Term
Sheet
To
prospectus dated December 1, 2005,
prospectus supplement dated October 12, 2006 and product supplement no. 70-II dated February 27, 2007 |
Term
Sheet
to
Product
Supplement No. 70-II
Registration
Statement No. 333-130051
Dated March 7, 2008; Rule 433 |
Structured
Investments |
JPMorgan
Chase & Co.
$ Return Enhanced Notes Linked to the S&P GSCI™ Agriculture Index Excess Return due April 30, 2009 |
·
|
The
notes are
designed for investors who seek a return of three times the appreciation
of the S&P GSCI™ Agriculture Index Excess Return up to a maximum total
return on the notes of 27%* at maturity. Investors should be willing
to
forgo interest and dividend payments and, if the Index declines,
be
willing to lose some or all of their
principal.
|
· |
Senior
unsecured obligations of JPMorgan Chase & Co. maturing April 30,
2009†.
|
· |
Payment
is
linked to the S&P GSCI™ Agriculture Index Excess Return as described
below. You may lose some or all of your
investment.
|
· |
Minimum
denominations of $1,000 and integral multiples
thereof.
|
·
|
The
terms of the notes as set forth in “Key Terms” below, to the extent they
differ from or conflict with those set forth in the accompanying
product
supplement no. 70-II, supersede the terms set forth in product
supplement
no. 70-II. Please also refer to “Supplemental Information” in this term
sheet for additional information.
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· |
The
notes are
expected to price on or about March 26, 2008 and are expected to
settle on
or about March 31, 2008.
|
Index:
|
The
S&P
GSCI™ Agriculture Index Excess Return (the “Index”), formerly known as the
GSCI®
Agriculture
Excess Return Index
|
Upside
Leverage Factor:
|
3
|
Payment
at
Maturity:
|
If
the
S&P GSCI™ Agriculture Ending Level is greater than the S&P GSCI™
Agriculture Initial Level, you will receive a cash payment that
provides
you with a return per $1,000 principal amount note equal to the
S&P
GSCI™ Agriculture Return multiplied by three, subject to a Maximum
Total
Return on the notes of 27%*. For example, if the S&P GSCI™ Agriculture
Return is more than 9.00%, you will receive the Maximum Total
Return on
the notes of 27%*, which entitles you to a maximum payment at
maturity of
$1,270 for every $1,000 principal amount note that you hold.
Accordingly,
if the S&P GSCI™ Agriculture Return is positive, your payment per
$1,000 principal amount note will be calculated as follows, subject
to the
Maximum Total Return:
|
$1,000
+[$1,000 x (S&P GSCI™ Agriculture Return x 3)]
*The
actual
Maximum Total Return on the notes will be set on the pricing
date and will
not be less than 27%.
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|
Your
investment will be fully exposed to any decline in the
Index.
If the
S&P GSCI™ Agriculture Ending Level declines from the S&P GSCI™
Agriculture Initial Level, you will lose 1% of the principal
amount of
your notes for every 1% that the Index declines beyond the S&P GSCI™
Agriculture Initial Level. Accordingly, if the S&P GSCI™ Agriculture
Return is negative, your payment per $1,000 principal amount
note will be
calculated as follows:
|
|
$1,000
+
($1,000 x S&P GSCI™ Agriculture Return)
|
|
You
will
lose some or all of your investment at maturity if the S&P GSCI™
Agriculture Ending Level declines from the S&P GSCI™ Agriculture
Initial Level.
|
|
S&P
GSCI™
Agriculture Return:
|
S&P
GSCI™ Agriculture Ending Level - S&P GSCI™ Agriculture Initial
Level
S&P
GSCI™
Agriculture Initial Level
|
S&P
GSCI™
Agriculture Initial Level:
|
The
closing
level of the Index on the pricing date, which is expected to
be on or
about March 26, 2008.
|
S&P
GSCI™
Agriculture Ending Level:
|
The
closing
level of the Index on the Observation Date.
|
Observation
Date:
|
April
27,
2009†
|
Maturity
Date:
|
April
30,
2009†
|
CUSIP:
|
48123MZL9
|
† |
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. 70-II.
|
Price
to Public
|
Fees
and Commissions (1)
|
Proceeds
to Us
|
|
Per
note
|
$
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) |
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 $22.00 per $1,000 principal amount
note and
would use a portion of that commission to allow concessions
to other
dealers of approximately $10.00 per $1,000 principal amount
note.
The
actual commission received by JPMSI may be more or less than
$22.00 and
will depend on market conditions on the pricing date. In
no event will the
commission received by JPMSI, which includes concessions
to be allowed to
other dealers, exceed $25.00 per $1,000 principal amount
note. See
“Underwriting” beginning on page PS-42 of the accompanying product
supplement no.
70-II.
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· |
Product
supplement no. 70-II dated February 27,
2007:
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· |
Prospectus
supplement dated October 12,
2006:
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· |
Prospectus
dated December 1, 2005:
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· |
“Goldman,
Sachs & Co.” or “Goldman, Sachs” shall be deemed to refer to
“S&P,” except to the extent such references relate to historical
information about the S&P GSCI™ or its sub-indices prior to their
acquisition by S&P in February
2007;
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· |
the
“Goldman Sachs Commodity Index” or the “GSCI®”
shall be deemed to refer to the S&P
GSCI™;
|
· |
the
“GSCI®
Agriculture
Excess Return Index” or the “GSCI®
Agriculture” shall be deemed to refer to the S&P GSCI™ Agriculture
Index Excess Return; and
|
· |
the
“GSCI®
Agriculture Return,” the “GSCI®
Agriculture Initial Level” and the “GSCI®
Agriculture Ending Level” shall be deemed to refer to the S&P GSCI™
Agriculture Return, the S&P GSCI™ Agriculture Initial Level and the
S&P GSCI™ Agriculture Ending
Level.
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· |
APPRECIATION
POTENTIAL —
The
notes
provide the opportunity to enhance returns by multiplying a positive
S&P GSCI™ Agriculture Return by three, up to the Maximum Total Return
on the notes of 27%, or $1,270 for every $1,000 principal amount
note. The
actual Maximum Total Return on the notes will be set on the pricing
date
and will not be less than 27%. 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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· |
DIVERSIFICATION
OF THE S&P GSCI™ AGRICULTURE INDEX EXCESS RETURN —
The
return
on the notes is linked to the S&P GSCI™ Agriculture Index Excess
Return, a sub-index of the S&P GSCI™, a
composite
index of commodity sector returns, calculated,
maintained and published daily by S&P.
The S&P
GSCI™ is a world production-weighted index that is designed to reflect
the
relative significance of principal non-financial commodities
(i.e.,
physical
commodities) in the world economy. The S&P GSCI™ represents the return
of a portfolio of the futures contracts for the underlying commodities.
The S&P GSCI™ Agriculture Index Excess Return represents the
agricultural commodity components of the S&P GSCI™, including Wheat
(Chicago Wheat), Red Wheat (Kansas Wheat), Corn, Soybeans, Cotton,
Sugar,
Coffee and Cocoa. For additional information about the Index,
see the
information set forth under “The Basket — The GSCI®
Indices”
in
the
accompanying product supplement no.
70-II.
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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. 70-II. Subject to
the limitations described therein, and based on certain factual
representations received from us, in the opinion of our special
tax
counsel, Davis Polk & Wardwell, it is reasonable to treat your
purchase and ownership of the notes as an “open transaction” for U.S.
federal income tax purposes. 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 —
The
notes
do not guarantee any return of principal. The return on the notes
at
maturity is linked to the performance of the Index and will depend
on
whether, and the extent to which, the S&P GSCI™ Agriculture Return is
positive or negative. Your investment will be fully exposed to
any decline
in the S&P GSCI™ Agriculture Ending Level as compared to the S&P
GSCI™ Agriculture Initial Level.
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· |
YOUR
MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM TOTAL RETURN
—
If
the
S&P GSCI™ Agriculture Ending Level is greater than the S&P GSCI™
Agriculture Initial Level, for each $1,000 principal amount note,
you will
receive at maturity $1,000 plus an additional amount that will
not exceed
a predetermined percentage of the principal amount, regardless
of the
appreciation in the Index, which may be significant. We refer
to this
percentage as the Maximum Total Return, which will be set on
the pricing
date and will not be less than 27%.
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· |
INVESTMENTS
RELATED TO THE VALUE OF THE INDEX MAY BE MORE VOLATILE THAN TRADITIONAL
SECURITIES INVESTMENTS — The
value of the Index is subject to variables that may be less significant
to
the values of traditional securities such as stocks and bonds,
and where
the return on the securities is not related to commodities or
commodities
futures contracts. Variables such as changes in supply and demand
relationships, governmental programs and policies, national and
international political and economic events, changes in interest
and
exchange rates, trading activities in commodities and related
contracts,
weather, trade, fiscal, monetary and exchange control policies
may have a
larger impact on commodity prices and commodity-linked indices
than on
traditional securities. These additional variables may create
additional
investment risks that cause the value of the notes to be more
volatile
than the values of traditional securities and may cause the levels
of the
Index to move in unpredictable and unanticipated directions and
at
unpredictable or unanticipated
rates.
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· |
YOU
WILL NOT HAVE RIGHTS IN THE EXCHANGE-TRADED FUTURES CONTRACTS
ON THE
COMMODITIES UNDERLYING THE INDEX —
As
an owner of the notes, you will not have rights that holders
of
exchange-traded futures contracts on the commodities underlying
the Index
may have.
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· |
OWNING
THE NOTES IS NOT THE SAME AS OWNING THE AGRICULTURAL COMMODITIES
UPON
WHICH THE FUTURES CONTRACTS THAT COMPOSE THE INDEX ARE BASED,
OR CERTAIN
OTHER COMMODITY-RELATED CONTRACTS DIRECTLY —
The
return on your notes will not reflect the return you would realize
if you
actually purchased the agricultural commodities upon which the
futures
contracts that compose the Index are based, or exchange-traded
or
over-the-counter instruments based on the Index. You will not
have any
rights that holders of such assets or instruments have.
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· |
HIGHER
FUTURE PRICES OF AGRICULTURAL COMMODITIES INCLUDED IN THE INDEX
RELATIVE
TO THEIR CURRENT PRICES MAY LEAD TO A DECREASE IN THE PAYMENT
AT MATURITY
OF THE NOTES —
As
the
contracts that underlie the Index come to expiration, they are
replaced by
contracts that have a later expiration. For example, a contract
purchased
and held in August may specify an October expiration. As time
passes, the
contract expiring in October is replaced by a contract for delivery
in
November. This is accomplished by selling the October contract
and
purchasing the November contract. This process is referred to
as
“rolling.” If the market for these contracts is (putting aside other
considerations) in “backwardation,” where the prices are lower in the
distant delivery months than in the nearer delivery months, the
sale of
the October contract would take place at a price that is higher
than the
price of the November contract, thereby creating a “roll yield.” While
many of the contracts included in the Index have historically
exhibited
consistent periods of backwardation, backwardation will most
likely not
exist at all times. Moreover, some of the commodities reflected
in the
Index have historically exhibited “contango” markets rather than
backwardation. Contango markets are those in which prices are
higher in
more distant delivery months than in nearer delivery months.
Commodities
may also fluctuate between backwardation and contango markets.
The absence
of backwardation in the commodity markets could result in negative
“roll
yields,” which could adversely affect the value of the commodity indices
and, accordingly, the payment at maturity of the
notes.
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· |
CHANGES
IN THE COMPOSITION AND VALUATION OF THE S&P GSCI™
MAY
ADVERSELY AFFECT THE PAYMENT AT MATURITY AND/OR THE MARKET VALUE
OF THE
NOTES —
The
composition of the S&P GSCI™ and its sub-indices (including the Index)
may change over time, as additional futures contracts satisfy
the
eligibility criteria or futures contracts currently included
in the
S&P GSCI™ fail to satisfy such criteria. The weighting factors applied
to each agricultural commodity included in the Index change annually,
based on changes in commodity production statistics. In addition,
S&P,
in consultation with its Advisory Panel, may modify the methodology
for
determining the composition and weighting of the Index and for
calculating
its value in order to assure that the Index represents a measure
of the
performance over time of the markets for the underlying commodities.
A
number of modifications to the methodology for determining the
contracts
to be included in the Index, and for valuing the Index, have
been made in
the past several years and further modifications may be made
in the
future. Such changes could adversely affect the payment at maturity
and/or
the market value of the notes.
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· |
THE
INDEX MAY BE MORE VOLATILE AND SUSCEPTIBLE TO PRICE FLUCTUATIONS
OF
COMMODITIES THAN A BROADER COMMODITIES INDEX —
The
Index may
be more volatile and susceptible to price fluctuations than a
broader
commodities index, such as the S&P GSCI™.
In contrast
to the S&P GSCI™,
which
includes contracts on agricultural commodities and non-agricultural
commodities as well, the Index is comprised of contracts on only
a portion
of the physical commodities that are actively traded. As a result,
price
volatility in the contracts included in the S&P
GSCI™
will likely
have a greater impact on the Index than it would on the broader
S&P
GSCI™,
and the
Index individually will be more susceptible to fluctuations and
declines
in value of the agricultural commodities included in the Index.
In
addition, because the Index omits principal market sectors comprising
the
S&P
GSCI™,
it may be
less representative of the economy and commodity markets as a
whole and
might therefore not serve as a reliable benchmark for commodity
market
performance generally.
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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,
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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· |
NO
INTEREST PAYMENTS —
As
a holder
of the notes, you will not receive interest payments or other
periodic
distributions on the notes.
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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.
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· |
MANY
ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES
-
In
addition
to the level of the Index 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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·
|
the
volatility, frequency and magnitude of changes in the value of
the
Index;
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·
|
supply
and
demand for the notes, including inventory positions of JPMSI
or any other
market maker;
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·
|
the
market
price of the physical commodities upon which the futures contracts
that
compose the Index are based or the exchange-traded futures contracts
on
such commodities;
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|
the
time to maturity of the notes;
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·
|
interest
and yield rates in the market
generally;
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·
|
a
variety of
economic, financial, political and regulatory, geographical,
meteorological or judicial events;
and
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·
|
our
creditworthiness, including actual or anticipated changes in
our credit
ratings.
|
S&P
GSCI™
Agriculture
Ending
Level
|
S&P
GSCI™
Agriculture
Return
|
Total
Return
|
180.00
|
80.00%
|
27.00%
|
165.00
|
65.00%
|
27.00%
|
150.00
|
50.00%
|
27.00%
|
140.00
|
40.00%
|
27.00%
|
125.00
|
25.00%
|
27.00%
|
120.00
|
20.00%
|
27.00%
|
115.00
|
15.00%
|
27.00%
|
110.00
|
10.00%
|
27.00%
|
109.00
|
9.00%
|
27.00%
|
105.00
|
5.00%
|
15.00%
|
102.50
|
2.50%
|
7.50%
|
100.00
|
0.00%
|
0.00%
|
95.00
|
-5.00%
|
-5.00%
|
90.00
|
-10.00%
|
-10.00%
|
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%
|