Term
sheet To prospectus dated December 1, 2005, prospectus supplement dated October 12, 2006 and product supplement no. 90-I dated July 26, 2007 |
Term
Sheet to
Product
Supplement No. 90-I
Registration
Statement No. 333-130051
Dated July 11, 2008; Rule 433 |
Structured
Investments |
JPMorgan
Chase & Co.
$
Return
Notes Linked to the JPMorgan Commodity Investable Global
Asset Rotator Excess Return due July 23,
2009
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·
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The
notes are
designed for investors who seek to participate in the appreciation
of the
JPMorgan Commodity Investable Global Asset Rotator Excess Return
as
described below. Investors should be willing to forgo interest
payments
and, if the Ending Underlying Value declines from the Initial Underlying
Value by more than 1.9%*,
be willing
to lose up to 98.1% of their
principal.
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·
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Senior
unsecured obligations of JPMorgan Chase & Co. maturing July 23,
2009†.
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·
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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 July 14, 2008††
and are
expected to settle on or about July 17,
2008.
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Underlying:
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JPMorgan
Commodity Investable Global Asset Rotator Excess Return (“Commodity-IGAR”
or the “Underlying”).
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Payment
at
Maturity:
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Payment
at
maturity will reflect the performance of the Underlying plus the
Additional Amount. The
principal amount of your notes will be fully exposed to any decline
in the
Ending Underlying Value, as compared to the Initial Underlying
Value,
except that in all cases you will receive the Additional Amount
at
maturity.
Accordingly,
at maturity, you will receive an amount per $1,000 principal amount
note
calculated as follows:
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$1,000
x (1 +
Underlying Return) + Additional Amount
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You
may lose some or all of your investment (other than the Additional
Amount)
if the Ending Underlying Value declines from the Initial Underlying
Value.
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Additional
Amount:
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At
least $19* for each $1,000 principal amount note.
* The
actual Additional Amount will be set on the pricing date and will
not be
less than $19 for each $1,000 principal amount note.
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Underlying
Return:
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Ending
Underlying Value - Initial Underlying Value
Initial
Underlying Value
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Initial
Underlying Value:
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The
Underlying closing value on the pricing date, which is expected
to be July
14, 2008.
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Ending
Underlying Value:
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The
Underlying closing value on the Observation Date.
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Observation
Date†:
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July
16,
2009
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Maturity
Date:
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July
23,
2009†
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CUSIP:
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48123LGR9
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†
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Subject
to
postponement in the event of a market disruption event and as described
under “Description of Notes —
Payment
at
Maturity” in the accompanying product supplement no.
90-I.
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††
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The
pricing
of the notes is subject to our special tax counsel delivering to
us their
opinion as described under “Selected Purchase Considerations —
Capital
Gains
Tax Treatment.”
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Price
to Public (1)
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Fees
and Commissions (2)
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Proceeds
to Us
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Per
note
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$
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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. 90-I dated July 26, 2007:
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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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Ending
Underlying Value
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Underlying
Return
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$1,000
x
(1
+
Underlying Return)
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Additional
Amount
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Payment
at Maturity
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297.00
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80.00%
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$1,800
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+
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$19
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=
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$1,819
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280.50
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70.00%
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$1,700
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+
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$19
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=
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$1,719
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264.00
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60.00%
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$1,600
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+
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$19
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=
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$1,619
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247.50
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50.00%
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$1,500
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+
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$19
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=
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$1,519
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231.00
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40.00%
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$1,400
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+
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$19
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=
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$1,419
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214.50
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30.00%
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$1,300
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+
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$19
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=
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$1,319
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198.00
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20.00%
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$1,200
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+
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$19
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=
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$1,219
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181.50
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10.00%
|
$1,100
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+
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$19
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=
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$1,119
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173.25
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5.00%
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$1,050
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+
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$19
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=
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$1,069
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165.00
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0.00%
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$1,000
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+
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$19
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=
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$1,019
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148.50
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-10.00%
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$900
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+
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$19
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=
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$919
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132.00
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-20.00%
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$800
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+
|
$19
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=
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$819
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115.50
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-30.00%
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$700
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+
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$19
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=
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$719
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99.00
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-40.00%
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$600
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+
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$19
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=
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$619
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82.50
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-50.00%
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$500
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+
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$19
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=
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$519
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66.00
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-60.00%
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$400
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+
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$19
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=
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$419
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49.50
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-70.00%
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$300
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+
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$19
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=
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$319
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33.00
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-80.00%
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$200
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+
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$19
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=
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$219
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16.50
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-90.00%
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$100
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+
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$19
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=
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$119
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0
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-100.00%
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$0
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+
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$19
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=
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$19
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JPMorgan
Structured Investments — Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator Excess Return |
·
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INVESTMENT
EXPOSURE TO THE COMMODITY-IGAR —
The
notes
provide the opportunity to participate in the appreciation of the
Commodity-IGAR and enhance returns by providing an additional payment
of
at least $19* for
each $1,000 principal amount note
at maturity.
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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*
The actual Additional Amount will be set on the pricing date and
will not
be less than $19 for each $1,000 principal amount
note.
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·
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RETURN
LINKED TO DYNAMIC BASKET OF SUB-INDICES REPRESENTING SUB-ASSET
CLASSES OF
THE GLOBAL COMMODITY MARKET —
The
return
on the notes is linked to the performance of the JPMorgan Commodity
Investable Global Asset Rotator Excess Return. Commodity-IGAR references
the value of a synthetic portfolio drawn from the constituent sub-indices
of the S&P GSCITM
using an
investment strategy that is generally known as momentum investing.
The
rebalancing method therefore seeks to capitalize on positive trends
in the
U.S. dollar level of the constituents on the assumption that if
certain
constituents performed well in the past, they will continue to
perform
well in the future. See “The JPMorgan Commodity Investable Global Asset
Rotator Excess Return” in the accompanying product supplement no.
90-I.
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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. 90-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. 90-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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JPMorgan
Structured Investments — Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator Excess Return |
·
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YOUR
INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The
notes do
not guarantee any return of principal (other than the Additional
Amount).
The return on the notes is linked to the performance of the Underlying,
and will depend on whether, and the extent to which, the Underlying
Return
is positive or negative. Your investment will be fully exposed
to any
decline in the Ending Underlying Value, as compared to the Initial
Underlying Value, although in all cases you will receive the Additional
Amount at maturity.
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·
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MINIMAL
PROTECTION AGAINST LOSS —
If
the
Underlying Return is negative, at maturity, you will likely receive
less
than the principal amount of your investment. For each 1% that
the Ending
Underlying Value declines relative to the Initial Underlying Value,
you
will lose 1% of your investment in the notes, although in all cases
you
will receive the Additional Amount at
maturity.
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·
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INVESTMENTS
RELATED TO THE VALUE OF COMMODITIES TEND TO BE MORE VOLATILE THAN
TRADITIONAL SECURITIES INVESTMENTS —
The
market
values of commodities tend to be highly volatile. Commodity market
values
are not related to the value of a future income or earnings stream,
as
tends to be the case with fixed-income and equity investments,
but are
subject to variables of specific application to commodities markets.
These
variables include changes in supply and demand relationships, governmental
programs and policies, national and international monetary, trade,
political and economic events, changes in interest and exchange
rates,
speculation and trading activities in commodities and related contracts,
weather, and agricultural, trade, fiscal and exchange control policies.
These factors may have a larger impact on commodity prices and
commodity-linked instruments than on traditional fixed-income and
equity
securities. These variables may create additional investment risks
that
cause the value of the notes to be more volatile than the values
of
traditional securities. These and other factors may affect the
levels of
the sub-indices included from time to time in Commodity-IGAR, and
thus the
value of your notes, in unpredictable or unanticipated ways.
Commodity-IGAR provides one avenue for exposure to commodities.
The high
volatility and cyclical nature of commodity markets may render
these
investments inappropriate as the focus of an investment portfolio.
However, commodities investments may fluctuate independently of
stock and
bond investments, rendering moderate exposure a method of obtaining
overall portfolio diversification.
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·
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OWNING
THE NOTES INVOLVES THE RISKS ASSOCIATED WITH COMMODITY-IGAR’S MOMENTUM
INVESTMENT STRATEGY —
Commodity-IGAR employs a mathematical model intended to implement
what is
generally known as a momentum investment strategy, which seeks
to
capitalize on consistent positive market price trends based on
the
supposition that consistent positive market price trends may continue.
This strategy is different from a strategy that seeks long-term
exposure
to a portfolio consisting of constant components. The Commodity-IGAR
strategy may fail to realize gains that could occur as a result
of holding
a commodity that has experienced price declines, but after which
experiences a sudden price spike. Further, the rules of Commodity-IGAR
limit exposure to rapidly appreciating sub-indices. This is because
Commodity-IGAR rebalances its exposure to sub-indices each month
so that
the exposure to any one sub-index does not exceed one-twelfth of
the total
synthetic portfolio as of the time of a monthly rebalancing. By
contrast,
a synthetic portfolio that does not rebalance monthly in this manner
could
see greater compounded gains over time through exposure to a consistently
and rapidly appreciating sub-index. Because the rules of Commodity-IGAR
limit the synthetic portfolio to holding only to sub-indices that
have
shown consistent positive price appreciation, the synthetic portfolio
may
experience periods where it holds few or no sub-indices, and therefore
is
unlikely during such periods to achieve returns that exceed the
returns
realized by other investment strategies, or be able to capture
gains from
other appreciating assets in the market that are not included in
the
universe of constituent
sub-indices.
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·
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OWNING
THE NOTES IS NOT THE SAME AS OWNING THE CONSTITUENT SUB-INDICES
OR
COMMODITIES CONTRACTS —
The
return
on your notes will not reflect the return you would realize if
you
actually held commodity contracts replicating the constituent sub-indices
of Commodity-IGAR. The Commodity-IGAR synthetic portfolio is a
hypothetical construct that does not hold any underlying assets
of any
kind. As a result, a holder of the notes will not have any direct
or
indirect rights to any commodity contracts or interests in the
constituent
sub-indices. Furthermore, the Commodity-IGAR synthetic portfolio
is
subject to monthly rebalancing and the assessment of a monthly
index
calculation fee that will reduce its value relative to the value
of the
constituent sub-indices.
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·
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COMMODITY-IGAR
LACKS AN OPERATING HISTORY —
Commodity-IGAR was established on September 15, 2006, and therefore
lacks
historical performance. Back-testing or similar analysis in respect
of
Commodity-IGAR must be considered illustrative only and may be
based on
estimates or assumptions not used by the calculation agent when
determining Commodity-IGAR values.
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·
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NO INTEREST PAYMENTS — As a holder of the notes, you will not receive any interest payments. |
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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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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 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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·
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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 COMIGAR Calculation Agent - the entity
that
calculates Commodity-IGAR values, and acting as calculation agent
and
hedging our obligations under the notes. In performing these duties,
the
economic interests of the COMIGAR Calculation Agent, the calculation
agent
and other affiliates of ours are potentially adverse to your interests
as
an investor in the notes.
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JPMorgan
Structured Investments — Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator Excess Return |
·
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MANY
ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE OF THE NOTES
—
In
addition
to the Underlying closing value 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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·
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the
volatility in the Underlying and the constituent
sub-indices;
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·
|
the
time to
maturity of such notes;
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the
market
price of the physical commodities upon which the futures contracts
that
compose the constituent sub-indices are
based;
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interest
and
yield rates in the market
generally;
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·
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economic,
financial, political, regulatory, geographical, agricultural,
meteorological or judicial events that affect the commodities underlying
the constituent sub-indices or markets generally and which may
affect the
value of the commodity futures contracts, and thus the closing
levels of
the constituent sub-indices; and
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·
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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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JPMorgan
Structured Investments — Return Notes Linked to the JPMorgan Commodity Investable Global Asset Rotator Excess Return |