment, accounting or regulatory matters in any
jurisdiction. In connection with any offering of structured products by JPMorgan
Chase & Co., you shall consult with your own advisors concerning such matters
and shall be responsible for making your own independent investigation and
appraisal of any such transactions, and JPMorgan Chase & Co. and its affiliates
shall have no responsibility or liability to you with respect thereto.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not
provide tax advice. Accordingly, any discussion of U.S. tax matters contained
herein (including any attachments) is not intended or written to be used, and
cannot be used, in connection with the promotion, marketing or recommendation by
anyone unaffiliated with JPMorgan Chase & Co. of any of the matters address
herein or for the purpose of avoiding U.S. tax-related penalties.
SEC Legend: JPMorgan Chase & Co. has filed a registration statement (including a
prospectus) with the SEC for any offerings to which these materials relate.
Before you invest in any offering of securities by JPMorgan Chase & Co., you
should read the prospectus in that registration statement, each prospectus
supplement, as well as the particular product supplement, term sheet and any
other documents that JPMorgan Chase & Co. has filed with the SEC for more
complete information about JPMorgan Chase & Co. and the offering of any
securities. You may get these documents without cost by visiting EDGAR on the
SEC Web site at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or
any dealer participating in the particular offering will arrange to send you the
prospectus and each prospectus supplement as well as any product supplement and
term sheet if you so request by calling toll-free 866-535-9248.
Copyright in these materials is owned by JPMorgan Chase & Co. ((C) JPMorgan
Chase & Co. 2007 (all rights reserved)). These materials, or any part thereof,
may not be reproduced, distributed or transmitted to any other person or
incorporated in any way into another document without the prior written consent
of JPMorgan Chase & Co.
CONFIDENTIAL
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$95.00 to purchase note
Initial investment
Investment at maturity
Option structure generates the potential for upside return based on the
appreciation of an underlying index or portfolio
Note matures at $100, protecting investor's principal
$5.00 to purchase option structure
Note: This is a hypothetical example only and does not represent an investment
in any particular portfolio. Fundamental components of a principal protected
structure Example: $100 initial investment, 1 year maturity, with 100% principal
protection Sample Structure Provided for Illustrative Purposes Only
Not all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
CONFIDENTIAL
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S&P 500 100% Principal Protected Note
Combines principal protection with potential upside participation
Sample Structure Provided for Illustrative Purposes Only 100% principal
protected equity-linked note versus cash investment in index at maturity
(assuming $100 initial investment) *At 100% index depreciation your return on
the notes will be 0%
2,400.00 60.00% 7.10%
2,250.00 50.00% 7.10%
2,100.00 40.00% 7.10%
1,950.00 30.00% 7.10%
Upside leverage factor 1,650.00 10.00% 7.10%
1,606.50 7.10% 7.10%
Underlying index S &P 500 1,575.00 5.00% 5.00%
Currency USD 1,500.00 0.00% 0.00%
Principal protection 100% 1,350.00 -10.00% 0.00%
Cap on index 7.10% 1,200.00 -20.00% 0.00%
Participation rate 100% 900.00 -40.00% 0.00%
Maximum return 7.10% 600.00 -60.00% 0.00%
Maturity 12 months 0.00 -100.00% 0.00%
*The table above as sumes an Initial Index Level of 1500. The actual Initial
Index Level will be set on the Pricing Date.
o 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 but not more than
the Maximum Return.
o The Additional Amount per $1,000 principal amount note paid at maturity will
equal $1,000 x the Index Return x the Participation Rate; provided that the
Additional Amount will not be less than zero or greater than the Maximum Return.
Max. gain
Max. loss
$70
$80
$90
$100
$110
$120
$130
$140
$150
- -40% -30% -20% -10% 0% 10% 20% 30% 40%
Index appreciation/depreciation
Payoff at Maturity
Principal protected note
Cash investment in index
Selected Purchase Considerations
o Appreciation potential subject to a cap: the notes provide the opportunity for
exposure to the underlying index, up to a cap, in addition to principal
protection at maturity
o Principal protection at maturity o Taxed as debt instruments* Terms o Return
on the notes is limited to the maximum return
o The notes might not pay more than the principal amount
o No interest or dividend payments or voting rights
o Certain built-in costs are likely to adversely affect the value of the notes
prior to maturity
o Any liquidity provided at the sole discretion of issuer Selected Risk
Considerations *This material is distributed with the understanding that the
issuer is not rendering accounting, legal or tax advice. You should consult your
own tax adviser before investing in the notes. Products may not be suitable for
all individual investors and are subject to investment risks. Ending Index
Level* * Index Return Total Return on Notes *
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
Payout table on a S&P 500 Principal Protected Note
Client buys a 100% Principal Protected Note with 100% participation, capped at
7.10%, 12 months
Underlying Buy 1 Zero Coupon Buy 1 100% Sell 1 107.1% PPN $100
Bond -$95.00 Strike Call Strike Call $100
==========================================================================
-$7.00 +$3.25
130.00 +$100 $30.00 -$22.90 $107.10
125.00 +$100 $25.00 -$17.90 $107.10
120.00 +$100 $20.00 -$12.90 $107.10
115.00 +$100 $15.00 -$7.90 $107.10
110.00 +$100 $10.00 -$2.90 $107.10
107.10 +$100 $7.10 $0.00 $107.10*
104.00 +$100 $4.00 $0.00 $104.00
103.00 +$100 $3.00 $0.00 $103.00
102.00 +$100 $2.00 $0.00 $102.00
101.00 +$100 $1.00 $0.00 $101.00
100.00 +$100 $0.00 $0.00 $100.00
98.00 +$100 $0.00 $0.00 $100.00
95.00 +$100 $0.00 $0.00 $100.00
90.00 +$100 $0.00 $0.00 $100.00
80.00 +$100 $0.00 $0.00 $100.00
70.00 +$100 $0.00 $0.00 $100.00
60.00 +$100 $0.00 $0.00 $100.00
50.00 +$100 $0.00 $0.00 $100.00
40.00 +$100 $0.00 $0.00 $100.00
20.00 +$100 $0.00 $0.00 $100.00
0.00 +$100 $0.00 $0.00 $100.00**
==========================================================================
* Maximum gain: $7.10
** Maximum loss: $0.00
CVA = 1.25%
** Important: the examples above are provided for illustrative purposes only.
Not all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
Call option - gives the owner the right, but not the obligation, to buy stock at
a specific price (strike price) on or before the expiry date
Who uses Call options?
Main characteristics
o A Call option gives the owner the right, but not the obligation, to buy stock
at a specific price (Strike Price) on or before the expiry date
o Call buyer pays an upfront Premium. The buyer may choose the expiry date and
the Strike Price
o The buyer's downside is limited to the
non-refundable premium o The seller's maximum upside is the premium Long
strategy
o Call options are bought by a client who is bullish on a stock o A call option
gives leveraged exposure to the stock. Since the outlay of the premium is a
fraction of the stock price, the investor enjoys all the upside that an outright
buyer has, but none of rights attached to owning the stock (dividend, voting
rights...)
o The investors downside is limited to the premium paid for the option- unlike
the downside for a stock owner
Short strategy
o Clients may sell Call options on stocks owned (writing a `covered call') to
enhance the yield
o Selling a call allows the holder to generate an upfront premium that will
benefit from a high volatility environment, enhance the yield return of the
stock, and provide some guaranteed return (e.g. the premium) at the expense of a
limited upside in the stock Long call
Long call
Underlying shares held by the Holder price P/L (50) (40) (30) (20) (10) - 10 20
30 40 50 70 80 90 100 110 120 130 140 150 160 Underlying shares sold forward
Underlying price P/L + Call option Short call
Short call
Underlying shares held by the Holder price P/L Underlying shares sold forward
(50) (40) (30) (20) (10) - 10 20 30 40 50 70 80 90 100 110 120 130 140 150 160
Underlying price P/L - Call option
In/Out of/At-the Money Put options
Stock Price > Strike Price In the Money
Stock Price
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Sample Structure Provided for Illustrative Purposes Only
The payout at maturity of a Call Option depends on the strike, the level of the
underlying, and the upfront premium
Client BUYS a Call struck at-the-money ($100) and pays
a premium of $5
Underlying Premium Long Call Total Payout
120 -$5 +$20 +$15
115 -$5 +$15 +$10
110 -$5 +$10 +$5
108 -$5 +$8 +$3
105 -$5 +$5 $0 **
104 -$5 +$4 -$1
103 -$5 +$3 -$2
102 -$5 +$2 -$3
101 -$5 +$1 -$4
100 -$5 $0 -$5 *
98 -$5 $0 -$5
96 -$5 $0 -$5
95 -$5 $0 -$5
92 -$5 $0 -$5
90 -$5 $0 -$5
80 -$5 $0 -$5
60 -$5 $0 -$5
40 -$5 $0 -$5
20 -$5 $0 -$5
0 -$5 $0 -$5
Client SELLS a Call struck at-the-money ($100) and
receives a premium of $5
Underlying Premium Short Call Total Payout
120 +$5 -$20 -$15
115 +$5 -$15 -$10
110 +$5 -$10 -$5
108 +$5 -$8 -$3
105 +$5 -$5 +$0 **
104 +$5 -$4 +$1
103 +$5 -$3 +$2
102 +$5 -$2 +$3
101 +$5 -$1 +$4
100 +$5 $0 +$5 *
98 +$5 $0 +$5
96 +$5 $0 +$5
95 +$5 $0 +$5
92 +$5 $0 +$5
90 +$5 $0 +$5
80 +$5 $0 +$5
60 +$5 $0 +$5
40 +$5 $0 +$5
20 +$5 $0 +$5
0 +$5 $0 +$5
* Maximum loss: $5
** Breakeven at $105
Maximum gain: unlimited
* Maximum gain: $5
** Breakeven at $105
Maximum loss: unlimited
These payout tables assume values remain constant between option purchase and
expiration.
Important: the examples above are provided for illustrative purposes only. Not
all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
S&P 500 Return Enhanced Note
Provides leveraged upside up to a cap
2,175.00 50.00% 16.00%
Underlying index 2,030.00 40.00% 16.00%
Upside leverage factor 1,885.00 30.00% 16.00%
Underlying Index S&P 500 1,740.00 20.00% 16.00%
Currency US D 1,595.00 10.00% 16.00%
Upside leverage factor 2x up to Cap 1,566.00 8.00% 16.00%
Cap on Index 8.00% 1,522.50 5.00% 10.00%
Buffer amount 10.00% 1,450.00 0.00% 0.00%
Downside leverage factor 1.1111 1,305.00 -10.00% 0.00%
Maximum potential gain 16.00% 1,160.00 -20.00% -11.11%
Maximum potential los s 100% 870.00 -40.00% -33.33%
Maturity date 12 Months 580.00 -60.00% -55.56%
0.00 -100.00% -100.00%
*The table above assumes an Initial Index Level of 1450. The actual Initial
Index Level will be set on the Pricing Date.
o If the average of the underlying closing index levels on the relevant dates is
greater than the closing index level on the pricing date for the notes, you will
receive a cash payment per $1,000 principal amount note that provides you with a
return on your inves tment of twice the index return, subject to a Maximum Total
return on the note of 16%
o Your principal is protected up to a 10% decline in the underlying index.
o If the underlying index declines by more than 10%, you will lose 1.1111% of
the principle amount for every 1% that the index declines.
Max. loss
Max. gain
Buffer zone
Buffer zone
$70
$80
$90
$100
$110
$120
$130
$140
$150
- -40% -30% -20% -10% 0% 10% 20% 30% 40%
Index appreciation/depreciation
Payoff at Maturity
Buffered return enhanced note
Cash investment in index
Buffered return enhanced note versus cash investment in portfolio payoff at
maturity (assuming $100 initial investment)
Selected Purchase Considerations
o Appreciation potential - The notes provide the opportunity to enhance equity
returns by multiplying a positive return on the underlying index by the leverage
factor, up to the maximum total return.
o Limited protection against loss- Payment at maturity of the principal amount
of the notes is protected against a decline in the underlying index during the
relevant measurement period of up to 10%.
o Potential capital gains tax treatment* Terms
o Your investment in the notes
may result in a loss
o Your maximum gain on the notes is limited to the maximum total return. o
Certain built-in costs are likely to adversely affect the value of the notes
prior to maturity o No interest or dividend payments or voting rights
o Any liquidity provided at sole discretion of issuer Selected Risk
Considerations *This material is distributed with the understanding that
JPMorgan is not rendering accounting, legal or tax advice. The notes are complex
instruments, and the tax law applicable to them is unclear; you should consult
your own tax adviser before investing in the notes.
Products may not be suitable for all individual investors and are subject to
investment risks.
Ending Index
Level*
Index
Return
Total Return on
Notes
*You may lose some or all of your investment, for example, a 100% index
depreciation will result in a loss of 100% of initial investment.
*
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
Payout table on a S&P 500 Return Enhanced Note
Client buys a Return Enhanced Note with 7.25% cap, 2x leverage, 14.5% max
return, and 12 month tenor +$100
Underlying Buy 1 Zero Sell 1 100% Strike Buy 2 100% Strike Sell 2 107.25% Strike REN $100.00
Bond -$95.00 Put 1 x $3.9 Calls 2 x -$7.00 Calls 2 x $3.17
====================================================================================================
120 +$100 $0 2x+$20 2x-$12.75 $114.5
115 +$100 $0 2x+$15 2x-$7.75 $114.5
112 +$100 $0 2x+$12 2x-$4.75 $114.5
110 +$100 $0 2x+$10 2x-$2.75 $114.5
107.25 +$100 $0 2x+$7.25 $0 $114.5*
105 +$100 $0 2x+$5 $0 $110
104 +$100 $0 2x+$4 $0 $108
103 +$100 $0 2x+$3 $0 $106
102 +$100 $0 2x+$2 $0 $104
101 +$100 $0 2x+$1 $0 $102
100 +$100 $0 $0 $0 $100
98 +$100 -$2 $0 $0 $98
95 +$100 -$5 $0 $0 $95
90 +$100 -$10 $0 $0 $90
80 +$100 -$20 $0 $0 $80
70 +$100 -$30 $0 $0 $70
60 +$100 -$40 $0 $0 $60
50 +$100 -$50 $0 $0 $50
40 +$100 -$60 $0 $0 $40
20 +$100 -$80 $0 $0 $20
0 +$100 -$100 $0 $0 $0 **
====================================================================================================
* Maximum gain: $14.5
** Maximum loss: $100
CVA = 1.25%
Important: the examples above are provided for illustrative purposes only. Not
all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
CONFIDENTIAL
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CONFIDENTIAL Short put Short put Who uses Put options? Who uses Put options? In/Out of/At-the Money Put options In/Out of/At-the Money Put options Main characteristics Main characteristics Long put Long put Put option - gives the owner the right, but not the obligation, to sell stock at a specific price (strike price) on or before the expiry date o A Put option gives the owner the right, but not the obligation, to sell stock at a specific price (Strike Price) on or before the expiry date o Put buyer pays an upfront premium. The put provides downside price protection o At expiration, the holder of a put will be guaranteed that the value of his investment will be at least equal to the strike price of the put o The value of the put at expiration compensates the holder for the decline in the value of the stock relative to the strike price Long strategy o Put options are purchased by clients who want protection o Purchasers believe the option premium is worth the `unlimited' protection that is available if the stock price declines below the strike price Short strategy o Put options are soldby clients who would like to buy more stock at a particular price o Sellers use the option premium received to subsidize the purchase price of the stock if the option were exercised o Sale of put options may be credit intensive Underlying shares held by the Holder price P/L Underlying shares sold forward (50) (40) (30) (20) (10) - - 10 20 30 40 50 70 80 90 100 110 120 130 140 150 160 Underlying price P/L + Put option Stock Price > Strike Price Out the Money Stock Price |
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Sample Structure Provided for Illustrative Purposes Only
The payout at maturity of Put options depends on the strike, the level of the
underlying and the upfront premium Underlying Premium Long Put Total Payout
Client BUYS a put struck at-the-money ($100) and pays a premium of $5
Underlying Premium Long Put Total Payout
120 -$5 $0 -$5
115 -$5 $0 -$5
110 -$5 $0 -$5
108 -$5 $0 -$5
105 -$5 $0 -$5
104 -$5 $0 -$5
103 -$5 $0 -$5
102 -$5 $0 -$5
101 -$5 $0 -$5
100 -$5 $0 -$5 *
98 -$5 +$2 -$3
96 -$5 +$4 -$1
95 -$5 +$5 $0 **
92 -$5 +$8 +$3
90 -$5 +$10 +$5
80 -$5 +$20 +$15
60 -$5 +$40 +$35
40 -$5 +$60 +$55
20 -$5 +$80 +$75
0 -$5 +$100 +$95 ***
Client SELLS a put struck at-the-money ($100) and receives a premium of $5
Underlying Premium Short Put Total Payout
120 +$5 $0 +$5
115 +$5 $0 +$5
110 +$5 $0 +$5
108 +$5 $0 +$5
105 +$5 $0 +$5
104 +$5 $0 +$5
103 +$5 $0 +$5
102 +$5 $0 +$5
101 +$5 $0 +$5
100 +$5 $0 +$5 *
98 +$5 -$2 +$3
96 +$5 -$4 +$1
95 +$5 -$5 $0 **
92 +$5 -$8 -$3
90 +$5 -$10 -$5
80 +$5 -$20 -$15
60 +$5 -$40 -$35
40 +$5 -$60 -$55
20 +$5 -$80 -$75
0 +$5 -$100 -$95 ***
* Maximum loss: $5
** Breakeven at: $95
*** Maximum gain: $95
* Maximum gain: $5
** Breakeven at: $95
*** Maximum loss: -$95
These payout tables assume values remain constant between option purchase and
expiration.
Important: the examples above are provided for illustrative purposes only. Not
all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
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Sample Structure Provided for Illustrative Purposes Only
S&P 500 Buffered Return Enhanced Note
Defined amount of downside protection with leveraged upside up to a cap
2,175.00 50.00% 16.10%
Underlying index 2,030.00 40.00% 16.10%
Upside leverage factor 1,885.00 30.00% 16.10%
Underlying Index S&P 500 1,740.00 20.00% 16.10%
Currency USD 1,595.00 10.00% 16.10%
Upside leverage factor 2x up to Cap 1,566.73 8.05% 16.10%
Cap on Index 8.05% 1,522.50 5.00% 10.00%
Buffer amount 10.00% 1,450.00 0.00% 0.00%
Downside leverage factor 1.1111 1,305.00 -10.00% 0.00%
Maximum potential gain 16.10% 1,160.00 -20.00% -11.11%
Maximum potential los s 100% 870.00 -40.00% -33.33%
Maturity date 12 Months 580.00 -60.00% -55.56%
0.00 -100.00% -100.00%
*The table above assumes an Initial Index Level of 1450. The actual Initial
Index Level will be set on the Pricing Date.
o If the average of the underlying closing index levels on the relevant dates is
greater than the clos ing index level on the pricing date for the notes, you
will receive a cash payment per $1,000 principal amount note that provides you
with a return on your inves tment of twice the index return, subject to a
Maximum Total return on the note of 16.1%
o Your principal is protected up to a 10% decline in the underlying index.
o If the underlying index declines by more than 10%, you will lose 1.1111% of
the principle amount for every 1% that the index declines. Max. loss Max. gain
Buffer zone Buffer zone $70 $80 $90 $100 $110 $120 $130 $140 $150 -40% -30% -20%
- -10% 0% 10% 20% 30% 40% Index appreciation/depreciation Payoff at Maturity
Buffered return enhanced note Cash investment in index Buffered return enhanced
note versus cash investment in portfolio payoff at maturity (assuming $100
initial investment) Selected Purchase Considerations
o Appreciation potential - The notes provide the opportunity to enhance equity
returns by multiplying a positive return on the underlying index by the leverage
factor, up to the maximum total return.
o Limited protection against loss- Payment at maturity of the principal amount
of the notes is protected against a decline in the underlying index during the
relevant measurement period of up to 10%. o Potential capital gains tax
treatment* Terms
o Your investment in the notes may result in a loss
o Your maximum gain on the notes is limited to the maximum total return.
o Certain built-in costs are likely to adversely affect the value of the notes
prior to maturity
o No interest or dividend payments or voting rights
o Any liquidity provided at sole discretion of issuer Selected Risk
Considerations *This material is distributed with the understanding that
JPMorgan is not rendering accounting, legal or tax advice. The notes are complex
instruments, and the tax law applicable to them is unclear; you should consult
your own tax adviser before investing in the notes. Products may not be suitable
for all individual investors and are subject to investment risks. Ending Index
Level* Index Return Total Return on Notes *You may lose some or all of your
investment, for example, a 100% index depreciation will result in a loss of 100%
of initial investment. *
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
Payout table on a S&P 500 Buffered Return Enhanced Note
Client buys a Buffered Return Enhanced Note, with an 8.05% cap, 2x leverage,
16.1% max, 10% Buffer, and 12 month tenor
Underlying Buy 1 Zero Coupon Sell 1.11 90% Buy 2 100% Sell 2 108.05% BREN $100
Bond -$92.50 Strike Puts 1.11 Strike Calls 2 x Strike Calls 2 x (1)
x +$2.5 -$9.10 +$4.9
====================================================================================================
120.0 +$100 $0 2x+$20 2x-$11.95 $116.1
115.0 +$100 $0 2x+$15 2x-$6.95 $116.1
112.0 +$100 $0 2x+$12 2x-$3.95 $116.1
110.0 +$100 $0 2x+$10 2x-$1.95 $116.1
109.0 +$100 $0 2x+$9 2x-$0.95 $116.1
108.05 +$100 $0 2x+$8.05 $0 $116.1 *
104.0 +$100 $0 2x+$4 $0 $108.0
103.0 +$100 $0 2x+$3 $0 $106.0
102.0 +$100 $0 2x+$2 $0 $104.0
101.0 +$100 $0 2x+$1 $0 $102.0
100.0 +$100 $0 $0.0 $0 $100.0
98.0 +$100 $0 $0.0 $0 $100.0
95.0 +$100 $0 $0.0 $0 $100.0
90.0 +$100 $0 $0.0 $0 $100.0 **
80.0 +$100 1.11x-$10 $0.0 $0 $88.9
70.0 +$100 1.11x-$20 $0.0 $0 $77.8
60.0 +$100 1.11x-$30 $0.0 $0 $66.7
50.0 +$100 1.11x-$40 $0.0 $0 $55.6
40.0 +$100 1.11x-$50 $0.0 $0 $44.4
20.0 +$100 1.11x-$70 $0.0 $0 $22.2
0.0 +$100 1.11x-$90 $0.0 $0 $0.00 ***
====================================================================================================
* Maximum gain: $16.1
** Buffer zone: 10%
*** Maximum loss: $100.0
CVA = 1.75%
Important: the examples above are provided for illustrative purposes only. Not
all investments are suitable for all investors. Investors should analyze
products based on their individual circumstances and taking into account such
factors as their investment objectives, tolerance for risk and liquidity needs.
CONFIDENTIAL
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Sample Structure Provided for Illustrative Purposes Only
Many factors affect the price of an option
An option's price represents the present value of its expected payoff at expi
Analysis of the effects of the market factors that affect the price of an option
Price of a call option
Direction of
change Market Factor Impact on value
Stock price
Strike price
Time to
expiration
Dividend yield
Interest rates
Price of a put option
Direction of
change Market Factor Impact on value
value
Stock price
Strike price
Time to
expiration
Dividend yield
Interest rates
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Certain Risk Considerations
NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS - As a holder of any notes
that may be issued by us, you will not receive any interest payments, and you
will not have voting rights or rights to receive cash dividends or other
distributions or other rights that holders of securities comprising the
underlying index or basket may have.
CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE NOTES
DESCRIBED ABOVE PRIOR TO MATURITY - While the payment at maturity described
above would be based on the full principal amount of any notes sold by JPMorgan
Chase & Co., the original issue price of any notes we issue includes an agent's
commission and the cost of hedging our obligations under such notes through one
or more of our affiliates. As a result, the price, if any, at which JPMSI will
be willing to purchase such 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 described
will not be designed to be short-term trading instruments. YOU SHOULD BE WILLING
TO HOLD ANY NOTES THAT WE ULTIMATELY ISSUE TO MATURITY.
POTENTIAL CONFLICTS - We and our affiliates play a variety of roles in
connection with any potential issuance of the notes described above, including
acting as calculation agent and hedging our obligations under such notes. In
performing these duties, the economic interests of the calculation agent and
other affiliates of ours would be potentially adverse to your interests as an
investor in such notes.
LACK OF LIQUIDITY - The notes described above will not be listed on any
securities exchange. There may be no secondary market for such notes, and JPMSI
will not be required to purchase notes in the secondary market. Even if there is
a secondary market, it may not provide enough liquidity to allow you to trade or
sell any notes issued by JPMorgan Chase & Co. easily. Because other dealers are
not likely to make a secondary market for such notes, prices for the notes
described above in any secondary market are likely to depend on the price, if
any, at which JPMSI is willing to buy such notes.
JPMORGAN CREDIT RISK - Because any notes that may be issued by us would be our
senior unsecured obligations, payment of any amount at maturity is subject to
our ability to pay our obligations as they become due.
MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES DESCRIBED
ABOVE - In addition to the level of the underlying index or basket on any day,
the value of any notes that may be issued by us described above will be affected
by a number of economic and market factors that may either offset or magnify
each other, including:
o the expected volatility of the underlying index or basket;
o the time to maturity of the notes described above;
o if the underlying index or indices are linked to equity securities, the
dividend rate on the common stocks underlying the index or indices;
o if the underlying index or indices or basket are linked to commodities, the
market price of the physical commodities upon which the futures contracts that
compose the underlying index or indices or basket of commodities are based or
the exchange-traded futures contracts on such commodities;
o interest and yield rates in the market generally;
o a variety of economic, financial, political, regulatory, geographical,
agricultural, meteorological or judicial events; and o our creditworthiness.
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Important Information
This material is intended to inform you of products and services offered by
JPMorgan Private Bank. "JPMorgan Private Bank" is the marketing name for the
private banking business conducted by JPMorgan Chase & Co. and its subsidiaries
worldwide. JPMorgan Chase Bank, N.A. and J.P. Morgan Trust Company, N.A. are
members of the FDIC. J.P. Morgan Securities Inc. (JPMSI) is a member of the New
York Stock Exchange and other national and regional exchanges. JPMSI (the
"broker-dealer") is a broker-dealer with the National Association of Securities
Dealers, Inc. and is a member of SIPC. In addition, JPMorgan Chase & Co. may
operate various other broker-dealers or investment advisory entities.
Investment management services are provided through JPMorgan Chase Bank,
N.A., J.P. Morgan Trust Company, N.A. and their affiliates. Brokerage services are
provided through J.P. Morgan Securities Inc. and its brokerage affiliates.
We believe the information contained in this material to be reliable. The opinions,
estimates, and investment strategies and views expressed in this document
constitute the judgment of our investment strategists dedicated to private clients,
based on current market conditions and are subject to change without notice. This
material is not the product of JPMorgan's research departments, and you should
not regard it as research or as a research report. Opinions expressed herein may
differ from the opinions expressed by other areas of JPMorgan, including research.
The investment strategies and views stated here may differ from those expressed
for other purposes or in other contexts by other JPMorgan market strategists. Past
performance is not indicative of comparable future results. The investments
discussed may fluctuate in price or value. Investors may get back less than they
invested. Changes in rates of exchange may have an adverse effect on the value
of investments.
If reference is made to a product or service offered by the broker-dealers, the
obligations and the securities sold, offered or recommended are not deposits and
are not insured by the FDIC, the Federal Reserve Board, or any other
governmental agency. The broker-dealers are not banks and are separate legal
entities from their bank affiliates. The obligations of the broker-dealers are
not obligations of their bank or thrift affiliates (unless explicitly stated
otherwise), and these affiliates are not responsible for securities sold,
offered or recommended by the broker-dealer. The foregoing also applies to our
other non-bank, non-thrift affiliates. FDIC insurance and domestic deposit
preference are not applicable to deposits or other obligations of our bank
branches or banking affiliates outside the United States.
Important information
The S&P 500 is a capitalization-weighted index of 500 stocks from a broad range
of industries. "S&P 500" is a trademark of Standard and Poor's Corporation.
The views and strategies described herein may not be suitable for all investors.
This material is distributed with the understanding that it is not rendering
accounting, legal or tax advice. Please consult your legal or tax advisor
concerning such matters.
Additional information is available upon request.
(C) 2007 JPMorgan Chase & Co.
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