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 17, 2008; Rule 433
|
Structured
Investments
|
JPMorgan
Chase & Co.
$
Buffered
Return Enhanced Notes Linked to a Basket Consisting of
the AMEX Hong Kong 30 Index, the FTSE/Xinhua China 25 Index, the
Korea
Stock Price Index 200, the MSCI Singapore Index and the MSCI Taiwan
Index
due April 3, 2009
|
·
|
The
notes are
designed for investors who seek a return of two times the appreciation
of
a diversified basket of Asian indices up to a maximum total return
on the
notes of 24.20%* at maturity. Investors should be willing to forgo
interest and dividend payments and, if the Basket declines by more
than
10%, be willing to lose some or all of their
principal.
|
·
|
Senior
unsecured obligations of JPMorgan Chase & Co. maturing April 3,
2009†.
|
·
|
Minimum
denominations of $20,000 and integral multiples of $1,000 in excess thereof.
|
·
|
The
notes are
expected to price on or about March 20, 2008††
and are
expected to settle on or about March 26,
2008.
|
Basket:
|
The
notes are
linked to a basket consisting of the AMEX Hong Kong 30 Index (“HKX”), the
FTSE/Xinhua China 25 Index (“XIN0I”), the Korea Stock Price Index 200
(“KOSPI2”), the MSCI Singapore Index (“SGY”) and the MSCI Taiwan Index
(“TWY”) (each a “Basket Index,” and together, the “Basket
Indices”).
|
Component
Weightings:
|
The
AMEX Hong
Kong Weighting is 16.50%, the FTSE/Xinhua Weighting is 28.00%, the
KOSPI
200 Weighting is 26.50%, the MSCI Singapore Weighting is 8.00% and
the
MSCI Taiwan Weighting is 21.00% (each a “Component Weighting,” and
collectively, the “Component Weightings”).
|
Upside
Leverage Factor:
|
2
|
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 two, subject to a Maximum
Total Return on the notes of 24.20%*. For example, if the Basket
Return is
more than 12.10%, you will receive the Maximum Total Return on the
notes
of 24.20%*, which entitles you to the maximum payment of $1,242 at
maturity 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, subject to the
Maximum Total Return:
|
$1,000
+
[$1,000 x (Basket Return x 2)]
|
|
*
The actual
Maximum Total Return on the notes will be set on the pricing date
and will
not be less than 24.20%.
|
|
Your
principal is protected against up to a 10% decline in the Basket
at
maturity. If the Ending Basket Level declines from the Starting Basket
Level by up to 10%, you will receive the principal amount of your
notes at
maturity.
If
the Ending
Basket Level declines from the Starting Basket Level by more than
10%, you
will lose 1.1111% of the principal amount of your notes for every
1% that
the Basket declines beyond 10% and your final payment per $1,000
principal
amount note will be calculated as follows:
|
|
$1,000
+
[$1,000 x (Basket Return + 10%) x 1.1111]
|
|
You
will
lose some or all of your investment at maturity if the Ending Basket
Level
declines from the Starting Basket Level by more than
10%.
|
|
Buffer
Amount:
|
10%
|
Downside
Leverage Factor:
|
1.1111
|
Basket
Return:
|
The
performance of the Basket from the Starting Basket Level to the Ending
Basket Level, calculated as follows:
Ending
Basket Level - Starting Basket Level
Starting
Basket Level
|
Starting
Basket Level:
|
Set
equal to
100 on the pricing date.
|
Ending
Basket
Level:
|
The
arithmetic average of the Basket Closing Levels on the five Ending
Averaging Dates.
|
Basket
Closing Level:
|
For
each of
the Ending Averaging Dates, the Basket Closing Level will be calculated
as
follows:
|
100
x [1 +
((AMEX Hong Kong Return * AMEX Hong Kong Weighting) + (FTSE/Xinhua
Return
* FTSE/Xinhua Weighting) + (KOSPI 200 Return * KOSPI 200 Weighting)
+
(MSCI Singapore Return * MSCI Singapore Weighting) + (MSCI Taiwan
Return *
MSCI Taiwan Weighting))]
|
|
Each
of the
returns set forth in the formula above reflects the performance of
the
relevant Basket Index, expressed as a percentage, from the closing
level
of that Basket Index on the pricing date to the closing level of
that
Basket Index on the relevant Ending Averaging Date.
|
|
Ending
Averaging Dates†:
|
March
25,
2009, March 26, 2009, March 27, 2009, March 30, 2009 and March 31,
2009
|
Maturity
Date†:
|
April
3,
2009
|
CUSIP:
|
†
|
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.
|
††
|
The
pricing
of the notes is subject to our special tax counsel delivering to
us their
opinion as described under “Selected Purchase Considerations —
Capital Gains Tax Treatment.”
|
Price
to Public
|
Fees
and Commissions (1)
|
Proceeds
to Us
|
|
Per
note
|
$
|
$
|
$
|
Total
|
$
|
$
|
$
|
·
|
Product
supplement no. 54-IV dated May 4, 2007:
|
·
|
Prospectus
supplement dated October 12, 2006:
|
·
|
Prospectus
dated December 1, 2005:
|
|
|
|
Ending
Basket Level
|
Basket
Return
|
Total
Return
|
180.00
|
80.00%
|
24.20%
|
165.00
|
65.00%
|
24.20%
|
150.00
|
50.00%
|
24.20%
|
140.00
|
40.00%
|
24.20%
|
130.00
|
30.00%
|
24.20%
|
120.00
|
20.00%
|
24.20%
|
112.10
|
12.10%
|
24.20%
|
110.00
|
10.00%
|
20.00%
|
105.00
|
5.00%
|
10.00%
|
102.50
|
2.50%
|
5.00%
|
101.00
|
1.00%
|
2.00%
|
100.00
|
0.00%
|
0.00%
|
95.00
|
-5.00%
|
0.00%
|
90.00
|
-10.00%
|
0.00%
|
80.00
|
-20.00%
|
-11.11%
|
70.00
|
-30.00%
|
-22.22%
|
60.00
|
-40.00%
|
-33.33%
|
50.00
|
-50.00%
|
-44.44%
|
40.00
|
-60.00%
|
-55.56%
|
30.00
|
-70.00%
|
-66.67%
|
20.00
|
-80.00%
|
-77.78%
|
10.00
|
-90.00%
|
-88.89%
|
0.00
|
-100.00%
|
-100.00%
|
·
|
APPRECIATION
POTENTIAL —
The
notes provide the opportunity to enhance equity returns by multiplying
a
positive Basket Return by two, up to the Maximum Total Return on
the notes
of 24.20%, or $1,242 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 24.20%. 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.
|
·
|
LIMITED
PROTECTION AGAINST LOSS —
Payment at maturity of the principal amount of the notes is protected
against a decline in the Ending Basket Level, as compared to the
Starting
Basket Level, of up to 10%. If the Ending Basket Level declines by
more
than 10%, for every 1% decline of the Basket beyond 10%, you will
lose an
amount equal to 1.1111% of the principal amount of your
notes.
|
·
|
DIVERSIFICATION
AMONG THE BASKET INDICES —
The
return on the notes is linked to a basket consisting of the AMEX
Hong Kong
30 Index, the FTSE/Xinhua China 25 Index, the Korea Stock Price Index
200,
the MSCI Singapore Index and the MSCI Taiwan Index. The AMEX Hong
Kong 30
Index is based on the capitalization of 30 stocks actively traded
on The
Stock Exchange of Hong Kong Ltd. and is designed to represent a
substantial segment of the Hong Kong stock market. The FTSE/Xinhua
China
25 Index is a stock index calculated and published by FTSE/Xinhua
Index
Limited, and is designed to represent the performance of the mainland
Chinese market available to international investors. It is currently
based
on the largest and the most liquid Chinese stocks listed and trading
on
The Stock Exchange of Hong Kong Ltd. The Korea Stock Price Index
200 is a
capitalization-weighted index of 200 Korean blue-chip stocks which
make up
a large majority of the total market value of the Korea Stock Exchange.
The MSCI Singapore Index is a free float-adjusted market capitalization
index that is calculated by Morgan Stanley Capital International
Inc.
(“MSCI”) and designed to measure equity market performance in Singapore.
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. For additional information about each Basket
Index,
see the information set forth under “The AMEX Hong Kong 30 Index,” “The
FTSE/Xinhua China 25 Index,” “The Korea Stock Price Index 200,” “The MSCI
Singapore Index” and “The MSCI Taiwan Index” on PS-31, PS-48, PS-53, PS-61
and PS-65, respectively, of the accompanying product supplement no.
54-IV,
as supplemented, with respect to the MSCI Singapore Index and the
MSCI
Taiwan Index, by the information set forth under “Supplemental
Information — Transition of the MSCI Singapore Index and the MSCI
Taiwan Index to a New Index Methodology” in this term
sheet.
|
·
|
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. |
·
|
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 Basket and will depend
on
whether, and the extent to which, the Basket Return is positive or
negative. Your investment will be exposed on a leveraged basis to
any
decline in the Ending Basket Level beyond the 10% buffer as compared
to
the Starting Basket Level.
|
·
|
YOUR
MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM TOTAL
RETURN —
If
the Ending Basket Level is greater than the Starting Basket 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 Basket,
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
24.20%.
|
·
|
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.
|
·
|
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
any of
the Basket Indices would have.
|
·
|
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 upon which the stocks
underlying each Basket Index are based, although any currency fluctuations
could affect the performance of the Basket. 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.
|
·
|
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.
|
·
|
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.
|
·
|
MANY
ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE
NOTES —
In
addition to the level of the Basket on any day, the value of the
notes
will be affected by a number of economic and market factors that
may
either offset or magnify each other,
including:
|
·
|
the
expected
volatility of the Basket Indices;
|
·
|
the
time to
maturity of the notes;
|
·
|
the
dividend
rate on the common stocks underlying the Basket
Indices;
|
·
|
interest
and
yield rates in the market
generally;
|
·
|
a
variety of
economic, financial, political, regulatory or judicial events;
|
·
|
the
exchange
rate and volatility of the exchange rate between the U.S. dollar,
the Hong
Kong dollar, the Chinese renminbi, the Korean won, the Singapore
dollar
and the new Taiwan dollar; and
|
·
|
our
creditworthiness, including actual or anticipated downgrades in our
credit
ratings.
|
·
|
THE
OFFERING OF THE NOTES MAY BE TERMINATED BEFORE
PRICING —
This
term sheet has not been reviewed by our special tax counsel, Davis
Polk
& Wardwell, and the pricing of the offering of the notes is subject
to
delivery by them of an opinion regarding the tax treatment of the
notes as
described under “Selected Purchase Considerations — Capital Gains Tax
Treatment” above. If our special tax counsel does not deliver this opinion
prior to pricing, the offering of the notes will be terminated.
|
(i)
|
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.
|
(ii)
|
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.
|
(i)
|
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.
|
(ii)
|
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.
|
(iii)
|
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.
|
(iv)
|
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.
|
(v)
|
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.
|
·
|
Investable
Market Index (Large + Mid + Small)
|
·
|
Standard
Index (Large + Mid)
|
·
|
Large
Cap
Index
|
·
|
Mid
Cap
Index
|
·
|
Small
Cap
Index
|
(i)
|
Semi−Annual
Index Reviews (“SAIRs”) in May and November of the Size Segment and Global
Value and Growth Indices which
include:
|
·
|
Updating
the
indices on the basis of a fully refreshed Equity
Universe.
|
·
|
Taking
buffer
rules into consideration for migration of securities across size
and style
segments.
|
·
|
Updating
FIFs
and Number of Shares (“NOS”).
|
(ii)
|
Quarterly
Index Reviews (“QIRs”) in February and August of the Size Segment Indices
aimed at:
|
·
|
Including
significant new eligible securities (such as IPOs that were not eligible
for earlier inclusion) in the
index.
|
·
|
Allowing
for
significant moves of companies within the Size Segment Indices, using
wider buffers than in the SAIR.
|
·
|
Reflecting
the impact of significant market events on FIFs and updating
NOS.
|
(iii)
|
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.
|