8-KExhibits & Filings

JPMORGAN CHASE & CO 8-K Report, Exhibit Filing (Feb 16, 2007)

Filed February 16, 2007For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

This 8-K filing from JPMorgan Chase & Co. (JPM), dated February 16, 2007, primarily serves to disclose an exhibit related to a specific financial product. The key exhibit is a Tax Opinion from Davis Polk & Wardwell concerning 5.10% Reverse Exchangeable Notes due May 18, 2007. These notes are linked to the common stock of Las Vegas Sands Corp. and carry an equivalent annual yield of 20.40%. For investors, this filing indicates JPM's involvement in structured products, specifically notes with a leveraged yield tied to the performance of another company's stock. The inclusion of a tax opinion suggests these are complex financial instruments where tax implications are a significant consideration for purchasers. Investors should note the short-term nature of these notes (due May 2007) and the high yield, which typically implies a corresponding level of risk.

Key Highlights

  • 1JPM filed an 8-K on February 16, 2007, reporting an event on February 14, 2007.
  • 2The primary content of the filing is Exhibit 8.1, a Tax Opinion from Davis Polk & Wardwell.
  • 3The Tax Opinion relates to specific financial notes: 5.10% Reverse Exchangeable Notes due May 18, 2007.
  • 4These notes are linked to the common stock of Las Vegas Sands Corp.
  • 5The notes offer a high equivalent annual yield of 20.40%.
  • 6The filing incorporates this exhibit by reference into JPM's existing Form S-3ASR Registration Statement.

Frequently Asked Questions

The main purpose of this 8-K filing is to disclose a Tax Opinion from Davis Polk & Wardwell concerning a specific financial product: 5.10% Reverse Exchangeable Notes due May 18, 2007, which are linked to the common stock of Las Vegas Sands Corp.

Reverse Exchangeable Notes are a type of structured financial product. They typically offer a high coupon payment (in this case, 5.10% for a short period, equivalent to 20.40% per annum) but the principal repayment at maturity is linked to the performance of an underlying asset, such as a stock. If the underlying stock price falls below a certain level, the investor may receive less than their principal amount back, in addition to the coupon payments.

The primary risk for investors holding these notes is the potential for a loss of principal if the price of Las Vegas Sands Corp. common stock declines significantly by the maturity date (May 18, 2007). The high yield of 20.40% per annum reflects this elevated risk.

A Tax Opinion is included because these types of structured notes can have complex tax implications for investors. The opinion from a legal firm like Davis Polk & Wardwell provides guidance on the tax treatment of the interest payments and the potential return or loss of principal.