MORGAN J P & CO INC, 10-K405, 1995-03-22

MORGAN J P & CO INC
10-K405, 1995-03-22
STATE COMMERCIAL BANKS

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<PAGE> 1

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
_______________________

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1994

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-5885

J.P. MORGAN & CO. INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware 13-2625764
(State or other jurisdiction (I.R.S. Employer
of
incorporation or Identification No.)
organization)

60 Wall Street, New York, NY 10260-0060
(Address of principal (Zip Code)
executive offices)

Registrant's telephone number, including area code: (212) 483-
2323
_________________________________________________________________
__

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
___________________ ________________________

Common Stock, $2.50 Par Value New York Stock Exchange

Adjustable Rate Cumulative New York Stock Exchange
Preferred
Stock, Series A, No Par
Value,
Stated Value $100

4 3/4% Convertible Debentures New York Stock Exchange
due 1998

Securities registered pursuant to Section 12(g) of the Act: NONE

<PAGE> 2

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes..X.. No.....

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by
nonaffiliates of J.P. Morgan totaled $12,082,995,399 at February
28, 1995.

The number of shares outstanding of J.P. Morgan's Common
Stock, $2.50 Par Value, at February 28, 1995, totaled 187,333,262
shares.

DOCUMENTS INCORPORATED BY REFERENCE

J.P. Morgan's Annual report to Stockholders for the year
ended December 31, 1994, is incorporated by reference in response
to Part I, Items 1, 2, 3, and 4; Part II, Items 5, 6, 7, 8, and
9; and Part IV, Item 14 of Form 10-K.

J.P. Morgan's definitive Proxy Statement dated March 22,
1995, is incorporated by reference in response to Part III, Items
10, 11, 12, and 13 of
Form 10-K.

<PAGE> 3

FORM 10-K CROSS-REFERENCE INDEX
_______________________________

P Page No. *
a
r
t
I

I Business
t
e
m
1
.
Description of business 12-19,101-
102
Number of employees 82
Financial information about foreign and
domestic 76-77,90-92
operations
Distribution of assets, liabilities, and
stockholders' equity; interest rates
and 84-86
interest differential
Investment portfolio 52-55
Loan portfolio 48,62-63,
87-92
Summary of loan loss experience 89-91
Deposits 84,86,95
Return on equity and assets 82-83
Short-term borrowings 96

I Properties 102
t
e
m
2
.

I Legal proceedings (a)
t
e
m
3
.

I Submission of matters to a vote of (a)
t security holders
e
m
4
.

P
a
r
t
I
I

I Market for registrant's common equity and
t related 81,82,97
e stockholder matters
m
5
.

I Selected financial data 82-83
t
e
m
6
.

I Management's discussion and analysis of
t financial 11-39
e condition and results of operations
m
7
.

I Financial statements and supplementary
t data
e
m
8
.
Report of independent accountants 41
J.P. Morgan & Co. Incorporated
Consolidated statement of income 42
Consolidated balance sheet 43
Consolidated statement of changes in
stockholders' equity 44
Consolidated statement of cash flows 45
Morgan Guaranty Trust Company of New York
-
Consolidated statement of condition 46
Notes to financial statements 47-81
Selected consolidated quarterly (b), 97
financial data

I Changes in and disagreements with
t accountants (a)
e on accounting and financial disclosure
m
9
.

<PAGE> 4

P Page No. *
a
r
t
I
I
I

I Directors and executive officers of the (c)
t registrant
e
m
1
0
.

I Executive compensation (c)
t
e
m
1
1
.

I Security ownership of certain beneficial
t owners (c)
e and management
m
1
2
.

I Certain relationships and related (c)
t transactions
e
m
1
3
.

P
a
r
t
I
V

I Exhibits, financial statement schedules,
t and reports
e on Form 8-K
m
1
4
.

1. Financial statements have been included
in Item 8.

2. Financial statement schedules
Schedule III - Condensed financial
information 78-80
of J.P. Morgan & Co. Incorporated
(parent)

Exhibits

3a Restated certificate of incorporation, as amended
. (incorporated by reference to Exhibit 3a to J.P.
Morgan's post-effective amendment No. 1 to Form S-
3, Registration No. 33-55851)

3b By-laws of J.P. Morgan as amended through
. December 11, 1991 (incorporated by reference to
Exhibit 3b to J.P. Morgan's registration
statement on Form S-3, Registration
No. 33-49775)

4. Instruments defining the rights of security
holders, including indentures. J.P. Morgan
hereby agrees to furnish to the Commission, upon
request, a copy of any unfiled agreements
defining the rights of holders of long-term debt
of J.P. Morgan and of all subsidiaries of J.P.
Morgan for which consolidated or unconsolidated
financial statements are required to be filed.

10 1992 stock incentive plan, as amended
a.

10 Director stock plan, as amended
b.

10 Deferred compensation plan for directors' fees,
c. as amended (incorporated by reference to Exhibit
10c to J.P. Morgan's annual report on Form 10-K
for the year ended December 31, 1992, File No, 1-
5885)

10 1989 stock incentive plan, as amended
d.

10 1987 stock incentive plan, as amended
e.
<PAGE> 5

10 Stock option plan, as amended
f.

10 Incentive compensation plan, as amended
g.

12 Statements re computation of ratios (incorporated by
. reference to Exhibit 12 to J.P. Morgan's post-
effective amendment No. 1 to Form S-3, Registration
No. 33-55851)

13 Annual report to stockholders
. Only those sections of the annual report to
stockholders referenced in the cross-reference index
above are incorporated in the report on Form 10-K.

21 Subsidiaries of J.P. Morgan
.

23 Consent of independent accountants
.

24 Powers of attorney
.

27 Financial data schedule
.

Other schedules and exhibits are omitted because the
required information either is not applicable or is shown
in the financial statements or the notes thereto.

Reports on Form 8-K

Report on Form 8-K dated October 13, 1994, was filed with
the Securities and Exchange Commission during the quarter
ended
December 31, 1994, which reported the issuance by J.P.
Morgan of a press release reporting its earnings for the
three- and nine-month periods ended September 30, 1994.
In addition, Form 8-K dated December 14, 1994, was filed
announcing a dividend increase and stock repurchase
program.

* Refers to pages appearing in the J.P. Morgan & Co.
Incorporated Annual report to stockholders for the year
ended December 31, 1994. Such annual report was mailed to
stockholders and a copy is attached hereto as Exhibit 13.
The aforementioned pages are incorporated herein by
reference in accordance with General Instruction G to Form
10-K. This document shall be deemed to have been "filed"
only to the extent of the material incorporated herein by
reference.

( Nothing to report.
a
)

( Fourth quarter 1994 results are incorporated by reference
bto the report on Form 8-K dated January 12, 1995, filed
)with the Securities and Exchange Commission.

( Incorporated by reference to the definitive Proxy
cStatement dated
)March 22, 1995.

<PAGE> 6

SIGNATURES
__________

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on March 22, 1995, on its behalf by the
undersigned, thereunto duly authorized.

(Registrant) J.P. MORGAN & CO. INCORPORATED

By (SIGNATURE) s/ EDWARD J. KELLY III
____________________________
(Name and Edward J. Kelly III, Secretary
Title)
Date March 22, 1995

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on March 22, 1995, by the
following persons on behalf of the registrant in the capacities
indicated.

By (SIGNATURE) s/JAMES T. FLYNN
_______________________________________
(Name and James T. Flynn, Chief Financial Officer
Title)
(Principal financial and accounting officer)

By (SIGNATURE) s/DOUGLAS A. WARNER III *
______________________________________________
_________
(Name and Douglas A. Warner III, Chairman of the Board,
Title) President, and Director
(Principal executive officer)

By (SIGNATURE) s/MARTIN FELDSTEIN *
__________________________
(Name and Martin Feldstein, Director
Title)

By (SIGNATURE) s/HANNA H. GRAY *
_______________________
(Name and Hanna H. Gray, Director
Title)

By (SIGNATURE) s/JAMES R. HOUGHTON *
___________________________
(Name and James R. Houghton, Director
Title)

By (SIGNATURE) s/JAMES L. KETELSEN *
___________________________
(Name and James L. Ketelsen, Director
Title)

<PAGE> 7

By (SIGNATURE) s/WILLIAM S. LEE *
________________________
(Name and William S. Lee, Director
Title)

By (SIGNATURE) s/ROBERTO G. MENDOZA *
______________________________________________
(Name and Roberto G. Mendoza, Vice Chairman of the Board
Title) and Director

By (SIGNATURE) s/LEE R. RAYMOND *
________________________
(Name and Lee R. Raymond, Director
Title)

By (SIGNATURE) s/RICHARD D. SIMMONS *
____________________________
(Name and Richard D. Simmons, Director
Title)

By (SIGNATURE) s/JOHN G. SMALE *
_______________________
(Name and John G. Smale, Director
Title)

By (SIGNATURE) s/KURT F. VIERMETZ *
____________________________________________
(Name and Kurt F. Viermetz, Vice Chairman of the Board
Title) and Director

By (SIGNATURE) s/RODNEY B. WAGNER *
____________________________________________
(Name and Rodney B. Wagner, Vice Chairman of the Board
Title) and Director

By (SIGNATURE) s/DENNIS WEATHERSTONE *
____________________________
(Name and Dennis Weatherstone, Director
Title)

By (SIGNATURE) s/DOUGLAS C. YEARLEY *
____________________________
(Name and Douglas C. Yearley, Director
Title)

* By s/MARGARET M. FORAN
______________________
Margaret M. Foran
(Attorney-in-fact)

<PAGE> 1

LIST OF EXHIBITS

3a. Restated certificate of incorporation, as amended
(incorporated by reference to Exhibit 3a to J.P. Morgan's
post-effective amendment No. 1 to Form S-3, Registration No.
33-55851)

3b. By-laws of J.P. Morgan as amended through December 11, 1991
(incorporated by reference to Exhibit 3b to J.P. Morgan's
registration statement on Form S-3, Registration No. 33-
49775)

4. Instruments defining the rights of security holders,
including indentures. J.P. Morgan hereby agrees to furnish
to the Commission, upon request, a copy of any unfiled
agreements defining the rights of holders of long-term debt
of J.P. Morgan and of all subsidiaries of J.P. Morgan for
which consolidated or unconsolidated financial statements are
required to be filed.

10a. 1992 Stock incentive plan, as amended

10b. Director stock plan, as amended

10c. Deferred compensation plan for directors' fees, as amended
(incorporated by reference to Exhibit 10c to J.P. Morgan's
annual report on Form 10-K for the year ended December 31,
1992, File No. 1-5885)

10d. 1989 stock incentive plan, as amended

10e. 1987 stock incentive plan, as amended

10f. Stock option plan, as amended

10g. Incentive compensation plan, as amended

12. Statements re computation of ratios (incorporated by
reference to Exhibit 12 to J.P. Morgan's post-effective
amendment No. 1 to Form S-3, Registration No. 33-55851)

13. The J.P. Morgan & Co. Incorporated Annual report to
stockholders (Pages 11-39, 41-92, 95-97, 101-102). This
document shall be deemed to have been "filed" only to the
extent of the material incorporated herein by reference.

21. Subsidiaries of J.P. Morgan

23. Consent of independent accountants

24. Powers of attorney

27. Financial data schedule

<PAGE> 1

Exhibit 10a

As amended
December 14, 1994

1992 Stock Incentive Plan

J. P. Morgan & Co. Incorporated and
Affiliated Companies

ARTICLE I

PURPOSE

The purpose of the 1992 Stock Incentive Plan (the
"Plan") is to promote the success of J. P. Morgan & Co.
Incorporated (the "Company") by providing a method whereby
eligible employees of the Company and its affiliated
companies may be awarded additional remuneration for
services rendered and encouraged to invest in the Common
Stock of the Company, thereby increasing their proprietary
interest in the Company's business, encouraging them to
remain in the employ of the Company or its affiliated
companies, and increasing their personal interest in the
continued success and progress of the Company.

ARTICLE II

DEFINITIONS

2.1. The following terms shall have the meaning
described below when used in the Plan:

(a) "Award" shall refer to a Restricted Stock
Award granted under Article VII or a Stock Unit Award
granted under Article VIII.

(b) "Board of Directors" shall mean the Board of
Directors of the Company.

(d) "Committee" shall mean the committee
appointed by the Board of Directors to administer the Plan
pursuant to Article III except that with respect to the
determinations to be made under Sections 6.1, 6.5, 6.8, 7.1,
7.2(c), 7.4, 8.1, 8.2, 9.1 and 9.6 with respect to an
eligible employee who is a member of the Board of Directors,
Committee shall mean all directors of the Company who are
not employees of the Company or any other Participating
Company and who are disinterested within the meaning of Rule
16b-3 under the Exchange Act and are outside directors under
Section 162(m)(4)(C) of the Code.

(e) "Common Stock" shall mean common stock, par
value $2.50, of the Company.

(f) "Company" shall mean J. P. Morgan & Co.
Incorporated or any successor to it in ownership of all or
substantially all of its assets.

(g) "Earlier Plans" shall mean the Company's 1989
Stock Incentive Plan, 1987 Stock Incentive Plan, Stock
Option Plan (1984) and Stock Option Plan (1984).

(h) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.

(i) "Incentive Stock Option" shall mean a stock
option granted under Article VI which is intended to meet
the requirements of Section 422 of the Code.

(j) "Nonqualified Stock Option" shall mean a
stock option granted under Article VI which is not intended
to be an Incentive Stock Option.

(k) "Option" shall mean an Incentive Stock Option
or a Nonqualified Stock Option, including for purposes of
Section 6.5 any stock option granted under the Earlier
Plans.

(l) "Participant" shall mean an eligible employee
who has been granted a Restricted Stock Award.

(m) "Participating Company" shall mean the
Company, the Trust Company or any subsidiary or other
affiliated entity (whether or not incorporated).

(n) "Restricted Stock Award" shall mean an award
of share credits under Article VII hereof.

(o) "Stock Appreciation Right" shall mean a right
granted under Section 6.5.

(p) "Stock Unit Award" shall mean an award
granted under Article VIII.

(q) "Trust Company" shall mean Morgan Guaranty
Trust Company of New York or any successor to it in
ownership of all or substantially all of its assets.

(r) "Vesting Date" shall mean the fifth
anniversary of the date a Restricted Stock Award was granted
or such other time or times the Committee shall designate in
respect of a Restricted Stock Award at the time of the grant
of such Award. If more than one Vesting Date is designated
for an Award, reference in the Plan to Vesting Date in
respect of such Award shall be deemed to refer to each part
of such Award and the Vesting Date for such part.

ARTICLE III

ADMINISTRATION

3.1. (a) The Board of Directors of the Company
shall appoint not less than three Directors to the Committee
which shall administer the Plan. No individual shall become
a member of the Committee unless such individual is
disinterested within the meaning of Rule 16b-3 under the
Exchange Act. The Committee shall have full power and
authority, subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may from
time to time be issued or adopted by the Board of Directors,
to grant to eligible persons Options and Stock Appreciation
Rights under Article VI of the Plan, to grant Restricted
Stock Awards under Article VII of the Plan, to grant Stock
Unit Awards under Article VIII of the Plan, to interpret the
provisions of the Plan and any agreements relating to
Options or Awards granted under the Plan, to supervise the
administration of the Plan and to delegate to senior
officers of the Company or the Trust Company the power to
act for the Committee as the Committee shall specify.

(b) All decisions made by the Committee (or such
persons acting under a delegation by the Committee pursuant
to Section 3.1(a)) pursuant to the provisions of the Plan
and related orders of the Board of Directors shall be within
the absolute discretion of the Committee or its delegate, as
the case may be, and shall be conclusive and binding on all
persons, including the Company, stockholders, employees and
beneficiaries of employees.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

4.1. (a) Subject to adjustment pursuant to Section
4.1(c), the maximum number of shares of Common Stock with
respect to which Options, Stock Appreciation Rights and
Awards may be granted shall be 14,000,000 shares of Common
Stock. Shares of Common Stock may be made available from
the authorized but unissued shares of the Company or from
shares reacquired by the Company, including shares purchased
in the open market. If an Option, Restricted Stock Award or
Stock Unit Award granted under the Plan shall expire or
terminate for any reason other than the exercise of a Stock
Appreciation Right, the shares subject to such Option or
Award shall be available for other Options and Awards to the
same employee or other employees.

(b) Subject to adjustment pursuant to Section
4.1(c), of the total shares of Common Stock referred to in
Section 4.1(a), the number of shares of Common Stock with
respect to which Awards may be granted shall not exceed
2,800,000 shares of Common Stock.

(c) In the event that the Committee shall
determine that any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock
at a price substantially below fair market value, or other
similar corporate event affects the Common Stock such that
an adjustment is required in order to preserve the benefits
or potential benefits intended to be made available under
this Plan, then the Committee shall, in its sole discretion,
and in such manner as the Committee may deem equitable,
adjust any or all of (1) the number and kind of shares which
thereafter may be awarded or optioned and sold or made the
subject of Stock Appreciation Rights under the Plan, (2) the
number and kind of shares subject to outstanding Options and
Awards, and Stock Appreciation Rights, and (3) the option
price with respect to any of the foregoing and/or, if deemed
appropriate, make provision for a cash payment to a
Participant or a person who has an outstanding option
provided, however, that the number of shares subject to any
Option or Award shall always be a whole number.

ARTICLE V

ELIGIBILITY

5.1. The employees eligible to participate in the
Plan and receive Options, Stock Appreciation Rights and
Awards under the Plan shall consist of key employees of the
Company and other Participating Companies.

ARTICLE VI

STOCK OPTIONS

6.1. Subject to the limitations of the Plan, the
Committee shall, after such consultation with and
consideration of the recommendations of management as the
Committee considers desirable, select from eligible
employees those to be granted Options and determine the time
when each Option shall be granted and the number of shares
subject to each Option and shall select the optionees to
receive Stock Appreciation Rights and the Options to which
such rights shall relate. Options may be either Incentive
Stock Options or Nonqualified Stock Options and more than
one Option may be granted to the same person.

6.2. Option Agreements. Each Option under the
Plan shall be evidenced by an option agreement which shall
contain such provisions as may be approved by the Committee.
Any such option agreement may be supplemented and amended
from time to time as approved by the Committee provided that
the terms of such option agreement after being amended or
supplemented conform to the terms of the Plan.

6.3. Option Price. The price at which shares may
be purchased upon exercise of a particular Option shall be
not less than 100% of the fair market value of such shares
on the date such Option is granted, as determined in
accordance with procedures to be established by the
Committee.

6.4. Exercise of Options. (a) Subject to the
provisions of the Plan with respect to death, retirement and
termination of employment, the period during which each
Option may be exercised shall be fixed by the Committee at
the time such Option is granted, but such period in no event
shall expire later than ten years from the date the Option
is granted.

(b) Except as permitted by Sections 6.7 and 9.1,
each Option may be exercised only after one year of
continued employment by the Company or any of its affiliated
companies and only during the continuance of the optionee's
employment with the Company or any of its affiliated
companies. Subject to the foregoing limitations and the
terms and conditions of the option agreement and unless
cancelled prior to exercise, each Option shall be
exercisable in whole or in part in installments at such time
or times as the Committee may prescribe and specify in the
applicable option agreement.

(c) No shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option
price therefor is received by the Company. Such payment
shall be made in cash or, unless prohibited by the
Committee, through the delivery of shares of Common Stock of
the Company with a value equal to the total option price or
a combination of cash and shares. In addition, the
Committee may prescribe additional methods of payment to the
extent permitted by applicable law. Any shares so delivered
shall be valued at their fair market value on the exercise
date determined as provided in Section 6.3. No optionee or
legal representative, legatee or distributee of any optionee
shall be deemed to be a holder of any shares subject to any
Option prior to the issuance of such shares upon exercise of
such Option or any related Stock Appreciation Right.

6.5. Stock Appreciation Rights. (a) Stock
Appreciation Rights may be granted to such optionees holding
Options granted under the Plan or the Earlier Plans as the
Committee may select and upon such terms and conditions as
the Committee may prescribe. Each Stock Appreciation Right
shall relate to a specific Option granted and may be granted
concurrently with the Option to which it relates or at any
time prior to the exercise, expiration or termination of
such Option. A Stock Appreciation Right shall entitle the
optionee, subject to the provisions of the Plan and the
related option agreement, to receive from the Company an
amount not more than the excess of the fair market value on
the exercise date of the number of shares for which the
Stock Appreciation Right is exercised over the option price
for such shares under the related Option. For this purpose,
such fair market value shall be determined as provided in
Section 6.3.

(b) A Stock Appreciation Right shall be
exercisable on such dates or during such periods as may be
determined by the Committee from time to time, provided that
the Committee may, for administrative convenience, determine
that, for any Stock Appreciation Right relating to a
Nonqualified Stock Option which right can only be exercised
during a limited period of time in order to satisfy rules
imposed by the Securities and Exchange Commission, the
exercise of any such right for cash during such limited
period shall be deemed to occur for all purposes hereunder
on the day during such limited period on which the fair
market value of the Common Stock, determined as provided in
Section 6.3, is the highest, and provided, further, that no
Stock Appreciation Right shall be exercisable at a time when
the related Option could not be exercised nor may it be
exercised with respect to a number of shares in excess of
the number for which such Option could then be exercised.
Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise
of Stock Appreciation Rights granted prior to such
determination as well as Stock Appreciation Rights
thereafter granted.

(c) A Stock Appreciation Right may be exercised
only upon surrender of the related Option by the optionee,
which shall be terminated to the extent of the number of
shares for which the Stock Appreciation Right is exercised.
Shares covered by such a terminated Option or portion
thereof granted under the Plan shall not be available for
other Options or Awards under the Plan.

(d) The amount payable by the Company upon
exercise of a Stock Appreciation Right may be paid in cash,
in shares (valued at their fair market value on the exercise
date determined as provided in Section 6.3) or in any
combination thereof as the Committee shall determine from
time to time. No fractional shares shall be issued and the
optionee shall receive cash in lieu thereof.

(e) The Committee may impose any other conditions
upon the exercise of a Stock Appreciation Right, which
conditions may include a condition that the Stock
Appreciation Right may be exercised only in accordance with
rules and regulations adopted by the Committee from time to
time. Such rules and regulations may govern the right to
exercise Stock Appreciation Rights granted prior to the
adoption or amendment of such rules and regulations as well
as Stock Appreciation Rights granted thereafter.

(f) The Committee may at any time amend or
suspend any Stock Appreciation Right theretofore granted
under the Plan, provided that the terms of any Stock
Appreciation Right after any amendment shall conform to the
provisions of the Plan. A Stock Appreciation Right shall
terminate upon the termination or expiration of the related
Option.

6.6. Transferability of Options and Stock
Appreciation Rights. (a) Except as provided in subsection
(b) below, an Option granted under the Plan may not be
transferred except by will or the laws of descent and
distribution and, during the lifetime of the person to whom
granted, may be exercised only by such person. A Stock
Appreciation Right may not be transferred to anyone and may
be exercised only by the optionee to whom it was granted.

(b) Notwithstanding subsection (a) above the
Committee may determine at the time of grant or thereafter,
that an Option granted under the Plan may be transferred by
the optionee to one or more members of the optionee's
immediate family, to a partnership of which the only
partners are members of the optionee's immediate family, or
to a trust established by the optionee for the benefit of
one or more members of the optionee's immediate family. For
this purpose immediate family means the optionee's spouse,
parents, children, grandchildren and the spouses of such
parents, children and grandchildren. A transferee described
in this subsection may not further transfer an Option except
by will or the laws of descent and distribution. An Option
transferred pursuant to this subsection shall remain subject
to the provisions of the Plan, including, but not limited
to, the provisions of Section 6.7 relating to the exercise
of the Option upon the death, retirement or termination of
employment of the optionee.

6.7. Death, Retirement and Termination of
Employment. Subject to the condition that no Option may be
exercised in whole or in part after the expiration of the
option period specified in the applicable option agreement
and subject to the Committee's right to cancel any Option in
accordance with Section 9.6:

(a) Upon termination of employment prior to an
optionee's attainment of age 55 but after the optionee is
eligible for retirement pursuant to a retirement plan of the
Company or any of its subsidiaries, an optionee may, within
three years after the date of such termination, purchase any
or all of the shares subject to an Option granted at least
one year prior to such termination of employment at or after
the time or times specified in the applicable option
agreement (determined without regard to such termination of
employment);

(b) Upon termination of employment on or after
attainment of age 55 and after the optionee is eligible for
retirement pursuant to a retirement plan of the Company or
any of its subsidiaries, an optionee may, at any time prior
to the expiration of the option period specified in the
applicable option agreement, purchase any or all of the
shares subject to an Option granted at least one year prior
to such termination of employment at or after the time or
times specified in the applicable option agreement
(determined without regard to such termination of
employment); and

(c) (i) Upon the death of an optionee while
employed or after a termination of employment described in
clause (b) above, the person or persons to whom such
optionee's rights under the Option are transferred by will
or the law of descent and distribution may, at any time
during the period commencing one year from the date of grant
of such Option and ending on the expiration of the option
period specified in the applicable option agreement,
purchase any or all of the shares remaining subject to the
Option at the time of such death at or after the time the
optionee would have been entitled to purchase such shares
had the optionee survived; and

(ii) Upon the death of an optionee after a
termination of employment described in clause (a) above, the
person or persons to whom such optionee's rights under the
Option are transferred by will or the law of descent and
distribution may, at any time prior to the expiration of the
three year period specified in clause (a), purchase any or
all of the shares remaining subject to such Option at or
after the time the optionee would have been entitled to
purchase such shares had the optionee survived; and

(d) Upon termination of employment for any reason
other than death or retirement as aforesaid, an optionee's
Options shall be cancelled to the extent not theretofore
exercised.

6.8. Waiver of Limitations. Notwithstanding
anything to the contrary in the Plan, in such circumstances
as the Committee may deem advisable, the Committee may waive
or otherwise remove, in whole or in part, any restrictions
or limitations applicable to an Option granted to an
eligible employee (including, without limitation, any
restriction or limitation on the period during which such
Option may be exercised following termination of such
eligible employee's employment and any restriction or
limitation on the exercisability of such Option) who, at the
time of such waiver or removal, is not subject to Section 16
of the Exchange Act.

ARTICLE VII

RESTRICTED STOCK AWARDS

7.1. Subject to the limitations of the Plan, the
Committee shall, after such consultation with and
consideration of the recommendations of management as the
Committee considers desirable, select from eligible
employees those Participants to be granted Restricted Stock
Awards and determine the time when each Award shall be
granted, the Vesting Date or Vesting Dates for each Award,
the time or times as of which vested Awards shall be paid
and the number of share credits (each of which shall be
equivalent to one share of Common Stock) subject to each
Award.

7.2. Vesting of Restricted Stock Awards. (a)
Subject to the rules of Sections 7.2(b), 7.2(c) and 9.1 each
Award shall fully vest and be 100% nonforfeitable on the
Vesting Date.

(b) Subject to the rules of Section 9.1, upon
termination of a Participant's employment prior to the
Vesting Date for any reason except for retirement, as
described below, or death, his Awards shall be forfeited and
the Participant shall have no right with respect to such
Awards. Upon termination of employment prior to the
Vesting Date by reason of the Participant's retirement under
a retirement plan maintained by the Company or a subsidiary
or by reason of death, an Award granted to such Participant
shall be vested and nonforfeitable to the extent of 20% (or
such other percentage as the Committee shall have determined
at the time of grant of such Award) for each complete twelve
month period from the date of the granting of such Award to
the date of such retirement or death.

(c) Notwithstanding the provisions of Sections
7.2(a) and 7.2(b), upon termination of a Participant's
employment prior to 100% vesting under the rules of Sections
7.2(a) and 7.2(b), the Committee may, in its sole
discretion, determine that Awards granted to such
Participant shall be vested to the extent determined by the
Committee but in no event less than the vesting computed
under the rules of Section 7.2(b).

7.3. Payment of Awards. (a)(i) Subject to the
provisions of subparagraph (ii) below, as soon as
practicable after an Award has become vested in accordance
with Section 7.2, such vested Award shall be paid to the
Participant or, in the case of the death of the Participant,
his designated beneficiary or beneficiaries or, in the
absence of a designated beneficiary, to the estate of the
Participant.

(ii) The Committee may, in its discretion,
provide that payment of vested Awards be deferred until such
time or times as the Committee shall specify at the time of
grant of such Award or thereafter, or such time or times as
the Participant may elect. Any election of a Participant
pursuant to the preceding sentence shall be filed with the
Committee in accordance with such rules and regulations,
including any deadline for the making of such an election,
as the Committee may provide.

(b)(i) Except as may be otherwise determined by
the Committee at the time of grant of an Award or
thereafter, in addition to the payment provided for in
Section 7.3(a), each Participant (or beneficiary) entitled
to payment under Section 7.3(a) shall receive the dividend
equivalent amount calculated under subparagraph (ii) below.

(ii) The dividend equivalent amount is the number
of additional share credits attributable to the number of
share credits awarded plus additional share credits
calculated hereunder. Such additional share credits shall
be determined and credited as of the end of each calendar
year by dividing (A) the aggregate cash dividends which
would have been paid had the share credits awarded or
credited under this subparagraph (ii), as the case may be,
been actual shares of Common Stock on the record date for
each such dividend during such calendar year by (B) the
average market prices per shares of Common Stock on the
last trading day of each calendar month during the 12 months
ending on the November 30 preceding the date such
determination is being made. For this purpose, the market
price on any day shall be the average of the highest and
lowest price of a share of Stock as reported on the
composite tape for such day, unless the Committee determines
that another procedure for determining market price would be
more appropriate.

(iii) In such cases as the Committee may deem
advisable, the Committee may, in lieu of the crediting
provided for in subparagraph (ii), determine to pay all or
part of the dividend equivalent amount in cash as dividends
are actually paid on Common Stock, or at such other time or
times as the Committee may otherwise determine.

(c) Payments pursuant to Section 7.3(a) and
7.3(b) shall be made in shares of Common Stock except there
may be paid in cash dividend equivalents or that part of the
total payment determined by the Company to be necessary to
satisfy tax withholding.

7.4. Waiver of Restrictions. In such
circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in
part, any restrictions or limitations to which a Restricted
Stock Award was made subject at the time of grant.

ARTICLE VIII

STOCK UNIT AWARDS

8.1. In addition to granting Options, Stock
Appreciation Rights and Restricted Stock Awards, the
Committee shall have authority to grant to eligible
employees Stock Unit Awards which can be in the form of
Common Stock or units, the value of which is based, in whole
or in part, on the value of Common Stock. Subject to the
provisions of the Plan, including Section 8.2 below, Stock
Unit Awards shall be subject to such terms, restrictions,
conditions, vesting requirements and payment rules (all of
which are sometimes hereinafter collectively referred to as
"rules") as the Committee may determine in its sole
discretion, all such rules applicable to a particular Stock
Unit Award to be reflected in writing and furnished to the
employee at the time of grant. The rules need not be
identical for each Stock Unit Award.

8.2. Rules. In the sole discretion of the
Committee, a Stock Unit Award shall be granted subject to
the following rules:

(a) Any shares of Common Stock which are part of
a Stock Unit Award may not be assigned, sold, transferred,
pledged or otherwise encumbered prior to the date on which
the shares are issued or, if later, the date provided by the
Committee at the time of the Award.

(c) Stock Unit Awards may relate in whole or in
part to certain performance criteria established by the
Committee at the time of grant.

(d) Stock Unit Awards may provide for deferred
payment schedules, vesting over a specified period of
employment, the payment (on a current or deferred basis) of
dividend equivalent amounts, with respect to the number of
shares of Common Stock covered by the Award, and elections
by the employee to defer payment of the Award or the lifting
of restrictions on the Award, if any.

(e) In such circumstances as the Committee may
deem advisable, the Committee may waive or otherwise remove,
in whole or in part, any restrictions or limitations to
which a Stock Unit Award was made subject at the time of
grant.

ARTICLE I

GENERAL PROVISIONS

9.1. Change in Control. (a)(i) In the case of a
Change in Control (as defined below) of the Company, each
Option then outstanding shall (unless the Committee
determines otherwise) immediately become exercisable in
full;

(ii) In the case of a Change in Control (as
defined below) of the Company, each Award shall (unless the
Committee determines otherwise) immediately be fully vested
and nonforfeitable and shall thereupon be paid as soon as
practicable.

(b) Any determination by the Committee made
pursuant to this Section 9.1 may be made as to all
outstanding Options or Awards or only as to certain Options
or Awards specified by the Committee and all such
determinations shall be made in cases covered by
subparagraphs (i) or (ii) below, prior to or as soon as
practicable after the occurrence of such event and in the
cases covered by subparagraphs (iii) and (iv) below, prior
to the occurrence of such event.

(i) any "person" or "group of persons" as such
terms are used in Section 13(d) and 14(d) of the Exchange
Act directly or indirectly purchases or otherwise becomes
the "beneficial owner" (as defined in Rule d-3 under the
Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any
condition), of voting securities representing 25% or more of
the combined voting power of all outstanding voting
securities of the Company;

(ii) during any period of two consecutive years,
the individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to
constitute at least a majority of the members thereof,
unless (1) there are seven or more directors then still in
office who were directors at the beginning of the period,
and (2) the election, or the nomination for election by the
Company's stockholders, of each new director was approved by
at least two-thirds of the directors then still in office
who were directors at the beginning of the period;

(iii) the stockholders of the Company shall approve
an agreement to merge or consolidate the Company with or
into another corporation as a result of which less than 50%
of the outstanding voting securities of the surviving or
resulting entity are or are to be owned by the former
shareholders of the Company (excluding from former
shareholders, a shareholder who is or, as a result of the
transaction in
question, becomes an "affiliate," as defined in Rule
12b-2 under the Exchange Act, of any party to such
consolidation or merger); or

(iv) the stockholders of the Company shall approve
the sale of all or substantially all of the Company's
business and/or assets to a person or entity which is not a
wholly-owned subsidiary of the Company.

9.2. Designation of Beneficiary. Subject to
such rules and regulations as the Committee may prescribe,
including the right of the Committee to limit the types of
designations which are acceptable for purposes of the Plan,
each employee who shall be granted an Option or Award under
the Plan may designate a beneficiary or beneficiaries and
may change such designation from time to time by filing a
written designation of beneficiaries with the Committee on a
form to be prescribed by it, provided that no such
designation shall be effective unless so filed prior to the
death of such employee.

9.3. No Right of Continued Employment. Neither
the establishment of the Plan, the granting of Options or
Awards, nor the payment of any benefits hereunder nor any
action of the Company or of the Board of Directors or of the
Committee shall be held or construed to confer upon any
person any legal right to be continued in the employ of the
Company or its subsidiaries, each of which expressly
reserves the right to discharge any employee whenever the
interest of any such company in its sole discretion may so
require without liability to such company, the Board of
Directors or the Committee except as to any rights which may
be expressly conferred upon such employee under the Plan.

9.4. No Segregation of Cash or Shares. The
Company shall not be required to segregate any cash or any
shares of Common Stock which may at any time be represented
by Options, Awards, share credits or dividend equivalent
amounts and the Plan shall constitute an "unfunded" plan of
the Company. No employee shall have voting or other rights
with respect to shares of Common Stock prior to the delivery
of such shares. The Company shall not, by any provisions of
the Plan, be deemed to be a trustee of any Common Stock or
any other property, and the liabilities of the Company to
any employee pursuant to the Plan shall be those of a debtor
pursuant to such contract obligations as are created by or
pursuant to the Plan, and the rights of any employee, former
employee or beneficiary under the Plan shall be limited to
those of a general creditor of the Company. In its sole
discretion, the Board of Directors may authorize the
creation of trusts or other arrangements to meet the
obligations of the Company and each other Participating
Company under the Plan, provided, however, that existence of
such trusts or other arrangements is consistent with the
unfunded status of the Plan.

9.5. Delivery of Shares. No shares shall be
delivered pursuant to any exercise of an Option or Stock
Appreciation Right or pursuant to the payment of any Award
until the requirements of such laws and regulations as may
be deemed by the Committee to be applicable thereto are
satisfied.

9.6. Cancellation of Options, Stock Appreciation
Rights and Awards. (a) Prior to the occurrence of a Change
in Control, but not thereafter, the Committee may, in its
sole discretion and with or without cause, cancel any
Option, Stock Appreciation Right or Award in whole or in
part to the extent it has not theretofore been exercised or,
in the case of Awards, become vested. Such cancellation
shall be effective as of the date specified by the
Committee.

(b) Notwithstanding subsection (a) above, prior
to payment of any Award, the Committee may, in its sole
discretion, in cases involving a serious breach of conduct
by an employee or former employee, or activity of a former
employee in competition with the business of a Participating
Company, cancel any Award, whether or not vested, in whole
or in part. Such cancellation shall be effective as of the
date specified by the Committee. The determination of
whether an employee or former employee has engaged in a
serious breach of conduct or activity in competition with
the business of a Participating Company shall be determined
by the Committee in good faith and in its sole discretion.

9.7. Transfer, Leave of Absence, etc. For
purposes of the Plan: (a) a transfer of an employee from a
Participating Company to an affiliated company, (b) a leave
of absence, duly authorized in writing by the Participating
Company, for military service or sickness, or for any other
purpose approved by the Participating Company if the period
of such leave does not exceed ninety days, and (c) a leave
of absence in excess of ninety days, duly authorized in
writing by the Participating Company, provided the
employee's right to reemployment is guaranteed either by a
statute or by contract, shall not be deemed a termination of
employment.

9.8. New York Law to Govern. All questions
pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined in
accordance with the laws of the State of New York.

9.9. Payments and Tax Withholding. The delivery
of any shares of Common Stock and the payment of any amount
in respect of a Stock Appreciation Right or Award shall be
of the account of the applicable Participating Company and
any such delivery or payment shall not be made until the
recipient shall have made satisfactory arrangements for the
payment of any applicable withholding taxes.

ARTICLE X

AMENDMENT AND TERMINATION

10.1. Amendments, Suspension or Discontinuance.
The Board of Directors may amend, suspend or discontinue the
Plan, provided, however, that except as permitted by Section
4.1(c), the Board of Directors may not, without the prior
approval of the stockholders of the Company, make any
amendment for which stockholder approval is necessary to
comply with any applicable tax or regulatory requirement,
including for these purposes any approval requirement which
is a prerequisite for exemptive relief under Section 16(b)
of the Exchange Act, and provided, further, that upon the
occurrence of a Change in Control no amendment may adversely
affect the rights of any person in connection with any
Option or Award previously granted.

10.2. Termination. No Option or Award shall be
granted under the Plan after expiration of three years from
the date upon which the Plan is approved by vote of the
stockholders of the Company.

<PAGE> 1

1
Exhibit 10b

As amended
December 14, 1994

J. P. MORGAN & CO. INCORPORATED

DIRECTOR STOCK PLAN (1992)

SECTION 1. Purpose. The purpose of the Director

Stock Plan (1992) (the "Plan") is to promote the success

of J. P. Morgan & Co. Incorporated (the "Company") by

providing a method whereby directors of the Company who

are not employees of the Company or any of its affiliated

companies may be awarded additional remuneration for

services rendered and thereby increase their proprietary

interest in its business and increase their personal

interest in the continued success and progress of the

Company.

SECTION 2. Administration. (a) Subject to the

provisions of the Plan, the Board of Directors ("Board")

of the Company shall have full power and authority to

interpret the provisions of the Plan, to establish, amend

and rescind any rules and regulations relating to the

Plan and to make all other determinations necessary or

advisable for the administration of the Plan provided

that the Board shall have no discretion with regard to

the selection of directors to receive awards under the

Plan, the number of shares subject to any award and the

timing of any such award.

(b) All decisions made by the Board pursuant to the

provisions of the Plan shall be final, conclusive and

binding on all persons, including the Company,

stockholders, and participants.

SECTION 3. Shares Subject to the Plan. (a)

Subject to adjustments made pursuant to paragraph (c) of

this Section 3, the aggregate number of shares of Common

Stock, $2.50 par value, of the Company ("Stock") in

respect of which an award of share credits (each of which

shall be equivalent to one share of Stock) may be granted

shall be 50,000.

(b) Any shares of Stock to be delivered upon

payment of the awards granted under the Plan shall be

made available from shares of Stock reacquired by the

Company, including such shares purchased in the open

market.

consolidation, recapitalization, stock split, stock

dividend, or other change in corporate structure

affecting the Stock, the aggregate number of share

credits which may be awarded under the Plan and the

number of share credits subject to the awards already

granted under the Plan shall be increased or decreased

proportionately, as the case may be.

SECTION 4. Eligibility and Extent of Participation.

(a) The persons eligible to receive awards under the

Plan ("Eligible Director") shall consist of each director

of the Company who is not an employee of the Company or

its affiliated companies and has not, within one year

immediately preceding the determination of such

director's eligibility, received any award under any plan

of the Company or its affiliated companies that entitles

participants thereon to acquire stock, stock options, or

stock appreciation rights of the Company or its

affiliated companies (other than any other plan under

which participants' entitlements are governed by

provisions meeting the requirements of Rule 16b-

3(c)(2)(ii) promulgated under the Securities Exchange Act

of 1934). Each holder of an award granted hereunder

shall hereinafter be referred to as a "Participant".

(b) Effective as of the end of the annual meeting

of stockholders of the Company, each person who is an

Eligible Director shall be granted an award of 400 share

credits in respect of the preceding Award Year except

that if the Eligible Director was not a director of the

Company for all of such Award Year, the size of the award

shall be pro rated based on the number of months in such

Award Year during which such Eligible Director was a

director of the Company. If an Eligible Director

retires, resigns, dies or otherwise ceases to be a

director of the Company prior to the end of the annual

meeting of stockholders of the Company, there shall be

granted, effective as of the first day of the month after

such person's termination of service as a director of the

Company, an award of 33 1/3 share credits for each month

during the Award Year such person was a director. For

purposes of this Section 4(b), a part of a month shall be

treated as a month and an Award Year shall mean the

period from the first day of the month after an annual

meeting of stockholders of the Company to the beginning

of the next annual meeting of stockholders of the

Company.

SECTION 5. Payment of Awards. (a) As soon as

practicable after a Participant has ceased being a

director of the Company, all awards shall be paid to the

Participant or, in the case of the death of the

Participant, the Participant's designated beneficiary or

beneficiaries or in the absence of a designated

beneficiary, to the estate of the Participant, in a

single payment.

(b)(i) In addition to the payment provided for in

paragraph (a) of this Section 5, each Participant (or

beneficiary) entitled to payment under this Section 5

shall receive at the same time the dividend equivalent

amounts calculated under subparagraphs (ii) and (iii)

below.

(ii) The dividend equivalent amount is the number

of additional share credits attributable to the number of

share credits awarded plus additional share credits

calculated hereunder. Such additional share credits

shall be determined and credited as of the end of each

calendar year ending prior to a Participant ceasing to be

a director of the Company by dividing (A) the aggregate

cash dividends which would have been paid had share

credits awarded or credited under this subparagraph (ii),

as the case may be, been actual shares of Stock on the

record date for each such dividend during such calendar

year by (B) the average market prices per shares of Stock

on the last trading day of each calendar month during the

12 months ending on the November 30 preceding the date

such determination is being made. For this purpose, the

market price on any day shall be the average of the

highest and lowest price of Stock as reported on the

composite tape for such day, unless the Board determines

that another procedure for determining market price would

be more appropriate.

(iii) The dividend equivalent amount for the year a

Participant ceases to be a director of the Company shall

be equal to the dividends that would have been paid in

respect of such year prior to the Participant ceasing to

be a director of the Company if the number of share

credits credited to the account of such director as of

the end of the preceding calendar year were shares of

Stock.

shall be made in shares of stock except that there shall

be paid in cash the value of any fractional share, the

amount determined under paragraph (b)(iii) and the

amount, if any, determined under Section 7(e).

SECTION 6. Delivery of Shares. No shares of Stock

shall be delivered pursuant to any payment of an award

until the requirements of such laws and regulations as

may be deemed by the Board to be applicable thereto are

satisfied.

SECTION 7. General Provisions. (a) Designation of

Beneficiary. Each Participant who shall be granted an

award under the Plan may designate a beneficiary or

beneficiaries and may change such designation from time

to time by filing a written instrument of beneficiaries

with the Board on a form to be prescribed by it, provided

that no such designation shall be effective unless so

filed prior to the death of such Participant.

(b) Except as may be permitted by Section 7(a), no

award of share credits nor any right to receive Stock

hereunder shall be subject in any manner to anticipation,

alienation, sale, transfer, assignment, pledge,

encumbrance or charge and any such attempted action shall

be void and of no effect.

shall not be required to segregate any cash or any shares

of Stock which may at any time be represented by awards,

share credits or dividend equivalents. No Participant

shall have voting or other rights with respect to shares

of Stock prior to the delivery of such shares. The

Company shall not, by any provisions of this Plan, be

deemed to be a trustee of any Stock or any other

property, and the liabilities of the Company to any

Participant pursuant to the Plan shall be those of a

debtor pursuant to such contract obligations as are

created by the Plan, and no such obligation of the

Company shall be deemed to be secured by any pledge or

other encumbrance on any property of the Company.

(d) New York Law to Govern. All questions

pertaining to the construction, regulation, validity and

effect of the provisions of the Plan shall be determined

in accordance with the laws of the State of New York.

(e) Withholding of Taxes. The Company shall be

authorized to withhold from any payment due under this

Plan the amount of withholding taxes, if any, due in

respect of an award or payment hereunder, unless other

provision satisfactory to the Company shall have been

made for the payment of such taxes.

SECTION 8. Amendments, Suspension or

Discontinuance. The Board of Directors may amend,

suspend, or discontinue the Plan, but except as permitted

by Rule 16b-3 promulgated under the Securities Exchange

Act of 1934 may not make any amendment which operates (a)

to modify the class of persons who constitute Eligible

Directors as defined in the Plan, (b) to increase the

total number of share credits or shares of Stock

available for awards granted under the Plan, or (c) to

extend the period during which awards may be granted

under the Plan. The provisions of Section 4 may not be

amended more often than once every six months other than

to comport with changes in the Internal Revenue Code, the

Employee Retirement Income Security Act of 1974, or the

rules under either such statute.

SECTION 9. Termination. No award shall be granted

under the Plan after expiration of ten years from the

date upon which the Plan is approved by vote of the

Board.

<PAGE> 1

Exhibit 10d

As amended
December 14,
1994

1989 Stock Incentive Plan

J. P. Morgan & Co. Incorporated
and Affiliated Companies

ARTICLE I

PURPOSE

The purpose of the 1989 Stock Incentive Plan
(the "Plan") is to promote the success of J. P. Morgan & Co.
Incorporated (the "Company") by providing a method whereby
eligible employees of the Company and its affiliated
companies may be awarded additional remuneration for
services rendered and encouraged to invest in the Common
Stock of the Company, thereby increasing their proprietary
interest in the Company's business, encouraging them to
remain in the employ of the Company or its affiliated
companies, and increasing their personal interest in the
continued success and progress of the Company.

ARTICLE II

DEFINITIONS

2.1. The following terms shall have the meaning
described below when used in the Plan:

(a) "Award" shall refer to a Restricted Stock
Award granted under Article VII or a Stock Unit Award
granted under Article VIII.

(b) "Board of Directors" shall mean the Board of
Directors of the Company.

(d) "Committee" shall mean the committee
appointed by the Board of Directors to administer the Plan
pursuant to Article III except that with respect to the
determinations to be made under Sections 6.1, 6.5, 6.8, 7.1,
7.2(c), 7.4, 8.1, 8.2, 9.1 and 9.6 with respect to an
eligible employee who is a member of the Board of Directors,
Committee shall mean all directors of the Company who are
not employees of the Company or any other Participating
Company and who are disinterested within the meaning of
Rule16b-3 under the Exchange Act and are outside directors
under Section 162 (m) (4) (C) of the Code.

(e) "Common Stock" shall mean common stock, par
value $2.50, of the Company.

(f) "Company" shall mean J. P. Morgan & Co.
Incorporated or any successor to it in ownership of all or
substantially all of its assets.

(g) "Earlier Plans" shall mean the Company's 1987
Stock Incentive Plan, Stock Option Plan (1984) and Stock
Option Plan (1984).

(h) "Incentive Stock Option" shall mean a stock
option granted under Article VI which is intended to meet
the requirements of Section 422A of the Code.

(i) "Nonqualified Stock Option" shall mean a
stock option granted under Article VI which is not intended
to be an Incentive Stock Option.

(j) "Option" shall mean an Incentive Stock Option
or a Nonqualified Stock Option, including for purposes of
Section 6.5 any stock option granted under the Earlier
Plans.

(k) "Participant" shall mean an eligible employee
who has been granted a Restricted Stock Award.

(l) "Participating Company" shall mean the
Company, the Trust Company or any subsidiary or other
affiliated entity (whether or not incorporated).

(m) "Restricted Stock Award" shall mean an award
of share credits under Article VII hereof.

(n) "Stock Appreciation Right" shall mean a right
granted under Section 6.5.

(o) "Stock Unit Award" shall mean an award
granted under Article VIII.

(p) "Trust Company" shall mean Morgan Guaranty
Trust Company of New York or any successor to it in
ownership of all or substantially all of its assets.

(q) "Vesting Date" shall mean the fifth
anniversary of the date a Restricted Stock Award was granted
or such other time or times the Committee shall designate in
respect of a Restricted Stock Award at the time of the grant
of such Award. If more than one Vesting Date is designated
for an Award, reference in the Plan to Vesting Date in
respect of such Award shall be deemed to refer to each part
of such Award and the Vesting Date for such part.

ARTICLE III

ADMINISTRATION

3.1. (a) The Board of Directors of the Company
shall appoint not less than three Directors to the Committee
which shall administer the Plan. No individual shall become
a member of the Committee if he shall have been eligible to
receive an Option or Award under the Plan (or a predecessor
of any part of the Plan) at any time during the 12-month
period prior to his becoming a member and no member of the
Committee shall be eligible to receive an Option or Award
under the Plan while a member of the Committee. The
Committee shall have full power and authority, subject to
such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be issued or
adopted by the Board of Directors, to grant to eligible
persons Options and Stock Appreciation Rights under Article
VI of the Plan, to grant Restricted Stock Awards under
Article VII of the Plan, to grant Stock Unit Awards under
Article VIII of the Plan, to interpret the provisions of the
Plan and any agreements relating to Options or Awards
granted under the Plan, to supervise the administration of
the Plan and to delegate to senior officers of the Company
or the Trust Company the power to act for the Committee as
the Committee shall specify.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

ELIGIBILITY

ARTICLE VI

STOCK OPTIONS

6.4. Exercise of Options. (a) Subject to the
provisions of the Plan with respect to death, retirement and
termination of employment, the period during which each
Option
may be exercised shall be fixed by the Committee at the time
such Option is granted, but such period in no event shall
expire later than ten years from the date the Option is
granted.

(d) Upon termination of employment for any reason
other than death or retirement as aforesaid, an optionee's
Options shall be cancelled to the extent not theretofore
exercised.

ARTICLE VII

RESTRICTED STOCK AWARDS

7.2. Vesting of Restricted Stock Awards. (a)
Subject to the rules of Sections 7.2(b), 7.2(c) and 9.1 each
Award shall fully vest and be 100% nonforfeitable on the
Vesting Date.

(b) Subject to the rules of Section 9.1, upon
termination of a Participant's employment prior to the
Vesting Date for any reason except for retirement, as
described below, or death, his Awards shall be forfeited and
the Participant shall have no right with respect to such
Awards. Upon termination of employment prior to the Vesting
Date by reason of the Participant's retirement under a
retirement plan maintained by the Company or a subsidiary or
by reason of death, an Award granted to such Participant
shall be vested and nonforfeitable to the extent of 20% (or
such other percentage as the Committee shall have determined
at the time of grant of such Award) for each complete twelve
month period from the date of the granting of such Award to
the date of such retirement or death.

(ii) The dividend equivalent amount is the number
of additional share credits attributable to the number of
share credits awarded plus additional share credits
calculated hereunder. Such additional share credits shall
be determined and credited as of the end of each calendar
year by dividing (A) the aggregate cash dividends which
would have been paid had the share credits awarded or
credited under this subparagraph (ii), as the case may be,
been actual shares of Common Stock on the record date for
each such dividend during such calendar year by (B) the
average market prices per shares of Common Stock on the last
trading day of each calendar month during the 12 months
ending on the November 30 preceding the date such
determination is being made. For this purpose, the market
price on any day shall be the average of the highest and
lowest price of a share of Stock as reported on the
composite tape for such day, unless the Committee determines
that another procedure for determining market price would be
more appropriate.

(c) Payments pursuant to Sections 7.3(a) and
7.3(b) shall be made in shares of Common Stock except there
may be paid in cash dividend equivalents or that part of the
total payment determined by the Company to be necessary to
satisfy tax withholding.

ARTICLE VIII

STOCK UNIT AWARDS

8.2. Rules. In the sole discretion of the
Committee, a Stock Unit Award shall be granted subject to
the following rules:

(c) Stock Unit Awards may relate in whole or in
part to certain performance criteria established by the
Committee at the time of grant.

ARTICLE IX

GENERAL PROVISIONS

(b) Any determination by the Committee
made pursuant to this Section 9.1 may be made as to all
outstanding Options or Awards or only as to certain Options
or Awards specified by the Committee and all such
determinations shall be made in cases covered by
subparagraphs (i) or (ii) below, prior to or as soon as
practicable after the occurrence of such event and in the
cases covered by subparagraphs (iii) and (iv) below, prior
to the occurrence of such event.

(i) any "person" or "group of persons" as such
terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")
directly or indirectly purchases or otherwise becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any
condition), of voting securities representing 25% or more of
the combined voting power of all outstanding voting
securities of the Company;

(ii) during any period of two consecutive
years,
the individuals who at the beginning of such
period constitute the Board of Directors cease for any
reason to constitute at least a majority of the members
thereof, unless (1) there are seven or more directors then
still in office who were directors at the beginning of the
period, and (2) the election, or the nomination for election
by the Company's stockholders, of each new director was
approved by at least two-thirds of the directors then still
in office who were directors at the beginning of the period;

(iii) the stockholders of the Company shall
approve an agreement to merge or consolidate the Company
with or into another corporation as a result of which less
than 50% of the outstanding voting securities of the
surviving or resulting entity are or are to be owned by the
former shareholders of the Company (excluding from former
shareholders, a shareholder who is or, as a result of the
transaction in question, becomes an "affiliate," as defined
in Rule 12b-2 under the Exchange Act, of any party to such
consolidation or merger); or

(iv) the stockholders of the Company shall
approve the sale of all or substantially all of the
Company's business and/or assets to a person or entity which
is not a wholly-owned subsidiary of the Company.

9.2. Designation of Beneficiary.
Subject to such rules and regulations as the Committee may
prescribe, including the right of the Committee to limit the
types of designations which are acceptable for purposes of
the Plan, each employee who shall be granted an Option or
Award under the Plan may designate a beneficiary or
beneficiaries and may change such designation from time to
time by filing a written designation of beneficiaries with
the Committee on a form to be prescribed by it, provided
that no such designation shall be effective unless so filed
prior to the death of such employee.

9.3. No Right of Continued Employment.
Neither the establishment of the Plan, the granting of
Options or Awards, nor the payment of any benefits hereunder
nor any action of the Company or of the Board of Directors
or of the Committee shall be held or construed to confer
upon any person any legal right to be continued in the
employ of the Company or its subsidiaries, each of which
expressly reserves the right to discharge any employee
whenever the interest of any such company in its sole
discretion may so require without liability to such company,
the Board of Directors or the Committee except as to any
rights which may be expressly conferred upon such employee
under the Plan.

9.4. No Segregation of Cash or Shares.
The Company shall not be required to segregate any cash or
any shares of Common Stock which may at any time be
represented by Options, Awards, share credits or dividend
equivalent amounts and the Plan shall constitute an
"unfunded" plan of the Company. No employee shall have
voting or other rights with respect to shares of Common
Stock prior to the delivery of such shares. The Company
shall not, by any provisions of the Plan, be deemed to be a
trustee of any Common Stock or any other property, and the
liabilities of the Company to any employee pursuant to the
Plan shall be those of a debtor pursuant to such contract
obligations as are created by or pursuant to the Plan, and
the rights of any employee, former employee or beneficiary
under the Plan shall be limited to those of a general
creditor of the Company. In its sole discretion, the Board
of Directors may authorize the creation of trusts or other
arrangements to meet the obligations of the Company and each
other Participating Company under the Plan, provided,
however, that existence of such trusts or other arrangements
is consistent with the unfunded status of the Plan.

9.5. Delivery of Shares. No shares
shall be delivered pursuant to any exercise of an Option or
Stock Appreciation Right or pursuant to the payment of any
Award until the requirements of such laws and regulations as
may be deemed by the Committee to be applicable thereto are
satisfied.

9.6. Cancellation of Options, Stock
Appreciation Rights and Awards. (a) Prior to the
occurrence of a Change in Control, but not thereafter, the
Committee may, in its sole discretion and with or without
cause, cancel any Option, Stock Appreciation Right or Award
in whole or in part to the extent it has not theretofore
been exercised or, in the case of Awards, become vested.
Such cancellation shall be effective as of the date
specified by the Committee.

9.7. Transfer, Leave of Absence, etc.
For purposes of the Plan: (a) a transfer of an employee
from a Participating Company to an affiliated company, (b) a
leave of absence, duly authorized in writing by the
Participating Company, for military service or sickness, or
for any other purpose approved by the Participating Company
if the period of such leave does not exceed ninety days, and
(c) a leave of absence in excess of ninety days, duly
authorized in writing by the Participating Company, provided
the employee's right to reemployment is guaranteed either by
a statute or by contract, shall not be deemed a termination
of employment.

9.8. New York Law to Govern. All
questions pertaining to the construction, regulation,
validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of New
York.

9.9. Payments and Tax Withholding. The
delivery of any shares of Common Stock and the payment of
any amount in respect of a Stock Appreciation Right or Award
shall be of the account of the applicable Participating
Company and any such delivery or payment shall not be made
until the recipient shall have made satisfactory
arrangements for the payment of any applicable withholding
taxes.

ARTICLE X

AMENDMENT AND TERMINATION

10.1. Amendments, Suspension or
Discontinuance. The Board of Directors may amend, suspend
or discontinue the Plan, provided, however, that except as
permitted by Section 4.1(c), the Board of Directors may not,
without the prior approval of the stockholders of the
Company, make any amendment for which stockholder approval
is necessary to comply with any applicable tax or regulatory
requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief
under Section 16(b) of the Exchange Act, and provided,
further, that upon the occurrence of a Change in Control no
amendment may adversely affect the rights of any person in
connection with any Option or Award previously granted.

10.2. Termination. No Option or Award
shall be granted under the Plan after expiration of six
years from the date upon which the Plan is approved by vote
of the stockholders of the Company.

<PAGE> 1

-2-

Exhibit 10e

As amended
December 14, 1994

1987 Stock Incentive Plan

J. P. Morgan & Co. Incorporated and
Affiliated Companies

ARTICLE I

PURPOSE

The purpose of the 1987 Stock Incentive Plan
(the "Plan") is to promote the success of J. P. Morgan &
Co. Incorporated (the "Company") by providing a method
whereby eligible employees of the Company and its
affiliated companies may be awarded additional
remuneration for services rendered and encouraged to
invest in the Common Stock of the Company, thereby
increasing their proprietary interest in the Company's
business, encouraging them to remain in the employ of the
Company or its affiliated companies, and increasing their
personal interest in the continued success and progress
of the Company.

ARTICLE II

DEFINITIONS

2.1. The following terms shall have the
meaning described below when used in the Plan:

(a) "Award" shall refer to a Restricted Stock
Award granted under Article VII or a Stock Unit Award
granted under Article VIII.

(b) "Board of Directors" shall mean the Board
of Directors of the Company.

(d) "Committee" shall mean the committee
appointed by the Board of Directors to administer the
Plan pursuant to Article III.

(e) "Common Stock" shall mean common stock,
par value $2.50, of the Company.

(f) "Company" shall mean J. P. Morgan & Co.
Incorporated or any successor to it in ownership of all
or substantially all of its assets.

(g) "Earlier Plans" shall mean the Company's
Stock Option Plan (1984), Stock Option Plan (1979) and
Stock Option Plan (1974).

(h) "Incentive Stock Option" shall mean a
stock option granted under Article VI which is intended
to meet the requirements of Section 422A of the Code.

(i) "Nonqualified Stock Option" shall mean a
stock option granted under Article VI which is not
intended to be an Incentive Stock Option.

(j) "Option" shall mean an Incentive Stock
Option or a Nonqualified Stock Option, including for
purposes of Section 6.5 any stock option granted under
the Earlier Plans.

(k) "Participant" shall mean an eligible
employee who has been granted a Restricted Stock Award.

(l) "Participating Company" shall mean the
Company, the Trust Company or any subsidiary or other
affiliated entity (whether or not incorporated)
designated by the Board of Directors, provided that any
such subsidiary or other affiliated entity shall approve
its designation as a Participating Company under the
Plan.

(m) "Restricted Stock Award" shall mean an
award of share credits under Article VII hereof.

(n) "Stock Appreciation Right" shall mean a
right granted under Section 6.5.

(o) "Stock Unit Award" shall mean an award
granted under Article VIII.

(p) "Trust Company" shall mean Morgan Guaranty
Trust Company of New York or any successor to it in
ownership of all or substantially all of its assets.

(q) "Vesting Date" shall mean the fifth
anniversary of the date a Restricted Stock Award was
granted or such other time or times the Committee shall
designate in respect of a Restricted Stock Award at the
time of grant of such Award. If more than one Vesting
Date is designated for an Award, references in the Plan
to Vesting Date in respect of such Award shall be deemed
to refer to each part of such Award and the Vesting Date
for such part.

ARTICLE III

ADMINISTRATION

3.1. (a) The Board of Directors of the
Company shall appoint not less than three Directors to
the Committee which shall administer the Plan. No
individual shall become a member of the Committee if he
shall have been eligible to receive an Option or Award
under the Plan (or a predecessor of any part of the Plan)
at any time during the 12-month period prior to his
becoming a member and no member of the Committee shall be
eligible to receive an Option or Award under the Plan
while a member of the Committee. The Committee shall
have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the
Plan as may from time to time be issued or adopted by the
Board of Directors, to grant to eligible persons Options
and Stock Appreciation Rights under Article VI of the
Plan, to grant Restricted Stock Awards under Article
VII of the Plan, to grant Stock Unit Awards under Article
VIII of the Plan, to interpret the provisions of the Plan
and any agreements relating to Options or Awards granted
under the Plan, and to supervise the administration of
the Plan.

(b) All decisions made by the Committee
pursuant to the provisions of the Plan and related orders
or resolutions of the Board of Directors shall be final,
conclusive and binding an all persons, including the
Company, stockholders, employees and beneficiaries of
employees.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

4.1. (a) Subject to adjustment pursuant to
Section 4.1(c), the maximum number of shares of Common
Stock with respect to which Options, Stock Appreciation
Rights and Awards may be granted shall be 8,000,000
shares of Common Stock. Shares of Common Stock may be
made available from the authorized but unissued shares of
the Company or from shares reacquired by the Company,
including shares purchased in the open market. If an
Option, Restricted Stock Award or Stock Unit Award
granted under the Plan shall expire or terminate for any
reason other than the exercise of a Stock Appreciation
Right, the shares subject to such Option or Award shall
be available for other Options and Awards to the same
employee or other employees.

(b) Subject to adjustment pursuant to Section
4.1(c) of the total shares of Common Stock referred to in
Section 4.1(a), the number of shares of Common Stock with
respect to which Awards may be granted shall not exceed
800,000 shares of Common Stock.

(c) In the event that the Committee shall
determine that any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange
of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value,
or other similar corporate event affects the Common Stock
such that an adjustment is required in order to preserve
the benefits or potential benefits intended to be made
available under this Plan, then the Committee shall, in
its sole discretion, and in such manner as the Committee
may deem equitable, adjust any or all of (1) the number
and kind of shares which thereafter may be awarded or
optioned and sold or made the subject of Stock
Appreciation Rights under the Plan, (2) the number and
kind of shares subject to outstanding Options, Awards and
Stock Appreciation Rights, and (3) the option price with
respect to any of the foregoing and/or, if deemed
appropriate, make provision for a cash payment to a
Participant or a person who has an outstanding Option,
provided, however, that the number of shares subject to
any Option or Award shall always be a whole number.

ARTICLE V

ELIGIBILITY

5.1. The employees eligible to participate in
the Plan and receive Options and Awards under the Plan
shall consist of key employees of the Company and other
Participating Companies.

ARTICLE VI

STOCK OPTIONS

6.1. (a) Subject to the limitations of the
Plan, the Committee shall, after such consultation with
and consideration of the recommendations of management as
the Committee considers desirable, select from eligible
employees those to be granted Options and determine the
time when each Option shall be granted and the number of
shares subject to each Option and shall select the
optionees to receive Stock Appreciation Rights and the
Options to which such rights shall relate. Options may
be either Incentive Stock Options or Nonqualified Stock
Options and more than one Option and Stock Appreciation
Right may be granted to the same person. Stock
Appreciation Rights may be granted to holders of any
unexpired options granted under the Plan or the Earlier
Plan.

(b) In accordance with rules and procedures
established by the Committee, the aggregate fair market
value (determined as of the date the Option is granted)
of Common Stock for which all Incentive Stock Options
granted on and after January 1, 1987 under this Plan and
any other plan of the Company (and any subsidiary or any
parent corporation within the meaning of Section 425 of
the Code) to an employee first become exercisable in any
calendar year shall not exceed $100,000.

6.2. Options Agreements. Each Option under
the Plan shall be evidenced by an option agreement which
shall be signed by an officer of the Company and the
optionee and shall contain such provisions as may be
approved by the Committee. Any such option agreement may
be supplemented and amended from time to time as approved
by the Committee provided that the terms of such option
agreement after being amended or supplemented conform to
the terms of the Plan. Each Stock Appreciation Right
shall be evidenced by the option agreement for the Option
to which it relates. In the case of any such right
relating to a previously granted option, the option
agreement shall be supplemented to evidence such right.

6.3. Option Price. The price at which shares
may be purchased upon exercise of a particular Option
shall be not less than 100% of the fair market value of
such shares on the date such Option is granted, as
determined in accordance with procedures to be
established by the Committee.

6.4. Exercise of Options. (a) Subject to the
provisions of the Plan with respect to death, retirement
and termination of employment, the period during which
each Option may be exercised shall be fixed by the
Committee at the time such Option is granted, but such
period in no event shall expire later than ten years from
the date the Option is granted in the case of Incentive
Stock Options and ten years and two days in the case of
Nonqualified Stock Options.

(b) Except as permitted by Sections 6.7 and
9.1, each Option may be exercised only after one year of
continued employment by the Company or any of its
affiliated companies and only during the continuance of
the optionee's employment with the Company or any of its
affiliated companies. Subject to the foregoing
limitations and the terms and conditions of the option
agreement and unless canceled prior to exercise, each
Option shall be exercisable in whole or in part in
installments at such time or times as the Committee may
prescribe and specify in the applicable option agreement.

(c) No shares shall be delivered pursuant to
any exercise of an Option until payment in full of the
option price therefor is received by the Company. Such
payment shall be made in cash or, unless prohibited by
the Committee, through the delivery of shares of Common
Stock of the Company with a value equal to the total
option price or a combination of cash and shares. In
addition, the Committee may prescribe additional methods
of payment to the extent permitted by applicable law.
Any shares so delivered shall be valued at their fair
market value on the exercise date determined as provided
in Section 6.3. No optionee or legal representative,
legatee or distributee of any optionee shall be deemed to
be a holder of any shares subject to any Option prior to
the issuance of such shares upon exercise of such Option
or any related Stock Appreciation Right.

6.5. Stock Appreciation Rights. (a) Stock
Appreciation Rights may be granted to such optionees
holding Options granted under the Plan or the Earlier
Plans as the Committee may select and upon such terms and
conditions as the Committee may prescribe. Each Stock
Appreciation Right shall relate to a specific Option
granted and may be granted concurrently with the Option
to which it relates or at any time prior to the exercise,
expiration or termination of such Option. A Stock
Appreciation Right shall entitle the optionee, subject to
the provisions of the Plan and the related option
agreement, to receive from the Company an amount not more
than the excess of the fair market value on the exercise
date of the number of shares for which the Stock
Appreciation Right is exercised over the option price for
such shares under the related Option. For this purpose,
such fair market value shall be determined as provided in
Section 6.3.

(b) A Stock Appreciation Right shall be
exercisable on such dates or during such periods as may
be determined by the Committee from time to time,
provided that the Committee may, for administrative
convenience, determine that, for any Stock Appreciation
Right relating to a Non-qualified Stock Option which
right can only be exercised during a limited period of
time in order to satisfy rules imposed by the Securities
and Exchange Commission, the exercise of any such right
for cash during such limited period shall be deemed to
occur for all purposes hereunder on the day during such
limited period on which the fair market value of the
Common Stock, determined as provided in Section 6.3, is
the highest, and provided, further, that no Stock
Appreciation Right shall be exercisable at a time when
the related Option could not be exercised nor may it be
exercised with respect to a number of shares in excess of
the number for which such Option could then be exercised.
Any such determination by the Committee may be changed by
the Committee from time to time and may govern the
exercise of Stock Appreciation Rights granted prior to
such determination as well as Stock Appreciation Rights
thereafter granted.

(c) A Stock Appreciation Right may be
exercised only upon surrender of the related Option by
the optionee, which shall be terminated to the extent of
the number of shares for which the Stock Appreciation
Right is exercised. Shares covered by such a terminated
Option or portion thereof granted under the Plan shall
not be available for other Options or Awards under the
Plan.

(d) The amount payable by the Company upon
exercise of a Stock Appreciation Right may be paid in
cash, in shares (valued at their fair market value on the
exercise date determined as provided in Section 6.3) or
in any combination thereof as the Committee shall
determine from time to time. No fractional shares shall
be issued and the optionee shall receive cash in lieu
thereof.

(e) The Committee may impose any other
conditions upon the exercise of a Stock Appreciation
Right, which conditions may include a condition that the
Stock Appreciation Right may be exercised only in
accordance with rules and regulations adopted by the
Committee from time to time such rules and regulations
may govern the right to exercise Stock Appreciation
Rights granted prior to the adoption or amendment of such
rules and regulations as well as Stock Appreciation
Rights granted thereafter.

(f) The Committee may at any time amend or
suspend any Stock Appreciation Right theretofore granted
under the Plan, provided that the terms of any Stock
Appreciation Right after any amendment shall conform to
the provisions of the Plan. A Stock Appreciation Right
shall terminate upon the termination or expiration of the
related Option.

6.6. Transferability of Options and Stock
Appreciation Rights. (a) Except as provided in
subsection (b) below, an Option granted under the Plan
may not be transferred except by will or the laws of
descent and distribution and, during the lifetime of the
person to whom granted, may be exercised only by such
person. A Stock Appreciation Right may not be
transferred to anyone and may be exercised only by the
optionee to whom it was granted.

(b) Notwithstanding subsection (a) above the
Committee may determine at the time of grant or
thereafter, that an Option granted under the Plan may be
transferred by the optionee to one or more members of the
optionee's immediate family, to a partnership of which
the only partners are members of the optionee's immediate
family, or to a trust established by the optionee for the
benefit of one or more members of the optionee's
immediate family. For this purpose immediate family
means the optionee's spouse, parents, children,
grandchildren and the spouses of such parents, children
and grandchildren. A transferee described in this
subsection may not further transfer an Option except by
will or the laws of descent and distribution. An Option
transferred pursuant to this subsection shall remain
subject to the provisions of the Plan, including, but not
limited to, the provisions of Section 6.7 relating to the
exercise of the Option upon the death, retirement or
termination of employment of the optionee.

6.7. Retirement, Death and Termination of
Employment. Subject to the condition that no Option may
be exercised in whole or in part after the expiration of
the option period specified in the applicable option
agreement and subject to the Committee's right to cancel
any Option in accordance with Section 9.6.

(a) Upon termination of employment, as a
result of retirement prior to an optionee's attainment of
age 55 pursuant to a retirement plan of the Company or
any of its subsidiaries, an optionee may, within three
years after the date of such termination, purchase any or
all of the shares with respect to which such optionee was
entitled to exercise such Option immediately prior to
such termination;

(b) Upon termination of employment as a result
of retirement of an optionee on or after attainment of
age 55 pursuant to a retirement plan of the Company or
any of its subsidiaries, and optionee may, at any time
prior to the expiration of the option period specified in
the applicable option agreement purchase any or all of
the shares with respect to which such optionee was
entitled to exercise such Option immediately prior to
such termination;

(c) (i) Upon the death of an optionee while
employed or while entitled to exercise the option
pursuant to clause (b) above, the person or persons to
whom such optionee's rights under the Option are
transferred by will or the law of descent and
distribution may, at any time prior to the expiration of
the option period specified in the applicable option
agreement, purchase any or all of the shares with respect
to which such optionee was entitled to exercise such
Option immediately prior to his death; and

(ii) Upon the death of an optionee while
entitled to exercise the Option pursuant to clause (a)
above, the person or persons to whom such optionee's
rights under the Option are transferred by will or the
law of descent and distribution may, at any time prior to
the expiration of the three year period referred to in
clause (a), purchase any or all of the shares with
respect to which such optionee was entitled to exercise
such Option immediately prior to his death; and

(d) Upon termination of employment for any
reason other than death or retirement as aforesaid, an
optionee's Options shall be canceled to the extent not
theretofore exercised.

6.8. Waiver of Limitations. Notwithstanding
anything to the contrary in the Plan, in such
circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in
part, any restrictions or limitations applicable to an
Option granted to an eligible employee (including,
without limitation, any restriction or limitation on the
period during which such Option may be exercised
following termination of such eligible employee's
employment and any restriction or limitation on the
exercisability of such Option) who, at the time of such
waiver or removal, is not subject to Section 16 of the
Exchange Act.

ARTICLE VII

RESTRICTED STOCK AWARDS

7.1. Subject to the limitations of the Plan,
the Committee shall, after such consultation with and
consideration of the recommendations of management as the
Committee considers desirable, select from eligible
employees those Participants to be granted Restricted
Stock Awards and determine the time when each Award shall
be granted, the Vesting Date or Vesting Dates for each
Award and the number of share credits (each of which
shall be equivalent to one share of Common Stock) subject
to each Award.

7.2. Vesting of Restricted Stock Awards. (a)
Subject to the rules of Sections 7.2(b), 7.2(c) and 9.1
each Award shall fully vest and be 100% nonforfeitable on
the Vesting Date.

(b) Subject to the rules of Section 9.1, upon
termination of a Participant's employment prior to the
Vesting Date for any reason except for retirement, as
described below, or death, his Awards shall be forfeited
and the Participant shall have no right with respect to
such Awards. Upon termination of employment prior to the
Vesting Date by reason of the Participant's retirement
under a retirement plan maintained by the Company or a
subsidiary or by reason of death, an Award granted to
such Participant shall be vested and nonforfeitable to
the extent of 20% (or such other percentage as the
Committee shall have determined at the time of grant of
such Award) for each complete twelve month period from
the date of the granting of such Award to the date of
such retirement or death.

(c) Notwithstanding the provisions of Sections
7.2(a) and 7.2(b), upon termination of a Participant's
employment prior to 100% vesting under the rules of
Sections 7.2(a) and 7.2(b), the Committee may, in its
sole discretion, determine that Awards granted to such
Participant shall be vested to the extent determined by
the Committee but in no event less than the vesting
computed under the rules of Section 7.2(b).

7.3. Payment of Awards. (a)(i) Subject to
the provisions of subparagraph (ii) below, as soon as
practicable after an Award has become vested in
accordance with Section 7.2, such vested Award shall be
paid to the Participant or, in the case of the death of
the Participant, his designated beneficiary or
beneficiaries or, in the absence of a designated
beneficiary, to the estate of the Participant.

(ii) The Committee may, in its discretion,
provide that payment of vested Awards shall be deferred
until such date or dates as the Participant may elect.
Any election of a Participant pursuant to the preceding
sentence shall be filed in writing with the Committee in
accordance with such rules and regulations, including any
deadline for the making of such an election, as the
Committee may provide.

(b)(i) In addition to the payment provided for
in Section 7.3(a), each Participant (or beneficiary)
entitled to payment under Section 7.3(a) shall receive
the dividend equivalent amount calculated under
subparagraph (ii) below.

(ii) The dividend equivalent amount is the
number of additional share credits attributable to the
number of share credits awarded plus additional share
credits calculated hereunder. Such additional share
credits shall be determined and credited as of the end of
each calendar year by dividing (A) the aggregate cash
dividends which would have been paid had share credits
awarded or credited under this subparagraph (ii), as the
case may be, been actual shares of Common Stock on the
record date for each such dividend during such calendar
year by (B) the average market prices per shares of
Common Stock on the last trading day of each calendar
month during the 12 months ending on the November 30
preceding the date such determination is being made. For
this purpose, the market price on any day shall be the
average of the highest and lowest price of a share of
Stock as reported on the composite tape for such day,
unless the Committee determines that another procedure
for determining market price would be more appropriate.

(iii) In such cases as the Committee may deem
advisable, the Committee may, in lieu of the crediting
provided for in subparagraph (ii), determine to pay all
or part of the dividend equivalent amount in cash as
dividends are actually paid on Common Stock or at such
other time or times as the Committee may otherwise
determine.

(c) Payments pursuant to Section 7.3(a) and
7.3(b) shall be made in shares of Common Stock except
there may be paid in cash dividend equivalents or that
part of the total payment determined by the Company to be
necessary to satisfy tax withholding requirements.

7.4. Waiver of Restrictions. In such
circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in
part, any restrictions or limitations to which a
Restricted Stock Award was made subject at the time of
grant.

ARTICLE VIII

STOCK UNIT AWARDS

8.1. In addition to granting Options, Stock
Appreciation Rights and Restricted Stock Awards, the
Committee shall have authority to grant to eligible
employees Stock Unit Awards which can be in the form of
Common Stock or units, the value of which is based, in
whole or in part, on the value of Common Stock. Subject
to the provisions of the Plan, including Section 8.2
below, Stock Unit Awards shall be subject to such terms,
restrictions, conditions, vesting requirements and
payment rules (all of which are sometimes hereinafter
collectively referred to as "rules") as the Committee may
determine in its sole discretion, all such rules
applicable to a particular Stock Unit Award to be
reflected in writing and furnished to the employee of the
time of grant. The rules need not be identical for each
Stock Unit Award.

8.2. Rules. In the sole discretion of the
Committee, a Stock Unit Award shall be granted subject to
the following rules:

(a) Any shares of Common Stock which are part
of a Stock Unit Award may not be assigned, sold,
transferred, pledged or otherwise encumbered prior to the
date on which the shares are issued or, if later, the
date provided by the Committee at the time of the Award.

(b) Stock Unit Awards may provide for the
payment of cash consideration by the person to whom such
Award is granted or provide that the Award, and Common
Stock to be issued in connection therewith, if
applicable, shall be delivered without the payment of
cash consideration, provided that for any Common Stock to
be purchased in connection with a Stock Unit Award the
purchase price shall be at least 50% of the fair market
value of such Common Stock on the date such Award is
granted.

(c) Stock Unit Awards may relate in whole or
in part to certain performance criteria established by
the Committee at the time of grant.

(d) Stock Unit Awards may provide for deferred
payment schedules, vesting over a specified period of
employment, the payment (on a current or deferred basis)
of dividend equivalent amounts, with respect to the
number of shares of Common Stock covered by the Award,
and elections by the employee to defer payment of the
Award or the lifting of restrictions on the Award, if
any.

(e) In such circumstances as the Committee may
deem advisable, the Committee may waive or otherwise
remove, in whole or in part, any restrictions or
limitations to which a Stock Unit Award was made subject
at the time of grant.

ARTICLE IX

GENERAL PROVISIONS

9.1. Change in Control. (a)(i) In the case
of a Change in Control (as defined below) of the Company,
each Option then outstanding shall (unless the Committee
determines otherwise) immediately become exercisable in
full;

(ii) In the case of a Change in Control (as
defined below) of the Company, each Award shall (unless
the Committee determines otherwise) immediately be fully
vested and nonforfeitable and shall thereupon be paid as
soon as practicable.

(b) Any determination by the Committee made
pursuant to this Section 9.1 may be made as to all
outstanding Options or Awards or only as to certain
Options or Awards specified by the Committee and all such
determinations shall be made in cases covered by
subparagraph (i) or (ii) below, prior to or as soon as
practicable after the occurrence of such event and in the
cases covered by subparagraphs (iii) and (iv) below,
prior to the occurrence of such event.

(i) any "person" or "group of persons" as such
terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")
directly or indirectly purchases or otherwise becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any
condition), of voting securities representing 25% or more
of the combined voting power of all outstanding voting
securities of the Company;

(ii) during any period of two consecutive
years, the individuals who at the beginning of such
period constitute the Board of Directors cease for any
reason to constitute at least a majority of the members
thereof, unless (1) there are seven or more directors
then still in office who were directors at the beginning
of the period and (2) the election, or the nomination for
election by the Company's stockholders, of each new
director was approved by at least two-thirds of the
directors then still in office who were directors at the
beginning of the period;

(iii) the stockholders of the Company shall
approve an agreement to merge or consolidate the Company
with or into another corporation as a result of which
less than 50% of the outstanding voting securities of the
surviving or resulting entity are or are to be owned by
the former shareholders of the Company (excluding from
former shareholders, a shareholder who is or, as a result
of the transaction in question, becomes an "affiliate,"
as defined in Rule 12b-2 under the Exchange Act, of any
party to such consolidation or merger); or

(iv) the stockholders of the Company shall
approve the sale of all or substantially all of the
Company's business and/or assets to a person or entity
which is not a wholly-owned subsidiary of the Company.

9.2. Designation of Beneficiary. Subject to
such rules and regulations as the Committee may
prescribe, including the right of the Committee to limit
the types of designations which are acceptable for
purposes of the Plan, each employee who shall be granted
an Option or Award under the Plan may designate a
beneficiary or beneficiaries and may change such
designation from time to time by filing a written
designation of beneficiaries with the Committee on a form
to be prescribed by it, provided that no such designation
shall be effective unless so filed prior to the death of
such employee.

9.3. No Right of Continued Employment.
Neither the establishment of the Plan, the granting of
Options or Awards, nor the payment of any benefits
hereunder nor any action of the Company or of the Board
of Directors or of the Committee shall be held or
construed to confer upon any person any legal right to be
continued in the employ of the Company or its
subsidiaries, each of which expressly reserves the right
to discharge any employee whenever the interest of any
such company in its sole discretion may so require
without liability to such company, the Board of Directors
or the Committee except as to any rights which may be
expressly conferred upon such employee under the Plan.

9.4. No Segregation of Cash or Shares. The
Company shall not be required to segregate any cash or
any shares of Common Stock which may at any time be
represented by Options, Awards, share credits or dividend
equivalent amounts and the Plan shall constitute an
"unfunded" plan of the Company. No employee shall have
voting or other rights with respect to shares of Common
Stock prior to the delivery of such shares. The Company
shall not, by any provisions of the Plan, be deemed to be
a trustee of any Common Stock or any other property, and
the liabilities of the Company to any employee pursuant
to the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the
Plan, and the rights of any employee, former employee or
beneficiary under the Plan shall be limited to those of a
general creditor of the Company. In its sole discretion,
the Board of Directors may authorize the creation of
trusts or other arrangements to meet the obligations of
the Company and each other Participating Company under
the Plan, provided, however, that existence of such
trusts or other arrangements is consistent with the
unfunded status of the Plan.

9.5. Delivery of Shares. No shares shall be
delivered pursuant to any exercise of an Option or Stock
Appreciation Right or pursuant to the payment of any
Award until the requirements of such laws and regulations
as may be deemed by the Committee to be applicable
thereto are satisfied.

9.6. Cancellation of Options, Stock
Appreciation Rights and Awards. (a) Prior to the
occurrence of a Change in Control, but not thereafter,
the Committee may, in its sole discretion and with or
without cause, cancel any Option, Stock Appreciation
Right or Award in whole or in part to the extent it has
not theretofore been exercised or, in the case of Awards,
become vested. Such cancellation shall be effective as
of the date specified by the Committee.

(b) Notwithstanding subsection (a) above, prior
to payment of any Award, the Committee may, in its sole
discretion, in cases involving a serious breach of
conduct by an employee or former employee, or activity of
a former employee in competition with the business of a
Participating Company, cancel any Award, whether or not
vested, in whole or in part. Such cancellation should be
effective as of the date specified by the Committee. The
determination of whether an employee or former employee
has engaged in a serious breach of conduct or activity in
competition with the business of a Participating Company
shall be determined by the Committee in good faith and in
its sole discretion.

9.7. Transfer, Leave of Absence, etc. For
purposes of the Plan: (a) a transfer of an employee from
a Participating Company to an affiliated company, (b) a
leave of absence, duly authorized in writing by the
Participating Company, for military service or sickness,
or for any other purpose approved by the Participating
Company if the period of such leave does not exceed
ninety days, and (c) a leave of absence in excess of
ninety days, duly authorized in writing by the
Participating Company, provided the employee's right to
reemployment is guaranteed either by a statute or by
contract, shall not be deemed a termination of
employment.

9.8. New York Law to Govern. All questions
pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined
in accordance with the laws of the State of New York.

9.9. Payments and Tax Withholding. The
delivery of any shares of Common Stock and the payment of
any amount in respect of a Stock Appreciation Right or
Award shall be for the account of the applicable
Participating Company and any such delivery or payment
shall not be made until the recipient shall have made
satisfactory arrangements for the payment of any
applicable withholding taxes.

ARTICLE X

AMENDMENT AND TERMINATION

10.1. Amendments, Suspension or
Discontinuance. The Board of Directors may amend,
suspend or discontinue the Plan, provided, however, that
except as permitted by Section 4.1(c), the Board of
Directors may not, without the prior approval of the
stockholders of the Company, make any amendment which
operates (a) to abolish the Committee, change the
qualification of its members or withdraw the
administration of the Plan from its supervision, (b) to
make any material change in the class of eligible
employees as defined in the Plan, (c) to increase the
total number of shares Common Stock available for Options
or Awards granted under the Plan, or (d) to extend the
period during which Options or Awards may be granted
under the Plan, and provided, further, that upon the
occurrence of a Change in Control no amendment may
adversely affect the rights of any person in connection
with any Option or Award previously granted.

10.2. Termination. No Option or Award shall
be granted under the Plan after expiration of three years
from the date upon which the Plan is approved by vote of
the stockholders of the Company.

<PAGE> 1

Exhibit 10f

As amended
December 14, 1994

J. P. MORGAN & CO. INCORPORATED

STOCK OPTION PLAN (1984)

SECTION 1. Purpose. The purpose of the Stock
Option Plan (1984) (the "Plan") is to promote the success of
J. P. Morgan & Co. Incorporated (the "Company") by providing
a method whereby key employees of the Company and its
subsidiaries may be encouraged to invest in the Common Stock
of the Company and thereby increase their proprietary
interest in its business, encourage them to remain in the
employ of the Company or its subsidiaries, and increase
their personal interest in the continued success and
progress of the Company.

SECTION 2. Administration. (a) The Board of
Directors of the Company shall designate a committee of not
less than three Directors (the "Committee"). No individual
shall become a member of the Committee if he shall have been
eligible to receive options to acquire shares of capital
stock of the Company or any subsidiary, or stock
appreciation rights, at any time during the 12-month period
prior to his becoming a member and no member of the
Committee shall be eligible to receive options or stock
appreciation rights. The Committee shall have full power
and authority, subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may from
time to time be issued or adopted by the Board of Directors,
to grant to eligible persons options to purchase shares of
the Company and stock appreciation rights pursuant to the
provisions of the Plan, to interpret the provisions of the
Plan and any option agreements issued under the Plan, and to
supervise the administration of the Plan.

(b) All decisions made by the Committee pursuant
to the provisions of the Plan and related orders or
resolutions of the Board of Directors shall be final,
conclusive and binding on all persons, including the
Company, stockholders, employees and optionees.

SECTION 3. Shares Subject to the Plan. (a) The
shares to be delivered upon exercise of options and stock
appreciation rights granted under the Plan may be made
available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including
shares purchased in the open market.

(b) Subject to adjustments made pursuant to the
provisions of paragraph (c) of this Section 3, (i) the
aggregate number of shares to be delivered upon exercise of
all options which may be granted under the plan shall not
exceed 1,200,000 shares of Common Stock, $2.50 par value, of
the Company and (ii) the aggregate number of shares which
may be delivered to any one employee upon exercise of all
options granted to him under the Plan shall not exceed
50,000 shares. The aggregate fair market value (determined
as of the time the option is granted) of the stock for which
any employee may be granted "incentive stock options" in any
calendar year under this Plan and all other stock options
plans of the Company (and any subsidiary or any parent
corporation within the meaning of Section 425 of the
Internal Revenue Code of 1954, as amended (the "Code"))
shall not exceed $100,000 plus any unused limit carryover
calculated in accordance with Section 422A of the Code with
respect to such employee. If an option granted under the
Plan shall expire or terminate for any reason other than the
exercise of a stock appreciation right, the shares subject
to, but not delivered under, such option shall be available
for other options to the same employee or other employees.

(c) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other
change in corporate structure affecting the Common Stock of
the Company, such adjustment shall be made in the aggregate
number of shares which may be delivered under the Plan, the
maximum number of shares which may be delivered to any one
employee under the Plan and the number and option price of
shares subject to the outstanding options granted under the
Plan (provided that the number of shares subject to any
option shall always be a whole number) as may be determined
to be appropriate by the Committee.

SECTION 4. Eligibility and Extent of
Participation. (a) The employees eligible to receive
options under the Plan shall consist of key employees of the
Company and its subsidiaries. Stock appreciation rights
may be granted to holders of any unexpired options granted
under this Plan or the Company's Stock Option Plan (1979)
and the Company's Stock Option Plan (1974) (collectively
referred to herein as the "Earlier Plans"). For the purpose
of the Plan, the term "subsidiary" is a corporation 50% or
more of the voting power of which is owned by the Company
directly or indirectly through one or more subsidiaries.

(b) Subject to the limitations of the Plan, the
Committee shall, after such consultation with and
consideration of the recommendations of management as the
Committee considers desirable, select from eligible
employees those to be granted options and determine the time
when each option shall be granted and the number of shares
subject to each option and shall select the optionees to
receive stock appreciation rights and the options to which
such rights shall relate. Subject to the provisions of
paragraph (b) of Section 3, more than one option and stock
appreciation right may be granted to the same person.

SECTION 5. Option Agreements. Each option under
the Plan shall be evidenced by an option agreement which
shall be signed by an officer of the Company and the
optionee, shall contain such provisions as may be approved
by the Committee and may be supplemented and amended from
time to time as approved by the Committee. Each stock
appreciation right shall be evidenced by the option
agreement for the option to which it relates. In the case
of any such right relating to a previously granted option,
the option agreement shall be supplemented to evidence such
right.

SECTION 6. Option Price. The price at which
shares may be purchased upon exercise of a particular option
shall be not less than 100 per cent of the fair market value
of such shares on the date such option is granted, as
determined in accordance with procedures to be established
by the Committee.

SECTION 7. Exercise of Options. (a) Subject to
the provisions of the Plan with respect to death, retirement
and termination of employment, the period during which each
option may be exercised shall be fixed by the Committee at
the time such option is granted, but such period in no event
shall expire later than ten years from the date the option
is granted.

(b) Each option granted under the Plan may be
exercised only after one year of continued employment by the
Company or any of its subsidiaries immediately following the
date the option is granted and, except as provided in
Section 10, only during the continuance of the optionee's
employment with the Company or any of its subsidiaries.
Subject to the foregoing limitations and the terms and
conditions of the option agreement and unless cancelled
prior to exercise in accordance with Section 13, each option
shall be exercisable in whole or in part in installments at
such time or times as the Committee may prescribe and
specify in the applicable option agreement.

(c) No shares shall be delivered pursuant to any
exercise of an option until payment in full of the option
price therefor is received by the Company. Such payment
shall be made in cash or, in the discretion of the
Committee, through the delivery of shares of Common Stock of
the Company with a value equal to the total option price or
a combination of cash and shares. In addition, the
Committee may prescribe additional methods of payment to the
extent permitted by applicable law. Any shares so delivered
shall be valued at their fair market value on the exercise
date determined as provided in Section 6 hereof. No
optionee or the legal representative, legatee or distributee
of an optionee, shall be deemed to be a holder of any shares
subject to any option prior to the issuance of such shares
upon exercise of such option or any related stock
appreciation right.

SECTION 8. Stock Appreciation Rights. (a) Stock
appreciation rights may be granted to such optionees holding
options granted under this Plan or the Plans as the
Committee may select and upon such terms and conditions as
the Committee may prescribe. Each stock appreciation right
shall relate to a specific option granted and may be granted
concurrently with the option to which it relates or at any
time prior to the exercise, expiration or termination of
such option. A stock appreciation right shall entitle the
optionee, subject to the provisions of the Plan and the
related option agreement, to receive from the Company an
amount equal to the excess of the fair market value on the
exercise date of the number of shares for which the stock
appreciation right is exercised over the option price for
such shares under the related option. For this purpose,
such fair market value shall be determined as provided in
Section 6 hereof.

(b) A stock appreciation right shall be
exercisable on such dates or during such periods as may be
determined by the Committee from time to time, provided that
the Committee may, for administrative convenience, determine
that, for any stock appreciation right relating to an option
which is not an "incentive stock option" which right can
only be exercised during a limited period of time in order
to satisfy rules imposed by the Securities and Exchange
Commission, the exercise of any such right for cash during
such limited period shall be deemed to occur for all
purposes hereunder on the day during such limited period on
which the fair market value of the Common Stock of the
Company, determined as provided in Section 6, is the
highest, and provided, further, that no stock appreciation
right shall be exercisable at a time when the related option
could not be exercised nor may it be exercised with respect
to a number of shares in excess of the number for which such
option could then be exercised. Any such determination by
the Committee may be changed by the Committee from time to
time and may govern the exercise of stock appreciation
rights granted prior to such determination as well as rights
thereafter granted.
(c) A stock appreciation right may be exercised
only upon surrender of the related option by the optionee,
which shall be terminated to the extent of the number of
shares for which the stock appreciation right is exercised.
Shares covered by such a terminated option or portion
thereof granted under this Plan shall not be available for
other options under this Plan.

(d) The amount payable by the Company upon
exercise of a stock appreciation right may be paid in cash,
in shares (valued at their fair market value on the exercise
date determined as provided in Section 6) or in any
combination thereof as the Committee shall determine from
time to time. No fractional shares shall be issued and the
optionee shall receive cash in lieu thereof.

(e) The Committee may impose any other conditions
upon the exercise of a stock appreciation right, which
conditions may include a condition that the stock
appreciation right may only be exercised in accordance with
rules and regulations adopted by the Committee from time to
time. Such rules and regulations may govern the right to
exercise stock appreciation rights granted prior to the
adoption or amendment of such rules and regulations as well
as stock appreciation rights granted thereafter.

(f) The Committee may at any time amend,
terminate or suspend any stock appreciation right
theretofore granted under this Plan, provided that the terms
of any stock appreciation right after any amendment shall
conform to the provisions of this Plan. A stock
appreciation right shall terminate upon the termination or
expiration of the related option.

SECTION 9. Transferability of Options and Stock
Appreciation Rights. (a) Except as provided in subsection
(b) below, an option granted under the Plan may not be
transferred except by will or the laws of descent and
distribution and, during the lifetime of the person to whom
granted, may be exercised only by such person. A stock
appreciation right may not be transferred to anyone and may
be exercised only by the optionee to whom it was granted.

(b) Notwithstanding subsection (a) above, the
Committee may determine, at the time of grant or thereafter,
that an Option granted under the Plan may be transferred by
the optionee to one or more members of the optionee's
immediate family, to a partnership of which the only
partners are members of the optionee's immediate family or
to a trust established by the optionee for the benefit of
one or more members of the optionee's immediate family. For
this purpose immediate family means the optionee's spouse,
parents, children, grandchildren and the spouses of such
parents, children and grandchildren. A transferee described
in this subsection may not further transfer an Option except
by will or the laws of descent and distribution. An Option
transferred pursuant to this subsection shall remain subject
to the provisions of the Plan, including, but not limited
to, the provisions of Section 10 relating to the exercise of
the Option upon the death, retirement or termination of
employment of the optionee.

SECTION 10. Death, Retirement and Termination of
Employment. Subject to the condition that no option may be
exercised in whole or in part after the expiration of the
option period specified in the applicable option agreement
and subject to the Committee's right to cancel any option in
accordance with Section 13:

(a) Upon the death of any optionee while employed
or within the three-year period referred to in clause (b)
below, the person or persons to whom such optionee's rights
under the option are transferred by will or the laws of
descent and distribution may, prior to three years after (i)
the date of such optionee's death while employed or (ii) the
termination of such optionee's employment for a reason
referred to in clause (b) below, as the case may be,
purchase any or all of the shares with respect to which such
optionee was entitled to exercise such option immediately
prior to his death;

(b) Upon termination of employment as a result of
retirement pursuant to a retirement plan of the Company or
any of its subsidiaries, an optionee may, within three years
after the date of such termination, purchase any or all of
the shares with respect to which such optionee was entitled
to exercise such option immediately prior to such
termination; and

(c) Upon termination of employment for any reason
other than death or retirement as aforesaid, an optionee's
options shall be cancelled to the extent not theretofore
exercised.

SECTION 11. Waiver of Limitations.
Notwithstanding anything to the contrary in the Plan, in
such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in
part, any restrictions or limitations applicable to an
Option granted to an eligible employee (including, without
limitation, any restriction or limitation on the period
during which such Option may be exercised following
termination of such eligible employee's employment any
restriction or limitation on the exercisability of such
Option) who, at the time of such waiver or removal, is not
subject to Section 16 of the Securities Exchange Act of
1934.

SECTION 12. Delivery of Shares. No shares shall
be delivered pursuant to any exercise of an option or stock
appreciation right until the requirements of such laws and
regulations as may be deemed by the Committee to be
applicable thereto are satisfied.

SECTION 13. Cancellation of Options and Stock
Appreciation Rights. The Committee may, in its sole
discretion, and with or without cause cancel any option or
stock appreciation right in whole or in part to the extent
it has not theretofore been exercised. Such cancellation
shall be effective as of the date specified by the
Committee.

SECTION 14. Designation of Beneficiary. Subject
to such rules and regulations as the Committee may
prescribe, including the right of the Committee to limit the
types of designations which are acceptable for purposes of
the Plan, each employee who shall be granted an option under
the Plan may designate a beneficiary or beneficiaries and
may change such designation from time to time by filing a
written designation of beneficiaries with the Committee on a
form to be prescribed by it, provided that no such
designation shall be effective unless so filed prior to the
death of such employee.

SECTION 15. Amendments, Suspension or
Discontinuance. The Board of Directors may amend, suspend,
or discontinue the Plan, but except as permitted by
paragraph (c) of Section 3, may not, without the prior
approval of the stockholders of the Company, make any
amendment which operates (a) to abolish the Committee,
change the qualification of its members or withdraw the
administration of the Plan from its supervision, (b) to make
any material change in the class of eligible employees as
defined in the Plan, (c) to increase the total number of
shares which may be delivered on exercise of options granted
under the Plan, (d) to increase the number of shares which
may be delivered to any one optionee upon exercise of
options granted under the Plan, (e) to extend the maximum
option period or the period during which options may be
granted under the Plan, (f) to decrease the minimum option
price or (g) to increase the number of shares with respect
to which stock appreciation rights granted under the Plan
may be exercised or to increase the amount which may be
received upon exercise of any stock appreciation right.

SECTION 16. Termination. No option shall be
granted under the Plan after expiration of three years from
the date upon which the Plan is approved by vote of the
stockholders of the Company.

<PAGE> 1

Exhibit 10g

As amended
December 14,
1994

INCENTIVE COMPENSATION PLAN
OF
J. P. MORGAN & CO. INCORPORATED
AND AFFILIATED COMPANIES

_______________________________

SECTION 1.

Purpose of Plan

The purpose of the Plan is to promote the success
of J. P. Morgan & Co. Incorporated and certain affiliated
companies by providing additional compensation for services
rendered during any Year by certain employees who have made
important contributions during such Year.

SECTION 2.

Definitions

The following words and phrases as used herein
shall have the following meanings unless a different meaning
is plainly required by the context:

2.1. "Company" shall mean J. P. Morgan & Co.
Incorporated or any successor to it in ownership of all or
substantially all of its assets.

2.2. "Trust Company" shall mean Morgan Guaranty
Trust Company of New York or any successor to it in
ownership of all or substantially all of its assets.

2.3. "Board of Directors" shall mean the Board of
Directors of the Company.

2.4. "Participating Company" shall mean the
Company, the Trust Company, and any subsidiary or other
affiliated entity (whether or not incorporated).

2.5. "Employee" shall mean (i) any junior or
senior executive employed by one or more Participating
Companies and (ii) except for purposes of Sections 4 and
5.2, any person who has been granted a Deferred Award.

2.6. "Plan" shall mean the Incentive Compensation
Plan as amended from time to time.

2.7. "Year" shall mean a calendar year.

2.8. "Committee" shall mean the Committee
established to administer the Plan in accordance with
Section 3.1 provided, however, that with respect to
determinations to be made under Section 4.1 with respect to
employees who are members of the Board of Directors,
Committee shall mean all members of the Board of Directors
who are not employees of the Company or any other
Participating Company and who are disinterested within the
meaning of Rule 16b-3 under the Securities Exchange Act of
1934 ("Exchange Act") and are outside directors under
Section 162(m)(4)(C) of the Internal Revenue Code.

2.9. "Immediate Award" shall mean an award under
the Plan receivable pursuant to Section 5.1.

2.10. "Deferred Award" shall mean an award under
the Plan which the Employee to whom the award is made shall
have elected to defer in accordance with Section 5.2.

2.11. "Deferred Cash Award" shall mean a Deferred
Award described in Section 5.3.

2.12. "Deferred Equity Award" shall mean a
Deferred Award described in Section 5.4.

2.13. "Deferred Balanced Award" shall mean a
Deferred Award described in Section 5.5.

2.14. "Deferred Award of JPM Share Credits" shall
mean a Deferred Award recorded in the form of Share Credits
pursuant to Section 5.6.

2.15. "Award Value" as used herein with reference
to a Deferred Award shall mean the dollar amount of such
award, and as used herein with reference to the value for
award purposes of a share of Common Stock of the Company to
be represented by a Deferred Award of JPM Share Credits
shall mean the value arrived at pursuant to Section 8.1.

2.16. "Final Balance" as used herein in the case
of an Employee who shall have been granted one or more
Deferred Awards shall mean the amount in such Employee's
Deferred Award account at his Valuation Date (other than
amounts attributable to Deferred Income Benefit Awards).

2.17. "Annual Interest Rate" for any period shall
mean the interest rate per annum for such period as
determined by the Committee from time to time; provided,
however, that the Committee shall not fix an interest rate
which is higher than the most recent U.S. Government bond
rate (based on a yield for a 30-year constant maturity)
published by the Board of Governors of the Federal Reserve
System.

2.18. "Final Income Benefit Balance" as used
herein in the case of an Employee who shall have been
granted one or more Deferred Income Benefit Awards shall
mean the aggregate amount in such Employee's Deferred Income
Benefit Award account, determined pursuant to Section 6.3,
at his Valuation Date.

2.19. "Deferred Income Benefit Award" shall mean
a Deferred Award payable in installments pursuant to Section
5.7.

2.20. "Special Employee" shall mean an employee
on whose life no life insurance policy has been purchased by
the Company in respect of a Deferred Income Benefit Award
for a particular award Year.

2.21. "Adjustment Rate" for any Year shall mean
6% per annum or such other rate as the Committee may from
time to time determine.

2.22. "Valuation Date" shall mean as to each
Employee the first business day of the Year following the
Year in which the Employee's employment terminates.

2.23. "Share Credit" shall mean the unit used to
record the value of a Deferred Award of JPM Share Credits
under Section 5.6 and shall be equivalent to one share of
Common Stock of the Company.

2.24 "Equity Award Credit" shall mean the unit
used to record the value of a Deferred Equity Award under
Section 5.4.

2.25 "Balanced Award Credit" shall mean the unit
used to record the value of a Deferred Balanced Award under
Section 5.5.

2.26 "Common Stock" shall mean common stock, par
value $2.50, of the Company.

2.27 "Exchange Act" shall mean the Securities
Exchange Act of 1934.

SECTION 3.

Administration of the Plan

3.1. The Committee. (a) The Plan shall be
administered by a Committee consisting of at least three
persons chosen by the Board of Directors from among those
members of the Board of Directors not eligible to
participate in the Plan. The Committee may consult with
management but shall have the responsibility of determining
the Employees who are to receive awards under the Plan and
as to the amount of such awards and shall otherwise be
responsible for the administration of the Plan.

(b) The Committee also shall:

(i) make appropriate adjustments in the number of
unpaid awards represented by Deferred Awards of JPM Share
Credits and by dividend equivalents to reflect any of the
events specified in Section 5.6(d);

(ii) determine in accordance with the provisions
of the Plan the Award Value of Common Stock of the Company;

(iii) determine for each Year the amounts of
Deferred Income Benefit Award benefits to be credited to the
Deferred Income Benefit Award accounts of Participants
receiving Deferred Income Benefit Awards for such Year
corresponding to the dollar amounts of any Deferred Income
Benefit Awards for such Year;

(iv) determine the Adjustment Rate as provided in
Section 2.21;

(v) construe and interpret the Plan and adopt
rules and regulations governing administration of the Plan;

(vi) delegate to senior officers of the Company
or the Trust Company such authority to act for the Committee
as the Committee shall specify; and

(vii) exercise the remaining duties and powers
conferred on it by the Plan.

SECTION 4.

Awards under the Plan

4.1. Grant of Awards under the Plan. The
Committee shall determine those Employees, if any, who are
to be granted awards under the Plan with respect to a Year
and the dollar amount of such awards as soon as practicable
after the close of such Year or at such earlier time as the
Committee shall determine. Deferred Awards shall be
granted under the Plan for any Year only to those Employees
who shall have elected to receive a Deferred Award for such
Year pursuant to Section 5.2. All Deferred Awards granted
under the Plan shall be in the form of Deferred Cash Awards,
Deferred Equity Awards, Deferred Balanced Awards, Deferred
Awards of JPM Share Credits, or Deferred Income Benefit
Awards or a combination thereof. Notwithstanding the above,
Deferred Awards of JPM Share Credits in respect of a Year to
persons subject to Section 16 of the Exchange Act shall not
exceed that number of Share Credits which is equal to
one-half of one percent (.5%) of the number of shares of
Common Stock of the Company which is outstanding at the
beginning of such Year.

SECTION 5.

Elections as to Method and Time or Times
of Payment or Delivery of Awards

5.1. Immediate Awards. Except to the extent that
Deferred Awards are elected pursuant to Section 5.2, awards
under the Plan for any Year shall be distributed as promptly
as practicable after the granting of such awards pursuant to
Section 4.1.

Any distribution of an Immediate Award shall be in
the form of such property as the Committee may in its
discretion determine, which may include, but not be limited
to, cash or, except for persons subject to Section 16 of the
Exchange Act, shares of common or preferred stock of the
Company. Any reference in the Plan to the amount of any
such award shall be read as defining the quantum of the
distribution and as a reference to the value of the property
distributed, as determined by the Committee. The
entitlement of Employees to receive a distribution under the
Plan shall be to such property as the Committee may in its
discretion determine on or before the date on which such
distribution is made.

5.2. Deferral Elections for Deferred Awards. (a)
Subject to the provisions of Section 5.2(b), an Employee
shall be eligible to receive a Deferred Award for any Year
only if he is an Employee on the first day of the following
Year, if he shall have elected to receive a Deferred Award
for such Year in the manner provided in this Section 5.2 and
only if either he shall have received an award under this
Plan or the Additional Compensation Plan of J. P. Morgan &
Co. Incorporated and Affiliated Companies for any preceding
Year or, if he has not received any such award, he is
designated by the Committee to be eligible to receive a
Deferred Award for such Year. Deferral Elections for a
Year shall be made at such time and in such manner as the
Committee shall prescribe. In the event that no additional
compensation award is granted to such Employee for the Year
in which such election is made, such election shall become
null and void. Any elections to defer all or a portion of
any additional compensation award which may be granted to an
Employee for any Year shall specify the part of such
deferred amount to be in the form of a Deferred Cash Award,
a Deferred Equity Award, a Deferred Balanced Award, a
Deferred Award of JPM Share Credits and a Deferred Income
Benefit Award. Failure of an eligible Employee to elect to
receive a Deferred Award for any Year shall be deemed to
constitute an election by such Employee to receive an
Immediate Cash Award in accordance with Section 5.1.

(b) The Committee shall have the right to limit
or reject all or any part of a deferral election if the
Committee in its sole discretion shall determine at any time
prior to the date of the granting of such awards pursuant to
Section 4.1 that deferral in the form elected has become
inadvisable because of changes in the Federal tax laws or
for any other reason and in such event all amounts subject
to such election shall be distributed in the manner provided
in Section 5.1 unless an alternative form of deferral has
also been elected by the Employee and such election is
accepted by the Committee. If the Committee permits an
Employee to elect to defer an award to a date prior to
termination of employment, all applicable references in the
Plan to termination of employment shall be deemed to refer
to such date.

5.3. Deferred Cash Awards. (a) Subject to the
provisions of Section 7, an Employee who has been granted
one or more Deferred Cash Awards shall be entitled to
receive as soon as practicable after his Valuation Date (but
in no event later than the February 1 following such
Valuation Date) that part of his Final Balance attributable
to all Deferred Cash Awards.

(b) There shall be credited to the Deferred Cash
Award account of each Employee who has been granted one or
more Deferred Cash Awards as of the close of each Year
following the Year for which each such award is made an
interest equivalent on the undistributed portion of such
Deferred Cash Account (including any interest equivalents
theretofore credited to such account) computed from the date
of the last such credit at the Annual Interest Rate for such
period. In the event a distribution is made pursuant to
Section 7.4, an interest equivalent shall be credited from
the date of the last crediting hereunder to the date of such
distribution.

5.4. Deferred Equity Awards. (a) Subject to the
provisions of Section 7, an Employee who has been granted
one or more Deferred Equity Awards shall be entitled to
receive as soon as practicable after his Valuation Date (but
in no event later than the February 1 following such
Valuation Date) that part of his Final Balance attributable
to all Deferred Equity Awards.

(b) The Committee shall determine the number of
Equity Award Credits with respect to any Deferred Equity
Award made to an Employee receiving a Deferred Equity Award
under the Plan for any Year by dividing the dollar amount of
such award by the value of the S&P 500 index at the close of
trading on the first trading day of the Year immediately
following the Year for which the award is granted. The
value of such Equity Award Credits shall fluctuate in
accordance with changes in the value of the S&P 500 index.

5.5. Deferred Balanced Awards. (a) Subject to
the provisions of Section 7, an Employee who has been
granted one or more Deferred Balanced Awards shall be
entitled to receive as soon as practicable after his
Valuation Date (but in no event later than the February 1
following such Valuation Date) that part of his Final
Balance attributable to all Deferred Balanced Awards.

(b) The Committee shall determine the number of
Balanced Award Credits with respect to any Deferred Balanced
Award made to an Employee receiving a Deferred Balanced
Award under the Plan for any Year by dividing the dollar
amount of such award by the combined value of the S&P 500
index and the Lehman Aggregate Bond index on the first
trading day of the Year immediately following the Year for
which the award is granted. The value of such Balanced
Award Credits shall fluctuate in accordance with changes in
the value of the S&P 500 index and the Lehman Aggregate Bond
index.

5.6. Deferred Awards of JPM Share Credits. (a)
Subject to the provisions of Section 7, an Employee who has
been granted one or more Deferred Awards of JPM Share
Credits shall be entitled to receive the amount represented
by all of such awards, plus the aggregate amount represented
by dividend equivalents theretofore or then to be credited
to such Employee with respect thereto, to and including the
date of termination of his employment, as a distribution of
the entire such amount as soon as practicable after such
Employee's Valuation Date (but in no event later than the
February 1 following such Valuation Date).

(b) The Committee shall determine the number of
Share Credits to be represented by any Deferred Award of JPM
Share Credits made to each Employee receiving a Deferred
Award of JPM Share Credits under the Plan for any Year by
dividing the dollar amount of that portion of his award
under the Plan for such Year to be made in the form of a
Deferred Award of JPM Share Credits by the Award Value of a
share of Common Stock of the Company for such Year as
determined in accordance with Section 8.1.

(c) An Employee or former Employee who has been
granted one or more Deferred Awards of JPM Share Credits
shall be credited, at the close of each Year until his
Deferred Awards of JPM Share Credits shall have been
distributed in full, with an amount (herein referred to as a
"dividend equivalent") equal to the aggregate cash dividends
to which he would have been entitled had he been the owner
on the record date for each such dividend declared during
such Year or portion of a Year of a number of shares of
Common Stock of the Company equal to the aggregate number of
Share Credits (including Share Credits representing dividend
equivalents with respect to prior record dates during such
Year) credited to his account as of such record date. All
amounts credited as dividend equivalents in respect of any
dividends the record date for which is on or prior to the
Valuation Date of an Employee shall be converted as of the
date on which they are so credited into Share Credits
representing dividend equivalents on the same basis as the
portions of awards for the same year to be made in the form
of Deferred Awards of JPM Share Credits are converted into
Share Credits of Common Stock of the Company pursuant to
Section 5.6(b). In the event a distribution is made
pursuant to Section 7.4, a dividend equivalent for the year
of such distribution may be determined in such manner as is
deemed appropriate in the discretion of the Committee to
reflect such distribution. All amounts credited as dividend
equivalents in respect of any dividends the record date for
which is after the Valuation Date of an Employee shall be
paid as provided in Section 7.2(c).

(d) In the event of a subdivision or combination
of shares of Common Stock of the Company, the number of
Share Credits credited to each Employee who has received one
or more Deferred Awards of JPM Share Credits (including
Share Credits representing dividend equivalents) on the
effective date of such subdivision or combination shall be
proportionately subdivided or combined as the case may be.
No adjustment is to be made in the account of any such
Employee in connection with the issuance by the Company of
any rights or options to acquire additional shares of Common
Stock of the Company or securities convertible into such
Common Stock. In the event of any stock dividend or
reclassification of the Common Stock of the Company or any
merger or consolidation to which the Company is a party, the
Committee shall make appropriate adjustments in the accounts
of such participants to reflect such stock dividend,
reclassification, merger or consolidation.

(e) In making determinations and adjustments
pursuant to paragraph (b), (c) or (d) of this Section 5.6
with respect to Deferred Awards of JPM Share Credits made to
an Employee, whole and fractional Share Credits shall be
credited to an Employee's account. If, after calculating
the number of Share Credits to be credited to an Employee's
account pursuant to such paragraphs, there remains at the
time of termination of his employment a balance credited to
such Employee's account which is not translated into a whole
Share Credit, then such balance shall be paid in cash to
such Employee (or if he has died, to his estate or
designated beneficiary or beneficiaries, as the case may be)
with the first distribution from his account.

5.7. Deferred Income Benefit Awards. (a)
Subject to the provisions of Section 7 and Section 5.7(c),
an Employee who has been granted one or more Deferred Income
Benefit Awards shall be entitled to receive as soon as
practicable after his Valuation Date and anniversaries
thereof (but in no event later than February 1 following
such Valuation Date or anniversary thereof, as applicable)
during each of the 15 Years following his termination of
employment an amount equal to 1/15th of the amount of his
Final Income Benefit Balance; provided, however, that any
amount otherwise receivable by an Employee in any Year shall
(i) be reduced on a present value basis by the Adjustment
Rate then in effect for each Year that the commencement of
distributions hereunder precedes the Year in which such
Employee would attain age 65 or (ii) be increased on an
annually compounded basis by the Adjustment Rate then in
effect for each Year that the commencement of distributions
hereunder succeeds the Year in which such Employee attains
age 65. In the event of the death of such employee before
receiving fifteen such distributions, the remaining
distributions shall be made to his beneficiary or
beneficiaries designated pursuant to Section 8.2 or, in the
absence of such designation, to his estate.

(b) Subject to the provisions of Section 7 and
Section 5.7(c) and in addition to any amounts otherwise
distributable pursuant to Section 5.7(a), the beneficiary or
beneficiaries of a deceased Employee designated by such
Employee pursuant to Section 8.2 or, in the absence of such
designation, his estate shall be entitled to receive as soon
as practicable after his Valuation Date and anniversaries
thereof (but in no event later than the February 1 following
such Valuation Date or anniversary thereof, as applicable)
during each of the fifteen Years following the death of such
Employee prior to the termination of his employment, an
amount equal to 1/15th of the amount of such Employee's
Final Income Benefit Balance; provided, however, that any
amount distributable to such beneficiary or beneficiaries
or estate in any Year shall (i) with respect to the pro rata
portion of the Final Income Benefit Balance attributable to
awards made in years in which the Employee was a Special
Employee, be reduced on a present value basis by the
Adjustment Rate then in effect for each Year that the
commencement of distributions hereunder precedes the Year
in which such Employee would have attained age 65 or (ii) be
increased on an annually compounded basis by the Adjustment
Rate then in effect for each Year that the commencement of
distributions hereunder succeeds the Year in which such
Employee attained age 65.

(c)(i) In addition to the Committee's right to
limit or reject deferral elections in accordance with
Section 5.2(b), the Committee shall have the right to
terminate or limit the right of Employees to elect that an
additional compensation award for any Year shall be in the
form of a Deferred Income Benefit Award if the Committee in
its sole discretion shall determine at any time that such
deferral has become inadvisable because of changes in the
Federal tax laws or any other circumstances which, in the
judgment of the Committee, jeopardize the ability of the
Company to adequately finance the Deferred Income Benefit
Awards. In such event, all affected amounts (including any
such amounts theretofore accrued in any Employee's Deferred
Income Benefit Award account) shall be deposited into an
existing or new Deferred Cash Award account for such
Employee and shall be deemed for purposes of Section 5.3(b)
to have been so deposited from the dates of the deposit of
such amounts in such Employee's Deferred Income Benefit
Award account. All such amounts shall be paid in accordance
with Section 7.

(ii) With respect to Deferred Income Benefit
Awards, and except as otherwise determined by the Committee
in its sole discretion:

(A) If the employment of an Employee who has
received one or more such awards is terminated for any
reason (other than death, or retirement under a retirement
plan of a Participating Company) prior to completion of 10
years of service then, effective as of the date of such
termination all amounts attributable to such awards accrued
in such Employee's Deferred Income Benefit Award account
shall be deposited into a new or existing Deferred Cash
Award account for such Employee, shall be deemed for
purposes of Section 5.3(b) to have been so deposited from
the date of deposit of such amounts in such Employee's
Deferred Income Benefit Award account, and shall be
distributed in a single sum as soon as practicable after his
Valuation Date (but in no event later than the February 1
following such Valuation Date).

(B) Subject to subparagraph (C) below, if an
Employee terminates employment for any reason other than
death after completion of 10 years of service, payment of
such Employee's Deferred Income Benefit Award account shall
be distributed in accordance with Section 5.7(a) and (b)
except that the commencement of such payments shall occur as
soon as practicable after the close of the Year following
the Year in which the Employee reaches age 65, or the
Employee reaches age 50 and the sum of the Employee's age
and years of service equals 70, whichever is earlier (but in
no event later than the February 1 first occurring after the
close of such Year).

(C) Notwithstanding subparagraph (B) above, if an
Employee terminates employment for any reason other than
retirement at or after age 65 under a retirement plan of a
Participating Company, and if any amount of such Employee's
Deferred Income Benefit Award account is attributable to a
Deferred Income Benefit Award credited to such Employee's
account in respect of the year immediately preceding the
year of such date of termination, such amount, plus interest
equivalents that would have been credited to such amount
under Section 5.3(b) if such amount had been a Deferred Cash
Award, shall be distributed in a single sum to such Employee
as soon as practicable after his Valuation Date (but in no
event later than the February 1 following such Valuation
Date).

SECTION 6.

Accounts of Participants

6.1. Accounts of Participants Receiving Deferred
Cash Award. Whenever a Deferred Cash Award is first granted
to an Employee, there shall be established for such Employee
a notional account to which there shall be credited the
amount of all Deferred Cash Awards and the amounts of all
interest equivalents granted or credited to such Employee.

6.2 Accounts of Participants Receiving Deferred
Equity Awards. Whenever a Deferred Equity Award is first
granted to an Employee, there shall be established for such
Employee a notional account to which there shall be credited
all Deferred Equity Awards.

6.3 Accounts of Participants Receiving Deferred
Balanced Awards. Whenever a Deferred Balanced Award is
first granted to an Employee, there shall be established for
such Employee a notional account to which there shall be
credited all Deferred Balanced Awards.

6.4. Accounts of Participants Receiving Deferred
Awards of JPM Share Credits. Whenever a Deferred Award of
JPM Share Credits is first granted to an Employee, there
shall be established for such Employee a notional account to
which there shall be credited all Deferred Awards of JPM
Share Credits and all dividend equivalents granted or
credited to such Employee.

6.5. Accounts of Participants Receiving Deferred
Income Benefit Awards. Whenever a Deferred Income Benefit
Award is first granted to an Employee, there shall be
established for such Employee a notional account to which
there shall be credited in each Year the amount set forth in
the schedule of Deferred Income Benefit Award benefits
determined by the Committee and in effect for such Year
corresponding to the dollar amount, if any, of such
Employee's Deferred Income Benefit Award for such Year.

6.6. Transfers Between Accounts. In accordance
with rules prescribed by the Committee in its discretion, an
Employee shall be permitted to transfer all or part of one
of his Deferred Award accounts to another Deferred Award
account, all such transfers to be effected as of the first
business day of the following year.

SECTION 7.

Payment or Delivery of Deferred
Awards to Employees or Former Employees

7.1. Method and Times of Distribution of
Deferred Awards. (a) All Deferred Awards shall be
distributed after termination of an Employee's employment
for any reason. Distribution of all Deferred Awards (other
than Deferred Income Benefit Awards which shall be
distributed in accordance with Section 5.7) shall be made in
a single distribution unless the Employee elects pursuant to
Section 7.1(b) to have distribution made in installments.
The determination of the amount distributable with respect
to Deferred Equity Awards and Deferred Balanced Awards shall
be made by multiplying the appropriate number of Equity
Award Credits and Balanced Award Credits by the value of the
S&P 500 index and the combined value of the S&P 500 index
and the Lehman Aggregate Bond index, respectively, at the
close of trading on the Employee's Valuation Date. The
determination of the amount distributable with respect to
Deferred Awards of JPM Share Credits (and Share Credits
representing dividend equivalents) shall be made by
multiplying the appropriate number of Share Credits by the
average of the highest and lowest price of a share of Common
Stock as reported on the Composite Tape on the Employee's
Valuation Date.

(b) At the time an Employee elects to defer an
award pursuant to Section 5.2 or at such other time as the
Committee shall permit in its discretion, an Employee may
elect to receive distribution of a Deferred Award in not
more than 15 installments to be distributed as soon as
practicable after the Valuation Date and anniversaries
thereof (but in no event later than the February 1 following
such Valuation Date and anniversary thereof, as applicable).
Each such election shall be filed with the Committee in a
manner to be determined by the Committee for such purpose.
If any Employee who has been granted a Deferred Award does
not have such an election on file with the Committee, such
Deferred Award shall be distributed as soon as practicable
after his Valuation Date (but in no event later than the
February 1 following such Valuation Date).

(c) Any distribution of a Deferred Award shall be
in the form of such property as the Committee may in its
discretion determine, which may include, but not be limited
to, cash or, except for persons subject to Section 16 of the
Exchange Act, shares of common or preferred stock of the
Company. Any reference in the Plan to the amount of any
such award shall be read as defining the quantum of the
distribution and as a reference to the value of the property
distributed, as determined by the Committee. The
entitlement of Employees to receive a distribution under the
Plan shall be to such property as the Committee may in its
discretion determine on or before the date on which such
distribution is made.

7.2. Termination of Employment for Any Reason
Other Than Death. (a) Upon termination of employment for
any reason other than death of an Employee who has received
one or more Deferred Awards, the amount of such Employee's
Final Balance shall be distributed to him as provided in
Section 5 or in accordance with the method of distribution
elected pursuant to Section 7.1(b).

(b) Any former Employee entitled to receive
distribution with respect to a Deferred Award of JPM Share
Credits in a single distribution or in installments pursuant
to Section 7.2(a) shall also receive at the time of such
distribution, or each such installment, as the case may be,
an amount equal to all dividend equivalents which have been
credited to the account of such former Employee pursuant to
Section 5.6(c) after his Valuation Date and not previously
paid to him.

(c) Upon termination of employment for any reason
other than death of an Employee who has received one or more
Deferred Income Benefit Awards, the amount of such
Employee's Final Income Benefit Balance shall be distributed
to him as provided in Section 5.7(a).

(d) Upon termination of employment of an Employee
for any reason (other than death, or retirement under a
retirement plan of a Participating Company) prior to his
completion of 10 years of service, all amounts due to such
Employee with respect to any Deferred Awards (other than
Deferred Income Benefit Awards) shall be distributed as soon
as practicable after such Employee's Valuation Date (but in
no event later than the February 1 following such Valuation
Date).

(e) For purposes of the Plan (i) a transfer of an
Employee from a Participating Company to an affiliated
company (ii) a leave of absence, duly authorized in writing
by the Participating Company, for military service or
sickness, or for any other purpose approved by the
Participating Company if the period of such leave does not
exceed 90 days, and (iii) a leave of absence in excess of 90
days, duly authorized in writing by the Participating
Company, provided the Employee's right to reemployment is
guaranteed either by a statute or by contract, shall not be
deemed a termination of employment.

7.3. Distribution of Deferred Awards Upon Death
of an Employee or Former Employee. Upon the death of an
Employee or former Employee who has received one or more
Deferred Awards, the undistributed balance of any Deferred
Awards shall be distributed to the estate of such Employee
or former Employee (or if any such deceased Employee or
former Employee shall have designated a beneficiary or
beneficiaries pursuant to Section 8.2, to such beneficiary
or beneficiaries) as soon as practicable after the close of
the Year in which occurs the death of such Employee or
former Employee or as provided in Section 5.7(a) in the case
of Deferred Income Benefit Awards (but in no event later
than the February 1 first occurring after the close of such
Year). Notwithstanding the foregoing, in lieu of the single
distribution provided for above in respect of Deferred
Awards (other than Deferred Income Benefit Awards) upon the
death of an Employee, distributions may be made in the
amount and at such times as would have been applicable had
the Employee terminated employment for a reason other than
death.

7.4. Acceleration of Deferred Awards. (a) At
any time before or after termination of employment of any
Employee who shall have elected to receive one or more
Deferred Awards, the Committee may at any time accelerate
and distribute in a lump sum all or any part of the
undistributed balance of such Deferred Award or Deferred
Awards (including any amounts credited with respect to any
such Deferred Award) in the event of a financial emergency
which is beyond the control of the Employee or beneficiary
and only if disallowance of the accelerated distribution or
delivery would result in severe financial hardship to the
Employee or beneficiary. Such accelerated distribution
shall be limited to the amount necessary to satisfy the
financial emergency. Solely for the purposes of this
Section 7.4(a), an Employee's Final Income Benefit Balance
in the case of a distribution made in order to assist an
Employee in meeting such an emergency, shall be determined
by crediting any Deferred Income Benefit Awards with the
Annual Interest Rate as if such Deferred Income Benefit
Awards had been Deferred Cash Awards.

(b) In special circumstances which do not qualify
for a hardship accelerated distribution under (a) above, the
Committee may, in its sole discretion, accelerate the
distribution of all or some Deferred Awards if because of
tax, financial, accounting or other meritorious reasons it
is determined by the Committee that such acceleration is
appropriate.

(c)(i) In the event of a Change in Control, the
distribution of all Deferred Awards shall (unless the
Committee determines otherwise) be made as soon as
practicable.

(ii) Any determination by the Committee
pursuant to this Section 7.4(c) may be made as to all
Deferred Awards or only as to certain Deferred Awards
specified by the Committee, may include different
distribution schedules as to certain Deferred Awards, and
all such determinations shall be made in cases covered by
Sections 7.4(c)(iii)(A) and 7.4(c)(iii)(B) prior to or as
soon as practicable after the occurrence of such event and
in cases covered by Sections 7.4(c)(iii)(C) and
7.4(c)(iii)(D) prior to the occurrence of such event.

(iii) For purposes of this Section 7.4(c), a
Change of Control shall have occurred if

(A) any "person" or "group of persons" as such
terms are used in Section 13(d) and 14(d) of the Exchange
Act directly or indirectly purchases or otherwise becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any
condition) of voting securities representing 25% or more of
the combined voting power of all outstanding voting
securities of the Company;

(B) during any period of two consecutive years,
the individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to
constitute at least a majority of the members thereof,
unless (1) there are seven or more directors then still in
office who were directors at the beginning of the period and
(2) the election, or the nomination for election by the
Company's stockholders, of each new director was approved by
at least two-thirds of the directors then still in office
who were directors at the beginning of the period;

(C) the stockholders of the Company shall approve
an agreement to merge or consolidate the Company with or
into another corporation as a result of which less than 50%
of the outstanding voting securities of the surviving or
resulting entity are or are to be owned by the former
stockholders of the Company (excluding from former
stockholders, a stockholder who is or, as a result of the
transaction in question, becomes an "affiliate," as defined
in Rule 12b-2 under the Exchange Act, of any party to such
consolidation or merger); or

(D) the stockholders of the Company shall approve
the sale of all or substantially all of the Company's
business and/or assets to a person or entity which is not a
wholly-owned subsidiary of the Company.

7.5. Reemployment of Former Employee. Upon the
reemployment by a Participating Company of any former
Employee who has commenced receiving distributions of one or
more Deferred Awards, all distributions of such awards shall
be suspended until the Valuation Date next following the
date such Employee again terminates employment (but in no
event later than the February 1 following such Valuation
Date). During the period of suspension such Deferred Awards
shall be adjusted pursuant to Section 5.3(b), 5.4(b), 5.5(b)
or 5.6(c), as the case may be. In the case of Deferred
Income Benefit Awards, the Committee shall take such steps
as it shall deem appropriate if a former Employee who is
receiving distributions under Section 5.7 is reemployed by a
Participating Company.

SECTION 8.

General Provisions

8.1. Value of JPM Stock. The value of shares of
Common Stock of the Company for purposes of determining the
Award Value to be represented by Deferred Awards of JPM
Share Credits for any Year shall be the average of the
market prices per share of the Common Stock of the Company
on the last trading day of each calendar month during the 12
months ending on the November 30 preceding the date such
determination is made. The market price on any day shall be
the average of the highest and lowest price of Common Stock
of the Company as reported on the composite tape for such
day, unless the Committee determines that another procedure
for determining market price would be more appropriate.

8.2. Designation of Beneficiary. Subject to
such rules and regulations as the Committee may prescribe,
including the right of the Committee to limit the types of
designations which are acceptable for purposes of the Plan,
each Employee who shall be granted a Deferred Award under
the Plan may designate a beneficiary or beneficiaries and
may change such designation from time to time by filing a
written designation of beneficiaries with the Committee on
forms to be prescribed by it, provided that no such
designation shall be effective unless so filed prior to the
death of such Employee.

8.3. No Right of Continued Employment. Neither
the establishment of the Plan nor the payment of any
benefits hereunder nor any action of any Participating
Company or of the Board of Directors or of the Committee
shall be held or construed to confer upon any person any
legal right to be continued in the employ of a Participating
Company and each Participating Company expressly reserves
the right to discharge an Employee whenever the interest of
any such company in its sole discretion may so require
without liability to such Participating Company, the Board
of Directors or the Committee except as to any rights which
may be expressly conferred upon such Employee under the
Plan.

8.4. Discretion of Company, Board of Directors
and Committee. Any decision made or action taken by the
Company or by the Board of Directors or by the Committee (or
such persons acting under a delegation by the Committee
pursuant to Section 3.1(b)) arising out of or in connection
with the construction, administration, interpretation and
effect of the Plan shall lie within the absolute discretion
of the Company, the Board of Directors or the Committee (or
such persons acting under a delegation by the Committee
pursuant to Section 3.1(b)), as the case may be, and shall
be conclusive and binding upon all persons.

8.5. Absence of Liability. No member of the
Board of Directors or of the Committee or officer of any
Participating Company shall be liable for any act or action
hereunder, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee, or,
except in circumstances involving his bad faith, for
anything done or omitted to be done by himself.

8.6. No Segregation of Cash or Shares. (a) The
Company shall not be required to segregate any cash or any
shares of Common Stock which may at any time be represented
by awards or interest or dividend equivalents credited to an
Employee and the Plan shall constitute an "unfunded" plan of
the Company. No interest at any time shall be allowable or
payable with respect to any Deferred Awards except as
expressly provided herein.

(b) The Company shall not, by any provisions of
this Plan, be deemed to be a trustee of any property, and
the liabilities of the Company to any Employee pursuant to
the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the
Plan, and the rights of any Employee, former Employee or
beneficiary shall be limited to those of an unsecured
creditor of the Company. In its sole discretion, the Board
of Directors may authorize the creation of trusts or other
arrangements to meet the obligations of the Participating
Companies under the Plan, provided, however, that existence
of such trusts or arrangements is consistent with the
unfunded status of the Plan.

8.7. Elections. Elections hereunder shall be
made by a participating Employee in such manner prescribed
by the Committee for such purpose within the time limits set
forth hereunder with respect to each such election or, if no
time limit is set forth, as may be established by the
Committee.

8.8. Inalienability of Benefits and Interests.
(a) Except as provided in Section 8.2 and paragraph (b) of
this Section 8.8, no benefit distributable under or interest
in the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance
or charge, and any such attempted action shall be void and
no such benefit or interest shall be in any manner liable
for or subject to debts, contracts, liabilities, engagements
or torts of any Employee, former Employee or beneficiary.
If an Employee, former Employee or beneficiary shall attempt
to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any benefit receivable under or interest
in the Plan in contravention of the foregoing sentence, the
Committee will disregard the attempted transfer, assignment,
or other alienation, and will distribute the deferred
amounts in accordance with the method or methods elected by
the Employee at the time the Employee elected to defer the
award or awards giving rise to the benefit or interest in
question or in accordance with the terms of Section 7.4.

(b) The provisions of paragraph (a) of this
Section 8.8 shall not apply to an assignment of a
distribution due under Section 5.7(a) by a deceased
Employee's legal representative or beneficiary if such
assignment is made for the purposes of settling the affairs
of such deceased Employee.

8.9. New York Law to Govern. All questions
pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined in
accordance with the laws of the State of New York.

8.10. Distribution of Awards. Distribution of
Immediate Awards and Deferred Award account balances shall
be by or for the account of the Participating Companies and
the Company and the Participating Companies may make such
arrangements as they may deem appropriate with respect
thereto.

SECTION 9.

Amendment, Suspension or Termination of Plan

(a) The Board of Directors may from time to time
amend, suspend or terminate in whole or in part, and if
suspended or terminated, may reinstate any or all of the
provisions of the Plan except that without the consent of
the Employee no amendment, suspension or termination of the
Plan shall adversely affect the rights of any Employee with
respect to awards previously made to such Employee.

(b) The Plan may also be amended by the Committee
provided that such amendment does not materially change the
underlying policy reflected by, or the level of benefits
provided by, the Plan.

<PAGE>

J.P. Morgan & Co. Incorporated
1994 Annual report

[ART APPPEARS HERE]

[PHOTO APPEARS HERE]

With sound advice and superior execution, J.P. Morgan is committed to excel
globally in serving clients with complex financial needs.

JP Morgan
<PAGE>

[PHOTO APPEARS HERE]

J.P. Morgan is a global banking firm that has built its business, over 150
years, on a commitment to excel in serving clients with complex financial
needs.
Drawing on commercial, investment, and merchant banking traditions,
we strive to be an international leader in capability and character, to
channel capital to productive uses, and to earn superior returns over time
for our stockholders.

[PHOTO APPEARS HERE]

Contents
1 Financial highlights
2 To our stockholders
8 1994 Highlights
11 Financial review
40 Responsibility for financial reporting
41 Report of independent accountants
42 Consolidated statement of income
43 Consolidated balance sheet
44 Consolidated statement of changes in stockholders' equity
45 Consolidated statement of cash flows
46 Consolidated statement of condition -
Morgan Guaranty Trust Company of New York
47 Notes to financial statements
82 Additional selected data
84 Consolidated average balances and taxable-equivalent
net interest earnings
87 Asset-quality analysis
93 Asset and liability management derivatives
94 Capital and funding analysis
97 Selected consolidated quarterly financial data
99 Form 10-K cross-reference index
101 Description of business
103 J.P. Morgan directory
108 Corporate information
<PAGE>

Financial highlights
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
Dollars in millions, except per share data 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the year
Pretax income.................................................... $1 825 $2 691 $1 749
Income before accounting changes................................. 1 215 1 723 1 130
Accounting changes .............................................. - (137) 452
Net income....................................................... 1 215 1 586 1 582
Dividends declared on common stock............................... 530 479 427
- -----------------------------------------------------------------------------------------------------------------------
Primary earnings per share
Income before accounting changes................................. $ 6.02 $ 8.48 $ 5.66
Accounting changes............................................... - (0.68) 2.29
Net income....................................................... 6.02 7.80 7.95
- -----------------------------------------------------------------------------------------------------------------------
Per common share
Dividends declared............................................... $ 2.79 $ 2.48 $ 2.23 1/2
Book value....................................................... 46.73 47.25 35.56
- -----------------------------------------------------------------------------------------------------------------------
At year-end
Stockholders' equity............................................. $ 9 568 $ 9 859 $ 7 308
Total assets..................................................... 154 917 133 888 103 197
- -----------------------------------------------------------------------------------------------------------------------
Selected ratios
Return on average common stockholders' equity:
Before accounting changes.................................... 12.9% 22.3% 18.3%
After accounting changes..................................... 12.9 20.9 23.9
Common stockholders' equity as % of year-end assets ............. 5.9 7.0 6.6
Total stockholders' equity as % of year-end assets............... 6.2 7.4 7.1
Tier 1 risk-based capital ratio.................................. 9.6 9.3 8.9
Total risk-based capital ratio .................................. 14.2 13.0 13.0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

[GRAPHIC APPEARS HERE]

[GRAPHIC APPEARS HERE]
<PAGE>

[PHOTO APPEARS HERE]
Douglas A. Warner III
Chairman of the Board and
President

To our stockholders

J.P. Morgan earned $1.2 billion last year, or $6.02 per share, down from a
record $1.7 billion in 1993, when more favorable conditions prevailed and
business was strong across the board.

In December the Board of Directors raised the quarterly dividend on
common stock by 10 percent to $.75 per share, reflecting confidence in
Morgan's long-range prospects despite weaker 1994 results. Our dividend has
increased every year for two decades. For the past 10 years it has grown at a
compound annual rate of 10 percent.

The Federal Reserve's move to raise interest rates in February 1994
essentially marked the end of a five-year rally in markets for major
financial assets around the world. Earlier, a brightening global economic
outlook and low inflation and interest rates in the United States had
encouraged investors to diversify into higher-yielding assets, first in the
domestic U.S. market, then in Europe and the emerging markets. As the
interest rate trend reversed last year, global capital flowed from relatively
higher-risk areas to safer havens. Asset values dropped; investors reduced
their involvement in many previously active markets. Political and economic
unrest in Mexico and well-publicized problems with some derivatives
transactions had a further chilling effect. All in all, conditions in 1994
were among the most arduous in memory.

Those difficult conditions persist, and right now we are fighting
headwinds. Nevertheless, as we look toward the horizon, we are frankly
excited about Morgan's potential. Major trends in financial markets are
favorable to our business; our combination of clients and capabilities around
the globe is unmatched by any competitor; our technology and capital are
strong; our people exemplify integrity and excellence.

2
<PAGE>

We intend to navigate the current cyclical trough in global markets
with a deliberate focus on future opportunities. In the current climate,
we're demanding more discipline to moderate the growth of expenses but will
continue to make key investments. When conditions improve, we want to be
poised to seize opportunities from a position of strength.

Business sector results

Presenting the dynamics of our complex, global business with increasing
clarity is a challenge we are working hard to meet. This year, as a step
toward providing more transparent information for investors, we report
results for five major sectors of our business: three that revolve around
services we provide for clients and two in which we act solely for our own
account (see page 12). This is a simple framework for viewing Morgan's
diversified global activities that we hope proves useful, but there are some
vital dimensions it can't capture. One is the extensive diversification of
activities within each sector. Another is the process of risk management that
pervades our firm. A third is the synergy we create by acting as one firm,
not a collection of separate businesses, with singular dedication to clients
and shared values. These dimensions distinguish Morgan in the world of
finance.

Overall, most of our pretax income last year came from our own asset
and liability management and equity investments. Sales, trading, and finance
- - with sizable but lower revenues than in 1993 and relatively high fixed
costs - had significant, market-related negative swings in contribution.
Asset management, with its steadier revenue stream, boosted the bottom line.

Revenues from sales and trading activities worldwide totaled $1.3
billion but were nearly 40 percent lower than in 1993. Investor activity
generally ebbed, hurting fixed income performance, and profits from
positioning were down significantly. We earned less in emerging markets
although the volume of our business with clients grew. Notably, our
activities as a dealer in derivatives made a greater contribution than in
1993 as strong client demand for risk management products and services
continued. Pretax income for the sales and trading sector dropped from more
than $1 billion in 1993 - an exceptional level - to $145 million.

As our clients raised less capital in both debt and equity markets
last year and credit pricing tightened, our global financing business posted
lower results. While revenues from corporate finance advisory assignments
improved with growing momentum in cross-border activity, pretax income for
the finance and advisory sector was down to $109 million from $352 million a
year earlier.

Our asset management and servicing business gained ground, with
pretax income rising 7 percent to $362 million. The assets we manage for
individual and institutional investors worldwide grew in 1994 to $150
billion. Earnings from the investment management, fiduciary, brokerage, and
operational services in this sector show a pattern of stable growth.

Results for our own portfolio of equity investments last year were very
strong, with gains realized on holdings of Columbia/HCA stock making a
substantial contribution. We acquired this stock in 1989 in connection with our
role in the leveraged acquisition of Hospital Corporation of America by its
management. While this has been our most successful investment in terms of the
size of Morgan's gain, our equity portfolio has generated consistently good
returns over the dozen years since its inception. It allows us to turn
relationships and knowledge gathered around the world into a comparative
investment advantage for our stockholders. The portfolio today exceeds $1
billion in value and includes securities of 90 companies. Pretax income from the
equity portfolio for 1994 was $640 million, up from $288 million in 1993.

3
<PAGE>

[PHOTOS APPEAR HERE]

Roberto G. Mendoza
Kurt F. Viermetz
Rodney B. Wagner
Vice Chairmen

Finally, asset and liability management contributed a substantial $872
million to pretax income last year, though less than in 1993, when securities
gains were higher. This sector covers managing the interest rate and liquidity
profile of our assets, liabilities, and off-balance-sheet exposures overall,
including our $23 billion portfolio of government securities. We acted early in
1994 to protect the value of the portfolio and achieved a positive total return
in an environment of rising interest rates.

Diversification and risk

Focused diversification is the fundamental strategy we have followed over the
past two decades both to adapt to the evolution of client needs and to moderate
the risk profile of our global business.

Ten years ago, traditional financial intermediation - interest rate
management and the extension of bank credit - generated half of Morgan's
revenues; today it accounts for roughly a quarter. Our revenues are now spread
across a broad range of highly complementary global activities, encompassed by
the five business sectors. Many activities are characterized by lower risk than
traditional intermediation: for example, investment management, corporate
securities underwriting, and - contrary to common perception - making markets
in swaps.

J.P. Morgan is a stronger firm than it was a decade ago, thanks to
successful diversification and our growing ability to manage risk dynamically.
We are less dependent on any one source of revenue, have a broader global client
base, and have engineered a measurable reduction in exposure to risk, especially
relative to our substantial capital.

There's no room for complacency, however, in managing the risks inherent
in our business. We've invested steadily in developing a comprehensive risk
management process that balances the benefits of decentralized global business
management with strong central policies, information flow, and control. We
manage actively and aim to detect a potential problem before it escalates, since
no system can prevent all problems from arising. This year we have provided more
detail about our process, beginning on page 19. What I want to stress here are
its key attributes:

. Transparency - a relentless drive to make risks within the firm visible,
since only known risk can be managed;

. Standard measurement - so that all risks can be defined and compared;

. Timely information - accurate, understandable, current data that can be
acted upon;

. Dynamic diversification - including efforts to identify and address
changing concentrations of risk;

. Independent, authoritative oversight - by our corporate risk management
group; and

. Judgment - because people, not mathematical models, ultimately manage
risk.

We offer to clients many of the same risk management techniques that we
use ourselves, notably derivatives. As a derivatives dealer, Morgan is strongly
oriented toward helping clients manage risk, not toward trading for our own
account. The average credit quality of our derivatives exposure is solidly above
the high quality of our traditional loan portfolio.

With the freer flow of trade and capital, companies and institutions the
world over operate in a more complex environment, in which derivatives have
proved efficient tools for managing risk and implementing basic business
strategies. Like any tool, they can be misused. Cases that have made headlines
in the past year are sobering and

4
<PAGE>

controversial - but fraud, excess, poor controls, or all three appear to have
been the fundamental problem, not the instruments themselves. As we debate their
role, it's important to recognize that derivatives have not created new or
special risks for dealers, users, or the financial system. They entail the same
kinds of credit, market, and liquidity risks as other, more familiar
instruments. From a public policy standpoint, they are best viewed as an
adaptation to change -an innovation that responds to a need in the global
marketplace. Responsible use and informed regulatory oversight, not fear or
prohibition, should preserve their value and guard against serious problems.

Opportunity

Our optimism about Morgan's opportunities is grounded in global trends that are
gaining momentum. Cross-border capital flows continue to expand. Institutional
savings continue to increase worldwide. Capital markets are extending their
reach. Demand for risk management is rising. Emerging nations continue to pursue
market-based growth strategies. We expect these trends to dominate, though we
don't underestimate the near-term consequences of strains in Mexico and other
developing areas, sobering recent cases of excessive risk-taking, and nervous
markets generally.

In creating challenges for sophisticated users of financial services
worldwide, such trends represent unlimited potential for us to be useful to our
clients. Morgan's key growth opportunity is to expand the scope of these
relationships.

Our clients are our lifeblood. As a group, they are globally diverse,
with slightly more than half based outside the United States. They include a
large number of the world's leading governments, multinational corporations,
financial institutions, privately held firms, and individuals of substantial
means - the most active and sophisticated participants in financial markets.
Because we have always stressed relationships over transactions, many have been
clients for decades, but we shake hands with new clients every day.

Our international network is extensive, long established, still growing,
and unique. We are active participants in every major financial market - raising
equity and debt capital, managing risk, advising on corporate structure,
investing, trading. But global resources are just the raw material of what we
are really seeking to build. The ability to think globally, draw on local
experts, and integrate far-flung capabilities is the true value that a global
financial firm should deliver to its clients. At our best, we do.

Although clients place their first call to Morgan for a growing variety
of needs, many still turn to us for just one or two services. The potential to
expand relationships across our now extensive global product line is great.
While we face able competitors in every market, the window of opportunity is
open. And the more we do for every client, the more the return on our investment
in global capabilities will grow.

Discipline

The infrastructure needed to conduct a global wholesale financial business
successfully is substantial. Attracting and retaining professionals of the
highest caliber requires careful recruiting, attention to development, and
competitive compensation. Technological systems for communication, analytics,
and control of risk are essential, expensive, and must be continually updated.
Being able to seize opportunities and withstand setbacks demands ample capital.
Few firms will be able to sustain the required level of investment through the
vicissitudes of market cycles. We intend to be one of them.

5
<PAGE>

Keeping our expenses under control while investing sufficiently
remains a key challenge. Expenses were up 7 percent in 1994, adjusting for a
special charge at the end of 1993, while revenues fell 12 percent. We expect
expenses to rise somewhat in 1995, but we have undertaken actions, business
by business, to discipline our spending and reap from it maximum value.

Last year offered a test of our determination to subject personal
compensation to greater variability as an individual gains responsibility within
the firm. In line with lower 1994 earnings, incentive compensation for senior
management fell 40 percent on average. Total compensation expense was the same
as in 1993. All managing directors and more senior officers received from 20
percent to 55 percent of their incentive compensation in the form of J.P. Morgan
stock that becomes payable after three to five years.

As adverse business conditions persist, some of our competitors are
cutting deeply into muscle. Assessing our capital and competitive strength, we
don't anticipate taking action under duress. Our immediate goal is to tighten
business discipline without pulling back from our clients or undermining our
future. We are determined to stay the course.

Change

At the end of the year, Dennis Weatherstone retired as Chairman. His career
and contribution have been remarkable in every respect. He certainly set a
high standard for me as his successor. It's our good fortune that he will
continue to be a Director and member of our International Council.

Although Dennis Weatherstone and I worked in close partnership during
the past five years, a change in leadership naturally raises questions about
what to expect. I'd like to address them, although many of the answers are
already implicit in this message.

To excel in serving clients with complex financial needs remains our
passion - one we trace to the days of Pierpont Morgan. In pursuit of that
goal, we place a special value on developing enduring relationships with
clients based on integrity and performance. Strategic clarity and continuity
will define our actions, as we strive to make the most of our strengths and
opportunities around the globe and into the next century.

Some things will change. Our clients face dynamic challenges, rapid
change is the rule in global markets, and our business is among the most
competitive in the world. Rising to these challenges requires embracing
change and initiating improvement all the time, within a consistent framework
of strategy and principles. To expand our client relationships - and thereby
capitalize on our most promising opportunity for growth - we need to be more
creative, efficient, and dedicated than ever.

We have revolutionized our firm over the past 20 years through this
very determination to remain a vital banking resource for our clients. We
have deliberately broken conventional molds; combined elements of investment,
commercial, merchant, and universal banking; and created a new kind of
financial firm that has remained a leader in evolving global markets.

Archaic U.S. laws have made Morgan's adaptation to converging markets
and international competition more difficult and costly. At long last, there
is growing consensus that the Glass-Steagall Act segregating securities
underwriting from commercial banking serves no public purpose. Reform would
benefit users of financial services, the process of capital formation, and
the competitiveness of financial institutions and American industry. We are
hopeful that Glass-Steagall and other outdated laws governing financial
services will be recast in 1995.

J.P. Morgan retains the highest credit ratings of any banking firm in
the United States following recent reviews by both major rating agencies.
Standard & Poor's affirmed the triple-A ratings of our principal operating
units, while Moody's Investors Service reduced them one notch to double-A.
Both agencies lowered our holding company ratings. It remains our conviction
that J.P. Morgan today is a stronger firm, with better diversified business
and risks, than at any time in its history. We will keep up our efforts to
communicate this conviction and the dynamics of our business in every
important forum.

We pledge to work hard to realize this firm's extraordinary global
potential. Strategically, we are alert to opportunities to extend or adjust
our portfolio of business activities with a view toward creating shareholder
value. We try to be equally alert to unexpected events and agile in
responding to them. Our strong capital base remains a critical resource,
providing flexibility and resilience.

The ultimate basis for optimism about J.P. Morgan is our people. They
are principled, resourceful, and motivated to excel; they represent a rich
diversity of intellect and skill. Transcending boundaries of every kind to
achieve common goals, they keep vital our traditional values of mutual
respect and putting clients' interests first. Worldwide, the quality of our
people is second to none. In good times and bad, it is their drive and
commitment that give us confidence in our future.

/s/ Douglas A. Warner III

Douglas A. Warner III
Chairman of the Board and
President

March 8, 1995

6
<PAGE>

[PHOTO APPEARS HERE]

Dennis Weatherstone
former Chairman of the Board

Dennis Weatherstone: A half century of service

Just before his sixteenth birthday in 1946, Dennis Weatherstone joined the
London office of an American bank, Guaranty Trust Company of New York, as a
bookkeeper. He retired at the end of 1994 as the Chairman of J.P. Morgan,
capping one of the most remarkable careers in twentieth century finance.

He made his mark first as a foreign exchange trader in London. After Guaranty
merged with J.P. Morgan in 1959, he helped guide the firm's participation in
the developing Euromarkets. He moved to New York in 1971 and rose to become
Treasurer, President, and finally Chairman and chief executive officer in
January 1990. He has been a champion of responsible innovation and helped
shape the strategy that transformed J.P. Morgan from a commercial bank into a
global financial services firm.

Dennis Weatherstone today is one of the world's leading authorities on global
markets and financial innovation. In 1993 he spearheaded a landmark study on
derivatives, under the auspices of the Group of Thirty, that set the standard
for risk management practices and controls. He recently was honored with
appointment to the Bank of England's Board of Banking Supervision.

Through his integrity, attentiveness to our clients, steadiness in times of
crisis, and keen though subtle competitive drive, Dennis Weatherstone has
left an indelible imprint on J.P. Morgan. With humor and humanity, he set a
standard for mutual respect that is a lasting legacy. In cutting through
complexity to find the simple truth, he showed us that management first and
always depends on the intellect, principles, and judgment of people.

We will be drawing on Dennis Weatherstone's wisdom and experience as a
Director, as a member of our International Council, and - always - as a
friend.

7
<PAGE>

1994 Highlights

Transactions of note

[ART APPEARS HERE]

Asia Pacific

. Served as global coordinator and one of three arrangers for a $120 million
syndicated loan, as part of a cofinancing with the World Bank of a $1.3
billion thermal power plant in China's Jiangsu Province. It was the first
syndicated loan undertaken by China's Ministry of Finance and is expected to
serve as a model for future financings.

. Advised Comalco Limited on its A$750 million acquisition of the Gladstone
Power Station from the Queensland Government of Australia. The sale marked
the first total privatization of a power plant in Australia.

. Led a $200 million issue of Yankee bonds by the China International Trust and
Investment Corp. The issue was one of the most successful financings for any
Chinese borrower to date.

. Advised Saudi Aramco on its acquisition of 40% of Petron from the Philippine
National Oil Company in what was then the largest privatization undertaken by
the Philippine government and the country's largest corporate acquisition.

. Served as sole lead manager for a three-year, $75 million Dragon bond issue
for Philippine National Bank. The issue was the first emerging markets fixed-
rate Dragon, so named because it was distributed exclusively to investors in
Asia.

. Led a $642 million bond issue backed by automobile loans for Nissan Motors.
It was Japan's first asset-backed deal in two years.

[ART APPEARS HERE]

The Americas

. Provided fairness opinion for the spin-off of Pacific Telesis's wireless
business as AirTouch Communications. At $8.6 billion, this was the largest
spin-off of a U.S.-based company ever completed.

. Led with two other banks the refinancing of $6.8 billion in bank debt for
Viacom International.

. Advised Signet Banking Corporation on the spin-off of its credit card
business into Capital One Financial Corporation; arranged a syndicated bridge
loan facility of up to $2.5 billion; and acted as lead manager for the
initial public offering of Capital One's shares.

. Doubled market share by lead-managing 82 municipal bond issues totaling $5.7
billion, including a $1.1 billion issue for New York City.

. Served as joint-lead manager/bookrunner for a $1.5 billion global bond issue
for the Federal National Mortgage Association, or "Fannie Mae." It was the
first global bond offered by a U.S. government-sponsored agency, and the
transaction was named a "Deal of the Year" by Institutional Investor.

. Advised the Ford Motor Company on the sale of its First Nationwide subsidiary
to First Madison Bank for $1.1 billion. The deal marked the largest sale of a
U.S. thrift institution.

. Advised Scrivner Inc. on its sale to Fleming Companies for $1.1 billion in
cash and then arranged $2.2 billion in financing for Fleming for the
acquisition. The transaction will create the largest wholesale food
distribution company in the United States.

. Raised $550 million in 24 hours for Service Corp. International, through
simultaneous equity, tax-efficient convertible preferred stock (TECONS), and
straight debt issues.

8
<PAGE>

. Raised $663 million with Marsh & McLennan Companies for the Trident Fund
L.P., an investment partnership that invests in insurance and reinsurance
ventures.

. Provided a $12 million loan to the National Community Development Initiative
as part of an $87 million private-public sector effort to revitalize
economically depressed neighborhoods in 23 U.S. cities. The loan was made
through the J.P. Morgan Community Development Corporation.

. Advised the GasAndes consortium on structuring financing for a $330 million
pipeline that will supply natural gas to Chile from Argentina.

. Served as underwriter of a $700 million bankers' acceptance facility as part
of a $1.1 billion financing for Petroleos Mexicanos (Pemex). This was the
first international syndicated loan in Mexico in 12 years.

. Acted as adviser and dealer-manager for Nabisco Argentina in its bid to
acquire 100% control of Establecimiento Modelo Terrabusi, S.A. It was the
largest tender offer ever in Argentina.

. Advised Mexican brewer Femsa Cerveza on its agreement with Canadian brewer
Labatt to form a North American beer partnership. It was the first cross-
border alliance to follow approval of the North American Free Trade
Agreement.

. Lead-managed and acted as global coordinator for the first initial public
offering of a Peruvian company - Banco Wiese -listed on the New York Stock
Exchange.

. Named as manager of Northrop Grumman's $2.8 billion employee pension fund.

[ART APPEARS HERE]

Europe

. Retained by STET, Italy's state-owned telecommunications holding company, to
advise five Italian phone companies it controls on their valuation and merger
into Telecom Italia, a single operator with a market value of almost $19
billion.

. Advised Swiss drug company Roche Holding on its $5.3 billion takeover of
American pharmaceutical company Syntex, creating the fourth-largest
pharmaceutical company in the world.

. Acted as a joint-lead manager for Landeskreditbank Baden-Wuerttemberg's (L-
Bank) DM2 billion debut global bond offering. It was the first deutsche mark
global issue by a German entity.

. Advised Credito Italiano on the $2.3 billion acquisition of a 78% stake in
Credito Romagnolo.

. Initiated the transaction and acted as sole adviser to Cheltenham &
Gloucester on its proposed sale to Lloyds Bank for (Pounds)1.8 billion, which
would mark the first acquisition of a building society in the United Kingdom.

. Created an innovative structure for a $1.5 billion revolving credit facility
for Airbus Finance, the finance company subsidiary of Airbus Industrie.

. Became the first U.S. bank to advise the French government on a
privatization - the sale of AGF, France's third-largest insurance company.

. Became the first foreign bank to joint lead-manage a domestic French issue -
FF950 million of seven-year bonds for Floral, a subsidiary of Credit Local de
France.

. Led the first Eurobond launched by an Eastern European corporation, a five-
year, $150 million Eurobond for CEZ, the Czech electric utility.

. Won the mandate to lead Poland's first Eurobond issue.

9
<PAGE>

Achievements

. Introduced RiskMetrics, a new financial tool for estimating risks in 15 key
markets around the world. The data are provided free each day over the
Internet.

. Launched Tax-Aware Equity Management, a unique investment process that helps
individuals maximize after-tax returns on U.S. stock portfolios.

. Settled $21.9 trillion in securities transactions as operator of the
Euroclear System, an increase of 27% over 1993.

. Executed emerging markets transactions valued at more than $1 trillion in
securities from more than 40 countries.

. Exceeded previous one-day volume records when Delaware-based money transfer
operations handled $750 billion from more than 50,000 U.S.-dollar-based
transactions.

. Started trading in the Brent crude oil forward market in May, marking the
firm's first major move into the physical oil markets since gaining
regulatory approval in September 1992.

. Celebrated 20 years in London of providing global investment management
capabilities. Today, J.P. Morgan manages $150 billion of assets worldwide -
$115 billion for institutional clients and $35 billion for private clients.

. Expanded the family of J.P. Morgan performance indices: Launched the
Commodity index, which covers industrial commodities, and the Refinance and
Repurchase indices, which provide the most comprehensive and detailed
measures of activity in the U.S. mortgage market, and increased to 14 the
number of government bond markets covered by Morgan.

. Trained U.S. senior managers in diversity skills and awareness, created task
forces to identify and address diversity-related issues in each of our
business groups, broadened our recruiting efforts, and created a flexible
work arrangements policy and mentoring programs to improve the retention and
development of employees.

Milestones

. Howard Goldfeder stepped down from the Board of Directors on May 1, 1994,
upon reaching the normal retirement age, and became a member of the Directors
Advisory Council. We thank him for his nine years of dedicated service to
J.P. Morgan and our stockholders.

. Opened offices in Beijing, Shanghai, Prague, and Warsaw.

. Opened a securities representative office in Seoul, complementing the banking
representative office, which opened in 1978.

. Opened new subsidiary offices in Mexico City to serve clients as both a bank
and broker-dealer.

. Formed a second joint venture with the Industrial Credit and Investment
Corporation of India, this time to offer investment management services in
India. The first joint venture, now in its second year, provides investment
banking services.

. Acquired a seat on the Stock Exchange of Hong Kong.

. Received approval from the Reserve Bank of Australia for full banking-branch
status.

. Commemorated 25th anniversary in Tokyo.

. Commemorated 75th anniversary in Brussels.

Amsterdam
Beijing
Bombay
Brussels
Buenos Aires
Caracas
Cayman Islands
Channel Islands
Chicago
Frankfurt
Geneva
Hong Kong
Houston
Jakarta
London
Los Angeles
Madrid
Manila
Melbourne
Mexico City
Milan
Nassau
New York
Osaka
Palm Beach
Paris
Prague
Rio de Janeiro
Rome
San Francisco
Santiago
Sao Paulo
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Toronto
Warsaw
Wilmington
Zurich

10
<PAGE>

Financial review

Contents
12 Global business activities
12 Overview
13 Asset Management and Servicing
14 Finance and Advisory
15 Sales and Trading
16 Equity Investments
18 Asset and Liability Management
19 Corporate Items
19 Risk management
23 Financial statement analysis
23 Net interest revenue
25 Trading revenue
28 Trading-related assets and liabilities
29 Derivatives
31 Corporate finance revenue
32 Credit-related fees
32 Credit-related financial instruments
33 Investment management fees
33 Operational service fees
33 Net investment securities gains
34 Other revenue
34 Operating expenses
35 Income taxes
35 Provision and allowance for credit losses
36 Nonperforming assets
37 Sources of funds
37 Stockholders' equity
38 Capital strength

11
<PAGE>

- --------------------------------------------------------------------------------
Global business activities

Asset Management and
Servicing

Investment management

Private banking

Exchange traded product brokerage

Securities and cash services

Euroclear operations

Equity Investments

Equity investment portfolio
management

Finance and Advisory

Client relationship management

Advisory services

Credit activities

Equities

Debt capital markets

Municipal finance

Asset and Liability
Management

Interest rate risk management

Liquidity management

Sales and Trading

Swaps

Fixed income

Foreign exchange

Commodities

Emerging markets

Proprietary trading

Overview

The business of J.P. Morgan is putting its capital to work for clients and
stockholders. We seek to achieve optimal returns by applying our intellectual,
financial, and technological capabilities to solve complex problems. Our
expertise covers every aspect of finance, from research, to strategic advice, to
capital raising, to risk management. We work on behalf of a worldwide client
base that includes corporations, governments, institutions, and individuals.

Our business has been built on a foundation of enduring client relationships,
and our approach begins with developing a thorough understanding of each
client's business and needs. This knowledge becomes the basis of objective
advice on business and investment strategies and capital structures. Our advice
might lead to a merger, acquisition, privatization, or capital restructuring; to
an investment portfolio realignment; or to no action, if that is in the client's
interest. We make markets in a diverse range of financial instruments, and our
global network enables both issuer and investor clients to execute transactions
around the world.

A wide variety of risk management services and products are increasingly
important to our dialogue with clients. Drawing on in-depth research and a range
of risk management products - including swaps and other derivatives - we are
able to help our clients manage their exposures to interest rates, foreign
exchange rates, and price swings in debt securities, equities, and commodities.
To meet the investment needs of institutional and private clients, we offer a
broad variety of asset management services. Research is fundamental to our
global asset management business, and we use our market expertise to design
investment approaches tailored to client objectives. We also offer an array of
operational services that provide superior execution capabilities and generate
cost savings through technological efficiencies.

As the financial markets have become more sophisticated, we have enhanced our
product offerings, building from our core of traditional banking products and
services and adding new ones to meet the needs of clients. Our complementary
capabilities, which can be applied individually or in combinations, allow us to
serve the widest range of client needs and produce lasting value.

In addition to the products and services provided to clients, we take
positions for our own account in an effort, based on market expectations and
research, to benefit from price movements and differentials among instruments
and markets. We also manage our own debt and equity investment portfolios and
the overall interest rate profile of our assets, liabilities, and other
exposures.

12
<PAGE>

To provide more useful information to investors, we are reporting financial
results this year for five business sectors. Three are oriented toward client
services: Asset Management and Servicing, Finance and Advisory, and Sales and
Trading. The Equity Investments sector comprises management of the firm's own
portfolio of equity securities. The Asset and Liability Management sector covers
the management of the firm's overall interest rate exposure. These five sectors
generally reflect the way we operate but do not correspond exactly with the
firm's organizational structure. Presented below are the summary results for
each sector for the years ended December 31, 1994 and 1993.

Asset Asset and
Manage- Finance Sales Equity Liability
ment and and and Invest- Manage- Corporate Consol-
In millions Servicing Advisory Trading ments ment Items idated
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Total revenue..................... $1 646 $1 165 $1 299 $663 $ 965 $(221) $5 517
Total expenses.................... 1 284 1 056 1 154 23 93 82 3 692
- ------------------------------------------------------------------------------------------------------------------------
Pretax income .................... 362 109 145 640 872 (303) 1 825
1993
Total revenue..................... 1 528 1 361 2 095 306 1 163 (182) 6 271
Total expenses.................... 1 190 1 009 1 020 18 104 239 3 580
- ------------------------------------------------------------------------------------------------------------------------
Pretax income .................... 338 352 1 075 288 1 059 (421) 2 691
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:
(1) The firm's management reporting system and policies were used to determine
the revenues and expenses directly attributable to each sector. Revenues
for each sector are presented on a taxable-equivalent basis. In addition,
earnings on stockholders' equity and certain overhead expenses not
allocated for management reporting purposes were allocated to each
business sector. Earnings on stockholders' equity were allocated based on
management's assessment of the inherent risk of each sector. Overhead
expenses were allocated based primarily on staff levels and represent
costs associated with various support functions that exist for the benefit
of the firm as a whole.
(2) In 1994 and 1993, $610 million and $968 million respectively related to
income taxes were not allocated to the business sectors. In addition, the
$137 million cumulative effect of change in method of accounting for
postretirement benefits was not included in the individual sector results
for 1993.

Asset Management and Servicing

Activities

Asset Management and Servicing activities focus on meeting the financial
objectives of clients by structuring investment strategies and providing
administrative, brokerage, and operational services. These services are provided
to institutional investors, financial institutions, multinational companies, and
private clients, including families and companies. In conducting these
activities, J.P. Morgan acts primarily in an agency capacity.

Investment management services are tailored to local market requirements while
taking full advantage of our global investment management expertise. A
significant part of our institutional client activity relates to the management
of employee benefit plan assets for corporations, state and local governments,
and unions. We offer private clients the opportunity to execute their investment
strategies through managed investment and trust portfolios and J.P. Morgan-
advised mutual funds. Trust and estate administration services are also provided
to private clients.

J.P. Morgan also acts as a futures and options broker in the execution and
clearance of contracts on many of the major futures and options exchanges
worldwide.

13
<PAGE>

Securities-related services include a wide variety of operational and
administrative activities consisting primarily of custody, clearing, settlement,
trust and agency and securities lending. Cash management services, such as
global cash clearing and money transfer services, are also provided to clients.
In addition, J.P. Morgan operates the Euroclear System, which is the world's
largest clearance and settlement system for internationally traded securities,
under contract to the Euroclear Clearance System Societe Cooperative in
Brussels. Credit and deposit products are also offered to our private clients
and participants in the Euroclear System. During 1994, we completed the sale of
our domestic corporate trust business. We continue to evaluate the services we
offer to ensure they are consistent with the firm's overall longer-term
strategy.

Results

[GRAPHIC APPEARS HERE]

The Asset Management and Servicing sector recorded pretax income of $362 million
in 1994 compared with $338 million in 1993, an increase of $24 million or 7%.
Total revenue increased 8% in 1994 to $1,646 million compared with $1,528
million in 1993, primarily because of increases in assets under management and
the volume of transactions in exchange traded products. Results for the domestic
corporate trust business as well as the gain on the 1994 sale of this business
have been excluded from the sector results and included in Corporate Items.

Asset management revenues increased as a result of net new business from both
domestic and international institutional clients. Revenues from J.P. Morgan-
advised mutual funds and private client discretionary accounts increased as a
result of an expanded product line and increased marketing efforts. Average
assets under management increased 8% to $148 billion in 1994 compared with $137
billion for 1993.

Revenues from securities-related services were higher in 1994 than in 1993 as
custody assets under administration and clearing fees increased. In addition,
our European trust and agency activities increased as a result of new business
reflecting higher Euromarket activity. Partially offsetting these increases were
lower revenues from credit and deposit products, as customers continued to
manage actively excess cash balances, and from securities lending activities
that suffered from a rising interest rate environment.

Revenues from futures and options brokerage transactions rose significantly
with increased volumes related to risk management activities from new and
existing clients.

Expenses associated with Asset Management and Servicing were $1,284 million in
1994 compared with $1,190 million in 1993. The 8% increase in expenses primarily
relates to higher employee compensation and benefits associated with an increase
in staff levels and investments in technology to support expanded activities.
Certain expenses such as brokerage, clearing, and subcustodian fees also
increased as a direct result of the increase in business activities and related
revenues.

Finance and Advisory

Activities

The Finance and Advisory sector provides an array of sophisticated advisory and
financing services to a broad range of U.S. and international clients. The
advice we offer is based on in-depth knowledge of the clients' businesses and
the industries and financial markets in which they operate. Our global network
of senior client relationship managers, responsible for developing this
knowledge, markets the full spectrum of our capabilities and provides the link
between a corporate client's needs and J.P. Morgan's financing, advisory, asset
management and servicing, and risk management products and services.

We advise clients on their business strategies and their capital structures.
This can take the form of exploring the risks and rewards of such strategic
alternatives as mergers and acquisitions, divestitures, privatizations, and
recapitalizations and examining debt and equity capital raising alternatives.

14
<PAGE>

There are many ways in which we meet our clients' financial needs. In some
cases, we satisfy clients' financing requirements through traditional means such
as issuing or syndicating credit facilities, establishing lines of credit, and
providing standby letters of credit and guarantees. In other cases, we draw on
our debt and equity origination capabilities. Capital is raised by underwriting
debt and equity securities and distributing the offerings in the most
appropriate private or public market through the sales and trading network
provided by our Sales and Trading sector. Our expertise in the debt and equity
markets is applied in structuring financing alternatives utilizing debt and
equity derivatives to address clients' often complex needs. Our activities also
include sales and trading in debt and equity securities through our global
trading network.

In addition to providing financing for corporate clients, we meet the
capital needs of public sector clients by originating, structuring, placing,
and trading tax-exempt and taxable municipal bonds and notes.

Results

[GRAPHIC APPEARS HERE]

The Finance and Advisory sector recorded pretax income of $109 million in 1994
compared with $352 million in 1993, a decrease of $243 million. Total revenue of
$1,165 million for 1994 decreased by $196 million, or 14%, from 1993, primarily
due to lower debt and equity underwriting and trading results.

Revenues generated from traditional credit-related products and services were
down slightly in 1994 compared with 1993, as declines resulting from tighter
spreads in an increasingly competitive environment were substantially offset by
higher levels of loan syndication activity.

Underwriting activity in the corporate debt, equities, and municipal markets
decreased significantly in 1994 from 1993 primarily because of a global slowdown
in underwriting caused by a rising interest rate environment. Trading revenue in
these markets also decreased from 1993.

Revenues from advisory activities increased slightly in 1994 as we
participated in a large number of client assignments across a broad geographic
and industry spectrum.

Expenses in 1994 for the Finance and Advisory sector were $1,056 million
compared with $1,009 million in 1993. The increase relates primarily to higher
technology expenses and increased salary expense offset in part by lower
accruals for incentive compensation.

Sales and Trading

Activities

Sales and Trading activities include making markets and taking positions in
swaps, fixed income securities, foreign exchange, and commodities across both
developed and emerging economies worldwide. Our extensive sales and trading
network enables us to fulfill our role as a market-maker by providing clients
with continual access to markets and by serving as a counterparty as we assist
them in managing a wide variety of financial risks. We provide thorough research
and analysis of current topics and general industry, market, and economic
information to our clients, along with several indices to assist them in
benchmarking their risk and performance. Our Sales and Trading clients and
counterparties include corporations, central banks, governments and their
agencies, financial institutions, pension funds, mutual funds, and leveraged
funds.

We offer risk management products and services to help clients manage exposure
to fluctuating foreign exchange and interest rates. This is accomplished by
structuring, executing, and making markets in interest rate and currency swaps,
options, and other derivative instruments.

J.P. Morgan is a primary dealer in government securities of the United States
and all other Group of Seven industrial nations, as well as other industrialized
nations. In addition to making markets in these fixed income securities and the
related strips, we also act as a market-maker in options, money market
instruments, and U.S. government agency securities, including mortgage-backed
securities.

Our foreign exchange products and services range from executing spot
transactions to structuring transactions that reduce interest rate and foreign
exchange risk resulting from currency contracts. We make markets in options and
short-term interest rate products, including forwards and forward rate
agreements.

15
<PAGE>

As part of our commodities activities we make markets in spot, forwards,
options, and swaps for producers, consumers, and investors in the commodities
markets worldwide and advise clients on developing hedging, investment, and
commodity-linked financing strategies. In addition, we offer physical commodity
services such as settlement of physical trades in the various metal and oil
markets, and metal borrowing and lending services.

Our worldwide trading network covering the emerging economies of Latin
America, Eastern Europe, Asia, the Middle East, and Africa enables us to fulfill
our role as a market-maker and to provide clients with a steady flow of
international market information. Through emerging market activities, we
participate in the interest rate, foreign exchange, equity, and commodity
markets.

We take positions, in varying degrees, in each of our client activities to
enable us to function effectively and benefit from our role as a market-maker.
In addition, we have a separate proprietary trading unit that engages in
transactions for J.P. Morgan's own account across all markets. The degree of
success achieved in our position-taking activities is determined by our ability
to anticipate future market conditions, diversify our risk-taking across many
markets and instruments, and take advantage of price differentials in these
markets.

Results

[GRAPHIC APPEARS HERE]

The Sales and Trading sector recorded pretax income of $145 million in 1994,
compared with the exceptional results of $1,075 million in 1993. Total revenue
was $1,299 million in 1994, a decrease of $796 million from a year earlier
primarily due to substantially lower positioning revenues, including losses in
our proprietary trading unit. Difficult market conditions, characterized by
rapidly rising interest rates and volatile exchange rate movements, led to
defensive investor participation in the markets globally throughout 1994. By
contrast, declining U.S. and European interest rates in 1993 produced favorable
market conditions that led to extremely strong client flows.

Revenues from swaps market-making activities continued to increase in 1994
as swap volumes continued on an upward trend as a result of strong client
demand for risk management products. Increases in revenues from our
commodities activities resulted from the continued penetration of the energy
and base metals markets and from commodity derivative transactions that were
structured for our clients.

Revenues from foreign exchange, emerging markets, and fixed income activities
declined in 1994 compared with 1993. Foreign exchange revenues declined in 1994
as positioning was less effective in uncertain markets. While revenues from
emerging market activities decreased from the exceptional results in 1993,
client volumes increased as we continued to provide clients with access to these
markets. Fixed income revenues decreased from their strong 1993 level as client
volumes declined significantly, particularly in Europe.

Total expenses for the Sales and Trading sector increased by approximately 13%
to $1,154 million. The increase was primarily attributable to costs associated
with enhancing and increasing the use of advanced technology in swaps and
emerging markets trading activities. Also contributing to the expense growth was
higher salary expense as a result of increased staff levels, offset in part by
lower incentive compensation accruals.

Equity Investments

Activities

The Equity Investments sector manages J.P. Morgan's portfolio of equity
investment securities with the objective of maximizing longer-term appreciation
and net realized securities gains. Supported by our own capital, J.P. Morgan
Capital Corporation, a wholly owned nonbank subsidiary of J.P. Morgan, acquires
equity securities for investment purposes primarily through private placements,
recapitalizations, and corporate restructurings. Equity Investments works
closely with the Finance and Advisory and Asset Management and Servicing sectors
to structure investments that achieve the firm's desired balance between risk
and return.

16
<PAGE>

This business offers the potential for significant rewards in return for
assuming significant risk. To reduce the level of risk involved, we diversify
the portfolio, which consists of approximately 90 investments, by industry,
geographic location, and year of purchase. New investments are made with the
expectation that the rate of return will be substantially greater than that
available in the public market. This return is frequently achieved through
the successful public offering of securities held in the portfolio. In
acquiring and disposing of equity investments, the firm is required to comply
with significant legal and regulatory restrictions. In addition, contractual
restrictions may also limit the ability to dispose of equity investments.
Investments are generally held from three to seven years and disposed of
after the expiration of restrictions based on the firm's view of potential
future appreciation.

Results

[GRAPHIC APPEARS HERE]

Equity Investments recorded pretax income of $640 million in 1994 compared
with $288 million in 1993, an increase of $352 million. Total revenue was
$663 million, compared with $306 million in 1993, primarily because of higher
net realized gains on equity investment securities.

As the objective in managing the equity investment portfolio is to maximize
total return, the results of Equity Investments are also evaluated on an
economic basis. Total return considers both reported revenue and the change in
the unrealized appreciation of the equity investment portfolio. As our
investment strategy covers a longer-term horizon, total return viewed over
shorter periods will reflect the impact of short-term market movements,
including industry-specific events. Total return was $124 million in 1994 and
$811 million in 1993, reflecting a slower pace of growth in our portfolio's
value. Total return for 1993 was particularly strong as the value of our
holdings of health-care and insurance-industry-related equity securities grew
significantly.

Information relating to equity investment securities at December 31 is
presented in the table below. Quoted or estimated values of equity investment
securities do not necessarily represent net realizable amounts, as the timing or
size of transactions and the liquidity of the markets may not support
realization of these values. Fair values for equity investment securities for
which there are no publicly quoted market prices are determined by management
based on financial and other available information.

In millions: December 31 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Marketable equity investment securities:
Fair and carrying value.............................. $759 $1 271 $845
Cost................................................. 183 241 193
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation..................................... 576 1 030 652
- --------------------------------------------------------------------------------------------------------------------------
Equity investment securities without available
market quotations:
Fair value........................................... 528 464 440
Cost and carrying value.............................. 432 283 386
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation..................................... 96 181 54
- --------------------------------------------------------------------------------------------------------------------------
Total net unrealized appreciation............................... 672 1 211 706
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Changes in unrealized appreciation reflect the impact of market movements, as
well as the realization of economic values included in total revenue. A
significant portion of the net unrealized appreciation on the marketable equity
investment portfolio at December 31, 1994, relates to investments in health-care
and insurance-industry-related equity securities. The decline in net unrealized
appreciation for securities without available market quotations at December 31,
1994, related primarily to one investment.

17
<PAGE>

Asset and Liability Management

Activities

Our objective in Asset and Liability Management is to create longer-term value
through the management of interest rate and liquidity risk related to J.P.
Morgan's assets, liabilities, and off-balance-sheet activities. We intend to
realize such value over time primarily as net interest revenue and net
investment securities gains.

Asset and liability management activities include managing the firm's
liquidity risk profile to ensure that, even under adverse conditions, we have
the necessary access to funds at a reasonable cost. Sources of funds include
interest-bearing and noninterest-bearing deposits, commercial paper, bank notes,
trading account liabilities, repurchase agreements, federal funds purchased,
long-term debt, and stockholders' equity. Liquidity targets are maintained to
ensure that we have adequate funds available to meet unforeseen conditions. A
strong capital position is integral to our ability to manage liquidity as it
enables us to raise funds in diverse markets worldwide at a reasonable cost.

Asset and liability management activities also include managing the interest
rate risk that arises from the firm's nontrading interest-rate-sensitive assets
and liabilities. Our primary focus is achieving a desired overall interest rate
profile, which may change over time, based on management's view of longer-term
global interest rates and economic conditions. A variety of instruments, both
on- and off-balance-sheet, in numerous currencies are used in an integrated
manner to achieve this objective. We manage the maturity and repricing
imbalances between our assets and liabilities through the use of derivative
instruments and by investing in the more liquid fixed income markets worldwide.
Asset and liability management swaps are used to hedge exposures, principally
debt investment securities; to modify the interest rate characteristics of
specified assets or liabilities, principally loans, short-term borrowings, and
long-term debt; and, in the case of risk-adjusting swaps, to increase or
decrease J.P. Morgan's overall exposure to interest rate risk in the same manner
as debt investment securities. In addition to the U.S. markets, we engage in
significant asset and liability management activities in Europe and Japan.

Results

[GRAPHIC APPEARS HERE]

Asset and Liability Management recorded pretax income of $872 million in 1994
compared with $1,059 million in 1993. Total revenue, which primarily includes
net interest revenue and net investment securities gains, was $965 million in
1994, as compared with $1,163 million in 1993. The decrease resulted from
lower net investment securities gains, as we repositioned portions of the
U.S. and European portfolios consistent with our longer-term view of changes
in global interest rates. Net interest revenue related to European and Asian
asset and liability management activities increased during 1994, while net
interest revenue associated with U.S. dollar activities declined.

The performance of the Asset and Liability Management sector, similar to that
of the Equity Investments sector, is evaluated on an economic basis using total
return. Total return not only considers reported revenue, but also incorporates
the change in the unrealized appreciation or depreciation on asset and liability
management financial instruments, such as debt investment securities, long-term
debt, and risk-adjusting swaps. Total return in 1994 was $395 million compared
with $1,534 million in 1993. The particularly strong results for 1993 reflected
increasing values across all portfolios as we were well positioned for the
decline in interest rates globally. Results for 1994 reflect reduced levels of
interest rate risk taken globally.

The following table presents the unrealized appreciation on asset and
liability management financial instruments at December 31.

Unrealized appreciation
-----------------------------------
In millions 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt investment securities...................................... $ 154 $ 859 $ 722
Other financial instruments, primarily risk-adjusting swaps..... 918 783 549
- ------------------------------------------------------------------------------------------------------------------------
Total unrealized appreciation................................... 1 072 1 642 1 271
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>

Changes in unrealized appreciation reflect the impact on financial instruments
of changes in global interest rates, as well as the realization of economic
values included in total revenue as net interest revenue and net investment
securities gains. Unrealized appreciation declined in 1994 primarily due to
recognition of net interest revenue and net investment securities gains. In
1993, unrealized appreciation increased, reflecting the positive impact on
financial instruments of changes in interest rates, particularly in Europe and
Japan.

As discussed further in the Risk management section of the Financial review,
J.P. Morgan uses a value at risk methodology to estimate the potential daily
earnings effect of a specified adverse movement in market prices in our asset
and liability management and trading activities. While asset and liability
management portfolios are viewed in this manner to allow for a consistent and
uniform measure of market risk across these activities, we also extend the time
period in order to evaluate risk estimates relative to changes in the value of
asset and liability management portfolios given our longer investment horizon.
Accordingly, value at risk is measured over a one-month horizon and compared
with total return over the same period. During 1994, monthly value at risk
averaged $108 million and ranged from $75 million to $166 million. (This equates
to average daily earnings at risk of approximately $24 million and a range of
$16 million to $36 million.) During 1994, monthly total return was consistently
within the range of monthly value at risk.

Corporate Items

Corporate Items consists of certain revenue and expense items that have not
been allocated to the sectors, intercompany eliminations, and the taxable
equivalent adjustment, which is calculated to gross-up tax exempt interest to
a taxable basis.

Items not allocated to specific sectors in 1994 and 1993 include past due
interest claims from Brazil and Argentina, certain corporate level expenses, and
the results of the domestic corporate trust business that was sold in 1994.
Included in Corporate Items in 1994 is the taxable equivalent adjustment of
$120 million, a $54 million gain on the sale of the domestic corporate trust
business and $50 million of interest revenue related to income tax refunds. The
1993 amounts include the taxable equivalent adjustment of $138 million, and a
special charge of $120 million relating to real estate and relocation
initiatives.

- --------------------------------------------------------------------------------

Risk management

The major risks of J.P. Morgan are market, liquidity, credit, legal, fiduciary
and agency, and operational. Comprehensive risk management processes have been
established to facilitate, control, and monitor risk-taking. These processes are
built on a foundation of early identification and analytically rigorous
measurement of risks by each of our businesses. Control mechanisms are in place
at different levels throughout the organization. The Corporate Risk Management
Group and risk management units within businesses, audit, legal, financial, and
operations are all involved in monitoring risks from a variety of perspectives
and ensuring that businesses are operating within established corporate policies
and limits. New businesses and material changes to existing businesses are
subjected to new product reviews to assure management that all significant risks
are identified and adequate control procedures are in place.

Operating within well-defined corporate policies and standards and subject to
rigorous independent oversight, J.P. Morgan's business managers are responsible
for managing risks in the activities and markets in which they do business.
These managers are located in markets around the world to permit first-hand
evaluation of changes in market, industry, credit, economic, and political
conditions and to use their experience and insights, supported by various risk
management tools, to adjust positions and revise strategies in an efficient and
timely manner. Our business managers are encouraged to protect against losses
from unexpected events by limiting the sizes of their risks and diversifying
exposures and activities

19
<PAGE>

across a variety of instruments, markets, clients, and geographic regions.
Integral to the management of market and credit risk is the development and
control of models used in the valuation and pricing of certain instruments. With
guidance provided by the Corporate Risk Management Group, business managers are
responsible for establishing and maintaining business-specific policies and
procedures to monitor and control the development and use of models.

The Corporate Risk Management Group oversees our risk management processes.
This unit, which is independent of our business groups, is managed jointly by
the heads of the Market Risk and Credit Policy committees. Fundamental
responsibilities of the Corporate Risk Management Group are establishing market
risk limits and concentration limits for credit risk by considering exposure to
particular products, counterparties, industries, and geographic regions. The
Corporate Risk Management Group develops, communicates, and assists business
groups implement corporate risk management policies, information systems, and
methodologies to enhance the firm's ability to manage risks and to evaluate
business risk performance. In order to maintain a common risk management
framework for use throughout the firm, the group also trains J.P. Morgan's
professionals in our risk management policies and methodologies. The group
reviews the introduction of new risk activities, has the authority to challenge
any risk position, and performs an independent review of significant positions.

The Market Risk and Credit Policy committees are composed of members of senior
management. The Market Risk Committee meets regularly to review and discuss
trends in the firm's market and liquidity risk profiles, and the Credit Policy
Committee meets to review credit risk developments. The Board of Directors
periodically reviews risk management policies and processes and trends in our
risk profiles.

The processes and procedures by which we manage our risk profile continually
evolve as our business activities change in response to market, credit, and
product developments. We are always seeking to strengthen the risk management
process through continuous investments in technology and training. Periodic
reviews performed by internal auditors, regulators, and independent accountants
subject our practices to additional scrutiny and further strengthen our
processes.

Market risk

Market risk is the uncertainty to which future earnings are exposed as a result
of changes in the value of portfolios of financial instruments. This risk is a
consequence of our market-making, positioning, and asset and liability
management activities in the interest rate, foreign exchange, equity, and
commodity markets.

The estimation of potential losses that could arise from adverse changes in
market conditions is a key element of managing market risk. J.P. Morgan employs
a value at risk methodology to estimate such potential losses. The firm's
primary measure of value at risk is referred to as "Daily Earnings at Risk"
(DEaR). This measure takes into account numerous variables that may cause a
change in the value of our portfolios, including interest rates, foreign
exchange rates, securities and commodities prices, and their volatilities, as
well as correlations between these variables. DEaR uses historical one-day
movements in these variables to estimate potential losses in trading and asset
and liability management activities assuming normal market conditions and market
liquidity. These estimates also take into account the potential diversification
effect of the different positions in each of our portfolios. On a monthly basis,
the Corporate Risk Management Group calculates, reviews, and updates the
historic volatilities and correlations that serve as the basis for these
estimates.

Market risk associated with the trading of options is more complex than that
associated with other derivative instruments, as the risk related to option
positions is not directly proportional to the size of the position or movements
in market factors. J.P. Morgan manages the market risk associated with options
through matching and diversification of positions as appropriate, and measures
the amount of risk on mismatches of positions through simulation analysis. These
methods convert the complex risk associated with options to risk that is
similar to that of the instruments used in our traditional trading activities.

20
<PAGE>

DEaR's one-day horizon allows for a consistent and uniform measure of market
risk across all applicable products and activities. It also facilitates regular
comparison of risk estimates to daily revenue from our trading activities,
providing an indication of the quality of these estimates. The DEaR measure of
potential losses uses an adverse market movement of 1.65 standard deviations as
the standard for risk measurement and comparison. Such movements approximate a
95% confidence interval. For a given portfolio this implies that actual daily
trading-related revenue might deviate from expected results by an amount greater
than DEaR approximately 5% of the time.

J.P. Morgan utilizes DEaR as a tool to estimate potential market risk related
to all of our trading and asset and liability management activities. The
Corporate Risk Management Group sets global DEaR limits for each of these
business activities. The level of risk to be assumed by a business is based on
our overall objectives, business manager experience, client requirements, market
liquidity, and volatility. Within these global limits, business managers set
regional, local, product, and trader limits as appropriate.

On a daily basis, J.P. Morgan estimates DEaR for each trading activity and all
trading activities combined. Similar daily estimates are made for our asset and
liability management activities. Senior management reviews a daily report of
profit and loss, aggregate positions, and the firm's global market risk profile.
This report also compares estimated DEaR on a global basis and by individual
business and by principal market with relevant DEaR limits, and includes a
description of significant positions and a discussion of market conditions.
Senior managers meet daily to discuss the firm's global market risk profile and
trading strategies.

The DEaR methodology is a uniform measure used across the firm to communicate
and evaluate the relative level of market risk within and across businesses and
major markets. However, no single measure can capture all dimensions of market
risk. As a result, we supplement DEaR with additional market risk information.
For example, stress tests that attempt to measure the effect on portfolio values
of unusual market movements are important parts of market risk management, as
they can help to identify potential vulnerabilities to abnormal events. Stress
testing can take several forms, including simulation analysis, for nonnormal
scenarios; sensitivity analysis, for moves in values of specific key variables
such as volatilities and shifts in yield curves; and specific event analysis,
for measuring the impact of abnormal market conditions associated with a
specific market event.

Liquidity risk

Liquidity risk arises in the general funding of the firm's activities and in
the management of positions. It includes both the risk of being unable to
fund our portfolio of assets at appropriate maturities and rates, and the
risk of being unable to liquidate a position in a timely manner at a
reasonable price. Management of our liquidity profile is designed to ensure
that even under adverse conditions, we have access to the funds necessary to
cover client needs, maturing liabilities, and the capital requirements of our
subsidiaries. A strong capital position is integral to our ability to manage
liquidity.

The Global Liquidity Management Group develops and enhances procedures to
identify, measure, and monitor the firm's liquidity sources and uses. The group
is responsible for maintaining an adequate liquidity surplus and for long-term
liquidity planning and risk management. This is accomplished by monitoring
differences in maturities between assets and liabilities and by analyzing future
funding requirements based on various assumptions, including conditions that
might adversely impact our ability to liquidate investment and trading positions
and our ability to access the markets. The Global Liquidity Management Group
works closely with the Corporate Risk Management Group to develop and implement
policies to achieve its objectives.

The liquidity of certain trading asset inventories is monitored continuously
by the appropriate business managers. On a periodic basis the Trading Asset
Review Committee, under the direction of the Corporate Risk Management Group,
reviews the liquidity and turnover of these inventories.

21
<PAGE>

Credit risk

Credit risk arises from the possibility that counterparties may default on
their obligations to the firm. These obligations arise from the extension of
credit and our trading and investment activities, taking the form of loans,
investment securities, trading account assets, or derivative instruments, and
from our participation in payment and securities settlement transactions on
our own behalf and as agent for our clients.

Managing credit risk has both qualitative and quantitative aspects. The
qualitative aspect is determining the creditworthiness of the counterparties.
Experienced credit officers evaluate the credit quality of the firm's obligors
and counterparties and assign internal credit ratings based upon this
evaluation. These officers along with our business managers are responsible for
credit screening and monitoring. Credit concentration limits for various
industries, products, and countries are set by the Corporate Risk Management
Group. Credit limits for individual clients and counterparties are established
by credit officers with direct knowledge of the client's creditworthiness.
Established limits and actual levels of exposures are reviewed regularly by
senior management.

The quantitative aspect of credit risk begins with the measurement of credit
exposure to our counterparties. The Corporate Risk Management Group is
responsible for establishing the framework of policies and practices required to
measure such risk. We measure credit exposure in terms of both current and
potential credit exposure. Current credit exposure is generally represented by
the notional or principal value for on-balance-sheet financial instruments and
by the positive market value of derivative instruments. Because many of our
exposures are affected by changes in market prices, we also estimate the
potential credit exposure over the remaining term of the transactions through
statistical analysis.

In managing our credit risk, we also estimate potential losses associated with
these credit exposures. This process involves numerous assumptions and considers
a number of variables, including the credit quality of our counterparties,
duration of the credit exposure, default probabilities and volatilities,
collateral values, and expected recovery rates in the event of default, as well
as the diversification across counterparties, industries, and geographic regions
of our global credit portfolio.

The growing diversity of our business through an expanded range of products
and services and participation in international markets has increased the
complexity of managing credit risk. To reduce individual counterparty credit
risk, we attempt to deal with creditworthy counterparties, obtain collateral
where appropriate, and utilize master netting agreements, primarily in
connection with derivative products. Under a master netting agreement, losses
associated with one transaction with a counterparty are offset against gains
associated with another so that exposure is limited to the net of all the gains
and losses related to the transactions covered by the agreement. These
agreements primarily cover offsetting transactions involving a single product,
but we are seeking to expand the use of cross-product netting agreements to
obtain additional benefits of offsetting.

Our credit review procedures are designed to identify country, industry,
product, and client exposures that require a higher-than-normal degree of
scrutiny. Once identified, individual exposures are carefully monitored by the
Asset Quality Review Committee, which meets quarterly. In assessing the adequacy
of our allowance for credit losses, this group of senior officers recommends the
portion of credit exposures that should be charged off and the amount of any
provision for credit losses.

Legal risk

Legal risk arises from the uncertainty of the enforceability, through legal or
judicial processes, of the obligations of J.P. Morgan's clients and
counterparties, including contractual provisions intended to reduce credit
exposure by providing for the offsetting or netting of mutual obligations. J.P.
Morgan seeks to remove or minimize such uncertainty through continuous
consultation with internal and external legal advisers in all countries in which
we conduct business.

22
<PAGE>

Fiduciary and agency risk

Fiduciaries and agents have obligations to act on behalf of others. Fiduciary
or agency risks exist in our investment management activities and to a lesser
extent in many of our other agency and brokerage activities. The firm has a
number of policies and procedures to ensure that our obligations to clients
are discharged faithfully and in compliance with applicable legal and
regulatory requirements. This includes setting policies with respect to the
creation, sale, and management of the firm's investment products, trade
execution, counterparty selection, and the evaluation of potential investment
opportunities.

Operational risk

Operational risk is the potential for loss caused by a breakdown in information,
communication, transaction processing, and settlement systems. J.P. Morgan
attempts to mitigate operational risk by maintaining a comprehensive system of
internal controls, maintaining key backup facilities, and undertaking regular
contingency planning. Internal controls include the establishment of systems and
procedures to monitor transactions, positions, and documentation.

Financial statement analysis

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest revenue............................................ $ 1 981 $ 1 772 $ 1 708
Noninterest revenue............................................. 3 536 4 499 2 950
Operating expenses.............................................. (3 692) (3 580) (2 854)
Provision for credit losses..................................... - - (55)
Income taxes.................................................... (610) (968) (619)
- ----------------------------------------------------------------------------------------------------------------------
Income before accounting changes................................ 1 215 1 723 1 130
Accounting changes.............................................. - (137) 452
- ----------------------------------------------------------------------------------------------------------------------
Net income...................................................... 1 215 1 586 1 582
- ----------------------------------------------------------------------------------------------------------------------
Primary earnings per common share
Income before accounting changes................................ $6.02 $8.48 $5.66
Net income...................................................... 6.02 7.80 7.95
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

Net interest revenue

[GRAPHIC APPEARS HERE]

Net interest revenue aggregates interest revenue and expense generated from
assets, liabilities, and derivatives in a variety of activities. Net interest
revenue is primarily derived from instruments used in our Asset and Liability
Management activities, including debt investment securities and risk-adjusting
swaps. The Finance and Advisory and Asset Management and Servicing sectors
generate net interest revenue from loans and other credit and deposit products.
In addition, net interest revenue results from various financial instruments
used in our trading-related businesses, primarily within the Sales and Trading
sector. Net interest revenue is affected by changes in interest rates, funding
strategies, and the relative proportion and composition of interest-bearing and
noninterest-bearing financial instruments. Trading-related net interest revenue
has become increasingly sensitive to these changes as our trading activities
have increased. The levels of equity capital and net noninterest-bearing
liabilities reduce the requirement to incur interest-bearing liabilities to fund
the firm's activities.

23
<PAGE>

Net interest revenue was $1,981 million in 1994 compared with $1,772 million
in 1993 and $1,708 million in 1992. Net interest revenue included $66 million,
$201 million, and $74 million in 1994, 1993, and 1992 primarily related to past
due interest claims from Brazil and Argentina. In 1994, the firm also recorded
$50 million of interest revenue associated with income tax refunds. Excluding
these items, net interest revenue was 19% higher in 1994 compared with 1993.
This increase was primarily attributable to increased net interest revenue from
the Sales and Trading sector. Net interest revenue associated with the Finance
and Advisory sector declined slightly in 1994, primarily due to the reduced
volume of credit-related activities and a decrease in spreads due to the more
competitive lending environment.

Net interest revenue attributable to the Sales and Trading sector increased in
1994 as interest-earning trading-related assets increased. We earned higher net
interest revenue in 1994 from European fixed income securities and emerging
markets activities, particularly in Brazil.

Net interest revenue related to European and Asian asset and liability
management activities increased during 1994, while net interest revenue
associated with U.S. dollar activities declined.

Net interest revenue, excluding receipts related to past due interest claims
from Brazil and Argentina, decreased 4% in 1993 compared with 1992. This decline
was principally due to lower net interest revenue attributable to our trading-
related activities. Trading-related net interest revenue declined as a result of
lower net interest revenue associated with interest rate and currency swap
activity, U.S. government securities and related derivatives, and mortgage-
backed securities. Partially offsetting this decline was an increase in
interest-earning trading-related assets. Net interest revenue associated with
asset and liability management activities improved as we positioned ourselves to
take advantage of the decline in European and Asian interest rates.

Net yield (the difference between the average rate earned on a taxable-
equivalent basis and the average cost of funds, including funds on which
interest is not paid), was 1.56% for 1994, compared with 1.51% for 1993 and
1.78% for 1992. The decrease in net yield from 1992 levels reflects the higher
average volume of trading-related assets with lower margins.

Interest rate sensitivity

J.P. Morgan is exposed to interest rate risk related to the use of
interest-rate-sensitive assets, liabilities, and derivatives. While the matching
of assets and liabilities of similar interest rate sensitivity would reduce the
risk associated with interest rate changes, this approach would not allow the
firm to benefit from anticipated changes in interest rates. Net interest revenue
may be generated from our asset and liability management activities by creating
maturity and repricing imbalances between assets, liabilities, and derivatives.
The resulting interest-rate-sensitivity gap is the net effect of assets,
liabilities, and derivatives maturing or repricing in a given period. Interest-
rate-sensitivity gaps are adjusted by changing repricing profiles through the
use of derivatives as well as by changing funding strategies and repositioning
assets.

A liability sensitive position results when more liabilities than assets
reprice or mature within a given period. Under this scenario, as interest rates
decline, increased net interest revenue will be generated. Conversely, an asset
sensitive position results when more assets than liabilities reprice within a
given period; in this instance, net interest revenue would benefit from an
increasing interest rate environment. In addition to generating revenue from
maturity and repricing imbalances, net interest revenue may also be generated by
matching assets, liabilities, and derivatives of similar maturity and repricing
profiles at a positive margin.

24
<PAGE>

The following table provides J.P. Morgan's interest-rate-sensitivity gaps at
December 31, 1994 and 1993, including the asset and liability interest-rate-
sensitivity gaps and the effect of derivatives on the gaps. The resulting
interest-rate-sensitivity gap is presented by U.S. dollar and non-U.S. dollar
currency components and reflects J.P. Morgan's market outlook at these points in
time. Significant variances in interest rate sensitivity may exist at other
dates not presented in the table. Amounts in parentheses reflect liability
sensitive positions.

By repricing or maturity dates
-----------------------------------------------------------------------------------------------------------------------------
After six After one
Within months year but After
six but within within five
In millions months one year five years
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994
Asset and liability interest-rate-sensitivity gap $ (8 885) $ (811) $ 2 361 $13 422
Derivatives affecting interest rate sensitivity.. 14 324 3 154 280 (17 757)
-----------------------------------------------------------------------------------------------------------------------------
Interest-rate-sensitivity gap/(a)/............... 5 439 2 343 2 641 (4 335)
-----------------------------------------------------------------------------------------------------------------------------
(a)Components of interest-rate-sensitivity gap:
U.S. dollar................................. 17 359 2 772 (4 752) (4 259)
Non-U.S. dollar *........................... (11 920) (429) 7 393 (76)
-----------------------------------------------------------------------------------------------------------------------------
Total....................................... 5 439 2 343 2 641 (4 335)
-----------------------------------------------------------------------------------------------------------------------------
December 31, 1993
Asset and liability interest-rate-sensitivity gap (3 915) 125 3 857 9 119
Derivatives affecting interest rate sensitivity.. 13 048 3 515 (14 381) (2 182)
-----------------------------------------------------------------------------------------------------------------------------
Interest-rate-sensitivity gap/(b)/................ 9 133 3 640 (10 524) 6 937
-----------------------------------------------------------------------------------------------------------------------------
(b)Components of interest-rate-sensitivity gap:
U.S. dollar.................................. 13 380 2 672 (13 891) 4 471
Non-U.S. dollar *............................ (4 247) 968 3 367 2 466
-----------------------------------------------------------------------------------------------------------------------------
Total........................................ 9 133 3 640 (10 524) 6 937
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Primarily yen, deutsche mark, French franc, Belgian franc, and sterling
positions.

As shown in the table, at December 31, 1994 and 1993, J.P. Morgan had an asset
sensitive gap in U.S. dollar six-month positions, while our non-U.S. dollar
positions were liability sensitive.

Trading revenue

[GRAPHIC APPEARS HERE]

Trading revenue is generated primarily by activities included within the
Sales and Trading and Finance and Advisory sectors. Trading revenue declined
51% to $1,019 million from $2,059 million in 1993, which was an exceptionally
strong year. Lower revenue from debt instrument trading accounted for most of
the decline.

Reported trading revenue does not include the net interest revenue associated
with our trading activities. As our business objective is to maximize total
revenue, trading-related net interest revenue should be considered when
evaluating trading results. The following table presents trading revenue and net
interest revenue associated with trading activities disaggregated by the
principal markets and instruments in which we participate. The captions do not
present trading revenue by business activity as discussed in the Global business
activities section of the Financial review.

25
<PAGE>

Trading revenue includes the results of trading-related hedges with the
instruments being hedged. For example, the results of U.S. Treasuries used to
hedge swaps are included in Swaps and other interest rate contracts. The
methodology utilized to derive net interest revenue attributable to trading
activities includes accruals on interest-earning and interest-bearing trading-
related positions as well as allocated amounts reflecting the cost or benefit,
based on short-term interest rates, of funding net trading-related positions.

Foreign
exchange Equities,
Swaps and other spot and com-
interest rate Debt option modities,
In millions contracts instruments contracts and other Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Trading revenue .................... $663 $ 41 $131 $184 $1 019
Net interest revenue (expense)...... (34) 349 3 (36) 282
- --------------------------------------------------------------------------------------------------------------------------
Combined revenue.................... 629 390 134 148 1 301
- --------------------------------------------------------------------------------------------------------------------------
1993
Trading revenue..................... 797 821 179 262 2 059
Net interest revenue (expense)...... 15 183 (2) (54) 142
- --------------------------------------------------------------------------------------------------------------------------
Combined revenue.................... 812 1 004 177 208 2 201
- --------------------------------------------------------------------------------------------------------------------------
1992
Trading revenue..................... 512 7 262 178 959
Net interest revenue (expense)...... 65 277 (4) (53) 285
- --------------------------------------------------------------------------------------------------------------------------
Combined revenue.................... 577 284 258 125 1 244
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Swaps and other interest rate contracts

Revenue from swaps and other interest rate contracts primarily results from
derivative instrument market-making transactions. These transactions include
interest rate swaps, currency swaps, foreign exchange forward contracts,
interest rate futures, forward rate agreements, and interest rate options.

Combined revenue decreased $183 million to $629 million in 1994, primarily
because of substantially lower revenues attributable to our proprietary trading
unit, partially offset by higher market-making revenue in swaps and other
derivative instruments.

In 1993, combined revenue from swaps and other interest rate contracts
increased $235 million to $812 million, reflecting higher market-making revenue
resulting from increased client volumes and demand for risk management products
in Europe and Asia.

Debt instruments

Debt instruments trading revenue results from trading activities in government
and government agency securities including mortgage-backed securities, corporate
debt instruments, high yield securities, and related options, futures, and
forwards.

Combined revenue decreased by $614 million to $390 million in 1994, primarily
due to lower client volumes in developed markets, less effective positioning in
Latin America, and proprietary trading losses in Europe. Refer to the Net
interest revenue section of the Financial review for further discussion of the
increase in trading-related net interest revenue associated with Sales and
Trading activities.

Combined debt instrument revenue increased $720 million to $1,004 million in
1993. Debt instrument revenue included outstanding results in emerging markets
activities, particularly in Latin America. Revenues in the fixed income markets
increased in 1993 as results from our mortgage-backed securities improved and we
earned higher market-making and positioning revenues in Europe.

26
<PAGE>

Foreign exchange spot and option contracts

Foreign exchange trading revenue includes the results from transactions using
foreign exchange spot and option contracts in many currencies.

Combined revenue decreased by $43 million to $134 million in 1994 because of
lower positioning revenues. Results in 1993 were down from a particularly strong
1992 as positioning was less effective.

Equities, commodities, and other

Trading revenue from equities, commodities, and other includes the results
from equity securities, equity and commodity derivatives, and various metals.

Combined revenue decreased by $60 million in 1994 to $148 million. The decline
resulted from lower equity securities trading revenues, partially offset by
higher market-making activity in commodity derivatives.

Combined revenue increased $83 million from 1992 to $208 million. This
increase was primarily related to our market-making activities from equity
derivatives as we continued to develop structured transactions to meet increased
client demand.

Market risk profile

The Daily Earnings at Risk (DEaR) estimate for our combined trading activities
averaged approximately $15 million for the twelve months ended December 31,
1994, and ranged from approximately $10 million to $26 million. The level of
market risk in our trading portfolios, which is measured on a diversified basis,
will vary with market factors, the level of client activity, and our
expectations of price and market movements. During 1994, we maintained generally
modest risk positions.

The frequency distribution of our 1994 daily combined trading-related revenue
is presented below.

[GRAPHIC APPEARS HERE]

During the twelve month period ended December 31, 1994, daily revenue averaged
$5.8 million. The above distribution around this average reflects the
diversified and client-oriented nature of our global trading activities.

J.P. Morgan evaluates the reasonableness of our DEaR estimates by comparing
DEaR to daily revenue. The confidence bands depicted in the above histogram,
which represent 1.65 standard deviations around average daily revenue,
approximate an average DEaR of $16 million for the twelve months ended December
31, 1994. This compares with our average DEaR estimate of $15 million.
Consistent with our risk measurement estimates and despite the increased
volatility in the financial markets worldwide, daily revenue fell short of
average daily revenue by amounts greater than related DEaR estimates on
approximately 5% of the trading days in 1994.

27
<PAGE>

Trading-related assets and liabilities

In billions: Average balances 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Trading account assets............................... $62.0 $37.3 $29.0
Securities purchased under agreements to resell...... 32.1 29.7 17.0
Securities borrowed.................................. 15.6 14.1 6.5
Liabilities:
Trading account liabilities.......................... 38.6 21.3 13.8
Securities sold under agreements to repurchase....... 45.5 47.3 31.3
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Trading account assets; Securities purchased under agreements to resell
(resale agreements); Securities borrowed; Trading account liabilities; and
Securities sold under agreements to repurchase (repurchase agreements) can
fluctuate by large amounts daily. The level of trading-related assets and
liabilities is influenced by client needs as well as market opportunities.

Trading-related assets and liabilities grew significantly in 1994. The average
balance of trading-related assets represented 64% of average total assets in
1994, compared with 55% in 1993 and 44% in 1992. The growth in 1994 was
primarily related to increased trading account assets and liabilities. Trading
account assets and liabilities, composed primarily of U.S. Treasury, foreign
government, trading-related derivatives, and corporate debt and equity
securities, increased due to the adoption of Financial Accounting Standards
Board Interpretation No. 39 (FIN No. 39), Offsetting of Amounts Related to
Certain Contracts, effective January 1, 1994. FIN No. 39 required the firm to
report positive market values of certain derivative instruments as assets and
negative market values as liabilities. Such amounts were previously presented on
a net basis. Offsetting positive and negative market values under FIN No. 39 is
permitted for contracts executed with the same counterparty when master netting
agreements are in place. The adoption of FIN No. 39 increased both trading
account assets and liabilities by approximately $13 billion at December 31,
1994. If FIN No. 39 had been in effect at December 31, 1993, trading account
assets and liabilities would have been increased by approximately $14 billion.

In addition to the increase attributable to the adoption of FIN No. 39,
trading account assets and liabilities grew in 1994 as a result of the continued
expansion of our trading activities within the Sales and Trading sector. The
growth in our average trading account assets in 1994 was due to increased
holdings of foreign government securities and U.S. government agency and
corporate debt and equity securities.

The firm uses resale agreements and securities borrowed to settle short
trading positions. We use repurchase agreements as a source of short-term
financing for trading-related positions and as one source of financing for the
debt investment securities portfolio. Effective December 31, 1994, the firm
adopted Financial Accounting Standards Board Interpretation No. 41 (FIN No. 41),
Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase
Agreements. FIN No. 41 permits the offsetting of amounts recognized as payables
under repurchase agreements against amounts recognized as receivables under
resale agreements provided certain specified criteria are met. The adoption of
FIN No. 41 did not have a material impact on 1994 resale and repurchase
agreement amounts.

The increase in the average balance of trading-related assets and liabilities
in 1993 as compared with 1992 was primarily related to the growth in resale
agreements and securities borrowed. Trading account assets and liabilities also
grew in 1993 as compared with 1992 due to increased holdings of foreign
government securities and corporate debt and equity securities, offset by
decreased holdings of U.S. Treasury and mortgage-backed securities.

28
<PAGE>

Derivatives

[GRAPHIC APPEARS HERE]

In general terms, derivative instruments are contracts or agreements whose value
is derived from interest rates, foreign exchange rates, prices of securities, or
financial or commodity indices. Derivatives include swaps, futures, forwards,
and option contracts.

Derivatives are generally either negotiated over-the-counter contracts or
standardized contracts executed on an exchange. Standardized exchange-traded
derivatives include futures and option contracts. Negotiated over-the-counter
derivatives include forwards, swaps, and option contracts. Over-the-counter
derivatives are generally not traded like securities; however, in the normal
course of business, with the agreement of the original counterparty, they may be
terminated or assigned to another counterparty. The timing of cash receipts and
payments related to derivatives is generally determined by contractual
agreement.

J.P. Morgan utilizes derivatives in its trading and asset and liability
management activities. As part of our trading activities, we act as a dealer in
derivative instruments to satisfy the risk management needs of our clients by
structuring transactions that allow clients to manage their exposure to interest
rates, foreign exchange rates, prices of securities and commodities, and
financial or commodity indices. In addition, we assume trading positions based
on our market expectations and to benefit from price differentials between
instruments and markets. We also utilize derivatives as hedges of trading
instruments. Derivative instruments used for trading purposes primarily include
interest rate swaps, foreign exchange forward contracts, forward rate
agreements, and purchased and written interest rate options.

As an end user, J.P. Morgan utilizes derivative instruments in the execution
of its asset and liability management strategies. Derivatives used for these
purposes primarily include interest rate swaps, foreign exchange forward
contracts, forward rate agreements, and debt securities forwards. Derivatives
are used to hedge exposures to interest rate or currency fluctuations, primarily
debt investment securities, and to modify the interest rate characteristics of
related balance sheet instruments, principally loans, short-term borrowings, and
long-term debt. In addition, we utilize derivatives to adjust our overall
interest rate risk profile primarily through the use of risk-adjusting swaps.
These swaps do not contain leverage or embedded option features and are used to
replicate the cash flows of nonamortizing cash instruments.

J.P. Morgan's competitive strength in derivatives activities results from our
strong capital base, expertise developed over many years, global distribution
capabilities, long-standing client relationships, sophisticated research and
technological support, and integrated approach to these activities.

As with balance sheet financial instruments, derivatives are subject to market
and credit risk. As discussed further in the Risk management section of the
Financial review, we evaluate the risk associated with derivatives in much the
same way as the risks associated with balance sheet financial instruments.
However, unlike balance sheet financial instruments, where the credit exposure
is generally represented by the notional or principal value, the credit
exposure associated with derivatives is generally a small fraction of the
notional value of the instrument and is represented by the positive market value
of the derivative instrument.

29
<PAGE>

The following tables provide the aggregate notional amount of each category of
derivative financial instruments and the contractual maturities for the 1994
balances. For detail of the notional amounts segregated by trading and asset and
liability management activities, refer to Note 8 to the financial statements,
Off-balance-sheet financial instruments. The following tables also provide the
total amount of credit exposure, after considering the benefit of $12.7 billion
of master netting agreements in effect at December 31, 1994 and the contractual
maturities for the 1994 balances.

Interest rate and currency swaps

<TABLE>
<CAPTION>
After one After five
Within year but years but
one within within After ten Total
In billions: December 31 year five ten years 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount............ $244.4 $574.4 $137.6 $18.5 $974.9 $663.7 $453.1
Credit exposure............ 1.7 5.6 2.7 0.9 10.9 11.5 8.3
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A swap is a contractual agreement in which a series of cash flows are
exchanged at specified intervals. The notional principal is not exchanged for
interest rate swaps, but is generally exchanged for currency swaps. The
notional amount of swaps, particularly interest rate swaps, grew during 1994
and 1993 as client demand for risk-management tools increased. At December
31, 1994, approximately 95% of the credit exposure associated with interest
rate and currency swaps was with counterparties considered to be of
investment grade quality, based on J.P. Morgan's internal credit evaluations.

Foreign exchange spot, forward, and futures contracts

After one After five
Within year but years but
one within within After ten Total
In billions: December 31 year five ten years 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount............ $373.9 $23.6 $0.2 - $397.7 $315.9 $262.2
Credit exposure............ 2.4 1.2 - - 3.6 4.1 5.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Foreign exchange contracts involve an agreement to exchange the currency of
one country for the currency of another country at an agreed-upon price and
settlement date. The contracts reported above primarily include forwards. The
increase in notional amounts of foreign exchange contracts during 1994 and
1993 reflects increased activity in foreign exchange forward contracts in
line with our expanded market-making activities.

Interest rate futures, forward rate agreements, and debt securities forwards

<TABLE>
<CAPTION>
After one After five
Within year but years but
one within within After ten Total
In billions: December 31 year five ten years 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount............ $268.5 $148.3 $6.3 $3.4 $426.5 $235.5 $203.9
Credit exposure............ 0.1 0.1 - - 0.2 0.4 0.2
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Interest rate futures comprise approximately 50% of the notional amounts
reported above. An interest rate futures contract is a standardized exchange-
traded agreement to receive or deliver a specified financial instrument at a
specified future date and price. The credit risk associated with futures
contracts is limited due to the daily settlement of open contracts with the
exchange on which the instrument is traded. The contracts reported above also
include forward rate agreements and debt securities forwards. A forward rate
agreement is an agreement that provides for payment or receipt of the difference
between a specified interest rate and a reference rate at a future settlement
date. Debt securities forwards include to-be-announced and when-issued
securities contracts. These contracts represent agreements to purchase or sell
fixed income securities and are executed prior to issuance of the security. The
increase in the notional amounts during 1994 and 1993 is consistent with the
growing activity in our market-making businesses.

30
<PAGE>

Commodity and equity swaps, forward, and futures contracts

<TABLE>
<CAPTION>
After one After five
Within year but years but
one within within After ten Total
In billions: December 31 year five ten years 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount............ $34.8 $9.0 $0.1 - $43.9 $35.0 $19.7
Credit exposure............ 0.9 0.2 - - 1.1 0.4 0.3
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The contracts shown above primarily include swaps in the commodity and equity
markets, and commodity forward agreements. We also utilize futures contracts
in the commodity and equity markets.

Option contracts

<TABLE>
<CAPTION>
After one After five
Within year but years but
one within within After ten Total
In billions: December 31 year five ten years 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount:
Purchased option
contracts.............. $148.5 $115.4 $15.7 $1.0 $280.6 $222.2 $198.7
Written option
contracts.............. 180.8 147.7 19.1 1.3 348.9 181.2 140.8
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

An option contract provides the option purchaser with the right but not the
obligation to buy or sell the underlying item at a set price during a period
or at a specified date. The option writer is obligated to buy or sell the
underlying item if the option purchaser chooses to exercise. The options
reported above include contracts in the interest rate, foreign exchange,
equity, and commodity markets. Option contracts also include caps and floors.
For caps and floors, the notional amounts are used to calculate periodic cash
flows. The notional amount of options grew in 1994 and 1993, primarily due to
increased market-making activities.

Credit exposure exists for purchased options and is measured as the positive
market value of the option contract. At December 31, 1994, the credit exposure
of purchased option contracts was $3.7 billion compared with $4.3 billion at
December 31, 1993, and $3.1 billion at December 31, 1992. There is no credit
exposure associated with written option contracts, as these contracts represent
obligations, rather than assets, of J.P. Morgan.

Corporate finance revenue

[GRAPHIC APPEARS HERE]

Corporate finance revenue is earned globally by providing strategic and
financial advice and by arranging financing for clients.

Corporate finance revenue, which is primarily reported in the Finance and
Advisory sector, decreased 18% to $434 million from record levels in 1993.
Corporate finance revenue in 1994 included revenues from securities underwriting
of $124 million, decreasing 49% from 1993 as global underwriting activities
throughout the industry decreased because of the unfavorable interest rate
environment. Revenues related to the arrangement of syndicated lending
facilities increased due to higher volumes.

Corporate finance revenues rose 21% to record levels in 1993 as we assisted
clients in arranging their capital structures and financing needs to take
advantage of an improving U.S. economy and favorable market conditions resulting
from lower interest rates. Corporate finance revenue in 1993 included revenues
from securities underwriting of $245 million as J.P. Morgan's participation in
the markets for debt and equity underwritings continued to increase. Advisory
services revenue increased in 1993 compared with 1992 as we participated in
diverse transactions on behalf of an increasing number of clients.

31
<PAGE>

Credit-related fees

[GRAPHIC APPEARS HERE]

Credit-related fees are earned from commitments to extend credit, securities
lending activities, and providing standby letters of credit and guarantees.

Credit-related fees of $204 million, recorded primarily in the Finance and
Advisory and Asset Management and Servicing sectors, decreased from $224 million
in 1993 primarily because of lower fees earned from securities lending. Fees
earned from standby letters of credit also declined due to lower average volumes
and more competitive pricing during 1994 as compared with 1993.

Credit-related fees for 1993 were up slightly from 1992, reflecting continued
growth in the securities lending business and higher volumes of commitments to
extend credit.

Credit-related financial instruments

Credit-related financial instruments include loans, commitments to extend
credit, standby letters of credit and guarantees, and securities lending
indemnifications. These instruments primarily result from the activities
engaged in by our Finance and Advisory and Asset Management and Servicing
sectors. The maximum credit risk associated with credit-related financial
instruments is measured by the contractual amounts of these instruments. For
off-balance-sheet credit-related financial instruments this balance
represents the amount at risk should the contract be fully drawn upon, the
client default, and any existing collateral become worthless. At December 31,
1994, approximately 90% of the credit exposure associated with credit-related
financial instruments was with counterparties considered to be of investment
grade quality, based on J.P. Morgan's internal credit evaluations.

Loans

The extension of credit, including loans, remains one of the many ways we
provide our clients with the broad array of financial services that they
require. Our portfolio of loans is diversified by borrower, industry, and
geographic area. At December 31 for each of the past three years, the loan
portfolio consisted mainly of shorter-term outstandings, with more than half
of total loans maturing within one year and approximately 90% maturing within
five years.

Commitments to extend credit

Commitments to extend credit are contracts to lend money to a client in the
future under specific terms and conditions. A majority of, and increases in,
J.P. Morgan's commitments during 1994 and 1993 relate to those issued to
support clients' commercial paper programs.

Standby letters of credit and guarantees

Standbys are contracts issued to support clients' obligations to third
parties, the beneficiaries. In the event a client fails to perform a
contractual obligation, payment is made to the beneficiary upon demand. The
client is required to reimburse J.P. Morgan for any payment made in
connection with the standbys.

The following table provides the contractual amount of commitments to extend
credit and standby letters of credit and guarantees and a maturity profile of
such instruments by contractual maturity for 1994.

After one
Within one year but More than Total
In billions: December 31 year within five five years 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contractual amount:
Commitments to
extend credit............ $16.8 $23.7 $4.1 $44.6 $39.0 $37.1
Standby letters of credit and
guarantees............... 6.9 2.9 0.1 9.9 10.5 11.9
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

32
<PAGE>

Securities lending indemnifications

Securities lending indemnifications are contractual obligations under which
J.P. Morgan guarantees that a third party lender of securities will be
protected against a borrower's failure to return such securities. J.P.
Morgan, acting as agent, receives from the borrower collateral, in the form
of cash, securities, or letters of credit, that generally equals the market
value of the securities borrowed plus some specified margin. The borrowers of
these securities are typically nonbank financial institutions. Generally,
securities are lent for an average period of less than 30 days.

In billions: December 31 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Contractual amount.............. $19.5 $26.4 $17.4
- ---------------------------------------------------------------------------
</TABLE>
At December 31, 1994, 1993, and 1992, J.P. Morgan held cash and other collateral
of $19.4 billion, $26.4 billion, and $17.4 billion respectively in support of
securities lending indemnifications.

Investment management fees

[GRAPHIC APPEARS HERE]

Investment management fees are derived from providing investment management
services to institutions and private clients and include fees from the
administration of trusts and estates. These activities are primarily reported
in the Asset Management and Servicing sector.

Investment management fees increased 11% to $517 million in 1994 compared with
1993. The increase was primarily due to net new business from both domestic and
international clients that resulted in higher institutional assets under
management. Assets under management in mutual funds and private client
discretionary accounts grew from product development and increased marketing
efforts.

The 23% increase in investment management fees in 1993 compared with 1992
reflected growth in assets managed for institutional clients, both domestic and
international, coupled with market appreciation and an increase in performance
fees. Private client discretionary accounts and assets under management in
mutual funds also grew.

Operational service fees

[GRAPHIC APPEARS HERE]

Operational service fees are earned from providing custody, clearing, and
brokerage of securities and futures as well as trust and agency and cash
management services and are primarily reported in the Asset Management and
Servicing sector.

Operational service fees increased by 11% to $546 million in 1994 compared
with $491 million in 1993. The increase was primarily due to higher futures
and equity commissions and higher custody and clearing fees.

The 20% increase in operational service fees in 1993 compared with 1992
resulted largely from growth in futures and equity commissions, custody assets,
and clearing fees.

Net investment securities gains

Net investment securities gains result from sales of securities from the debt
investment portfolio, made in connection with our asset and liability
management activities, consistent with our longer-term view of changes in
global interest rates. Net investment securities gains of $122 million in
1994, consisting of gross realized gains of $429 million and gross realized
losses of $307 million, and net investment securities gains of $323 million in
1993, consisting of gross realized gains of $599 million and gross realized
losses of $276 million, resulted primarily from sales of foreign and U.S.
government and government agency securities. Net investment securities gains of
$388 million in 1992, consisting of gross realized gains of $470 million and
gross realized losses of $82 million, resulted primarily from sales of U.S. and
foreign government securities.

33
<PAGE>

Other revenue

Other revenue includes net realized gains and losses from the equity
investment portfolio and write-downs for other-than-temporary impairments in
the value of such securities. These net gains are reported in the Equity
Investments sector. Other revenue also includes dividend income and the
results of certain miscellaneous transactions.

Other revenue of $694 million in 1994 reflects net equity investment security
gains of $606 million, primarily relating to the realization of gains on a
portion of the firm's equity investment in Columbia/HCA Healthcare
Corporation. In addition, other revenue includes $54 million related to the
gain on the sale of our domestic corporate trust business and $56 million of
hedging losses from the management of nontrading foreign currency exposures.
Equity earnings from affiliates and dividend income also contributed to
miscellaneous net revenue.

Other revenue of $406 million in 1993 reflected $246 million of net equity
investment security gains. The 1993 results also included equity earnings
from affiliates of $50 million and gains on the disposition of
restructuring-country assets.

Operating expenses
[GRAPHIC APPEARS HERE]

In millions 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee compensation and benefits.......... $2 217 $2 221 $1 738
Net occupancy............................... 275 391 293
Technology and communications............... 645 512 409
Other expenses.............................. 555 456 414
- -------------------------------------------------------------------------------
Total operating expenses.................... 3 692 3 580 2 854
- -------------------------------------------------------------------------------
</TABLE>

Over the past two years, operating expenses have increased primarily due to
higher costs associated with the firm's continued investments in its swaps,
fixed income, equities, and emerging markets businesses and the entrance into
new markets and locations. During 1994 and 1993, we increased our staff in
order to support this expansion.

We continue to expand and modernize our networks and information delivery
capabilities; develop global transaction processing, trading, and information
systems; and bring the latest technology to the desktop to enhance our research
and analytical capabilities. Technology and communications expenditures that
enable us to complete these capabilities efficiently in a controlled environment
are integral to successfully managing our global businesses.

Operating expenses increased $112 million, or 3%, in 1994 compared with 1993
and increased $726 million, or 25%, in 1993 compared with 1992. Operating
expenses in 1993 included a special charge of $120 million primarily related to
real estate and relocation initiatives.

Employee compensation and benefits, which represents 60% of total operating
expenses in 1994, is composed of salaries, incentive compensation, and benefits.
An essential component of our success is the ability to hire and retain the most
competent and highly skilled professionals. In this regard, we compensate
employees in accordance with their performance and that of the firm. A
significant component of the firm's senior officers' compensation is tied to the
firm's results with a portion paid in restricted stock in order to align their
compensation with longer-term shareholder results.

Employee compensation and benefits expense in 1994 was flat compared with 1993
as higher salary expense related to an increase in personnel was offset by a
decrease in incentive compensation and profit sharing accruals in line with
current year earnings. The number of staff grew by 1,862 to 17,055 in 1994.
Employee compensation and benefits increased 28% in 1993 compared with 1992,
primarily reflecting higher incentive compensation and profit sharing accruals
in line with higher 1993 earnings. Salary and other benefits expense also grew
in 1993 due to the increase in the number of personnel and increased costs
associated with international staff assignments.

Net occupancy decreased 30% to $275 million in 1994 compared with 1993 and
increased 33% to $391 million in 1993 compared with 1992, primarily due to the
special charge of $110 million incurred in 1993 relating to the utilization of
our office space in New York and several other locations.

34
<PAGE>

Technology and communications expense includes consulting, equipment,
software, and market information costs in connection with supporting computer
processing, trading, and desktop professional systems and communications.
Technology and communications expense includes consulting fees, but does not
include compensation and benefit costs for systems and communication specialists
employed by J.P. Morgan.

Technology and communications expense increased 26% during 1994 to $645
million and 25% during 1993 to $512 million as we increased our use of
consultants in line with our strategy to utilize external resources to meet our
technology and communication needs. The use of external resources in delivering
technology provides greater flexibility in our cost structure, enabling us to
better manage our costs as business conditions change. Also contributing to the
increase in technology and communications expense was the expansion of
communication networks, higher depreciation of desktop systems and data
processing equipment, and increased usage of market information services.

Other expenses include travel, professional fees and costs for outside
services, brokerage fees, taxes other than income taxes, and charitable
contributions. The 22% increase in other expenses in 1994 was primarily
attributable to increased business activities, such as travel expenses related
to the growth in the firm's businesses around the world; brokerage fees due to
higher business volume; taxes other than income taxes; and employment agency
fees related to the significant growth in personnel.

The 10% increase in other expenses in 1993 compared with 1992 primarily
reflected increased travel expenses related to the development and support of
growing businesses; clearing and subcustodian charges resulting from increases
in transaction volume; and charitable contributions.

As a result of the difficult business environment that has continued into
1995, J.P. Morgan has taken a number of actions to hold expense growth to a
disciplined rate. A special charge of approximately $55 million, primarily
related to severance, will be included in the 1995 first quarter results as a
consequence of these actions.

Income taxes

Income tax expense for 1994 was $610 million, a decrease of $358 million from
the 1993 amount, reflecting lower pretax income and a lower effective tax
rate. Income taxes increased in 1993 compared with 1992 due to higher pretax
income. The effective tax rate for 1994, 1993, and 1992 was 33.4%, 36.0%, and
35.4% respectively, excluding the cumulative effects of adopting Statement of
Financial Accounting Standards (SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, in 1993 and SFAS No. 109,
Accounting for Income Taxes, in 1992.

Provision and allowance for credit losses

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for credit losses..................... - - $ 55
Charge-offs:
Commercial and industrial..................... $ (37) $ (82) (143)
Other......................................... (17) (41) (56)
Restructuring countries....................... (18) (37) (48)
Recoveries...................................... 45 60 33
Allowance for credit losses, December 31........ 1 131 1 157 1 258
- -------------------------------------------------------------------------------
</TABLE>

Management determines the provision for credit losses as the amount needed to
maintain an allowance adequate to absorb losses inherent in the existing
portfolios of loans and other undertakings to extend credit, such as
irrevocable unused loan commitments, or to make payments to others for which
a client is ultimately liable, such as standby letters of credit and
guarantees, commercial letters of credit and acceptances, and all other
credit exposures, including derivatives.

35
<PAGE>

J.P. Morgan considers the entire allowance for credit losses to be available
to absorb losses in connection with all credit exposures including derivatives.
No provision for credit losses was deemed necessary in 1994 or 1993. In
assessing the probability of losses that have not yet been identified and the
adequacy of the allowance, we have considered economic conditions; regulatory
requirements; our historical experience; concentrations of risk by country,
industry, product, and client; and the relatively large size of many of our
credit exposures given our wholesale banking orientation.

Charge-offs in 1994 and 1993, other than those for restructuring countries,
were $54 million and $123 million respectively, related to relatively few
borrowers, and were diversified by industry. The 1994 charge-offs were primarily
U.S.-related, while 1993 charge-offs were geographically diverse.

Restructuring-country charge-offs, including charges resulting from sales and
swaps of loans, have declined significantly over the past several years.

Nonperforming assets

Total nonperforming assets at December 31 are presented in the following
table:

In millions 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans:
Commercial and industrial............................ $136 $182 $201
Other................................................ 81 92 152
- ------------------------------------------------------------------------------
217 274 353
Restructuring countries.............................. 2 8 183
- ------------------------------------------------------------------------------
Total nonaccrual loans................................. 219 282 536
Other nonperforming assets............................. 1 13 22
- ------------------------------------------------------------------------------
Total nonperforming assets............................. 220 295 558
- ------------------------------------------------------------------------------
</TABLE>

Nonaccrual loans declined $63 million and $254 million during 1994 and 1993
respectively. In 1994, new classifications were more than offset by loan
repayments, loan sales, charge-offs, and the return of certain loans to
performing status.

During 1993, a portion of the restructuring-country loan portfolio with a book
value of $275 million was transferred to the trading account, resulting in a
decline of approximately $175 million from the 1992 amount of restructuring-
country nonaccrual loans.

The Financial Accounting Standards Board has issued SFAS No. 114 and
subsequent amendment SFAS No. 118, both entitled Accounting by Creditors for
Impairment of a Loan, which are applicable to financial statements for fiscal
years beginning after December 15, 1994. The new accounting standards apply to
all creditors and prescribe criteria for recognition of loan impairment as well
as methods to measure impairment for certain loans, including loans whose terms
were modified in troubled debt restructurings. The standards require that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price, or at the fair value of the
collateral if the loan is collateral dependent. The adoption of these standards
effective January 1, 1995, did not have a material impact on J.P. Morgan's
financial statements.

36
<PAGE>

Sources of funds

J.P. Morgan's strong capital base and international presence have allowed us
to develop a global funding base consisting of a variety of sources. As a
result, J.P. Morgan is able to limit its dependence on any individual source
and choose the funding instruments that best meet management's strategies.
Our sources include interest-bearing and noninterest-bearing deposits,
commercial paper, bank notes, trading account liabilities, repurchase
agreements, federal funds purchased, long-term debt, and stockholders'
equity. In determining the most appropriate funding source at a particular
point in time, management considers market conditions, prevailing interest
rates, liquidity needs, and our desired maturity profile.

In billions: Average balances 1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Noninterest-bearing deposits.................. $ 5.2 $ 5.9 $ 4.8
Interest-bearing deposits..................... 39.9 34.4 33.3
Commercial paper.............................. 4.2 3.4 4.4
Other liabilities for borrowed money.......... 10.3 11.2 10.0
- ----------------------------------------------------------------------------
</TABLE>

Noninterest-bearing deposits are mainly composed of items in the process of
collection and clients' compensating balances placed with us in lieu of fees
for operational services. Interest-bearing deposits are short term in nature
and central to our operations. Other liabilities for borrowed money primarily
include bank notes, term federal funds purchased, and other short-term
borrowings. Information about trading account liabilities and repurchase
agreements, important sources of funding, is provided in the Trading-related
assets and liabilities section of the Financial review.

Long-term debt

In billions: December 31 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt qualifying as risk-based capital....... $3.2 $2.5 $2.3
Long-term debt not qualifying as risk-based capital... 3.6 2.8 3.1
- -------------------------------------------------------------------------------
6.8 5.3 5.4
- -------------------------------------------------------------------------------
</TABLE>

In 1994 we issued $2.4 billion of long-term debt, of which approximately $950
million qualified as risk-based capital. Offsetting the additions to
long-term debt were approximately $970 million of maturities during 1994.

Additions in 1993 included the issuance of $1.2 billion of long-term debt, of
which approximately $710 million qualified as risk-based capital. Offsetting the
additions in 1993 were approximately $920 million of maturities and the early
redemption at par of $430 million of debt, of which approximately $190 million
reduced qualifying risk-based capital.

Stockholders' equity

Dollars in billions: December 31 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Common stockholders' equity....................... $9.1 $9.4 $6.8
Total stockholders' equity........................ 9.6 9.9 7.3
- ---------------------------------------------------------------------------
Total stockholders' equity to year-end assets..... 6.2% 7.4% 7.1%
- ---------------------------------------------------------------------------
</TABLE>

Common and total stockholders' equity decreased in 1994 as a result of lower
unrealized gains on investment securities, net of taxes, and an increase in
treasury stock purchased. The decrease was partially offset by the retention
of earnings in excess of common and preferred stock dividends.

The ratio of total stockholders' equity to year-end assets decreased as a
result of the adoption in 1994 of FIN No. 39, which caused both assets and
liabilities to increase by approximately $13 billion at December 31, 1994.

During 1994, the firm purchased approximately 7 million shares of common stock
to reduce the dilutive impact on earnings per share of increasing equity through
the firm's employee benefit plans. In December 1994, the Board of Directors
approved the purchase of up to 7 million additional shares of

37
<PAGE>

J.P. Morgan common stock for the same purpose. These shares may be purchased
periodically in 1995 or beyond in the open market or through privately
negotiated transactions.

Capital strength
[GRAPHIC APPEARS HERE]

J.P. Morgan and its subsidiaries, as well as certain foreign branches of the
principal subsidiary, Morgan Guaranty Trust Company of New York (Morgan
Guaranty), are subject to the capital adequacy rules of several U.S. and
foreign regulators. The Board of Governors of the Federal Reserve System
(Federal Reserve Board), J.P. Morgan's primary regulator, establishes minimum
capital requirements for the consolidated bank holding company as well as for
certain of its subsidiaries, including Morgan Guaranty. Under the capital
guidelines established by the Federal Reserve Board, the published capital
ratios of J.P. Morgan are calculated excluding the equity, assets, and off-
balance-sheet exposures of J.P. Morgan Securities Inc. (JPMSI). JPMSI is subject
to the Uniform Net Capital Rule of the Securities and Exchange Commission. The
capital of J.P. Morgan and its principal subsidiaries exceeded the minimum
requirements set by each regulator at December 31, 1994.

Federal Reserve Board risk-based capital and leverage ratio guidelines

The Federal Reserve Board has established risk-based capital guidelines for
evaluating the capital adequacy of banks and bank holding companies. These
guidelines require minimum ratios of risk-based capital to risk adjusted
assets of 4% for Tier 1 capital and 8% for total capital. The Federal Reserve
Board also has guidelines for a leverage ratio that is designed to complement
the risk-based capital ratios in determining the overall capital adequacy of
banks and bank holding companies. A minimum leverage ratio of Tier 1 capital
to quarterly average total assets of 3% is required for banks and bank
holding companies.

During 1992, the bank regulators adopted five capital category definitions
applicable to banks for certain regulatory supervision purposes ranging from
"well capitalized" to "critically undercapitalized." A bank is considered "well
capitalized" if it has minimum Tier 1 capital, total capital, and leverage
ratios of 6%, 10%, and 5% respectively. At December 31, 1994 and 1993, Morgan
Guaranty's ratios exceeded the minimum standards for a "well capitalized" bank.

The calculation of risk-based capital requires that capital be maintained for
both balance sheet assets and off-balance-sheet exposures in accordance with
their credit risk as defined by the Federal Reserve Board. While the risk-based
capital ratios consider the credit risk associated with these exposures, they do
not currently consider other risks, including liquidity, interest rate, and
other market risks. The Federal Reserve Board is currently evaluating responses
to their proposal to incorporate interest rate risk into the risk-based capital
framework.

In 1994, the Federal Reserve Board finalized the regulatory capital treatment
of SFAS No. 115 Accounting for Certain Investments in Debt and Equity
Securities. In accordance with the final rules, the ratios provided exclude the
impact of SFAS No. 115.

Capital strength of J.P. Morgan and Morgan Guaranty
J.P. Morgan's capital ratios at December 31 were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital........................... 9.6% 9.3% 8.9%
Total risk-based capital................. 14.2 13.0 13.0
- -------------------------------------------------------------------------------
Leverage................................. 6.5 7.3 7.1
- -------------------------------------------------------------------------------
</TABLE>

At December 31 the risk-based capital and leverage ratios of Morgan Guaranty,
calculated in accordance with bank regulatory accounting principles, were:

<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital........................... 9.7% 8.2% 7.9%
Total risk-based capital................. 12.6 11.7 12.5
- -------------------------------------------------------------------------------
Leverage................................. 5.5 5.9 5.7
- -------------------------------------------------------------------------------
</TABLE>

38
<PAGE>

J.P. Morgan's and Morgan Guaranty's Tier 1 and total capital ratios
strengthened as a result of an increase in stockholders' equity, principally
retained earnings, at December 31, 1994, as compared with December 31, 1993.
J.P. Morgan's total capital ratios strengthened primarily from the issuance
of long-term debt qualifying as risk-based capital. J.P. Morgan's and Morgan
Guaranty's Tier 1 and total capital ratios also increased as a result of a
Federal Reserve Board amendment to the risk-based capital guidelines that
modified the basis of recognition of bilateral netting agreements related to
interest rate and foreign exchange derivative contracts.

On January 1, 1994, the firm adopted FIN No. 39 resulting in a decline in J.P.
Morgan's and Morgan Guaranty's leverage ratios; implementation did not affect
the risk-based capital ratios.

J.P. Morgan's and Morgan Guaranty's Tier 1 capital and leverage ratios
strengthened from an increase in stockholders' equity, principally retained
earnings, at December 31, 1993, as compared with December 31, 1992. Morgan
Guaranty's total risk-based capital ratio at December 31, 1993, declined to
11.7%, primarily because of an increase in risk adjusted assets.

Risk-based capital

The following table presents the components of J.P. Morgan's risk-based
capital at December 31.

In millions 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stockholders' equity..................................... $8 620 $8 203 $6 816
Adjustable rate cumulative preferred stock...................... 244 244 244
Less: investments in certain subsidiaries and goodwill/(a)/.... 599 674 435
- ---------------------------------------------------------------------------------------------
Tier 1 capital.................................................. 8 265 7 773 6 625
- ---------------------------------------------------------------------------------------------
Variable cumulative preferred stock............................. 248 248 248
Long-term debt qualifying as risk-based capital................. 3 227 2 459 2 300
Qualifying allowance for credit losses.......................... 1 079 1 043 933
Less: investments in certain subsidiaries/(a)/................. 598 673 434
- ---------------------------------------------------------------------------------------------
Tier 2 capital.................................................. 3 956 3 077 3 047
- ---------------------------------------------------------------------------------------------
Total risk-based capital........................................ 12 221 10 850 9 672
- ---------------------------------------------------------------------------------------------
</TABLE>

(a) One half of our investment in certain subsidiaries (principally JPMSI)
is deducted from both Tier 1 and Tier 2 capital.

Risk adjusted assets

J.P. Morgan's risk adjusted assets at December 31, excluding the assets and
off-balance-sheet exposures of JPMSI, are set forth in the following table.
Additional information is provided in the Risk adjusted assets section of
Capital and funding analysis.

<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- --------------------
Balance Balance Balance
sheet/ Risk sheet/ Risk sheet/ Risk
notional adjusted notional adjusted notional adjusted
In billions amount balance amount balance amount balance
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets ....................... $ 129.1 $47.4 $ 107.8 $46.6 $ 84.2 $40.8
Off-balance-sheet exposures.... 2 489.1 38.9 1 679.8 36.8 1 309.0 33.8
- ------------------------------------------------------------------------------------------------------------
Gross risk adjusted assets..... 86.3 83.4 74.6
Less: allowance for credit
losses not qualifying as
risk-based capital........... (0.1) (0.1) (0.3)
- ------------------------------------------------------------------------------------------------------------
Risk adjusted assets........... 86.2 83.3 74.3
- ------------------------------------------------------------------------------------------------------------
</TABLE>
In 1994, the Federal Reserve Board proposed changes to the risk-based capital
framework that would broaden the recognition of qualifying bilateral netting
arrangements to include commodity, equity, and other derivative contracts and
would also amend the method of calculating the risk adjusted balance of all
derivative contracts. As proposed, the amendments are not expected to have a
significant impact on the risk-based capital ratios of J.P. Morgan and Morgan
Guaranty.

39
<PAGE>

Responsibility for financial reporting

The financial statements and related financial information in this annual
report were prepared by the management of J.P. Morgan. In doing so,
management applied generally accepted accounting principles and also
exercised its judgment and made estimates in those instances where they
were deemed appropriate.

In discharging its responsibility both for the integrity and fairness of
these statements and information, and for the examination of the accounting
systems from which they are derived, management maintains a system of
internal control designed to provide reasonable assurance, weighing the
costs with the benefits sought, that transactions are executed in
accordance with management's authorization, assets are safeguarded, and
proper records are maintained. An important element in management's effort
to establish a reliable control environment is the careful selection,
training, and development of professional personnel, including internal
auditors. Management believes that the system of internal control, which is
subject to close scrutiny by management and by internal auditors and is
revised as considered necessary, supports the integrity and reliability of
the financial statements.

Further, the independent accountants perform a study and evaluation of
the system of internal accounting control for the purpose of expressing an
opinion on the financial statements of J.P. Morgan.

The Board of Directors of J.P. Morgan appoints an Audit Committee
responsible for monitoring the accounting practices and internal controls
of the company. The Committee, whose membership consists of directors who
are not officers or employees of J.P. Morgan, meets periodically with
members of the internal auditing staff to discuss the nature and scope of
their work and to review such reports and other matters as the Committee
deems necessary. The Audit Committee also recommends to the Board of
Directors the engagement of an independent accounting firm and meets with
representatives of that firm to discuss the examination of the financial
statements as well as other auditing and financial reporting matters. Both
the internal auditors and the independent accountants are given access to
the Audit Committee at any time to discuss privately matters they believe
may be of significance.

In addition, J.P. Morgan is examined periodically by examiners from the
Federal Reserve System and other regulatory agencies. The Board of
Directors and management consider reports that arise from such
examinations.

Douglas A. Warner III James T. Flynn
Chairman of the Board and President Chief Financial Officer

40
<PAGE>

Report of independent accountants

To the Directors and Stockholders of J.P. Morgan & Co. Incorporated

We have audited the accompanying consolidated balance sheet of J.P. Morgan
& Co. Incorporated and its subsidiaries ("J.P. Morgan") as of December 31,
1994 and 1993, the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1994, and the consolidated statement of condition
of Morgan Guaranty Trust Company of New York and its subsidiaries as of
December 31, 1994 and 1993. These financial statements are the
responsibility of J.P. Morgan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements audited by us
present fairly, in all material respects, the financial position of J.P.
Morgan at December 31, 1994 and 1993, the results of their operations and
cash flows for each of the three years in the period ended December 31,
1994, and the financial position of Morgan Guaranty Trust Company of New
York and its subsidiaries at December 31, 1994 and 1993, in conformity with
generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, J.P.
Morgan changed its method of accounting for the offsetting of amounts
related to certain contracts, as of January 1, 1994. In 1993, J.P. Morgan
changed its methods of accounting for postretirement benefits and
investments in debt and marketable equity securities. Also in 1993,
retroactive to January 1, 1992, J.P. Morgan changed its method of
accounting for income taxes.

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

January 11, 1995

41
<PAGE>

Consolidated statement of income
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
In millions, except per share data 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest revenue
Interest revenue................................................ $8 379 $7 442 $7 281
Interest expense................................................ 6 398 5 670 5 573
- -------------------------------------------------------------------------------------------------------
Net interest revenue............................................ 1 981 1 772 1 708
Provision for credit losses..................................... - - 55
- -------------------------------------------------------------------------------------------------------
Net interest revenue after provision for credit losses.......... 1 981 1 772 1 653

Noninterest revenue
Trading revenue................................................. 1 019 2 059 959
Corporate finance revenue....................................... 434 532 439
Credit-related fees............................................. 204 224 214
Investment management fees...................................... 517 464 377
Operational service fees........................................ 546 491 409
Net investment securities gains................................. 122 323 388
Other revenue................................................... 694 406 164
- -------------------------------------------------------------------------------------------------------
Total noninterest revenue....................................... 3 536 4 499 2 950

Operating expenses
Employee compensation and benefits.............................. 2 217 2 221 1 738
Net occupancy................................................... 275 391 293
Technology and communications................................... 645 512 409
Other expenses.................................................. 555 456 414
- -------------------------------------------------------------------------------------------------------
Total operating expenses........................................ 3 692 3 580 2 854
Income before income taxes and
cumulative effects of accounting changes...................... 1 825 2 691 1 749
Income taxes.................................................... 610 968 619
- -------------------------------------------------------------------------------------------------------
Income before cumulative effects of
accounting changes............................................ 1 215 1 723 1 130
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes...... - (137) -
Cumulative effect of change in method of accounting
for income taxes.............................................. - - 452
- -------------------------------------------------------------------------------------------------------
Net income...................................................... 1 215 1 586 1 582
- -------------------------------------------------------------------------------------------------------
Per common share/(a)/
Income before cumulative effects of accounting changes.......... $6.02 $ 8.48 $5.66
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes...... - (0.68) -
Cumulative effect of change in method of accounting
for income taxes.............................................. - - 2.29
Net income...................................................... 6.02 7.80 7.95
Dividends declared.............................................. 2.79 2.48 2.23 1/2
- -------------------------------------------------------------------------------------------------------
</TABLE>

(a) Earnings per share amounts for 1994 and 1993 represent both primary and
fully diluted earnings per share. Earnings per share amounts for 1992
represent primary earnings per share. For 1992 fully diluted earnings per
share before and after the cumulative effect of the change in accounting
for income taxes were $5.63 and $7.92 respectively.

The accompanying notes are an integral part of these financial statements.

42
<PAGE>

Consolidated balance sheet
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
December 31
-----------------------
Dollars in millions 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks...................................................................... $ 2 210 $ 1 008
Interest-earning deposits with banks......................................................... 1 362 1 221
Debt investment securities available for sale carried at fair value.......................... 22 657 19 547
Trading account assets....................................................................... 57 065 41 349
Securities purchased under agreements to resell ($21 170 in 1994
and $22 645 in 1993) and federal funds sold................................................ 21 350 22 706
Securities borrowed.......................................................................... 12 127 10 818
Loans .................................................................................. 22 080 24 380
Less: allowance for credit losses............................................................ 1 131 1 157
- ---------------------------------------------------------------------------------------------------------------------------
Net loans .................................................................................. 20 949 23 223
Customers' acceptance liability.............................................................. 586 406
Accrued interest and accounts receivable .................................................... 5 028 4 938
Premises and equipment, net ................................................................. 2 016 1 853
Other assets................................................................................. 9 567 6 819
- ---------------------------------------------------------------------------------------------------------------------------
Total assets................................................................................. 154 917 133 888
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Noninterest-bearing deposits:
In offices in the U.S...................................................................... 3 693 4 681
In offices outside the U.S................................................................. 767 839
Interest-bearing deposits:
In offices in the U.S...................................................................... 1 826 2 401
In offices outside the U.S................................................................. 36 799 32 481
- ---------------------------------------------------------------------------------------------------------------------------
Total deposits............................................................................... 43 085 40 402
Trading account liabilities.................................................................. 36 407 18 216
Securities sold under agreements to repurchase ($30 179 in 1994 and
$36 306 in 1993) and federal funds purchased............................................... 35 768 39 412
Commercial paper............................................................................. 3 507 2 573
Other liabilities for borrowed money......................................................... 10 900 10 127
Accounts payable and accrued expenses........................................................ 6 231 6 416
Liability on acceptances..................................................................... 586 413
Long-term debt not qualifying as risk-based capital.......................................... 3 605 2 817
Other liabilities............................................................................ 2 063 1 194
- ---------------------------------------------------------------------------------------------------------------------------
142 152 121 570
Long-term debt qualifying as risk-based capital.............................................. 3 197 2 459
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities............................................................................ 145 349 124 029
Commitments and contingencies (Notes 8, 16, 17, 18, and 20)

Stockholders' equity
Preferred stock.............................................................................. 494 494
Common stock, $2.50 par value (authorized shares: 500 000 000;
issued: 200 668 373 in 1994 and 199 531 757 in 1993)....................................... 502 499
Capital surplus.............................................................................. 1 452 1 393
Retained earnings............................................................................ 7 044 6 386
Net unrealized gains on investment securities, net of taxes.................................. 456 1 165
Other........................................................................................ 367 250
- ---------------------------------------------------------------------------------------------------------------------------
10 315 10 187
Less: treasury stock (12 966 917 shares in 1994 and 6 445 226 shares in 1993) at cost........ 747 328
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity................................................................... 9 568 9 859
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity................................................... 154 917 133 888
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

43
<PAGE>

Consolidated statement of changes in stockholders' equity
J.P. Morgan & Co. Incorporated

In millions 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred stock
Adjustable rate cumulative preferred stock balance, January 1 and December 31..... $ 244 $ 244 $ 244
- ------------------------------------------------------------------------------------------------------------------
Variable cumulative preferred stock balance, January 1 and December 31............ 250 250 250
- ------------------------------------------------------------------------------------------------------------------
Total preferred stock, December 31................................................ 494 494 494
- ------------------------------------------------------------------------------------------------------------------
Common stock
Balance, January 1................................................................ 499 492 483
Shares issued under dividend reinvestment plan, various employee
benefit plans, and conversion of debentures..................................... 3 7 9
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 502 499 492
- ------------------------------------------------------------------------------------------------------------------
Capital surplus
Balance, January 1................................................................ 1 393 1 234 1 059
Shares issued under dividend reinvestment plan, various employee
benefit plans, and conversion of debentures, and income tax
benefits associated with stock options.......................................... 59 159 175
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 1 452 1 393 1 234
- ------------------------------------------------------------------------------------------------------------------
Retained earnings
Balance, January 1................................................................ 6 386 5 302 4 167
Income before cumulative effect of accounting changes............................. 1 215 1 723 1 130
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes........................ - (137) -
Cumulative effect of change in method of accounting for income taxes.............. - - 452
Dividends declared on adjustable rate cumulative preferred stock.................. (12) (12) (12)
Dividends declared on variable cumulative preferred stock......................... (8) (6) (8)
Dividends declared on common stock................................................ (530) (479) (427)
Dividend equivalents on common stock issuable..................................... (7) (5) -
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 7 044 6 386 5 302
- ------------------------------------------------------------------------------------------------------------------
Net unrealized gains on investment securities, net of taxes
Balance, January 1................................................................ 1 165 - -
Cumulative unrealized gains, net of taxes, at December 31, 1993................... - 1 165 -
Net change in unrealized gains, net of taxes...................................... (709) - -
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 456 1 165 -
- ------------------------------------------------------------------------------------------------------------------
Other
Common stock issuable under stock award plans
Balance, January 1................................................................ 253 - -
Cumulative deferred stock award balance, January 1, 1993.......................... - 165 -
Deferred stock awards, net........................................................ 116 88 -
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 369 253 -
- ------------------------------------------------------------------------------------------------------------------
Foreign currency translation
Balance, January 1................................................................ (3) 1 5
Translation adjustments........................................................... 2 (5) (1)
Income tax benefit (expense)...................................................... (1) 1 (3)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. (2) (3) 1
- ------------------------------------------------------------------------------------------------------------------
Total other, December 31.......................................................... 367 250 1
- ------------------------------------------------------------------------------------------------------------------
Less: treasury stock
Balance, January 1................................................................ 328 215 140
Purchases......................................................................... 444 132 81
Shares distributed under various employee benefit plans........................... (25) (19) (6)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31.............................................................. 747 328 215
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity, December 31........................................... 9 568 9 859 7 308
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

44
<PAGE>

Consolidated statement of cash flows
J.P. Morgan & Co. Incorporated

In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income.......................................................................... $ 1 215 $ 1 586 $ 1 582
Adjustments to reconcile to cash provided by (used in) operating activities:
Cumulative effect of change in method of accounting for postretirement
benefits, net of related income taxes........................................... - 137 -
Cumulative effect of change in method of accounting for income taxes.............. - - (452)
Noncash items: depreciation, amortization, provision for credit losses,
deferred income taxes, and stock award plans.................................... 371 258 296
(Increase) decrease in assets:
Trading account assets.......................................................... (15 772) (15 083) (6 915)
Securities purchased under agreements to resell................................. 1 461 (12 650) (88)
Securities borrowed............................................................. (1 309) (3 742) (5 022)
Accrued interest and accounts receivable........................................ (92) (2 240) 5 349
Increase (decrease) in liabilities:
Trading account liabilities..................................................... 18 151 5 124 4 919
Securities sold under agreements to repurchase.................................. (6 140) 12 705 6 071
Accounts payable and accrued expenses........................................... 342 2 768 (5 376)
Other changes in operating assets and liabilities, net............................ (1 881) (88) 992
Net investment securities gains included in cash flows from
investing activities............................................................ (122) (323) (388)
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities..................................... (3 776) (11 548) 968
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in interest-earning deposits with banks......................... (142) 299 3 231
Debt investment securities:
Proceeds from sales............................................................... 51 091 61 900 31 604
Proceeds from maturities, calls, and mandatory redemptions........................ 3 705 4 605 4 731
Purchases......................................................................... (59 062) (64 180) (36 581)
(Increase) decrease in federal funds sold........................................... (119) 36 (34)
Decrease in loans................................................................... 2 209 2 027 1 201
Payments for premises and equipment................................................. (341) (179) (214)
Other changes, net.................................................................. (1 099) (432) 737
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities..................................... (3 758) 4 076 4 675
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in noninterest-bearing deposits................................. (1 061) 1 540 (327)
Increase (decrease) in interest-bearing deposits.................................... 3 703 6 446 (4 054)
Increase (decrease) in federal funds purchased...................................... 2 483 349 (1 327)
Increase (decrease) in commercial paper............................................. 934 96 (286)
Other liabilities for borrowed money proceeds....................................... 7 946 8 482 11 709
Other liabilities for borrowed money payments....................................... (8 128) (12 021) (11 529)
Long-term debt proceeds............................................................. 2 342 1 208 1 358
Long-term debt payments............................................................. (879) (1 356) (1 207)
Capital stock issued................................................................ 61 166 156
Capital stock purchased or redeemed................................................. (445) (132) (81)
Dividends paid...................................................................... (541) (480) (435)
Other changes, net.................................................................. 2 297 3 081 7
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities..................................... 8 712 7 379 (6 016)
- -----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and due from banks.......................... 24 (48) (33)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and due from banks...................................... 1 202 (141) (406)
Cash and due from banks, beginning of year.......................................... 1 008 1 149 1 555
- -----------------------------------------------------------------------------------------------------------------------------
Cash and due from banks, end of year................................................ 2 210 1 008 1 149
- -----------------------------------------------------------------------------------------------------------------------------
Cash disbursements were made for:
Interest.......................................................................... $6 178 $5 714 $5 718
Income taxes...................................................................... 1 223 566 636
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

45
<PAGE>

Consolidated statement of condition
Morgan Guaranty Trust Company of New York

<TABLE>
<CAPTION>
December 31
----------------------
Dollars in millions 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks...................................................................... $ 2 182 $ 943
Interest-earning deposits with banks......................................................... 1 605 1 307
Debt investment securities available for sale carried at fair value.......................... 21 292 17 306
Trading account assets....................................................................... 45 386 31 679
Securities purchased under agreements to resell and federal funds sold....................... 16 562 15 510
Loans........................................................................................ 19 397 20 377
Less: allowance for credit losses............................................................ 1 025 1 052
- -----------------------------------------------------------------------------------------------------------------------
Net loans.................................................................................... 18 372 19 325
Customers' acceptance liability.............................................................. 556 406
Accrued interest and accounts receivable..................................................... 3 594 4 034
Premises and equipment, net of accumulated depreciation of
$1 149 in 1994 and $1 002 in 1993.......................................................... 1 818 1 701
Other assets................................................................................. 7 360 3 521
- -----------------------------------------------------------------------------------------------------------------------
Total assets................................................................................. 118 727 95 732
- -----------------------------------------------------------------------------------------------------------------------
Liabilities
Noninterest-bearing deposits:
In offices in the U.S...................................................................... 3 698 4 603
In offices outside the U.S................................................................. 770 854
Interest-bearing deposits:
In offices in the U.S...................................................................... 1 480 1 917
In offices outside the U.S................................................................. 38 566 32 320
- -----------------------------------------------------------------------------------------------------------------------
Total deposits............................................................................... 44 514 39 694
Trading account liabilities.................................................................. 30 730 12 894
Securities sold under agreements to repurchase and federal funds purchased................... 22 099 22 310
Other liabilities for borrowed money......................................................... 5 320 5 451
Accounts payable and accrued expenses........................................................ 2 902 4 491
Liability on acceptances..................................................................... 556 413
Long-term debt not qualifying as risk-based capital (includes $630 in 1994
and $466 in 1993 of notes payable to J.P. Morgan).......................................... 1 968 918
Other liabilities............................................................................ 2 080 869
- -----------------------------------------------------------------------------------------------------------------------
110 169 87 040
Long-term debt qualifying as risk-based capital (includes $1 030 in 1994 and
$1 517 in 1993 of notes payable to J.P. Morgan)............................................ 1 249 1 756
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities............................................................................ 111 418 88 796
Commitments and contingencies
Stockholder's equity
Preferred stock, $100 par value (authorized shares: 2 500 000)............................... - -
Common stock, $25 par value (authorized and outstanding shares: 10 000 000).................. 250 250
Surplus...................................................................................... 2 670 2 170
Undivided profits............................................................................ 4 266 4 042
Net unrealized gains on investment securities, net of taxes.................................. 124 477
Foreign currency translation................................................................. (1) (3)
- -----------------------------------------------------------------------------------------------------------------------
Total stockholder's equity................................................................... 7 309 6 936
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity................................................... 118 727 95 732
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

Member of the Federal Reserve System and Federal Deposit Insurance Corporation

The accompanying notes are an integral part of this financial statement.

46
<PAGE>

Notes to financial statements

1. Accounting policies

J.P. Morgan is the holding company for subsidiaries engaged globally in
providing a wide range of financial services. The accounting and reporting
policies and practices of J.P. Morgan and subsidiaries, including Morgan
Guaranty Trust Company of New York and subsidiaries (Morgan Guaranty),
conform with generally accepted accounting principles. The following is a
description of significant accounting policies and practices.

Consolidation

The consolidated financial statements include the accounts of J.P. Morgan and
subsidiaries (companies in which its percentage of ownership exceeds 50%).
All material intercompany accounts and transactions have been eliminated in
consolidation. The equity method of accounting is used in determining the
carrying values of investments in companies in which the percentage of
investment in voting stock is 20% or more but not more than 50%. These
investments are included in Other assets.

Debt and equity investment securities

Debt investment securities:

Debt investment securities are held to maximize total return over the longer
term. Beginning December 31, 1993, investment securities that may be sold in
response to or in anticipation of changes in interest rates and prepayment
risk, liquidity considerations, and other factors are considered available
for sale. Such securities are carried at fair value with unrealized gains and
losses, including the effect of hedges, reported as a net amount within the
stockholders' equity account, Net unrealized gains on investment securities,
net of taxes, until realized.

Realized gains and losses on investment securities, which are generally
computed by the specific identification method, and other-than-temporary
impairments in value are included in Net investment securities gains. Debt
investment securities transactions are recorded on their trade dates.
Carrying values of individual debt investment securities are reduced through
write-downs to reflect other-than-temporary impairments in value.

In instances where J.P. Morgan has the positive intent and ability to hold to
maturity, investment securities will be carried at cost, adjusted for
amortization of premiums and accretion of discounts.

Prior to December 31, 1993, but subsequent to June 30, 1992, debt investment
securities were carried at the lower of aggregate amortized cost or market
value with aggregate unrealized net valuation adjustments, if any, included
in Net investment securities gains. Prior to June 30, 1992, investment
securities were carried at cost, adjusted for amortization of premiums and
accretion of discounts.

Equity investment securities:

Equity investment securities of companies in which the percentage of
investment in voting stock is less than 20% are held for long-term
appreciation and are included in Other assets. Beginning December 31, 1993,
equity investment securities with available market quotations are carried at
fair value with unrealized gains and losses reported as a net amount within
the stockholders' equity account, Net unrealized gains on investment
securities, net of taxes, until realized. Prior to December 31, 1993,
marketable equity securities were carried at the lower of aggregate cost or
market value. Equity investment securities without available market
quotations are carried at cost. Carrying values of individual marketable and
nonmarketable equity investment securities are reduced through write-downs to
reflect other-than-temporary impairments in value. Realized gains and losses,
which are generally computed by the specific identification method, and
other-than-temporary impairments in value are included in Other revenue.

47
<PAGE>

Trading account assets and liabilities

Trading account assets and liabilities (short trading positions) are carried
at market value and are recorded as of their trade dates. Short trading
positions are classified as liabilities. Gains and losses on trading
positions are recognized currently.

Securities financing arrangements

Securities purchased under agreements to resell (resale agreements) and
securities sold under agreements to repurchase (repurchase agreements) are
generally treated as collateralized lending and borrowing transactions and
are carried at the amounts at which the securities were initially acquired or
sold. Securities borrowed that are collateralized by cash are included on the
balance sheet at amounts equal to the collateral advanced.

J.P. Morgan takes possession of securities purchased under resale agreements,
primarily U.S. Treasury and U.S. government agency securities. J.P. Morgan
monitors the market value of these securities and obtains additional
collateral when appropriate to secure the seller's repurchase obligations.

Premiums and discounts

Amortization of premiums and accretion of discounts are generally recognized
as interest expense or interest revenue over the life of the instrument.

Nonaccrual loans

Nonaccrual loans are those loans on which the accrual of interest is
discontinued because the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about future
collectibility of principal or interest, even though the loans are currently
performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or the value of any collateral securing
the loan is sufficient to cover the principal and the accrued interest. When
a loan is placed on nonaccrual status, any accrued but unpaid interest
previously recorded on such loan is reversed against interest revenue of the
current period. Interest received on nonaccrual loans is generally either
applied against the principal or reported as revenue, according to
management's judgment as to the collectibility of principal. Generally, a
loan may be restored to accrual status only after all delinquent interest and
principal are brought current and, in the case of loans where interest has
been interrupted for a substantial period, a regular payment performance is
established.

Allowance for credit losses

An allowance is maintained that is considered adequate to absorb losses
inherent in the existing portfolios of loans and other undertakings to extend
credit, such as irrevocable unused loan commitments, or to make payments to
others for which a client is ultimately liable, such as standby letters of
credit and guarantees, commercial letters of credit and acceptances, and all
other credit exposures, including derivatives. A judgment as to the adequacy
of the allowance is made at the end of each quarterly reporting period.
Should the allowance require adjustment either because of reductions due to
charge-offs or because of changes in the size or risk characteristics of the
portfolios, the allowance is adjusted through a provision for credit losses
in the quarterly reporting period.

Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is generally computed by the straight-line method over the
estimated useful lives of the related assets.

Derivatives used for trading purposes

Derivatives entered into for trading purposes or used as hedges of trading
instruments are carried at market value. Instruments used for trading
purposes include swaps, futures, forward, spot, and option contracts in the
interest rate, foreign exchange, equity, and commodity markets. Gains and
losses associated with such derivatives are recognized currently in Trading
revenue. The portion of the market value associated with derivatives that
reflects credit considerations, ongoing servicing, and transaction hedging
costs is recognized over the life of the agreement in Trading revenue.
Unrealized gains and losses

48
<PAGE>

are reported on a gross basis in Trading account assets or Trading account
liabilities, after taking into consideration the offsetting permitted under
Financial Accounting Standards Board Interpretation No. 39 (FIN No. 39),
Offsetting of Amounts Related to Certain Contracts. The market values of options
purchased and written are recorded on a gross basis in Trading account assets
and Trading account liabilities respectively.

Derivatives used for purposes other than trading

Asset and liability management derivatives are used to hedge exposures, to
modify the interest rate characteristics of related balance sheet
instruments, or to meet longer-term asset and liability management
objectives, including maximization of net interest revenue.

Derivatives used to hedge exposures must be designated as a hedge at the
inception of the derivative contract and must remain effective as a hedge
throughout the hedge period. Derivatives used for hedging purposes include
swaps, forwards, debt securities forwards, futures, and purchased options in the
interest rate and foreign exchange markets. Interest rate swaps are also used to
modify the interest rate characteristics of related balance sheet instruments.
Swaps used to modify the interest rate characteristics of nontrading-related
balance sheet instruments must be linked to the related asset or liability at
the inception and throughout the term of the derivative contract. Unrealized
gains and losses on all of these derivative contracts are generally deferred.
Derivatives used as hedges or to modify the interest rate characteristics of
debt investment securities are carried at fair value with the related unrealized
gains and losses deferred in a separate component of stockholders' equity.
Margin requirements associated with futures contracts and option premiums for
contracts used as hedges are recorded in Other assets or Other liabilities. The
interest component associated with derivatives used as hedges or to modify the
interest rate characteristics of assets and liabilities is recognized over the
life of the contract in Net interest revenue. Upon contract settlement or
termination, the cumulative change in the derivative's market value is recorded
as an adjustment to the carrying value of the underlying asset or liability and
recognized in Net interest revenue over the expected remaining life of the
related asset or liability. In instances where the underlying instrument is
sold, the cumulative change in the value of the associated derivative is
recognized immediately in the component of earnings relating to the underlying
instrument.

Risk-adjusting swaps are used in a manner similar to debt investment
securities to achieve a desired overall interest rate profile by increasing or
decreasing the firm's overall exposure to interest rate risk. Risk-adjusting
swaps include only interest rate swaps that do not contain leverage or embedded
option features and replicate the cash flows of nonamortizing cash instruments.
Interest revenue or expense associated with these swaps is accrued over the life
of the swap agreement in Net interest revenue. Risk-adjusting swaps are carried
at the lower of aggregate cost or market value with aggregate unrealized net
valuation adjustments, if any, recorded in Other revenue. Risk-adjusting swaps
are generally not terminated. In instances where a risk-adjusting swap is
terminated, losses are recognized immediately and gains are deferred and
amortized over the original remaining life of the terminated swap in Other
revenue.

Fee revenue

Corporate finance revenue includes fees earned from providing advisory
services and arranging financing for clients. All such fees are recognized as
revenue when the related services are performed. In addition, credit
arrangement and syndication fees are recognized after certain retention,
timing, and yield criteria are satisfied.

Credit-related, investment management, and operational service fees that
represent a return for services rendered are recognized as revenue when the
related service is performed. Commitment fees are recognized as revenue in the
period the unused commitment is available.

49
<PAGE>

Income taxes

Deferred tax assets and liabilities are established for the expected future
tax consequences of temporary differences between the carrying amounts and
tax bases of assets and liabilities using enacted tax rates. A valuation
allowance is established to reduce deferred tax assets to the amounts
expected to be realized. Investment tax credits continue to be amortized over
the estimated useful lives of the related assets.

Statement of cash flows

Cash flows from trading account assets and liabilities, resale and repurchase
agreements, and securities borrowed and trading-related derivative
transactions are classified as operating activities. Cash flows from
investment securities, including securities available for sale, are
classified as investing activities. Cash flows from sales of investment
securities that had remaining lives of greater than one year when purchased
and less than 90 days when sold, mandatory redemptions, and calls are
classified as proceeds from maturities. Cash flows from derivative
transactions used as hedges are classified consistent with the items being
hedged.

Other

Certain prior-year amounts have been reclassified to conform with 1994
classifications.

2. Accounting changes

Balance sheet netting practices

On January 1, 1994, J.P. Morgan adopted FIN No. 39, which required the firm
to report positive market values of certain derivative instruments as assets
and negative market values as liabilities. Such amounts were previously
presented on a net basis. Offsetting under FIN No. 39 is permitted for
contracts executed with the same counterparty when master netting agreements
are in place. The adoption of FIN No. 39 increased both Trading account
assets and Trading account liabilities by approximately $13 billion at
December 31, 1994. While implementation reduced J.P. Morgan's asset-based
ratios, including the leverage ratio, net income and the risk-based capital
ratios were not affected. If FIN No. 39 had been in effect at December 31,
1993, assets and liabilities would have been increased by approximately $14
billion. Financial statements for prior periods have not been restated.

Accounting for postretirement benefits other than pensions

Effective January 1, 1993, J.P. Morgan adopted Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, which requires the recognition of costs related
to postretirement benefits on an accrual basis rather than expensing such
costs when paid. Adoption of the accrual method beginning in 1993 increased
Employee compensation and benefits for the year by $21 million. In adopting
this standard, J.P. Morgan recorded the full amount of the accumulated
postretirement benefit obligation as of January 1, 1993, resulting in a
nonoperating charge to earnings of $137 million ($0.68 per share) after
income taxes of $74 million.

Accounting for income taxes

In 1993 J.P. Morgan adopted retroactive to January 1, 1992, SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 supersedes SFAS No. 96, Accounting
for Income Taxes, which J.P. Morgan adopted in 1988. SFAS No. 109 requires
the recognition of certain deferred tax assets that were not permitted to be
recognized under SFAS No. 96. As a result of adopting SFAS No. 109, the
income statement for 1992 was restated to include the cumulative effect of
this change in accounting principle as of January 1, 1992, which aggregated
$452 million ($2.29 per share), and to reflect a revised effective tax rate
of 35.4%, compared with the 21.0% originally reported. The net effect of this
change was to increase originally reported full year 1992 net income by $200
million, or $1.03 per share ($1.02 per share assuming full dilution).

50
<PAGE>

Accounting for certain investments in debt and equity securities

Effective December 31, 1993, J.P. Morgan adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, which resulted in a change
in the accounting for debt and marketable equity investment securities held
for investment purposes. Those securities, which J.P. Morgan previously
carried at the lower of aggregate cost or market value, are considered
available for sale and carried at fair value. Unrealized gains and losses are
excluded from earnings and reported net of taxes as a separate component of
stockholders' equity until realized. Upon adoption of this standard, J.P.
Morgan recorded increases in Debt investment securities of $859 million and
Other assets of $1,030 million for marketable equity investment securities, and
a deferred tax liability of $724 million related to the appreciation of the
affected securities, resulting in an increase of $1,165 million in
stockholders' equity, net of tax.

3. Interest revenue and expense

An analysis of interest revenue and expense derived from on- and
off-balance-sheet financial instruments is presented in the table below.
Interest revenue and expense associated with derivative financial
instruments, such as swaps, forwards, spot, futures, options, and debt
securities forwards, used as hedges or to modify the interest rate
characteristics of assets and liabilities, are attributed to and included
with the related balance sheet instrument. Net interest revenue associated
with risk-adjusting swaps that are used to meet longer-term asset and
liability management objectives, including the maximization of net interest
revenue, is not attributed to a specific balance sheet instrument, but is
included in the Other sources caption in the table below.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest revenue
Deposits with banks............................................. $ 197 $ 235 $ 452
Debt investment securities/(a)/................................. 1 206 1 440 1 747
Trading account assets.......................................... 2 784 1 991 1 730
Securities purchased under agreements to resell
and federal funds sold........................................ 1 593 1 408 926
Securities borrowed............................................. 624 408 218
Loans........................................................... 1 409 1 652 1 970
Other sources, primarily risk-adjusting swaps................... 566 308 238
- ---------------------------------------------------------------------------------------------------
Total interest revenue.......................................... 8 379 7 442 7 281
- ---------------------------------------------------------------------------------------------------

Interest expense
Deposits........................................................ 1 946 1 917 2 306
Trading account liabilities..................................... 1 288 916 701
Securities sold under agreements to repurchase
and federal funds purchased................................... 2 196 2 055 1 608
Other borrowed money............................................ 679 554 663
Long-term debt.................................................. 289 228 295
- ---------------------------------------------------------------------------------------------------
Total interest expense.......................................... 6 398 5 670 5 573
- ---------------------------------------------------------------------------------------------------
Net interest revenue............................................ 1 981 1 772 1 708
- ---------------------------------------------------------------------------------------------------
</TABLE>

(a) Interest revenue from debt investment securities included taxable revenue
of $1,035 million, $1,266 million, and $1,549 million and revenue exempt
from U.S. income taxes of $171 million, $174 million, and $198 million in
1994, 1993, and 1992 respectively.

For the twelve months ended December 31, 1994, net interest revenue associated
with asset and liability management derivatives was approximately $150 million.
At December 31, 1994, approximately $420 million of net deferred gains on closed
derivative contracts used for asset and liability management purposes were
recorded on the balance sheet. Such amount is primarily composed of net deferred
gains on closed hedge contracts included in the amortized cost of the debt
investment portfolio as discussed in Note 6 to the financial statements,
Investment securities. Net deferred gains are expected to amortize into Net
interest revenue as follows: $40 million (1995), $50 million (1996), $60 million
(1997), $70 million (1998), $60 million (1999), and approximately $140 million
thereafter.

51
<PAGE>

4. Trading revenue

An analysis of trading revenue is presented in the following table. Reported
Trading revenue does not include the net interest revenue associated with our
trading activities. As our business objective is to maximize total revenue,
trading-related net interest revenue should be considered when evaluating
results. For additional information related to trading-related net interest
revenue, refer to the Trading revenue discussion in the Financial review.

In millions 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps and other interest rate contracts/(a)/.................... $ 663 $ 797 $512
Debt instruments/(b)/........................................... 41 821 7
Foreign exchange spot and option contracts...................... 131 179 262
Equities, commodities, and other/(c)/........................... 184 262 178
- --------------------------------------------------------------------------------------------------------
Trading revenue................................................. 1 019 2 059 959
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes gains and losses from interest rate swaps, currency swaps,
foreign exchange forward contracts, interest rate futures, forward rate
agreements, and interest rate options.

(b) Includes gains and losses from U.S. and foreign government, government
agency, and corporate debt securities and related derivatives.

5. Cash and due from banks

J.P. Morgan is required to maintain noninterest-earning reserve balances with
U.S. Federal Reserve banks and various foreign central banks. Such balances,
which are based principally on deposits outstanding, are included in Cash and
due from banks. At December 31, 1994 and 1993, required reserves were $390
million and $564 million respectively, compared with average required
reserves during the year of $426 million in 1994 and $505 million in 1993.

6. Investment securities

Debt investment securities

At December 31, 1994 and 1993, the debt investment securities portfolio was
classified as available for sale and measured at fair value with unrealized
gains (losses) excluded from earnings and reported as a net amount within the
stockholders' equity account Net unrealized gains on investment securities,
net of taxes, until realized. Prior to the adoption of this accounting
standard, the debt investment securities portfolio was carried at LOCOM.

J.P. Morgan utilizes derivatives, primarily interest rate swaps and debt
securities forwards, to hedge the debt investment portfolio, principally
mortgage-backed securities. At December 31, 1994, net unrealized gains
associated with open contracts used to hedge the debt investment portfolio
were $6 million, consisting of gross unrealized gains of $26 million and
gross unrealized losses of $20 million. During the latter part of 1994,
certain derivative contracts used to hedge mortgage-backed securities were
closed and subsequently replaced. Net deferred gains on such closed hedge
contracts were $463 million at December 31, 1994, and were included in the
amortized cost of the related debt investment securities. Refer to Note 3 to
the financial statements, Interest revenue and expense, for a discussion of
total net deferred gains on closed derivative contracts and the related
amortization.

52
<PAGE>

Gross unrealized gains and losses as well as a comparison of the cost, fair
value, and carrying value of debt investment securities at December 31, 1994,
1993, and 1992, are presented in the table below. Net unrealized appreciation
associated with debt investment securities available for sale carried at fair
value at December 31, 1994, was $154 million, consisting of gross unrealized
appreciation of $426 million and gross unrealized depreciation of $272
million. Such amounts represent the gross unrealized appreciation or
depreciation on each debt security, including the effects of any related
hedge.

<TABLE>
<CAPTION>
Gross Gross Fair and
unrealized unrealized carrying
In millions Cost gains losses value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 (carried at fair value)
U.S. Treasury.................................... $ 1 651 $ 14 $ 42 $ 1 623
U.S. government agency, principally
mortgage-backed................................ 13 531 210 88 13 653
U.S. state and political subdivision............. 2 396 157 58 2 495
U.S. corporate and bank debt..................... 265 17 - 282
Foreign government/(a)/.......................... 3 758 20 65 3 713
Foreign corporate and bank debt.................. 802 7 19 790
Other............................................ 100 1 - 101
- -------------------------------------------------------------------------------------------------------
Total debt investment securities................. 22 503 426 272 22 657
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Gross Gross Fair and
unrealized unrealized carrying
In millions Cost gains losses value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 (carried at fair value)
U.S. Treasury.................................... $ 2 461 $115 $ 3 $ 2 573
U.S. government agency, principally
mortgage-backed................................ 7 645 233 53 7 825
U.S. state and political subdivision............. 2 229 302 - 2 531
U.S. corporate and bank debt..................... 280 18 - 298
Foreign government/(a)/.......................... 4 279 178 5 4 452
Foreign corporate and bank debt.................. 1 665 74 - 1 739
Other............................................ 129 1 1 129
- -------------------------------------------------------------------------------------------------------
Total debt investment securities................. 18 688 921 62 19 547
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Cost and Gross Gross
carrying unrealized unrealized Fair
In millions value gains losses value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 (carried at LOCOM)
U.S. Treasury.................................... $ 3 804 $ 84 $ 5 $ 3 883
U.S. government agency, principally
mortgage-backed................................ 7 791 366 108 8 049
U.S. state and political subdivision............. 2 362 283 1 2 644
U.S. corporate and bank debt..................... 421 16 1 436
Foreign government/(a)/.......................... 4 898 94 43 4 949
Foreign corporate and bank debt.................. 2 156 38 2 2 192
Other............................................ 79 1 - 80
- -------------------------------------------------------------------------------------------------------
Total debt investment securities................. 21 511 882 160 22 233
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Primarily includes debt of countries that are members of the Organization
for Economic Cooperation and Development.

At December 31, 1994, there were no securities of a single issuer whose fair
value exceeded 10% of stockholders' equity.

As a result of applying LOCOM accounting to our investment securities
portfolio, from June 30, 1992, to December 31, 1993, no unrealized losses
were recorded, as the aggregate portfolio had net unrealized appreciation.

53
<PAGE>

The following table presents the components of Net investment securities gains
realized during 1994, 1993, and 1992. Gains and losses on securities carried at
fair value reflect transactions that occurred subsequent to the December 31,
1993, change in reporting for this portfolio. Amounts relating to LOCOM reflect
transactions that occurred subsequent to June 30, 1992, through December 31,
1993, and amounts relating to securities carried at cost reflect transactions
through June 30, 1992.

In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross realized gains from sales of securities carried:
At fair value........................................ $ 411 - -
At LOCOM............................................. - $ 581 $189
At cost.............................................. - - 275
Gross realized losses from sales of securities carried:
At fair value........................................ (307) - -
At LOCOM............................................. - (276) (58)
At cost.............................................. - - (24)
Net gains on maturities, calls, and mandatory
redemptions of securities carried:
At fair value........................................ 18 - -
At LOCOM............................................. - 18 5
At cost.............................................. - - 1
- -----------------------------------------------------------------------------------------------
Net investment securities gains........................ 122 323 388
- -----------------------------------------------------------------------------------------------
</TABLE>

A profile of the maturities of available-for-sale debt investment securities
as of December 31, 1994, and the related weighted-average rates on such
securities is presented in the following table. Mortgage-backed securities
are included based on their weighted-average lives, reflecting anticipated
future prepayments based on a consensus of dealers in the market.

<TABLE>
<CAPTION>
After one After five After ten
Within year but years but years but After
one within within within twenty
Dollars in millions year five ten twenty years Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury........................ $ 423 $ 264 $ 508 $ 147 $309 $ 1 651
U.S. government agency,
principally mortgage-backed........ 25 1 547 11 659 300 - 13 531
U.S. state and political subdivision. 431 435 503 586 441 2 396
U.S. corporate and bank debt......... 49 38 178 - - 265
Foreign government................... 884 2 125 748 1 - 3 758
Foreign corporate and bank debt...... 40 663 99 - - 802
Other................................ - - - - 100 100
- --------------------------------------------------------------------------------------------------------------------
Total debt investment securities,
at cost............................ 1 852 5 072 13 695 1 034 850 22 503
Fair value........................... 1 862 5 060 13 774 1 142 819 22 657
- --------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses)........ 10 (12) 79 108 (31) 154
- --------------------------------------------------------------------------------------------------------------------
Average rates on debt
investment securities, at cost..... 8.81% 6.55% 6.87% 10.29% 8.54% 7.18%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

Average rates represent the weighted average at December 31, 1994, and include
the effects of various hedging transactions. U.S. state and political
subdivision securities have been adjusted to a taxable-equivalent basis.

Equity investment securities

Equity investment securities are held for long-term appreciation and are
included in Other assets. These securities, which are acquired primarily
through private placements, recapitalizations, and corporate restructurings
and consist of both marketable and nonmarketable securities, are generally
owned by J.P. Morgan Capital Corporation, a wholly-owned nonbank subsidiary
of J.P. Morgan. Quoted or estimated values of equity investment securities do
not necessarily represent net realizable amounts, as the timing or size of
transactions and the liquidity of the markets may not support realization of
these values. Most of our equity investment securities are subject to legal,
regulatory, and contractual restrictions that limit our ability to dispose of
them freely.

54
<PAGE>

At December 31, 1994 and 1993 marketable equity investment securities were
classified as available for sale and carried at fair value. Net unrealized
appreciation of $576 million and $1,030 million associated with these
available-for-sale equity investment securities at December 31, 1994 and
1993, respectively, are included in a separate component of stockholders'
equity, net of taxes. Net realized gains on equity investment securities
during 1994 of $606 million are reflected in Other revenue. This amount
represents $625 million of gross realized gains and $19 million of
write-downs of equity investment securities. In 1993 and 1992 net gains from
equity investment securities were $246 million and $69 million after
write-downs of $27 million and $62 million respectively. Gross unrealized
gains and losses as well as a comparison of the cost, fair value, and
carrying value of marketable equity investment securities at December 31,
1994 and 1993, follows.

In millions: December 31 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Cost.................................... $183 $ 241
Gross unrealized gains.................. 579 1 030
Gross unrealized losses................. (3) -
- -----------------------------------------------------------------
Fair and carrying value................. 759 1 271
- -----------------------------------------------------------------
</TABLE>

Nonmarketable equity investment securities are outside the scope of SFAS No.
115 and continue to be carried at a cost of $432 million at December 31,
1994, compared with a cost of $283 million at December 31, 1993. The
estimated fair value of securities without available market quotations was
$528 million and $464 million at December 31, 1994 and 1993, respectively.

7. Trading account assets and liabilities

Trading account assets and liabilities, including derivative instruments used
for trading purposes, are carried at fair value. The following tables present
the carrying value of trading account assets and liabilities at December 31,
1994 and 1993, and the average balance for the years then ended.

1994
-----------------------
Carrying Average
In millions value balance
- -----------------------------------------------------------------------------------
<S> <C> <C>
Trading account assets
U.S. Treasury.......................................... $ 6 668 $ 7 675
U.S. government agency................................. 3 332 4 579
Foreign government..................................... 17 073 17 569
Corporate debt and equity.............................. 7 409 7 915
Other securities....................................... 3 088 2 885
Interest rate and currency swaps....................... 10 914 11 036
Foreign exchange contracts............................. 3 573 5 032
Interest rate futures and forwards..................... 152 151
Commodity and equity contracts......................... 1 146 1 219
Purchased option contracts............................. 3 710 3 959
- -----------------------------------------------------------------------------------
57 065 62 020
- -----------------------------------------------------------------------------------
Trading account liabilities
U.S. Treasury.......................................... 7 187 9 015
Foreign government..................................... 8 481 8 640
Corporate debt and equity.............................. 2 519 2 445
Other securities....................................... 1 165 888
Interest rate and currency swaps....................... 8 283 8 455
Foreign exchange contracts............................. 2 605 4 178
Interest rate futures and forwards..................... 182 132
Commodity and equity contracts......................... 1 300 815
Written option contracts............................... 4 685 3 984
- -----------------------------------------------------------------------------------
36 407 38 552
- -----------------------------------------------------------------------------------
</TABLE>

55
<PAGE>

<TABLE>
<CAPTION>
1993
-----------------------
Carrying Average
In millions value balance
- -----------------------------------------------------------------------------------
<S> <C> <C>
Trading account assets
U.S. Treasury.......................................... $ 5 716 $ 7 835
U.S. government agency................................. 3 462 3 154
Foreign government..................................... 15 827 13 540
Corporate debt and equity.............................. 7 564 5 708
Derivatives, primarily purchased options............... 6 280 5 442
Other.................................................. 2 500 1 613
- -----------------------------------------------------------------------------------
41 349 37 292
- -----------------------------------------------------------------------------------
Trading account liabilities
U.S. Treasury.......................................... 6 200 9 017
Foreign government..................................... 5 750 5 393
Corporate debt and equity.............................. 1 547 1 158
Derivatives, primarily written options................. 4 457 4 513
Other.................................................. 262 1 196
- -----------------------------------------------------------------------------------
18 216 21 277
- -----------------------------------------------------------------------------------
</TABLE>

At December 31, 1994, the level of J.P. Morgan's trading account assets and
liabilities increased compared with December 31, 1993, as a result of the
adoption of FIN No. 39, effective January 1, 1994. For additional information
related to the balance sheet netting practices for certain derivatives, see
Note 2 to the financial statements, Accounting changes.

56
<PAGE>

8. Off-balance-sheet financial instruments

Derivatives

Derivatives may be used either for trading or asset and liability management
purposes. Accordingly, the notional amounts presented in the table below have
been identified as relating to either trading or asset and liability
management activities based on management's intent and ongoing usage. A
summary of the credit exposure, which is represented by the positive market
value associated with derivatives, after considering the benefit of
approximately $12.7 billion and $11.6 billion of master netting agreements in
effect at December 31, 1994 and 1993, respectively is also presented.

<TABLE>
<CAPTION>
Notional amounts Credit exposure
------------------------ ---------------------
In billions: December 31 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate and currency swaps
Trading.................................................. $723.5 $480.2
Asset and liability management/(a)//(b)//(c)/............ 251.4 183.5
- -------------------------------------------------------------------------------------------------------------------
Total interest rate and currency swaps................... 974.9 663.7 $10.9 $11.5
- -------------------------------------------------------------------------------------------------------------------
Foreign exchange spot, forward, and futures contracts
Trading.................................................. 382.8 304.0
Asset and liability management/(a)//(b)/................. 14.9 11.9
- -------------------------------------------------------------------------------------------------------------------
Total foreign exchange spot, forward,
and futures contracts.................................. 397.7 315.9 3.6 4.1
- -------------------------------------------------------------------------------------------------------------------
Interest rate futures, forward rate agreements,
and debt securities forwards
Trading.................................................. 404.5 223.8
Asset and liability management........................... 22.0 11.7
- -------------------------------------------------------------------------------------------------------------------
Total interest rate futures, forward rate
agreements, and debt securities forwards............... 426.5 235.5 0.2 0.4
- -------------------------------------------------------------------------------------------------------------------
Commodity and equity swaps, forward,
and futures contracts, all trading....................... 43.9 35.0 1.1 0.4
- -------------------------------------------------------------------------------------------------------------------
Purchased options/(d)/
Trading.................................................. 276.7 200.1
Asset and liability management/(a)/...................... 3.9 22.1
- -------------------------------------------------------------------------------------------------------------------
Total purchased options.................................. 280.6 222.2 3.7 4.3
- -------------------------------------------------------------------------------------------------------------------
Written options, all trading/(e)//(f)/..................... 348.9 181.2 - -
- -------------------------------------------------------------------------------------------------------------------
Total credit exposure...................................... 19.5 20.7
- -------------------------------------------------------------------------------------------------------------------
Less: amounts recorded as assets on
the balance sheet/(g)/................................... 19.5 6.3
- -------------------------------------------------------------------------------------------------------------------
Credit exposure not reported on the
balance sheet/(g)/....................................... - 14.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The majority of J.P. Morgan's asset and liability management derivatives
are transacted with independently managed J.P. Morgan derivatives dealers
that function as intermediaries for credit and administrative purposes.

(b) The notional amounts of asset and liability management derivatives
contracts conducted in the foreign exchange markets, primarily forward
contracts, amounted to $16.9 billion at December 31, 1994, and were
primarily denominated in the following currencies: Deutsche mark $3.8
billion, Belgian franc $2.3 billion, Italian lira $2.2 billion, Canadian
dollar $1.5 billion, British pound $1.3 billion, French franc $1.2
billion, and Swiss franc $1.0 billion.

(c) The notional amounts of risk-adjusting swaps were $233.0 billion and
$168.4 billion at December 31, 1994 and 1993, respectively.

(d) At December 31, 1994 and 1993, purchased options used for trading purposes
included $206.6 billion and $141.6 billion respectively of interest rate
options, $45.7 billion and $44.1 billion respectively of foreign exchange
options, and $24.4 billion and $14.4 billion respectively of commodity and
equity options. Only interest rate options are used for asset and
liability management purposes.

(e) At December 31, 1994 and 1993, written options included $271.2 billion and
$118.1 billion respectively of interest rate options, $51.5 billion and
$47.6 billion respectively of foreign exchange options, and $26.2 billion
and $15.5 billion respectively of commodity and equity options.

(f) The total notional amount of written put options includes $3.9 billion and
$3.4 billion of written put option contracts on debt securities at
December 31, 1994 and 1993 respectively.

(g) For additional information, see Note 2 to the financial statements,
Accounting changes.

57
<PAGE>

The following presents the credit exposure associated with derivatives at
December 31, 1994, segregated by type of counterparty.

<TABLE>
<CAPTION>
Nonbank
financial Govern-
In billions institutions ments Banks All other Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit exposure..................... $2.5 $2.9 $8.9 $5.2 $19.5
- ------------------------------------------------------------------------------------------------
</TABLE>

Credit-related financial instruments

Credit-related financial instruments include commitments to extend credit,
standby letters of credit and guarantees, and indemnifications in connection
with securities lending activities. The contractual amounts of these
instruments represent the amounts at risk should the contract be fully drawn
upon, the client default, and the value of any existing collateral become
worthless. The total contractual amount of credit-related financial
instruments does not represent the expected future liquidity requirements,
since a significant amount of commitments to extend credit and standby
letters of credit and guarantees are expected to expire or mature without
being drawn. The credit risk associated with these instruments varies
depending on the creditworthiness of the client and the value of any
collateral held. Commitments to extend credit generally require the client to
meet certain credit-related terms and conditions before drawdown. Collateral
is required in connection with securities lending indemnifications. Market
risk for commitments to extend credit and standby letters of credit and
guarantees, while not significant, may exist as availability of and access to
credit markets change.

A summary of the contractual amount of credit-related instruments at December
31 is presented in the following table.

In billions 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit.................................. $44.6 $39.0
Standby letters of credit and guarantees...................... 9.9 10.5
Securities lending indemnifications/(a)/...................... 19.5 26.4
- --------------------------------------------------------------------------------------
</TABLE>

(a) At December 31, 1994 and 1993, J.P. Morgan held cash and other collateral
of $19.4 billion and $26.4 billion respectively in support of securities
lending indemnifications.

The following presents the contractual amount of commitments to extend credit
and standby letters of credit and guarantees at December 31, 1994, segregated by
type of counterparty.

<TABLE>
<CAPTION>
Nonbank
financial Govern-
In billions institutions ments Banks All other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend credit........................... $10.0 $2.1 $3.8 $28.7/(a)/ $44.6
Standby letters of credit and guarantees............... 3.1 0.8 0.3 5.7/(b)/ 9.9
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The utilities industry exceeded 10% of this amount.
(b) The telecommunications, utilities, and health-care industries each
exceeded 10% of this amount.

Other

Consistent with industry practice, amounts receivable and payable for
securities that have not reached the contractual settlement dates are
recorded net on the consolidated balance sheet. Amounts payable for
securities purchased of $26.1 billion and $12.8 billion were netted against
amounts receivable for securities sold of $29.4 billion and $14.9 billion to
arrive at a net trade date receivable of $3.3 billion and $2.1 billion at
December 31, 1994 and 1993, respectively.

58
<PAGE>

9. Estimated fair value of financial instruments

In accordance with SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, J.P. Morgan estimates that the aggregate net fair value of all
balance sheet and off-balance-sheet financial instruments exceeded associated
net carrying values at December 31, 1994 and 1993, by $2.2 billion and $2.6
billion respectively before considering income taxes.

In accordance with generally accepted accounting principles, J.P. Morgan's
financial instruments are recorded using several methods, including historical
cost and fair or market value. Under the historical cost method, the carrying
value generally represents the amount received when a liability is incurred or
the amount paid to acquire an asset less subsequent amortization and allowances
that reflect management's estimate of uncollectible amounts. This method differs
from the basis of disclosure under SFAS No. 107, which states that the fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. Therefore, differences between carrying values under
the historical cost accounting method and fair value estimates can be
significant. For example, such differences arise in the case of the loan
portfolio, where the net carrying value represents management's estimate of
ultimately recoverable principal amounts versus fair value estimates that
represent a theoretical exchange value based on current market conditions that
take into account both principal and interest and the timing of cash flows.

59
<PAGE>

The following table presents the carrying value and fair value of J.P.
Morgan's financial instruments at December 31, 1994 and 1993.

<TABLE>
<CAPTION>
1994 1993
----------------------------- -----------------------------
Appre- Appre-
ciation/ ciation/
Carrying Fair (depre- Carrying Fair (depre-
In billions value value ciation) value value ciation)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Financial instruments used for trading purposes:
Financial assets:
Trading account assets/(a)/....................... $57.1 $57.1 - $41.3 $41.3 -
Securities purchased under agreements to
resell and federal funds sold/(b)/.............. 21.3 21.3 - 22.7 22.7 -
Securities borrowed/(c)/.......................... 12.1 12.1 - 10.8 10.8 -
Financial liabilities:
Trading account liabilities/(a)/.................. 36.4 36.4 - 18.2 18.2 -
Securities sold under agreements to repurchase
and federal funds purchased/(b)/................ 35.7 35.7 - 39.4 39.5 $(0.1)
Financial instruments used for purposes other
than trading:
Financial assets:/(d)/
Debt investment securities........................ 22.7 22.7 - 19.5 19.5 -
Net loans......................................... 20.9 22.1 $1.2 23.2 24.5 1.3
Other financial assets/(e)/....................... 18.1 18.2 0.1 14.0 14.4 0.4
Financial liabilities:/(d)/
Deposits.......................................... 43.1 43.0 0.1 40.4 40.5 (0.1)
Other liabilities for borrowed money.............. 10.9 10.9 - 10.1 10.2 (0.1)
Long-term debt.................................... 6.1 5.9 0.2 4.6 4.4 0.2
Related derivatives............................. - 0.1 (0.1) - 0.2 (0.2)
Other financial liabilities/(f)/.................. 12.3 12.3 - 9.4 9.4 -
Off-balance-sheet financial instruments:
Risk-adjusting swaps/(g)/......................... - 0.8 0.8 - 1.2 1.2
Commitments to extend credit and standby letters
of credit and guarantees........................ - 0.1 (0.1) - - -
- -------------------------------------------------------------------------------------------------------------------
Excess of net fair values over net
carrying values before considering income taxes.. 2.2 2.6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Refer to Note 7 to the financial statements, Trading account assets and
liabilities, for the carrying value and fair value of financial
instruments, including derivatives, used for trading purposes.
(b) These trading-related financial instruments are generally treated as
collateralized lending and borrowing transactions and are carried at the
amounts at which the securities were initially acquired or sold.
(c) These trading-related financial instruments that are collateralized by
cash are carried at amounts equal to the collateral advanced.
(d) Derivatives are used to hedge or modify the interest rate characteristics
of debt investment securities, loans, deposits, other liabilities for
borrowed money, long-term debt, and other financial assets and
liabilities. Net unrealized losses associated with such derivatives
contracts amounted to $59 million at December 31, 1994. Gross unrealized
gains and gross unrealized losses associated with open derivative
contracts used for these purposes at December 31, 1994, are presented
below. Such amounts primarily relate to interest rate and currency swaps
used to hedge or modify the interest rate characteristics of long-term
debt.

<TABLE>
<CAPTION>
Gross Gross Net unrealized
In millions: December 31, 1994 unrealized gains unrealized losses gains/(losses)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt......................................... $ 42 $141 $(99)
Other financial instruments............................ 89 49 40
- -----------------------------------------------------------------------------------------------------------------------
Total................................................. 131 190 (59)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(e) Includes cash and due from banks, interest-earning deposits with banks,
customers' acceptance liability, accrued interest and accounts receivable,
and other financial assets.
(f) Includes commercial paper, liability on acceptances, accounts payable and
accrued expenses, and other financial liabilities.
(g) Represents the net unrealized gain associated with risk-adjusting swaps
and their related hedges that are entered into to meet longer-term asset
and liability management objectives. The net amount is composed of $2.7
billion of gross unrealized gains and $1.9 billion of gross unrealized
losses at December 31, 1994. The unrealized gains and losses related to
the derivative contracts used to hedge these risk-adjusting swaps,
included above, were not material at December 31, 1994. There were no
terminations of risk-adjusting swaps during 1994.

60
<PAGE>

The following table summarizes the fair values of all on- and
off-balance-sheet financial instruments according to the valuation methods
used to determine fair value estimates.

<TABLE>
<CAPTION>
Off-balance-
sheet
Financial assets Financial liabilities instruments
--------------------- ------------------------ ------------
Carrying Carrying
In billions: December 31 value Fair value value Fair value Fair value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Carried at fair or market value................... $ 80.5 $ 80.5 $ 36.4 $ 36.4 -
Carried at cost:
Carrying value approximates fair value due
to short-term nature.......................... 52.3 52.3 46.4 46.4 -
Fair value based on available quoted market
prices........................................ 2.4 2.4 3.0 2.9 -
Fair value derived using estimation
techniques.................................... 17.0 18.3 58.7 58.6 $0.7
- ------------------------------------------------------------------------------------------------------------------------
152.2 153.5 144.5 144.3 0.7
- ------------------------------------------------------------------------------------------------------------------------
1993
Carried at fair or market value................... 62.2 62.2 18.2 18.2 -
Carried at cost:
Carrying value approximates
fair value due to short-term nature........... 48.1 48.1 48.2 48.2 -
Fair value based on available quoted
market prices................................. 1.7 1.8 2.6 2.7 -
Fair value derived using estimation
techniques.................................... 19.5 21.1 53.1 53.3 1.2
- ------------------------------------------------------------------------------------------------------------------------
131.5 133.2 122.1 122.4 1.2
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

Carried at fair or market value

Trading account assets and liabilities, including derivatives used for
trading purposes, are carried at market value. Debt and marketable equity
investment securities are carried at fair value.

Carried at cost: Carrying value approximates fair value due to short-term
nature

For short-term balance-sheet instruments without publicly quoted market
prices, the carrying value approximates fair value. These balance-sheet
instruments include cash and due from banks, certain securities purchased
under agreements to resell and federal funds sold, securities borrowed,
certain loans, customers' acceptance liability, accrued interest and accounts
receivable, certain other financial assets, certain securities sold under
agreements to repurchase and federal funds purchased, liability on
acceptances, accounts payable and accrued expenses, and certain other
financial liabilities. Instruments with a maturity or repricing profile of
one year or less are generally classified as short-term.

Carried at cost: Fair value based on available quoted market prices

The fair values of certain loans and other financial assets and certain other
financial liabilities were determined based on quoted market prices for the
instruments or similar issues in their most active market.

Carried at cost: Fair value derived using estimation techniques

The fair values of most financial instruments without quoted market prices
are derived using discount rates that management believes are appropriate.
Interest rates derived from prevailing market yield curves, which closely
reflect J.P. Morgan's interest-earning deposit and borrowing rates, are used
to discount interest-earning deposits, other interest-earning assets,
interest-bearing deposits, other borrowings,

61
<PAGE>

long-term repurchase agreements, and risk-adjusting swaps. In order to estimate
fair values for commercial paper, J.P. Morgan's current commercial paper rates
are used; for most long-term debt, J.P. Morgan's current cost of funds for debt
with similar terms and remaining maturities is used. Loans are discounted at
current market rates that are applicable to loans of similar type, maturity, and
credit standing. The fair value of nonaccrual loans is derived using expected
cash flows on a discounted basis. For presentation purposes, the allowance for
credit losses is classified with the carrying value of loans whose fair value is
derived using estimation techniques. Fair values for equity investment
securities for which there are no publicly quoted market prices are determined
by management based on financial and other available information.

The fair value related to commitments to extend credit and standby letters of
credit and guarantees is derived by comparing the contractual future stream of
fees with such fee streams adjusted to reflect current market rates that would
be applicable to instruments of similar type, maturity, and credit standing. The
fair value of securities lending indemnifications is determined similarly based
on fee streams, which are at market rates since most agreements mature in less
than 30 days.

10. Loans

Loans at December 31 are summarized in the following table.

In millions 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans in offices in the U.S.
Commercial and industrial...................................................... $ 3 047 $ 3 507
Financial institution:
Banks........................................................................ 458 730
Other financial institutions................................................. 738 1 457
Collateralized by real estate.................................................. 365 411
Other, including U.S. state and political subdivision.......................... 1 483 1 928
- ----------------------------------------------------------------------------------------------------------
6 091 8 033
- ----------------------------------------------------------------------------------------------------------
Loans in offices outside the U.S.
Commercial and industrial...................................................... 8 451 7 809
Financial institution:
Banks........................................................................ 1 940 1 076
Other financial institutions................................................. 2 460 3 917
Collateralized by real estate.................................................. 329 313
Foreign governments and official institutions.................................. 846 1 149
Other.......................................................................... 1 963 2 083
- ----------------------------------------------------------------------------------------------------------
15 989 16 347
- ----------------------------------------------------------------------------------------------------------
22 080 24 380
- ----------------------------------------------------------------------------------------------------------
</TABLE>

The distribution of total loans at December 31 on the basis of the location
of the borrower is presented in the following table.

In millions 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans to borrowers in the U.S.
In offices in the U.S.......................................................... $ 5 202 $ 6 740
In offices outside the U.S..................................................... 5 608 5 604
- ----------------------------------------------------------------------------------------------------------
10 810 12 344
- ----------------------------------------------------------------------------------------------------------
Loans to borrowers outside the U.S.
In offices in the U.S.......................................................... 889 1 293
In offices outside the U.S..................................................... 10 381 10 743
- ----------------------------------------------------------------------------------------------------------
11 270 12 036
- ----------------------------------------------------------------------------------------------------------
22 080 24 380
- ----------------------------------------------------------------------------------------------------------
</TABLE>

62
<PAGE>

Total nonaccrual loans, net of charge-offs, at December 31 are presented in
the following table.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and industrial....................................... $136 $182 $201
Other........................................................... 81 92 152
- ----------------------------------------------------------------------------------------------------------
217 274 353
Restructuring countries......................................... 2 8 183
- ----------------------------------------------------------------------------------------------------------
219 282 536
- ----------------------------------------------------------------------------------------------------------
</TABLE>

An analysis of the effect of nonaccrual loans, net of charge-offs, on
interest revenue is presented in the following table.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest revenue that would have been recorded if accruing/(a)/ $ 18 $ 24 $ 47
Less interest revenue recorded:/(b)/
Related to the current period................................. 5 3 16
Related to prior periods...................................... 39 167 42
- ----------------------------------------------------------------------------------------------------------
Positive impact of nonaccrual loans on interest revenue......... (26) (146) (11)
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(a) Represents $13 million, $14 million, and $24 million from borrowers in the
U.S. and $5 million, $10 million, and $23 million from borrowers outside
the U.S. in 1994, 1993, and 1992 respectively.
(b) Represents $4 million, $5 million, and $2 million from borrowers in the
U.S. and $40 million, $165 million, and $56 million from borrowers outside
the U.S. in 1994, 1993, and 1992 respectively.

11. Allowance for credit losses

An analysis of the allowance for credit losses is presented in the following
table.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1.............................................. $1 157 $1 258 $1 419
- ----------------------------------------------------------------------------------------------------------
Recoveries...................................................... 45 60 33
Charge-offs:
Commercial and industrial..................................... (37) (82) (143)
Restructuring countries....................................... (18) (37) (48)
Other......................................................... (17) (41) (56)
- ----------------------------------------------------------------------------------------------------------
Net charge-offs................................................. (27) (100) (214)
Provision for credit losses..................................... - - 55
Translation adjustment.......................................... 1 (1) (2)
- ----------------------------------------------------------------------------------------------------------
Balance, December 31............................................ 1 131 1 157 1 258
- ----------------------------------------------------------------------------------------------------------
</TABLE>

12. Premises and equipment
The components of premises and equipment at December 31 are presented in the
following table.

<TABLE>
<CAPTION>
In millions 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land........................................................................... $ 113 $ 113
Buildings...................................................................... 934 888
Equipment and furniture........................................................ 1 439 1 240
Leasehold improvements......................................................... 337 276
Property under financing obligation:
Land and building............................................................ 460 436
Construction-in-progress....................................................... 35 25
- ----------------------------------------------------------------------------------------------------------
3 318 2 978
Less: accumulated depreciation................................................. 1 302 1 125
- ----------------------------------------------------------------------------------------------------------
2 016 1 853
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Depreciation expense was $231 million in 1994, $221 million in 1993, and $205
million in 1992.

No interest was capitalized in connection with various construction projects
in 1994 or 1993.

63
<PAGE>

13. Long-term debt

Long-term debt qualifying as risk-based capital generally must be unsecured
and subordinated with an original weighted-average maturity of at least five
years. In addition, certain other debt instruments that qualified as capital
under previous regulatory capital guidelines also qualify as risk-based
capital.

In order to hedge or modify exposure to interest rate and currency exchange
rate movements, J.P. Morgan utilizes derivative instruments, primarily interest
rate and currency swaps, in conjunction with some of its debt issues. The effect
of these derivative instruments is included in the calculation of the interest
expense on the associated debt, and as a result, the effective interest rates on
the debt may differ from the coupon rates reflected in the tables below. The
interest rates shown for the floating-rate issues are those in effect at
December 31, 1994, and in parentheses, at December 31, 1993, excluding the
effect of related derivatives, if any. These rates are determined by formulas
and may be subject to certain minimum or maximum rates.

The net proceeds of J.P. Morgan's long-term debt may be used for general
corporate purposes or as advances to subsidiaries. J.P. Morgan has the option to
redeem certain debt prior to maturity at specified prices.

Long-term debt qualifying as risk-based capital and other long-term debt at
December 31 are presented in the following tables.

Long-term debt qualifying as risk-based capital

<TABLE>
<CAPTION>
Amount outstanding
Maturity Interest ------------------
Dollars in millions date rate 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan (parent)
Subordinated Japanese yen notes.................. 1994 6% - $ 179
Subordinated capital notes....................... 1994 8 7/8 - 250
Floating-rate subordinated deutsche mark notes... 1995 5.44 (6.5) $ 258 232
Zero-coupon subordinated notes/(a)/.............. 1998 8.66 304 279
Convertible debentures/(b)/...................... 1998 4 3/4 2 2
Subordinated notes............................... 1998-2003 8 1/2-9 5/8 449 448
Subordinated notes............................... 1998-2004 7 5/8 717 250
Floating-rate subordinated notes................. 2000-2005 5.37-6.13 (5-5.3) 940 948
Subordinated notes............................... 2002-2009 5 3/4-7 1/4 649 348
Subordinated Italian lira notes.................. 2003 8 79 64
Subordinated Canadian dollar notes............... 2004 6 7/8 180 -

Morgan Guaranty
Subordinated notes............................... 1996 8 1/8 100 100
Subordinated notes............................... 2002 7 3/8 199 199
- --------------------------------------------------------------------------------------------------------------
3 877 3 299
Less: amortization for risk-based capital
purposes/(c)/.................................. (680) (840)
- --------------------------------------------------------------------------------------------------------------
Total long-term debt qualifying as risk-based
capital........................................ 3 197 2 459
- --------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The principal amount of these notes is $400 million. The rate shown for
these notes, which do not bear interest, represents a level yield to
maturity. The carrying value increases as the discount on the notes is
accreted to interest expense.
(b) At December 31, 1994, these debentures were convertible into 96,400 shares
of J.P. Morgan common stock at $20 per share.
(c) The balance of debt qualifying as risk-based capital is reduced 20% per
year during each of the last five years prior to maturity.

64
<PAGE>

Long-term debt not qualifying as risk-based capital

<TABLE>
<CAPTION>
Amount outstanding
Maturity Interest -----------------
Dollars in millions date rate 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J.P. Morgan (parent)
Notes............................................ 1995 5 3/8% $ 250 $ 250
Notes............................................ 1997 6 1/2 303 -
Deutsche mark notes.............................. 1998 7 1/4 165 -
Swiss franc notes................................ 1999 5 116 -
Notes, Series B-E/(a)/........................... 2008-2009 7.7 425 425
Convertible mortgage loan/(b)/................... 2018 7 1/2 407 409

Morgan Guaranty
Mortgages payable................................ 1994-1996 various 3 11
Zero-coupon notes/(c)/........................... 1995-1996 3.88-4.87(3.30-4.87) 45 64
Zero-coupon notes/(c)/........................... 1995-1997 5.09-6.39 52 -
Notes............................................ 1995-1996 7-11 3/8 294 -
Floating-rate notes.............................. 1996 6.98 200 -
Floating-rate deutsche mark notes................ 1996-1997 5.48-5.75(6.43) 23 14
Italian lira notes............................... 1997 11 3/8 108 -
Floating-rate notes.............................. 1999 5.5 200 -
Notes/(d)/....................................... 2001 6.06 25 -
British pound financing obligation/(e)/.......... - - 309 303

J.P. Morgan Delaware
Floating-rate notes.............................. 1994 (3.2-3.9) - 501
- ---------------------------------------------------------------------------------------------------------------
2 925 1 977
Add: amortization for risk-based capital
purposes/(f)/.................................. 680 840
Total long-term debt not qualifying as
risk-based capital............................. 3 605 2 817

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The interest rates on these notes will be reset during 1998 for the
following 10-year term at a rate based on the interest rate for 10-year
U.S. Treasury securities at that time.
(b) Interest on the notes increases 1/2% every four years from 7%, as set in
1988, to 9% in 2004. After 2008 the rate will be fixed based upon the
interest rate for 10-year U.S. Treasury securities at that time. Beginning
in 2008 the loan may be converted, at the option of the lender, into a 49%
interest in the J.P. Morgan building at 60 Wall Street. If the loan is
converted, J.P. Morgan will have the option to lease the property for
seven 10-year terms. J.P. Morgan has the right to prepay the debt if the
lender does not exercise the conversion option. The loan is collateralized
by the 60 Wall Street building owned by Morgan Guaranty.
(c) The rates shown for these notes, which do not bear interest, represent a
level yield to maturity.
(d) The interest rate on these notes will be reset during 1997 to 5.775% for
the following four-year term.
(e) Represents the sale of a 52.5% interest in J.P. Morgan's office building
complex in London. The transaction is treated as a financing obligation.
The financing obligation is being amortized over a 25-year period,
corresponding with J.P. Morgan's initial lease term for the entire
complex. J.P. Morgan has renewal options to lease this space for an
additional 50 years. The lease contains escalation clauses under which
rental payments will be redetermined every five years, beginning after
year 15. Interest on the financing obligation is imputed annually at an
effective rate that varies depending on then-current rental rates in the
London real estate market.

The aggregate amounts of minimum cash payments (at the December 31, 1994,
exchange rate) to be applied to the financing obligation for each of the
five years subsequent to December 31, 1994, and thereafter are presented
in the following table.

<TABLE>
<CAPTION>
In millions
--------------------------------------------------------------------------
<S> <C>
1995........................................................ $ 22
1996........................................................ 24
1997........................................................ 24
1998........................................................ 24
1999........................................................ 24
2000 and later.............................................. 307
--------------------------------------------------------------------------
Total cash payments......................................... 425
Less: interest.............................................. 116
--------------------------------------------------------------------------
Balance outstanding at December 31, 1994.................... 309
--------------------------------------------------------------------------
</TABLE>
(f) The balance of debt qualifying as risk-based capital is reduced 20%
per year during each of the last five years prior to maturity.

65
<PAGE>

Maturities

The aggregate amounts of maturities and announced redemptions for the five
years subsequent to December 31, 1994, excluding the British pound financing
obligation noted above, are $558 million (1995), $655 million (1996), $426
million (1997), $1,113 million (1998), and $315 million (1999).

14. Income taxes

J.P. Morgan and eligible subsidiaries file a consolidated U.S. federal income
tax return. The current and deferred portions of income tax expense included
in the consolidated statement of income, excluding the cumulative effects of
adopting SFAS No. 106 and SFAS No. 109 in 1993 and 1992 respectively are
presented in the following table.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
Income tax expense
(benefit) Current Deferred Total Current Deferred Total Current Deferred Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S........................ $161 $ 91 $252 $ 289 $ 44 $333 $149 $ 152 $301
Foreign.................... 243 16 259 567 (106) 461 397 (185) 212
State and local............ 115 (16) 99 196 (22) 174 116 (10) 106
- --------------------------------------------------------------------------------------------------------
519 91 610 1 052 (84) 968 662 (43) 619
- --------------------------------------------------------------------------------------------------------
</TABLE>

The income tax expense related to net investment securities gains, included
in Income taxes, was $50 million in 1994, $132 million in 1993, and $155
million in 1992.

Deferred tax assets and liabilities at December 31, 1994, 1993, and 1992,
resulted from the items listed in the following table.

In millions 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets
Allowance for credit losses..................................... $ 444 $ 454 $ 485
Compensation and benefits....................................... 454 390 172
Foreign operations.............................................. 88 85 92
Debt investment securities...................................... - - 64
Write-down of equity investment securities...................... 52 53 50
Other........................................................... 129 172 175
- --------------------------------------------------------------------------------------------------------
Total deferred tax assets before valuation allowance............ 1 167 1 154 1 038
Less: valuation allowance/(a)/.................................. 140 150 165
- --------------------------------------------------------------------------------------------------------
Total deferred tax assets....................................... 1 027 1 004 873
- --------------------------------------------------------------------------------------------------------
Deferred tax liabilities
Gains on debt and equity investment securities.................. 342 724 -
Lease financing transactions.................................... 120 114 113
Interest rate and currency swaps................................ 99 129 106
Unremitted earnings............................................. 67 49 58
Depreciation.................................................... 44 47 57
Other........................................................... 219 120 190
- --------------------------------------------------------------------------------------------------------
Total deferred tax liabilities.................................. 891 1 183 524
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) The valuation allowance is primarily related to the ability to recognize
tax benefits associated with foreign operations.

66
<PAGE>

J.P. Morgan recorded a deferred income tax liability of $274 million and $724
million at December 31, 1994 and 1993, respectively related to the net
unrealized gains on investment securities classified as available for sale under
SFAS No. 115.

A reconciliation of the difference between the expected U.S. statutory income
tax rate and J.P. Morgan's effective income tax rate, excluding the cumulative
effects of adopting SFAS No. 106 and SFAS No. 109 in 1993 and 1992 respectively
is shown in the following table.

<TABLE>
<CAPTION>
% of pretax income 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate.................................................... 35.0% 35.0% 34.0%
Increase (decrease) due to:
State and local taxes, net of U.S. income tax effects.................... 3.5 4.2 4.0
Tax-exempt income from investments and loans, net of
related disallowed interest expense.................................... (3.7) (3.0) (5.4)
Other.................................................................... (1.4) (0.2) 2.8
- ------------------------------------------------------------------------------------------------------------------------
Effective tax rate......................................................... 33.4 36.0 35.4
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

Pretax income

The following table presents Income before income taxes and cumulative effects
of accounting changes reported by location of office. This presentation differs
from the basis of disclosure of U.S., foreign, and state and local tax expense
above and from the basis of disclosure of U.S.-related and foreign-country-
related income in Note 22 to the financial statements, U.S.-related and foreign-
country-related operations.

15. Preferred stock

Total authorized shares of preferred stock are 10,000,000. J.P. Morgan may
redeem the outstanding preferred stock, in whole or in part, at its option, for
the stated value plus accrued and unpaid dividends. All preferred stock has a
dividend preference as well as a liquidation preference and is generally
nonvoting. Preferred stock outstanding at December 31 is presented in the
following table.

<TABLE>
<CAPTION>
Authorized, issued, Dividend rate/(a)/
and outstanding shares ----------------------
1994 and 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjustable Rate Cumulative Preferred Stock,
Series A (stated value: $100 per share).................................. 2 444 300 5.00% 5.00%
Variable Cumulative Preferred Stock, Series
B, C, D, E, and F (authorized, issued, and
outstanding: 50 000 shares each series;
stated value: $1 000 per share).......................................... 250 000 4.30-4.80 2.45-2.65
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Series A: The quarterly dividend rate is determined by a formula based on
the interest rates of certain actively traded U.S. Treasury obligations.
The quarterly rate in no event will be less than 5.00% or greater than
11.50% per annum. The Series A preferred stock qualifies as Tier 1
capital. Series B, C, D, E, and F: Dividend rates for each series are
determined periodically either by auction or remarketing. The dividend
rates may not exceed certain maximums that are 110% to 200% of various
market interest rates, depending on the prevailing rating of the stock at
the dividend determination dates and the duration of the then-current
dividend periods. The dividend periods may vary from one day to 30 years,
depending on the dividend determination method used. During 1994 and 1993,
J.P. Morgan reset the dividend rates approximately every 49 days. The
dividend rates stated above represent the range of those in effect at
year-end. These series of preferred stock qualify as Tier 2 capital.

67
<PAGE>

16. Pension benefits

Pension plans are in effect for substantially all regular employees of J.P.
Morgan. J.P. Morgan's pension plans are generally noncontributory defined
benefit plans. The plans' pension benefits are generally based on age and years
of credited service and a percentage of qualifying compensation during the final
years of employment.

J.P. Morgan's policy generally has been to contribute currently the accrued
costs of its funded pension plans. The principal U.S. plan continues to meet
legal funding requirements. Contributions to that plan were $63 million in 1994,
and no contributions were made in 1993 and 1992. The accrued costs of certain
other pension plans are not contributed currently, since contributions to these
unfunded plans are not tax deductible.

For J.P. Morgan's domestic and foreign funded plans, the value of plan assets
exceeded accumulated benefits at September 30, 1994 and 1993 (the dates of the
actuarial valuations). The following table presents information related to these
plans, including the amounts recorded on the consolidated balance sheet.

<TABLE>
<CAPTION>
In millions 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets/(a)/........................................................................ $1 029 $953
Less: accumulated benefits earned prior to valuation date/(b)/
Vested............................................................................... 699 770
Nonvested............................................................................ 19 24
- ------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation/(b)/.................................................. 718 794
- ------------------------------------------------------------------------------------------------------------------------
Funded status of accumulated benefit obligation......................................... 311 159
Less: additional benefits based on estimated future salary levels/(b)/.................. 222 235
- ------------------------------------------------------------------------------------------------------------------------
Funded status of projected benefit obligation/(c)/...................................... 89 (76)
Amounts available to increase (reduce) future pension expense:
Unamortized balance of the initial transition amount/(d)/............................ (49) (57)
Cumulative net actuarial loss (gain), including deferred investment results/(e)/..... (34) 102
Costs of retroactive benefits granted by plan amendments............................. 28 29
- ------------------------------------------------------------------------------------------------------------------------
Net amounts available to increase (decrease) expense in future periods............... (55) 74
- ------------------------------------------------------------------------------------------------------------------------
Net prepaid (accrued) pension cost recorded on the consolidated balance sheet........... 34 (2)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Plan assets, which are at fair value, are managed by a trustee and are
generally invested in fixed income securities, listed stocks, and commingled
pension trust funds.
(b) Expressed as the actuarial present value.
(c) The projected benefit obligation, which equals the sum of the accumulated
benefit obligation and additional benefits based on estimated future salary
levels, was $940 million and $1,029 million at September 30, 1994 and 1993,
respectively.
(d) To be recognized ratably as a reduction of pension expense through 1999.
(e) Actuarial gains and losses result from experience that differs from that
assumed or from a change in an actuarial assumption.

Obligations related to unfunded pension plans are recorded as a liability on the
consolidated balance sheet. At December 31, 1994 and 1993, such obligations were
$102 million and $91 million respectively.

68
<PAGE>

The following table presents the components of 1994, 1993, and 1992 pension
expense for all defined benefit pension plans. The pension expense related to
defined contribution pension plans continues to be immaterial.

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of benefits earned during the period................................ $ 67 $ 51 $ 53
Interest cost on the projected benefit obligation........................ 81 75 74
Assumed return on all pension plan assets/(a)/........................... (89) (87) (84)
Amortization, primarily of the initial transition amount................. (3) (5) (7)
- -----------------------------------------------------------------------------------------------------------------------
Pension expense reflected in Employee compensation and benefits.......... 56 34 36
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the 12-month periods ended September 30, 1994, 1993, and 1992, the
actual returns on plan assets were $33 million, $155 million, and $50
million respectively. The differences between the actual and assumed amounts
have been deferred.

The following table presents weighted-average actuarial assumptions used to
calculate the projected benefit obligation and pension expense. Assumptions at
September 30 are used to calculate the projected benefit obligation as of that
date and determine the pension expense for the following fiscal year.

<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumptions at September 30:
Assumed rate of return................................................. 9.5% 9.5% 10.4%
Future annual compensation increases................................... 6.0 5.0 5.6
Discount rate.......................................................... 8.3 7.0 8.0
- -----------------------------------------------------------------------------------------------------------------------
Pension expense for the year ended December 31:
Assumed rate of return................................................. 9.5% 10.4% 10.3%
Future annual compensation increases................................... 5.0 5.6 6.0
Discount rate.......................................................... 7.0 8.0 8.0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

69
<PAGE>

17. Postretirement benefits other than pensions

U.S. employees who were hired before February 1, 1989, and who have completed
ten years of continuous service with J.P. Morgan may be eligible for pensioner
health care and life insurance coverage when they retire, although J.P. Morgan
has no contractual obligation to provide this coverage. Eligible employees
retiring after July 1, 1992, will absorb a greater proportion of the cost of
health care than those who retired on or before July 1, 1992. U.S. employees
hired on or after February 1, 1989, are not eligible for pensioner health care
coverage but may be eligible for limited life insurance coverage when they
retire. Postretirement benefit eligibility requirements for non-U.S. employees
vary from country to country.

Effective November 21, 1994, J.P. Morgan began to fund its postretirement
benefit obligations through the purchase of corporate owned life insurance
(COLI) on the lives of eligible employees and retirees. Assets attributable to
the COLI policy are held in a separate account at the insurance company, and the
cash value of the policy is invested by the insurance company in equity
securities and/or bonds or other debt instruments. The COLI policy is owned by
J.P. Morgan; however, the COLI proceeds (i.e., death benefits, withdrawals, and
other distributions) are segregated and restricted to reimbursing J.P. Morgan
for its net postretirement benefit claim payments and related administrative
expenses.

The following table reconciles the actuarial present value of J.P. Morgan's
accumulated postretirement benefit obligation (APBO) relating to health care and
life insurance at September 30, the date of the actuarial valuation, to the
amount recorded on the consolidated balance sheet at December 31.

(a) Actuarial gains and losses result from experience that differs from that
assumed or from a change in an actuarial assumption.

The following table presents the components of 1994 and 1993 postretirement
benefit expense.

<TABLE>
<CAPTION>
In millions 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost of benefits earned during the period...................................... $ 9 $ 8
Interest cost on APBO.......................................................... 18 18
- --------------------------------------------------------------------------------------------------------------------
Expense reflected in Employee compensation and benefits........................ 27 26
Transition obligation, recorded on January 1, 1993,
as a one-time cumulative nonoperating charge................................. -- 211
- --------------------------------------------------------------------------------------------------------------------
Total postretirement benefit expense........................................... 27 237
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

70
<PAGE>

The following table presents actuarial assumptions used to calculate the APBO
and postretirement benefit expense. Assumptions at September 30 are used to
calculate the APBO as of that date and determine postretirement benefit expense
for the following fiscal year.

<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assumptions at September 30:
Assumed rate of return.......................................................... 9.0% --
Future annual compensation increases, affecting the APBO for
pensioner life insurance only................................................. 5.5 4.5%
Health-care cost trend rate:
First year.................................................................... 15.0 15.5
Ultimate rate after gradual decreases for 15 years............................ 5.5 5.5
Discount rate................................................................... 8.5 7.0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

If the assumed health-care cost trend rate were increased one percentage point
in each future year, annual postretirement benefit expense would have increased
by $3 million in 1994 and 1993. In addition, the APBO as of September 30 would
have increased by $20 million and $25 million for 1994 and 1993 respectively.

18. Stock options and awards

Common stock

J.P. Morgan's stock option and award plans provide for the issuance of stock-
related awards to key employees, such as stock options, stock appreciation
rights, restricted stock awards, stock bonus awards and stock unit awards. To
satisfy awards granted under the plans, common stock may be made available from
J.P. Morgan's authorized but unissued shares. Shares may also be purchased on
the open market at various times during the year. Shares available for future
grant under the plans totaled 7,902,928 at December 31, 1994.

In 1993, J.P. Morgan reclassified its accumulated obligations under various
stock award plans from accounts payable and accrued expenses to stockholders'
equity. At year-end 1993, the reclassification resulted in a $253 million
increase to equity capital. This reclassification more appropriately reflects
the firm's obligation to settle these awards by issuing its common stock.

71
<PAGE>

Stock options:

Stock options are issued at prices not less than the fair market value on the
date of grant. Stock options are generally exercisable commencing one or two
years following the date of grant and in no event later than ten years from the
date of grant. The following is a summary of options transactions during 1994,
1993, and 1992.

<TABLE>
<CAPTION>
Shares under Option price
option per share
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1991................................................ 13 105 484 $13 5/16 to 45 1/8
Granted................................................................ 4 368 000 66 1/8
Exercised.............................................................. (2 150 084) 13 5/16 to 45 1/8
Canceled............................................................... (80 100)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992................................................ 15 243 300 17 15/16 to 66 1/8
Granted................................................................ 4 531 750 60 3/4
Exercised.............................................................. (2 011 346) 17 15/16 to 66 1/8
Canceled............................................................... (230 750)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993................................................ 17 532 954 17 15/16 to 66 1/8
Granted................................................................ 4 541 600 71
Exercised.............................................................. (946 955) 17 15/16 to 66 1/8
Canceled............................................................... (402 579)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994................................................ 20 725 020 24 3/32 to 71
- -------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31,
1992................................................................... 10 940 800 17 15/16 to 45 1/8
1993................................................................... 11 048 204 17 15/16 to 66 1/8
1994................................................................... 14 229 295 24 3/32 to 66 1/8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

In January 1995, J.P. Morgan granted 5,961,952 options at an option price of
$60.50.

Restricted stock, stock bonus, and stock unit awards:

Restricted stock is awarded in the form of share credits, each of which is
equivalent to one share of J.P. Morgan common stock. Restricted stock awards
generally become fully vested on the fifth anniversary of the date of the award.
Payment of the award may be made to the participant as soon as practicable after
the award has become vested, but may be deferred at the discretion of a
committee of the Board of Directors administering the plans. At December 31,
1994, 1993, and 1992, total share credits representing previously granted
restricted stock awards, including share credits attributable to dividend
equivalents, were 2,146,629 credits, 1,524,733 credits, and 1,235,049 credits
respectively. In January 1995, 457,509 share credits representing restricted
stock awards were granted.

Stock bonus awards are substantially similar to restricted stock awards,
except that stock bonus awards generally become vested on the third anniversary
of the date of the award. Payment of stock bonus awards may be made to the
participant as soon as practicable after the award has become vested, but may be
deferred at the discretion of a committee of the Board of Directors
administering the plans. At December 31, 1994, 1993, and 1992, total share
credits representing previously granted stock bonus awards, including share
credits attributable to dividend equivalents, were 1,573,006 credits, 871,292
credits, and 448,381 credits respectively. In January 1995, 1,175,221 share
credits representing stock bonus awards were granted.

Stock unit awards are substantially similar to restricted stock and stock
bonus awards, except the value of a stock unit award will never exceed (but may
be less than) the dollar value of the initial award. Stock unit awards generally
become fully vested on either the third or fifth anniversary of the date of the
award. At December 31, 1994, no stock unit awards had been granted. In January
1995, 52,323 stock unit awards were granted.

72
<PAGE>

Redeemable preferred stock

J.P. Morgan may award redeemable preferred stock to certain employees. The
redeemable preferred stock is redeemable at any time by the stockholder. J.P.
Morgan may also call the outstanding redeemable preferred stock, in whole, upon
30 days' notice after 60 days from issuance. At December 31, 1994, approximately
1 million shares of the redeemable preferred stock had been authorized, and
there were no shares issued or outstanding. In January 1995, shares of this
stock were awarded to employees, and substantially all of these shares have been
redeemed by those employees.

19. Earnings per common share

In the calculation of primary and fully diluted earnings per common share, net
income is adjusted by adding back to net income the interest expense on
convertible debentures and the expense related to dividend equivalents on
certain deferred incentive compensation awards, net of the related income tax
effects, and deducting the preferred stock dividends.

Primary and fully diluted earnings per common share in 1994, 1993, and 1992
are computed by dividing income components by the weighted-average number of
common and common equivalent shares outstanding during the year.

For the primary earnings per share calculation, the weighted-average number of
common and common equivalent shares outstanding includes the average number of
shares of common stock outstanding, the average number of shares issuable upon
conversion of convertible debentures, and the average number of shares issuable
under employee benefit plans that have a dilutive effect.

The weighted-average number of common and common equivalent shares
outstanding, assuming full dilution, includes the average number of shares of
common stock outstanding, the average number of shares issuable upon conversion
of convertible debentures, and the average number of shares issuable under
various employee benefit plans. The maximum dilutive effect is computed using
the period-end market price of J.P. Morgan common stock, if it is higher than
the average market price used in calculating primary earnings per share.

<TABLE>
<CAPTION>
Dollars in millions 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adjusted income before cumulative
effects of accounting changes.......................................... $1 198 $1 705 $1 115
Cumulative effect of change in method of accounting for
postretirement benefits, net of related income taxes................... -- (137) --
Cumulative effect of change in method of accounting for
income taxes........................................................... -- -- 452
Adjusted net income...................................................... 1 198 1 568 1 567
Primary earnings per share:
Weighted-average number of common and common
equivalent shares outstanding....................................... 199 056 561 201 073 125 197 233 938
Fully diluted earnings per share:
Weighted-average number of common and common
equivalent shares outstanding, assuming full dilution............... 199 056 809 201 116 329 197 795 009
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

73
<PAGE>

20. Commitments and contingent liabilities

Excluding mortgaged properties, assets carried at approximately $49.5 billion
and approximately $37.5 billion in the consolidated balance sheet at December
31, 1994 and 1993, respectively were pledged as collateral for borrowings, to
qualify for fiduciary powers, to secure public monies as required by law, and
for other purposes.

In compliance with rules and regulations established by various domestic and
foreign regulators, cash of $113 million and $68 million and securities with a
market value of $1,024 million and $609 million were segregated in special bank
accounts for the benefit of securities and futures brokerage customers at
December 31, 1994 and 1993, respectively.

Operating expenses include net rentals of $94 million in 1994, $83 million in
1993, and $75 million in 1992. Minimum rental commitments on noncancellable
leases for premises and equipment are $1,147 million in the aggregate, and for
each of the five years subsequent to December 31, 1994, are $118 million (1995),
$104 million (1996), $91 million (1997), $84 million (1998), and $64 million
(1999). Certain leases contain renewal options and escalation clauses.

In the ordinary course of business, J.P. Morgan guarantees the performance of
certain obligations of certain subsidiaries and affiliates. It is not
anticipated that these agreements will have a material effect on the results of
operations of J.P. Morgan.

Various legal actions and proceedings are pending against or involve J.P.
Morgan and its subsidiaries. Management, after reviewing with counsel all
actions and proceedings pending against or involving J.P. Morgan and its
subsidiaries, considers that the aggregate liability or loss, if any, resulting
from them will not be material.

74
<PAGE>

21. Concentrations of financial instruments

J.P. Morgan's clients and other counterparties to the company's on- and off-
balance-sheet financial instruments operate in diverse industries of the world
economy, most significantly in the United States and Europe, and include nonbank
financial institutions, governments, and banks.

Summarized in the following tables are the amounts of credit exposure
associated with the company's on- and off-balance-sheet financial instruments
allocated to the industries and geographic areas of the ultimate obligors at
December 31, 1994 and 1993. The unrealized gains included below have been
reduced for the effects of master netting agreements. The amounts below do not
consider $87.5 billion and $80.8 billion of cash and marketable security
collateral at December 31, 1994 and 1993, respectively related mainly to loans,
resale agreements, securities lending indemnifications, and amounts receivable
for securities sold not yet settled, that are available to J.P. Morgan to limit
these credit exposures.

<TABLE>
<CAPTION>
Nonbank
financial Govern-
In billions: December 31 institutions/(a)/ ments Banks All other Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
On-balance-sheet:
U.S........................................ $18.2 $31.9 $13.1 $19.3 $ 82.5
Europe/(b)/................................ 8.8 18.8 13.4 6.9 47.9
Asia and Pacific........................... 2.4 3.2 4.1 2.1 11.8
Western hemisphere, excluding U.S.......... 1.2 5.8 2.0 2.8 11.8
- ------------------------------------------------------------------------------------------------------------------------
Total on-balance-sheet credit exposure..... 30.6 59.7 32.6 31.1 154.0/(c)/ /(d)/
- ------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet:
U.S........................................ 33.8 2.3 3.9 28.7 68.7
Europe/(b)/................................ 10.6 4.0 6.1 5.2 25.9
Asia and Pacific........................... 3.0 2.6 0.8 0.5 6.9
Western hemisphere, excluding U.S.......... 1.1 0.5 1.0 0.6 3.2
- ------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet credit exposure ... 48.5 9.4 11.8 35.0 104.7
- ------------------------------------------------------------------------------------------------------------------------
Total credit exposure...................... 79.1 69.1 44.4 66.1/(e)/ 258.7
- ------------------------------------------------------------------------------------------------------------------------
Cash and marketable security
collateral............................... 56.2 4.5 21.8 5.0 87.5
- ------------------------------------------------------------------------------------------------------------------------

1993
On-balance-sheet:
U.S........................................ 21.1 24.9 13.8 15.6 75.4
Europe/(b)/................................ 8.9 20.8 7.3 8.9 45.9
Asia and Pacific........................... 0.6 2.1 2.1 1.4 6.2
Western hemisphere, excluding U.S.......... 1.9 1.8 0.7 1.3 5.7
- ------------------------------------------------------------------------------------------------------------------------
Total on-balance-sheet credit exposure..... 32.5 49.6 23.9 27.2 133.2/(c)/
- ------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet:
U.S........................................ 29.9 4.1 3.4 26.5 63.9
Europe/(b)/................................ 12.1 3.0 11.7 6.4 33.2
Asia and Pacific........................... 1.1 0.8 4.0 1.1 7.0
Western hemisphere, excluding U.S.......... 1.4 0.7 1.0 0.2 3.3
- ------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet credit exposure.... 44.5 8.6 20.1 34.2 107.4
- ------------------------------------------------------------------------------------------------------------------------
Total credit exposure...................... 77.0 58.2 44.0 61.4/(e)/ 240.6
- ------------------------------------------------------------------------------------------------------------------------
Cash and marketable security
collateral............................... 54.1 3.1 19.3 4.3 80.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Nonbank financial institutions include securities firms, insurance
companies, and investment companies.
(b) Includes Middle East and Africa.
(c) On-balance-sheet items without credit exposure totaled $0.9 billion and $0.7
billion in 1994 and 1993 respectively.
(d) For the twelve months ended December 31, 1994, on-balance-sheet credit
exposure includes the impact of adopting FIN No. 39.
(e) No single industry in this category exceeded $7 billion and $6 billion at
December 31, 1994 and 1993, respectively.

75
<PAGE>

22. U.S.-related and foreign-country-related operations

For reporting purposes only, operations of J.P. Morgan are divided into
components identified as "U.S.-related" and "foreign-country-related."
Management believes that the methodology used to allocate J.P. Morgan's results
between foreign and domestic sources, while inexact, is an appropriate one.

Assets

Assets are distributed on the basis of the location of the borrower or obligor,
with the exception of interest-earning deposits with banks, which are
distributed based on the location of the institution receiving the deposit, and
trading account assets, premises and equipment, accrued interest and accounts
receivable, and other assets, which are distributed based on the location of the
office recording the asset.

Assets at December 31 were distributed among geographic regions as shown in
the table below.

<TABLE>
<CAPTION>
Dollars in millions, % of total assets 1994 1993 1992
- ----------------------------------------------------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Europe/(a)/............................. $ 63 939 41% $ 48 248 36% $ 33 488 33%
Western hemisphere, excluding U.S....... 6 914 5 6 416 5 5 062 5
Asia and Pacific........................ 5 840 4 5 888 4 4 615 4
- ---------------------------------------------------------------------------------------------------------------------
Total foreign-country-related assets.... 76 693 50 60 552 45 43 165 42
Total U.S.-related assets............... 78 224 50 73 336 55 60 032 58
- ---------------------------------------------------------------------------------------------------------------------
Consolidated total assets............... 154 917 100 133 888 100 103 197 100
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Includes Middle East and Africa.

Revenues and expenses

Because the operations of J.P. Morgan are highly integrated, an identification
of revenues and expenses as U.S.-related or foreign-country-related necessarily
involves estimates and assumptions. Interest revenue is distributed according to
the location of the borrower from whom the revenue is earned, except for
interest on trading-related assets and other interest-earning assets, which is
distributed based on the location of the office recording the assets. Interest
expense is allocated based on the distribution of interest revenue. The benefit
of capital is allocated based on the proportion of average assets attributed to
each geographic region. Noninterest revenue is generally distributed based on
the location of the office recording the revenue. Allocations are made of
expenses incurred in one component of operations on behalf of another, and
adjustments are made for differences between U.S. and foreign-country income tax
rates.

The provision for credit losses is allocated primarily on the basis of changes
in the respective portions of the allowance for credit losses that could be
considered as U.S.-related or foreign-country-related based on the location of
the borrower.

76
<PAGE>

On the basis described above, the respective contributions of U.S.-related and
foreign-country-related operations to the results of J.P. Morgan in 1994, 1993,
and 1992 are estimated in the following table.

<TABLE>
<CAPTION>
Western
hemi- Total
sphere, Asia foreign- Total
excluding and country- U.S.- Consoli-
In millions Europe/(a)/ U.S. Pacific related related dated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994
Total revenues.............................. $4 432 $381 $617 $5 430 $6 485 $11 915
Total expenses.............................. 3 542 354 664 4 560 5 530 10 090
Income (loss) before income taxes........... 890 27 (47) 870 955 1 825
Income tax expense (benefit)................ 355 11 (19) 347 263 610
Net income (loss)........................... 535 16 (28) 523 692 1 215
- --------------------------------------------------------------------------------------------------------------------------
1993
Total revenues.............................. 5 042 570 643 6 255 5 686 11 941
Total expenses.............................. 3 380 338 568 4 286 4 964 9 250
Income before income taxes and
cumulative effect of
accounting change......................... 1 662 232 75 1 969 722 2 691
Income tax expense.......................... 657 92 29 778 190 968
Income before cumulative effect of
accounting change......................... 1 005 140 46 1 191 532 1 723
Cumulative effect of accounting
change.................................... -- -- -- -- (137) (137)
Net income.................................. 1 005 140 46 1 191 395 1 586
- --------------------------------------------------------------------------------------------------------------------------
1992
Total revenues.............................. 4 003 627 550 5 180 5 051 10 231
Total expenses.............................. 2 921 406 486 3 813 4 669 8 482
Income before income taxes and
cumulative effect of
accounting change......................... 1 082 221 64 1 367 382 1 749
Income tax expense.......................... 454 93 27 574 45 619
Income before cumulative effect of
accounting change......................... 628 128 37 793 337 1 130
Cumulative effect of accounting
change.................................... 331 68 20 419 33 452
Net income.................................. 959 196 57 1 212 370 1 582
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Includes Middle East and Africa.

In these years, the only foreign country estimated to have accounted for 10% or
more of total revenues was the United Kingdom (16% in 1994, and 17% in 1993 and
1992).

77
<PAGE>

23. Condensed financial statements of J.P. Morgan (parent)

Presented below are the condensed statement of income, balance sheet, and
statement of cash flows for J.P. Morgan & Co. Incorporated, the parent company.

Statement of income
J.P. Morgan (parent)

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Equity in undistributed earnings of subsidiaries....................... $ (82) $1 224 $ 760
Dividends from subsidiaries:
Banks................................................................ 725 276 630
Other................................................................ 593 60 195
- -----------------------------------------------------------------------------------------------------------------------
Total equity in earnings of subsidiaries/(a)(b)/....................... 1 236 1 560 1 585
Interest from subsidiaries............................................. 423 312 396
Other interest revenue................................................. 27 18 --
Corporate finance revenue allocations from subsidiaries................ 59 74 28
Service fees from subsidiaries......................................... 87 27 12
Net investment securities gains (losses)............................... (29) 4 --
Other revenue (includes gains of $24 in 1993 from the early
extinguishment of notes advanced to a subsidiary bank)............... 17 28 --
- -----------------------------------------------------------------------------------------------------------------------
Total revenue.......................................................... 1 820 2 023 2 021
- -----------------------------------------------------------------------------------------------------------------------
Expenses
Interest (includes $16 in 1994, $6 in 1993, and $2 in 1992
to subsidiaries)..................................................... 446 307 401
Employee compensation and benefits..................................... 103 72 21
Other.................................................................. 56 33 14
- -----------------------------------------------------------------------------------------------------------------------
Total expenses......................................................... 605 412 436
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes............................................. 1 215 1 611 1 585
Income taxes........................................................... -- 25 3
- -----------------------------------------------------------------------------------------------------------------------
Net income............................................................. 1 215 1 586 1 582
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The 1993 amount includes the $137 million cost representing the cumulative
effect of the change in method of accounting for postretirement benefits.
(b) The 1992 amount includes the $452 million cumulative effect of the change in
method of accounting for income taxes.

Certain prior-year amounts have been reclassified to conform with 1994
classifications.

78
<PAGE>

Balance sheet
J.P. Morgan (parent)

<TABLE>
<CAPTION>
December 31
-----------------------
In millions 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Interest-earning deposits with subsidiary banks.......................................... $ 1 640 $ 188
Debt investment securities available for sale carried at fair value...................... 1 116 711
Investments in subsidiaries:
Banks.................................................................................. 7 978 7 775
U.S. broker-dealer..................................................................... 486 556
Other nonbanks......................................................................... 985 1 345
Advances to subsidiaries:
Banks.................................................................................. 1 660 1 983
U.S. broker-dealer..................................................................... 3 309 3 166
Other nonbanks......................................................................... 1 681 1 005
Accrued interest and accounts receivable, primarily from subsidiary banks................ 221 135
Other assets (includes $488 in 1994 and $177 in 1993 related to
corporate-owned life insurance contracts and $150 in 1994
from dividends receivable from subsidiary banks)....................................... 774 303
- ------------------------------------------------------------------------------------------------------------------------
Total assets............................................................................. 19 850 17 167
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Securities sold under agreements to repurchase with subsidiary banks..................... 592 311
Commercial paper......................................................................... 3 430 2 449
Accounts payable and accrued expenses.................................................... 933 413
Long-term debt not qualifying as risk-based capital...................................... 2 266 1 864
Other liabilities........................................................................ 51 28
- ------------------------------------------------------------------------------------------------------------------------
7 272 5 065
Long-term debt qualifying as risk-based capital.......................................... 3 010 2 243
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities........................................................................ 10 282 7 308
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity............................................................... 9 568 9 859
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity............................................... 19 850 17 167
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

79
<PAGE>

Statement of cash flows
J.P. Morgan (parent)

<TABLE>
<CAPTION>
In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income................................................................. $ 1 215 $ 1 586 $ 1 582
Adjustments to reconcile to cash provided by operating activities:
Equity in undistributed (earnings) losses of subsidiaries................ 82 (1 224) (760)
Increase due to changes in other balance sheet amounts................... 359 148 55
Net investment securities (gains) losses included in cash flows
from investing activities.............................................. 29 (4) --
Other revenue from the early redemption of advances
to subsidiaries........................................................ -- (24) --
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities...................................... 1 685 482 877
- -----------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in interest-earning deposits
with subsidiary banks.................................................... (1 452) 111 469
Debt investment securities:
Proceeds from sales...................................................... 535 203 --
Purchases................................................................ (1 064) (882) --
Increase in advances to subsidiaries....................................... (695) (9) (679)
Capital to subsidiaries.................................................... (270) (17) (62)
Payments for insurance contracts........................................... (367) (180) --
Other changes, net......................................................... 36 24 (21)
- -----------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities.......................................... (3 277) (750) (293)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in securities sold under agreements to repurchase
with subsidiary banks.................................................... 281 311 --
Increase (decrease) in commercial paper
and other short-term borrowings.......................................... 991 (10) (294)
Long-term debt:
Proceeds................................................................. 1 575 741 896
Payments................................................................. (464) (594) (825)
Capital stock:
Issued................................................................... 61 166 156
Purchased or redeemed.................................................... (445) (132) (81)
Dividends paid............................................................. (541) (480) (435)
Cash receipts from subsidiary banks for common stock issuable.............. 108 251 --
Other changes, net......................................................... 26 15 --
- -----------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities............................ 1 592 268 (583)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in cash and due from banks........................................ -- -- 1
Cash and due from banks, beginning of year................................. 2 2 1
- -----------------------------------------------------------------------------------------------------------------------------
Cash and due from banks, end of year....................................... 2 2 2
- -----------------------------------------------------------------------------------------------------------------------------
Cash disbursements for interest and taxes.................................. $445 $318 $404
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

80
<PAGE>

24. Certain restrictions: Subsidiaries

Under the Federal Reserve Act and New York State law, there are legal
restrictions limiting the amount of dividends that Morgan Guaranty, a state
member bank, can declare. The most restrictive test requires approval of the
Federal Reserve Board if dividends declared exceed the net profits for that year
combined with the net profits for the preceding two years. The calculation of
the amount available for payment of dividends is based on net profits determined
in accordance with bank regulatory accounting principles, reduced by the amount
of dividends declared. At December 31, 1994, the cumulative retained net profits
for the years 1994 and 1993 available for distribution as dividends in 1995
without approval of the Federal Reserve Board amounted to approximately $1,440
million.

The Federal Reserve Board may prohibit the payment of dividends if it
determines that circumstances relating to the financial condition of a bank are
such that the payment of dividends would be an unsafe and unsound practice.
Delaware banking law also places certain limitations on the amount of dividends
that J.P. Morgan Delaware, a Delaware state bank, can pay.

U.S. federal law also places certain restrictions on certain types of
transactions engaged in by insured banks and their subsidiaries with certain
affiliates, including, in the case of Morgan Guaranty and J.P. Morgan Delaware,
J.P. Morgan and its nonbanking subsidiaries. "Covered transactions" are limited
to 20% of capital and surplus, as defined, and "covered transactions" with any
one such affiliate are limited to 10% of capital and surplus. "Covered
transactions" are defined to include, among other things, loans and extensions
of credit to such an affiliate, purchases of assets from such an affiliate, and
any guarantees, acceptances, and letters of credit issued on behalf of such an
affiliate. Such loans, extensions of credit, guarantees, acceptances, and
letters of credit must be collateralized. In addition, a wide variety of
transactions engaged in by insured banks and their subsidiaries with such
affiliates are required to be made on terms and under circumstances that are at
least as favorable to the bank or subsidiary concerned as those prevailing at
the time for comparable transactions with nonaffiliated companies.

Certain other subsidiaries are subject to various restrictions, mainly
regulatory requirements, that may limit cash dividends and advances to J.P.
Morgan and that establish minimum capital requirements.

81
<PAGE>

Additional selected data
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
Dollars in millions, except per share data 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected financial data
Total interest revenue............................. $ 8 379 $ 7 442 $ 7 281 $ 7 786 $ 8 445
Total noninterest revenue.......................... 3 536 4 499 2 950 2 528 2 035
Total revenues..................................... 11 915 11 941 10 231 10 314 10 480
Net interest revenue............................... 1 981 1 772 1 708 1 484 1 148
Provision for credit losses........................ - - 55 40 50
Total operating expenses........................... 3 692 3 580 2 854 2 487 2 079
Net income......................................... 1 215 1 586/(a)/ 1 582/(b)/ 1 146/(c)/ 1 005/(d)/
At year-end:
Total assets.................................... 154 917 133 888 103 197 103 468 93 103
Long-term debt/(e)/............................. 6 802 5 276 5 443 5 395 4 723
Stockholders' equity............................ 9 568 9 859 7 308 6 068 5 189
Common stockholders' equity..................... 9 074 9 365 6 814 5 574 4 695
Tier 1 risk-based capital/(m)/.................. 8 265 7 773 6 625 5 470 4 654
Total risk-based capital/(m)/................... 12 221 10 850 9 672 8 437 7 439
Per common share:
Net income/(f)/................................. $ 6.02 $ 7.80/(a)/ $ 7.95/(b)/ $ 5.80/(c)/ $ 5.21/(d)/
Book value...................................... 46.73/(g)/ 47.25/(h)/ 35.56 29.41 25.29
Dividends declared.............................. 2.79 2.48 2.23 1/2 2.03 1.86
Earnings ratios
Net income as % of:
Average total assets............................ 0.70%/(g)/ 1.08%/(h)(i)/ 1.32%/(j)/ 1.05%/(k)/ 0.98%/(l)/
Average stockholders' equity.................... 12.5 /(g)/ 19.8 /(h)(i)/ 22.5/(j)/ 20.4/(k)/ 20.3/(l)/
Average common stockholders' equity............. 12.9 /(g)/ 20.9 /(h)(i)/ 23.9/(j)/ 21.9/(k)/ 21.9/(l)/
Dividend payout ratio
Dividends declared per common share as % of
net income per common share..................... 46.3% 31.8%/(i)/ 28.1%/(j)/ 35.0%/(k)/ 35.7%/(l)/
Capital ratios
Average stockholders' equity as % of average
total assets.................................... 5.7%/(g)/ 5.5%/(h)/ 5.8% 5.2% 4.8%
Common stockholders' equity as % of:
Average total assets............................ 5.3/(g)/ 6.4/(h)/ 5.7 5.1 4.6
Total year-end assets........................... 5.9/(g)/ 7.0/(h)/ 6.6 5.4 5.0
Total stockholders' equity as % of:
Average total assets............................ 5.5/(g)/ 6.7/(h)/ 6.1 5.6 5.1
Total year-end assets........................... 6.2/(g)/ 7.4/(h)/ 7.1 5.9 5.6
Tier 1 risk-based capital ratio/(m)/............... 9.6 9.3 8.9 6.9 6.3
Total risk-based capital ratio/(m)/................ 14.2 13.0 13.0 10.7 10.0
Leverage ratio/(m)/................................ 6.5 7.3 7.1 5.8 5.5
Other selected data
Registered holders of record of common stock at
year-end........................................ 29 596 28 919 28 061 26 741 27 313
Common shares outstanding at year-end
(in thousands) ................................. 187 701 193 087 191 610 189 529 185 654
Employees at year-end:
In the U.S. .................................... 9 607 8 983 8 567 8 080 8 085
Outside the U.S................................. 7 448 6 210 5 801 5 243 4 883
- -------------------------------------------------------------------------------------------------------------------------
Total........................................ 17 055 15 193 14 368 13 323 12 968
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

82
<PAGE>

(a) Net income in 1993 includes a $137 million ($0.68 per share) charge related
to the cumulative effect of a change in accounting for postretirement
benefits adopted January 1, 1993.
(b) Net income in 1992 includes $452 million ($2.29 per share) related to the
cumulative effect of a change in accounting for income taxes adopted
retroactive to January 1, 1992. As a result of applying the new method of
accounting for income taxes, income before the cumulative effect of the
change for 1992 was reduced by $252 million, or $1.26 per share ($1.27 per
share assuming full dilution); net income was increased by $200 million, or
$1.03 per share ($1.02 per share assuming full dilution).
(c) Net income in 1991 includes $32 million ($0.17 per common share) related to
the extraordinary gain on early retirement of debt.
(d) Net income in 1990 includes $230 million ($1.22 per common share) related to
the cumulative effect of a change in accounting for trading swaps adopted
January 1, 1990. As a result of applying the new method of accounting for
trading swaps, income before the cumulative effect of the change for 1990
was increased by approximately $150 million ($0.79 per share).
(e) Includes $3,197 million, $2,459 million, $2,300 million, $2,080 million, and
$1,883 million of long-term debt qualifying as risk-based capital in 1994,
1993, 1992, 1991, and 1990 respectively.
(f) Earnings per share amounts for 1994 and 1993 represent both primary and
fully diluted earnings per share; earnings per share amounts for 1992, 1991,
and 1990 represent primary earnings per share. For 1992 fully diluted
earnings per share before and after the cumulative effect of the change in
accounting were $5.63 and $7.92 respectively. For 1991 fully diluted
earnings per share before and after the extraordinary gain were $5.58 and
$5.75 respectively. For 1990 fully diluted earnings per share before and
after the cumulative effect of the change in accounting were $3.97 and $5.19
respectively.
(g) Excluding the effect of SFAS No. 115, the book value per common share would
have been $44.39 for the twelve months ended December 31, 1994; net income
would have been 0.71% of average total assets, 13.6% of average
stockholders' equity, and 14.2% of average common stockholders' equity;
average stockholders' equity would have been 5.2% of average total assets;
common stockholders' equity would have been 5.0% of average total assets and
5.6% of total year-end assets; total stockholders' equity would have been
5.3% of average total assets and 5.9% of total year-end assets.
(h) Excluding the effect of adopting SFAS No. 115 at December 31, 1993, the book
value per common share would have been $41.37; net income would have been
1.09% of average total assets, 19.8% of average stockholders' equity, and
20.9% of average common stockholders' equity; average stockholders' equity
would have been 5.5% of average total assets; common stockholders' equity
would have been 5.6% of average total assets and 6.2% of total year-end
assets; total stockholders' equity would have been 6.0% of average total
assets and 6.6% of total year-end assets.
(i) Excluding the cumulative effect of the accounting change for postretirement
benefits, 1993 net income would have been 1.18% of average total assets,
21.1% of average stockholders' equity, and 22.3% of average common
stockholders' equity; dividends declared per common share would have been
29.3% of income per common share before the accounting change.
(j) Excluding the cumulative effect of the accounting change for income taxes,
1992 net income would have been 0.94% of average total assets, 17.2% of
average stockholders' equity, and 18.3% of average common stockholders'
equity; dividends declared per common share would have been 39.5% of income
per common share before the accounting change.
(k) Excluding the effect of the extraordinary gain on early retirement of debt,
1991 net income would have been 1.03% of average total assets, 19.8% of
average stockholders' equity, and 21.3% of average common stockholders'
equity; dividends declared per common share would have been 36.1% of income
per common share before the extraordinary gain.
(l) Excluding the cumulative effect of the accounting change for trading swaps,
1990 net income would have been 0.76% of average total assets, 15.6% of
average stockholders' equity, and 17.7% of average common stockholders'
equity; dividends declared per common share would have been 46.6% of income
per common share before the accounting change.
(m) In accordance with Federal Reserve Board guidelines, the effect of SFAS No.
115 and the equity, assets, and off-balance-sheet exposures of J.P. Morgan
Securities Inc. are excluded.
* Not meaningful

83
<PAGE>

Consolidated average balances and taxable-equivalent net interest earnings
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
Dollars in millions 1994 1993 1992
- ------------------------------------------------------------------------- -------------------------- ---------------------------
Interest and average rates on Average Average Average Average Average Average
a taxable-equivalent basis balance Interest rate balance Interest rate balance Interest rate
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning deposits with banks,
mainly in offices outside the U.S.......... $ 2 252 $ 197 8.75% $ 2 636 $ 235 8.92% $ 5 069 $ 452 8.92%

Debt investment securities in offices
in the U.S.:/(a)/
U.S. Treasury.............................. 1 282 79 6.16 2 541 117 4.60 1 747 117 6.70
U.S. state and political subdivision....... 2 215 267 12.05 2 185 276 12.63 2 476 304 12.28
Other...................................... 10 569 547 5.18 8 811 448 5.08 7 284 487 6.69
Debt investment securities in offices outside
the U.S./(a)/.............................. 6 010 409 6.81 9 257 696 7.52 10 848 948 8.74
Trading account assets:
In offices in the U.S. .................... 14 632 952 6.51 13 534 755 5.58 14 362 913 6.36
In offices outside the U.S................. 24 033 1 838 7.65 16 985 1 240 7.30 9 699 821 8.46
Securities purchased under agreements to
resell and federal funds sold, mainly in
offices in the U.S......................... 32 247 1 593 4.94 29 869 1 408 4.71 17 385 926 5.33
Securities borrowed in offices in the U.S.... 15 615 624 4.00 14 076 408 2.90 6 469 218 3.37
Loans:
In offices in the U.S...................... 7 754 438 5.65 8 295 447 5.39 8 493 484 5.70
In offices outside the U.S................. 16 201 991 6.12 17 954 1 242 6.92 20 403 1 534 7.52
Other interest-earning assets:/(b)/
In offices in the U.S...................... 913 269 * 594 199 * 308 249 *
In offices outside the U.S................. 646 295 * 165 109 * 403 (11) *
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets................ 134 369 8 499 6.33 126 902 7 580 5.97 104 946 7 442 7.09
Allowance for credit losses.................. (1 143) (1 199) (1 354)
Cash and due from banks...................... 1 790 2 355 2 076
Other noninterest-earning assets/(c)/........ 37 565 18 122 14 586
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets................................. 172 581 146 180 120 254
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The percentage of average interest-earning assets attributable to offices
outside the U.S. was 48% in 1994, 46% in 1993, and 48% in 1992.
Average balances are derived from daily balances except in the case of some
subsidiaries, which are derived from month-end balances. Interest and
average rates applying to the following asset categories have been adjusted
to a taxable-equivalent basis: Debt investment securities in offices in the
U.S., Trading account assets in offices in the U.S., and Loans in offices in
the U.S. The applicable tax rate used to adjust tax-exempt interest to a
taxable-equivalent basis was approximately 41% in 1994 and 1993, and 40% in
1992.
Nonaccrual loans are included in the determination of average total loans.
(a) For the twelve months ended December 31, 1994, average debt investment
securities are computed based on historical amortized cost, excluding the
effects of SFAS No. 115 adjustments.
(b) Interest revenue includes the effect of certain off-balance-sheet
transactions.
(c) For the twelve months ended December 31, 1994, Other noninterest-earning
assets include the impact of adopting FIN No. 39 and SFAS No. 115.
* Not meaningful

84
<PAGE>

<TABLE>
<CAPTION>
Dollars in millions 1994 1993 1992
- ------------------------------------------------------------------------- -------------------------- ---------------------------
Interest and average rates on Average Average Average Average Average Average
a taxable-equivalent basis balance Interest rate balance Interest rate balance Interest rate
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities and stockholders' equity
Interest-bearing deposits:
In offices in the U.S...................... $ 2 175 $ 101 4.64% $ 2 487 $ 126 5.07% $ 3 395 $ 214 6.30%
In offices outside the U.S................. 37 768 1 845 4.89 31 906 1 793 5.62 29 885 2 092 7.00
Trading account liabilities:
In offices in the U.S...................... 8 028 510 6.35 8 203 433 5.28 6 511 397 6.10
In offices outside the U.S................. 11 109 778 7.00 7 052 483 6.85 3 709 304 8.20
Securities sold under agreements to
repurchase and federal funds purchased,
mainly in offices in the U.S............... 48 372 2 196 4.54 49 322 2 055 4.17 35 119 1 608 4.58
Commercial paper, mainly in offices in
the U.S.................................... 4 174 182 4.36 3 412 109 3.19 4 424 173 3.91
Other interest-bearing liabilities:
In offices in the U.S...................... 8 085 365 4.51 8 260 287 3.47 7 103 305 4.29
In offices outside the U.S................. 2 315 132 5.70 2 908 156 5.36 2 920 185 6.34
Long-term debt, mainly in offices in the U.S. 5 901 289 4.90 5 420 228 4.21 5 448 295 5.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities........... 127 927 6 398 5.00 118 970 5 670 4.77 98 514 5 573 5.66
Noninterest-bearing deposits:
In offices in the U.S...................... 3 818 4 671 4 118
In offices outside the U.S................. 1 395 1 265 709
Other noninterest-bearing liabilities/(a)/... 29 684 13 264 9 885
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities............................ 162 824 138 170 113 226
Stockholders' equity......................... 9 757 8 010 7 028
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity... 172 581 146 180 120 254
Net yield on interest-earning assets:........ 1.56 1.51 1.78
Attributable to offices in the U.S./(b)/... 1.41 1.22 1.65
Attributable to offices outside the U.S./(b)/ 1.73 1.84 1.93
Taxable-equivalent net interest earnings:.... 2 101 1 910 1 869
Attributable to offices in the U.S./(b)/... 994 845 899
Attributable to offices outside the U.S./(b)/ 1 107 1 065 970
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The percentage of average interest-bearing liabilities attributable to
offices outside the U.S. was 51% in 1994, and 44% in 1993 and 1992.
(a) For the twelve months ended December 31, 1994, Other noninterest-bearing
liabilities include the impact of adopting FIN No. 39.
(b) Funding costs are allocated based on the location of the office recording
the asset. No allocation is made for capital.

85
<PAGE>

Analysis of year-to-year changes in taxable-equivalent net interest earnings
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
1994/93 1993/92
------------------------------ -----------------------------
Increase (decrease) Increase (decrease)
due to change in: due to change in:
------------------- ------------------
Average Average Increase Average Average Increase
In millions balance rate (decrease) balance rate (decrease)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Interest-earning deposits with banks, mainly in offices
outside the U.S.......................................... $ (34) $ (4) $ (38) $ (217) - $(217)
Debt investment securities in offices in the U.S.:
U.S. Treasury............................................ (70) 32 (38) 43 $ (43) -
U.S. state and political subdivision..................... 4 (13) (9) (37) 9 (28)
Other.................................................... 90 9 99 91 (130) (39)
Debt investment securities in offices outside the U.S...... (226) (61) (287) (129) (123) (252)
Trading account assets:
In offices in the U.S.................................... 66 131 197 (51) (107) (158)
In offices outside the U.S............................... 536 62 598 545 (126) 419
Securities purchased under agreements to resell and
federal funds sold, mainly in offices in the U.S......... 115 70 185 600 (118) 482
Securities borrowed in offices in the U.S.................. 48 168 216 224 (34) 190
Loans:
In offices in the U.S.................................... (30) 21 (9) (11) (26) (37)
In offices outside the U.S............................... (115) (136) (251) (175) (117) (292)
Other interest-earning assets:
In offices in the U.S.................................... 96 (26) 70 149 (199) (50)
In offices outside the U.S............................... 229 (43) 186 3 117 120
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets.............................. 709 210 919 1 035 (897) 138
- ----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
Interest-bearing deposits:
In offices in the U.S.................................... $ (15) $ (10) $ (25) $ (51) $ (37) $ (88)
In offices outside the U.S............................... 303 (251) 52 134 (433) (299)
Securities sold, not yet purchased:
In offices in the U.S.................................... (9) 86 77 94 (58) 36
In offices outside the U.S............................... 284 11 295 236 (57) 179
Securities sold under agreements to repurchase and
federal funds purchased, mainly in offices in
the U.S.................................................. (40) 181 141 602 (155) 447
Commercial paper, mainly in offices in the U.S............. 28 45 73 (36) (28) (64)
Other interest-bearing liabilities:
In offices in the U.S.................................... (6) 84 78 45 (63) (18)
In offices outside the U.S............................... (33) 9 (24) (1) (28) (29)
Long-term debt, mainly in offices in the U.S............... 27 34 61 (5) (62) (67)
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities......................... 539 189 728 1 018 (921) 97
- ----------------------------------------------------------------------------------------------------------------------------------
Change in taxable-equivalent net interest earnings......... 170 21 191 17 24 41
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Changes in the average balance/rate are allocated based on the percentage
relationship of the change in average balance or average rate to the total
increase (decrease). Included in the above analysis is approximately $39
million, $167 million, and $42 million of interest revenue recorded in 1994,
1993, and 1992 respectively that related to prior years.

Taxable-equivalent net interest earnings and the statement of income
J.P. Morgan & Co. Incorporated

86
<PAGE>

Asset-quality analysis

Loans

J.P. Morgan's portfolio of loans is diversified by borrower, industry, and
geographic area. On the basis of the location of the borrower or, in the case
of guaranteed loans, the location of the guarantor, at December 31, 1994, 49%
of loans were in the United States, compared with 51% at December 31, 1993.
No more than 12% and 7% of loans were in any single foreign country at 1994
and 1993 year-ends respectively. At December 31, 1994 and 1993, 11% and 14%
respectively of loans were collateralized by marketable securities or cash.
At December 31, 1994, after exclusion of these collateralized amounts, there
was no category of borrower or guarantor that accounted for 10% or more of
total loans, while at December 31, 1993, nonbank financial institutions
accounted for 10% of total loans.

The following table shows loan diversity based upon maturity and interest rate
structure, by category and location of the booking office.
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------------------------------
After one After five
Within year but years but After
In millions: December 31, 1994 one year within five within ten ten years Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans in offices in the U.S.
Commercial and industrial......................... $ 2 342 $ 483 $ 92 $130 $ 3 047
Financial institution:
Banks.................................. 458 - - - 458
Other financial institutions........... 523 214 - 1 738
Collateralized by real estate..................... 53 81 68 163 365
Other, including U.S. state and
political subdivision.................. 1 032 197 63 191 1 483
- ------------------------------------------------------------------------------------------------------------------------------------
4 408 975 223 485 6 091
- ------------------------------------------------------------------------------------------------------------------------------------
Loans in offices outside the U.S.
Commercial and industrial......................... 4 034 3 060 1 313 44 8 451
Financial institution:
Banks.................................. 1 842 97 1 - 1 940
Other financial institutions........... 1 559 833 65 3 2 460
Collateralized by real estate..................... 116 111 70 32 329
Foreign governments and official
institutions........................... 458 283 92 13 846
Other ......................................... 1 272 591 72 28 1 963
- ------------------------------------------------------------------------------------------------------------------------------------
9 281 4 975 1 613 120 15 989
- ------------------------------------------------------------------------------------------------------------------------------------
13 689 5 950 1 836 605 22 080
- ------------------------------------------------------------------------------------------------------------------------------------
Loans at fixed rates of interest
Offices in the U.S................................ 2 487 645 133 124 3 389
Offices outside the U.S........................... 1 791 735 86 30 2 642
- ------------------------------------------------------------------------------------------------------------------------------------
4 278 1 380 219 154 6 031
- ------------------------------------------------------------------------------------------------------------------------------------
Loans at floating rates of interest
Offices in the U.S................................ 1 921 330 90 361 2 702
Offices outside the U.S........................... 7 490 4 240 1 527 90 13 347
- ------------------------------------------------------------------------------------------------------------------------------------
9 411 4 570 1 617 451 16 049
- ------------------------------------------------------------------------------------------------------------------------------------
13 689 5 950 1 836 605 22 080
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>

Additional detail on loans by category and location at December 31 is
presented in the following table.
<TABLE>
<CAPTION>
In millions 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans in offices in the U.S.
Commercial and industrial.......................... $ 3 047 $ 3 507 $ 3 643 $ 2 476 $ 2 357
Financial institution:
Banks................................... 458 730 258 369 731
Other financial institutions............ 738 1 457 1 089 1 794 2 178
Collateralized by real estate...................... 365 411 457 412 512
Other, including U.S. state and
political subdivision................... 1 483 1 928 2 802 2 540 2 723
- ----------------------------------------------------------------------------------------------------------------------------
6 091 8 033 8 249 7 591 8 501
- ----------------------------------------------------------------------------------------------------------------------------
Loans in offices outside the U.S.
Commercial and industrial.......................... 8 451 7 809 8 777 10 359 10 681
Financial institution:
Banks................................... 1 940 1 076 956 1 077 1 369
Other financial institutions............ 2 460 3 917 4 107 4 034 3 320
Collateralized by real estate...................... 329 313 691 847 866
Foreign governments and official
institutions............................ 846 1 149 1 840 1 741 1 364
Other .......................................... 1 963 2 083 1 818 2 148 1 461
- ----------------------------------------------------------------------------------------------------------------------------
15 989 16 347 18 189 20 206 19 061
- ----------------------------------------------------------------------------------------------------------------------------
22 080 24 380 26 438 27 797 27 562
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Nonaccrual loans

Nonaccrual loans, net of charge-offs, at December 31, distributed according
to the location of the borrower, are presented in the following table.
<TABLE>
<CAPTION>
In millions 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Borrowers in the U.S.
Commercial and industrial..................... $106 $129 $168 $214 $119
Other ..................................... 60 68 114 106 138
- -------------------------------------------------------------------------------------------------------------------------
166 197 282 320 257
- -------------------------------------------------------------------------------------------------------------------------
Borrowers outside the U.S.
Commercial and industrial..................... 30 53 33 57 33
Other ..................................... 21 24 38 19 5
- -------------------------------------------------------------------------------------------------------------------------
51 77 71 76 38
Restructuring countries....................... 2 8 183 246 691
- -------------------------------------------------------------------------------------------------------------------------
53 85 254 322 729
- -------------------------------------------------------------------------------------------------------------------------
219 282 536 642 986
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
88
<PAGE>

An analysis of changes in nonaccrual loans is presented in the following
table.
<TABLE>
<CAPTION>
In millions 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans, January 1............................ $282 $536 $642 $986 $1 125
Additions to nonaccrual loans.......................... 96 113 201 232 260
Less: Repayments of principal net
of additional advances...................... 76 86 86 87 45
Loans returning to accrual status........... 42 26 78 37 18
Charge-offs:
Commercial and industrial........... 20 24 62 46 20
Restructuring countries............. 1 1 6 343 218
Other............................... 8 30 33 30 6
Interest and other credits.................. 11 19 20 15 10
Sales and swaps of loans to
restructuring countries................... 1 181 22 18 82
- ---------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans, December 31.......................... 219 282 536 642 986
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Loans that are 90 days or more past due may still accrue interest if they are
in the process of collection and are either well collateralized or
guaranteed. The composition of such loans at December 31 is presented in the
following table.
<TABLE>
<CAPTION>
In millions 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Borrowers in the U.S................................... $1 $2 $1 - $ 3
Borrowers outside the U.S.............................. 1/(a)/ 3/(a)/ - $37/(b)/ 110/(c)/
- -------------------------------------------------------------------------------------------------------------------------
2 5 1 37 113
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Guaranteed by the French and Swiss governments.
(b) Includes $24 million guaranteed by the French, German, and Swiss
governments and $13 million guaranteed by the U.S. government.
(c) Includes $23 million of loans that were well collateralized and $87
million of loans that were guaranteed. Of this $87 million, $49 million
was guaranteed by the U.S. government; $21 million was guaranteed by the
French, German, and Swiss governments; and $17 million was guaranteed by
U.S. corporations.

Allowance and provision for credit losses

A provision for credit losses is recorded in each accounting period, as
necessary, based on senior management's judgment as to the amount needed to
maintain the allowance for credit losses at an adequate level to absorb
losses inherent in the existing portfolios of loans and other undertakings to
extend credit, such as irrevocable unused loan commitments, or to make
payments to others for which a client is ultimately liable, such as standby
letters of credit and guarantees, commercial letters of credit and
acceptances, and all other credit exposures, including derivatives. Size and
risk characteristics of the portfolios are considered in determining the
appropriate level for the allowance and therefore the amount of the
provision. Because J.P. Morgan deals with a relatively small number of
borrowers, management believes that it is generally able to identify
borrowers with financial problems reasonably early and to monitor carefully
its credits to such borrowers. The Asset Quality Review Committee recommends
those credits or portions of credits judged to be uncollectible and that
should be charged off. It also recommends the size of the allowance
considered adequate after taking such charge-offs into account.

Specific allocations

In reaching its judgment as to an adequate allowance, the Asset Quality
Review Committee estimates the amounts necessary to provide for possible
losses relating to specific credits. Although these credits are presently
judged to be collectible, there is a greater-than-normal risk that some
portion of them will become uncollectible if the factors that have adversely
affected those borrowers continue.
89
<PAGE>

Allocation to general risk

The allocation to general risk considers the probability that there are
inherent losses in the existing portfolios that cannot yet be identified. The
allocation to general risk also includes the portion of the allowance that
can be considered to be related to outstandings to restructuring countries.
The allowance related to restructuring countries is based on overall concerns
about the willingness and ability of certain countries to make timely
payments on their outstanding debt and does not result in allocations of the
allowance being made against specific counterparties. In 1991 we changed our
method of calculating the allowance coverage for outstandings to
restructuring countries, with a smaller portion of the allowance applicable
to restructuring countries. When the discount from legal claims, which
includes charge-offs, is combined with the portion of the allowance that
could be viewed as covering restructuring-country outstandings, coverage of
total outstanding legal claims at December 31, 1994, was 27%. Comparable
coverage ratios at December 31, 1993, 1992, 1991, and 1990, were 36%, 66%,
70%, and 74%, respectively.

The following table summarizes the activity in the consolidated allowance for
credit losses for the last five years.
<TABLE>
<CAPTION>

Dollars in millions 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1.................................. $1 157 $1 258 $1 419 $1 850 $2 620
- ----------------------------------------------------------------------------------------------------------------------------
Recoveries:
Borrowers in the U.S., primarily
commercial and industrial............. 14 7 7 4 7
Borrowers outside the U.S................ 31 53 26 26 10
- ----------------------------------------------------------------------------------------------------------------------------
45 60 33 30 17
- ----------------------------------------------------------------------------------------------------------------------------
Charge-offs:
Borrowers in the U.S., primarily
commercial and industrial............. (51) (78) (117) (78) (37)
Borrowers outside the U.S.:
Restructuring countries............... (18) (37) (48) (383) (742)
Other, primarily commercial
and industrial..................... (3) (45) (82) (40) (61)
- ----------------------------------------------------------------------------------------------------------------------------
(72) (160) (247) (501) (840)
- ----------------------------------------------------------------------------------------------------------------------------
Net charge-offs..................................... (27) (100) (214) (471) (823)
Provision for credit losses......................... - - 55 40 50
Translation adjustment.............................. 1 (1) (2) - 3
- ----------------------------------------------------------------------------------------------------------------------------
Balance, December 31................................ 1 131 1 157 1 258 1 419 1 850
- ----------------------------------------------------------------------------------------------------------------------------
Specific allocations, primarily
commercial and industrial/(a)/................... 186 283 326 445 233
Allocation to general risk/(b)/..................... 945 874 932 974 1 617
- ----------------------------------------------------------------------------------------------------------------------------
Net charge-offs as % of average
loans/(c)/....................................... 0.11% 0.38% 0.74% 1.61% 2.70%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) At December 31, 1994, the specific allocation of the allowance for credit
losses was as follows: borrowers in the U.S., $116 million; borrowers
outside the U.S., $70 million.
(b) Includes the portion of the allowance that could be considered to be
related to outstandings to restructuring countries, which totaled
approximately $239 million, $310 million, $426 million, $424 million, and
$1,533 million at December 31, 1994, 1993, 1992, 1991, and 1990,
respectively.
(c) Excluding restructuring-country net charge-offs and loans, the ratios for
1994, 1993, 1992, 1991, and 1990 would have been 0.13%, 0.37%, 0.68%,
0.41%, and 0.31% respectively.

Foreign-country-related assets

The composition of foreign-country-related assets is presented in the
following table. Assets are distributed on the basis of the location of the
borrower or obligor, with the exception of interest-earning deposits with
banks, which are distributed based on the location of the office receiving
the deposit, and trading account assets, premises and equipment, accrued
interest and accounts receivable, and other assets, which are distributed
based on the location of the office recording the asset.

90
<PAGE>

<TABLE>
<CAPTION>
In millions: December 31 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest-earning deposits with banks:
At overseas branches or subsidiaries of U.S. banks........... $ 94 $ 23 $ 54
Other........................................................ 1 258 1 154 1 462
Loans ....................................................... 11 249 12 006 12 762
Less: allowance for credit losses............................... 647 708 748
- ----------------------------------------------------------------------------------------------------------------------------
Net loans....................................................... 10 602 11 298 12 014
Investment securities........................................... 4 442 6 318 7 074
Trading account assets.......................................... 40 070 28 535 13 921
Customers' acceptance liability................................. 342 141 666
Other assets.................................................... 19 885 13 083 7 974
- ----------------------------------------------------------------------------------------------------------------------------
Total foreign-country-related assets............................ 76 693 60 552 43 165
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Foreign-country-related allowance for credit losses

In response to regulatory requirements, the following table presents the
foreign-country-related portion of the allowance for credit losses. In cases
where a specific allocation of the allowance was made for a borrower, the
foreign-country-related component is determined on the basis of the
borrower's location. The foreign-country-related portion of the allowance
also includes the amount of the allowance that could be considered to relate
to outstandings to restructuring countries. The remaining portion of the
allowance allocated to general risk is apportioned to U.S.-related and
foreign-country-related components in the same proportion as average total
loans. In 1991 the method of calculating coverage of outstandings to
restructuring countries changed, with a smaller portion of the allowance
applicable to restructuring-country debt. As a result, a portion of the
allowance for credit losses previously designated as relating to
restructuring countries was apportioned between U.S.-related and foreign-
country-related components in the same proportion as average total loans.
<TABLE>
<CAPTION>
In millions 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1.................. $708 $748 $ 807 $1 614 $2 389
- -----------------------------------------------------------------------------------------------------------------------
Recoveries.......................... 31 53 26 26 10
Charge-offs:
Commercial and industrial........ (2) (34) (69) (40) (27)
Restructuring countries.......... (18) (37) (48) (383) (742)
Other............................ (1) (11) (13) - (34)
- ------------------------------------------------------------------------------------------------------------------------
Net charge-offs..................... 10 (29) (104) (397) (793)
Provision for credit losses......... (1) 9 17 5 15
Net transfer (from) to U.S.-related
allowance........................ (71) (19) 30 (415) -
Translation adjustment.............. 1 (1) (2) - 3
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31................ 647 708 748 807 1 614
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Foreign-country-related outstandings

Foreign-country-related outstandings represent outstandings to foreign
borrowers that are denominated in U.S. dollars or currencies other than the
borrower's local currency or, in the case of a guarantee, other than the
guarantor's local currency. Countries in which J.P. Morgan's outstandings
exceeded 1% of total assets at December 31, 1994, 1993, and 1992, are listed
in the following table. Outstandings, which are shown by category of
borrower, include loans, interest-earning deposits with banks, investment
securities, customers' acceptance liability, securities purchased under
agreements to resell, trading account securities, accrued interest, and other
monetary assets. Outstandings generally are distributed according to the
location and category of the borrower. In the case of guaranteed outstandings
or when tangible, liquid collateral is held and realizable outside the
obligor's country, distribution is generally made according to the location
and category of the guarantor or the location where the collateral is held
and realizable.

91
<PAGE>

<TABLE>
<CAPTION>
Public sector Private sector
------------------------------------------- -------------------
Governments,
government agencies,
central banks, and Commit- Con-
official and Government-owned Other, ments tingent
international ---------------- mainly to extend out-
In millions: December 31 institutions Banks Other Banks businesses Total credit standings/(a)/
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994/(c)/
United Kingdom............. $ 40 $263 $ 4 $669 $3 018 $3 994 $4 263 $2 876
Switzerland................ 1 17 49 961 613 1 641 397 749
- ------------------------------------------------------------------------------------------------------------------------
1993/(c)/
United Kingdom............. 77 23 61 790 3 506 4 457 4 388 2 717
Belgium/(b)/............... 53 - 13 28 1 863 1 957 25 4 408
France ................. 218 342 290 644 278 1 772 872 583
Argentina.................. 1 148 18 12 18 290 1 486 3 -
- ------------------------------------------------------------------------------------------------------------------------
1992/(c)/
United Kingdom............. 13 21 40 537 2 282 2 893 3 671 1 892
Sweden ................... 1 328 10 20 5 182 1 545 164 119
France ................... 56 304 455 400 107 1 322 912 197
Belgium/(b)/............... 105 - 3 44 1 016 1 168 50 3 502
Switzerland................ 3 1 - 251 866 1 121 213 777
Japan .................. 119 5 5 482 479 1 090 296 94
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amounts reported for each country exclude those outstandings that are
denominated in the local currency of that country except in cases of net
unfunded or unhedged positions in the local currency.
(a) Contingent outstandings include standby letters of credit, guarantees, and
securities lending indemnifications.
(b) Includes credit-related exposures of Morgan Guaranty's Brussels office to
borrowers domiciled in various countries, which are secured by marketable
securities of issuers in various countries.
(c) Mexican cross-border outstandings at December 31, 1994, 1993, and 1992, were
$1,086 million, $933 million and $763 million respectively, less than 0.75%
of total assets; commitments to extend credit and contingent outstandings
were $30 million and $11 million at December 31, 1994, $31 million and $11
million at December 31, 1993, and $17 million and $140 million at December
31, 1992. Not included in Mexican cross-border outstandings are United
Mexican States (UMS) bonds, substantially all of which have been sold
forward, that are collateralized by U.S. Treasury securities. If the book
value of these bonds, which is discussed below, had been included, total
Mexican cross-border outstandings would have exceeded 1% of total assets at
December 31, 1994 and 1993, and 0.75% of total assets at December 31, 1992.
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- ----------------- ------------------
Book Face Book Face Book Face
In millions: December 31 value value value value value value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UMS bonds collateralized by U.S.
Treasury securities:
Due in 2008.......................... $1 112 $1 149 $ 87 $ 88 $124 $152
Due in 2019.......................... 985 1 303 670 730 8 14
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The UMS bonds are collateralized as to principal by zero-coupon U.S.
Treasury securities with face value equal to the face value of the underlying
bonds. The collateral, which will become available when the UMS bonds mature,
is pledged to the holders of the bonds and is held by the Federal Reserve
Bank of New York. The fair value of the U.S. Treasury securities was $585
million, $161 million, and $48 million, at December 31, 1994, 1993, and 1992,
respectively. The estimated market value of the UMS bonds at December 31,
1994, 1993, and 1992, was $1,945 million, $757 million, and $146 million
respectively.

At December 31, 1994, there were no nonaccrual loans relating to the
countries listed in the above table. At December 31, 1993 and 1992, the
amount of nonaccrual loans relating to the countries listed in the table was
immaterial. Additionally, loans contractually past due 90 days or more as to
principal or interest payments but with interest still being accrued were
immaterial for each of the countries in the table at December 31, 1994, 1993,
and 1992.

Foreign countries in which J.P. Morgan's total foreign-country-related
outstandings were between 0.75% and 1% of total assets are presented below.
<TABLE>
<CAPTION>

Total cross-border
In millions: December 31 outstandings
- -------------------------------------------------------------------------------------------------------------
<S> <C>
1992
Italy ...................................................................................... $885
- -------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994 and 1993, there were no foreign-country-related
outstandings between 0.75% and 1% of total assets.

92
<PAGE>

Asset and liability management derivatives

The objective of asset and liability management is to create longer-term
value through the management of interest rate and liquidity risk related to
J.P. Morgan's assets, liabilities, and off-balance-sheet activities. J.P.
Morgan utilizes a variety of financial instruments, including derivatives, in
an integrated manner to achieve these objectives. Additional information on
asset and liability management derivatives, primarily interest rate swaps, is
provided below. For more information about asset and liability management
activities, see the Asset and Liability Management section of the Financial
review, and Note 8 to the financial statements, Off-balance-sheet financial
instruments.

The table below summarizes maturities and weighted-average interest rates to
be received and paid on U.S. dollar and non-U.S. dollar asset and liability
management interest rate swaps at December 31, 1994. The majority of asset and
liability management interest rate swaps, as presented below, are risk-adjusting
swaps. Also included in the table are swaps designated as hedges or used to
modify the interest rate characteristics of assets and liabilities. Variable
rates presented are generally based on the London Interbank Offered Rate (LIBOR)
at December 31, 1994, and reset at predetermined dates. The table was prepared
under the assumption that these variable interest rates remain constant. The
variable interest rates to be received or paid will change to the extent that
rates fluctuate. Such changes may be substantial.

Not included in the table below are other derivatives used for asset and
liability management purposes, such as currency swaps, basis swaps, foreign
exchange contracts, interest rate futures, forward rate agreements, debt
securities forwards, and purchased options, totaling $46.8 billion at December
31, 1994. The contractual maturities of these derivative contracts are primarily
less than one year.
<TABLE>
<CAPTION>
By expected maturities
- ------------------------------------------------------------------------------------------------------------------------
After
Dollars in billions 1995 1996 1997 1998 1999 1999 Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate swaps:
U.S. dollar
Receive fixed swaps
Notional amount..................... $17.9 $11.3 $ 4.5 $ 2.9 $ 2.6 $ 2.7 $ 41.9
Weighted average:
Receive rate..................... 6.47% 6.91% 5.79% 8.31% 7.62% 7.35% 6.77%
Pay rate......................... 5.92 6.38 5.92 5.83 5.80 5.80 6.02

Pay fixed swaps
Notional amount..................... $19.0 $11.1 $ 7.9 $ 4.7 $ 2.6 $ 4.6 $ 49.9
Weighted average:
Receive rate..................... 5.86% 6.15% 5.97% 5.83% 5.84% 5.93% 5.94%
Pay rate......................... 4.63 6.01 6.06 5.90 7.24 6.82 5.62

Interest rate swaps:
Non-U.S. dollar
Receive fixed swaps
Notional amount..................... $24.7 $22.6 $15.4 $ 6.1 $ 6.0 $ 5.3 $ 80.1
Weighted average:
Receive rate..................... 6.40% 5.63% 6.96% 6.22% 5.97% 7.43% 6.31%
Pay rate......................... 5.02 4.37 5.36 4.63 4.32 5.76 4.87

Pay fixed swaps
Notional amount..................... $23.1 $17.1 $16.0 $ 6.1 $ 5.3 $ 5.9 $ 73.5
Weighted average:
Receive rate..................... 5.10% 5.09% 5.26% 4.84% 4.74% 5.61% 5.13%
Pay rate......................... 6.33 6.12 6.36 5.89 6.11 7.61 6.34
- -------------------------------------------------------------------------------------------------------------------------
Total notional amount............... $84.7 $62.1 $43.8 $19.8 $16.5 $18.5 $245.4
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
There is $2.0 billion and $4.0 billion of notional amounts related to
currency swaps and basis swaps respectively not included in the table above.

93
<PAGE>

Capital and funding analysis

Risk adjusted assets

J.P. Morgan's consolidated risk adjusted assets and the net adjustments to
exclude the assets and off-balance-sheet exposures of J.P. Morgan Securities
Inc. at December 31 are set forth in the following table.
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- ---------------------- ---------------------
Balance Balance Balance
sheet/ Risk sheet/ Risk sheet/ Risk
notional adjusted notional adjusted notional adjusted
In billions amount balance amount balance amount balance
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks and interest-
earning deposits with banks......... $ 3.5 $ 0.7 $ 2.2 $ 0.5 $ 2.7 $ 0.6
Debt investment securities............. 22.7 2.9 19.5 2.6 21.5 3.7
Trading account assets................. 57.0 11.3 41.3 12.6 26.2 6.3
Resale agreements and federal
funds sold.......................... 21.4 4.4 22.7 3.0 10.1 1.1
Securities borrowed.................... 12.1 2.4 10.8 2.2 7.1 1.4
Loans.................................. 22.1 18.9 24.4 20.9 26.4 22.7
Allowance for credit losses............ (1.1) - (1.2) - (1.3) -
Customers' acceptance liability........ 0.6 0.6 0.4 0.4 1.0 1.0
Premises and equipment, net............ 2.0 2.0 1.9 1.9 1.9 1.9
Other assets........................... 14.6 12.0 11.9 9.7 7.6 6.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets........................... 154.9 55.2 133.9 53.8 103.2 45.4
Net effect of excluding JPMSI assets
(primarily trading account assets,
resale agreements, and securities
borrowed)........................... (25.8) (7.8) (26.1) (7.2) (19.0) (4.6)
- ------------------------------------------------------------------------------------------------------------------------------------

Assets, excluding JPMSI................ 129.1 47.4 107.8 46.6 84.2 40.8
- ----------------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet exposures
Commitments to extend credit........... 44.6 16.7 39.0 14.2 37.1 13.8
Standby letters of credit and guarantees 9.9 7.8 10.5 8.0 11.9 8.9
Securities lending indemnifications.... 19.5 1.8 26.4 1.7 17.4 1.6
Other credit facilities................ 0.6 0.2 1.9 0.6 0.8 0.1
Foreign exchange contracts,
including foreign exchange options 494.9 3.5 407.5 2.6 349.3 2.9
Currency swaps......................... 112.7 3.5 96.0 3.2 85.4 2.6
Interest rate swaps.................... 862.2 3.6 567.7 5.1 367.7 3.0
Interest rate and other contracts...... 1 002.7 1.8 582.3 1.4 476.0 1.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet exposures...... 2 547.1 38.9 1 731.3 36.8 1 345.6 33.9
Net effect of excluding JPMSI
off-balance-sheet exposures......... (58.0) - (51.5) - (36.6) (0.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet exposures,
excluding JPMSI..................... 2 489.1 38.9/(a)/ 1 679.8 36.8 1 309.0 33.8
- ----------------------------------------------------------------------------------------------------------------------------------
Gross risk adjusted assets, excluding
JPMSI............................... 86.3 83.4 74.6
Less: allowance for credit losses not
qualifying as risk-based capital.... (0.1) (0.1) (0.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Risk adjusted assets,
excluding JPMSI..................... 86.2 83.3 74.3
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes $4.6 billion related to potential future credit exposure as
defined in the risk-based capital framework.

94
<PAGE>

Deposits

Average deposits in offices outside the U.S. are presented in the following
table.
<TABLE>
<CAPTION>
1994 1993 1992
------------------ ------------------ ------------------
Average Average Average Average Average Average
Dollars in millions balance rate paid balance rate paid balance rate paid
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits
From banks in foreign countries........ $12 139 5.05% $12 472 6.81% $10 679 7.88%
From foreign governments and
official institutions............... 8 932 4.24 6 362 3.74 4 932 4.72
Other time............................. 13 114 5.75 10 415 5.78 11 735 7.20
On demand.............................. 3 583 2.76 2 657 3.91 2 539 6.81
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits in
offices outside the U.S............. 37 768 4.89 31 906 5.62 29 885 7.00
- --------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits
From banks in foreign countries........ 183 150 39
From foreign governments and
official institutions............... 43 78 28
Other demand........................... 1 169 1 037 642
- --------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing deposits in
offices outside the U.S............. 1 395 1 265 709
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Foreign-country-related deposits in offices in the U.S. totaled $0.9 billion
at December 31, 1994, $1.9 billion at December 31, 1993, and $1.2 billion at
December 31, 1992.

A profile of the maturities of time certificates of deposit and other time
deposits in denominations of $100,000 or more at December 31, 1994, is presented
in the following table.
<TABLE>
<CAPTION>
After six
Within After three months but After
three months but within one
In millions months within six one year year Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Offices in the U.S.:
Time certificates of deposit $ 34 $ 21 - $210 $ 265
Other time deposits..................... 162 142 $ 98 113 515
- -------------------------------------------------------------------------------------------------------------------------
196 163 98 323 780
- -------------------------------------------------------------------------------------------------------------------------
Offices outside the U.S.:
Time certificates of deposit 4 346 333 50 20 4 749
Other time deposits..................... 23 008 1 173 801 431 25 413
- -------------------------------------------------------------------------------------------------------------------------
27 354 1 506 851 451 30 162
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

95
<PAGE>

Purchased funds and other borrowings

Purchased funds and other borrowings are detailed in the following table.
<TABLE>
<CAPTION>
Dollars in millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities sold under agreements to repurchase
Balance at year-end............................................. $30 179 $36 306 $23 687
Average balance................................................. 45 470 47 329 31 276
Maximum month-end balance....................................... 51 387 58 425 39 891
Average interest rate:
During year.................................................. 4.55% 4.21% 4.71%
At year-end.................................................. 5.43 4.29 4.70
- ----------------------------------------------------------------------------------------------------------------------------
Federal funds purchased (day-to-day)
Balance at year-end............................................. $5 589 $3 106 $2 757
Average balance................................................. 2 902 1 993 3 843
Maximum month-end balance....................................... 5 589 4 412 6 545
Average interest rate:
During year.................................................. 4.35% 3.02% 3.48%
At year-end.................................................. 5.25 3.02 2.32
- ----------------------------------------------------------------------------------------------------------------------------
Commercial paper
Balance at year-end............................................. $3 507 $2 573 $2 477
Average balance................................................. 4 174 3 412 4 424
Maximum month-end balance....................................... 4 882 5 244 5 801
Average interest rate:
During year.................................................. 4.36% 3.19% 3.91%
At year-end.................................................. 5.89 3.22 3.59
- ----------------------------------------------------------------------------------------------------------------------------
Other liabilities for borrowed money
Federal funds purchased (term)
Balance at year-end.......................................... $465 $ 17 $ 133
Average balance.............................................. 372 97 594
Maximum month-end balance.................................... 516 787 1 323
Average interest rate:
During year............................................... 4.30% 3.93% 4.62%
At year-end............................................... 3.82 3.16 3.66
Other
Balance at year-end.......................................... $10 435 $10 110 $10 548
Average balance.............................................. 10 028 11 071 9 429
Maximum month-end balance.................................... 10 823 13 242 12 819
Average interest rate:
During year............................................... 4.80% 3.98% 4.91
At year-end............................................... 5.82 4.57 3.94
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average interest rates during each year are computed by dividing total
interest expense by the average amount borrowed. Average interest rates at
year-end are average rates for a single day and as such may reflect one-day
market distortions that may not be indicative of generally prevailing rates.
Original maturities of securities sold under agreements to repurchase
generally are not more than six months. Original maturities of commercial
paper are generally not more than nine months. Other liabilities for borrowed
money generally have original maturities of one year or less.

96
<PAGE>

Selected consolidated quarterly financial data
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>

In millions, except per share data 1994
- --------------------------------------------------------------------------------------------
Three months ended Dec. 31 Sept. 30 June 30 Mar. 31
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest revenue................................ $2 369 $2 142 $2 031 $1 837
Interest expense................................ 1 851 1 616 1 491 1 440
- ----------------------------------------------------------------------------------------------
Net interest revenue............................ 518 526 540 397
Total noninterest revenue....................... 710 906 926 994
Total operating expenses........................ 963 941 936 852
- ----------------------------------------------------------------------------------------------
Income before income taxes and cumulative
effects of accounting changes................ 265 491 530 539
Income taxes.................................... 72 164 180 194
- ----------------------------------------------------------------------------------------------
Income before cumulative effects of
accounting changes........................... 193 327 350 345
Cumulative effect of change in method of
accounting for postretirement benefits,
net of related income taxes.................. - - - -
- ----------------------------------------------------------------------------------------------
Net income ..................................... 193 327 350 345
- ----------------------------------------------------------------------------------------------
Per common share/(a)/
Before cumulative effects of accounting
changes...................................... $0.96 $1.63 $ 1.73 $1.69
Cumulative effect of change in method of
accounting for postretirement benefits,
net of related income taxes.................. - - - -
Net income...................................... 0.96 1.63 1.73 1.69
- ----------------------------------------------------------------------------------------------
Dividends declared.............................. 0.75 0.68 0.68 0.68
- ----------------------------------------------------------------------------------------------
Price range per common share on the
composite tape:
High........................................ $62 1/2 $66 1/4 $67 1/8 $72
Low......................................... 55 1/8 59 3/4 60 60 1/2
Closing price per common share at quarter-end 56 1/8 60 3/4 62 62 3/4
- ----------------------------------------------------------------------------------------------

In millions, except per share data 1993
- --------------------------------------------------------------------------------------------
Three months ended Dec. 31 Sept. 30 June 30 Mar. 31
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest revenue................................ $1 830 $1 950 $1 829 $1 833
Interest expense................................ 1 353 1 511 1 405 1 401
- ---------------------------------------------------------------------------------------------
Net interest revenue............................ 477 439 424 432
Total noninterest revenue....................... 1 158 1 174 1 116 1 051
Total operating expenses........................ 1 023 882 866 809
- ---------------------------------------------------------------------------------------------
Income before income taxes and cumulative
effects of accounting changes................ 612 731 674 674
Income taxes.................................... 220 263 243 242
- ---------------------------------------------------------------------------------------------
Income before cumulative effects of
accounting changes........................... 392 468 431 432
Cumulative effect of change in method of
accounting for postretirement benefits,
net of related income taxes.................. - - - (137)
- ---------------------------------------------------------------------------------------------
Net income ..................................... 392 468 431 295
- ---------------------------------------------------------------------------------------------
Per common share/(a)/
Before cumulative effects of accounting
changes...................................... $1.92 $2.30 $2.12 $2.16
Cumulative effect of change in method of
accounting for postretirement benefits,
net of related income taxes.................. - - - (0.69)
Net income...................................... 1.92 2.30 2.12 1.47
- --------------------------------------------------------------------------------------------
Dividends declared.............................. 0.68 0.60 0.60 0.60
- --------------------------------------------------------------------------------------------
Price range per common share on the
composite tape:
High........................................ $78 7/8 $79 3/8 $74 3/8 $70 3/8
Low......................................... 68 1/4 67 5/8 63 3/4 59 3/8
Closing price per common share at quarter-end 69 3/8 78 3/8 67 7/8 67 7/8
- ---------------------------------------------------------------------------------------------
</TABLE>
The principal market on which the company's common stock is traded is
the New York Stock Exchange.
(a) Earnings per share amounts represent both primary and fully diluted earnings
per share for 1994 and the quarters ended June 30, 1993, and December 31,
1993. For the quarter ended March 31, 1993, fully diluted earnings per share
before and after the cumulative effect of the change in accounting were
$2.15 and $1.46 respectively. For the quarter ended September 30, 1993,
fully diluted earnings per share were $2.29.

The 1994 fourth quarter results are discussed in J.P. Morgan's December 31,
1994, Interim report to stockholders.

97
<PAGE>

Form 10-K annual report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

- --------------------------------------------------------------------------------
For the fiscal year ended
December 31, 1994

J.P. Morgan & Co. Incorporated
(Incorporated in the State of Delaware)
60 Wall Street, New York, NY 10260-0060
(212) 483-2323

Filed with:
Securities and Exchange Commission, Washington, D.C. 20549

Commission file number: 1-5885
I.R.S. Employer Identification Number: 13-2625764

The following securities are registered on the New York Stock Exchange
pursuant to Section 12(b) of the Act:

Common Stock, $2.50 Par Value
Adjustable Rate Cumulative Preferred Stock, Series A
No Par Value, Stated Value $100
4 3/4% Convertible Debentures due 1998

No securities are registered pursuant to Section 12(g) of the Act.

The aggregate market value of the voting stock held by nonaffiliates of J.P.
Morgan totaled $12,082,995,399 at February 28, 1995.

The number of shares outstanding of J.P. Morgan's Common Stock, $2.50 Par
Value, at February 28, 1995, totaled 187,333,262 shares.

J.P. Morgan (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past 90 days.

Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein nor in any amendment to this Form 10-K, but is contained in
J.P. Morgan's 1995 Proxy Statement incorporated by reference in Part III of
this Form 10-K.

J.P. Morgan's definitive Proxy Statement dated March 22, 1995, is
incorporated by reference in response to Part III, Items 10, 11, 12, and 13
of Form 10-K.

98
<PAGE>

Form 10-K cross-reference index

- --------------------------------------------------------------------------------
Part I

1.Business

Description of business, 12-19, 101-102
Number of employees, 82
Financial information about foreign and domestic operations, 76-77, 90-92
Distribution of assets, liabilities, and stockholders' equity; interest rates
and interest differential, 84-86
Investment portfolio, 52-55
Loan portfolio, 48, 62-63, 87-92
Summary of loan loss experience, 89-91
Deposits, 84, 86, 95
Return on equity and assets, 82-83
Short-term borrowings, 96
2.Properties, 102
3.Legal proceedings/(a)/
4.Submission of matters to a vote of security holders/(a)/

- --------------------------------------------------------------------------------
Part II

5. Market for registrant's common equity and related stockholder matters, 81,
82, 97
6. Selected financial data, 82-83
7. Management's discussion and analysis of financial condition and results of
operations, 11-39
8. Financial statements and supplementary data
Report of independent accountants, 41
J.P. Morgan & Co. Incorporated
Consolidated statement of income, 42
Consolidated balance sheet, 43
Consolidated statement of changes in stockholders' equity, 44
Consolidated statement of cash flows, 45
Morgan Guaranty Trust Company of New York - Consolidated statement of
condition, 46
Notes to financial statements, 47-81
Selected consolidated quarterly financial data,/(b)/97
9. Changes in and disagreements with accountants on accounting and financial
disclosure/(a)/

- --------------------------------------------------------------------------------
Part III

10. Directors and executive officers of the registrant/(c)/
11. Executive compensation/(c)/
12. Security ownership of certain beneficial owners and management/(c)/
13. Certain relationships and related transactions/(c)/

- --------------------------------------------------------------------------------
Part IV

14. Exhibits, financial statement schedules, and reports on Form 8-K
1. Financial statements have been included in Item 8.
2. Financial statement schedules
Schedule III - Condensed financial information of J.P. Morgan & Co.
Incorporated (parent), 78-80

- --------------------------------------------------------------------------------
Exhibits

3a.Restated certificate of incorporation, as amended (incorporated by
reference to Exhibit 3a to J.P. Morgan's post-effective amendment No. 1
to Form S-3, Registration No. 33-55851)
3b.By-laws of J.P. Morgan as amended through December 11, 1991 (incorporated
by reference to Exhibit 3b to J.P. Morgan's registration statement on
Form S-3, Registration No. 33-49775)
4. Instruments defining the rights of security holders, including
indentures/(d)/
10a.1992 stock incentive plan, as amended
10b.Director stock plan, as amended
10c.Deferred compensation plan for directors' fees, as amended (incorporated
by reference to Exhibit 10c to J.P. Morgan's annual report on Form 10-K
for the year ended December 31, 1992, File No. 1-5885)
10d.1989 stock incentive plan, as amended
10e.1987 stock incentive plan, as amended
10f.Stock option plan, as amended
10g.Incentive compensation plan, as amended
12. Statements re computation of ratios (incorporated by reference to
Exhibit 12 to J.P. Morgan's post-effective amendment No. 1 to Form S-3,
Registration No. 33-55851)
13. Annual report to stockholders/(e)/
21. Subsidiaries of J.P. Morgan
23. Consent of independent accountants
24. Powers of attorney
27. Financial data schedule

- --------------------------------------------------------------------------------
Reports on Form 8-K

Report on Form 8-K dated October 13, 1994, was filed with the Securities and
Exchange Commission during the quarter ended December 31, 1994, which
reported the issuance by J.P. Morgan of a press release reporting its
earnings for the three- and nine-month periods ended September 30, 1994. In
addition, Form 8-K dated December 14, 1994, was filed announcing a dividend
increase and stock repurchase program.

- --------------------------------------------------------------------------------
This report on Form 10-K has not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed upon the
accuracy or adequacy of this report. Portions of the annual report to
stockholders are not required for the Form 10-K report and are not filed as
part of J.P. Morgan's Form 10-K.

- --------------------------------------------------------------------------------
(a) Nothing to report.
(b) Fourth quarter 1994 results are incorporated by reference to the report on
Form 8-K dated January 12, 1995, filed with the Securities and Exchange
Commission.
(c) Incorporated by reference to the definitive Proxy Statement dated March
22, 1995.
(d) J.P. Morgan hereby agrees to furnish to the Commission, upon request, a
copy of any unfiled agreements defining the rights of holders of long-term
debt of J.P. Morgan and of all subsidiaries of J.P. Morgan for which
consolidated or unconsolidated financial statements are required to be
filed.
(e) Only those sections of the annual report to stockholders referenced in the
cross-reference index above are incorporated in the report on Form 10-K.

- --------------------------------------------------------------------------------
Other schedules and exhibits are omitted because the required information
either is not applicable or is shown in the financial statements or the notes
thereto.

<PAGE>

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on March 22, 1995, on its behalf by the undersigned, thereunto duly
authorized.

J.P. Morgan & Co. Incorporated
Registrant

EDWARD J. KELLY III
- --------------------------
Edward J. Kelly III
Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 22, 1995, by the following persons on
behalf of the registrant in the capacities indicated.

JAMES T. FLYNN
- --------------------
James T. Flynn
Chief Financial Officer
(Principal financial and accounting officer)

Douglas A. Warner III*
Chairman of the Board, President, and Director
Martin Feldstein* Director
Hanna H. Gray* Director
James R. Houghton* Director
James L. Ketelsen* Director
William S. Lee* Director
Roberto G. Mendoza*
Vice Chairman of the Board and Director

Lee R. Raymond* Director
Richard D. Simmons* Director
John G. Smale* Director
Kurt F. Viermetz*
Vice Chairman of the Board and Director
Rodney B. Wagner*
Vice Chairman of the Board and Director
Dennis Weatherstone* Director
Douglas C. Yearley* Director

*By: MARGARET M. FORAN
----------------------------------
Margaret M. Foran
Attorney-in-fact

100
<PAGE>

Description of business

J.P. Morgan & Co. Incorporated, whose origins date to a merchant banking firm
founded in London in 1838, is the holding company for subsidiaries engaged
globally in providing a wide range of financial services. Our activities are
summarized on page 12. A list of principal subsidiaries and associated
companies appears on page 103.

Regulation

J.P. Morgan is subject to regulation under the Bank Holding Company Act of
1956 (the Act). Under the Act, J.P. Morgan is required to file certain
reports with the Board of Governors of the Federal Reserve System (the Board)
and is subject to examination by the Board. The Act generally precludes J.P.
Morgan and its subsidiaries from engaging in nonbanking activities, or from
acquiring more than 5% of any class of voting securities of any company
engaging in such activities, unless the Board has determined, by order or
regulation, that such proposed activities are closely related to banking.
Federal law and Board interpretations limit the extent to which J.P. Morgan
and its subsidiaries can engage in certain aspects of the securities
business. Under Board policy, J.P. Morgan is expected to act as a source of
financial strength to each subsidiary bank and to commit resources to support
such subsidiary bank, even in circumstances where J.P. Morgan might not be in
a financial position to do so.

The Glass-Steagall Act prohibits affiliates of banks that are
members of the Federal Reserve System, including J.P. Morgan Securities Inc.
(JPMSI), from being "engaged principally" in bank-ineligible underwriting and
dealing activities (mainly corporate debt and equity securities). As
interpreted by the Board, this prohibition currently restricts JPMSI's gross
revenues from such activities to a maximum of 10% of its total gross
revenues. J.P. Morgan will continue to seek ways to expand the limits on such
activities and to achieve the reform of the Glass-Steagall Act necessary to
achieve our long-term objectives.

Morgan Guaranty Trust Company of New York, J.P. Morgan's largest
subsidiary, is a member of the Federal Reserve System. It and J.P. Morgan
Delaware, another wholly owned subsidiary of J.P. Morgan, are members of the
Federal Deposit Insurance Corporation (FDIC). Their businesses are subject to
both U.S. federal and state law and to examination and regulation by U.S.
federal and state banking authorities. J.P. Morgan and its nonbank
subsidiaries are affiliates of Morgan Guaranty and J.P. Morgan Delaware
within the meaning of the applicable federal statutes. Such banks are subject to
restrictions on loans and extensions of credit to J.P. Morgan and certain other
affiliates and on certain other types of transactions with them or involving
their securities. Among other wholly owned subsidiaries:

. J.P. Morgan Securities Inc. is a broker-dealer registered with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, the New York Stock Exchange, and other exchanges.

. J.P. Morgan Futures Inc. is subject to regulation by the Commodity
Futures Trading Commission, the National Futures Association, and the commodity
exchanges and clearinghouses of which it is a member.

. J.P. Morgan Investment Management Inc. is registered with the
Securities and Exchange Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended.

J.P. Morgan subsidiaries conducting business in other countries are also
subject to regulations and restrictions imposed by those jurisdictions,
including capital requirements.

101

<PAGE>

Competition

In all areas of business J.P. Morgan and its subsidiaries operate in an
intensely competitive environment, especially with respect to services and
pricing. In the United States, we face competition from other money center
bank holding companies, investment banks, many regional and foreign banks,
and a wide range of nonbank financial institutions. Internationally, we face
competition from investment banks, commercial banks, and universal banks in
the money centers of Europe and Asia.

Properties

J.P. Morgan owns and occupies buildings in New York, including its
headquarters at 60 Wall Street, as well as 23 Wall Street and 15 Broad
Street. J.P. Morgan also owns property in Delaware, London, and Paris and
leases office space in New York, Brussels, Delaware, Paris, and London. J.P.
Morgan also owns and leases property in other locations in which it does
business throughout the world.

J.P. Morgan's financing arrangement for an office building complex
in London, which is more fully described in Note 13 to the financial
statements, Long-term debt, involved the sale of a 52.5% interest in the
building complex to the lender, excluding the interior office finishing,
furniture, and technology.

As more fully described in Note 13 to the financial statements, the
60 Wall Street building is subject to a mortgage in the amount of $400
million.

No other property owned by J.P. Morgan and its subsidiaries is
subject to any material encumbrance.

102
<PAGE>

J.P. Morgan directory
Principal subsidiaries and offices - wholly owned except where noted

- --------------------------------------------------------------------------------
North America

New York
J.P. Morgan & Co. Incorporated
Morgan Guaranty Trust Company of New York
J.P. Morgan Securities Inc.
J.P. Morgan Investment Management Inc.
J.P. Morgan Futures Inc.
J.P. Morgan Capital Corporation
Morgan Guaranty International Finance Corporation
J.P. Morgan Community Development Corporation

Chicago
J.P. Morgan & Co. - Chicago office
J.P. Morgan Securities - Chicago office
J.P. Morgan Futures - Chicago office

Houston
J.P. Morgan Securities - Houston office
J.P. Morgan Investment Management - Houston office

Los Angeles
Morgan Guaranty - representative office
J.P. Morgan California
J.P. Morgan Investment Management - Los Angeles office

Palm Beach
J.P. Morgan Florida, FSB
J.P. Morgan Securities - Palm Beach office

San Francisco
J.P. Morgan & Co. - San Francisco office
Morgan Guaranty - representative office
J.P. Morgan California - San Francisco office
J.P. Morgan Futures - San Francisco office
J.P. Morgan Securities - San Francisco office

Wilmington
J.P. Morgan Delaware
J.P. Morgan Services Inc.

Toronto
Morgan Bank of Canada
J.P. Morgan Securities Canada Inc.

Nassau
Morgan Guaranty - banking office
Morgan Trust Company of The Bahamas Limited

Cayman Islands
J.P. Morgan Delaware - banking office
Morgan Trust Company of the Cayman Islands Ltd.

- --------------------------------------------------------------------------------
Europe

London
Morgan Guaranty - banking and private banking offices
J.P. Morgan Securities Ltd.
J.P. Morgan Sterling Securities Ltd.
J.P. Morgan Investment Management - London office
J.P. Morgan Whitefriars Inc.

Amsterdam
J.P. Morgan Nederland N.V.

Brussels
Morgan Guaranty - banking office
J.P. Morgan Benelux S. A.
Euroclear Operations Centre+

Channel Islands
J.P. Morgan Jersey Limited

Frankfurt
Morgan Guaranty - banking and private banking offices
J.P. Morgan GmbH
J.P. Morgan Investment GmbH

Geneva
J.P. Morgan (Suisse) S.A.

Madrid
Morgan Guaranty - banking and private banking offices
Morgan Gestion, S.A.
J.P. Morgan Espana S.A.
J.P. Morgan Sociedad de Valores y Bolsa, S.A.

Milan
Morgan Guaranty - banking and private banking offices
J.P. Morgan S.p.A.
J.P. Morgan SIM S.p.A.

Paris
Morgan Guaranty - banking and private banking offices
J.P. Morgan & Cie S.A.
Societe de Bourse J.P. Morgan S.A.

Prague
J.P. Morgan International Ltd.

Rome
Morgan Guaranty - representative office

Warsaw
J.P. Morgan Polska Sp. z o.o.

Zurich
Morgan Guaranty - banking office
J.P. Morgan (Suisse) - Zurich office
J.P. Morgan (Switzerland) Ltd.
J.P. Morgan Securities Ltd. - Zurich office

- --------------------------------------------------------------------------------
Asia/Pacific

Tokyo
Morgan Guaranty - banking and private banking offices
J.P. Morgan Trust Bank Ltd.
J.P. Morgan Securities Asia* - Tokyo office

Beijing
J.P. Morgan & Co. - representative office

Bombay
ICICI Securities and Finance Company Limited**

Hong Kong
Morgan Guaranty - banking and private banking offices
J.P. Morgan Securities Hong Kong Ltd.
J.P. Morgan Securities Asia* - Hong Kong office

Jakarta
Morgan Guaranty - representative office

Manila
Morgan Guaranty - representative office

Melbourne
Morgan Guaranty - banking office
J.P. Morgan Australia Limited
J.P. Morgan Investment Management Australia Limited
J.P. Morgan Australia Securities Limited

Osaka
J.P. Morgan Securities Asia* - Osaka office

Seoul
Morgan Guaranty - representative office

Shanghai
J.P. Morgan & Co. - representative office

Singapore
Morgan Guaranty - banking and private banking offices
J.P. Morgan Securities Asia Ltd.*
J.P. Morgan Futures - Singapore office
J.P. Morgan Investment Management - Singapore office

Sydney
Morgan Guaranty - banking office
J.P. Morgan Australia - Sydney office
J.P. Morgan Australia Securities - Sydney office

Taipei
Morgan Guaranty - representative office

- --------------------------------------------------------------------------------
Latin America

Buenos Aires
Morgan Guaranty - banking office
J.P. Morgan Argentina S.A.

Caracas
J.P. Morgan Venezuela, S.A.

Mexico City
J.P. Morgan Grupo Financiero, S.A. de C.V.
J.P. Morgan Casa de Bolsa, S.A. de C.V.
Banco J.P. Morgan, S.A.

Rio de Janeiro
Morgan Guaranty - banking office
Banco J.P. Morgan S.A. - Rio de Janeiro office
JPM Corretora de Cambio, Titulos e Valores Mobiliarios - Rio de Janeiro office
J.P. Morgan Investimentos e Financas - Rio de Janeiro office

Santiago
J.P. Morgan Chile Ltda.

Sao Paulo
Morgan Guaranty - banking office
Banco J.P. Morgan S.A.
JPM Corretora de Cambio, Titulos e Valores Mobiliarios S.A.
J.P. Morgan Investimentos e Financas Ltda.

* 50% owned
**40% owned
+ operated by J.P. Morgan

103

<PAGE>

Senior Management

Douglas A. Warner III
Chairman of the Board and President
Chief Executive Officer

Roberto G. Mendoza
Kurt F. Viermetz
Rodney B. Wagner
Vice Chairmen

Michael E. Patterson
Chief Administrative Officer

Peter B. Smith
Stephen G. Thieke
Corporate Risk Management

Michael Enthoven
Technology and Operations

James T. Flynn
Chief Financial Officer

Herbert J. Hefke
Human Resources

Edward J. Kelly III
General Counsel

Ronald H. Menaker
Corporate Services

Edward F. Murphy
Auditor

David H. Sidwell
Controller

C. Nicholas Potter
Luc Bomans
William L. Cobb Jr.
Stephanie S. Hanbury-Brown
James H. Higgins III
John T. Olds
Keith M. Schappert
John W. Schmidlin
Asset Management and Servicing

John A. Mayer Jr.
Ramon de Oliveira
Walter A. Gubert
Maureen A. Hendricks
Thomas B. Ketchum
Joseph P. Mac Hale
John K. McColloch
Jackson P. Tai
J. Adam L. Wethered
Finance and Advisory

Peter L. Woicke
Pilar Conde
Till M. Guldimann
Peter D. Hancock
Thomas L. Kalaris
Scott A. Levine
David M. Pryde
Nicolas S. Rohatyn
Georges-Arnaud Saier
Klaus T. Said
Jakob T. Stott
Sales and Trading

David M. Cromwell
Equity Investments

Michael Corey
Asset and Liability Management

104
<PAGE>

Board of Directors
J.P. Morgan & Co. Incorporated

Douglas A. Warner III
Chairman of the Board and President

- --------------------------------------------------------------------------------
Martin Feldstein
President and Chief Executive Officer
National Bureau of Economic Research, Inc.

Hanna H. Gray
President Emeritus and Harry Pratt Judson
Distinguished Service Professor of History
The University of Chicago

James R. Houghton
Chairman and Chief Executive Officer
Corning Incorporated

James L. Ketelsen
Retired Chairman and Chief Executive Officer
Tenneco Inc.

William S. Lee
Chairman Emeritus
Duke Power Company

Roberto G. Mendoza
Vice Chairman of the Board

Lee R. Raymond
Chairman of the Board and Chief Executive Officer
Exxon Corporation

Richard D. Simmons
President
International Herald Tribune

John G. Smale
Chairman of the Board
General Motors Corporation
and Retired Chairman of the Board
and Chief Executive
The Procter & Gamble Company

Kurt F. Viermetz
Vice Chairman of the Board

Rodney B. Wagner
Vice Chairman of the Board

Dennis Weatherstone
Retired Chairman of the Board

Douglas C. Yearley
Chairman, President, and Chief Executive Officer
Phelps Dodge Corporation

- --------------------------------------------------------------------------------
Committees of the Board

Executive Committee
J.P. Morgan and Morgan Guaranty
Messrs. Warner (Chairman), Houghton,
Mendoza, Viermetz, Wagner, Weatherstone

Audit Committee
J.P. Morgan
Examining Committee
Morgan Guaranty
Messrs. Ketelsen (Chairman), Feldstein, Smale, Yearley

Committee on Trust Matters
J.P. Morgan
Dr. Gray (Chairman), Messrs. Ketelsen, Simmons

Committee on Management Development and Executive Compensation
J.P. Morgan
Messrs. Houghton (Chairman), Lee, Raymond

Committee on Director Nominations and Board Affairs
J.P. Morgan
Mr. Lee (Chairman), Dr. Gray, Messrs. Smale, Yearley

Committee on Employment Policies and Benefits
Morgan Guaranty
Messrs. Simmons (Chairman), Feldstein
105

<PAGE>

International Council
J.P. Morgan & Co. Incorporated

Formed in 1967 and composed of business leaders and prominent individuals
from public life, the International Council advises the senior management of
J.P.Morgan on matters relating to its global business. It meets approximately
every eight months to discuss relevant issues of international concern and
interest.

In 1994 Jacques Calvet, Sir Roderick Carnegie, David Culver, and
Aarnout Loudon retired from the Council, and Robert E. Allen, Leszek
Balcerowicz, Derek L. Keys, John B. Prescott, Condoleezza Rice, Jess
Soderberg, and L.R. Wilson joined. Dennis Weatherstone joined the Council at
the beginning of 1995.

Hon. George P. Shultz
Chairman of the Council
Distinguished Fellow, Hoover Institution
Stanford University
Stanford, California

- --------------------------------------------------------------------------------
Robert E. Allen
Chairman and Chief Executive Officer
AT&T
Basking Ridge, New Jersey

H. Brewster Atwater Jr.
Chairman of the Board and Chief Executive Officer
General Mills, Inc.
Minneapolis, Minnesota

Leszek Balcerowicz
Professor
Warsaw School of Economics
Chairman
Center for Social and Economic Research
Warsaw, Poland

Riley P. Bechtel
President and Chief Executive Officer
Bechtel Group, Inc.
San Francisco, California

Bo Berggren
Chairman
Stora Kopparbergs Bergslags AB
Stockholm, Sweden

Marcus Bierich
Chairman of the Supervisory Board
Robert Bosch GmbH
Stuttgart, Germany

Jorge Born
President
Bomagra S.A.
Buenos Aires, Argentina

Lawrence A. Bossidy
Chairman and Chief Executive Officer
Allied-Signal Inc.
Morristown, New Jersey

Ing. Carlo De Benedetti
Chairman and Chief Executive Officer
Ing. C. Olivetti & C., S.p.A.
Ivrea, Italy

Sir Christopher Hogg
Chairman
Reuters Holdings PLC and Courtaulds plc
London, England

The Rt. Hon. The Lord Howe of
Aberavon, PC, QC
House of Lords
London, England

Derek L. Keys
Chairman
Billiton International Metals B.V.
London, England

Yotaro Kobayashi
Chairman and Chief Executive Officer
Fuji Xerox Co., Ltd.
Tokyo, Japan

Hon. Lee Kuan Yew
Senior Minister
Singapore

Carlos March
Chairman
The March Group
Madrid, Spain

Helmut O. Maucher
Chairman and Chief Executive Officer
Nestle S.A.
Vevey, Switzerland

Ali I. Naimi
President and Chief Executive Officer
Saudi Aramco
Dhahran, Saudi Arabia

Karl Otto Pohl
Partner
Sal. Oppenheim Jr. & Cie.
Frankfurt, Germany

John B. Prescott
Managing Director and Chief Executive Officer
The Broken Hill Proprietary Company Ltd.
Melbourne, Australia

Condoleezza Rice
Provost
Stanford University
Stanford, California

Jess Soderberg
Partner and Chief Executive Officer
A.P. Moller
Copenhagen, Denmark

Dennis Weatherstone
Retired Chairman
J.P. Morgan & Co. Incorporated
New York, New York

L.R. Wilson
Chairman, President, and Chief Executive Officer
BCE Inc.
Montreal, Canada

106
<PAGE>

Directors Advisory Council
Morgan Guaranty Trust Company of New York

The Directors Advisory Council of Morgan Guaranty Trust Company, whose
members are retired directors of J.P. Morgan, provides counsel to management
and the Board.

Ellmore C. Patterson
Chairman
Directors Advisory Council
Retired Chairman
J.P. Morgan & Co. Incorporated

- --------------------------------------------------------------------------------
Ralph E. Bailey
Former Vice Chairman
E.I. du Pont de Nemours & Company
and Retired Chairman and Chief Executive Officer
Conoco Inc.

Boris S. Berkovitch
Retired Vice Chairman
J.P. Morgan & Co. Incorporated

James O. Boisi
Retired Vice Chairman
J.P. Morgan & Co. Incorporated

William C. Bolenius

Carter L. Burgess

Frank T. Cary
Retired Chairman of the Board
International Business Machines Corporation

Charles D. Dickey Jr.
Retired Chairman of the Board
Scott Paper Company

Walter A. Fallon
Former Chairman of the Board
Eastman Kodak Company

Lewis W. Foy
Former Chairman
Bethlehem Steel Corporation

Howard Goldfeder
Retired Chairman and Chief Executive Officer
Federated Department Stores, Inc.

John J. Horan
Former Chairman and Chief Executive Officer
Merck & Co., Inc.

Howard W. Johnson
President Emeritus and Former
Chairman of the Corporation
Massachusetts Institute of Technology

Edward R. Kane
Former President
E.I. du Pont de Nemours & Company

Ralph F. Leach
Retired Chairman of the Executive Committee
J.P. Morgan & Co. Incorporated

Robert V. Lindsay
Retired President
J.P. Morgan & Co. Incorporated

John M. Meyer Jr.
Retired Chairman
J.P. Morgan & Co. Incorporated

Howard J. Morgens
Chairman Emeritus
The Procter & Gamble Company

Walter H. Page
Retired Chairman
J.P. Morgan & Co. Incorporated

De Witt Peterkin Jr.
Retired Vice Chairman
J.P. Morgan & Co. Incorporated

Donald E. Procknow
Former Vice Chairman and Chief Operating Officer
AT&T Technologies, Inc.

Thomas Rodd
Retired Vice Chairman
J.P. Morgan & Co. Incorporated

John P. Schroeder
Retired Vice Chairman
J.P. Morgan & Co. Incorporated

Warren M. Shapleigh
Retired Vice Chairman of the Board
Ralston Purina Company

Olcott D. Smith
Retired Chairman
Aetna Life and Casualty Company

107

<PAGE>

Corporate information

Corporate headquarters
J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, NY 10260-0060,
1-212-483-2323

Annual meeting
The annual meeting of stockholders of J.P. Morgan will be held on Wednesday,
May 10, 1995, at 11:00 a.m. in Morgan Hall West, 46th floor, 60 Wall Street,
New York.

Listing
The common stock of J.P. Morgan is listed on the New York, Amsterdam, London,
Paris, Swiss, and Tokyo stock exchanges. International Depositary Receipts
for the stock are listed on the Brussels and London stock exchanges. NYSE
symbol: JPM

The Adjustable Rate Cumulative Preferred Stock, Series A of J.P. Morgan is
listed on the New York Stock Exchange. NYSE symbol: JPM Pr A

Transfer agent and registrar
Common Stock and Adjustable Rate Cumulative Preferred Stock, Series A:
First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, NJ
07303-2500, 1-800-446-2617

Variable Cumulative Preferred Stock, Series B through F:
Bankers Trust Company, 4 Albany Street, 7th floor, New York, NY 10006-1500,
1-212-250-6850

Form 10-K
J.P. Morgan's annual report on Form 10-K as filed with the Securities and
Exchange Commission is incorporated in this report.

Dividend reinvestment and stock purchase plan
Stockholders wishing to receive a prospectus for the dividend reinvestment
and stock purchase plan are invited to write to First Chicago Trust Company
of New York, J.P. Morgan Dividend Reinvestment Plan, P.O. Box 2500, Jersey
City, NJ 07303-2500, or call 1-800-446-2617.

Report on contributions
A report on J.P. Morgan's philanthropic contributions is published annually
by the Advisory Committee, J.P. Morgan Charitable Trust. It is available at
the J.P. Morgan annual meeting. Copies can also be obtained by writing to
Community Relations and Public Affairs Department, J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, NY 10260-0060.

Equal opportunity at J.P. Morgan
J.P. Morgan is committed to providing equal opportunity in the workplace. The
company, through this commitment, benefits from the full use and development
of its employees.

108
<PAGE>

[PHOTO APPEARS HERE]

<PAGE>

J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0060
(212) 483-2323

<PAGE>

Graphics Appendix List
----------------------

Cover
Photo of J.P. Morgan employees.

Contents
Photo of J.P. Morgan employees.

Page 1
(1) Depicted on the lower left corner of Page 1 is a bar chart showing
separately pretax income and income before cumulative effect of accounting
changes and extraordinary gain, in millions of dollars, for each of the five
years in the period from 1990 to 1994. Pretax income is shown as $1,054 for
1990, $1,485 for 1991, $1,749 for 1992, $2,691 for 1993, and $1,825 for 1994.
Income before cumulative effect of accounting changes and extraordinary gain is
shown as $775 for 1990, $1,114 for 1991, $1,130 for 1992, $1,723 for 1993, and
$1,215 for 1994.

(2) Depicted on the lower right corner of Page 1 is an upward sloping line
graph showing dividends per common share for the twenty-one years in the period
from 1974 to 1994 in four year intervals. The amounts are shown as follows:
1974 $0.41, 1978 $0.57, 1982 $0.87, 1986 $1.26, 1990 $1.86, 1994 $2.79.

Page 2
Photo of Douglas A. Warner III.

Page 4
Photos of Roberto G. Mendoza, Kurt F. Viermetz and Rodney B. Wagner.

Page 7
Photo of Dennis Weatherstone.

Page 14
(1) Depicted on the upper portion of Page 14 is a bar chart showing the private
client and institutional client components of total assets under management, in
billions of dollars, at December 31, 1993 and 1994. Private client assets under
management are shown as $35 at December 31, 1993 and 1994. Institutional assets
under management are shown as $112 at December 31, 1993, and $115 at December
31, 1994. Total assets under management are shown as $147 at December 31, 1993,
and $150 at December 31, 1994.

(2) Depicted on the lower portion of Page 14 is a bar chart showing revenue
from the Asset Management and Servicing sector, in millions of dollars, for 1993
and 1994. Asset Management and Servicing revenue is shown as $1,528 for 1993
and $1,646 for 1994.

Page 15
Depicted on Page 15 is a bar chart showing revenue from the Finance and Advisory
sector, in millions of dollars, for 1993 and 1994. Finance and Advisory revenue
is shown as $1,361 for 1993 and $1,165 for 1994.

Page 16
Depicted on Page 16 is a bar chart showing revenue from the Sales and Trading
sector, in millions of dollars, for 1993 and 1994. Sales and Trading revenue is
shown as $2,095 for 1993 and $1,299 for 1994.

Page 17
Depicted on Page 17 is a bar chart showing revenue from the Equity Investments
sector, in millions of dollars, for 1993 and 1994. Equity Investments revenue
is shown as $306 for 1993 and $663 for 1994.

Page 18
Depicted on Page 18 is a bar chart showing revenue from the Asset and Liability
Management sector, in millions of dollars, for 1993 and 1994. Asset and
Liability Management revenue is shown as $1,163 for 1993 and $965 for 1994.

Page 23
Depicted on Page 23 is a bar chart showing net interest revenue, in millions of
dollars, for 1992, 1993, and 1994. Net interest revenue is shown as $1,708 for
1992, $1,772 for 1993, and $1,981 for 1994.
<PAGE>

Page 25
Depicted on Page 25 is a bar chart showing trading revenue, in millions of
dollars, for 1992, 1993, and 1994. Trading revenue is shown as $959 for 1992,
$2,059 for 1993, and $1,019 for 1994.

Page 27
Depicted on Page 27 is a histogram showing the frequency distribution of 1994
daily combined trading-related revenue. Daily trading-related revenue generally
fell within 1.65 standard deviations revenue confidence bands, approximately $16
million, set relative to average daily trading-related revenue of $5.8 million.

Page 29
Depicted on Page 29 is a bar chart showing credit exposure on derivatives, in
billions of dollars, at December 31, 1992, 1993, and 1994. Credit exposure on
derivatives is shown as $17.8 at December 31, 1992, $20.7 at December 31, 1993,
and $19.5 at December 31, 1994.

Page 31
Depicted on Page 31 is a bar chart showing corporate finance revenue, in
millions of dollars, for 1992, 1993, and 1994. Corporate finance revenue is
shown as $439 for 1992, $532 for 1993, and $434 for 1994.

Page 32
Depicted on Page 32 is a bar chart showing credit-related fees, in millions of
dollars, for 1992, 1993, and 1994. Credit-related fees are shown as $214 for
1992, $224 for 1993, and $204 for 1994.

Page 33
(1) Depicted on the upper portion of Page 33 is a bar chart showing investment
management fees, in millions of dollars, for 1992, 1993, and 1994. Investment
management fees are shown as $377 for 1992, $464 for 1993, and $517 for 1994.

(2) Depicted on the lower portion of Page 33 is a bar chart showing operational
service fees, in millions of dollars, for 1992, 1993, and 1994. Operational
service fees are shown as $409 for 1992, $491 for 1993, and $546 for 1994.

Page 34
Depicted on Page 34 is a bar chart showing total operating expenses, in millions
of dollars, for 1992, 1993, and 1994. Operating expenses are shown as $2,854
for 1992, $3,580 for 1993, and $3,692 for 1994.

Page 38
Depicted on Page 38 is a bar chart showing the tier 1 and tier 2 capital
components of the total risk-based capital ratio at December 31, 1992, 1993, and
1994. The tier 1 components are shown as 8.9%, 9.3%, and 9.6% at December 31,
1992, 1993, and 1994, respectively. The tier 2 components are shown as 4.1%,
3.7%, and 4.6% at December 31, 1992, 1993, and 1994, respectively. Total risk-
based capital ratios are shown as 13.0% at December 31, 1992 and 1993, and 14.2%
at December 31, 1994.

Back Cover
Photos of J.P. Morgan employees.

<PAGE> 1

EXHIBIT 21

Subsidiaries of J.P. Morgan & Co. Incorporated
______________________________________________

J.P. Morgan & Co. Incorporated
Delaware

Subsidiaries of J.P. Morgan & Co. Incorporated
______________________________________________
(all wholly owned, except where noted)

Fund 800 Inc.
Delaware

J.P. Morgan California
California

Morgan Fonciere Cayman Islands Ltd.
Cayman Islands

Morgan Trust Company of the Cayman Islands Ltd.
Cayman Islands

Morgan Trust Company of The Bahamas Limited
Commonwealth of The Bahamas

J.P. Morgan Acceptance Corporation I
Delaware

J.P. Morgan Capital Corporation
Delaware

J.P. Morgan Capital Emerging Markets K Corporation
Delaware

J.P. Morgan Delaware
Delaware

J.P. Morgan Florida Holdings Corp.
Delaware

EXHIBIT 21

J.P. Morgan Funds Management Inc.
Delaware

J.P. Morgan Futures Inc.
Delaware

J.P. Morgan GT Corporation
Delaware

J.P. Morgan Holdings Inc.
Delaware

J.P. Morgan International Capital Corporation
Delaware

J.P. Morgan International Holdings Corp.
Delaware

J.P. Morgan Investment Corporation
Delaware

J.P. Morgan Investment Management Inc.
Delaware

J.P. Morgan Leasefunding Corp.
Delaware

J.P. Morgan (1992-I) Foreign Sales Corporation
Barbados

J.P. Morgan Mortgage Funding Inc.
Delaware

J.P. Morgan Mortgage Pass-Through Corporation
Delaware

J.P. Morgan News Partnership Corporation
Delaware

EXHIBIT 21

J.P. Morgan Partnership Capital Corporation
Delaware

J.P. Morgan Real Estate Partnership Corporation
Delaware

J.P. Morgan Energy Partnership Corporation
Delaware

J.P. Morgan Ventures Energy Corporaiton
Delaware

J.P. Morgan Private Investments Inc.
Delaware

J.P. Morgan Securities Holdings Inc.
Delaware

J.P. Morgan Securities Inc.
Delaware

J.P. Morgan Services Inc.
Delaware

J.P. Morgan Structured Finance Corp.
Delaware

J.P. Morgan Structured Obligations Corporation
Delaware

J.P. Morgan Trust Company of Delaware
Delaware

J.P. Morgan Ventures Corporation
Delaware

J.P. Morgan Venezuela S.A.
Venezuela

EXHIBIT 21

J.P. Morgan Community Development Corporation
Delaware

Corsair, Inc.
Delaware

J.P. Morgan Florida, FSB
Florida

J.P. Morgan Trading and Finance Limited
United Kingdom

J.P. Morgan & Co. Limited
United Kingdom

Morgan Guaranty Trust Company of New York
New York

EXHIBIT 21

Subsidiaries of Morgan Guaranty Trust Company of New York
_________________________________________________________

Angel Court Limited
United Kingdom

Morgan Guaranty Nominees Bahamas Limited
Commonwealth of The Bahamas

J.P. Morgan Interfunding Corp.
Delaware

Morprop Incorporated
Delaware

MorWest, Inc.
Delaware

J.P. Morgan V.E. Ltd.
New York

J.P. Morgan V.E. 92 Ltd.
New York

Oil Tankers Leasing Corporation
New York

Ship Holding Corp.
New York

Whitkath Inc.
New York

EC Nominees Limited
United Kingdom

Guaranty Nominees Limited
United Kingdom

EXHIBIT 21

JPM (Eagle Star) Nominees Limited
United Kingdom

JPM Nominees Limited
United Kingdom

MGTB Nominees Limited
United Kingdom

MGT-EOC Nominees Limited
United Kingdom

Morgan Guaranty Executor and Trustee Company Limited
United Kingdom

J.P. Morgan Trustees Ltd.
United Kingdom

Morgan Guaranty International Finance Corporation
Section 25 (a) of the Federal Reserve Act of the United
States

Subsidiaries of Morgan Guaranty International Finance
Corporation
____________________________________________________________

Morgan Guaranty International Bank
Section 25 (a) of the Federal Reserve Act of the United
States

J.P. Morgan Argentina S.A.1
Argentina

J.P. Morgan Chile Limitada2
Chile

Morgan Guaranty Finance Limited
Bermuda

EXHIBIT 21

J.P. Morgan Funds Bahamas Ltd.
Commonwealth of The Bahamas

JPM Corretora de Cambio, Titulos e Valores Mobiliarios S.A.
Brazil

Banco J.P. Morgan, S.A.3
Brazil

J.P. Morgan Investimentos e Financas Ltda.
Brazil

J.P. Morgan GmbH4 (97% owned)
Federal Republic of Germany

J.P. Morgan Holding Deutschland GmbH
Federal Republic of Germany

J.P. Morgan Investment GmbH
Federal Republic of Germany

J.P. Morgan & Cie S.A.
France

Morgan Gestion S.A.
France

Societe de Bourse J.P. Morgan S.A.
France

Morgan Conseil S.A.
France

EXHIBIT 21

J.P. Morgan Fund Services S.A.5
Grand Duchy of Luxembourg

J.P. Morgan SIM S.p.A.6
Italy

J.P. Morgan S.p.A.7
Italy

J.P. Morgan Trust Bank Ltd.8
Japan

J.P. Morgan Jersey Limited
Jersey, The Channel Islands

J.P. Morgan Benelux S.A.
Kingdom of Belgium

J.P. Morgan Securities Asia Ltd. (50% owned)
Republic of Singapore

J.P. Morgan Financial Markets Ltd.
Switzerland

J.P. Morgan (Suisse) S.A.
Switzerland

J.P. Morgan Portfolio Ltd.
United Kingdom

Morgan Property Development Company Limited
United Kingdom

EXHIBIT 21

J.P. Morgan Polska Sp. z o.o.
Warsaw, Poland

J.P. Morgan International Ltd.
Prague, Czech Republic

J.P. Morgan Grupo Financiero, S.A. de C.V.
Mexico City, Mexico

Banco J.P. Morgan, S.A.
Mexico City, Mexico

J.P. Morgan Casa de Bolsa, S.A. de C.V.
Mexico City, Mexico

J.P. Morgan Fondi Italia S.p.A.
Italy

J.P. Morgan Services Ltd.
Singapore

Franco Financiere Neerlandaise (10% Owned)
France

FL 21 SARL (10% Owned)
France

ICICI Securities and Finance Co. Ltd. (40% Owned)
Bombay, India

Epargne-Interessement (23% Owned)
France

Private Export Funding Corporation (7.5% Owned)
New York

J.P. Morgan Overseas Capital Corporation
Delaware

EXHIBIT 21

Subsidiaries of J.P. Morgan Overseas Capital Corporation
_________________________________________________________

J.P. Morgan Nederland N.V.
Amsterdam, The Netherlands

J.P. Morgan Securities Hong Kong Ltd.
Crown Colony of Hong Kong

J.P. Morgan Whitefriars Inc.
Delaware

J.P. Morgan Whitefriars (UK)
United Kingdom

J.P. Morgan Securities Ltd.
United Kingdom

J.P. Morgan Securities Canada Inc.
Ontario, Canada

Morgan Bank of Canada
Ontario, Canada

Morgan Bank of Canada (Receivables Purchase Financing) Ltd.
Ontario, Canada

J.P. Morgan Espana S.A.
Spain

J.P. Morgan Sociedad de Valores y Bolsa S.A.
Spain

Morgan Gestion, S.A.
Spain

J.P. Morgan Sterling Securities Ltd.
United Kingdom

EXHIBIT 21

Kipps Nominees Ltd.
United Kingdom

Morgan Guaranty Holdings Ltd.
United Kingdom

Morgan Guaranty Trust Company Limited (U.K.)
United Kingdom

Sociven S.A.
Venezuela

J.P. Morgan Australia Holdings Limited
Victoria, Australia

J.P. Morgan Australia Limited
Victoria, Australia

J.P. Morgan Australia Securities Limited
Victoria, Australia

J.P. Morgan Investment Management Australia Limited
Victoria, Australia

J.P. Morgan Nominees Pty. Limited
Victoria, Australia

Barenilla (10% Owned)
Spain

Bank of the Philippine Islands (20.4% Owned)
Philippines

Saudi International Bank Ltd. (20% Owned)
London
_______________________________
1 JPMOCC owns a minority interest in company.

2 JPMOCC owns a minority interest in company.

3 J.P. Morgan Investimentos e Financas Ltda. has a 36% ownership interest.

4 MGT has a 3% ownership interest.

5 JPMOCC owns a minority interest in company.

6 Morgan Guaranty International Bank as a 30% ownership interest.

7 JPMOCC owns a minority interest in company.

8 J.P. Morgan & Cie S.A. owns preferred shares carrying 35% of the voting
power.

<PAGE> 1

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS
__________________________________

We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on
Form S-3 (Nos. 33-44312, 33-45651, and 33-55851) and in the
Prospectuses constituting part of the Registration Statements on
Form S-8, as amended, (Nos. 33-49263, 33-49265, 33-49267, 33-
32659, and 33-49419) of our report dated January 11, 1995
appearing on Page 41 of the J.P. Morgan & Co. Incorporated Annual
Report on Form 10-K for the year ended December 31, 1994. We
also consent to the references to us under the heading "Experts"
in such Prospectuses.

s/PRICE WATERHOUSE LLP
______________________
Price Waterhouse LLP
New York, New York
March 22, 1995

<PAGE> 1

Exhibit 24

POWER OF ATTORNEY
(Form 10-K)

KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Douglas A. Warner III,
Roberto G. Mendoza, Kurt F. Viermetz, Rodney B. Wagner,
Michael E. Patterson, Edmund P. Rogers III, Edward J.
Kelly III and Margaret M. Foran and each of them, with
full power to act without the others, as the
undersigned's true and lawful attorney-in-fact and agent,
with full and several power of substitution, for the
undersigned and in the undersigned's name, place and
stead, in any and all capacities, to sign any and all
Annual Reports of J.P. Morgan & Co. Incorporated on Form
10-K and any and all amendments thereto pursuant to the
Securities Exchange Act of 1934, as amended, and to file
the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully
to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or
their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.