Term
sheet
To prospectus dated December 1, 2005, prospectus supplement dated October 12, 2006 and product supplement no. 54-IV dated May 4, 2007 |
Term
Sheet to
Product
Supplement No. 54-IV
Registration
Statement No. 333-130051
Dated March 13, 2008; Rule 433 |
Structured
Investments
|
JPMorgan
Chase & Co.
$
Return
Enhanced Notes Linked to the MSCI Taiwan Index due September 17,
2009
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·
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The
notes are
designed for investors who seek a return of three times the appreciation
of the MSCI Taiwan Index up to a maximum total return on the notes
of
78.75%* at maturity. Investors should be willing to forgo interest
and
dividend payments and, if the Index declines, be willing to lose
some or
all of their principal.
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·
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Senior
unsecured obligations of JPMorgan Chase & Co. maturing September 17,
2009†.
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·
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Minimum
denominations of $20,000 and integral multiples of $1,000 in excess
thereof.
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·
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The
notes are
expected to price on or about March 14, 2008††
and are
expected to settle on or about March 19,
2008.
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Index:
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The
MSCI
Taiwan Index (the “Index”)
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Upside
Leverage Factor:
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3
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Payment
at
Maturity:
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If
the MSCI
Taiwan Closing Level is greater than the MSCI Taiwan Starting Level,
you
will receive a cash payment that provides you with a return per $1,000
principal amount note equal to the MSCI Taiwan Return multiplied
by three,
subject to a Maximum Total Return on the notes of 78.75%*. For example,
if
the MSCI Taiwan Return is more than 26.25%, you will receive the
Maximum
Total Return on the notes of 78.75%*, which entitles you to a maximum
payment at maturity of $1,787.50 for every $1,000 principal amount
note
that you hold. Accordingly, if the MSCI Taiwan Return is positive,
your
payment per $1,000 principal amount note will be calculated as follows,
subject to the Maximum Total Return:
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$1,000
+[$1,000 x (MSCI Taiwan Return x 3)]
*The
actual
Maximum Total Return on the notes will be set on the pricing date
and will
not be less than 78.75%.
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Your
investment will be fully exposed to any decline in the
Index.
If the MSCI
Taiwan Closing Level declines from the MSCI Taiwan Starting Level,
you
will lose 1% of the principal amount of your notes for every 1% that
the
Index declines beyond the MSCI Taiwan Starting Level. Accordingly,
if the
MSCI Taiwan Return is negative, your payment per $1,000 principal
amount
note will be calculated as follows:
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$1,000
+
($1,000 x MSCI Taiwan Return)
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You
will
lose some or all of your investment at maturity if the MSCI Taiwan
Closing
Level declines from the MSCI Taiwan Starting Level.
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||
MSCI
Taiwan
Return:
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The
performance of the Index from the MSCI Taiwan Starting Level to the
MSCI
Taiwan Closing Level, calculated as follows:
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MSCI
Taiwan Closing Level - MSCI Taiwan Starting Level
MSCI
Taiwan
Starting Level
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MSCI
Taiwan
Starting Level:
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The
closing
level of the Index on the pricing date.
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MSCI
Taiwan
Closing Level:
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The
arithmetic average of the closing levels of the Index on each of
the five
Ending Averaging Dates.
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Ending
Averaging Dates†:
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September
8,
2009, September 9, 2009, September 10, 2009, September 11, 2009 and
September 14, 2009
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Maturity
Date†:
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September
17,
2009
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CUSIP:
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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. 54-IV.
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††
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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.”
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Price
to Public
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Fees
and Commissions (1)
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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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·
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Product
supplement no. 54-IV dated May 4, 2007: http://www.sec.gov/Archives/edgar/data/19617/000089109207001766/e27198_424b2.pdf
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·
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Prospectus
supplement dated October 12, 2006:
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http://www.sec.gov/Archives/edgar/data/19617/000089109206003117/e25276_424b2.pdf |
·
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Prospectus
dated December 1, 2005:
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MSCI
Taiwan
Closing
Level
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MSCI
Taiwan
Return
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Total
Return
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576.00
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80.00%
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78.75%
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528.00
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65.00%
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78.75%
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448.00
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50.00%
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78.75%
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420.00
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40.00%
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78.75%
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416.00
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30.00%
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78.75%
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404.00
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26.25%
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78.75%
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400.00
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25.00%
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75.00%
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368.00
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15.00%
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45.00%
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352.00
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10.00%
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30.00%
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336.00
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5.00%
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15.00%
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323.20
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1.00%
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3.00%
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320.00
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0.00%
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0.00%
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288.00
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-10.00%
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-10.00%
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256.00
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-20.00%
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-20.00%
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224.00
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-30.00%
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-30.00%
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192.00
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-40.00%
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-40.00%
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160.00
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-50.00%
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-50.00%
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128.00
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-60.00%
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-60.00%
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96.00
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-70.00%
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-70.00%
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64.00
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-80.00%
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-80.00%
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32.00
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-90.00%
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-90.00%
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0.00
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-100.00%
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-100.00%
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·
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APPRECIATION
POTENTIAL —
The
notes
provide the opportunity to enhance equity returns by multiplying
a
positive MSCI Taiwan Return by three, up to the Maximum Total Return
on
the notes of 78.75%, or $1,787.50 for every $1,000 principal amount
note.
The actual Maximum Total Return on the notes will be set on the pricing
date and will not be less than 78.75%. 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.
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·
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DIVERSIFICATION
OF THE MSCI TAIWAN INDEX —
The return on the notes is linked to the MSCI Taiwan Index. The
MSCI
Taiwan Index, which is calculated by MSCI, is a free float-adjusted
market
capitalization index of securities listed on the Taiwan Stock
Exchange.
MSCI Inc., the sponsor of the Index, has announced changes to the
indes
methodology of the Index. For additional information about the Index,
see
the information set forth under “The MSCI Taiwan Index” in the
accompanying product supplement no. 54-IV, as supplemented by the
information set forth under “Supplemental Information — Transition of the
MSCI Taiwan Index to a New Index Methodology” in this term
sheet.
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·
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CAPITAL
GAINS TAX TREATMENT — You should review carefully the section
entitled “Certain U.S. Federal Income Tax Consequences” in the
accompanying product supplement no. 54-IV. 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. 54-IV 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.
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YOUR
INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
The
notes
do not guarantee any return of principal. The return on the notes
at
maturity is linked to the performance of the Index and will depend
on
whether, and the extent to which, the MSCI Taiwan Return is positive
or
negative. Your investment will be fully exposed to any decline in
the MSCI
Taiwan Closing Level as compared to the MSCI Taiwan Starting Level.
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·
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YOUR
MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM TOTAL
RETURN —
If
the MSCI
Taiwan Closing Level is greater than the MSCI Taiwan Starting Level,
for
each $1,000 principal amount note, you will receive at maturity $1,000
plus an additional amount that will not exceed a predetermined percentage
of the principal amount, regardless of the appreciation in the Index,
which may be significant. We refer to this percentage as the Maximum
Total
Return, which will be set on the pricing date and will not be less
than
78.75%.
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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 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 J.P. Morgan Securities Inc., which we refer
to as
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.
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NO
INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS —
As
a holder
of the notes, you will not receive 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 composing
the
Index would have.
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NO
DIRECT EXPOSURE TO FLUCTUATIONS IN FOREIGN EXCHANGE
RATES —
The
value of
your notes will not be adjusted for exchange rate fluctuations between
the
U.S. dollar and the currencies in which the stocks composing the
Index are
denominated, although any currency fluctuations could affect the
performance of the Index. Therefore, if the applicable currencies
appreciate or depreciate relative to the U.S. dollar over the term
of the
notes, you will not receive any additional payment or incur any reduction
in your payment at maturity.
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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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POTENTIAL
CONFLICTS —
We
and our
affiliates play a variety of roles in connection with the issuance
of the
notes, including acting as calculation agent and hedging our obligations
under the notes. In performing these duties, the economic interests
of the
calculation agent and other affiliates of ours are potentially adverse
to
your interests as an investor in the
notes.
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·
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MANY
ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE
NOTES —
In
addition
to the level of the Index 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:
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the
expected
volatility of the Index;
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the
time to
maturity of the notes;
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the
dividend
rate on the common stocks underlying the
Index;
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interest
and
yield rates in the market
generally;
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a
variety of
economic, financial, political, regulatory or judicial events;
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the
exchange
rate and volatility of the exchange rate between the U.S. Dollar
and the
New Taiwan Dollar; and
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our
creditworthiness, including actual or anticipated downgrades in our
credit
ratings.
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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.
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(i)
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Identifying
Eligible Equity Securities: The Equity Universe initially looks at
securities listed in any of the countries in the MSCI Global Index
Series,
which will be classified as either Developed Markets (“DM”) or Emerging
Markets (“EM”). All listed equity securities, or listed securities that
exhibit characteristics of equity securities, except mutual funds,
ETFs,
equity derivatives, limited partnerships, and most investment trusts,
are
eligible for inclusion in the Equity Universe. Real Estate Investment
Trusts (“REITs”) in some countries and certain income trusts in Canada are
also eligible for inclusion.
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(ii)
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Country
Classification of Eligible Securities: Each company and its securities
(i.e., share classes) are classified in one and only one country,
which
allows for a distinctive sorting of each company by its respective
country.
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(i)
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Equity
Universe Minimum Size Requirement: This investability screen is
applied at
the company level. In order to be included in a Market Investable
Equity
Universe, a company must have the required minimum full market
capitalization.
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(ii)
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Equity
Universe Minimum Float−Adjusted Market Capitalization Requirement: This
investability screen is applied at the individual security level.
To be
eligible for inclusion in a Market Investable Equity Universe, a
security
must have a free float−adjusted market capitalization equal to or higher
than 50% of the Equity Universe Minimum Size
Requirement.
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(iii)
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DM
and EM
Minimum Liquidity Requirement: This investability screen is applied
at the
individual security level. To be eligible for inclusion in a Market
Investable Equity Universe, a security must have adequate liquidity.
The
Annualized Traded Value Ratio (“ATVR”), a measure that offers the
advantage of screening out extreme daily trading volumes and taking
into
account the free float−adjusted market capitalization size of securities,
is used to measure liquidity. In the calculation of the ATVR, the
trading
volumes in depository receipts associated with that security, such
as ADRs
or GDRs, are also considered. A minimum liquidity level of 20% ATVR
is
required for inclusion of a security in a Market Investable Equity
Universe of a Developed Market, and a minimum liquidity level of
15% ATVR
is required for inclusion of a security in a Market Investable Equity
Universe of an Emerging Market.
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(iv)
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Global
Minimum Foreign Inclusion Factor Requirement: This investability
screen is
applied at the individual security level. To be eligible for inclusion
in
a Market Investable Equity Universe, a security’s Foreign Inclusion Factor
(“FIF”) must reach a certain threshold. The FIF of a security is defined
as the proportion of shares outstanding that is available for purchase
in
the public equity markets by international investors. This proportion
accounts for the available free float of and/or the foreign ownership
limits applicable to a specific security (or company). In general,
a
security must have an FIF equal to or larger than 0.15 to be eligible
for
inclusion in a Market Investable Equity
Universe.
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(v)
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Minimum
Length of Trading Requirement: This investability screen is applied
at the
individual security level. For an initial public offering (“IPO”) to be
eligible for inclusion in a Market Investable Equity Universe, the
new
issue must have started trading at least four months before the
implementation of the initial construction of the index or at least
three
months before the implementation of a Semi−Annual Index Review. This
requirement is applicable to small new issues in all markets. Large
IPOs
are not subject to the Minimum Length of Trading Requirement and
may be
included in a Market Investable Equity Universe and the Standard
Index
outside of a Quarterly or Semi−Annual Index
Review.
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Investable
Market Index (Large + Mid + Small)
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Standard
Index (Large + Mid)
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·
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Large
Cap
Index
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·
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Mid
Cap
Index
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Small
Cap
Index
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Updating
the
indices on the basis of a fully refreshed Equity
Universe.
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Taking
buffer
rules into consideration for migration of securities across size
and style
segments.
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·
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Updating
FIFs
and Number of Shares (“NOS”).
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(ii)
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Quarterly
Index Reviews (“QIRs”) in February and August of the Size Segment Indices
aimed at:
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·
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Including
significant new eligible securities (such as IPOs that were not eligible
for earlier inclusion) in the
index.
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Allowing
for
significant moves of companies within the Size Segment Indices, using
wider buffers than in the SAIR.
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·
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Reflecting
the impact of significant market events on FIFs and updating
NOS.
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(iii)
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Ongoing
event−related changes. Ongoing event-related changes to the indices are
the result of mergers, acquisitions, spin-offs,bankruptcies,
reorganizations and other similar corporate events. They can also
result
from capital reorganizations in the form of rights issues, bonus
issues,
public placements and other similar corporate actions that take place
on a
continuing basis. These changes generally are reflected in the indices
at
the time of the event. Significantly large IPOs are included in the
indices after the close of the company’s tenth day of
trading.
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