Supplemental
term sheet†
To prospectus dated December 1, 2005, prospectus supplement dated October 12, 2006 and product supplement no. 34-VI dated February 28, 2008 |
Supplemental
term sheet to
Product
Supplement No. 34-VI
Registration
Statement No. 333-130051
Dated
March 11, 2008; Rule
433
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Structured
Investments
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JPMorgan
Chase & Co.
$
Reverse
Exchangeable Notes due September 30, 2008
Linked
to the Common Stock of a Single
Reference Stock Issuer
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·
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This
supplemental term sheet relates to one (1) note offering. The notes
are
linked to one, and only one, Reference Stock.
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·
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The
notes are
designed for investors who seek an interest rate that is higher than
the
current dividend yield on the Reference Stock or the yield on a
conventional debt security with the same maturity issued by us or
an
issuer with a comparable credit rating. Investors should be willing
to
forgo the potential to participate in the appreciation of the Reference
Stock, be willing to accept the risks of owning the common stock
of the
Reference Stock issuer, and be willing to lose some or all of their
principal at maturity.
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·
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Investing
in
the notes is not equivalent to investing in the shares of the Reference
Stock issuer.
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·
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The
notes
will pay interest monthly at the fixed rate specified below. However,
the
notes do not guarantee any return of principal at
maturity.
Instead,
the payment at maturity will be based on the Final Share Price of
the
Reference Stock and whether the closing price of the Reference Stock
has
declined from the Initial Share Price by more than the Protection
Amount
during the Monitoring Period, as described
below.
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·
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Payment
at
maturity for each $1,000 principal amount note will be either a cash
payment of $1,000 or delivery of shares of the Reference Stock (or,
at our
election, the Cash Value thereof), in each case, together with any
accrued
and unpaid interest, as described
below.
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·
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Minimum
denominations of $1,000 and integral multiples
thereof.
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Payment
at
Maturity:
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The
payment
at maturity, in excess of any accrued and unpaid interest, is based
on the
performance of the Reference Stock. You will receive $1,000 for each
$1,000 principal amount note, plus any accrued and unpaid interest
at
maturity, unless:
(1)
the
Final
Share Price is less than the Initial Share Price; and
(2)
on
any day
during the Monitoring Period, the closing
price
of the
Reference Stock has declined, as compared to the Initial Share Price,
by
more than the Protection Amount.
If
the
conditions described in both (1) and (2) are satisfied, at maturity
you
will receive, in addition to any accrued and unpaid interest, instead
of
the principal amount of your notes, the number of shares of the Reference
Stock equal to the Physical Delivery Amount (or, at our election,
the Cash
Value thereof). Fractional shares will be paid in cash. The
market value of the Physical Delivery Amount or the Cash Value thereof
will most likely be substantially less than the principal amount
of your
notes, and may be zero.
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Maturity
Date:
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September 30, 2008*
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Pricing
Date:
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On
or about
March 26, 2008
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Settlement
Date:
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On
or about
March 31, 2008
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Observation
Date:
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September
25,
2008*
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Interest
Payment Dates:
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Interest
on
the notes will be payable monthly in arrears on the last calendar
day of
each month (each such date, an “Interest Payment Date”), commencing April
30, 2008, to and including the Interest Payment Date corresponding
to the
Maturity Date. See “Selected Purchase Considerations — Monthly Interest
Payments” in this supplemental term sheet for more
information.
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Monitoring
Period:
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The
period
from the Pricing Date to and including the Observation Date.
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Physical
Delivery Amount:
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The
number of
shares of the Reference Stock, per $1,000 principal amount note,
equal to
$1,000 divided by the Initial Share Price, subject to
adjustments.
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Cash
Value:
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The
amount in
cash equal to the product of (1) $1,000 divided by the Initial Share
Price
of the Reference Stock and (2) the Final Share Price of the Reference
Stock, subject to adjustments.
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Initial
Share
Price:
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The
closing
price of the Reference Stock on the Pricing Date. The Initial Share
Price
is subject to adjustments in certain circumstances. See “Description of
Notes — Payment at Maturity” and “General Terms of Notes — Anti-dilution
Adjustments” in the accompanying product supplement no. 34-VI for further
information about these adjustments.
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Final
Share
Price:
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The
closing
price of the Reference Stock on the Observation
Date.
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Approximate
Tax Allocation of
Monthly
Coupon††
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|||||||||||
Page
Number
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Ticker
Symbol
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Principal
Amount
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Interest
Rate
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Protection
Amount
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Initial
Share Price
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CUSIP
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Approximate
Monthly Coupon
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Interest
on Deposit
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Put
Premium
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||
American
Eagle Outfitters, Inc.
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TS-3
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AEO
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6.00%
(equivalent to 12.00% per annum)
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40.00%
of the Initial Share Price
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48123MYX4
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$10.00
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23.50%
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76.50%
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*
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Subject
to
postponement in the event of a market disruption event and as described
under “Description of Notes — Payment at Maturity” in the accompanying
product supplement no. 34-VI.
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†
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This
supplemental term sheet supplements the term sheet dated March 7,
2008 to
product supplement no. 34-VI but does not supersede the term
sheet.
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††
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Based
on one
reasonable treatment of the notes, as described herein under “Selected
Purchase Considerations —
Tax
Treatment
as a Unit Comprising a Put Option and a Deposit” and in the accompanying
product supplement no. 34-VI under “Certain U.S. Federal Income Tax
Consequences” on page PS-28. The allocations presented herein were
determined as of March 6, 2008; the actual allocations will be determined
as of the Pricing Date and may
differ.
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Price
to Public
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Fees
and Commissions (1)
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Proceeds
to Us
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Per
note
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$
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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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(1)
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In
no event
will the fees and commissions received by J.P. Morgan Securities
Inc.,
which we refer to as JPMSI, which include concessions to be allowed
to
other dealers, exceed $60.00 per $1,000 principal amount note. For
more
detailed information about fees, commissions and concessions, please
see
“Supplemental Underwriting Information” on the last page of this
supplemental term sheet.
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·
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Product
supplement no. 34-VI dated February
28,
2008:
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·
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Prospectus
supplement dated October 12, 2006:
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·
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Prospectus
dated December 1, 2005:
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·
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THE
NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD ON DEBT SECURITIES
OF
COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT
RATING —
The
notes
will pay interest at the Interest Rate indicated on the cover of
this
supplemental term sheet. We believe that the Interest Rate is higher
than
the yield received on debt securities of comparable maturity issued
by us
or an issuer with a comparable credit rating. Because the notes are
our
senior unsecured obligations, any interest payment or any payment
at
maturity is subject to our ability to pay our obligations as they
become
due.
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·
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MONTHLY
INTEREST PAYMENTS —
The
notes offer monthly interest payments at the Interest Rate set forth
on
the cover of this supplemental term sheet. Interest will be payable
monthly in arrears on the last
calendar day of each month (each such date, an “Interest Payment Date”),
commencing April 30, 2008, to
and
including the Interest Payment Date corresponding to the Maturity
Date,
to the holders of record at the close of business on the date 15
calendar
days prior to the Interest Payment Date. If an Interest Payment Date
is
not a business day, payment will be made on the next business day
immediately following such day, but no additional interest will accrue
as
a result of the delayed payment.
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·
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THE
NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL —
Your
return
of principal at maturity is protected if the Final Share Price does
not
decline from the Initial Share Price or the closing price of the
Reference
Stock does not decline, as compared to the Initial Share Price, by
more
than the Protection Amount on any day during the Monitoring Period.
However,
if the Final Share Price declines from the Initial Share Price and
the
closing price of the Reference Stock on any day during the Monitoring
Period has declined by more than the Protection Amount, you could
lose the
entire principal amount of your
notes.
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·
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TAX
TREATMENT AS A UNIT COMPRISING A PUT OPTION AND A DEPOSIT —
You
should
review carefully the section entitled “Certain U.S. Federal Income Tax
Consequences” in the accompanying product supplement no. 34-VI.
We
and you
agree (in the absence of an administrative determination or judicial
ruling to the contrary)
to treat the
notes as units comprising a Put Option and a Deposit for U.S. federal
income tax purposes. We will determine the portion of each coupon
payment
that we will allocate to interest on the Deposit and to Put Premium,
respectively, and will provide that allocation in the pricing supplement
for the notes. If the notes had priced on March 6, 2008, of each
coupon
payment, we would have treated the percentages specified on the cover
of
this supplemental term sheet as interest on the Deposit and as Put
Premium, respectively. The actual allocation that we will determine
for
the notes may differ from this hypothetical allocation, and will
depend
upon a variety of factors, including actual market conditions and
our
borrowing costs for debt instruments of comparable maturities on
the
Pricing Date. Assuming this characterization is respected, amounts
treated
as interest on the Deposit will be taxed as ordinary income while
the Put
Premium will not be taken into account prior to maturity or sale.
However,
there are other reasonable treatments that the Internal Revenue Service
(the “IRS”) or a court may adopt, 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. While it is not clear
whether the notes would be viewed as similar to the typical prepaid
forward contract described in the notice, it is possible that 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. The notice
focuses on a number of issues, the most relevant of which for holders
of
the notes are the character of income or loss (including whether
the Put
Premium might be currently included as ordinary income) and the degree,
if
any, to which income realized by Non-U.S. Holders should be subject
to
withholding tax. Both U.S. and Non-U.S. Holders should consult their
tax
advisers regarding all aspects of the U.S. federal income tax consequences
of an investment in the notes, including possible alternative treatments
and the issues presented by this notice. Purchasers who are not initial
purchasers of notes at the issue price should also consult their
tax
advisers with respect to the tax consequences of an investment in
the
notes, including possible alternative characterizations, as well
as the
allocation of the purchase price of the notes between the Deposit
and the
Put Option.
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·
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YOUR
INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
The
notes
do not guarantee any return of principal. The payment at maturity
will be
based on the Final Share Price and whether the closing price of the
Reference Stock has declined from the Initial Share Price by more
than the
Protection Amount on any day during the Monitoring Period. Under
certain
circumstances, you will receive at maturity a predetermined number
of
shares of the Reference Stock (or, at our election, the Cash Value
thereof). The market value of those shares of the Reference Stock
or the
Cash Value thereof will most likely be less than the principal amount
of
each note and may be zero. Accordingly,
you could lose up to the entire principal amount of your
notes.
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·
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YOUR
PROTECTION MAY TERMINATE ON ANY DAY DURING THE TERM OF THE NOTES
—
If,
on any
day during the Monitoring Period, the closing price of the Reference
Stock
declines below the Initial Share Price minus the Protection Amount,
you
will at maturity be fully exposed to any depreciation in the Reference
Stock. We refer to this feature as a contingent buffer. Under these
circumstances, and
if the Final
Share Price is less than the Initial Share Price, you will receive
at
maturity a predetermined number of shares of the Reference Stock
(or, at
our election, the Cash Value thereof) and, consequently, you will
lose 1%
of the principal amount of your investment for every 1% decline in
the
Final Share Price compared to the Initial Share Price. You will be
subject
to this potential loss of principal even if the price of the Reference
Stock subsequently recovers such that the Final Share Price is above
the
Initial Share Price minus the Protection Amount. If these notes had
a
non-contingent buffer feature, under the same scenario, you would
have
received the full principal amount of your notes plus accrued and
unpaid
interest at maturity. As a result, your investment in the notes may
not
perform as well as an investment in a security with a return that
includes
a non-contingent buffer.
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·
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YOUR
RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL AMOUNT PLUS ACCRUED
INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF THE REFERENCE
STOCK —
Unless
(i)
the Final Share Price is less than the Initial Share Price and (ii)
on any
day during the Monitoring Period, the closing price of the Reference
Stock
has declined, as compared to the Initial Share Price, by more than
the
Protection Amount, for each $1,000 principal amount note, you will
receive
$1,000 at maturity plus any accrued and unpaid interest, regardless
of any
appreciation in the value of the Reference Stock, which may be
significant. Accordingly, the return on the notes may be significantly
less than the return on a direct investment in the Reference Stock
during
the term of the notes.
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·
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NO
OWNERSHIP RIGHTS IN THE REFERENCE STOCK —
As
a holder
of the notes, you will not have any ownership interest or rights
in the
Reference Stock, such as voting rights or dividend payments. In addition,
the Reference Stock issuer 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 Reference Stock and the notes.
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·
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NO
AFFILIATION WITH THE REFERENCE STOCK ISSUER —
We
are not
affiliated with the issuer of the Reference Stock. We assume no
responsibility for the adequacy of the information about the Reference
Stock issuer contained in this supplemental term sheet or in product
supplement no. 34-VI. You should make your own investigation into
the
Reference Stock and its issuer. We are not responsible for the Reference
Stock issuer’s public disclosure of information, whether contained in SEC
filings or otherwise.
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·
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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 supplemental 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, and as a general matter, the price, if any, at which 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. This
secondary market price will also be affected by a number of factors
aside
from the agent’s commission and hedging costs, including those referred to
under “Many Economic and Market Factors Will Impact the Value of the
Notes” below.
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·
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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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·
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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. 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. We and/or our affiliates may also currently or from time to
time
engage in business with the Reference Stock issuer, including extending
loans to, or making equity investments in, the Reference Stock issuer
or
providing advisory services to the Reference Stock issuer. In addition,
one or more of our affiliates may publish research reports or otherwise
express opinions with respect to the Reference Stock issuer and these
reports may or may not recommend that investors buy or hold the Reference
Stock. As a prospective purchaser of the notes, you should undertake
an
independent investigation of the Reference Stock issuer that in your
judgment is appropriate to make an informed decision with respect
to an
investment in the notes.
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·
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HEDGING
AND TRADING IN THE REFERENCE STOCK —
While
the
notes are outstanding, we or any of our affiliates may carry out
hedging
activities related to the notes, including in the Reference Stock
or
instruments related to the Reference Stock. We or our affiliates
may also
trade in the Reference Stock or instruments related to the Reference
Stock
from time to time. Any of these hedging or trading activities as
of the
Pricing Date and during the term of the notes could adversely affect
our
payment to you at maturity.
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·
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MANY
ECONOMIC AND MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES
—
In
addition
to the value of the Reference Stock and interest rates on any trading
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 and which are
set out
in more detail in product supplement no. 34-VI.
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·
the
Initial
Share Price:
|
$17.60
|
·
the
Protection Amount: $7.04
|
·
the
Interest
Rate:
|
6.00%
(equivalent to 12.00% per
annum)
|
Hypothetical
lowest closing price during the Monitoring Period
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Hypothetical
Final Share Price
|
Payment
at Maturity
|
Total
Value of Payment Received at Maturity**
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$17.60
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$35.20
|
$1,000.00
|
$1,000.00
|
$8.80
|
$18.48
|
$1,000.00
|
$1,000.00
|
$17.60
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$17.60
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$1,000.00
|
$1,000.00
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$10.56
|
$10.56
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$1,000.00
|
$1,000.00
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$8.80
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$16.72
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56
shares of
the Reference Stock or the Cash Value thereof
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$950.00
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$8.80
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$8.80
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56
shares of
the Reference Stock or the Cash Value thereof
|
$500.00
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$4.40
|
$4.40
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56
shares of
the Reference Stock or the Cash Value thereof
|
$250.00
|
$0.00
|
$0.00
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56
shares of
the Reference Stock or the Cash Value thereof
|
$0.00
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**
|
Note
that you
will receive at maturity any accrued and unpaid interest in cash,
in
addition to either shares of the Reference Stock (or, at our election,
the
Cash Value thereof) or the principal amount of your note in cash.
Also
note that if you receive the Physical Delivery Amount, the total
value of
payment received at maturity shown in the table above includes the
value
of any fractional shares, which will be paid in
cash.
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