Term Sheet |
Term Sheet to
Product Supplement No. 39-XI Registration Statement No. 333-130051 Dated July 14, 2008; Rule 433 |
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Structured |
JPMorgan
Chase & Co. $ Buffered Return Enhanced Notes Linked to a Weighted Basket Consisting of the S&P 500® Index, the Russell 2000® Index, the S&P MidCap 400® Index, the MSCI EAFE® Index, the iShares® MSCI Emerging Markets Index Fund and the Financial Select Sector SPDR® Fund due July 22, 2011 |
General
Key Terms
Basket: |
The notes are linked to a basket consisting of the S&P 500® Index (SPX), the Russell 2000® Index (RUT), the S&P MidCap 400® Index (MID), the MSCI EAFE® Index (MXEA) (each a Basket Index and, collectively, the Basket Indices), the iShares® MSCI Emerging Markets Index Fund (EEM) and the Financial Select Sector SPDR® Fund (XLF) (each a Basket Fund and, collectively, the Basket Funds). Each Basket Index and Basket Fund is referred to as a Basket Component and, collectively, the Basket Components. |
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Component Weightings: |
The S&P 500 Weighting is 30%, the Russell 2000 Weighting is 20%, the S&P MidCap Weighting is 20%, the MSCI EAFE Weighting is 24%, the MSCI Emerging Markets Weighting is 3% and the Financial Select Sector Weighting is 3% (each a Component Weighting, and collectively, the Component Weightings). |
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Upside Leverage Factor: |
The Upside Leverage Factor will be determined on the pricing date and will not be less than 3. |
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Payment at Maturity: |
If the Ending Basket Level is greater than the Starting Basket Level, you will receive a cash payment that provides you with a return per $1,000 principal amount note equal to the Basket Return multiplied by the Upside Leverage Factor, subject to the Maximum Total Return on the notes of 30%*. For example, if the Basket Return is equal to or greater than 10%, you will receive the Maximum Total Return on the notes of 30%*, which entitles you to a maximum payment at maturity of $1,300 for every $1,000 principal amount note that you hold. Accordingly, if the Basket Return is positive, your payment per $1,000 principal amount note will be calculated as follows: |
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$1,000 + [$1,000 x (Basket Return x Upside Leverage Factor)] |
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*The actual Maximum Total Return on the notes will be set on the pricing date and will not be less than 30%. | ||
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Your principal is protected against up to a 20% decline in the Basket. If the Ending Basket Level declines from the Starting Basket Level by up to 20%, you will receive the principal amount of your notes at maturity. |
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If the Ending Basket Level declines from the Starting Basket Level by more than 20%, you will lose 1% of the principal amount of your notes for every 1% that the Basket declines beyond 20%. Under these circumstances, your final payment per $1,000 principal amount note will be calculated as follows: | ||
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$1,000 + [$1,000 x (Basket Return + 20%)] |
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If the Ending Basket Level declines from the Starting Basket Level by more than 20%, you could lose up to $800 per $1,000 principal amount note at maturity. |
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Buffer Amount: |
20%. |
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Basket Return: |
Ending Basket Level
Starting Basket Level |
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Starting Basket Level: |
Set equal to 100 on the pricing date. |
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Ending Basket Level: |
The Basket Closing Level on the Observation Date. |
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Basket Closing Level: |
The Basket Closing Level on any trading day will be calculated as follows: |
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100 x [1 + (S&P 500 Return * S&P 500 Weighting) + (Russell 2000 Return * Russell 2000 Weighting) + (S&P MidCap Return * S&P MidCap Weighting) + (MSCI EAFE Return * MSCI EAFE Weighting) + (MSCI Emerging Markets Return * MSCI Emerging Markets Weighting) + (Financial Select Sector Return * Financial Select Sector Weighting)] |
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Each of the S&P 500 Return, the Russell 2000 Return, the S&P MidCap Return, the MSCI EAFE Return, the MSCI Emerging Markets Return and the Financial Select Sector Return reflects the performance of the respective Basket Component, expressed as a percentage, from the relevant Basket Component closing level or closing price on the pricing date to the relevant Basket Component closing level or closing price on such trading day. The Final Share Price used to calculate the MSCI Emerging Markets Return is the closing price of one share of the iShares® MSCI Emerging Markets Index Fund on the Observation Date, multiplied by the Share Adjustment Factor. The Final Share Price used to calculate the Financial Select Sector Return is the closing price of one share of the Financial Select Sector SPDR® Fund on the Observation Date, multiplied by the Share Adjustment Factor. For additional information, see Description of Notes Payment at Maturity in the accompanying product supplement no. 39-XI. |
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Share Adjustment Factor: |
With respect to each Basket Fund, 1.0 on the pricing date and subject to adjustment under certain circumstances. See Description of Notes Payment at Maturity and General Terms of Notes Anti Dilution Adjustments in the accompanying product supplement no. 39-XI for further information about these adjustments. |
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Observation Date: |
July 18, 2011 |
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Maturity Date: |
July 22, 2011 |
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CUSIP: |
48123LFV1 |
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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. 39-XI. |
Investing in the Buffered Return Enhanced Notes involves a number of risks. See Risk Factors beginning on page PS-16 of the accompanying product supplement no. 39-XI and Selected Risk Considerations beginning on page TS-1 of this term sheet. |
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, each prospectus supplement, product supplement no. 39-XI and this term sheet if you so request by calling toll-free 866-535-9248.
You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplements and prospectus. Any representation to the contrary is a criminal offense.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(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) |
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 $57.00 per $1,000 principal amount note. This commission includes the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes. JPMSI may use a portion of that commission to pay selling concessions to other dealers of approximately $25.00 per $1,000 principal amount note. The actual commission received by JPMSI may be more or less than $57.00 and will depend on market conditions on the pricing date. In no event will the commission received by JPMSI, which includes concessions to be paid to other dealers, exceed $60.00 per $1,000 principal amount note. See Underwriting beginning on page PS-145 of the accompanying product supplement no. 39-XI. |
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
JPMorgan
July 14, 2008
ADDITIONAL TERMS SPECIFIC TO THE NOTES
You should read this term sheet together with the prospectus dated December 1, 2005, as supplemented by the prospectus supplement dated October 12, 2006 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 39-XI dated June 11, 2008. This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in Risk Factors in the accompanying product supplement no. 39-XI, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product
supplement no. 39-XI dated June 11, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208003043/e31925_424b2.pdf
Prospectus supplement dated October 12, 2006:
http://www.sec.gov/Archives/edgar/data/19617/000089109206003117/e25276_424b2.pdf
Prospectus dated December 1, 2005:
http://www.sec.gov/Archives/edgar/data/19617/000089109205002389/e22923_base.txt
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-1 |
capital gain (as defined in Section 1260 of the Code) of the U.S. Holder. In addition, an interest charge will also apply to any deemed underpayment of tax. Although the matter is not clear, Section 1260 of the Code should not apply to the notes. U.S. Holders should consult their tax advisors regarding the potential application of the constructive ownership rules.Moreover, on December 7, 2007, the Treasury Department and the IRS released a notice requesting comments on the possible 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 (as discussed above). 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 on a retroactive basis.You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes, including possible alternative characterizations in general and the possible impact of the notice described above in particular.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket Components or any of the component equity securities of the Basket Indices or the equity securities held by the Basket Funds. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 39-XI dated June 11, 2008.
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JPMorgan
Structured Investments |
TS-2 |
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JPMorgan
Structured Investments |
TS-3 |
What Is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Basket?
The following table illustrates the hypothetical total return at maturity on the notes. The total return as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume an Upside Leverage Factor of 3 and a Maximum Total Return on the notes of 30%. The Upside Leverage Factor will be determined on the pricing date and will not be less than 3. The Maximum Total Return will be determined on the pricing date and will not be less than 30%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
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Ending |
Basket Return |
Total Return |
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150.00 |
50.00% |
30.00% |
140.00 |
40.00% |
30.00% |
130.00 |
30.00% |
30.00% |
120.00 |
20.00% |
30.00% |
115.00 |
15.00% |
30.00% |
110.00 |
10.00% |
30.00% |
105.00 |
5.00% |
15.00% |
102.50 |
2.50% |
7.50% |
101.00 |
1.00% |
3.00% |
100.00 |
0.00% |
0.00% |
95.00 |
-5.00% |
0.00% |
90.00 |
-10.00% |
0.00% |
80.00 |
-20.00% |
0.00% |
70.00 |
-30.00% |
-10.00% |
60.00 |
-40.00% |
-20.00% |
50.00 |
-50.00% |
-30.00% |
40.00 |
-60.00% |
-40.00% |
30.00 |
-70.00% |
-50.00% |
20.00 |
-80.00% |
-60.00% |
10.00 |
-90.00% |
-70.00% |
0.00 |
-100.00% |
-80.00% |
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Hypothetical Examples of Amounts
Payable at Maturity
The following examples illustrate how the total returns set forth in the table above are calculated assuming an initial investment in $3,000 aggregate principal amount of notes (or an aggregate of three $1,000 principal amount notes).
Example 1: The level of the Basket increases from a Starting Basket Level of 100 to an Ending Basket Level of 105. Because the Ending Basket Level of 105 is greater than the Starting Basket Level of 100 and the Basket Return of 5% multiplied by 3 does not exceed the hypothetical Maximum Total Return of 30%, the investor receives a payment at maturity of $3,450 per $3,000 aggregate principal amount of notes, calculated as follows:
3 x [$1,000 + ($1,000 x [5% x 3])] = $3,450
Example 2: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 80. Because the Ending Basket Level of 80 is less than the Starting Basket Level of 100 by not more than the Buffer Amount of 20%, the investor receives a payment at maturity of $3,000 per $3,000 aggregate principal amount of notes.
Example 3: The level of the Basket increases from a Starting Basket Level of 100 to an Ending Basket Level of 120. Because the Ending Basket Level of 120 is greater than the Starting Basket Level of 100 and the Basket Return of 20% multiplied by 3 exceeds the hypothetical Maximum Total Return of 30%, the investor receives a payment at maturity of $3,900 per $3,000 aggregate principal amount of notes, the maximum payment on the notes.
Example 4: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 70. Because the Ending Basket Level of 70 is less than the Starting Basket Level of 100 by more than the Buffer Amount of 20%, the Basket Return is negative and the investor receives a payment at maturity of $2,700 per $3,000 aggregate principal amount of notes, calculated as follows:
3 x [$1,000 + ($1,000 x [-30% + 20%])] = $2,700
Example 5: The level of the Basket decreases from a Starting Basket Level of 100 to an Ending Basket Level of 0. Because the Ending Basket Level of 0 is less than the Starting Basket Level of 100 by more than the Buffer Amount of 20%, the Basket Return is negative and the investor receives a payment at maturity of $600 per $3,000 aggregate principal amount of notes, which reflects the principal protection provided by the Buffer Amount of 20%, calculated as follows:
3 x [$1,000 + ($1,000 x [-100% + 20%])] = $600
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JPMorgan
Structured Investments |
TS-4 |
Historical Information
The following graphs show the historical weekly performance of the S&P 500® Index, the Russell 2000® Index, the S&P MidCap 400® Index, the MSCI EAFE® Index and the Financial Select Sector SPDR® Fund from January 3, 2003 through July 11, 2008 as well as the historical weekly performance of the iShares® MSCI Emerging Markets Index Fund and the Basket as a whole from April 11, 2003 through July 11, 2008. The graph of the historical Basket performance assumes the Basket level on April 11, 2003 was 100 and the Component Weightings specified on the cover of this term sheet on that date. The closing level of the S&P 500® Index on July 11, 2008 was 1239.49. The closing level of the Russell 2000® Index on July 11, 2008 was 674.95. The closing level of the S&P MidCap 400® on July 11, 2008 was 787.78. The closing level of the MSCI EAFE® Index on July 11, 2008 was 1874.97. The closing price of the iShares® MSCI Emerging Markets Index Fund on July 11, 2008 was $129.22. The closing price of the Financial Select Sector SPDR® Fund Index on July 11, 2008 was $18.68.
We obtained the various Basket Component closing levels or closing prices below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of information obtained from Bloomberg Financial Markets.
The historical closing levels or closing prices of each Basket Component and of the Basket as a whole should not be taken as an indication of future performance, and no assurance can be given as to the closing level or closing price of any Basket Component on the Observation Date. We cannot give you assurance that the performance of the Basket Components will result in the return of any of your initial investment in excess of $200 per $1,000 principal amount note.
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JPMorgan
Structured Investments |
TS-5 |
Supplemental Underwriting Information
We expect that delivery of the notes will be made against payment for the notes on or about the settlement date set forth on the front cover of this pricing supplement, which will be the fifth business day following the pricing date of the notes (this settlement cycle being referred to as T+5). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the pricing date or the succeeding business day will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisers.
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JPMorgan
Structured Investments |
TS-6 |