Term sheet |
Term Sheet
to Product Supplement No. 133-I Registration Statement No. 333-130051 Dated July 14, 2008; Rule 433 |
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Structured |
JPMorgan Chase & Co. $ Return Enhanced Notes Linked to an Equally Weighted Basket of 7 Common Stocks due July 20, 2011 |
General
Key Terms
Basket: |
The Basket consists of 7 common stocks (each, a Basket Stock and collectively, the Basket Stocks). The Basket Stocks and the Bloomberg ticker symbol, the relevant securities exchange on which it is listed, the Stock Weighting and the Initial Share Price of each Basket Stock are set forth under The Basket on page TS-1 of this term sheet. |
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 70.00%*. For example, if the Basket Return is more than 35.00%, you will receive the Maximum Total Return on the notes of 70.00%*, which entitles you to a maximum payment at maturity of $1,700 for every $1,000 principal amount note that you hold. Accordingly, if the Basket Return is positive, your payment at maturity 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 70.00%. |
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Your investment will be fully exposed to any decline in the Basket. If the Ending Basket Level declines from the Starting Basket Level, you will lose 1% of the principal amount of your notes for every 1% that the Basket declines beyond the Starting Basket Level. Accordingly, if the Basket Return is negative, your payment at maturity per $1,000 principal amount note will be calculated as follows: |
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$1,000 + ($1,000 x Basket Return) |
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You will lose some or all of your investment at maturity if the Ending Basket Level declines from the Starting Basket Level. |
Basket Return: |
Ending Basket Level Starting Basket
Level |
Starting Basket Level: |
Set equal to 100 on the pricing date. |
Ending Basket Level: |
The Basket Closing Level on the Observation Date. |
Basket Closing Level: |
The Basket Closing Level on the Observation Date will be calculated as follows: 100 x [1 + the sum of the Stock Return of each Basket Stock on the Observation Date x (1/7)] |
Stock Return: |
With respect to each Basket Stock, on the Observation Date: Final
Share Price Initial Share Price |
Initial Share Price: |
With respect to each Basket Stock, the closing price of one share of such Basket Stock on the Pricing Date. |
Final Share Price: |
With respect to each Basket Stock, the closing price of one share of such Basket Stock on the Observation Date times the Stock Adjustment Factor for such Basket Stock on such day. |
Stock Adjustment Factor: |
With respect to each Basket Stock, 1.0 on the pricing date and subject to adjustment under certain circumstances. See Description of Notes Payment at Maturity and General Terms of Notes Anti-Dilution Adjustments in the accompanying product supplement no. 133-I for further information. |
Observation Date: |
July 15, 2011 |
Maturity Date: |
July 20, 2011 |
CUSIP: |
48123LFW9 |
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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. 133-I. |
Investing in the Return Enhanced Notes involves a number of risks. See Risk Factors beginning on page PS-8 of the accompanying product supplement no. 133-I and Selected Risk Considerations beginning on page TS-2 of this term sheet.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplements and prospectus. Any representation to the contrary is a criminal offense.
To the extent the information contained in footnotes (1) and (2) below differs from or conflicts with the disclosure set forth under Use of Proceeds in product supplement no. 133-I, the information in the footnotes (1) and (2) below controls.
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Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
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Per note |
$ |
$ |
$ |
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Total |
$ |
$ |
$ |
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(1) |
The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
(2) |
If the notes priced today, J.P. Morgan Securities Inc., which we refer to as JPMSI, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $30.00 per $1,000 principal amount note. This commission will include the projected profits that our affiliates expect to realize in consideration for assuming risks inherent in hedging our obligations under the notes. The actual commission received by JPMSI may be more or less than $30.00 and will depend on market conditions on the pricing date. In no event will the commission received by JPMSI exceed $35.00 per $1,000 principal amount note. See Underwriting beginning on page PS-34 of the accompanying product supplement no. 133-I. |
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
JPMorgan
July 14, 2008
Additional Terms Specific to the Notes
JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, each prospectus supplement, product supplement no. 133-I and this term sheet if you so request by calling toll-free 866-535-9248.
You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
You should read this term sheet together with the prospectus dated December 1, 2005, as supplemented by the prospectus supplement dated October 12, 2006 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 133-I dated April 25, 2008. This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in Risk Factors in the accompanying product supplement no. 133-I, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product
supplement no. 133-I dated April 25, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208002225/e31364_424b2.pdf
Prospectus supplement dated October 12, 2006:
http://www.sec.gov/Archives/edgar/data/19617/000089109206003117/e25276_424b2.pdf
Prospectus dated December 1, 2005:
http://www.sec.gov/Archives/edgar/data/19617/000089109205002389/e22923_base.txt
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the Company, we, us or our refers to JPMorgan Chase & Co.
The Basket
The Basket Stocks and the Bloomberg ticker symbol, the relevant securities exchange on which it is listed, the Stock Weighting and the Initial Share Price of each Basket Stock are set forth below:
Ticker Symbol |
Basket Stock |
Exchange |
Stock Weighting |
Initial Share Price |
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BNI |
Burlington Northern Santa Fe Corporation |
NYSE |
1/7 |
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CNI |
Canadian National Railway Company |
NYSE |
1/7 |
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CP |
Canadian Pacific Railway Limited |
NYSE |
1/7 |
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CSX |
CSX Corporation |
NYSE |
1/7 |
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KSU |
Kansas City Southern |
NYSE |
1/7 |
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NSC |
Norfolk Southern Corporation |
NYSE |
1/7 |
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UNP |
Union Pacific Corporation |
NYSE |
1/7 |
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The Initial Share Price of each Basket Stock will be determined on the pricing date.
Selected Purchase Considerations
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JPMorgan
Structured Investments |
TS-1 |
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. Non-U.S. Holders should also note that we do not currently intend to withhold on proceeds paid to them under Section 1445 of the Code, although it is possible that we may decide (or that the IRS could argue) that we are required to do so.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Basket Stocks. These risks are explained in more detail in the Risk Factors section of the accompanying product supplement no. 133-I dated April 25, 2008.
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JPMorgan
Structured Investments |
TS-2 |
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JPMorgan
Structured Investments |
TS-3 |
What Is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Basket?
The following table illustrates the hypothetical total return at maturity on the notes. The total return as used in this term sheet is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note to $1,000. The hypothetical total returns set forth below assume a Maximum Total Return on the notes of 70.00%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
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Ending Basket |
Basket Return |
Total Return |
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180.00 |
80.00% |
70.00% |
165.00 |
65.00% |
70.00% |
150.00 |
50.00% |
70.00% |
140.00 |
40.00% |
70.00% |
135.00 |
35.00% |
70.00% |
130.00 |
30.00% |
60.00% |
120.00 |
20.00% |
40.00% |
110.00 |
10.00% |
20.00% |
105.00 |
5.00% |
10.00% |
102.50 |
2.50% |
5.00% |
100.00 |
0.00% |
0.00% |
95.00 |
-5.00% |
-5.00% |
90.00 |
-10.00% |
-10.00% |
85.00 |
-15.00% |
-15.00% |
80.00 |
-20.00% |
-20.00% |
70.00 |
-30.00% |
-30.00% |
60.00 |
-40.00% |
-40.00% |
50.00 |
-50.00% |
-50.00% |
40.00 |
-60.00% |
-60.00% |
30.00 |
-70.00% |
-70.00% |
20.00 |
-80.00% |
-80.00% |
10.00 |
-90.00% |
-90.00% |
0.00 |
-100.00% |
-100.00% |
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Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total returns set forth in the table above are calculated.
Example 1: The level of the Basket increases from the Starting Basket Level of 100 to an Ending Basket Level of 120. Because the Ending Basket Level of 120 is greater than the Starting Basket Level of 100 and the Basket Return of 20% multiplied by 2 does not exceed the hypothetical Maximum Total Return of 70.00%, the investor receives a payment at maturity of $1,400 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 x (20% x 2)] = $1,400
Example 2: The level of the Basket increases from the Starting Basket Level of 100 to an Ending Basket Level of 140. Because the Ending Basket Level of 140 is greater than the Starting Basket Level of 100 and the Basket Return of 40% multiplied by 2 exceeds the hypothetical Maximum Total Return of 70.00%, the investor receives a payment at maturity of $1,700 per $1,000 principal amount note, the maximum payment on the notes.
Example 3: The level of the Basket decreases from the Starting Basket Level of 100 to an Ending Basket Level of 80. Because the Ending Basket Level of 80 is less than the Starting Basket Level of 100, the Basket Return is negative and the investor receives a payment at maturity of $800 per $1,000 principal amount note, calculated as follows:
$1,000 + ($1,000 x -20%) = $800
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JPMorgan
Structured Investments |
TS-4 |
The Basket Stocks
Public Information
All information contained herein on the Basket Stocks and on the Basket Stock issuers is derived from publicly available sources and is provided for informational purposes only. Companies with securities registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, are required to periodically file certain financial and other information specified by the SEC. Information provided to or filed with the SEC by a Basket Stock issuer pursuant to the Exchange Act can be located by reference to the SEC file number provided below and can be accessed through www.sec.gov. We do not make any representation that these publicly available documents are accurate or complete. See The Basket Stocks beginning on page PS-18 of the accompanying product supplement no. 133-I for more information.
Historical Information of the Basket Stocks and the Basket
The graphs contained in this term sheet set forth the historical performance of the Basket Stocks based on the weekly closing prices (in U.S. dollars) of the Basket Stocks from January 3, 2003 through July 11, 2008, as well as the Basket as a whole based on the weekly closing prices (in U.S. dollars) of the Basket Stocks from January 3, 2003 through July 11, 2008. The graph of the historical Basket performance assumes the Basket Closing Level on January 3, 2003 was 100 and the Stock Weightings were as specified under The Basket on page TS-1 of this term sheet. We obtained the closing prices and other market information in this term sheet from Bloomberg Financial Markets, without independent verification. The closing prices and this other information may be adjusted by Bloomberg Financial Markets for corporate actions such as public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.
Since the commencement of trading of each Basket Stock, the price of such Basket Stock has experienced significant fluctuations. The historical performance of each Basket Stock and the historical performance of the Basket should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of each Basket Stock or the levels of the Basket during the term of the notes. We cannot give you assurance that the performance of each Basket Stock will result in the return of any of your initial investment. We make no representation as to the amount of dividends, if any, that each Basket Stock issuer will pay in the future. In any event, as an investor in the notes, you will not be entitled to receive dividends, if any, that may be payable on each Basket Stock.
Burlington Northern Santa Fe Corporation (BNSF)
According to its publicly available filings with the SEC, BNSF, through its subsidiaries, is engaged primarily in the freight rail transportation business. BNSFs primary operating subsidiary, BNSF Railway, operates one of the largest North American rail networks in 28 states and two Canadian provinces. The common stock of BNSF, par value $0.01 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of BNSF in the accompanying product supplement no. 133-I. BNSFs SEC file number is 001-11535.
Historical Information of the Common Stock of BNSF
The following graph sets forth the historical performance of the common stock of BNSF based on the weekly closing price (in U.S. dollars) of the common stock of BNSF from January 3, 2003 through July 11, 2008. The closing price of the common stock of BNSF on July 11, 2008 was $95.45.
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JPMorgan
Structured Investments |
TS-5 |
Canadian National Railway Company (Canadian National)
According to its publicly available filings with the SEC, Canadian National is engaged in the rail and related transportation business. Canadian National spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, with connections to all points in North America. The common shares of Canadian National, no par value (which we refer to as the common stock of Canadian National), is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Canadian National in the accompanying product supplement no. 133-I. Canadian Nationals SEC file number is 001-2413.
Historical Information of the Common Stock of Canadian National
The following graph sets forth the historical performance of the common stock of Canadian National based on the weekly closing price (in U.S. dollars) of the common stock of Canadian National from January 3, 2003 through July 11, 2008. The closing price of the common stock of Canadian National on July 11, 2008 was $47.15.
Canadian Pacific Railway Limited (Canadian Pacific)
According to its publicly available filings with the SEC, Canadian Pacific, together with its subsidiaries, is a fully integrated and technologically advanced railway providing rail and intermodal freight transportation services over a network serving the principal business centers of Canada, the US Midwest and Northeast regions. The common shares of Canadian Pacific, no par value (which we refer to as the common stock of Canadian Pacific), is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Canadian Pacific in the accompanying product supplement no. 133-I. Canadian Pacifics SEC file number is 001-15272.
Historical Information of the Common Stock of Canadian Pacific
The following graph sets forth the historical performance of the common stock of Canadian Pacific based on the weekly closing price (in U.S. dollars) of the common stock of Canadian Pacific from January 3, 2003 through July 11, 2008. The closing price of the common stock of Canadian Pacific on July 11, 2008 was $63.34.
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JPMorgan
Structured Investments |
TS-6 |
CSX Corporation (CSX)
According to its publicly available filings with the SEC, CSX, together with its subsidiaries, provides customers access to a modern transportation network that connects ports, production, facilities and distribution centers to markets in the Northeast, Midwest and the southern states. CSX transports a diversified portfolio of products serving every major market in the eastern United States and has direct access to all Atlantic and Gulf Coast ports, as well as the Mississippi River, the Great Lakes and St. Lawrence Seaway. The common stock of CSX, par value $1.00 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of CSX in the accompanying product supplement no. 133-I. CSXs SEC file number is 001-8022.
Historical Information of the Common Stock of CSX
The following graph sets forth the historical performance of the common stock of CSX based on the weekly closing price (in U.S. dollars) of the common stock of CSX from January 3, 2003 through July 11, 2008. The closing price of the common stock of CSX on July 11, 2008 was $60.62.
Kansas City Southern
According to its publicly available filings with the SEC, Kansas City Southern is engaged primarily in the freight rail transportation business through operating a single coordinated rail network. The company provides customers with freight delivery services within its regions and throughout North America through connections with other carriers. The common stock of Kansas City Southern, par value $0.01 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Kansas City Southern in the accompanying product supplement no. 133-I. Kansas City Southerns SEC file number is 001-4717.
Historical Information of the Common Stock of Kansas City Southern
The following graph sets forth the historical performance of the common stock of Kansas City Southern based on the weekly closing price (in U.S. dollars) of the common stock of Kansas City Southern from January 3, 2003 through July 11, 2008. The closing price of the common stock of Kansas City Southern on July 11, 2008 was $43.88.
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JPMorgan
Structured Investments |
TS-7 |
Norfolk Southern Corporation (Norfolk Southern)
According to its publicly available filings with the SEC, Norfolk Southern is a company that controls a major freight railroad, Norfolk Southern Railway Company. Norfolk Southern is primarily engaged in the rail transportation of raw materials, intermediate products and finished goods primarily in the Southeast, East and Midwest and, via interchange with rail carriers, to and from the rest of the United States. The common stock of Norfolk Southern, par value $1.00 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Norfolk Southern in the accompanying product supplement no. 133-I. Norfolk Southerns SEC file number is 001-8339.
Historical Information of the Common Stock of Norfolk Southern
The following graph sets forth the historical performance of the common stock of Norfolk Southern based on the weekly closing price (in U.S. dollars) of the common stock of Norfolk Southern from January 3, 2003 through July 11, 2008. The closing price of the common stock of Norfolk Southern on July 11, 2008 was $61.78.
Union Pacific Corporation (Union Pacific)
According to its publicly available filings with the SEC, Union Pacific owns one of Americas leading transportation companies. Its principal operating company, Union Pacific Railroad Company, links 23 states in the western two-thirds of the country and serves the fastest-growing U.S. population centers. The common stock of Union Pacific, par value $2.50 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Union Pacific in the accompanying product supplement no. 133-I. Union Pacifics SEC file number is 001-6075.
Historical Information of the Common Stock of Union Pacific
The following graph sets forth the historical performance of the common stock of Union Pacific based on the weekly closing price (in U.S. dollars) of the common stock of Union Pacific from January 3, 2003 through July 11, 2008. The closing price of the common stock of Union Pacific on July 11, 2008 was $71.92.
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JPMorgan
Structured Investments |
TS-8 |
Historical Information of the Basket
The following graph sets forth the historical performance of the Basket based on the weekly Basket Closing Level from January 3, 2003 through July 11, 2008. The following graph assumes the Basket Closing Level on January 3, 2003 was 100 and the Stock Weightings were as specified on TS-1 of this term sheet.
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JPMorgan
Structured Investments |
TS-9 |