Term
sheet
To prospectus dated December 1, 2005, prospectus supplement dated December 1, 2005 and product supplement no. 26-I dated March 23, 2006 |
Term
Sheet
No. 11
to
Product
Supplement No. 26-I
Registration
Statement No. 333-130051
Dated
February
12,
2008;
Rule
433
|
Structured
Investments |
JPMorgan
Chase & Co.
$ Lesser Index Annual Review Notes Linked to the S&P 500® Index and the Dow Jones EURO STOXX 50® Index due March 8, 2011 |
·
|
The
notes are
designed for investors who seek early exit prior to maturity at
a premium
if, on any one of the three annual Review Dates, both the S&P
500®
Index and
the Dow Jones EURO STOXX 50®
Index are at
or above their respective Call Levels applicable to that Review
Date. If
the notes are not called, investors are protected at maturity against
up
to a 10% decline of either Index or both Indices on the final Review
Date
but will lose some or all of their principal if either Index or
both
Indices decline by more than 10%. Investors in the notes should
be willing
to accept this risk of loss, and be willing to forgo interest and
dividend
payments, in exchange for the opportunity to receive a call premium
payment if the notes are called.
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·
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The
first
Review Date, and therefore the earliest call date, is March 3,
2009.
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·
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Senior
unsecured obligations of JPMorgan Chase & Co. maturing March 8,
2011†.
|
·
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Minimum
denominations of $50,000 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 February 15, 2008††
and are
expected to settle on or about February 21,
2008.
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Indices:
|
The
S&P
500®
Index and
the Dow Jones EURO STOXX 50®
Index (each
an “Index,” and collectively, the “Indices”).
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||
Automatic
Call:
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On
any Review
Date, if the Index closing level for each Index is greater than
or equal
to its respective Call Level, the notes will be automatically called
for a
cash payment per note that will vary depending on the applicable
Review
Date and call premium.
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||
Call
Level:
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First Review Date | 90% of the Initial Index Level for each Index | |
Second Review Date | 100% of the Initial Index Level for each Index | ||
Final Review Date | 100% of the Initial Index Level for each Index | ||
Payment
if
Called:
|
For
every
$1,000 principal amount note, you will receive $1,000 plus a call
premium
calculated as follows:
•
at
least
15.25%*
x $1,000 if
called on the first Review Date
•
at
least
30.50%*
x $1,000 if
called on the second Review Date
•
at
least
45.75%*
x $1,000 if
called on the final Review Date
*The
actual
percentage applicable to the first, second and final Review Dates
will be
determined on the pricing date but will not be less than 15.25%,
30.50%
and 45.75%, respectively.
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||
Payment
at
Maturity:
|
If
the notes
are not called and a mandatory redemption is not triggered, your
principal
is protected at maturity against up to a 10% decline of either
Index or
both Indices. If neither Ending Index Level has declined by more
than 10%
from its respective Initial Index Level, you will receive the principal
amount of your notes at maturity. If the Ending Index Level of
either
Index declines by more than 10% from its respective Initial Index
Level,
you will lose 1.1111% of the principal amount of your notes for
every 1%
that the Lesser Performing Index declines beyond 10% and your payment
per
$1,000 principal amount note will be calculated as follows:
$1,000
+
[$1,000 x (the Lesser Index Return + 10%) x 1.1111]
where
the
“Lesser Index Return” is the lower of the Index Return for the S&P
500®
Index and
the Index Return for the Dow Jones EURO STOXX 50®
Index.
Assuming
the notes are not called, you will lose some or all of your investment
at
maturity if the Lesser Index Return reflects a decline of more
than
10%.
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Buffer:
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10%
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||
Index
Return:
|
For
each
Index, the performance of the Index from the Initial Index Level
to the
Ending Index Level calculated as follows:
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||
Ending Index
Level - Starting Index Level
Starting
Index Level
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|||
Initial
Index
Level:
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For
each
Index, the Index closing level on the pricing date.
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||
Ending
Index
Level:
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For
each
Index, the Index closing level on the final Review
Date.
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||
Lesser
Performing Index:
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The
Index
with the Lesser Index Return.
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||
Review
Dates†:
|
March
3, 2009
(first Review Date), March 3, 2010 (second Review Date), and March
3, 2011
(final Review Date).
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||
Maturity
Date†:
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March
8,
2011
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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” or “Description of
Notes — Automatic Call,” as applicable, in the accompanying product
supplement no. 26-I.
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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)
|
Proceeds
to Us
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|
Per
note
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$
|
$
|
$
|
Total
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$
|
$
|
$
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(1)
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Please
see
“Supplemental Underwriting Information” in this term sheet for information
about fees and commissions.
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· |
Product
supplement no. 26-I dated March 23, 2006:
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· |
Prospectus
supplement dated December 1, 2005:
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· |
Prospectus
dated December 1, 2005:
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Appreciation/
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||||
Depreciation
|
Total
Return
|
Total
Return
|
Total
|
|
Level
of Index
|
of
Index with
|
if
called at
|
if
called at
|
Return
|
with
Lesser Return
|
Lesser
Return
|
First
|
Second
|
at
Final
|
at
Review Date
|
at
Review Date
|
Review
Date
|
Review
Date
|
Review
Date
|
2430.00
|
80.00%
|
15.25%
|
30.50%
|
45.75%
|
2295.00
|
70.00%
|
15.25%
|
30.50%
|
45.75%
|
2160.00
|
60.00%
|
15.25%
|
30.50%
|
45.75%
|
2025.00
|
50.00%
|
15.25%
|
30.50%
|
45.75%
|
1890.00
|
40.00%
|
15.25%
|
30.50%
|
45.75%
|
1755.00
|
30.00%
|
15.25%
|
30.50%
|
45.75%
|
1620.00
|
20.00%
|
15.25%
|
30.50%
|
45.75%
|
1552.50
|
15.00%
|
15.25%
|
30.50%
|
45.75%
|
1485.00
|
10.00%
|
15.25%
|
30.50%
|
45.75%
|
1417.50
|
5.00%
|
15.25%
|
30.50%
|
45.75%
|
1350.00
|
0.00%
|
15.25%
|
30.50%
|
45.75%
|
1348.65
|
-0.10%
|
15.25%
|
N/A
|
0.00%
|
1282.50
|
-5.00%
|
15.25%
|
N/A
|
0.00%
|
1215.00
|
-10.00%
|
15.25%
|
N/A
|
0.00%
|
1147.50
|
-15.00%
|
N/A
|
N/A
|
-5.56%
|
1080.00
|
-20.00%
|
N/A
|
N/A
|
-11.11%
|
945.00
|
-30.00%
|
N/A
|
N/A
|
-22.22%
|
810.00
|
-40.00%
|
N/A
|
N/A
|
-33.33%
|
675.00
|
-50.00%
|
N/A
|
N/A
|
-44.44%
|
540.00
|
-60.00%
|
N/A
|
N/A
|
-55.56%
|
405.00
|
-70.00%
|
N/A
|
N/A
|
-66.67%
|
270.00
|
-80.00%
|
N/A
|
N/A
|
-77.78%
|
135.00
|
-90.00%
|
N/A
|
N/A
|
-88.89%
|
0.00
|
-100.00%
|
N/A
|
N/A
|
-100.00%
|
· |
APPRECIATION
POTENTIAL —
If
the Index
closing level for each Index is greater than or equal to its respective
Call Level on a Review Date, your investment will yield a payment
per
$1,000 principal amount note of $1,000 plus: (i) at least 15.25%*
x $1,000
if called on the first Review Date; (ii) at least 30.50%* x $1,000
if
called on the second Review Date; or (iii) at least 45.75%* x $1,000
if
called on the final Review Date. Because the notes are our senior
unsecured obligations, payment of any amount if called or at maturity
is
subject to our ability to pay our obligations as they become
due.
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· |
POTENTIAL
EARLY EXIT WITH APPRECIATION AS A RESULT OF AUTOMATIC CALL
FEATURE —
While
the
original term of the notes is just over three years, the notes
will be
called before maturity if the closing level of both Indices is
at or above
the applicable Call Level on a Review Date and you will be entitled
to
the
applicable payment set forth on the cover of this term sheet.
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· |
LIMITED
PROTECTION AGAINST LOSS —
If
the notes
are not called and neither Ending Index Level declines by more
than 10% as
compared to its respective Initial Index Level, you will be entitled
to
receive the full principal amount of your notes at maturity. If
the Ending
Index Level for either Index declines by more than 10%, for every
1% that
the Lesser Performing Index has declined below 10%, you will lose
an
amount equal to 1.1111% of the principal amount of your notes.
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· |
POTENTIAL
FOR EARLY EXIT AND 15.25%** RETURN IN YEAR ONE, EVEN IF THE INDEX
RETURN
FOR EACH INDEX IS NEGATIVE ON THE FIRST REVIEW DATE —
The Call
Level for the first Review Date is set at 90% of the Initial Index
Level
for each Index. Accordingly, you will receive a payment of $1,152.50**
per
$1,000 principal amount note after the first Review Date, even
if the
Index closing level for each Index on the first Review Date reflects
a
decline of up to 10% from its respective Initial Index
Level.
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· |
DIVERSIFICATION
OF THE INDICES —
The return on the notes at maturity is linked to the Lesser Performing
Index which will be either the S&P 500®
Index or the Dow Jones EURO STOXX 50®
Index. The
S&P 500®
Index consists of 500 component stocks selected to provide a performance
benchmark for the U.S. equity markets.
The Dow
Jones EURO STOXX 50®
Index
consists of 50 component stocks of market sector leaders from within
the
Eurozone. The
Dow Jones EURO STOXX 50®
Index and STOXX®
are the intellectual property (including registered trademarks)
of STOXX
Limited, Zurich, Switzerland, and/or Dow Jones & Company, Inc., a
Delaware corporation, New York, USA (the “Licensors”), which are used
under license. The notes are in no way sponsored, endorsed, sold
or
promoted by the Licensors and neither of the Licensors shall have
any
liability with respect thereto. For additional information on each
Index,
see the information set forth under “The S&P 500®
Index” and “The Dow Jones EURO STOXX 50®
Index” in the accompanying product supplement no.
26-I.
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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. 26-I. 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. 26-I 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 —
If
the notes
are not called and the Ending Index Level of either Index declines
by more
than 10% compared to its respective Initial Index Level, you
will lose
1.1111% of your principal amount for every 1% decline in the
Ending Index
Level of the Lesser Performing Index compared to its Initial
Index Level
beyond the 10% buffer.
|
· |
THE
RETURN ON THE NOTES AT MATURITY IS LINKED TO THE LESSER PERFORMING
INDEX
—
You
may
receive a lower payment at maturity than you would have received
if you
had invested in the Indices individually, the stocks composing
the Indices
or contracts related to the Indices or their component stocks.
An
automatic call will be triggered only if both Indices are at
or above
their respective Call Levels on one of the Review Dates and,
if the notes
are not called, your return on the notes at maturity will be
determined by
reference to the Lesser Performing Index. Therefore, your investment
in
the notes may not result in a return on such investment even
if the Index
closing level of one of the two Indices is above its respective
Call Level
on each Review Date. The two Indices’ respective performances may not be
correlated and, as a result, your investment in the notes may
only produce
a positive return if there is a broad-based rise in the performance
of
equities across diverse markets during the term of the
notes.
|
· |
LIMITED
RETURN ON THE NOTES —
Your
potential gain on the notes will be limited to the call premium
applicable
for a Review Date, as set forth on the cover of this term sheet,
regardless of the appreciation in either Index or both Indices,
which may
be significant. Because the Index closing level of either Index
at various
times during the term of the notes could be higher than on
the Review
Dates and at maturity, you may receive a lower payment if called
or at
maturity, as the case may be, than you would have if you had
invested
directly in either Index or both
Indices.
|
· |
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
S&P 500®
Index or the
Dow Jones EURO STOXX 50®
Index would
have.
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· |
CERTAIN
BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF
THE NOTES PRIOR
TO MATURITY —
While
the
payment on any Review Date or 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 willing to
hold the notes
to maturity.
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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 Dow Jones EURO STOXX 50®
Index are denominated, although any currency fluctuations could
affect the
performance of the Dow Jones EURO STOXX 50®
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. In addition, we
are currently
one of the companies that make up the S&P 500®
Index.
We
will not have any obligation to consider your interests as
a holder of the
notes in taking any corporate action that might affect the
value of the
S&P
500® Index
and the notes.
|
· |
MANY
ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES
—
In
addition
to the level of the Indices 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 Indices;
|
· |
the
time to
maturity of the notes;
|
· |
the
dividend
rate on the common stocks underlying each
Index;
|
· |
the
expected positive or negative correlation between the S&P
500®
Index and the Dow Jones EURO STOXX 50®
Index, or the expected absence of any such
correlation;
|
· |
interest
and
yield rates in the market
generally;
|
· |
a
variety of
economic, financial, political, regulatory and judicial events;
|
· |
the
exchange
rate and the volatility of the exchange rate between the U.S.
dollar and
the European Union euro; 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.
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