MORGAN J P & CO INC, 10-K, 1996-03-25

MORGAN J P & CO INC
10-K, 1996-03-25
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, 1995

[ ] 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

Depositary shares representing New York Stock Exchange
a one-tenth interest in 6 5/8%
Cumulative Preferred Stock,
Series H, No Par Value,
Stated Value $500

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 $15,377,040,281 at February
29, 1996.

The number of shares outstanding of J.P. Morgan's Common
Stock, $2.50 Par Value, at February 29, 1996, totaled 187,811,179
shares.

DOCUMENTS INCORPORATED BY REFERENCE

J.P. Morgan's Annual report to Stockholders for the year
ended December 31, 1995, 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 25,
1996, 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
_______________________________

Page No. *
Part I

Item 1. Business
Description of business 6-14, 99-101
Number of employees 80
Financial information about foreign and
domestic operations 74-75,88-90
Distribution of assets, liabilities, and
stockholders' equity; interest rates
and interest differential 82-84
Investment portfolio 53-55
Loan portfolio 47,62-63,
85-90
Summary of loan loss experience 87-89
Deposits 82,84,93
Return on equity and assets 80-81
Short-term borrowings 94

Item 2. Properties 101

Item 3. Legal proceedings (a)

Item 4. Submission of matters to a vote of
security holders (a)

Part II

Item 5. Market for registrant's common equity and
related stockholder matters 79,80-81,95

Item 6. Selected financial data 80-81

Item 7. Management's discussion and analysis of
financial condition and results of
operations 6-38

Item 8. Financial statements and supplementary data
Report of independent accountants 40
J.P. Morgan & Co. Incorporated
Consolidated statement of income 41
Consolidated balance sheet 42
Consolidated statement of changes in
stockholders' equity 43
Consolidated statement of cash flows 44
Morgan Guaranty Trust Company of New York -
Consolidated statement of condition 45
Notes to financial statements 46-79
Selected consolidated quarterly
financial data (b), 95
Consolidated average balances and net
interest earnings, for the three months
ended December 31, 1995 and 1994 110-111

Item 9. Changes in and disagreements with accountants
on accounting and financial disclosure (a)

<PAGE> 4

Part III Page No. *

Item 10. Directors and executive officers of the
registrant (c)

Item 11. Executive compensation (c)

Item 12. Security ownership of certain beneficial
owners and management (c)

Item 13. Certain relationships and related
transactions (c)

Part IV

Item 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) 76-78

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
(incorporated by reference to Exhibit 10a to J.P.
Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10b Director stock plan, as amended (incorporated by
reference to Exhibit 10b to J.P. Morgan's annual
report on Form 10-K for the year ended December
31, 1994, File No. 1-5885)

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
(incorporated by reference to Exhibit 10d to J.P.
Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10e 1987 stock incentive plan, as amended
(incorporated by reference to Exhibit 10e to J.P.
Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10f Stock option plan, as amended (incorporated by
reference to Exhibit 10f to J.P. Morgan's annual
report on Form 10-K for the year ended December 31,
1994, File No. 1-5885)

10g Incentive compensation plan, as amended
(incorporated by reference to Exhibit 10g to J.P.
Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10h Stock option award (incorporated by reference to
Exhibit 10h to J.P. Morgan's quarterly report on
Form 10-Q for the quarter ended March 31, 1995, File
No. 1-5885)

10i 1995 stock incentive plan

10j 1995 executive officer performance plan

12 Statements re computation of ratios (incorporated by
reference to Exhibit 12 to J.P. Morgan's amendment
No. 2 to Form S-3, Registration No. 33-64193)

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

* Refers to pages appearing in the J.P. Morgan & Co.
Incorporated Annual report to stockholders for the year
ended December 31, 1995. 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.

<PAGE> 6

(a) Nothing to report.

(b) Fourth quarter 1995 results are incorporated by reference
to the report on Form 8-K dated January 11, 1996, filed
with the Securities and Exchange Commission.

<PAGE> 7

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 25, 1996, on its behalf by the
undersigned, thereunto duly authorized.

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

By (SIGNATURE) /s/ RACHEL F. ROBBINS
____________________________
(Name and Rachel F. Robbins, Secretary
Title)
Date March 25, 1996

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on March 25, 1996, by the
following persons on behalf of the registrant in the capacities
indicated.

By (SIGNATURE) s/JOHN A. MAYER JR.
_______________________________________
(Name and John A. Mayer Jr., Chief Financial Officer
Title) (Principal financial officer)

By (SIGNATURE) s/DAVID H. SIDWELL
_______________________________________
(Name and David H. Sidwell, Managing Director and
Title) Controller
(Principal accounting officer)

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

By (SIGNATURE) s/RILEY P. BECHTEL *
__________________________
(Name and Riley P. Bechtel, Director
Title)

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> 8

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/MICHAEL E. PATTERSON *
______________________________________________
(Name and Michael E. Patterson, Vice Chairman of the
Title) Board 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/KURT F. VIERMETZ *
____________________________________________
(Name and Kurt F. Viermetz, 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 (incorporated by
reference to Exhibit 10a to J.P. Morgan's annual report on
Form 10-K for the year ended December 31, 1994, File No. 1-5885)

10b. Director stock plan, as amended (incorporated by reference
to Exhibit 10b to J.P. Morgan's annual report on Form 10-K
for the year ended December 31, 1994, File No. 1-5885)

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 (incorporated by
reference to Exhibit 10d to J.P. Morgan's annual report on
Form 10-K for the year ended December 31, 1994, File No. 1-5885)

10e. 1987 stock incentive plan, as amended (incorporated by
reference to Exhibit 10e to J.P. Morgan's annual report on
Form 10-K for the year ended December 31, 1994, File No. 1-5885)

10f. Stock option plan, as amended (incorporated by reference to
Exhibit 10f to J.P. Morgan's annual report on Form 10-K for
the year ended December 31, 1994, File No. 1-5885)

10g. Incentive compensation plan, as amended (incorporated by
reference to Exhibit 10g to J.P. Morgan's annual report on
Form 10-K for the year ended December 31, 1994, File No. 1-5885)

10h. Stock option award (incorporated by reference to Exhibit 10h
to J.P. Morgan's quarterly report on Form 10-Q for the
quarter ended March 31, 1995, File No. 1-5885)

10i. 1995 stock incentive plan

10j. 1995 executive officer performance plan

12. Statements re computation of ratios (incorporated by
reference to Exhibit 12 to J.P. Morgan's amendment No. 2 to
Form S-3, Registration No. 33-64193)

13. The J.P. Morgan & Co. Incorporated Annual report to
stockholders (Pages 6-38, 40-90, 93-95, 99-101). 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

Exhibit 10(i)

1995 Stock Incentive Plan of
J.P. Morgan & Co. Incorporated and Affiliated Companies

Article I

Purpose

The purpose of the 1995 Stock Incentive Plan (the "Plan") is to
afford an incentive to key employees of J.P. Morgan & Co. Incorporated
(the "Company") and its affiliates to acquire a proprietary interest in
the Company, to encourage such employees to increase their efforts on
behalf of the Company and remain in its employ, and to more closely
align the interests of such key employees with those of the Company's
stockholders.

Article II

Definitions

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

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

(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 lll.

(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) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(h) "Fair Market Value" of Common Stock on any day shall mean the
average of the highest and lowest price of Common Stock as reported on
the composite tape for such day, unless the Committee determines that
another procedure for determining Fair Market Value would be more
appropriate.

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

(k) "Option" shall mean an Incentive Stock Option or a
Nonqualified Stock Option.

(l) "Optionee" shall mean a Participant who is granted an Option.

(m) "Participant" shall mean an eligible employee who has been
granted an Option, Stock Appreciation Right or Award under the Plan.

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

(o) "Plan" shall mean this 1995 Stock Incentive Plan of J.P.
Morgan & Co. Incorporated and Affiliated Companies.

(p) "Related Right" shall mean a Stock Appreciation Right
described in Section 7.2.

(q) "Restricted Period" shall mean the period during which a
Restricted Stock Award is being earned in accordance with Section 8.3.

(r) "Restricted Stock Award" shall mean an award granted under
Article Vlll.

(s) "Stand Alone Right" shall mean a Stock Appreciation Right
described in Section 7.3.

(t) "Stock Appreciation Right" shall mean a right granted under
Article Vll.

(u) "Stock Unit Award" shall mean an award granted under Article
IX.

(v) "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.

Article III

3.1. (a) The Board of Directors shall appoint not less than three
Directors to the Committee which shall administer the Plan. With
respect to determinations regarding the grant, amount, acceleration or
forfeiture of Options, Stock Appreciation Rights or awards with respect
to an eligible employee who is a member of the Board of Directors, the
Committee shall be composed of all directors of the Company who are not
employees of the Company or any other Participating Company. No
individual shall be 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, Stock Appreciation
Rights and Awards under the Plan; to waive any restrictions or
limitations, or impose additional limitations or restrictions, on
previously granted Options, Stock Appreciation Rights, or Awards
(within the parameters of the Plan); to interpret the provisions of the
Plan and any agreements relating to Options, Stock Appreciation Rights
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 subsection 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 subsection 4.1 (d), the
maximum number of shares of Common Stock with respect to which Options,
Stock Appreciation Rights and Awards may be granted shall be 28,000,000
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, Stock Appreciation Right or Award granted under
the Plan shall expire or terminate for any reason other than the
exercise of a Related Right (to the extent set forth in subsection
7.2(c) ), the shares subject to such Option, Stock Appreciation Right
or Award shall be available for other Options, Stock Appreciation
Rights and Awards to the same Participant or other eligible employees.
Any shares delivered in payment of the exercise price of an Option
shall be available for other Options, Stock Appreciation Rights and
Awards to the same Participant or other eligible employees.

(b) Subject to adjustment pursuant to subsection 4.1 (d), of the
total shares of Common Stock referred to in subsection 4.1 (a), the
number of shares of Common Stock with respect to which Awards may be
granted shall not exceed 7,000,000 shares of Common Stock.

(c) Subject to adjustment pursuant to subsection 4.1 (d), of the
total shares of Common Stock referred to in subsection 4.1 (a), the
number of shares of Common Stock with respect to which Options or Stock
Appreciation Rights may be granted to any Participant during the term
of the Plan shall not exceed 2,800,000 shares of Common Stock.

(d) 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, Stock
Appreciation Rights and Awards, 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. The number of shares subject to
any Option, Stock Appreciation Right 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. Grant of Options. 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 Options
and determine the time when each Option shall be granted and the number
of shares subject to each Option. Options may be either Incentive Stock
Options or Nonqualified Stock Options and more than one Option may be
granted to the same person. Options shall be evidenced in such manner
as may be approved by the Committee. Options may be amended or
supplemented from time to time as approved by the Committee, provided
that the terms of such Options after being amended or supplemented
conform to the terms of the Plan.

6.2. 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.

6.3. Medium and Time of Payment. 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 Fair Market
Value equal to the total Option price or a combination of cash and
shares. 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, or on such
other date as determined by the Committee for administrative
convenience. No Optionee, transferee, 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.

6.4. Term and Exercisability of Options. An Option shall be
exercisable ratably on each of the first three anniversaries of the
date of grant of such Option or as otherwise determined by the
Committee, but in no event shall such Option be exercised earlier than
one year or later than ten years from the date the Option is granted.
The Committee may require that an Option only be exercised upon the
achievement of such performance objectives as the Committee shall
designate. An Option shall be subject to earlier termination as
provided in Section 6.6 with respect to death, retirement and
termination of employment or as provided in Section 10.6.

6.5. Transferability of Options. (a) Except as provided in
subsection (b) below, an Option may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the
laws of descent and distribution and, during the lifetime of the
Optionee, may be exercised only by such Optionee.

(b) Notwithstanding subsection (a) above, the Committee may
determine that an Option 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. 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 6.6 relating
to the exercise of the Option upon the death, retirement or termination
of employment of the Optionee, and shall be subject to such other rules
as the Committee shall determine.

6.6. Death, Retirement and Termination of Employment. Subject to
the condition that no Option be exercised in whole or in part after the
expiration of the Option period specified by the Committee, and subject
to the Committee's right to cancel any Option in accordance with
Section 10.6, unless otherwise determined by the Committee:

(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 or a transferee described in subsection
6.5(b), 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 the Optionee would have been entitled to purchase such shares
had the Optionee not terminated employment;

(b) Upon termination of employment on or after an Optionee's
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 or a transferee described in subsection
6.5(b), may, at any time prior to the expiration of the Option period,
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 the Optionee would have been entitled to purchase such shares
had the Optionee not terminated employment;

(c) Upon the death of an Optionee after a termination of
employment described in subsections (a) or (b) above, the Optionee's
designated beneficiary, or if none, the person or persons to whom such
Optionee's rights under the Option are transferred by will or the laws
of descent and distribution, or a transferee described in subsection
6.5(b), may, at any time prior to the expiration of the Option period
determined under subsection (a) or (b), as the case may be, purchase
any or all of the shares subject to an Option at or after the time the
Optionee would have been entitled to purchase such shares had the
Optionee survived;

(d) Upon the death of an Optionee while employed, the Optionee's
designated beneficiary, or if none, the person or persons to whom such
Optionee's rights under the Option are transferred by will or the laws
of descent and distribution, or a transferee described in subsection
6.5(b), may, within three years after the date of such death, but no
later than the expiration of the Option period, purchase any or all of
the shares subject to an Option at or after the time the Optionee would
have been entitled to purchase such shares had the Optionee survived;
and

(e) Upon termination of employment for any reason other than death
or retirement as aforesaid, an Optionee's Options, including any
Options transferred pursuant to subsection 6.5(b), shall be cancelled
to the extent not theretofore exercised. In addition, the Optionee
shall repay to the Company the value of the difference between the Fair
Market Value on the date of exercise over the Option price of any
Options exercised within the six month period preceding the date of
such termination and the value of any Related Right described in
Section 7.2 exercised during such period.

Article VII

Stock Appreciation Rights

7.1. Grant of Stock Appreciation Rights. 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 Stock Appreciation Rights and determine the
time when each Stock Appreciation Right shall be granted and such other
terms of each Stock Appreciation Right pursuant to this Article Vll.
Stock Appreciation Rights may be granted either alone ("Stand Alone
Rights") or in conjunction with all or part of any Option granted under
the Plan ( "Related Rights" ) . In the case of a Nonqualified Stock
Option, Related Rights may be granted either at or after the time of
the grant of the Nonqualified Stock Option. In the case of an Incentive
Stock Option, Related Rights may be granted only at the time of the
grant of the Incentive Stock Option.

7.2. Related Rights. (a) A Related Right shall be exercisable only
at such time or times and to the extent that the Option to which it
relates shall be exercisable in accordance with Article 6, provided
that the Committee may, for administrative convenience, determine that,
for any Related Right which 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 Related 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 is the highest. A Related Right
granted with respect to an Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Option,
provided that, unless otherwise provided by the Committee, a Related
Right granted with respect to less than the full number of shares
covered by a related Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the
related Option exceeds the number of shares not covered by the Related
Right, provided further that, in the event of the death of the
Participant, the Related Right shall be cancelled to the extent not
theretofore exercised, whether or not the related Option is cancelled.

(b) Upon the exercise of a Related Right, a Participant shall be
entitled to receive up to, but not more than, an amount in cash or
shares of Common Stock equal in value to the excess of the Fair Market
Value of one share of Common Stock over the Option price per share of
Common Stock of the related Option multiplied by the number of shares
of Common Stock in respect of which the Related Right shall have been
exercised. The Committee shall have the right to determine the form of
payment. Any shares delivered in payment shall be valued at their Fair
Market Value on the date of exercise. No fractional shares shall be
issued and the Participant shall receive cash in lieu thereof.

(c) Upon the exercise of a Related Right, the Option or part
thereof to which such Related Right is related shall be deemed to have
been exercised for the purpose of the limitations set forth in Section
4.1 on the number of shares of Common Stock to be issued under the
Plan, but only to the extent of the number of shares of Common Stock
issued under the Related Right.

7.3. Stand Alone Rights. (a) A Stand Alone Right shall be
exercisable ratably on each of the first three anniversaries of the
grant of such Stand Alone Right or as otherwise determined by the
Committee, but in no event shall such Stand Alone Right be exercised
earlier than one year or later than ten years from the date the Stand
Alone Right is granted. The Committee may require that a Stand Alone
Right only be exercised upon the achievement of such performance
objectives as the Committee shall designate. The Committee may, for
administrative convenience, determine that, for any Stand Alone Right
which 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 Stand Alone 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 is the highest. A Stand Alone Right shall be subject to earlier
termination as provided in subsection 7.3(c) with respect to death,
retirement and termination of employment.

(b) Upon the exercise of a Stand Alone Right, a Participant shall
be entitled to receive up to, but not more than, an amount in cash or
shares of Common Stock equal in value to the excess of the Fair Market
Value of one share of Common Stock on the date of exercise over the
Fair Market Value of one share of Common Stock on the date of grant
multiplied by the number of shares in respect of which the right is
being exercised. The Committee shall have the right to determine the
form of payment. Any shares delivered in payment shall be valued at
their Fair Market Value on the date of exercise. No fractional shares
shall be issued and the Participant shall receive cash in lieu thereof.

(c) Subject to the condition that no Stand Alone Right may be
exercised in whole or in part after the expiration of the period
specified by the Committee, and subject to the Committee's right to
cancel any Stock Appreciation Right in accordance with Section 10.6,
unless otherwise determined by the Committee:

(i) Upon termination of employment prior to a Participant's
attainment of age 55 but after the Participant is eligible for
retirement pursuant to a retirement plan of the Company or any of its
subsidiaries, a Participant may, within three years after the date of
such termination, exercise any or all of the Stand Alone Right granted
at least one year prior to such termination of employment, at or after
the time or times the Participant would have been entitled to exercise
such Stand Alone Right had the Participant not terminated employment;

(ii) Upon termination of employment on or after a Participant's
attainment of age 55 and after the Participant is eligible for
retirement pursuant to a retirement plan of the Company or any of its
subsidiaries, a Participant may, at any time prior to the expiration of
the Stock Appreciation Right exercise period, exercise any or all of
the Stand Alone Right granted at least one year prior to such
termination of employment, at or after the time or times the
Participant would have been entitled to exercise such Stand Alone Right
had the Participant not terminated employment; and

(iii) Upon termination of employment for any reason other than
retirement as aforesaid, a Participant's Stand Alone Rights shall be
cancelled to the extent not theretofore exercised. In addition, except
in the event of death, the Participant shall repay to the Company the
value of any Stand Alone Right exercised within the six month period
preceding the date of such termination.

7.4. Transfer of Stock Appreciation Rights. A Stock Appreciation
Right may not be transferred to anyone and may only be exercised by the
Participant to whom it is granted

Article VIII

Restricted Stock Awards

8.1. Grant of Restricted Stock Awards. 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. Restricted Stock Awards
shall be evidenced in such manner as may be approved by the Committee.
Restricted Stock Awards may be amended or supplemented from time to
time as approved by the Committee, provided that the terms of such
Awards after being amended or supplemented conform to the terms of the
Plan. No provision of this Plan shall be interpreted to prohibit the
grant of a Restricted Stock Award hereunder in connection with awards
granted pursuant to the 1995 Executive Officer Performance Plan of J.P.
Morgan & Co. Incorporated and Affiliated Companies or any other plan of
the Company, provided that any such Award conforms to the terms of this
Plan.

8.2. Number of Share Credits. Each Restricted Stock Award shall
state the number of share credits to be subject to the Award.

8.3. Restrictions. A Restricted Stock Award may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, for a period of
five years from the date of grant of the Award or such other period as
the Committee shall determine, and for such further period as the
payment of Awards may be deferred pursuant to Section 8.5. The
Committee may define the Restricted Period in terms of the passage of
time, the satisfaction of performance criteria, a combination of time
and performance, or in any other manner it deems appropriate.
Restricted Stock Awards shall not be paid until the successful
completion of the Restricted Period except as may be otherwise provided
in circumstances of death or retirement pursuant to Section 8.4, or
until the end of any deferral period described in subsection 8.5(b).

8.4. Death, Retirement and Termination of Employment. Unless
otherwise determined by the Committee:

(a) Upon termination of a Participant's employment prior to the
end of the Restricted Period for any reason except for retirement or
death, as described below, the Participant's Awards shall be forfeited
and the Participant shall have no right with respect to such Award.

(b) Upon termination of a Participant's employment prior to the
end of the Restricted Period by reason of the Participant's retirement
under a retirement plan maintained by the Company or any of its
subsidiaries, or by reason of death, a pro rata portion (based on
completed full years of service subsequent to the date of grant of an
Award) of an Award shall be payable to the Participant or the
Participant's beneficiary, or if none, the person or persons to whom
such Participant's rights under the Award are transferred by will or
the laws of descent and distribution, subject to any further deferral
of the Award in accordance with subsection 8.5(b), provided that with
respect to an Award subject to performance restrictions, the Committee
shall make such determination with respect to such Award as it deems
appropriate.

8.5. Payment of Awards. (a) Subject to the provisions of
subsection (b) hereof, as soon as practicable after the successful
completion of the Restricted Period, such Award shall be paid to the
Participant or, in the case of the death of the Participant, the
Participant's beneficiary, or if none, the person or persons to whom
such Participant's rights under the Award are transferred by will or
the laws of descent and distribution.

(b) The Committee may, in its discretion, provide that payment of
Awards be deferred until such time or times as the Committee shall
specify, 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.

(c) Except as otherwise determined pursuant to subsection 8.6(c),
payments pursuant to this Section 8.5, including any dividend
equivalents determined under subsection 8.6(b), shall be made in shares
of Common Stock, except there may be paid in cash the value of any
partial shares of Common Stock and that part of the total payment
determined by the Company to be necessary to satisfy tax withholding
requirements.

8.6. Dividend Equivalents. (a) Except as may be otherwise
determined by the Committee, in addition to the payment provided for in
Section 8.5, each Participant (or beneficiary) entitled to payment
under Section 8.5 shall receive the dividend equivalent amount
calculated under subsection (b) hereof.

(b) 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 ( 1 ) the aggregate cash dividends which would have
been paid had the share credits awarded or credited under this
subsection (b), as the case may be, been actual shares of Common Stock
on the record date for each such dividend during such calendar year by
(2) 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 Common Stock as reported on the
composite tape for such day. The Committee may designate any other
manner for determining and crediting dividend equivalents as it deems j
appropriate.

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

Article IX

Stock Unit Awards

9.1. Grant of Stock Unit 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 9.2 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 Participant.
In no event shall any Award vest less than one year from the date of
grant. The rules need not be identical for each Stock Unit Award. No
provision of this Plan shall be interpreted to prohibit the grant of a
Stock Unit Award hereunder in connection with awards granted pursuant
to the 1995 Executive Officer Performance Plan or any other plan of the
Company, provided that any such Award conforms to the terms of the
Plan.

9.2. 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 sold, assigned, I transferred, pledged, hypothecated
or otherwise disposed of, except by will or the laws of descent and
distribution, prior to the date on which the shares are issued or such
other date provided by the Committee at the time of grant of the Award
or thereafter.

(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.

(c) Stock Unit Awards may relate in whole or in part to
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 Participant to defer payment of the Award or the
lifting of restrictions on the Award, if any.

Article X

General Provisions

10.1. Change in Control. (a) (i) In the case of a Change in
Control (as defined below) of the Company, (i) each Option and Stock
Appreciation Right then outstanding shall (unless the Committee
determines otherwise) immediately be nonforfeitable and 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 10.1 may be made as to all outstanding Options, Stock
Appreciation Rights or Awards or only as to certain Options, Stock
Appreciation Rights or Awards specified by the Committee, and all such
determinations shall be made in cases covered by paragraphs (c) (i) or
(ii) below, prior to or as soon as practicable after the occurrence of
such event and in the cases covered by paragraphs (c) (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 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.

10.2. 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 Participant 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 Participant.

10.3. No Right of Continued Employment. Neither the establishment
of the Plan, the granting of Options, Stock Appreciation Rights 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.

10.4. 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, Stock Appreciation Rights,
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 Committee 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.

10.5. 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.

10.6. 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.

10.7. Transfer, Leave of Absence, etc. For purposes of the Plan:
(1 ) a transfer of a Participant from a Participating Company to an
affiliated company, (2) 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 H the period of
such leave does not exceed ninety days, and (3) a leave of absence in
excess of ninety days, duly authorized in writing by the Participating
Company, provided the Participant's right to reemployment is guaranteed
either by a statute or by contract, shall not be deemed a termination
of employment.

10.8. 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.

10.9. 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 XI

Amendment and Termination

11.1. Amendments, Suspension or Discontinuance. The Board of
Directors may amend, suspend or discontinue the Plan, provided,
however, that 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 or
following the occurrence of a Change in Control no amendment may
adversely affect the rights of any person in connection with any
Option, Stock Appreciation Right or Award previously granted.

11.2. Termination. No Option, Stock Appreciation Right or 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 stockholders of the
Company.

Exhibit 10(j)

1995 Executive Officer Performance 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 by providing performance-based compensation for
certain executive officers.

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

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

2.4. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

2.5. "Employee" shall mean any executive employed by one or more
Participating Companies who is determined by the Committee ( i ) to be
a covered employee as defined in Section 162 (m) of the Code for the
preceding year or (ii) likely to be such a covered employee for the
performance year.

2.6. "Plan" shall mean the 1995 Executive Officer Performance Plan
of J.P. Morgan & Co. Incorporated and Affiliated Companies, as amended
from time to time.

2.7. "Committee" shall mean the Committee established to
administer the Plan in accordance with Section 3.1.

2.8. "Stock Incentive Plan" shall mean the 1995 Stock Incentive
Plan of J.P. Morgan & Co. Incorporated and Affiliated Companies and any
successor plan thereto.

Section 3.

Administration of the Plan

3.1. The Committee. 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 who (i) are not
eligible to participate in the Plan, (ii) are not employees of a
Participating Company and (iii) are outside directors within the
meaning of Section 162(m) of the Code. The Committee may consult with
management but shall have the responsibility of determining the
Employees who are to receive awards under the Plan and the amount of
such awards and shall otherwise be responsible for the administration
of the Plan. The Committee also shall construe and interpret the Plan
and adopt rules and regulations governing administration of the Plan,
and 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. Subject to the Committee's
discretion to reduce such awards, each year each covered Employee shall
be entitled to an award equal to .75% of Morgan's consolidated income
before income taxes, discontinued operations, awards under this Plan,
expenses classified as "Provisions for Restructuring" (net of "Related
Applicable Income Tax Benefits"), extraordinary items and cumulative
effects of accounting method changes all as determined in accordance
with generally accepted accounting principles and as appearing in
Morgan's Consolidated Statement of Income contained in Morgan's
Consolidated Financial Statements for the year as audited by Morgan's
independent accountants. The Committee, in its sole discretion, may
require vesting periods with respect to any award, including the
attainment of such further performance goals as it deems appropriate.
In addition, there is no obligation to pay all or any of an earned
award. In no event shall any award be paid under the Plan unless and
until the 'Plan has been approved by stockholders.

Section 5.

Elections as to Awards

5.1 Immediate Awards. Except as provided in Section 5.2, awards
earned under the Plan shall be paid as promptly as practicable after
the close of the applicable year, or after such further vesting or
performance period as determined by the Committee. Any such
distribution shall be in cash or such other property as the Committee
may determine, including shares of Common Stock of the Company. To the
extent any payment is made in such shares, such payments shall be made
under the Stock Incentive Plan.

5.2 Deferred Awards. (a) The Committee shall have the right to
require that payment of all or any portion of an earned award be
deferred until such time or times as the Committee, in its sole
discretion, shall determine. In addition, an Employee may elect to
defer the payment of any award earned under the Plan. Deferral
elections shall be made at such time and in such manner as the
Committee shall prescribe. The Committee shall establish such terms,
conditions, rules and regulations as it shall deem necessary and
advisable with respect to deferred awards including, but not limited
to, the time of payment, (including acceleration), the method of
determining the additional amounts to be credited with respect to a
deferred award, the applicable methods of payment of deferred awards,
and any special rules that may apply in the event of termination of
employment by reason of death, disability, or retirement. Any election
under this Section 5.2 shall be irrevocable by the Employee. Any
distribution of a deferred award shall be in cash or such other
property as the Committee may determine including shares of Common
Stock of the Company. To the extent any deferred award is paid in such
shares, such payments shall be made under the Stock Incentive Plan.

(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 end of the Award Period 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 payable 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.

Section 6.

General Provisions

6.1. 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.

6.2. Discretion of Company, Board of Directors and Committee. Any
decision made or action taken by the Company, the Board of Directors or
by the Committee 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, as the case may be, and shall be conclusive and binding upon
all persons.

6.3. 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.

6.4. No Segregation of Cash or Shares. (a) The Company shall not
be required to segregate any cash or any other assets which may at any
time be represented by awards credited to an Employee and the Plan
shall constitute an "unfunded" plan of the Company.

(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.

6.5. Inalienability of Benefits and Interests. (a) Except as
expressly provided by the Committee and subsection (b) hereof, no
benefit payable 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.

(b) The provisions of subsection (a) hereof shall not apply to an
assignment of a payment due after the death of the Employee by the
deceased Employee's legal representative or beneficiary if such
assignment is made for the purposes of settling the affairs of such
deceased Employee.

6.6. 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.

6.7. Payment of Awards. Payment of Immediate Awards and Deferred
Awards 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.

6.8. Cancellation of 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 award in whole or in
part to the extent it has not theretofore been earned. 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.

6.9. Change in Control. (a) In the event of a Change in Control,
the payment of all deferred awards and awards subject to additional
vesting provisions, including awards subject to attainment of further
performance goals, shall (unless the Committee otherwise determines) be
made as soon as practicable.

(b) For purposes of this Section 6.9, a Change in Control shall
have the same meaning as specified in the Stock Incentive Plan.

Section 7.

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 such
amendment does not materially change the underlying policy reflected
by, or the level of benefits provided by, the Plan.

(c) Notwithstanding subsections (a) and (b), above, no amendment
may be effective without shareholder approval if such shareholder
approval is necessary to comply with the applicable rules of Section
162 ( m ) of the Code.

<PAGE>

J.P. Morgan is a global financial services 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.

CONTENTS

1 Financial highlights
2 To our stockholders
6 Five business sectors
15 Risk management
22 Financial review
39 Responsibility for financial reporting
40 Report of independent accountants
41 Consolidated statement of income
42 Consolidated balance sheet
43 Consolidated statement of changes in stockholders' equity
44 Consoidated statement of cash flows
45 Consolidated statement of condition--
Morgan Guaranty Trust Company of New York
46 Notes to financial statements
80 Additional selected data
82 Consolidated average balances and taxable-equivalent
net interest earnings
85 Asset-quality analysis
91 Asset and liability management derivatives
92 Capital and funding analysis
95 Selected consolidated quarterly financial data
97 Form 10-K cross-reference index
99 Description of business
105 J.P. Morgan directory
109 Corporate information
<PAGE>

FINANCIAL HIGHLIGHTS
J.P. Morgan & Co. Incorporated

Dollars in millions, except per share data 1995 1994
------ ------
<S> <C> <C>
FOR THE YEAR
Pretax income.......................................... $ 1 906 $ 1 825
Net income............................................. 1 296 1 215
Dividends declared on common stock..................... 574 530
-------- --------
PRIMARY EARNINGS PER SHARE............................. $ 6.42 $ 6.02
-------- --------
PER COMMON SHARE
Dividends declared..................................... $ 3.06 $ 2.79
Book value............................................. 50.71 46.73
-------- --------
AT YEAR-END
Total stockholders' equity............................. $ 10 451 $ 9 568
Total assets........................................... 184 879 154 917
-------- --------
SELECTED RATIOS
Return on average common stockholders' equity.......... 13.6% 12.9%
Common stockholders' equity as % of year-end assets.... 5.4 5.9
Total stockholders' equity as % of year-end assets..... 5.7 6.2
Tier 1 risk-based capital ratio........................ 8.8 9.6
Total risk-based capital ratio......................... 13.0 14.2
-------- --------
</TABLE>

[GRAPHIC APPEARS HERE] [GRAPHIC APPEARS HERE]

1
<PAGE>

TO OUR STOCKHOLDERS

J.P. Morgan earned $1.3 billion in 1995, up 7 percent from 1994; per share, net
income was $6.42 compared with $6.02 a year earlier. We gained momentum with
clients, held to a disciplined plan of expense growth, and improved the quality
of earnings.

Looking at the five major sectors of Morgan's global business, we saw
advances in those that center on services we provide for clients: Finance and
advisory revenues rose 27 percent to $1.5 billion; Sales and trading revenues
also grew 27 percent to $1.6 billion; and Asset management and servicing was
up 2 percent to $1.3 billion. The combined pretax contribution of these three
client-centered business sectors rose 70 percent in 1995 to $1.1 billion. In
the two sectors that cover activities undertaken solely for our own account,
revenues of $534 million from realized gains on Equity investments were down
from the high level of 1994, and Asset and liability management increased
modestly to $1 billion. Overall, these two sectors produced $1.4 billion of
income before taxes, slightly less than in 1994.

IN 1995 WE ACCELERATED THE DRIVE TO EARN A GROWING SHARE
OF OUR CLIENTS' BUSINESS AND HELD DOWN THE GROWTH OF EXPENSES.

Expenses for the year increased 8 percent. We invested in people and the
continued development of core business capacity, but checked the rise of all
other costs. In the second half of 1995, particularly, expense discipline
allowed us to bring revenue growth to the bottom line. Revenues for the second
half of the year were 15 percent higher than for the latter half of 1994.
Expenses over the same period, in contrast, rose just 6 percent.

Improved financial performance in 1995 was an important achievement. The
dynamics underlying that progress are even more significant.

The impact of investments made over the past decade is visible: J.P. Morgan
today has the most complete range of critical, sophisticated skills offered
by any financial firm in the world. Proficiency in equity, fixed income, and
advisory capabilities now complements credit, markets, and investment management
leadership of long standing. Fully $1 billion of revenue in 1995 was generated
by activities that produced little or nothing at the start of the 1990s, such as
securities underwriting in the United States and trading in emerging markets.
The vital strategic task of our recent history - transformation into a firm
that integrates investment, commercial, and merchant banking globally - is
essentially complete. We now have the challenge of realizing the potential
inherent in the new J.P. Morgan.

That task involves setting priorities among the many business opportunities
open to us. In sharpening strategic focus, we have made choices about what
not to do. One such choice was the sale in 1995 of Morgan's securities custody
and clearing operations. Consolidation among large providers was accelerating,
and these operations would have required substantial continuing investment. We
concluded that clients ultimately would be better served by institutions that
considered such operations intrinsic to their strategy. We decided our
investment dollars should be channeled to areas of greater potential value to
Morgan.

Dedication to clients and to superb performance on their behalf are
ingrained Morgan values. Having built the capabilities important to clients -
still motivated by those values - we are accelerating the drive to earn a
growing share of clients' financial business. Last year we rebalanced our
organization, orienting the entire firm around strengthened groups of bankers
whose job it is to draw together the right combination of global resources

2
<PAGE>

[PHOTO APPEARS HERE]
Douglas A. Warner III
Chairman and
Chief Executive Officer

to meet clients needs. Client by client, we expanded our dialogue, focused
our efforts, and collaborated intently to win pivotal assignments that would
build trust in the value we contribute as an advisor, transactor, and financial
partner. Clients have responded. The result is growing momentum and growing
market share.

DEDICATION TO CLIENTS AND TO SUPERB PERFORMANCE ON THEIR
BEHALF ARE INGRAINED MORGAN VALUES.

In a record year for merger activity, Morgan advanced to be among the top
five merger and acquisition advisors worldwide, ranking first in Latin America
and second in Europe. We counseled clients in prominent transactions, including,
for example, the largest cross-border merger of the year, Hoechst's $7 billion
acquisition of Marion Merrell Dow, the $15.3 billion merger of TSB Group with
Lloyds Bank in the United Kingdom, and the $5.7 billion Westinghouse purchase of
CBS. Throughout Asia, we helped clients such as Telekom Malaysia, the Hong Kong
Mass Transit Railway Corporation, and San Miguel, the largest food and beverage
concern in Southeast Asia, gain access to international capital. We served as
a manager for $17 billion of equity issues and led milestone deals, including
the $470 million initial public offering of MEMC Electronic Materials, one of
the largest-ever technology IPOs. In debt underwriting, Morgan turned in strong
competitive performance in the United States, having long been a leader in the
Eurobond market, and joined the top tier of underwriters of investment-grade
corporate debt. As clients reevaluated the appropriate use of derivative
instruments and looked critically at dealers, Morgan gained market share and
continued to break new ground with sophisticated risk management services and
innovative products, such as credit derivatives. We remain a leader in the
syndicated loan and private debt and equity markets and continue to be at the
forefront in emerging markets. Assets we manage on behalf of institutional and
individual investors grew to $179 billion. Transaction volume at Euroclear, the
leading clearing and settlement system for international securities, reached
$25 trillion.

Productivity is improving, as we work to generate more revenue and value
for every dollar we spend. Intensive investment since the mid-1980s produced the
powerful framework we have today; in the process, inevitably, it built up a head
of steam in spending. Now further along in the investment cycle in most business
areas, we focused in 1995 on managing costs tightly, deliberately. Overall,
expense growth was held to 8 percent. Without cutting off the flow of investment
needed to deliver on our potential, without cutting into muscle, we have lowered
the trajectory of costs.

Looking ahead, what are our challenges for 1996 and beyond? How can we
fulfill the potential of J.P. Morgan and carry a great banking legacy into the
twenty-first century?

First and always, by being a source of superior value to clients. We aim to
perform with such commitment, speed, and effect that whenever and wherever
clients have a critical need, they turn to us.

3
<PAGE>

Continuing to build our momentum with clients is our most promising growth
opportunity. If a client calls J.P. Morgan when the challenge is critical and
performance crucial, that call implies trust, on which productive long-term
relationships thrive. When we deliver superior advice and execution, we earn
the chance to build still greater confidence by introducing a satisfied client
to colleagues who can address other critical issues, in other markets. Being
the firm that a client calls first - and repeatedly - offers Morgan the chance
to play a role that uses our strengths and creates value through the
understanding, communication, and desire to excel that enduring relationships
naturally yield. Playing that critical role can maximize the return on our
investment in global capabilities, and - because disproportionate rewards go
to clients' lead firms - produce outstanding profits.

Our effort to earn more business from our clients through exceptional
performance will only intensify. This is our top priority.

EXPERIENCE IN COMMITTING OUR OWN CAPITAL GIVES CLIENTS
CONFIDENCE IN OUR ADVICE AND ABILITY TO ACT SUCCESSFULLY
IN THE MARKETS FOR THEM.

Investing and trading for our own account are also integral to our
business. Morgan must be a market force in its own right to accommodate the
needs of the multinational corporations, large institutions, and sophisticated
private concerns and individuals that constitute our client base. Positioning
is a natural adjunct of our dealings with them as we make markets in currencies
and instruments around the world. Experience in committing our own capital gives
investors and issuers confidence in our advice and ability to act successfully
in the markets for them.

Having the best possible risk-takers and a tolerance for risk that
accentuates our advantage will continue to be vital. As we press for growth in
our business with clients, we recognize that proprietary activities will always
be essential and can fire results when opportunities allow.

The complexity, breadth, and velocity of our business demand comprehensive
management of risk. We balance the benefits of decentralized global business
management with strong central policies, a constant flow of information, and
rigorous control. We manage actively and aim to detect a potential problem
before it escalates. While we seek constantly to improve the quality and
sophistication of our risk analysis, the most critical roles in managing risk
fall to responsible, skilled people and fundamental business diversification.

A leap in the productivity of our efforts is an imperative. We need to be
more visionary, more agile, less bureaucratic - anticipating change and focusing
energy on meeting the constantly evolving needs of our clients. As we invest,
we must set higher goals for expected return. Active, disciplined management
of our cost structure and allocation of resources to areas of opportunity are
part of the task; technology, clearly, has an important role to play. To design
the most efficient infrastructure for our business, we are exploring alliances
with technology firms and further consolidation of shared support services. At
the end of the day, we will test our work against the measures that count: the
value that we create for clients and stockholders, and by implication for our
people and communities. That is the way to boost our return on equity from the
result of last year - 13.6 percent - to the superior level that our owners
expect.

Meanwhile, the metamorphosis of the competitive landscape continues.
Formidable institutions - from the European universal banks to American super-
regionals

4
<PAGE>

to premier investment banking houses - are fighting for a place among the few
preeminent global firms that will emerge from the restructuring of the financial
services industry now under way.

WE NOW HAVE THE CHALLENGE OF REALIZING THE POTENTIAL
INHERENT IN THE NEW J.P. MORGAN.

Unequivocally, J.P. Morgan intends to be one of those leaders. Intensive
focus on what our clients value and we do best will guide us. Institutional
scale is important, but to the extent that being big interferes with being
nimble, creative, and responsive, it will inhibit rather than enhance
comparative advantage. The struggle for survival among financial competitors may
drive down returns, but ultimately the firms that stay most relevant and
valuable to their clients will thrive.

Morgan's edge, we believe, will derive ultimately from its commitment to
clients. That commitment implies integrity, a passion to excel, and the patience
to build relationships over long horizons; it engenders trust, the most valuable
distinction of all. In reinforcing the reality that underlies our reputation as
a firm that can be trusted, we preserve a precious advantage.

We will push hard to be the best at what we do, in every market and every
product. We will continue to invest selectively and prize efficiency. We will
seek highly talented people, motivated by shared purpose and values, and
challenge them to develop their potential. Our management and hundreds of senior
officers will continue to be paid significantly in J.P. Morgan stock, so that we
run the firm as owners. But most of all we will try to draw out the best of J.P.
Morgan for our clients, in terms of both capability and character. That is the
wellspring of our vision and will drive our success.

/s/ Douglas A. Warner III

Douglas A. Warner III
Chairman of the Board
Chief Executive Officer

March 8, 1996

TRANSITIONS

[PHOTO APPEARS HERE]
RODNEY B. WAGNER

Drawing a multifaceted 40-year career at our firm to a close, Vice Chairman
Rodney B. Wagner retired in February 1996. In the best Morgan tradition, Rod has
served as a respected advisor to our clients, especially in emerging nations,
over decades of change and in more than a few crises. His long involvement in
the developing world began during the 1960s when he served for a period in
Washington, D.C., and Ankara as an executive of the Agency for International
Development. He was instrumental in resolving developing country debt problems
in the 1980s and helped design a landmark program for Mexico that became a
widely used model for debt restructuring. A superb ambassador of the firm,
Rod was also a friend and mentor to many.

Michael E. Patterson was named a vice chairman and director of J.P. Morgan
last December. He joined Morgan in 1987 as general counsel and has served as
the firm's chief administrative officer, with wide-ranging responsibilities,
since 1994.

In 1995 we also welcomed as a director Riley P. Bechtel, chief executive
officer of the Bechtel Group, a multinational construction firm. John G. Smale,
retired chairman of The Procter & Gamble Company, stepped down from the Board
during the year at the normal retirement age. We appreciate his many years of
valuable service.

We note finally, with sadness, the death on May 4, 1995, of Lewis T.
Preston, our former chairman, who was the architect of the modern J.P. Morgan
and the preeminent international banker of his era; and on March 2, 1996, of
Peter B. Smith, a valued member of our management team and chairman of the
Credit Policy Committee. They will be greatly missed.

5
<PAGE>

We are committed to offering advice and execution of the highest
quality, conducting our business in a principled way, and maintaining
the global market power that allows us to help our clients succeed while
enhancing returns for our stockholders.

FIVE BUSINESS SECTORS

J.P. Morgan's purpose is to provide services of superior value to our clients,
enabling them to meet critical financial challenges globally. We have
specialized for more than 150 years in serving clients with sophisticated needs:
corporations, governments, institutions, and individuals around the world, as
both users and investors of funds. Their challenges range from exploring and
executing business strategy, to raising and structuring capital, to investing
and trading assets, to managing complex forms of risk. We are committed to
understanding our clients' goals, protecting their interests, and creating and
delivering the products and services that will advance their success. We offer a
complete range of investment, commercial, and merchant banking as well as asset
management capabilities, a pervasive global mindset, and a flexible, responsive
organization.

FINANCE AND ADVISORY

Morgan helps to structure and raise equity and debt capital throughout the world
to support clients' operating needs, counsels on business and financing
strategy, and executes transactions that advance strategic goals.

SALES AND TRADING

Morgan provides access to world financial markets for clients and trades for its
own account. We deal in securities, currencies, commodities, and derivatives to
help clients meet investment, trading, and risk management needs, supported by
comprehensive research on market conditions and opportunities.

ASSET MANAGEMENT AND SERVICING

Morgan invests assets entrusted to us by institutions and individuals, through
separately managed portfolios and investment funds. We also provide financial
advisory, banking, brokerage, and fiduciary services for private clients and
operate the world's largest securities clearing and settlement system for
internationally traded securities, Euroclear.

EQUITY INVESTMENTS

Morgan manages its own diversified portfolio of equity investments, turning
knowledge and experience around the world into a comparative investment
advantage for our stockholders. Many opportunities develop through relationships
with clients.

ASSET AND LIABILITY MANAGEMENT

Morgan actively manages the interest rate risk and liquidity profile of its
assets, liabilities, and off-balance-sheet exposures.

6
<PAGE>

[GRAPHIC APPEARS HERE]

- --------------------------------------------------------------------------------
FINANCE & ADVISORY
ADVISORY
EQUITIES
DEBT UNDERWRITING
CREDIT

Revenues were up 27% and pretax income rose sharply as record levels of merger
activity and favorable financing conditions gave us opportunities to
create value for clients. We gained market share as a strategic advisor,
completing transactions valued at $65 billion, and as an underwriter of
securities,raising $235 billion of debt and equity, and arranging $173 billion
of syndicated loans.

- --------------------------------------------------------------------------------
SALES & TRADING
FIXED INCOME
FOREIGN EXCHANGE
COMMODITIES
PROPRIETARY

Revenues grew 27% and pretax income rebounded, with market conditions improving
in both developed and emerging markets as the events that shook investor
confidence in 1994 receded. Morgan's performance in emerging markets was strong,
as were the results of our proprietary trading unit; trading revenue in
developed country fixed income markets declined. Demand for risk management
products strengthened, and foreign exchange revenues were up.

- --------------------------------------------------------------------------------
ASSET MANAGEMENT & SERVICING
ASSET MANAGEMENT
EXCHANGE TRADED
PRODUCTS
PRIVATE BANKING
OPERATIONAL SERVICES

Revenues were up modestly as a result of inflows of new business from
institutional investors. J.P. Morgan is one of the world's leading investment
managers, with $179 billion of assets under management. Brokerage revenues for
exchange-traded products held steady and transaction volumes rose, despite
lower industry market volume. Revenues from operational services declined as
a result of lower volumes in credit and deposit products, which in turn
contributed to a decrease in the sector's pretax income.

- --------------------------------------------------------------------------------
EQUITY INVESTMENTS
EQUITY INVESTMENT
PORTFOLIO
MANAGEMENT

Revenues generated by our diversified $1 billion equity portfolio were 19% below
the high level of 1994. We made new private equity investments of $190 million
in 33 businesses last year, using our global network to identify trends and
opportunities. Total return - revenues plus the change in net unrealized
appreciation - increased 212% in 1995 to $387 million, reflecting a
higher rate of growth in the portfolio's value.

- --------------------------------------------------------------------------------
ASSET & LIABILITY MANAGEMENT
INTEREST RATE RISK
MANAGEMENT
LIQUIDITY MANAGEMENT

Revenues rose 5% to $1,013 million, as higher net interest revenue was realized
from activities in the United States and Asia. Total return, which combines
reported revenue and the change in net unrealized appreciation of our portfolio,
was up 25%, reflecting improved performance in Europe and Asia. We actively
manage the interest rate exposure of our portfolio, including $25 billion of
government securities, based on our judgments about long-term interest rate and
economic trends.

7
<PAGE>

SUMMARY OF SECTOR RESULTS

J.P. Morgan's financial performance improved in 1995, with a better balance of
results among major business activities and continued progress toward strategic
goals, including expanding the scope of our relationships with clients. Overall,
the firm's revenues grew 7% to $5.9 billion. Expenses, at $4 billion, were up
8%, reflecting selective continued investment, especially in equities, asset
management, and private client resources, combined with tighter cost control.
Pretax income - shown in the table below - rose 4% to $1.9 billion.
<TABLE>
<CAPTION>

Asset Asset and
Finance Sales Manage- Equity Liability
and and ment and Invest- Manage- Corporate Consol-
In millions Advisory Trading Servicing ments ment Items idated

1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues... $1 475 $1 649 $1 258 $534 $1 013 ($25) $5 904
Total expenses... 1 128 1 228 920 24 107 591 3 998
- ----------------------------------------------------------------------------------------------
Pretax income.... 347 421 338 510 906 (616) 1 906

1994
- ----------------------------------------------------------------------------------------------
Total revenues... 1 165 1 299 1 232 663 965 193 5 517
Total expenses... 1 056 1 154 835 23 93 531 3 692
- ----------------------------------------------------------------------------------------------
Pretax income.... 109 145 397 640 872 (338) 1 825
- ----------------------------------------------------------------------------------------------
</TABLE>

The firm's management reporting system and policies were used to determine the
revenues and expenses directly attributable to each sector. 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. In both 1995 and 1994, $610
million related to income taxes was not allocated to the business sectors.

In these pages we present the year's results for five basic sectors of business
activity. Use of this sector framework helps to clarify our complex, global
business, although there are some vital dimensions it cannot capture: the
extensive diversification of activities within each sector; our comprehensive
process of risk management; the integration of global activities that heightens
responsiveness and efficiency; the complementary value of client-oriented and
proprietary activities; and the shared values and dedication to clients that
unite our people.

Revenues of $4.4 billion for the three business sectors that revolve
around activities for clients - Finance and Advisory, Sales and Trading, and
Asset Management and Servicing - grew 19%, and their combined pretax income of
$1.1 billion was up 70% from 1994, reflecting success in earning a growing share
of clients' financial business and in winning new clients. The $1.4 billion of
pretax income contributed by the Equity Investments and Asset and Liability
Management sectors, devoted exclusively to proprietary business, was down
modestly from 1994.

A significant strategic step was taken in 1995 with the sale of our
securities custody and clearing operations - part of a sharpened focus on our
core business activities. This sale does not affect our role as operator of the
Euroclear System.

8
<PAGE>

We broke new ground in markets worldwide to help
clients meet critical challenges, putting our full set of
investment Banking And Credit Skills to work with
visible impact.

FINANCE AND ADVISORY
[GRAPHIC APPEARS HERE]

In 1995, J.P. Morgan accelerated its momentum in investment banking. From
advising on mergers to raising debt and equity capital to publishing research on
companies and industries, we expanded the scope of our effort and won new
business by identifying opportunities and solving problems for our clients.
Gains in market share were reflected in Morgan's advancement in industry
rankings of advisors and underwriters.

Three major trends affected the advisory and financing environment:
Corporations seeking to maximize shareholder value clarified their focus; the
availability of low-cost funds encouraged firms to raise capital; and cross-
border transactions redefined market boundaries. Morgan was strongly positioned
to capitalize on these trends.

Advisory revenues rose as transactions completed for clients placed
J.P. Morgan as the top-ranked merger-and-acquisition firm in Latin America,
second in Europe, and fifth worldwide. We completed 93 merger, acquisition, and
divestiture assignments valued at $65 billion. The breadth of our capabilities
enabled us to serve a number of clients at several stages of a transaction. For
example, we advised Service Corporation International, the world's largest
provider of funeral and cemetery services, on its $580 million acquisition of
the largest funeral operator in France and then lead-managed a $323 million
common stock offering and more than $700 million in public and private bond
offerings to finance the transaction and meet other company needs.

Debt and equity underwriting revenues also grew. We broke into the U.S.
"bulge bracket" to rank among the top six underwriters of investment grade
corporate debt. Our equities business advanced, as the quality of our research
and the effectiveness of our distribution had growing impact. Equity
underwriting revenues, generated in large part by initial public offerings for
technology, financial, and emerging markets issuers, increased nearly 30%.
Equity derivatives revenues were up as clients sought tools to help manage
market volatility.

Our syndicated loan volume rose sharply to $173 billion, ranking Morgan
as the third-largest arranger of these facilities. In a sign of the increasingly
global character of the market, we led a $2 billion credit facility for
electronics giant Siemens - the first international loan syndication for a
German company led by a non-German bank.

Total Finance and Advisory revenues rose 27% to $1,475 million.

SELECTED 1995 HIGHLIGHTS

ADVISED TSB GROUP ON ITS $15.3 BILLION MERGER WITH LLOYDS BANK - THE LARGEST M&A
DEAL IN EUROPE IN 1995.

ADVISED JOHNSON & JOHNSON ON ITS $1.8 BILLION UNSOLICITED BID AND SUBSEQUENT
FRIENDLY MERGER WITH CORDIS - CREATING THE WORLD'S LEADING MANUFACTURER OF
CARDIOLOGY EQUIPMENT.

LEAD-MANAGED A $130 MILLION CONVERTIBLE ISSUE FOR ALFA S.A., THE ONLY EQUITY
OFFERING BY A MEXICAN COMPANY IN 1995.

LEAD-MANAGED $637 MILLION OF ASSET-BACKED NOTES AND CERTIFICATES FOR FORD MOTOR
CREDIT CO. - THE FIRST SECURITIZATION OF SHORT-TERM OPERATING LEASES.

LED A $500 MILLION DEBUT ISSUE OF YANKEE BONDS FOR TELEKOM MALAYSIA, CITED AS
THE ASIAN BOND DEAL OF THE YEAR.

9
<PAGE>

Sales, trading, and research teams provide clients with the
ability to tailor and execute both investment and risk
management strategies across every asset class in global markets.

SALES AND TRADING
[GRAPHIC APPEARS HERE]

Sales and trading results rebounded last year, as the strains of 1994 yielded to
growing investor confidence in both emerging and developed markets. Favorable
conditions produced strong client demand for the full range of our fixed income,
foreign exchange, and commodities products, including related derivatives.
Results in our separate proprietary unit were up, as we took advantage of
opportunities across markets, with particular success in Asia.

Morgan's research, noted in independent surveys for its depth and
insight, continued to create advantages for clients; our indices and models set
industry standards as performance benchmarks. We are a leading market-maker in
15 financial centers around the world, including as a primary dealer for the
government securities of every major industrialized country. An acknowledged
leader in risk management, our firm is cited for superior market-making,
pricing, and problem-solving skills.

Results in fixed income sales and trading were mixed; overall, revenues
declined. We maintained strong leadership in emerging markets, as investor
sentiment turned positive, spurring client demand and healthy revenue growth:
Trading volume was twice that of our nearest competitor. With rising interest in
markets beyond Latin America, we provided access to opportunities in countries
such as Poland, China, and Russia.

In developed country markets, bond trading revenues declined, mainly as
a result of losses in mortgage-backed securities. During the year, we
significantly curtailed mortgage-backed activities in a strategic realignment of
resources.

Demand for the range of interest rate, currency and other derivative
instruments strengthened, increasing our volumes roughly 40%, as clients
reassessed strategies and reaffirmed the value of derivatives as effective risk
management tools. Despite that demand, risk management revenues were affected by
losses on positions arising from some client activities.

Foreign exchange trading revenue rose significantly as client demand and
transaction volumes grew; commodities results were lower, reflecting a decline
in base-metals revenues, following an exceptionally good year in 1994.

Total Sales and Trading revenues rose 27% to $1,649 million.

SELECTED 1995 HIGHLIGHTS

EXECUTED EMERGING MARKETS TRANSACTIONS IN SECURITIES OF 50 COUNTRIES
VALUED AT $948 BILLION.

RANKED AS THE TOP DERIVATIVES DEALER AND THE TOP INTEREST RATE OPTIONS
AND SWAP OPTIONS HOUSE IN SEPARATE INDUSTRY SURVEYS. MORGAN WAS
CITED FOR THE BREADTH AND QUALITY OF ITS SERVICE AND ITS "UNDISPUTED"
DOMINANCE IN DOLLAR, YEN, AND DEUTSCHE MARK PRODUCTS.

NAMED EMERGING MARKETS RESEARCH HOUSE OF THE YEAR BY INTERNATIONAL
FINANCING REVIEW.

WROTE THE FIRST FOREIGN EXCHANGE FORWARD ON THE POLISH ZLOTY.

10
<PAGE>

We use rigorous research and sophisticated skills to manage an
extensive range of investments on behalf of institutions
and individuals worldwide.

ASSET MANAGEMENT AND SERVICING
[GRAPHIC APPEARS HERE]

J.P. Morgan enhanced its position as one of the world's leading investment
managers in 1995. Assets under management grew 19% to $179 billion, one-third of
which is invested outside of the United States. We won a record level of new
business from institutional clients. More than a third of those assignments
involved managing international portfolios, as interest in non-U.S. markets
continued to grow.

We have a strong record of long-term performance and base our investment
approach on in-depth fundamental and quantitative research. With a broad array
of investment products, we manage both separate portfolios and pooled investment
vehicles, including 120 Morgan-managed mutual funds totaling $21 billion. In
1995 we began distributing two families of funds through selected institutional
marketplaces to reach a broader universe of independent financial advisors.

We help individuals around the world, and their associated trusts and
closely held businesses, to structure their assets optimally and to extract
greater value from their investments. We have been entrusted with the management
of $41 billion of private client assets. For those managing their own
portfolios, our full-service brokerage unit offers a complete range of global
securities and handled a fast-growing volume of client transactions in 1995. The
J.P. Morgan Asset Account, an integrated cash management and brokerage account,
was introduced to private clients last year.

As a broker of exchange-traded products, we are active dealers on 41
futures and options exchanges around the world. We execute and clear these
contracts on behalf of institutional clients. Our brokerage transaction volume
and market share grew on nearly all major exchanges, despite lower industry
market volume; revenues held steady.

With the growth of cross-border securities activity in 1995, the
Euroclear System settled $25 trillion in securities transactions, a 14% rise.
For more than 25 years, the Euroclear System - operated under contract by Morgan
in Brussels - has supported the growth of international securities markets by
offering efficient settlement, clearing, and related services to brokers,
dealers, custodians, investment managers, and other financial institutions.

In a strategic disposition, we sold our securities custody and clearing
business in 1995 and discontinued certain of our cash services. Revenues and
expenses for 1995 and 1994 associated with these businesses are in the Corporate
Items section.

Total Asset Management and Servicing revenues increased $26 million to
$1,258 million in 1995.

SELECTED 1995 HIGHLIGHTS

RANKED AMONG THE TOP 10 INSTITUTIONAL INVESTMENT MANAGERS FOR THE 21ST
CONSECUTIVE YEAR, WITH $138 BILLION IN ASSETS UNDER MANAGEMENT FOR
INSTITUTIONAL CLIENTS.

ADDED $300 MILLION OF CLIENT FUNDS THAT ARE INVESTED IN THE JAPANESE EQUITY
MARKET - USING A STRATEGY DUBBED "NIPPON NEUTRAL" - TO PRODUCE A STEADY
INCREMENTAL RETURN WHETHER THE MARKET GOES UP OR DOWN.

RANKED AS THE TOP FUTURES BROKER ON THE LONDON INTERNATIONAL FINANCIAL
FUTURES EXCHANGE.

SETTLED $25 TRILLION OF TRANSACTIONS IN THE EUROCLEAR SYSTEM, AND WITH THE
ADDITION OF MEXICO INCREASED TO 25 THE NUMBER OF ITS DOMESTIC MARKET LINKS.

11
<PAGE>

Using our own capital, we apply insights gained worldwide
to invest in high-potential opportunities.

EQUITY INVESTMENTS
[GRAPHIC APPEARS HERE]

For more than a decade, J.P. Morgan has invested its own capital in fast-growing
companies and special situations, drawing on global perspective and in-depth
industry knowledge to produce strong returns for our stockholders. We seek to
spot trends - in industries, markets, and technologies - before they reach the
mainstream and identify promising companies with the potential to become
leaders. For many firms at the forefront of innovation, private equity capital
from a knowledgeable investor like Morgan is what's needed to advance growth.
Inherently, equity investment of this type accepts higher risk to create the
potential for higher return.

Morgan's $1 billion private equity investment portfolio consists of
approximately 95 investments diversified by industry and geography. In 1995, we
invested $190 million in 33 businesses. More than half of our investments were
made in Europe, Latin America, and Asia. We committed capital to a range of
industrial sectors, including media, telecommunications, technology, consumer
products, and retail.

We have private equity investment professionals in New York, San
Francisco, Hong Kong, and Singapore. They can call on Morgan's global
resources - industry expertise, markets knowledge, and analytical support - as
they explore investment opportunities both through the firm's global network and
independently. Each possible investment is evaluated on its merits, in the
context of the risk and return profile of the firm's portfolio; many
opportunities develop from our relationships with clients. The realization of
gains accelerates when equity and merger markets are strong, but the process of
assessing new opportunities and managing existing investments continues
throughout market cycles.

Total Equity Investments revenues of $534 million were 19% lower than in
1994, when gains realized on holdings of Columbia/HCA Healthcare Corporation
stock were substantial. Total return, which combines revenues and the change in
net unrealized appreciation, increased 212% in 1995 to $387 million, reflecting
a higher rate of growth in the portfolio's value.

NET UNREALIZED APPRECIATION

<TABLE>
<CAPTION>
IN MILLIONS 1993 1994 1995
- ----------- ---- ---- ----
<S> <C> <C> <C>
Marketable
equity investments $1 030 $ 576 $ 440

Nonmarketable
equity investments 181 96 85
----- ----- -----
Total net unrealized
appreciation 1 211 672 525
</TABLE>

<PAGE>

We actively manage our interest rate profile to create
long-term value, based on our view of global interest
rate and economic trends.

ASSET AND LIABILITY MANAGEMENT
[GRAPHIC APPEARS HERE]

In managing interest rate risk on and off our balance sheet, our constant
objective is to create value over time, realized as net interest revenue and
securities gains. In anticipation of economic developments and fundamental
trends in interest rates, we dynamically adjust the interest rate profile of
assets, liabilities, and off-balance-sheet exposures, focusing on opportunities
to build long-term value. A full discussion of our approach to risk management
can be found in the next section of this report.

In 1995, we scaled down the level of risk in our asset and liability
management activities. Our risk profile did not position us to benefit
substantially in this sector from declines in U.S. interest rates. With a
conviction that key rates in Japan and Europe would fall, however, we took
asset and liability management positions that rewarded anticipation of those
trends.

Our liquidity risk profile was managed, as always, to ensure that we have the
ability to access funds at a reasonable cost, even under adverse conditions. A
strong capital position is an integral part of our liquidity management because
it enables us to raise funds as economically as possible in a variety of
international markets. In 1995 we took advantage of the favorable market
conditions to obtain attractive term funding for our business needs.

Asset and Liability Management revenues increased 5% to $1,013 million, as
higher net interest revenue was realized from activities in the United States
and Asia. Net unrealized appreciation declined to $553 million in 1995, mainly
as a result of the recognition of net interest revenue.

Total return, which combines reported revenue and the change in net
unrealized appreciation, increased 25% to $494 million in 1995. The rise
reflected improved performance in Europe and Asia, where we were well positioned
for declines in interest rates, partially offset by lower returns in the United
States.

UNREALIZED APPRECIATION (DEPRECIATION)

<TABLE>
<CAPTION>
IN MILLIONS 1993 1994 1995
- ----------- ---- ---- ----
<S> <C> <C> <C>
Debt investment
securities $ 859 $ 154 $ 484

Risk-adjusting
swaps 1 207 776 389

Long-term repurchase
agreements (119) 46 (152)

Other financial
instruments (305) 96 (168)
------ ----- ------
Total net unrealized
appreciation 1 642 1 072 553
</TABLE>

13
<PAGE>

CORPORATE ITEMS

Corporate Items include revenues and expenses that have not been allocated
to the five business sectors, intercompany eliminations, and the taxable
equivalent adjustment, which is calculated to gross-up tax exempt interest to a
taxable basis.

Revenues reported in this category in 1995 included a gain of $40
million related to the sale of the firm's global and local custody and U.S.
commercial paper issuing and paying agency businesses. Revenues and expenses for
1995 and 1994 related to these businesses as well as the firm's discontinued
cash services activities were as follows:

. Total revenues were $397 million in 1995, down from $414 million in 1994.

. Total expenses of $433 million in 1995 and $449 million in 1994 included
approximately $200 million, in both years, of costs allocated to these
activities that were primarily related to technology. Efforts are under
way to reduce these costs.

A $55 million charge related to expense management initiatives is also
included in Corporate Items in 1995.

Corporate Items in 1994 included a $54 million gain on the sale of the
domestic corporate trust business, $50 million of net interest revenue related
to income tax refunds, and past due interest claims from Brazil and Argentina.

14
<PAGE>

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, individual businesses, as well as the audit, legal, financial, and
operations groups, 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 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 thorough independent oversight, Morgan's business managers are responsible
for managing risks in the activities and markets in which they do business.
These managers, located in markets around the world, have firsthand knowledge of
changes in market, industry, credit, economic, and political conditions in their
host countries and 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 magnitude of the risks they take and
diversifying exposures and activities across a variety of instruments, markets,
clients, and geographic regions.

The Corporate Risk Management Group oversees our firmwide risk management
processes. The primary objective of the group is to develop, communicate, and
implement an institutional view of and process for managing risk across Morgan.
This unit, which is independent of our business groups, is managed by the head
of the Market Risk and Credit Policy committees.

The Corporate Risk Management Group performs independent reviews of
significant risk concentrations and has the authority to challenge any risk
position. The group establishes and controls 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 maintains a common risk management framework by developing,
communicating, and assisting business groups in implementing corporate risk
management policies, information systems, and methodologies. The group also
trains Morgan's professionals in our risk management policies
and methodologies.

The Market Risk and Credit Policy committees, along with the Operating Risk
Committee, are composed of members of senior management. The Market Risk
Committee reviews trends in the firm's market and liquidity risk profiles, and
the Credit Policy Committee reviews credit risk developments. The Operating Risk
Committee identifies and implements necessary changes to the firm's operating

15
<PAGE>

environment, in response to changes in the marketplace, in technology, and in
the firm's strategic initiatives and organizational structures. The Board of
Directors periodically reviews trends in our risk profiles and performance as
well as any significant developments in risk management policies
and controls.

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 trading 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 among these variables. Option risks are measured using
simulation analysis and other analytical techniques. These methods produce risk
measures that are comparable to those generated for nonoption risks. 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 regular basis, the Corporate Risk Management Group calculates,
reviews, and updates the historic volatilities and correlations that serve as
the basis for these estimates.

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 as well
as opportunities to enhance our risk measurement processes. DEaR measures
potential losses that are expected to occur within a 95% confidence level,
implying that actual daily revenue might exceed DEaR approximately 5% of the
time. In estimating DEaR, it is necessary to make assumptions about market
behavior. The standard forecast used by Morgan assumes normal market behavior
and an adverse market movement of 1.65 standard deviations.

Morgan utilizes DEaR as one tool to estimate potential market risk related
to all of our trading and asset and liability management activities. The
Corporate Risk Management Group sets DEaR limits for each trading activity, all
trading activities combined, and for our asset and liability management
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 limits, business managers set regional,
local, product, currency, and trader limits as appropriate.

On a daily basis, 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 for the above-mentioned
activities by

16
<PAGE>

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 and tools. 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; 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.

MARKET RISK PROFILES

The following presents the market risk profiles for our trading activities and
asset and liability management activities as of and for the years ended December
31, 1995 and 1994. Overall, market risk levels of the firm in 1995 were in line
with 1994 as higher risk levels in trading activities were offset by lower
levels in asset and liability management activities.

Trading activities

The following graph presents DEaR related to our combined trading activities for
each trading day in 1995 and 1994, as well as the average quarterly DEaR. 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. Risk levels in 1994, as
depicted in the graph, reflected our response to difficult market conditions.
During 1995, our risk levels increased although still at levels considered to
be moderate. Our change in views of market opportunities throughout 1995 was
reflected primarily by higher market risk levels in our proprietary unit and
emerging markets activities.

[GRAPHIC APPEARS HERE]

17
<PAGE>

At year-end 1995, DEaR for our combined trading activities across all market
risks was approximately $27 million, as compared with approximately $13 million
at year-end 1994. The primary sources of market risk associated with our trading
activities relate to movements in interest rates and foreign exchange rates,
each of which is measured on a diversified basis. At year-end 1995, DEaR of
$27 million represented the combination of interest rate risk of approximately
$20 million, foreign exchange rate risk of approximately $9 million, and all
other market risks of $9 million, offset by ($11) million reflecting additional
diversification among these risks. These estimates are based on various
correlation assumptions.

The frequency distribution of our 1995 daily combined trading-related
revenues, generated by our trading businesses, is presented below.

[GRAPHIC APPEARS HERE]

The above distribution around average daily revenue of $7.6 million reflects the
diversified and client-oriented nature of our global trading activities. Average
daily revenue was $5.8 million in 1994.

J.P. Morgan evaluates the reasonableness of our DEaR estimates by comparing
DEaR to daily revenue. In 1995, the quality of our risk estimates remained
strong. Consistent with statistical expectations, daily revenue fell short of
expected results by amounts greater than related DEaR estimates on approximately
4% of the trading days in 1995. In addition, the confidence bands depicted in
the above histogram, which represent 1.65 standard deviations around average
daily revenue, would imply an average DEaR of $18 million, compared to our
actual average DEaR estimate of $19 million for 1995.

We also evaluate various downside risk indicators. For example, average
daily revenue, for the 10 days that fell short of the downside confidence band,
was a loss of ($15) million in 1995, compared with a loss of ($23) million for
11 days in 1994.

18
<PAGE>

Asset and liability management activities

We use a value at risk methodology to estimate over various time horizons the
potential earnings effect of a specified adverse movement in market prices in
our asset and liability management activities. Asset and liability management
portfolios are also reflected on a DEaR basis to allow for a consistent and
uniform measure of market risk across asset and liability management and trading
activities.

During 1995, value at risk measured over a weekly horizon averaged
approximately $39 million and ranged from $27 million to $56 million. This
compares with weekly average value at risk of approximately $53 million and a
range of $37 million to $81 million in 1994. These amounts approximate average
DEaR of $17 million and a range of $12 million to $25 million in 1995, and
average DEaR of $24 million and a range of $16 million to $36 million in 1994.
Risk levels related to our asset and liability management activities declined
in 1995, based on our view of longer-term market opportunities.

Weekly value at risk was approximately $29 million at year-end 1995, as
compared with approximately $48 million at year-end 1994. These amounts
approximate DEaR of $13 million at year-end 1995 and $22 million at year-end
1994.

We evaluate our weekly value at risk estimates relative to total return
over the same period. In 1995, weekly total return related to our asset and
liability management activities fell short of expected weekly results by amounts
greater than related weekly value at risk estimates approximately 5% of
the time.

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. 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.

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 trading asset inventories is monitored continuously by the
appropriate business managers. On a periodic basis the Corporate Risk Management
Group reviews the liquidity and turnover of certain of these inventories as part
of its overall business risk profile review.

CREDIT RISK

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

19
<PAGE>

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 of 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.
Morgan seeks to remove or minimize such uncertainty through continuous
consultation with internal and external legal advisors in all countries in
which we conduct business.

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.

20
<PAGE>

OPERATIONAL RISK

Operational risk is the potential for loss caused by a breakdown in information,
communication, transaction processing, and settlement systems and procedures.
J.P. Morgan attempts to mitigate operational risk by maintaining a comprehensive
system of internal controls.

The objective of an internal control framework begins with the
identification and prioritization of business objectives, and the linkage of
these objectives to the business processes through which they are attained.
Morgan's business managers are responsible for establishing and maintaining an
appropriate system of internal controls after considering the risks of their
business and the standards and policies of the firm. Risks inherent in reaching
each objective are identified, and control objectives required to mitigate
those risks are established. Consistent with these control objectives,
we develop control procedures and standards, identify their impact on the
respective business processes, and implement them at the appropriate level.
Monitoring the effectiveness of our control procedures is a vital component of
this framework.

In addition to the establishment of a system of internal controls, we also
maintain key backup facilities worldwide, and update systems and equipment as
required in response to changes in business conditions and technology needs.
Contingency plans are executed and communicated throughout the firm on a regular
basis.

Our control environment encompasses all of the above elements and is
enhanced by the integrity and competence of our professionals, the way our
professionals are developed and supervised, and management's philosophy and
operating style. This comprehensive system of internal controls enables
management to ensure compliance with management policies and external
regulations.

21
<PAGE>

FINANCIAL REVIEW

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net interest revenue . . . . . . . $ 2 003 $ 1 981 $ 1 772
Noninterest revenue . . . . . . . 3 901 3 536 4 499
Operating expenses . . . . . . . . (3 998) (3 692) (3 580)
Income taxes . . . . . . . . . . . (610) (610) (968)
- -----------------------------------------------------------------
INCOME BEFORE ACCOUNTING CHANGE. . 1 296 1 215 1 723
Accounting change. . . . . . . . . - - (137)
- -----------------------------------------------------------------
Net income 1 296 1 215 1 586
- -----------------------------------------------------------------

Primary earnings per common share

INCOME BEFORE ACCOUNTING CHANGE. . $ 6.42 $ 6.02 $ 8.48
Net income. . . . . . . . . . . . 6.42 6.02 7.80
- -----------------------------------------------------------------
</TABLE>

NET INTEREST REVENUE
[GRAPHIC APPEARS HERE]

Net interest revenue aggregates interest revenue and expense generated from
assets, liabilities, and off-balance-sheet activities. Net interest revenue
derived from instruments used in our Asset and Liability Management activities
is the largest contributor to net interest revenue. 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.

Net interest revenue was $2,003 million in 1995, compared with $1,981
million in 1994 and $1,772 million in 1993. Net interest revenue included $66
million and $201 million in 1994 and 1993 respectively, 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 7% higher in 1995 than in 1994.
This increase was primarily attributable to increased net interest revenue from
our Asset and Liability Management activities in the United States and Asia. Net
interest revenue associated with the Finance and Advisory sector also increased
in 1995, primarily due to increased net interest revenue from credit-related
products, somewhat offset by higher funding costs associated with our expanding
equities business. Net interest revenue attributable to the Sales and Trading
sector declined, primarily due to lower yields on fixed income securities offset
by higher net interest revenue from Latin American deposits and redeposits. Net
interest revenue related to the Asset Management and Servicing sector also
declined primarily from credit and deposit services. Net interest revenue
derived from the custody and cash services businesses disposed of in 1995
represented approximately 6% of consolidated net interest revenue in 1995.

Net interest revenue, excluding receipts related to past due interest and
interest on income tax refunds, increased 19% in 1994 compared with 1993. This
increase was primarily attributable to increased net interest revenue from the
Sales and Trading sector, reflecting higher trading-related net interest revenue
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 also increased during 1994, while net
interest revenue associated with U.S. dollar activities declined. Partially
offsetting this increase in 1994 was lower net interest revenue associated with
the Finance and Advisory sector, primarily due to the reduced volume of credit-
related activities and a decrease in spreads due to the more competitive lending
environment.

22
<PAGE>

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.

The following table provides J.P. Morgan's interest-rate-sensitivity gaps
at December 31, 1995 and 1994, 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.

<TABLE>
<CAPTION>
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, 1995
Asset and liability interest-rate-sensitivity gap...... $(3 530) $(2 403) $12 240 $3 037
Derivatives affecting interest rate sensitivity........ 8 384 (4 113) (7 262) 2 991
------- -------- -------- ------
Interest-rate-sensitivity gap (a)...................... 4 854 (6 516) 4 978 6 028
------- -------- -------- ------
(a) Components of interest-rate-sensitivity gap:
U.S. dollar................................ 2 017 (6 220) 5 180 3 580
Non-U.S. dollar *.......................... 2 837 (296) (202) 2 448
------- -------- -------- ------
Total...................................... 4 854 (6 516) 4 978 6 028
------- -------- -------- ------
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 (b)...................... 5 439 2 343 2 641 (4 335)
------- -------- -------- ------
(b) 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)
------- -------- -------- ------
</TABLE>
* Primarily yen, deutsche mark, French franc, Belgian franc, and sterling
positions.

23
<PAGE>

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 increased 35% to
$1,376 million in 1995 from $1,019 million in 1994. Reported trading revenue
does not include net interest revenue associated with trading activities. 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.
Trading-related net interest revenue should be considered when evaluating
trading results since the firm manages its trading activities based on combined
revenues.

The following table presents trading revenue and net interest revenue
associated with the firm's trading activities, in both developed and emerging
markets, disaggregated by principal product groupings. The table does not
represent total revenues generated by business activities as discussed in the
Five business sectors. For example, underwriting revenues and equities
commissions, which are reported in Investment banking revenue and Operational
service fees respectively on the Consolidated statement of income, are not
included below.
<TABLE>
<CAPTION>
Fixed Foreign Com- Proprietary
In millions Income Equities Exchange modities Unit Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995
Trading revenue $ 668 $ 249 $253 $42 $ 164 $1 376
Net interest revenue (expense) 201 (112) 22 - 20 131
- ---------------------------------------------------------------------------------------------
Combined revenue 869 137 275 42 184 1 507
- ---------------------------------------------------------------------------------------------
1994
Trading revenue 766 115 168 82 (112) 1 019
Net interest revenue (expense) 299 (20) 10 (8) 1 282
- ---------------------------------------------------------------------------------------------
Combined revenue 1 065 95 178 74 (111) 1 301
- ---------------------------------------------------------------------------------------------
1993
Trading revenue 1 290 199 315 57 198 2 059
Net interest revenue (expense) 182 (41) 2 - (1) 142
- ---------------------------------------------------------------------------------------------
Combined revenue 1 472 158 317 57 197 2 201
- ---------------------------------------------------------------------------------------------
</TABLE>

Combined revenue of $1,507 million in 1995 increased $206 million from 1994 due
primarily to higher proprietary unit revenues and strong client demand across a
range of the firm's market-making activities. Combined revenue of $1,301 million
in 1994 decreased $900 million from $2,201 million in 1993 due primarily to
defensive investor participation in the markets globally and losses in the
firm's proprietary unit.

Fixed Income

Fixed Income includes the results of making markets in U.S. and foreign
government securities, debt instruments in emerging markets, interest rate and
currency swaps, options and other derivative instruments, money market
instruments, U.S. government agency securities, and corporate debt securities.

Combined revenue of $869 million in 1995 decreased $196 million from 1994.
While demand for risk management products was higher, revenues declined from
1994 due to losses in positions arising from some client activities. We also
recorded losses from mortgage-backed securities in 1995 as we reduced inventory
positions in a strategic realignment of these activities. Partially offsetting
these declines were higher results from emerging markets activities.

24
<PAGE>

Combined revenue of $1,065 million in 1994 decreased $407 million from
exceptional 1993 revenues. The decrease in 1994 was due primarily to lower
client volumes in fixed income securities, primarily in Europe, and less
effective positioning in Latin American debt markets.

Equities

Equities includes the results of making markets in global equity securities and
equity derivatives such as swaps, options, futures, and forward contracts.

Combined revenue of $137 million in 1995 increased $42 million from 1994
primarily due to increased client demand for equity derivatives.

Combined revenue declined $63 million in 1994 from $158 million in 1993
resulting from lower equity securities trading revenues.

Foreign Exchange

Foreign Exchange includes the results of making markets in spot, options, and
short-term interest rate products, including forwards and forward rate
agreements in a number of currencies.

Combined revenue increased $97 million to $275 million in 1995 due
primarily to an increase in client demand.

Combined revenue declined to $178 million in 1994 from $317 million in
1993, as positioning was less effective in uncertain markets.

Commodities

Commodities includes the results of making markets in spot, forwards, options,
and swaps, and advising clients on developing hedging, investment, and
commodity-linked financing strategies. Revenues related to physical commodity
services such as settlement of physical trades in the various metal and oil
markets and metal borrowing and lending services are also included.

Combined revenue of $42 million in 1995 decreased $32 million from the
exceptional 1994 results due primarily to declines in base metals revenues.

Combined revenue of $74 million in 1994 increased $17 million from 1993.
The increase was due to continued penetration of energy and base metal markets
and from higher market-making activity in commodity derivatives.

Proprietary Unit

In addition to our client-focused trading activities, we have a separate
proprietary unit that engages in transactions for our own account across all
markets.

Combined revenue of $184 million in 1995 reflected gains, primarily in
Asian markets, compared with losses of ($111) million in 1994, primarily in
European markets.

Combined revenue in 1994 decreased $308 million from $197 million in 1993.

TRADING-RELATED ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
In billions: Average balances 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Trading account assets........................................ $68.0 $62.0 $37.3
Securities purchased under agreements to resell............... 31.6 32.1 29.7
Securities borrowed........................................... 15.2 15.6 14.1
Liabilities:
Trading account liabilities................................... 45.2 38.6 21.3
Securities sold under agreements to repurchase................ 40.1 45.5 47.3
- ------------------------------------------------------------------------------------------
</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.

25
<PAGE>

The firm uses resale agreements and securities borrowed to settle short
trading positions and to meet the inventory financing needs of clients. 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. The adoption
did not have a material impact on 1994 resale and repurchase agreement amounts.

Trading account assets and liabilities are mainly composed of U.S. Treasury
and foreign government securities, trading-related derivatives, and corporate
debt and equity securities. Average trading account assets grew in 1995 as a
result of increased holdings of foreign government and corporate debt and equity
securities, reflecting the continued expansion of our activities within the
Sales and Trading and Finance and Advisory sectors. In addition, due to the
growth in our securities businesses in the United States and Europe in the past
several years, average balances for resale agreements, securities borrowed, and
repurchase agreements have increased to meet the needs of clients and to profit
from interest rate spreads. The average balance of trading-related assets
represented 64% of average total assets in 1995 and 1994, compared with 55% in
1993.

The increase in the average balance of trading-related assets and
liabilities in 1994 as compared with 1993 was primarily related to increased
trading account assets and liabilities resulting from the adoption of Financial
Accounting Standards Board Interpretation No. 39 (FIN No. 39), Offsetting of
Amounts Related to Certain Contracts. 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.
The growth in 1994 was also due to the continued expansion of our trading
activities within the Sales and Trading sector.

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'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.

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 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, interest rate futures, forward rate
agreements, commodity forwards, equity swaps, 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, interest rate futures, and debt securities
forwards. Derivatives are used to hedge exposures to interest rate or currency
fluctuations, primarily on or related to

26
<PAGE>

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.

As with balance sheet financial instruments, derivatives are subject to
market and credit risk. As discussed in Risk management, we evaluate the risks
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.

The following table presents the percentages of credit exposure associated
with all derivatives by counterparty credit quality, based on J.P. Morgan's
internal credit ratings. J.P. Morgan's internal rating definitions are
analogous to those of public rating agencies in the United States. Ratings of
AAA, AA, A, and BBB represent investment grade ratings and ratings of BB and
below represent noninvestment grade ratings. The percentages presented below
do not consider the credit enhancement effect of collateral securing these
instruments.

Total
credit
Percentage at December 31, 1995 exposure
- ------------------------------- --------
<S> <C>
AAA, AA..................................................... 45%
A........................................................... 38
BBB......................................................... 12
BB and below................................................ 5
--------
Total....................................................... 100%
--------
</TABLE>

The following tables provide the aggregate notional amount of each category of
derivative financial instruments and the contractual maturities for the 1995
balances. For detail of the notional amounts segregated by trading and asset
and liability management activities, refer to Note 9 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
$27.7 billion, $12.7 billion, and $11.6 billion of master netting agreements
in effect at December 31, 1995, 1994, and 1993, respectively, and the
contractual maturities for the 1995 balances. We increased our use of master
netting agreements in 1995 as our market-making activities continued to increase
and as the legal enforceability of these agreements expanded to new
jurisdictions.

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 1995 1994 1993
- ------------------------ ------ --------- --------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount..................... $497.3 $766.9 $228.2 $23.2 $1 515.6 $974.9 $663.7
Credit exposure..................... 2.3 4.8 4.3 1.0 12.4 10.9 11.5
------ --------- --------- --------- -------- ------ ------
</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 1995 and 1994 as client
demand for risk management tools increased.

27
<PAGE>

Foreign exchange spot, 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 1995 1994 1993
- ------------------------ ------ --------- --------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount..................... $455.4 $6.4 - - $461.8 $397.7 $315.9
Credit exposure..................... 3.0 0.3 - - 3.3 3.6 4.1
------ --------- --------- --------- ------- ------ ------
</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 1995 and 1994
reflects increased activity in foreign exchange forward contracts in line with
our increased 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 1995 1994 1993
- ------------------------ ------ --------- --------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount..................... $321.1 $92.5 $1.8 - $415.4 $426.5 $235.5
Credit exposure..................... 0.4 0.1 - - 0.5 0.2 0.4
------ --------- --------- --------- ------- ------ ------
</TABLE>

Interest rate futures, with a notional amount of $180.5 billion, $210.4 billion,
and $119.8 billion at December 31, 1995, 1994, and 1993, respectively, are
standardized exchange-traded agreements 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.

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 1995 1994 1993
- ------------------------ ------ --------- --------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount..................... $49.6 $14.4 $1.1 - $65.1 $43.9 $35.0
Credit exposure..................... 1.1 0.3 - - 1.4 1.1 0.4
------ --------- --------- --------- ------- ------ ------
</TABLE>

The contracts shown above primarily include swaps and futures in the commodity
and equity markets, and commodity forward agreements. The increase in notional
amounts during 1995 reflects increased activity in equity contracts in line with
our strategy to expand our market-making capabilities.

28
<PAGE>

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 1995 1994 1993
- ------------------------ ------ --------- --------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount:
Purchased option
contracts..................... $286.4 $152.0 $24.6 $1.8 $464.8 $280.6 $222.2
Written option
contracts..................... 325.5 167.1 29.2 2.2 524.0 348.9 181.2
------ --------- --------- --------- ------- ------ ------
</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. Interest rate options also include caps and floors. For
caps and floors, the notional amounts are used to calculate periodic cash flows.
The notional amount of options, particularly interest rate options, grew in 1995
and 1994, primarily due to increased market-making activities.

Option contracts are either negotiated over-the-counter or standardized
contracts executed on an exchange. The notional amount of purchased options
executed on an exchange amounted to $137.4 billion and those negotiated
over-the-counter amounted to $327.4 billion at December 31, 1995. Written
options executed on an exchange amounted to $162.4 billion and those negotiated
over-the-counter amounted to $361.6 billion at December 31, 1995.

Credit exposure exists for purchased options and is measured as the
positive market value of the option contract. At December 31, 1995, the credit
exposure of purchased option contracts was $5.2 billion compared with $3.7
billion at December 31, 1994, and $4.3 billion at December 31, 1993. There is
no credit exposure associated with written option contracts, as these contracts
represent obligations, rather than assets, of J.P. Morgan.

INVESTMENT BANKING REVENUE
[GRAPHIC APPEARS HERE]

Investment banking revenue is earned globally by providing strategic and
financial advice and by arranging financing for clients and includes advisory,
loan syndication, and underwriting revenues.

Investment banking revenue of $584 million, which is primarily reported in
the Finance and Advisory sector, increased 35% to record levels in 1995, as we
benefited from increased global investment banking activity. Advisory and
syndication fees rose 27% to $395 million, primarily from higher advisory fees
as merger and acquisition activity reached record levels in 1995 and we
participated in transactions on behalf of a broad range of clients around the
globe. Revenues from the arrangement of syndicated lending facilities also
rose in 1995 due to higher activity. Underwriting revenue increased 52% to
$189 million in 1995, as debt and equity securities underwriting activities
grew.

Investment banking revenue decreased 18% to $434 million in 1994 from 1993.
Underwriting revenue decreased 49% in 1994 to $124 million as global
underwriting activities throughout the industry decreased because of the
unfavorable interest rate environment. Advisory and syndication fees rose
8% in 1994 to $310 million, as revenue related to the arrangement of syndicated
lending facilities increased due to higher volumes.

29
<PAGE>

CREDIT-RELATED FEES
[GRAPHIC APPEARS HERE]

Credit-related fees are earned from commitments to extend credit, standby
letters of credit and guarantees, and securities lending activities and are
recorded primarily in the Finance and Advisory and Asset Management and
Servicing sectors. Approximately 12% of credit-related fees, primarily
securities lending fees, recorded in 1995 were attributable to the firm's
custody businesses that were sold in 1995 and are reported in Corporate Items.

Credit-related fees of $162 million decreased 21% in 1995 compared with
1994 as we continued to earn lower fees from securities lending. Fees earned
from commitments to extend credit and standby letters of credit were down
slightly in 1995 compared to 1994 as higher average volumes were offset by
continued competitive pricing.

Credit-related fees of $204 million in 1994 decreased from $224 million in
1993 primarily due to 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.

CREDIT-RELATED FINANCIAL INSTRUMENTS

Credit-related financial instruments include loans, commitments to extend
credit, and standby letters of credit and guarantees. These instruments
primarily result from the activities engaged in by our Finance and Advisory
sector. 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.

The following table presents the percentages of credit exposure associated
with credit-related financial instruments by counterparty credit quality, based
on J.P. Morgan's internal credit ratings. J.P. Morgan's internal rating
definitions are analogous to those of public rating agencies in the
United States. Ratings of AAA, AA, A, and BBB represent investment grade ratings
and ratings of BB and below represent noninvestment grade ratings. The
percentages presented below do not consider the credit enhancement effect of
collateral securing these instruments. Overall, approximately 86% of the total
credit exposure at December 31, 1995, was with counterparties considered to be
of investment grade quality, based on our internal ratings. At December 31,
1994, approximately 90% of the total credit exposure was with investment grade
counterparties.

<TABLE>
<CAPTION>
Total
credit
Percentage at December 31, 1995 exposure
- ------------------------------- --------
<S> <C>
AAA, AA.............................. 23%
A.................................... 41
BBB.................................. 22
BB and below......................... 14
--------
Total................................ 100%
--------
</TABLE>

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 nearly 50% 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 the past three years relate to those issued to
support clients' commercial paper programs.

30
<PAGE>

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 1995.

<TABLE>
<CAPTION>
After one
Within one year but More than Total
In billions: December 31 year within five five years 1995 1994 1993
- ------------------------ ---------- ----------- ---------- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Contractual amount:
Commitments to
extend credit................. $17.5 $31.8 $5.8 $55.1 $44.6 $39.0
Standby letters of credit and
guarantees.................... 6.6 3.9 1.2 11.7 9.9 10.5
---------- ---------- ---------- ------ ----- -----
</TABLE>

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. The contractual amount of securities
lending indemnifications at December 31, 1995, declined as a result of the sale
of the firm's custody businesses in 1995.

<TABLE>
<CAPTION>
In billions: December 31 1995 1994 1993
- ------------------------ ---- ----- ----
<S> <C> <C> <C>
Contractual amount...................... $1.0 $19.5 $26.4
---- ----- ----
</TABLE>

At December 31, 1995, 1994, and 1993, J.P. Morgan held cash and other
collateral of $1.1 billion, $19.4 billion, and $26.4 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 $574 million in 1995 compared
with 1994, reflecting an increase in assets under management primarily from
institutional net new business.

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.

OPERATIONAL SERVICE FEES

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 generally reported in the Asset Management and
Servicing and Finance and Advisory sectors. Revenues generated by the firm's
custody and cash services businesses represent approximately 34% of operational
service fees for the twelve months ended December 31, 1995, and are reported in
Corporate Items.

31
<PAGE>

Operational service fees were $546 million in 1995, unchanged from 1994.
Equities commissions revenue increased due to increased market penetration and
volumes. The increase was offset by lower revenue from custody, clearing, and
trust services resulting from the disposition of businesses in 1995 and 1994.

The 11% increase in operational service fees in 1994 compared with 1993 was
primarily due to higher futures and equity commissions and higher custody and
clearing fees.

[GRAPHIC APPEARS HERE]

NET INVESTMENT SECURITIES GAINS

Net investment securities gains result from sales of securities from the debt
investment securities portfolio, made in connection with our asset and
liability management activities, consistent with our longer-term view of
changes in global interest rates. In 1995, 1994, and 1993 net investment
securities gains were $21 million, $122 million, and $323 million respectively
and resulted primarily from sales of foreign and U.S. government and government
agency securities. Gross realized gains and gross realized losses were $384
million and $363 million in 1995, $429 million and $307 million in 1994, and
$599 million and $276 million in 1993 respectively.

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 $638 million in 1995 included net equity investment
securities gains of $485 million, primarily related to the realization of gains
on a portion of the firm's equity investment in Columbia/HCA Healthcare
Corporation. In addition, other revenue included a gain of $40 million
on the sales of the firm's global and local custody and U.S. commercial paper
issuing and paying agency businesses. Gross sales proceeds of $260 million were
largely offset by nonrecurring costs of $220 million associated with the exit
from these businesses. The costs included a real estate charge of $110 million
as a result of the rationalization of the firm's space requirements coincident
with the disposition of these businesses and the corresponding reduction in
personnel. Equity earnings from affiliates and dividend income also contributed
to miscellaneous net revenue.

Other revenue of $694 million in 1994 reflected $606 million of net equity
investment securities gains primarily related to the realization of gains on a
portion of the firm's equity investment in Columbia/HCA Healthcare Corporation,
$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.

OPERATING EXPENSES

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ------ ------ ------
<S> <C> <C> <C>
Employee compensation and benefits .. $2 498 $2 217 $2 221
Net occupancy........................ 322 275 391
Technology and communications........ 671 645 512
Other expenses....................... 507 555 456
------ ------ ------
Total operating expenses............. 3 998 3 692 3 580
------ ------ ------
</TABLE>

J.P. Morgan's strategy for expense management, which is critical to the firm's
goal of maximizing long-term profitability, focuses on making disciplined
investments and ensuring maximum productivity in, as well as accountability for,
existing activities. As part of this process we review our business activities
to ensure that they remain important to our clients and provide the firm with an
appropriate return on investment. In 1995 we embarked on an effort to lower the
growth rate in expenses and to expand accountability for each business as well
as the corporate infrastructure. Our expense management efforts will continue
into 1996, ensuring that the level of expenses is consistent with the firm's
overall strategy.

32
<PAGE>

Total operating expenses increased 8% to $3,998 million in 1995. The
weakening in the U.S. dollar's value accounted for 2 percentage points of the
increase. Employee compensation and benefits expense rose; however, expenses
other than employee compensation and benefits were essentially flat. In 1994,
total operating expenses increased 3% to $3,692 million as compared with 1993.
Operating expenses in 1993 included a special charge of $120 million primarily
related to real estate and relocation initiatives. Excluding the special charge,
operating expenses increased 7% in 1994 from 1993.

Employee compensation and benefits

Employee compensation and benefits, which represented 62% of total operating
expenses in 1995, 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 stockholder results.

Employee compensation and benefits expense, excluding a special charge of
$55 million related to expense management initiatives, increased 10% in 1995
compared with 1994. The increase was primarily due to higher incentive
compensation linked to improved earnings and higher salary expense reflecting
the full-year impact of the 1994 growth in staff levels. At December 31, 1995,
the total number of staff was 15,613 as compared with 17,055 employees at
December 31, 1994, and 15,193 employees at December 31, 1993. Employee
compensation and benefits expense in 1994 was flat compared with 1993 as higher
salary expense related to an increase in staff was offset by a decrease in
incentive compensation and profit-sharing accruals in line with lower earnings

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-based
Compensation, applicable to financial statements for fiscal years beginning
after December 15, 1995. This standard permits either the recognition of
compensation cost for the estimated fair value of employee stock-based
compensation arrangements on the date of grant, or the disclosure in the notes
to the financial statements of the pro forma effects on net income and earnings
per share, determined as if the fair value-based method had been applied in
measuring compensation cost. J.P. Morgan will adopt this standard for the year
ended December 31, 1996, and intends to elect the disclosure option.

Net occupancy

Net occupancy increased 17% to $322 million in 1995 compared with 1994,
reflecting the full-year impact of our 1994 expansions in new and existing
locations. Net occupancy decreased 30% to $275 million in 1994 compared with
1993, 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.

Technology and communications

Reported 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. Our
total investment in technology and communications encompasses these costs as
well as other technology-related costs, primarily compensation and benefits
costs for systems and communications specialists employed by J.P. Morgan.

In managing our technology and communications spending, we make decisions
regarding the most appropriate use of our resources. In recent years, we have
taken steps to utilize these resources in a more flexible manner. We increased
the use of consultants and other external resources to meet our technology and
communications 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. It also allows management to
focus on the firm's business activities and initiatives while expediting
delivery of the latest technologies.

33
<PAGE>

[GRAPHIC APPEARS HERE]

Reported technology and communications expense increased 4% during 1995 to
$671 million, as compared to an increase of 26% in 1994 from 1993, reflecting
our focus in 1995 on the highest-priority projects. Increases in 1995 primarily
resulted from higher depreciation and increased usage of external resources and
market information services. Increases in 1994 compared with 1993 primarily
resulted from costs of additional consultants and external resources, the
expansion of communication networks, higher depreciation of desktop systems and
data processing equipment, and increased usage of market information services.

Total technology and communications spending, which includes other
technology-related costs, primarily employee compensation and benefits, was
$1,040 million in 1995, $984 million in 1994, and $808 million in 1993.
Spending on technology and communications increased 6% in 1995 from 1994, and
increased 22% in 1994 from 1993.

Other expenses

Other expenses include travel, professional fees and costs for outside services,
brokerage fees, taxes other than income taxes, and educational costs. Other
expenses declined 9% in 1995, reflecting a reduction in travel-related expenses
and in costs incurred for outside services, including advertising and promotion
fees and employment agency fees.

The 22% increase in other expenses in 1994 compared with 1993 was primarily
due to increased business activities, such as travel expenses; brokerage fees
due to higher business volume; taxes other than income taxes; and employment
agency fees related to the significant growth in personnel.

INCOME TAXES

Income tax expense of $610 million in 1995 was unchanged from 1994, reflecting
an increase in pretax income, offset by a lower effective tax rate. Income tax
expense decreased $358 million in 1994 compared with 1993, reflecting lower
pretax income and a lower effective tax rate. The effective tax rate for 1995,
1994, and 1993 was 32.0%, 33.4%, and 36.0% respectively, excluding the
cumulative effect of adopting SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, in 1993.

ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ------- ------- --------
<S> <C> <C> <C>
Charge-offs:
Commercial and industrial...................................... $ (39) $ (37) $ (82)
Other.......................................................... (16) (17) (41)
Restructuring countries........................................ - (18) (37)
Recoveries.......................................................... 54 45 60
Allowance for credit losses, December 31............................ 1 130 1 131 1 157
------- ------- --------
</TABLE>

No provision for credit losses was deemed necessary in 1995, 1994, or 1993.
In assessing the probability of losses that have not yet been identified and the
adequacy of the allowance, we have taken into consideration 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 1995 and 1994, other than those for restructuring countries,
were $55 million and $54 million respectively, related to relatively few
borrowers primarily in the U.S., and were diversified by industry.

34
<PAGE>

Restructuring-country charge-offs, including charges resulting from sales
and swaps of loans, have declined significantly over the past several years, and
there were no charge-offs related to restructuring countries in 1995.

NONPERFORMING ASSETS

Total nonperforming assets, net of charge-offs, are presented in the following
table:

<TABLE>
<CAPTION>
In millions: December 31 1995 1994 1993
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
Impaired loans:
Commercial and industrial... $ 67 $ 136 $ 182
Other....................... 48 81 92
------ ------ ------
115 217 274
Restructuring countries.......... 2 2 8
------ ------ ------
Total impaired loans............. 117 219 282
Other nonperforming assets....... 1 1 13
------ ------ ------
Total nonperforming assets....... 118 220 295
------ ------ ------
</TABLE>

Effective January 1, 1995, J.P. Morgan adopted SFAS No. 114 and subsequent
amendment SFAS No. 118, both entitled Accounting by Creditors for Impairment of
a Loan, which prescribe criteria for recognition of loan impairment as well as
methods to measure impairment of certain loans, including loans whose terms were
modified in troubled debt restructurings. J.P. Morgan defines an impaired loan
as any loan 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 (i.e., nonaccrual
loans). Factors involved in determining impairment include, but are not limited
to, expected future cash flows, financial condition of the borrower, and current
economic conditions. Consistent with prior periods, all of J.P. Morgan's
impaired loans at December 31, 1995, were on nonaccrual status. Accordingly,
comparisons of current balances with those of prior periods are not affected by
the implementation of SFAS No. 114 and 118. The adoption of these standards did
not have a material impact on J.P. Morgan's financial statements and did not
affect its charge-off policy.

Impaired loans declined $102 million during 1995 as new classifications
were more than offset by loan repayments, loan sales, and charge-offs. In 1994,
impaired loans declined $63 million as new classifications were more than
offset by repayments, sales, charge-offs, and the return of certain loans to
performing status.

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.

<TABLE>
<CAPTION>
In billions: Average balances 1995 1994 1993
- ----------------------------- ----- ----- -----
<S> <C> <C> <C>
Noninterest-bearing deposits.......... $ 4.7 $ 5.2 $ 5.9
Interest-bearing deposits............. 43.8 39.9 34.4
Commercial paper...................... 2.8 4.2 3.4
Other liabilities for borrowed money.. 12.1 10.3 11.2
----- ----- -----
</TABLE>

35
<PAGE>

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.

Long-term debt

<TABLE>
<CAPTION>
In billions: December 31 1995 1994 1993
- ------------------------ ----- ----- -----
<S> <C> <C> <C>
Long-term debt qualifying as risk-based capital...... $ 3.6 $ 3.2 $ 2.5
Long-term debt not qualifying as risk-based capital.. 5.7 3.6 2.8
----- ----- -----
9.3 6.8 5.3
----- ----- -----
</TABLE>

Taking advantage of favorable market conditions for raising long-term funds, in
1995 we issued $3.8 billion of long-term debt, of which approximately $695
million qualified as risk-based capital. Offsetting the additions to long-term
debt were approximately $511 million of maturities during 1995 and early
redemptions at par of $800 million of debt.

Additions in 1994 included the issuance of $2.4 billion of long-term debt,
of which approximately $950 million qualified as risk-based capital. Offsetting
the additions were approximately $970 million of maturities during 1994.

STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Dollars in billions: December 31 1995 1994 1993
- -------------------------------- ----- ----- -----
<S> <C> <C> <C>
Common stockholders' equity.................... $10.0 $ 9.1 $ 9.4
Total stockholders' equity..................... 10.5 9.6 9.9

Total stockholders' equity to year-end assets.. 5.7% 6.2% 7.4%
----- ----- -----
</TABLE>

Common and total stockholders' equity increased in 1995 due primarily to the
retention of earnings in excess of common and preferred dividends and higher
unrealized gains on investment securities, net of taxes. 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.

In 1995, the ratio of total stockholders' equity to year-end assets
decreased as a result of the growth of $30 billion in year-end assets. The ratio
of total stockholders' equity to year-end assets decreased in 1994 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 1995 and 1994, the firm purchased approximately 4 million and 7
million shares respectively of common stock to reduce the dilutive impact on
earnings per share of the firm's employee benefit plans. In December 1995, the
Board of Directors approved the purchase of up to 7 million additional shares of
J.P. Morgan common stock for the same purpose. These shares may be purchased
periodically in 1996 or beyond in the open market or through privately
negotiated transactions.

During February 1996, J.P. Morgan issued $200 million of perpetual 6 5/8%
cumulative preferred stock, series H, with a stated value of $500 per share.
These shares are represented by 4 million depositary shares with a stated value
of $50 per share, each representing one-tenth of a preferred share.

36
<PAGE>

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, 1995.

Federal Reserve Board risk-based capital and leverage ratio guidelines

The Federal Reserve Board has 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.

For certain regulatory supervision purposes, bank regulators use five
capital category definitions applicable to banks 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, 1995 and 1994, Morgan Guaranty's ratios
exceeded the minimum standards for a "well capitalized" bank.

The risk-based capital guidelines require 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. It is anticipated that the Federal Reserve Board will
require banks to measure and report interest rate risk in 1996, although
resulting in no explicit capital charge, and that market risk will be
incorporated into the risk-based capital framework in 1997.

Capital strength of J.P. Morgan and Morgan Guaranty

J.P. Morgan's capital ratios at December 31 were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
<S> <C> <C> <C>
Tier 1 capital............ 8.8% 9.6% 9.3%
Total risk-based capital.. 13.0 14.2 13.0
----- ----- ------
Leverage.................. 6.1 6.5 7.3
----- ----- ------
</TABLE>

In accordance with Federal Reserve Board guidelines, the risk-based capital
and leverage ratios provided exclude the effect of SFAS No. 115, Accounting
for Certain Investments in Debt and Equity Securities.

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

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
<S> <C> <C> <C>
Tier 1 capital............. 8.5% 9.7% 8.2%
Total risk-based capital... 11.0 12.6 11.7
----- ----- ------
Leverage................... 5.5 5.5 5.9
----- ----- ------
</TABLE>

At December 31, 1995, the Tier 1 and total risk-based capital and leverage
ratios of J.P. Morgan and Morgan Guaranty decreased when compared to December
31, 1994, as an increase in risk adjusted assets more than offset higher
stockholders' equity, principally retained earnings.

37
<PAGE>

At December 31, 1994, 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, when 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. The firm adopted FIN No. 39, effective January 1,
1994, resulting in a decline in J.P. Morgan's and Morgan Guaranty's leverage
ratios; implementation did not affect the risk-based capital ratios.

Risk-based capital

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

In millions 1995 1994 1993
- ----------- ------- ------- -------
<S> <C> <C> <C>
Common stockholders' equity....................................... $ 9 393 $ 8 620 $ 8 203
Adjustable rate cumulative preferred stock........................ 244 244 244
Less: investments in certain subsidiaries and goodwill (a)........ 604 599 674
------- ------- -------
Tier 1 capital.................................................... 9 033 8 265 7 773
------- ------- -------
Variable cumulative preferred stock............................... 248 248 248
Long-term debt qualifying as risk-based capital................... 3 590 3 227 2 459
Qualifying allowance for credit losses............................ 1 130 1 079 1 043
Less: investments in certain subsidiaries (a)..................... 603 598 673
------- ------- -------
Tier 2 capital.................................................... 4 365 3 956 3 077
------- ------- -------
Total risk-based capital.......................................... 13 398 12 221 10 850
------- ------- -------
</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>
1995 1994 1993
------------------- -------------------- -------------------
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........................ $ 147.6 $54.3 $ 129.1 $47.4 $ 107.8 $46.6
Off-balance-sheet exposures... 3 492.5 48.8 2 489.1 38.9 1 679.8 36.8
-------- -------- -------- -------- --------- --------
Gross risk adjusted assets.... 103.1 86.3 83.4
Less: allowance for credit
losses not qualifying as
risk-based capital....... - (0.1) (0.1)
-------- -------- -------- -------- --------- --------
Risk adjusted assets......... 103.1 86.2 83.3
-------- --------
</TABLE>

<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 John A. Mayer Jr.
Chairman of the Board Chief Financial Officer

39
<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, 1995 and
1994, 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, 1995, and the consolidated statement of condition of Morgan Guaranty Trust
Company of New York and its subsidiaries as of December 31, 1995 and 1994. 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, 1995 and 1994, the results of their operations and cash flows for
each of the three years in the period ended December 31, 1995, and the financial
position of Morgan Guaranty Trust Company of New York and its subsidiaries at
December 31, 1995 and 1994, 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 postretirement benefits and
investments in debt and marketable equity securities in 1993.

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

January 10, 1996

40
<PAGE>

CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>

In millions, except per share data 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue............................................... $9 937 $8 379 $7 442
Interest expense............................................... 7 934 6 398 5 670
------ ------ ------
Net interest revenue........................................... 2 003 1 981 1 772

NONINTEREST REVENUE
Trading revenue................................................ 1 376 1 019 2 059
Investment banking revenue..................................... 584 434 532
Credit-related fees............................................ 162 204 224
Investment management fees..................................... 574 517 464
Operational service fees....................................... 546 546 491
Net investment securities gains................................ 21 122 323
Other revenue.................................................. 638 694 406
------ ------ ------
Total noninterest revenue...................................... 3 901 3 536 4 499

OPERATING EXPENSES
Employee compensation and benefits............................. 2 498 2 217 2 221
Net occupancy.................................................. 322 275 391
Technology and communications.................................. 671 645 512
Other expenses................................................. 507 555 456
------ ------ ------
Total operating expenses....................................... 3 998 3 692 3 580
Income before income taxes and
cumulative effect of accounting change.................... 1 906 1 825 2 691
Income taxes................................................... 610 610 968
------ ------ ------
Income before cumulative effect of
accounting change......................................... 1 296 1 215 1 723
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes.. - - (137)
------ ------ ------
NET INCOME..................................................... 1 296 1 215 1 586
------ ------ ------

PER COMMON SHARE (a)
Income before cumulative effect of accounting change........... $6.42 $6.02 $ 8.48
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes.. - - (0.68)
Net income..................................................... 6.42 6.02 7.80
Dividends declared............................................. 3.06 2.79 2.48
------ ------ ------
</TABLE>
(a) Earnings per share amounts for 1995 represent primary earnings per
share. For 1995 fully diluted earnings per share were $6.36. Earnings per share
amounts for 1994 and 1993 represent both primary and fully diluted earnings per
share.

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

41
<PAGE>

CONSOLIDATED BALANCE SHEET
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
December 31
------------------
Dollars in millions 1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks..................................................................... $ 1 535 $ 2 210
Interest-earning deposits with banks........................................................ 1 986 1 362
Debt investment securities available for sale carried at fair value (Cost: $24 154 at 1995
and $22 503 at 1994)................................................................... 24 638 22 657
Trading account assets...................................................................... 69 408 57 065
Securities purchased under agreements to resell ($32 157 at 1995
and $21 170 at 1994) and federal funds sold............................................ 32 157 21 350
Securities borrowed......................................................................... 19 830 12 127
Loans....................................................................................... 23 453 22 080
Less: allowance for credit losses........................................................... 1 130 1 131
-------- --------
Net loans................................................................................... 22 323 20 949
Customers' acceptance liability............................................................. 237 586
Accrued interest and accounts receivable.................................................... 3 539 5 028
Premises and equipment, net................................................................. 1 927 2 016
Other assets................................................................................ 7 299 9 567
-------- --------
Total assets................................................................................ 184 879 154 917
-------- --------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S.................................................................. 3 287 3 693
In offices outside the U.S............................................................. 744 767

Interest-bearing deposits:
In offices in the U.S.................................................................. 2 003 1 826
In offices outside the U.S............................................................. 40 404 36 799
-------- --------
Total deposits.............................................................................. 46 438 43 085
Trading account liabilities................................................................. 45 289 36 407
Securities sold under agreements to repurchase ($40 803 at 1995 and
$30 179 at 1994) and federal funds purchased........................................... 45 099 35 768
Commercial paper............................................................................ 2 801 3 507
Other liabilities for borrowed money........................................................ 15 129 10 900
Accounts payable and accrued expenses....................................................... 5 643 6 231
Liability on acceptances.................................................................... 237 586
Long-term debt not qualifying as risk-based capital......................................... 5 737 3 605
Other liabilities........................................................................... 4 465 2 063
-------- --------
170 838 142 152
Long-term debt qualifying as risk-based capital............................................. 3 590 3 197
-------- --------
Total liabilities........................................................................... 174 428 145 349
Commitments and contingencies (Notes 9, 17, 18, 19, and 21)

STOCKHOLDERS' EQUITY
Preferred stock............................................................................. 494 494
Common stock, $2.50 par value (authorized shares: 500 000 000;
issued: 200 678 373 at 1995 and 200 668 373 at 1994)................................... 502 502
Capital surplus............................................................................. 1 430 1 452
Retained earnings........................................................................... 7 731 7 044
Net unrealized gains on investment securities, net of taxes................................. 566 456
Other....................................................................................... 552 367
-------- --------
11 275 10 315
Less: treasury stock (13 562 755 shares at 1995 and 12 966 917 shares at 1994) at cost...... 824 747
-------- --------
Total stockholders' equity.................................................................. 10 451 9 568
-------- --------
Total liabilities and stockholders' equity.................................................. 184 879 154 917
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.

42
<PAGE>

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>

In millions 1995 1994 1993
------- ------ ------
<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.............................................................. 502 499 492
Shares issued under dividend reinvestment plan, various employee
benefit plans, and conversion of debentures................................ - 3 7
------- ------ ------
Balance, December 31............................................................ 502 502 499
------- ------ ------
CAPITAL SURPLUS
Balance, January 1.............................................................. 1 452 1 393 1 234
Shares issued or distributed under dividend reinvestment plan,
various employee benefit plans, and conversion of debentures,
and income tax benefits associated with stock options...................... (22) 59 159
------- ------ ------
Balance, December 31............................................................ 1 430 1 452 1 393
------- ------ ------
RETAINED EARNINGS
Balance, January 1.............................................................. 7 044 6 386 5 302
Income before cumulative effect of accounting change............................ 1 296 1 215 1 723
Cumulative effect of change in method of accounting
for postretirement benefits, net of related income taxes................... - - (137)
Dividends declared on adjustable rate cumulative preferred stock................ (12) (12) (12)
Dividends declared on variable cumulative preferred stock....................... (12) (8) (6)
Dividends declared on common stock.............................................. (574) (530) (479)
Dividend equivalents on common stock issuable................................... (11) (7) (5)
------- ------ ------
Balance, December 31............................................................ 7 731 7 044 6 386
------- ------ ------
NET UNREALIZED GAINS ON INVESTMENT SECURITIES, NET OF TAXES
Balance, January 1.............................................................. 456 1 165 -
Cumulative unrealized gains, net of taxes, at December 31, 1993................. - - 1 165
Net change in unrealized gains, net of taxes.................................... 110 (709) -
------- ------ ------
Balance, December 31............................................................ 566 456 1 165
------- ------ ------
OTHER

COMMON STOCK ISSUABLE UNDER STOCK AWARD PLANS
Balance, January 1.............................................................. 369 253 -
Cumulative deferred stock award balance, January 1, 1993........................ - - 165
Deferred stock awards, net...................................................... 187 116 88
------- ------ ------
Balance, December 31............................................................ 556 369 253
------- ------ ------
FOREIGN CURRENCY TRANSLATION
Balance, January 1.............................................................. (2) (3) 1
Translation adjustments......................................................... (3) 2 (5)
Income tax benefit (expense).................................................... 1 (1) 1
------- ------ ------
Balance, December 31............................................................ (4) (2) (3)
------- ------ ------
Total other, December 31........................................................ 552 367 250
------- ------ ------
LESS: TREASURY STOCK
Balance, January 1.............................................................. 747 328 215
Purchases....................................................................... 293 444 132
Shares distributed under various employee benefit plans......................... (216) (25) (19)
------- ------ ------
Balance, December 31............................................................ 824 747 328
------- ------ ------
Total stockholders' equity, December 31......................................... 10 451 9 568 9 859
------- ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements.

43
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>

In millions 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET INCOME.................................................................... $ 1 296 $ 1 215 $ 1 586
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
Noncash items: depreciation, amortization, deferred income taxes,
and stock award plans.................................................... 565 371 258
(Increase) decrease in assets:
Trading account assets................................................... (12 271) (15 772) (15 083)
Securities purchased under agreements to resell.......................... (10 974) 1 461 (12 650)
Securities borrowed...................................................... (7 703) (1 309) (3 742)
Accrued interest and accounts receivable................................. 1 489 (92) (2 240)
Increase (decrease) in liabilities:
Trading account liabilities.............................................. 8 937 18 151 5 124
Securities sold under agreements to repurchase........................... 10 637 (6 140) 12 705
Accounts payable and accrued expenses.................................... (788) 342 2 768
Other changes in operating assets and liabilities, net................... 6 655 (1 881) (88)
Net investment securities gains included in cash flows from
investing activities..................................................... (21) (122) (323)
-------- -------- --------
CASH (USED IN) OPERATING ACTIVITIES........................................... (2 178) (3 776) (11 548)
-------- -------- --------
(Increase) decrease in interest-earning deposits with banks................... (622) (142) 299
Debt investment securities:
Proceeds from sales...................................................... 42 262 51 091 61 900
Proceeds from maturities, calls, and mandatory redemptions............... 3 916 3 705 4 605
Purchases................................................................ (46 419) (59 062) (64 180)
(Increase) decrease in federal funds sold..................................... 180 (119) 36
(Increase) decrease in loans.................................................. (1 375) 2 209 2 027
Payments for premises and equipment........................................... (237) (341) (179)
Other changes, net............................................................ (1 549) (1 099) (432)
-------- -------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES............................... (3 844) (3 758) 4 076
-------- -------- --------
Increase (decrease) in noninterest-bearing deposits........................... (428) (1 061) 1 540
Increase in interest-bearing deposits......................................... 3 820 3 703 6 446
Increase (decrease) in federal funds purchased................................ (1 293) 2 483 349
Increase (decrease) in commercial paper....................................... (706) 934 96
Other liabilities for borrowed money proceeds................................. 23 864 7 946 8 482
Other liabilities for borrowed money payments................................. (18 240) (8 128) (12 021)
Long-term debt proceeds....................................................... 3 808 2 342 1 208
Long-term debt payments....................................................... (1 399) (879) (1 356)
Capital stock issued or distributed........................................... 143 61 166
Capital stock purchased....................................................... (293) (445) (132)
Dividends paid................................................................ (583) (541) (480)
Other changes, net............................................................ (3 351) 2 297 3 081
-------- -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES......................................... 5 342 8 712 7 379
-------- -------- --------
Effect of exchange rate changes on cash and due from banks.................... 5 24 (48)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS................................ (675) 1 202 (141)
Cash and due from banks, beginning of year.................................... 2 210 1 008 1 149
-------- -------- --------
Cash and due from banks, end of year.......................................... 1 535 2 210 1 008
-------- -------- --------
Cash disbursements made for:
Interest................................................................. $ 7 568 $ 6 178 $ 5 714
Income taxes............................................................. 560 1 223 566
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.

44
<PAGE>

CONSOLIDATED STATEMENT OF CONDITION
Morgan Guaranty Trust Company of New York
<TABLE>
<CAPTION>

December 31
-------------------
Dollars in millions 1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks......................................................... $ 1 421 $ 2 182
Interest-earning deposits with banks............................................ 2 081 1 605
Debt investment securities available for sale carried at fair value............. 23 625 21 292
Trading account assets.......................................................... 55 298 45 386
Securities purchased under agreements to resell and federal funds sold.......... 21 013 16 562
Loans........................................................................... 20 628 19 397
Less: allowance for credit losses............................................... 1 021 1 025
-------- --------
Net loans....................................................................... 19 607 18 372
Customers' acceptance liability................................................. 237 556
Accrued interest and accounts receivable........................................ 3 401 3 594
Premises and equipment, net of accumulated depreciation of
$1 224 in 1995 and $1 149 in 1994.......................................... 1 734 1 818
Other assets.................................................................... 4 574 7 360
-------- --------
Total assets.................................................................... 132 991 118 727
-------- --------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S...................................................... 3 254 3 698
In offices outside the U.S................................................. 839 770
Interest-bearing deposits:
In offices in the U.S...................................................... 1 846 1 480
In offices outside the U.S................................................. 40 450 38 566
-------- --------
Total deposits.................................................................. 46 389 44 514
Trading account liabilities..................................................... 39 126 30 730
Securities sold under agreements to repurchase and federal funds purchased...... 20 090 22 099
Other liabilities for borrowed money............................................ 7 368 5 320
Accounts payable and accrued expenses........................................... 4 168 2 902
Liability on acceptances........................................................ 237 556
Long-term debt not qualifying as risk-based capital (includes $418 in 1995 and
$630 in 1994 of notes payable to J.P. Morgan).............................. 2 786 1 968
Other liabilities............................................................... 2 852 2 080
-------- --------
123 016 110 169
Long-term debt qualifying as risk-based capital (includes $1 310 in 1995 and
$1 030 in 1994 of notes payable to J.P. Morgan)............................ 1 509 1 249
-------- --------
Total liabilities............................................................... 124 525 111 418
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......................................................................... 2 820 2 670
Undivided profits............................................................... 5 136 4 266
Net unrealized gains on investment securities, net of taxes..................... 264 124
Foreign currency translation.................................................... (4) (1)
-------- --------
Total stockholder's equity...................................................... 8 466 7 309
-------- --------
Total liabilities and stockholder's equity...................................... 132 991 118 727
-------- --------
</TABLE>
Member of the Federal Reserve System and Federal Deposit Insurance
Corporation
The accompanying notes are an integral part of this financial statement.

45
<PAGE>

NOTES TO FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

J.P. Morgan, a global financial services firm, is the holding company for
subsidiaries engaged in providing a wide range of financial services including
advisory, financing, trading, investment, and related capabilities. J.P. Morgan
provides these capabilities to a broad global client base including
corporations, governments, institutions, and individuals. 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 debt 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, debt investment securities were carried at the
lower of aggregate amortized cost or market value (LOCOM) with aggregate
unrealized net valuation adjustments, if any, included in Net investment
securities gains.

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 investment
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.

46
<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.

Impaired loans

J.P. Morgan defines an impaired loan as any loan 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 (i.e., nonaccrual loans). Factors involved in determining
impairment include, but are not limited to, expected future cash flows,
financial condition of the borrower, and current economic conditions. When a
loan is recognized as impaired, any accrued but unpaid interest previously
recorded on such loan is reversed against interest revenue of the current
period. Interest received on impaired 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.

J.P. Morgan measures each loan impairment based upon the present value of
expected future cash flows discounted at an individual loan's effective interest
rate, except where there is an observable market value or, if the loan is
collateral dependent, at the fair value of the collateral.

Management recommends those credits or portions of credits judged to be
uncollectible and that should be charged off.

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.

47
<PAGE>

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
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. The specific criteria required for
derivatives used for such purposes are described below. Derivatives that do not
meet these criteria are carried at market value with changes in value recognized
currently in earnings.

Derivatives used as hedges must be effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge at
the inception of the derivative contract. Accordingly, changes in the market
value of the derivative must be highly correlated with changes in the market
value of the underlying hedged item at inception of the hedge and over the life
of the hedge contract. Derivatives used for hedging purposes include swaps,
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, whereby the terms of the swap
generally equal the terms of 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 market value of such derivatives 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 replicate the cash flows of
nonamortizing cash instruments and do not contain leverage or embedded option
features. 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.

48
<PAGE>

Fee revenue

Investment banking 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.

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, trading-related
derivative transactions, resale and repurchase agreements, and securities
borrowed 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

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.

Certain prior-year amounts have been reclassified to conform with 1995
classifications.

2. ACCOUNTING CHANGES

Accounting for impairment of a loan

Effective January 1, 1995, J.P. Morgan adopted Statement of Financial Accounting
Standards (SFAS) No. 114 and subsequent amendment SFAS No. 118, both entitled
Accounting by Creditors for Impairment of a Loan, which prescribe criteria for
recognition of loan impairment as well as methods to measure impairment of
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 did not have a material impact on
J.P. Morgan's financial statements and did not affect its charge-off policy.

Accounting for postretirement benefits other than pensions

Effective January 1, 1993, J.P. Morgan adopted 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.

49
<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 taxes.

3. DISPOSITION OF GLOBAL AND LOCAL SECURITIES CUSTODY BUSINESSES

In 1995, J.P. Morgan sold its global and local custody businesses and its U.S.
commercial paper issuing and paying agency business and discontinued certain
cash services businesses. Total revenue related to these activities for the year
ended December 31, 1995, was approximately 6% of consolidated total revenues.
The transition of client accounts to the buyers is expected to be completed over
the next 18 to 24 months. The firm is contractually obligated to provide certain
services to these clients for the benefit of the buyer until the transition is
complete.

Gross proceeds of $260 million from the sales were recorded in Other
revenue. The firm recorded $220 million of nonrecurring costs, net against
proceeds, associated with the exit of these businesses. The costs included
severance and other personnel-related costs of $35 million, unreimbursed
transition costs of $35 million, and other costs of approximately $40 million.
In addition, a real estate charge of $110 million was recorded as a result of
the rationalization of the firm's space requirements coincident with the
disposition of these businesses and the corresponding reduction in personnel.
The total number of personnel to be affected by these actions is expected to be
approximately 1,200, with 850 employees removed from the firm's December 31,
1995, headcount.

50
<PAGE>

4. 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 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
INTEREST REVENUE
Deposits with banks............................. $ 168 $ 197 $ 235
Debt investment securities (a).................. 1 552 1 206 1 440
Trading account assets.......................... 3 036 2 784 1 991
Securities purchased under agreements to resell
and federal funds sold..................... 1 942 1 593 1 408
Securities borrowed............................. 876 624 408
Loans........................................... 1 699 1 409 1 652
Other sources, primarily risk-adjusting swaps... 664 566 308
------ ------ ------
Total interest revenue.......................... 9 937 8 379 7 442
------ ------ ------

INTEREST EXPENSE
Deposits........................................ 2 520 1 946 1 917
Trading account liabilities..................... 1 361 1 288 916
Securities sold under agreements to repurchase
and federal funds purchased................ 2 568 2 196 2 055
Other borrowed money............................ 935 679 554
Long-term debt.................................. 550 289 228
------ ------ ------
Total interest expense.......................... 7 934 6 398 5 670
------ ------ ------
Net interest revenue............................ 2 003 1 981 1 772
------ ------ ------
</TABLE>
(a) Interest revenue from debt investment securities included taxable
revenue of $1,392 million, $1,035 million, and $1,266 million and revenue exempt
from U.S. income taxes of $160 million, $171 million, and $174 million in 1995,
1994, and 1993 respectively.

For the twelve months ended December 31, 1995 and 1994, net interest revenue
associated with asset and liability management derivatives was approximately
$370 million and $150 million respectively. At December 31, 1995, approximately
($250) million of net deferred losses 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 losses on closed hedge contracts
included in the amortized cost of the debt investment portfolio. As discussed in
Note 7 to the financial statements, Investment securities, the net unrealized
appreciation associated with the debt investment portfolio was $484 million at
December 31, 1995. Net deferred losses on closed derivative contracts at
December 31, 1995, are expected to amortize into Net interest revenue as
follows: ($140) million in 1996; ($80) million in 1997; ($30) million in 1998;
($4) million in 1999; ($1) million in 2000; and approximately $5 million
thereafter. At December 31, 1994, approximately $420 million of net deferred
gains on closed derivative contracts were recorded on the balance sheet,
primarily composed of net deferred gains on closed hedge contracts included in
the amortized cost of the debt investment portfolio. The amount of net deferred
gains or losses on closed derivative contracts will change from period to
period, primarily due to amortization of such amounts to net interest revenue
and the execution of our asset and liability management strategies, which may
result in the sale of the underlying hedged instruments and/or termination of
hedge contracts.

51
<PAGE>

5. TRADING REVENUE

Trading revenue disaggregated by principal product groupings is presented below.
For additional information refer to the Trading revenue discussion in the
Financial review.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Fixed Income...... $ 668 $ 766 $1 290
Equities.......... 249 115 199
Foreign Exchange.. 253 168 315
Commodities....... 42 82 57
Proprietary Unit.. 164 (112) 198
------ ------ ------
Trading revenue... 1 376 1 019 2 059
------ ------ ------
</TABLE>

6. 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, 1995 and 1994, required reserves were $385
million and $390 million respectively, compared with average required reserves
during the year of $378 million in 1995 and $426 million in 1994.

52
<PAGE>

7. INVESTMENT SECURITIES

Debt investment securities

At December 31, 1995 and 1994, 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.

Gross unrealized gains and losses as well as a comparison of the cost and
carrying value of debt investment securities available for sale and carried at
fair value at December 31, 1995 and 1994, are presented in the table below. Net
unrealized appreciation associated with debt investment securities at December
31, 1995, was $484 million, consisting of gross unrealized appreciation of $595
million and gross unrealized depreciation of $111 million. Such amounts
represent the gross unrealized appreciation or depreciation on each debt
security, including the effects of any related hedge. For additional detail of
gross unrealized gains and losses associated with open derivative contracts used
to hedge debt investment securities, see Note 10 to the financial statements,
Estimated fair value of financial instruments.
<TABLE>
<CAPTION>
Gross Gross Fair and
unrealized unrealized carrying
In millions Cost gains losses value
------- ---------- ---------- --------
<S> <C> <C> <C> <C>
1995
U.S. Treasury $ 1 892 $136 $ 2 $ 2 026
U.S. government agency, principally
mortgage-backed 15 392 200 69 15 523
U.S. state and political subdivision 1 875 214 16 2 073
U.S. corporate and bank debt 188 5 - 193
Foreign government (a) 3 413 33 21 3 425
Foreign corporate and bank debt 1 295 6 3 1 298
Other 99 1 - 100
------- ---- ---- -------

Total debt investment securities 24 154 595 111 24 638
------- ---- ---- -------
<CAPTION>
Gross Gross Fair and
unrealized unrealized carrying
In millions Cost gains losses value
------- ---------- ---------- --------
<S> <C> <C> <C> <C>
1994
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
------- ---- ---- -------
</TABLE>

(a) Primarily includes debt of countries that are members of the
Organization for Economic Cooperation and Development.

At December 31, 1995, 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
through 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 1995, 1994, and 1993. 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 through December 31, 1993.

In millions 1995 1994 1993
- ----------- ----- ----- -----
<S> <C> <C> <C>
Gross realized gains from sales of securities carried:
At fair value...................................... $ 371 $ 411 -
At LOCOM........................................... - - $ 581
Gross realized losses from sales of securities carried:
At fair value...................................... (363) (307) -
At LOCOM........................................... - - (276)
Net gains on maturities, calls, and mandatory
redemptions of securities carried:
At fair value...................................... 13 18 -
At LOCOM........................................... - - 18
----- ----- -----
Net investment securities gains........................ 21 122 323
----- ----- -----
</TABLE>

A profile of the maturities of available-for-sale debt investment securities as
of December 31, 1995, 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.............................................. $ 105 $ 899 $ 490 $ 126 $ 272 $ 1 892
U.S. government agency,
principally mortgage-backed........................... 416 14 629 347 - - 15 392
U.S. state and political subdivision....................... 285 386 338 462 404 1 875
U.S. corporate and bank debt............................... 58 112 18 - - 188
Foreign government......................................... 751 923 1 725 14 - 3 413
Foreign corporate and bank debt............................ 508 482 248 15 42 1 295
Other...................................................... - - - - 99 99
---------- ---------- ---------- --------- ------- --------
Total debt investment securities,
at cost............................................... 2 123 17 431 3 166 617 817 24 154
Fair value................................................. 2 130 17 600 3 288 717 903 24 638
---------- ---------- ---------- --------- ------- --------
Net unrealized gains....................................... 7 169 122 100 86 484
---------- ---------- ---------- --------- ------- --------
Average rates on debt
investment securities, at cost........................ 5.96% 7.74% 7.29% 10.35% 8.39% 7.61%
---------- ---------- ---------- --------- ------- --------
</TABLE>

Average rates represent the weighted average at December 31, 1995, and
include the effects of various hedging transactions. Average rates do not give
effect to unrealized gains and losses that are reflected as a component of
stockholders' equity. 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. 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. 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, 1995 and 1994, marketable equity investment securities were
classified as available for sale and carried at fair value. Net unrealized
appreciation of $440 million and $576 million associated with these available-
for-sale equity investment securities at December 31, 1995 and 1994,
respectively, primarily related to investments in health-care and insurance-
industry-related securities, is included within the stockholders' equity
account Net unrealized gains on investment securities, net of taxes. Net
realized gains on equity investment securities during 1995 of $485 million are
reflected in Other revenue. This amount represents $518 million of gross
realized gains and $33 million of write-downs of equity investment securities.
In 1994 and 1993 net realized gains from equity investment securities were $606
million and $246 million after write-downs of $19 million and $27 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, 1995 and 1994, follows.

<TABLE>
<CAPTION>
In millions: December 31 1995 1994
- ------------------------ ----- -----
<S> <C> <C>
Cost....................................... $ 237 $ 183
Gross unrealized gains..................... 441 579
Gross unrealized losses.................... (1) (3)
----- -----
Fair and carrying value.................... 677 759
</TABLE>

Nonmarketable equity investment securities are outside the scope of SFAS No. 115
and continue to be carried at cost of $424 million at December 31, 1995,
compared with $432 million at December 31, 1994. The estimated fair value of
securities without available market quotations was $509 million and $528 million
at December 31, 1995 and 1994, respectively. Net unrealized appreciation at
December 31, 1995 and 1994, for securities without market quotations was
primarily related to one communications-industry investment.

8. TRADING ACCOUNT ASSETS AND LIABILITIES

Trading account assets and liabilities, including derivative instruments used
for trading purposes, are carried at fair value. The following table presents
the carrying value of trading account assets and liabilities at December 31,
1995 and 1994, and the average balance for the years then ended.

<TABLE>
<CAPTION>
1995 1994
------------------ -----------------
Carrying Average Carrying Average
In millions value balance value balance
- ----------- -------------------------------------
<S> <C> <C> <C> <C>
TRADING ACCOUNT ASSETS
U.S. Treasury....................... $ 8 396 $ 6 900 $ 6 668 $ 7 675
U.S. government agency.............. 2 549 2 410 3 332 4 579
Foreign government.................. 20 111 20 139 17 073 17 569
Corporate debt and equity........... 12 406 10 008 7 409 7 915
Other securities.................... 3 147 4 834 3 088 2 885
Interest rate and currency swaps.... 12 444 13 032 10 914 11 036
Foreign exchange contracts.......... 3 286 4 920 3 573 5 032
Interest rate futures and forwards.. 444 309 152 151
Commodity and equity contracts...... 1 377 1 372 1 146 1 219
Purchased option contracts.......... 5 248 4 095 3 710 3 959
--------- -------- -------- --------
69 408 68 019 57 065 62 020
--------- -------- -------- --------

TRADING ACCOUNT LIABILITIES
U.S. Treasury....................... 9 282 7 070 7 187 9 015
Foreign government.................. 8 953 10 334 8 481 8 640
Corporate debt and equity........... 2 847 3 384 2 519 2 445
Other securities.................... 668 1 552 1 165 888
Interest rate and currency swaps.... 11 208 12 016 8 283 8 455
Foreign exchange contracts.......... 4 126 4 501 2 605 4 178
Interest rate futures and forwards.. 549 373 182 132
Commodity and equity contracts...... 2 595 1 633 1 300 815
Written option contracts............ 5 061 4 320 4 685 3 984
--------- -------- -------- --------
45 289 45 183 36 407 38 552
--------- -------- -------- --------
</TABLE>

55
<PAGE>

9. 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 $27.7 billion
and $12.7 billion of master netting agreements in effect at December 31, 1995
and 1994, respectively is also presented.

<TABLE>
<CAPTION>
Notional amounts Credit exposure
----------------- ---------------
In billions: December 31 1995 1994 1995 1994
- ------------------------ -------- ------- ------ --------
<S> <C> <C> <C> <C>
Interest rate and currency swaps
Trading.................................................. $1 233.3 $723.5
Asset and liability management (a) (b) (c)............... 282.3 251.4
-------- -------
Total interest rate and currency swaps................... 1 515.6 974.9 $ 12.4 $10.9
-------- ------- ------ ------
Foreign exchange spot, forward, and futures contracts
Trading.................................................. 443.7 382.8
Asset and liability management (a) (b)................... 18.1 14.9
-------- ------- ------ ------
Total foreign exchange spot, forward,
and futures contracts................................... 461.8 397.7 3.3 3.6
-------- ------- ------ ------
Interest rate futures, forward rate agreements,
and debt securities forwards
Trading.................................................. 412.7 404.5
Asset and liability management........................... 2.7 22.0
-------- ------- ------ ------
Total interest rate futures, forward rate
agreements, and debt securities forwards................. 415.4 426.5 0.5 0.2
-------- ------- ------ ------
Commodity and equity swaps, forward,
and futures contracts, all trading....................... 65.1 43.9 1.4 1.1
-------- ------- ------ ------
Purchased options (d)
Trading.................................................. 462.2 276.7
Asset and liability management (a)....................... 2.6 3.9
-------- ------- ------ ------

Total purchased options.................................. 464.8 280.6 5.2 3.7
-------- ------- ------ ------
Written options, all trading (e) (f).......................... 524.0 348.9 - -
-------- ------- ------ ------
Total credit exposure recorded as assets
on the balance sheet..................................... 22.8 19.5
-------- ------- ------ ------
</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) At December 31, 1995 and 1994, the notional amounts of asset and liability
management derivatives contracts conducted in the foreign exchange markets,
primarily forward contracts, amounted to $20.8 billion and $16.9 billion
respectively. At December 31, 1995, these contracts were primarily
denominated in the following currencies: deutsche mark $4.6 billion, Italian
lira $2.5 billion, Japanese yen $2.3 billion, French franc $1.8 billion,
British pound $1.7 billion, Spanish peseta $1.7 billion, Belgian franc $1.5
billion, and Swiss franc $1.5 billion. At December 31, 1994, these contracts
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 $259.4 billion and $233.0
billion at December 31, 1995 and 1994, respectively.
(d) At December 31, 1995 and 1994, purchased options used for trading purposes
included $356.7 billion and $206.6 billion respectively of interest rate
options, $72.5 billion and $45.7 billion respectively of foreign exchange
options, and $33.0 billion and $24.4 billion respectively of commodity and
equity options. Only interest rate options are used for asset and liability
management purposes. Purchased options executed on an exchange amounted to
$137.4 billion and those negotiated over the counter amounted to $327.4
billion at December 31, 1995.
(e) At December 31, 1995 and 1994, written options included $414.6 billion and
$271.2 billion respectively of interest rate options, $72.8 billion and
$51.5 billion respectively of foreign exchange options, and $36.6 billion
and $26.2 billion respectively of commodity and equity options. Written
options executed on an exchange amounted to $162.4 billion and those
negotiated over the counter amounted to $361.6 billion at December 31, 1995.
(f) The total notional amount of written put options includes $6.7 billion and
$3.9 billion of written put option contracts on debt securities at December
31, 1995 and 1994, respectively.

56
<PAGE>

The following presents the credit exposure associated with derivatives at
December 31, 1995 and 1994, segregated by type of counterparty.
<TABLE>
<CAPTION>

Nonbank
financial Govern-
In billions: December 31 institutions ments Banks All other Total
- ------------------------ ------------ ------- ----- --------- -----
<S> <C> <C> <C> <C> <C>
1995
Credit exposure.......... $5.8 $2.8 $8.9 $5.3 $22.8

1994
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.

<TABLE>
<CAPTION>
In billions 1995 1994
- ----------- ----- -----
<S> <C> <C>
Commitments to extend credit................... $55.1 $44.6
Standby letters of credit and guarantees....... 11.7 9.9
Securities lending indemnifications (a)........ 1.0 19.5
</TABLE>

(a) At December 31, 1995 and 1994, J.P. Morgan held cash and other collateral of
$1.1 billion and $19.4 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, 1995 and 1994,
segregated by type of counterparty.

<TABLE>
<CAPTION>
Nonbank
financial Govern-
In billions: December 31 institutions ments Banks All other Total
- ------------------------ ------------ ------- ----- --------- ------
<S> <C> <C> <C> <C> <C>
1995
Commitments to extend credit.. $ 9.4 $3.7 $4.4 $37.6(a) $55.1
Standby letters of credit and
guarantees............... 3.8 2.0 0.5 5.4(b) 11.7
------------ ------- ----- --------- ------
1994
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) At December 31, 1995 and 1994, the utilities industry exceeded 10% of this
amount.
(b) The utilities and health-care industries at December 31, 1995, and the
telecommunications, utilities, and health-care industries at December 31,
1994, each exceeded 10% of this amount.

57
<PAGE>

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 $31.6
billion and $26.1 billion were netted against amounts receivable for securities
sold of $27.5 billion and $29.4 billion to arrive at a net trade date payable of
$4.1 billion and net trade date receivable of $3.3 billion at December 31, 1995
and 1994, respectively.

10. 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, 1995 and 1994, by $1.4 billion and $2.2
billion respectively before considering income taxes. Net unrealized
appreciation declined in 1995, primarily due to a decrease in net unrealized
appreciation associated with risk-adjusting swaps mainly as a result of the
recognition of net interest revenue.

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.

58
<PAGE>

The following table presents the carrying value and fair value of J.P. Morgan's
financial instruments at December 31, 1995 and 1994.

<TABLE>
<CAPTION>
1995 1994
---------------------------- ---------------------------
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)................ $69.4 $69.4 - $57.1 $57.1 -
Securities purchased under
agreements to resell and
federal funds sold (b)............... 32.2 32.2 - 21.3 21.3 -
Securities borrowed (c)................... 19.8 19.8 - 12.1 12.1 -
FINANCIAL LIABILITIES:
Trading account liabilities (a)........... 45.3 45.3 - 36.4 36.4 -
Securities sold under agreements
to repurchase and federal funds
purchased (b)........................ 45.1 45.3 ($0.2) 35.7 35.7 -
FINANCIAL INSTRUMENTS USED FOR
PURPOSES OTHER THAN TRADING:
FINANCIAL ASSETS: (d)
Debt investment securities................ 24.6 24.6 - 22.7 22.7 -
Net loans................................. 22.3 23.5 1.2 20.9 22.1 $ 1.2
Other financial assets (e)................ 14.2 14.2 - 18.1 18.2 0.1
FINANCIAL LIABILITIES: (d)
Deposits.................................. 46.4 46.5 (0.1) 43.1 43.0 0.1
Related derivatives.................. - (0.1) 0.1 - - -
Other liabilities for borrowed
money................................ 15.1 15.1 - 10.9 10.9 -
Long-term debt (f)........................ 8.6 8.9 (0.3) 6.1 5.9 0.2
Related derivatives.................. - (0.3) 0.3 - 0.1 (0.1)
Other financial liabilities (g)........... 12.9 12.9 - 12.3 12.3 -
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Risk-adjusting swaps (h).................. - 0.4 0.4 - 0.8 0.8
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............. 1.4 2.2
-------- ----- -------- -------- ------ ---------
</TABLE>

(a) Refer to Note 8 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. Securities
sold under agreements to repurchase are also used as one source of financing
for the debt investment securities portfolio.
(c) These trading-related financial instruments that are collateralized by cash
are carried at amounts equal to the collateral advanced.

59
<PAGE>

(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 gains and losses associated with such derivatives contracts
amounted to $195 million and ($59) million at December 31, 1995 and 1994,
respectively. Gross unrealized gains and gross unrealized losses associated
with open derivative contracts used for these purposes at December 31, 1995
and 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, deposits, and debt investment securities,
principally mortgage-backed securities.

<TABLE>
<CAPTION>
Gross Gross Net unrealized
In millions: December 31 unrealized gains unrealized losses gains/(losses)
- ------------------------ ---------------- ----------------- --------------
<S> <C> <C> <C>
1995
Long-term debt............... $275 $ 19 $ 256
Debt investment securities... 1 111 (110)
Deposits..................... 57 1 56
Other financial instruments.. 38 45 (7)
---------------- ----------------- --------------
Total........................ 371 176 195
---------------- ----------------- --------------
1994
Long-term debt............... 42 141 (99)
Debt investment securities... 26 20 6
Other financial instruments.. 63 29 34
---------------- ----------------- --------------
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) Estimated fair value for J.P. Morgan's convertible mortgage loan and British
pound financing obligation is not practicable due to the complex terms and
conditions associated with the transactions. For additional information
regarding these financing obligations, see Note 14 to the financial
statements, Long-term debt.
(g) Includes commercial paper, liability on acceptances, accounts payable and
accrued expenses, and other financial liabilities.
(h) 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 gross
unrealized gains and gross unrealized losses of $4.4 billion and $4.0
billion respectively at December 31, 1995, and $2.7 billion and $1.9 billion
respectively 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, 1995 and 1994. There were
no material terminations of risk-adjusting swaps during 1995 or 1994.

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>
1995
Carried at fair or market value............ $ 94.7 $ 94.7 $ 45.3 $45.3 -
Carried at cost:
Carrying value approximates
fair value due to
short-term nature.................... 65.1 65.1 58.1 58.3 -
Fair value based on available
quoted market prices................. 2.8 2.8 5.4 5.4 -
Fair value derived using
estimation techniques................ 19.9 21.1 64.6 64.6 $0.4
-------- ---------- --------- ---------- -----------
182.5 183.7 173.4 173.6 0.4
-------- ---------- --------- ---------- -----------

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
-------- ---------- --------- ---------- -----------
</TABLE>

60
<PAGE>

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, 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 impaired 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.

61
<PAGE>

11. LOANS

Loans at December 31 are summarized in the following table.

<TABLE>
<CAPTION>
In millions 1995 1994
- ----------- ------- -------
<S> <C> <C>
LOANS IN OFFICES IN THE U.S.
Commercial and industrial............................... $ 1 990 $3 047
Financial institution:
Banks.............................................. 729 458
Other financial institutions....................... 527 738
Collateralized by real estate........................... 365 365
Other, including U.S. state and political subdivision... 1 666 1 483
------- -------
5 277 6 091
------- -------
LOANS IN OFFICES OUTSIDE THE U.S.
Commercial and industrial............................... 10 045 8 451
Financial institution:
Banks.............................................. 1 447 1 940
Other financial institutions....................... 3 013 2 460
Collateralized by real estate........................... 281 329
Foreign governments and official institutions........... 1 042 846
Other................................................... 2 348 1 963
------- -------
18 176 15 989
------- -------
23 453 22 080
------- -------
</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 1995 1994
- ----------- ------- -------
<S> <C> <C>
LOANS TO BORROWERS IN THE U.S.
In offices in the U.S................. $ 3 769 $ 5 202
In offices outside the U.S............ 6 702 5 608
------- -------
10 471 10 810
------- -------

LOANS TO BORROWERS OUTSIDE THE U.S.
In offices in the U.S................. 1 508 889
In offices outside the U.S............ 11 474 10 381
------- -------
12 982 11 270
------- -------
23 453 22 080
------- -------
</TABLE>

Total impaired loans, net of charge-offs, at December 31 are presented in the
following table. At December 31, 1995, more than half of the impaired loan
balance is measured based upon the present value of expected future cash flows
discounted at an individual loan's effective interest rate, one third is based
on the fair value of the collateral, and the remainder is measured by an
observable market price.

In millions 1995 1994 1993
- ----------- ----- ----- -----
<S> <C> <C> <C>
Commercial and industrial....$ 67 $ 136 $ 182
Other........................ 48 81 92
----- ----- -----
115 217 274
Restructuring countries...... 2 2 8
----- ----- -----
117 219 282
----- ----- -----
</TABLE>

Consistent with prior periods, all of J.P. Morgan's impaired loans at December
31, 1995, were on nonaccrual status. Accordingly, comparisons of current
balances with those of prior periods are not affected by the implementation of
SFAS No. 114 and 118.

62
<PAGE>

As of December 31, 1995, no SFAS No. 114 reserve was required for the $117
million recorded investment in impaired loans. Charge-offs and interest applied
to principal have reduced the recorded investment values to amounts that are
less than the SFAS No. 114 calculated values. For the twelve months ended
December 31, 1995, the average recorded investment in impaired loans was $186
million.

An analysis of the effect of impaired loans, net of charge-offs, on interest
revenue is presented in the following table.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ----- ------ -----
<S> <C> <C> <C>
Interest revenue that would have been recorded if accruing (a)...................... $ 17 $ 18 $ 24
Less interest revenue recorded: (b)
Related to the current period.................................................. 1 5 3
Related to prior periods....................................................... 38 39 167
----- ------ -----
Positive impact of impaired loans on interest revenue............................... 22 26 146
----- ------ -----
</TABLE>

(a) Represents $13 million, $13 million, and $14 million from borrowers in the
U.S. and $4 million, $5 million, and $10 million from borrowers outside the
U.S. in 1995, 1994, and 1993 respectively.
(b) Represents $30 million, $4 million, and $5 million from borrowers in the
U.S. and $9 million, $40 million, and $165 million from borrowers outside
the U.S. in 1995, 1994, and 1993 respectively.

12. ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses is presented in the following
table.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ------ ------ ------
<S> <C> <C> <C>
BALANCE, JANUARY 1................................. $1 131 $1 157 $1 258
------ ------ ------
Recoveries......................................... 54 45 60
Charge-offs:
Commercial and industrial..................... (39) (37) (82)
Restructuring countries....................... - (18) (37)
Other......................................... (16) (17) (41)
------ ------ ------
Net charge-offs.................................... (1) (27) (100)
Translation adjustment............................. - 1 (1)
------ ------ ------
BALANCE, DECEMBER 31............................... 1 130 1 131 1 157
------ ------ ------
</TABLE>

13. PREMISES AND EQUIPMENT

The components of premises and equipment at December 31 are presented in the
following table.

<TABLE>
<CAPTION>
In millions 1995 1994
- ----------- ------- -------
<S> <C> <C>
Land....................................................... $ 112 $ 113
Buildings.................................................. 958 934
Equipment and furniture.................................... 1 435 1 439
Leasehold improvements..................................... 347 337
Property under financing obligation:
Land and building..................................... 455 460
Construction-in-progress................................... 32 35
------- -------
3 339 3 318
Less: accumulated depreciation............................. 1 412 1 302
------- -------
1 927 2 016
------- -------
</TABLE>

Depreciation expense was $247 million in 1995, $231 million in 1994, and $221
million in 1993.
No interest was capitalized in connection with various construction
projects in 1995 or 1994.

63
<PAGE>

14. 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 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 are those in effect at December 31, 1995, and
in parentheses, at December 31, 1994, excluding the effect of related
derivatives, if any. Floating rates are determined by formulas and may be
subject to certain minimum or maximum rates.

Based solely on the contractual terms of the debt issues, total long-term
debt had a weighted-average interest rate of 6.94% at December 31, 1995. The
weighted-average interest rate for total long-term debt, including the effects
of the related derivative instruments, was 6.01% at December 31, 1995.

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 1995 1994
- ------------------- --------- ------------------------- ------ -------
<S> <C> <C> <C> <C>
J.P. MORGAN (PARENT)
Floating-rate subordinated deutsche mark notes..................... 1995 5.44% - $ 258
Zero-coupon subordinated notes (a)................................. 1998 8.66 $ 331 304
Convertible debentures (b)......................................... 1998 4 3/4 2 2
Subordinated notes................................................. 1998-2004 7 5/8 747 717
Subordinated notes................................................. 1998-2010 6 1/4-8 1/2 (8 1/2-9 5/8) 748 449
Floating-rate subordinated notes................................... 2000-2005 5.3-5.76 (5.37-6.13) 940 940
Subordinated notes................................................. 2002-2009 5 3/4-7 1/4 649 649
Subordinated Italian lira notes.................................... 2003 8 81 79
Subordinated Canadian dollar notes................................. 2004 6 7/8 185 180
Subordinated Japanese yen loan..................................... 2005 4.78 97 -

MORGAN GUARANTY
Subordinated notes................................................. 1996 8 1/8 100 100
Subordinated notes................................................. 2002 7 3/8 199 199
--------- ------------------------- ------ -------
4 079 3 877
Less: amortization for risk-based capital
purposes (c).................................................. (489) (680)
--------- ------------------------- ------ -------
Total long-term debt qualifying as risk-based
capital....................................................... 3 590 3 197
--------- ------------------------- ------ -------
</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, 1995, these debentures were convertible into 86,400 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>
Maturity Interest Amount outstanding
Dollars in millions date rate 1995 1994
- ------------------- --------- -------------------- ------ -------
<S> <C> <C> <C> <C>
J.P. MORGAN (PARENT)
Notes............................................... 1995 5 3/8% - $ 250
Notes............................................... 1997 6 1/2-8 (6 1/2) $ 804 303
Floating-rate notes................................. 1997 5.93 500 -
South African rand notes............................ 1997 14 1/2 69 -
Deutsche mark notes................................. 1998 7 1/4 177 165
Swiss franc notes................................... 1999-2003 4 5/8-5 1/2 (5) 442 116
Netherlands guilder notes........................... 2000 6 157 -
Notes, Series B-E (a)............................... 2008-2009 7.7 425 425
Convertible mortgage loan (b)....................... 2018 7 1/2 407 407

MORGAN GUARANTY
Mortgages payable................................... 1995-1996 various - 3
Zero-coupon notes (c)............................... 1995-1997 4.46-4.89 (3.88-4.87) 23 45
Zero-coupon notes (c)............................... 1995-1997 5.79-6.39 (5.09-6.39) 31 52
Notes............................................... 1995-2001 5.78-8.4 (7-11 3/8) 684 294
Floating-rate notes................................. 1996 5.79-6.86 (6.98) 700 200
Floating-rate deutsche mark notes................... 1996-1997 4.13-4.38 (5.48-5.75) 24 23
Italian lira notes.................................. 1997 11 3/8 111 108
Floating-rate Portuguese escudo notes............... 1998 9.69 100 -
Floating-rate notes................................. 1999-2005 4.92-6.24 (5 1/2) 260 200
Notes (d)........................................... 2001 6.06 40 25
British pound financing obligation (e).............. - - 294 309
--------- -------------------- ------ -------
5 248 2 925
--------- -------------------- ------ -------
Add: amortization for risk-based capital
purposes (f)................................... 489 680
--------- -------------------- ------ -------
Total long-term debt not qualifying as
risk-based capital............................. 5 737 3 605
--------- -------------------- ------ -------
</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,
which 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, 1995,
exchange rate) to be applied to the financing obligation for each of the five
years subsequent to December 31, 1995, and thereafter are presented in the
following table.

<TABLE>
<CAPTION>
In millions
- -----------
<S> <C>
1996.............................................. $ 23
1997.............................................. 24
1998.............................................. 24
1999.............................................. 24
2000.............................................. 24
2001 and later.................................... 280
-----
Total cash payments............................... 399
Less: interest.................................... 105
-----
Balance outstanding at December 31, 1995.......... 294
-----
</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, 1995, excluding the British pound financing
obligation noted above, are $1,164 million (1996), $1,495 million (1997), $1,035
million (1998), $314 million (1999), and $747 million (2000).

15. 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 effect of
adopting SFAS No. 106 in 1993, are presented in the following table.

In millions 1995 1994 1993
- ----------- ------------------------- ------------------------- -------------------------
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.................. $ 43 $ (3) $ 40 $161 $ 91 $252 $ 289 $ 44 $333
Foreign.............. 505 (4) 501 243 16 259 567 (106) 461
State and local...... 114 (45) 69 115 (16) 99 196 (22) 174
------- -------- ----- ------- -------- ----- ------- -------- -----
662 (52) 610 519 91 610 1 052 (84) 968
------- -------- ----- ------- -------- ----- ------- -------- -----
</TABLE>

The income tax expense related to net investment securities gains, included in
Income taxes, was $8 million in 1995, $50 million in 1994, and $132 million in
1993.

Deferred tax assets and liabilities at December 31, 1995, 1994, and 1993,
resulted from the items listed in the following table.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ------ ------ ------
<S> <C> <C> <C>
DEFERRED TAX ASSETS
Compensation and benefits . . . . . . . . . . . . . . $ 646 $ 454 $ 390
Allowance for credit losses . . . . . . . . . . . . . 444 444 454
Foreign operations. . . . . . . . . . . . . . . . . . 82 88 85
Write-down of equity investment securities. . . . . . 54 52 53
Other. . . . . . . . . . . . . . . . . . . . . . . . 199 129 172
------ ------ ------
Total deferred tax assets before valuation allowance 1 425 1 167 1 154
Less: valuation allowance (a) 140 140 150
------ ------ ------
Total deferred tax assets 1 285 1 027 1 004
------ ------ ------
DEFERRED TAX LIABILITIES

Gains on debt and equity investment securities. . . . 564 342 724
Lease financing transactions. . . . . . . . . . . . . 135 120 114
Unremitted earnings. . . . . . . .. . . . . . . . . . 86 67 49
Interest rate and currency swaps . . . . . . . . . . 68 99 129
Depreciation . . . . . . . . . . . . . . . . . . . . 43 44 47
Other . . . . . . . . . . . . . . . . . . . . . . . 241 219 120
------ ------ ------
Total deferred tax liabilities 1 137 891 1 183
------ ------ ------
</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 $358 million, $274
million, and $724 million at December 31, 1995, 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
effect of adopting SFAS No. 106 in 1993, is shown in the following table.

<TABLE>
<CAPTION>
% of pretax income 1995 1994 1993
- ------------------ ---- ---- ----
<S> <C> <C> <C>
U.S. statutory tax rate...................................... 35.0% 35.0% 35.0%
Increase (decrease) due to:
State and local taxes, net of U.S. income tax effects... 2.4 3.5 4.2
Tax-exempt income....................................... (6.7) (3.7) (3.0)
Other................................................... 1.3 (1.4) (0.2)
---- ---- ----
Effective tax rate........................................... 32.0 33.4 36.0
---- ---- ----
</TABLE>

Pretax income

The following table presents Income before income taxes and cumulative effect of
accounting change 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 23 to the financial statements, U.S.-related and foreign-country-
related operations.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
- ----------- ------ ------ ------
<S> <C> <C> <C>
Offices in the U.S. . . . $ 455 $ 908 $ 227
Offices outside the U.S.. 1 451 917 2 464
------ ------ ------
1 906 1 825 2 691
------ ------ ------
</TABLE>

16. 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,
and outstanding shares Dividend rate (a)
1995 and 1994 1995 1994
---------------------- ---- ----
<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 4.28-4.56 4.30-4.80
</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 1995 and 1994, 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>

17. 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 $26 million in 1995
and $63 million in 1994; no contributions were made in 1993. 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, 1995 and 1994 (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 1995 1994
- ----------- ------ ------
<S> <C> <C>
Plan assets (a)................................................................. $1 175 $1 029
Less: accumulated benefits earned prior to valuation date (b)
Vested..................................................................... 763 699
Nonvested.................................................................. 112 19
------ ------
Accumulated benefit obligation (b)......................................... 875 718
------ ------
Funded status of accumulated benefit obligation................................. 300 311
Less: additional benefits based on estimated future salary levels (b)........... 209 222
------ ------
Funded status of projected benefit obligation (c)............................... 91 89
Amounts available to increase (reduce) future pension expense:
Unamortized balance of the initial transition amount (d)................... (42) (49)
Cumulative net actuarial gain, including deferred investment results (e)... (27) (34)
Costs of retroactive benefits granted by plan amendments................... 38 28
------ ------
Net amounts available to decrease expense in future periods................ (31) (55)
------ ------
Net prepaid pension cost recorded on the consolidated balance sheet............. 60 34
------ ------
</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 $1,084 million and $940 million at September 30, 1995 and 1994,
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, 1995 and 1994, such obligations
were $112 million and $102 million respectively.

The following table presents the components of 1995, 1994, and 1993 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 1995 1994 1993
- ----------- ------ ------ ------
<S> <C> <C> <C>
Cost of benefits earned during the period. . . . . . . . . $ 60 $ 67 $ 51
Interest cost on the projected benefit obligation. . . . . 87 81 75
Assumed return on all pension plan assets (a). . . . . . . (98) (89) (87)
Amortization, primarily of the initial transition amount . (6) (3) (5)
------ ------ ------
Pension expense reflected in Employee compensation and benefits 43 56 34
------ ------ ------
</TABLE>

(a) For the twelve-month periods ended September 30, 1995, 1994, and 1993, the
actual returns on plan assets were $141 million, $33 million, and $155
million respectively. The differences between the actual and assumed amounts
have been deferred.

68
<PAGE>

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>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Assumptions at September 30:
Assumed rate of return...................... 9.3% 9.5% 9.5%
Future annual compensation increases........ 5.1 6.0 5.0
Discount rate............................... 7.4 8.3 7.0
----- ----- -----
Pension expense for the year ended December 31:
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
----- ----- -----
</TABLE>

18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

U.S. employees retiring with J.P. Morgan 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 pensioner life insurance coverage,
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 pensioner 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.

<TABLE>
<CAPTION>
In millions 1995 1994
----- -----
<S> <C> <C>
Actuarial present value of APBO:
Retirees........................................................................... $ 97 $ 87
Fully eligible active participants................................................. 22 22
Other active participants.......................................................... 83 90
----- -----
Total APBO at September 30.............................................................. 202 199
Cumulative net actuarial gain, including deferred investment results (a)................ 73 58
Fair value of COLI policy at December 31................................................ (91) (40)
----- -----
Net accrued postretirement benefit liability recorded on the consolidated balance sheet. 184 217
----- -----
</TABLE>

(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 1995, 1994, and 1993
postretirement benefit expense.

<TABLE>
<CAPTION>
In millions 1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Cost of benefits earned during the period.............................. $ 6 $ 9 $ 8
Interest cost on APBO.................................................. 17 18 18
Assumed return on COLI policy (a)...................................... (3) - -
Amortization of unrecognized net gains................................. (2) - -
----- ----- -----
Expense reflected in Employee compensation and benefits................ 18 27 26
Transition obligation, recorded on January 1, 1993,
as a one-time cumulative nonoperating charge...................... - - 211
----- ----- -----
Total postretirement benefit expense................................... 18 27 237
----- ----- -----
</TABLE>

(a) For the twelve-month period ended September 30, 1995, the actual return was
$9 million. The difference between the actual and assumed amounts has been
deferred.

69
<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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Assumptions at September 30:
Assumed rate of return........................................ 9.0% 9.0% -
Future annual compensation increases, affecting the APBO for
pensioner life insurance only................................. 4.8 5.5 4.5%
Health-care cost trend rate:
First year.................................................... 12.0 15.0 15.5
Ultimate rate after gradual decreases until the year 2009..... 5.5 5.5 5.5
Discount rate................................................. 7.5 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 $2 million in 1995 and $3 million in 1994 and 1993. In addition, the APBO as
of September 30 would have increased by $16 million, $20 million, and $25
million for 1995, 1994, and 1993 respectively.

19. 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. In 1995 a new plan was
approved authorizing 28,000,000 shares for future grant. Shares available for
future grant under the plans totaled 29,462,846 at December 31, 1995.

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.

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 to three
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 1995,
1994, and 1993.

<TABLE>
<CAPTION>
Shares under Option price
option per share
------------ -------------------
<S> <C> <C>
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
Granted.................... 7 166 952 60 1/2 to 85
Exercised.................. (3 128 485) 24 3/32 to 71
Canceled................... (437 566)
------------ -------------------
Balance, December 31, 1995...... 24 325 921 31 5/16 to 85
------------ -------------------
Exercisable at December 31,
1993....................... 11 048 204 17 15/16 to 66 1/8
1994....................... 14 229 295 24 3/32 to 66 1/8
1995....................... 15 179 860 31 5/16 to 71
------------ -------------------
</TABLE>

70
<PAGE>

In January 1996, J.P. Morgan granted 4,708,808 options at an option price of
$75.625.

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 generally 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, 1995, 1994, and 1993, total share credits representing previously
granted restricted stock awards, including share credits attributable to
dividend equivalents, were 2,968,840 credits, 2,146,629 credits, and 1,524,733
credits respectively. In January 1996, 318,642 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, 1995, 1994, and 1993, total share
credits representing previously granted stock bonus awards, including share
credits attributable to dividend equivalents, were 2,603,378 credits, 1,573,006
credits, and 871,292 credits respectively. In January 1996, 1,577,334 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. At December
31, 1995, total share credits representing previously granted stock unit awards,
including share credits attributable to dividend equivalents, were 52,533
credits. In January 1996, 123,364 share credits representing stock unit awards
were granted.

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, 1995 and 1994,
approximately 1.7 million and 1.0 million shares respectively of the redeemable
preferred stock had been authorized, and there were no shares issued or
outstanding. In 1995, shares of this stock were awarded to employees, and all
shares were redeemed by those employees. Shares were also awarded to employees
in January 1996, and substantially all of these shares have been redeemed by
those employees.

71
<PAGE>

20. 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 1995, 1994, and 1993
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 1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Adjusted income before cumulative
effect of accounting change............................. $ 1 275 $ 1 198 $ 1 705
Cumulative effect of change in method of accounting for
postretirement benefits, net of related income taxes.... - - (137)
Adjusted net income.......................................... 1 275 1 198 1 568

Primary earnings per share:
Weighted-average number of common and common
equivalent shares outstanding........................... 198 654 973 199 056 561 201 073 125
Fully diluted earnings per share:
Weighted-average number of common and common
equivalent shares outstanding, assuming full dilution... 200 613 199 199 056 809 201 116 329
------------ ------------ ------------
</TABLE>

21. COMMITMENTS AND CONTINGENT LIABILITIES

Excluding mortgaged properties, assets carried at approximately $53.1 billion
and approximately $49.5 billion in the consolidated balance sheet at December
31, 1995 and 1994, 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 $96 million and $113 million and securities with
a market value of $1,786 million and $1,024 million were segregated in special
bank accounts for the benefit of securities and futures brokerage customers at
December 31, 1995 and 1994, respectively.

Operating expenses include net rentals of $115 million in 1995, $94 million
in 1994, and $83 million in 1993. Minimum rental commitments on noncancellable
leases for premises and equipment are $1,050 million in the aggregate, and for
each of the five years subsequent to December 31, 1995, are $118 million (1996),
$102 million (1997), $91 million (1998), $64 million (1999), and $62 million
(2000). 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.

72
<PAGE>

22. 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, 1995 and 1994. The amounts below do not consider $91.2 billion and
$87.5 billion of cash and marketable security collateral at December 31, 1995
and 1994, 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>
1995
On-balance-sheet:
U.S...................................... $23.7 $32.2 $20.3 $16.5 $ 92.7
Europe (b)............................... 13.5 20.3 13.4 9.5 56.7
Asia and Pacific......................... 1.7 7.1 3.4 2.4 14.6
Western hemisphere, excluding U.S........ 8.6 6.0 2.1 3.4 20.1
------------- ------- ------ --------- -----
Total on-balance-sheet credit exposure... 47.5 65.6 39.2 31.8 184.1(c)
------------- ------- ------ --------- -----
Off-balance-sheet:
U.S...................................... 22.6 5.9 3.5 33.6 65.6
Europe (b)............................... 10.3 5.8 6.3 8.4 30.8
Asia and Pacific......................... 0.4 1.0 2.3 2.3 6.0
Western hemisphere, excluding U.S........ 2.4 1.4 0.3 0.8 4.9
------------- ------- ------ --------- -----
Total off-balance-sheet credit exposure.. 35.7 14.1 12.4 45.1 107.3
------------- ------- ------ --------- -----
Total credit exposure.................... 83.2 79.7 51.6 76.9(d) 291.4
------------- ------- ------ --------- -----
Cash and marketable security
collateral.......................... 53.8 1.7 26.1 9.6 91.2
------------- ------- ------ --------- -----
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)
------------- ------- ------ --------- -----
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(d) 258.7
------------- ------- ------ --------- -----
Cash and marketable security
collateral.......................... 56.2 4.5 21.8 5.0 87.5
------------- ------- ------ --------- -----
</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 $0.8 billion and $0.9
billion in 1995 and 1994 respectively.
(d) No single industry in this category exceeded 10% of this amount at December
31, 1995 and 1994.

73
<PAGE>

23. 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 1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
-------- --- -------- --- -------- ---
Europe (a)............................................. $ 73 040 40% $ 63 939 41% $ 48 248 36%
Western hemisphere, excluding U.S...................... 13 543 7 6 914 5 6 416 5
Asia and Pacific....................................... 7 753 4 5 840 4 5 888 4
-------- --- -------- --- -------- ---
Total foreign-country-related assets................... 94 336 51 76 693 50 60 552 45
Total U.S.-related assets.............................. 90 543 49 78 224 50 73 336 55
-------- --- -------- --- -------- ---
Consolidated total assets.............................. 184 879 100 154 917 100 133 888 100
-------- --- -------- --- -------- ---
</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.

74
<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 1995,
1994, and 1993 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>
1995
Total revenues....................... $5 301 $780 $964 $7 045 $6 793 $13 838
Total expenses....................... 4 061 575 766 5 402 6 530 11 932
Income before income taxes........... 1 240 205 198 1 643 263 1 906
Income tax expense (benefit)......... 498 82 79 659 (49) 610
Net income........................... 742 123 119 984 312 1 296
--------- --------- ------- -------- ------- --------
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
--------- --------- ------- -------- ------- --------
</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 (21% in 1995, 16% in 1994, and 17%
in 1993).

75
<PAGE>

24. 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 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
REVENUE
Equity in undistributed earnings of subsidiaries...................... $ 588 $ (82) $1 224
Dividends from subsidiaries:
Banks............................................................ 285 725 276
Other............................................................ 420 593 60
------ ------ ------
Total equity in earnings of subsidiaries (a).......................... 1 293 1 236 1 560
Interest from subsidiaries............................................ 616 423 312
Other interest revenue................................................ 46 27 18
Investment banking revenue allocations from subsidiaries.............. 71 59 74
Service fees from subsidiaries........................................ 134 87 27
Net investment securities gains (losses).............................. (28) (29) 4
Other revenue (includes gains of $24 in 1993 from the early
extinguishment of notes advanced to a subsidiary bank)........... 3 17 28
------ ------ ------
Total revenue......................................................... 2 135 1 820 2 023
------ ------ ------
EXPENSES
Interest (includes $24 in 1995, $16 in 1994, and $6 in 1993
to subsidiaries)................................................. 665 446 307
Employee compensation and benefits.................................... 159 103 72
Other expenses........................................................ 75 56 33
------ ------ ------
Total expenses........................................................ 899 605 412
------ ------ ------
Income before income taxes............................................ 1 236 1 215 1 611
Income tax expense (benefit).......................................... (60) - 25
------ ------ ------
NET INCOME............................................................ 1 296 1 215 1 586
------ ------ ------
</TABLE>

(a) The 1993 amount includes the $137 million cost representing the cumulative
effect of the change in method of accounting for postretirement benefits.

Certain prior-year amounts have been reclassified to conform with 1995
classifications.

76
<PAGE>

BALANCE SHEET

J.P. Morgan (parent)

<TABLE>
<CAPTION>
December 31
-----------------
In millions 1995 1994
------- -------
<S> <C> <C>
ASSETS
Interest-earning deposits with subsidiary banks............................... $ 377 $ 1 640
Debt investment securities available for sale carried at fair value........... 688 1 116
Investments in subsidiaries:
Banks.................................................................... 8 985 7 978
U.S. broker-dealer....................................................... 407 486
Other nonbanks........................................................... 947 985
Advances to subsidiaries:
Banks.................................................................... 1 878 1 810
U.S. broker-dealer....................................................... 2 148 3 309
Other, primarily securities-related...................................... 5 154 1 531
Accrued interest and accounts receivable, primarily from subsidiary banks..... 265 221
Other assets (includes $908 in 1995 and $488 in 1994 related to
corporate-owned life insurance contracts, $544 in 1995 and $26 in 1994
related to deferred tax assets, and $50 in 1995 and $150 in 1994
from dividends receivable from subsidiary banks)......................... 1 660 774
------- -------
Total assets.................................................................. 22 509 19 850
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Securities sold under agreements to repurchase with subsidiary banks.......... 102 592
Commercial paper.............................................................. 2 729 3 430
Other liabilities for borrowed money.......................................... 1 140 -
Accounts payable and accrued expenses......................................... 1 255 933
Long-term debt not qualifying as risk-based capital........................... 3 369 2 266
Other liabilities............................................................. 71 51
------- -------
8 666 7 272
Long-term debt qualifying as risk-based capital............................... 3 392 3 010
------- -------
Total liabilities............................................................. 12 058 10 282
------- -------
Total stockholders' equity.................................................... 10 451 9 568
------- -------
Total liabilities and stockholders' equity.................................... 22 509 19 850
------- -------
</TABLE>

77
<PAGE>

STATEMENT OF CASH FLOWS

J.P. Morgan (parent)

<TABLE>
<CAPTION>
In millions 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
NET INCOME................................................................... $ 1 296 $ 1 215 $ 1 586
Adjustments to reconcile to cash provided by operating activities:
Equity in undistributed (earnings) losses of subsidiaries............... (588) 82 (1 224)
Increase (decrease) due to changes in other
balance sheet amounts................................................... (223) 359 148
Net investment securities (gains) losses included in cash flows
from investing activities............................................... 28 29 (4)
Other revenue from the early redemption of advances
to subsidiaries......................................................... - - (24)
------- ------- -------
CASH PROVIDED BY OPERATING ACTIVITIES........................................ 513 1 685 482
------- ------- -------
(Increase) decrease in interest-earning deposits
with subsidiary banks................................................... 1 263 (1 452) 111
Debt investment securities:
Proceeds from sales..................................................... 5 720 535 203
Purchases............................................................... (5 230) (1 064) (882)
Increase in advances to subsidiaries......................................... (2 479) (695) (9)
Capital to subsidiaries...................................................... (250) (270) (17)
Payments for insurance contracts............................................. (367) (367) (180)
Other changes, net........................................................... (14) 36 24
------- ------- -------
CASH (USED IN) INVESTING ACTIVITIES.......................................... (1 357) (3 277) (750)
------- ------- -------
Increase (decrease) in securities sold under agreements
to repurchase with subsidiary banks..................................... (490) 281 311
Increase (decrease) in commercial paper...................................... (698) 991 (10)
Other liabilities for borrowed money proceeds................................ 1 140 - -
Long-term debt:
Proceeds................................................................ 2 230 1 575 741
Payments................................................................ (833) (464) (594)
Capital stock:
Issued or distributed................................................... 143 61 166
Purchased............................................................... (293) (445) (132)
Dividends paid............................................................... (583) (541) (480)
Cash receipts from subsidiary banks for common stock issuable................ 171 108 251
Other changes, net........................................................... 57 26 15
------- ------- -------
CASH PROVIDED BY FINANCING ACTIVITIES........................................ 844 1 592 268
------- ------- -------
INCREASE IN CASH AND DUE FROM BANKS.......................................... - - -
Cash and due from banks, beginning of year................................... 2 2 2
------- ------- -------
Cash and due from banks, end of year......................................... 2 2 2
------- ------- -------
Cash disbursements for interest and taxes.................................... $ 617 $ 445 $ 318
------- ------- -------
</TABLE>

78
<PAGE>

25. 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, 1995, the cumulative retained net profits
for the years 1995 and 1994 available for distribution as dividends in 1996
without approval of the Federal Reserve Board amounted to approximately $1,235
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.

79
<PAGE>

ADDITIONAL SELECTED DATA
J.P. Morgan & Co. Incorporated

Dollars in millions, except per share data 1995 1994 1993 1992 1991
- ------------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
Total interest revenue....................... $ 9 937 $ 8 379 $ 7 442 $ 7 281 $ 7 786
Total noninterest revenue.................... 3 901 3 536 4 499 2 950 2 528
Total revenues............................... 13 838 11 915 11 941 10 231 10 314
Net interest revenue......................... 2 003 1 981 1 772 1 708 1 484
Provision for credit losses.................. - - - 55 40
Total operating expenses..................... 3 998 3 692 3 580 2 854 2 487
Net income................................... 1 296 1 215 1 586 (a) 1 582 (b) 1 146 (c)
At year-end:
Total assets............................ 184 879 154 917 133 888 103 197 103 468
Long-term debt (d)...................... 9 327 6 802 5 276 5 443 5 395
Stockholders' equity.................... 10 451 9 568 9 859 7 308 6 068
Common stockholders' equity............. 9 957 9 074 9 365 6 814 5 574
Tier 1 risk-based capital (l)........... 9 033 8 265 7 773 6 625 5 470
Total risk-based capital (l)............ 13 398 12 221 10 850 9 672 8 437
Per common share:
Net income (e).......................... $ 6.42 $ 6.02 $ 7.80 (a) $ 7.95 (b) $ 5.80 (c)
Book value.............................. 50.71 (f) 46.73 (g) 47.25 (h) 35.56 29.41
Dividends declared...................... 3.06 2.79 2.48 2.23 1/2 2.03
EARNINGS RATIOS
Net income as % of:
Average total assets.................... 0.73%(f) 0.70%(g) 1.08%(h) (i) 1.32%(j) 1.05%(k)
Average stockholders' equity............ 13.2 (f) 12.5 (g) 19.8 (h) (i) 22.5 (j) 20.4 (k)
Average common stockholders' equity..... 13.6 (f) 12.9 (g) 20.9 (h) (i) 23.9 (j) 21.9 (k)
DIVIDEND PAYOUT RATIO
Dividends declared per common share as % of
net income per common share............. 47.7% 46.3% 31.8%(i) 28.1%(j) 35.0%(k)
CAPITAL RATIOS
Average stockholders' equity as % of average
total assets............................ 5.5%(f) 5.7%(g) 5.5%(h) 5.8% 5.2%
Common stockholders' equity as % of:
Average total assets.................... 5.6 (f) 5.3 (g) 6.4 (h) 5.7 5.1
Total year-end assets................... 5.4 (f) 5.9 (g) 7.0 (h) 6.6 5.4
Total stockholders' equity as % of:
Average total assets.................... 5.9 (f) 5.5 (g) 6.7 (h) 6.1 5.6
Total year-end assets................... 5.7 (f) 6.2 (g) 7.4 (h) 7.1 5.9
Tier 1 risk-based capital ratio (l).......... 8.8 9.6 9.3 8.9 6.9
Total risk-based capital ratio (l)........... 13.0 14.2 13.0 13.0 10.7
Leverage ratio (l)........................... 6.1 6.5 7.3 7.1 5.8
OTHER SELECTED DATA
Registered holders of record of common stock
at year-end............................. 29 391 29 596 28 919 28 061 26 741
Common shares outstanding at year-end
(in thousands).......................... 187 116 187 701 193 087 191 610 189 529
Employees at year-end:
In the U.S.............................. 8 855 9 607 8 983 8 567 8 080
Outside the U.S......................... 6 758 7 448 6 210 5 801 5 243
------- ------- ------- ------- -------
Total................................... 15 613 17 055 15 193 14 368 13 323
------- ------- ------- ------- -------
</TABLE>

80
<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 share) related to
the extraordinary gain on early retirement of debt.

(d) Includes $3,590 million, $3,197 million, $2,459 million, $2,300
million, and $2,080 million of long-term debt qualifying as risk-based
capital in 1995, 1994, 1993, 1992, and 1991 respectively.

(e) Earnings per share amounts for 1994 and 1993 represent both primary and
fully diluted earnings per share; earnings per share amounts for 1995,
1992 and 1991 represent primary earnings per share. For 1995 fully
diluted earnings per share were $6.36. 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.

(f) Excluding the effect of SFAS No. 115, the book value per common share
would have been $47.83 for the twelve months ended December 31, 1995;
net income would have been 0.73% of average total assets, 13.78% of
average stockholders' equity, and 14.3% of average common stockholders'
equity; average stockholders' equity would have been 5.3% of average
total assets; common stockholders' equity would have been 5.29% of
average total assets and 5.11% of total year-end assets; and total
stockholders' equity would have been 5.57% of average total assets and
5.37% of total year-end assets.

(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; and 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; and 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) 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.

81
<PAGE>

CONSOLIDATED AVERAGE BALANCES AND TAXABLE-EQUIVALENT NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated

Dollars in millions 1995 1994 1993
- ----------------------------- ---------------------------- -------------------------- ---------------------------
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................... $ 1 796 $ 168 9.35% $ 2 252 $ 197 8.75% $ 2 636 $ 235 8.92%
Debt investment securities
in offices in the U.S.:(a)
U.S. Treasury........................ 1 983 130 6.56 1 282 79 6.16 2 541 117 4.60
U.S. state and
political subdivision............... 1 964 236 12.02 2 215 267 12.05 2 185 276 12.63
Other................................ 13 619 962 7.06 10 569 547 5.18 8 811 448 5.08
Debt investment securities
in offices outside the U.S.(a)........... 4 433 309 6.97 6 010 409 6.81 9 257 696 7.52
Trading account assets:
In offices in the U.S................ 12 802 836 6.53 14 632 952 6.51 13 534 755 5.58
In offices outside the
U.S................................. 25 560 2 205 8.63 24 033 1 838 7.65 16 985 1 240 7.30
Securities purchased under agreements to
resell and federal funds sold,
mainly in offices in the U.S......... 31 769 1 942 6.11 32 247 1 593 4.94 29 869 1 408 4.71
Securities borrowed in offices in the U.S. 15 222 876 5.75 15 615 624 4.00 14 076 408 2.90
Loans:
In offices in the U.S................ 6 586 479 7.27 7 754 438 5.65 8 295 447 5.39
In offices outside the U.S........... 17 561 1 236 7.04 16 201 991 6.12 17 954 1 242 6.92
Other interest-earning assets:(b)
In offices in the U.S................ 1 185 252 * 913 269 * 594 199 *
In offices outside the U.S........... 1 635 412 * 646 295 * 165 109 *
-------- ------- ----- -------- ------- ----- -------- ------ ------
Total interest-earning assets............. 136 115 10 043 7.38 134 369 8 499 6.33 126 902 7 580 5.97
Allowance for credit losses............... (1 130) (1 143) (1 199)
Cash and due from banks................... 1 796 1 790 2 355
Other noninterest-earning assets(c)....... 41 729 37 565 18 122
-------- ------- ----- -------- ------- ----- -------- ------ ------
Total assets.............................. 178 510 172 581 146 180
-------- ------- ----- -------- ------- ----- -------- ------ ------
</TABLE>

The percentage of average interest-earning assets attributable to offices
outside the U.S. was 50% in 1995, 48% in 1994, and 46% in 1993.

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 1995, 1994, and 1993.
Impaired loans are included in the determination of average total loans.
(a) For the twelve months ended December 31, 1995 and 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, 1995 and 1994, Other noninterest-
earning assets include the effects of FIN No. 39 and SFAS No. 115.
* Not meaningful

82
<PAGE>

Dollars in millions 1995 1994 1993
- ----------------------------- ---------------------------- -------------------------- ---------------------------

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................ $ 2 048 $ 98 4.79% $ 2 175 $ 101 4.64% $ 2 487 $ 126 5.07%
In offices outside the U.S........... 41 762 2 422 5.80 37 768 1 845 4.89 31 906 1 793 5.62
Trading account liabilities:
In offices in the U.S................ 6 596 438 6.64 8 028 510 6.35 8 203 433 5.28
In offices outside the U.S........... 12 222 923 7.55 11 109 778 7.00 7 052 483 6.85
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices
in the U.S........................... 43 658 2 568 5.88 48 372 2 196 4.54 49 322 2 055 4.17

Commercial paper, mainly in offices
in the U.S........................... 2 809 169 6.02 4 174 182 4.36 3 412 109 3.19
Other interest-bearing liabilities:
In offices in the U.S................ 10 414 639 6.14 8 085 365 4.51 8 260 287 3.47
In offices outside the U.S........... 1 869 127 6.80 2 315 132 5.70 2 908 156 5.36
Long-term debt, mainly in offices
in the U.S........................... 8 761 550 6.28 5 901 289 4.90 5 420 228 4.21
-------- -------- ------- ------- ------ ------ ------- ------ -----

Total interest-bearing liabilities........ 130 139 7 934 6.10 127 927 6 398 5.00 118 970 5 670 4.77
Noninterest-bearing deposits:
In offices in the U.S................ 3 336 3 818 4 671
In offices outside the U.S........... 1 354 1 395 1 265
Other noninterest-bearing liabilities(a).. 33 822 29 684 13 264
-------- ------ -------

Total liabilities......................... 168 651 162 824 138 170
Stockholders' equity...................... 9 859 9 757 8 010
------- ------- -------
Total liabilities and stockholders'
equity............................... 178 510 172 581 146 180
Net yield on interest-earning assets:..... 1.55 1.56 1.51
Attributable to offices in the
U.S.(b).............................. 1.29 1.41 1.22
Attributable to offices outside the
U.S.(b).............................. 1.85 1.73 1.84
Taxable-equivalent net interest earnings:. 2 109 2 101 1 910
Attributable to offices in the
U.S.(b).............................. 883 994 845
Attributable to offices outside the
U.S.(b).............................. 1 226 1 107 1 065
------- ----- -----
</TABLE>

The percentage of average interest-bearing liabilities attributable to
offices outside the U.S. was 53% in 1995, 51% in 1994, and 44% in 1993.
(a) For the twelve months ended December 31, 1995 and 1994, Other noninterest-
bearing liabilities include the effects of FIN No. 39.
(b) Funding costs are allocated based on the location of the office recording
the asset. No allocation is made for capital.

83
<PAGE>

ANALYSIS OF YEAR-TO- YEAR CHANGES IN TAXABLE-EQUIVALENT NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated

<TABLE>
<CAPTION>
1995/94 1994/93
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............. $ (42) $ 13 $ (29) $ (34) $ (4) $ (38)
Debt investment securities
in offices in the U.S.:
U.S. Treasury................................. 46 5 51 (70) 32 (38)
U.S. state and political subdivision.......... (30) (1) (31) 4 (13) (9)
Other.......................................... 184 231 415 90 9 99
Debt investment securities
in offices outside the U.S.................... (109) 9 (100) (226) (61) (287)
Trading account assets:
In offices in the U.S......................... (119) 3 (116) 66 131 197
In offices outside the U.S.................... 122 245 367 536 62 598
Securities purchased under agreements to
resell and federal funds sold, mainly in
offices in the U.S............................ (24) 373 349 115 70 185
Securities borrowed in offices in the U.S...... (16) 268 252 48 168 216
Loans:
In offices in the U.S......................... (72) 113 41 (30) 21 (9)
In offices outside the U.S.................... 88 157 245 (115) (136) (251)
Other interest-earning assets:
In offices in the U.S......................... 69 (86) (17) 96 (26) 70
In offices outside the U.S.................... 295 (178) 117 229 (43) 186
------ ------ ------ ----- ----- -----
Total interest-earning assets.................. 392 1 152 1 544 709 210 919
------ ------ ------ ----- ----- -----
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
In offices in the U.S......................... (6) 3 (3) (15) (10) (25)
In offices outside the U.S.................... 209 368 577 303 (251) 52
Trading account liabilities:
In offices in the U.S......................... (94) 22 (72) (9) 86 77
In offices outside the U.S.................... 81 64 145 284 11 295
Securities sold under agreements to
repurchase and federal funds purchased,
mainly in offices in the U.S.................. (229) 601 372 (40) 181 141
Commercial paper, mainly in offices
in the U.S.................................... (70) 57 (13) 28 45 73
Other interest-bearing liabilities:
In offices in the U.S......................... 121 153 274 (6) 84 78
In offices outside the U.S.................... (28) 23 (5) (33) 9 (24)
Long-term debt, mainly in offices
in the U.S.................................... 175 86 261 27 34 61
------ ------ ------ ----- ----- -----
Total interest-bearing liabilities............. 159 1 377 1 536 539 189 728
------ ------ ------ ----- ----- -----
CHANGE IN TAXABLE-EQUIVALENT NET INTEREST EARNINGS 233 (225) 8 170 21 191
------ ------ ------ ----- ----- -----
</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 $38
million, $39 million, and $167 million of interest revenue recorded in 1995,
1994, and 1993 respectively that related to prior years.

TAXABLE-EQUIVALENT NET INTEREST EARNINGS AND THE STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated

In millions 1995 1994 1993
- ----------- ------- ------ ------
<S> <C> <C> <C>
Taxable interest revenue.................................................. $ 9 728 $8 154 $7 178
Tax-exempt interest revenue, adjusted to a taxable-equivalent basis....... 315 345 402
------- ------ ------
Total interest revenue, adjusted to a taxable-equivalent basis............ 10 043 8 499 7 580
Less: interest expense.................................................... 7 934 6 398 5 670
------- ------ ------
Taxable-equivalent net interest earnings.................................. 2 109 2 101 1 910
Less: adjustment of tax-exempt interest revenue........................... 106 120 138
------- ------ ------
Net interest revenue, as in the statement of income....................... 2 003 1 981 1 772
------- ------ ------
</TABLE>

84
<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, 1995, 45% of
loans were in the United States, compared with 49% at December 31, 1994. No more
than 12% of loans were in any single foreign country at both 1995 and 1994 year-
ends. At December 31, 1995 and 1994, 12% and 11% respectively of loans were
collateralized by marketable securities or cash. At December 31, 1995 and 1994,
after exclusion of these collateralized amounts, there was no category of
borrower or guarantor that accounted for 10% or more 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, 1995 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............. $ 940 $ 480 $ 421 $ 149 $ 1 990
Financial institution:
Banks............................ 575 154 - - 729
Other financial institutions..... 344 181 1 1 527
Collateralized by real estate......... 43 92 71 159 365
Other, including U.S. state and
political subdivision............ 1 272 162 176 56 1 666
------- ------- ------- ------- -------
3 174 1 069 669 365 5 277
------- ------- ------- ------- -------
LOANS IN OFFICES OUTSIDE THE U.S.
Commercial and industrial............. 3 681 4 583 1 677 104 10 045
Financial institution:
Banks............................ 911 519 17 - 1 447
Other financial institutions..... 1 881 860 152 120 3 013
Collateralized by real estate......... 106 110 27 38 281
Foreign governments and official
institutions..................... 569 422 21 30 1 042
Other................................. 1 105 1 189 53 1 2 348
------- ------- ------- ------- -------
8 253 7 683 1 947 293 18 176
------- ------- ------- ------- -------
11 427 8 752 2 616 658 23 453
------- ------- ------- ------- -------
LOANS AT FIXED RATES OF INTEREST
Offices in the U.S.................... 1 124 759 473 149 2 505
Offices outside the U.S............... 1 752 969 50 36 2 807
------- ------- ------- ------- -------
2 876 1 728 523 185 5 312
------- ------- ------- ------- -------
LOANS AT FLOATING RATES OF INTEREST
Offices in the U.S.................... 2 050 310 196 216 2 772
Offices outside the U.S............... 6 501 6 714 1 897 257 15 369
------- ------- ------- ------- -------
8 551 7 024 2 093 473 18 141
------- ------- ------- ------- -------
11 427 8 752 2 616 658 23 453
------- ------- ------- ------- -------
</TABLE>

85
<PAGE>

Additional detail on loans by category and location at December 31 is
presented in the following table.

In millions 1995 1994 1993 1992 1991
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
LOANS IN OFFICES IN THE U.S.
Commercial and industrial.................... $ 1 990 $ 3 047 $ 3 507 $ 3 643 $ 2 476
Financial institution:
Banks................................... 729 458 730 258 369
Other financial institutions............ 527 738 1 457 1 089 1 794
Collateralized by real estate................ 365 365 411 457 412
Other, including U.S. state and
political subdivision................... 1 666 1 483 1 928 2 802 2 540
------- ------- ------- ------- -------
5 277 6 091 8 033 8 249 7 591
------- ------- ------- ------- -------
LOANS IN OFFICES OUTSIDE THE U.S.
Commercial and industrial.................... 10 045 8 451 7 809 8 777 10 359
Financial institution:
Banks................................... 1 447 1 940 1 076 956 1 077
Other financial institutions............ 3 013 2 460 3 917 4 107 4 034
Collateralized by real estate................ 281 329 313 691 847
Foreign governments and official
institutions............................ 1 042 846 1 149 1 840 1 741
Other........................................ 2 348 1 963 2 083 1 818 2 148
------- ------- ------- ------- -------
18 176 15 989 16 347 18 189 20 206
------- ------- ------- ------- -------
23 453 22 080 24 380 26 438 27 797
</TABLE>

Impaired loans
Impaired loans, net of charge-offs, at December 31, distributed according to the
location of the borrower, are presented in the following table. Consistent with
prior periods, all of J.P. Morgan's impaired loans at December 31, 1995, were on
nonaccrual status. Accordingly, comparisons of current balances with those of
prior periods are not affected by the implementation of SFAS No. 114 and 118. At
December 31, 1995, more than half of the impaired loan balance is measured based
upon the present value of expected future cash flows discounted at an individual
loan's effective interest rate, one third is based on the fair value of the
collateral, and the remainder is measured by an observable market price.

In millions 1995 1994 1993 1992 1991
- ----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
BORROWERS IN THE U.S.
Commercial and industrial.................... $ 59 $ 106 $ 129 $ 168 $ 214
Other........................................ 31 60 68 114 106
----- ----- ----- ----- -----
90 166 197 282 320
----- ----- ----- ----- -----
BORROWERS OUTSIDE THE U.S.
Commercial and industrial.................... 8 30 53 33 57
Other........................................ 17 21 24 38 19
----- ----- ----- ----- -----
25 51 77 71 76
Restructuring countries...................... 2 2 8 183 246
----- ----- ----- ----- -----
27 53 85 254 322
----- ----- ----- ----- -----
117 219 282 536 642
----- ----- ----- ----- -----
</TABLE>

86
<PAGE>

An analysis of changes in impaired loans is presented in the following table.

In millions 1995 1994 1993 1992 1991
- ----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
IMPAIRED LOANS, JANUARY 1.................... $ 219 $ 282 $ 536 $ 642 $ 986
Additions to impaired loans.................. 89 96 113 201 232
Less: Repayments of principal net
of additional advances.................. 113 53 86 86 87
Loans returning to accrual status....... - 42 26 78 37
Charge-offs:
Commercial and industrial............. 13 20 24 62 46
Restructuring countries............... - 1 1 6 343
Other................................. 7 8 30 33 30
Interest and other credits.............. 12 11 19 20 15
Sales and swaps of loans................ 46 24 181 22 18
----- ----- ----- ----- -----
IMPAIRED LOANS, DECEMBER 31.................. 117 219 282 536 642
----- ----- ----- ----- -----
</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.

In millions 1995 1994 1993 1992 1991
- ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Borrowers in the U.S......................... $2 $1 $2 $1 -
Borrowers outside the U.S.................... - 1 (a) 3 (a) - $37 (b)
---- ---- ---- ---- ----
2 2 5 1 37
---- ---- ---- ---- ----
</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.

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.

87
<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. 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, 1995, was 20%. Comparable coverage
ratios at December 31, 1994, 1993, 1992, and 1991, were 27%, 36%, 66%, and 70%
respectively.

The following table summarizes the activity in the consolidated allowance
for credit losses for the last five years.

Dollars in millions 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1........................... $1 131 $1 157 $1 258 $1 419 $1 850
------------ ------------- ----------- ----------- ------------
Recoveries:
Borrowers in the U.S., primarily
commercial and industrial............... 37 14 7 7 4
Borrowers outside the U.S............... 17 31 53 26 26
------------ ------------- ----------- ----------- ------------
54 45 60 33 30
------------ ------------- ----------- ----------- ------------
Charge-offs:
Borrowers in the U.S., primarily
commercial and industrial............... (45) (51) (78) (117) (78)
Borrowers outside the U.S.:
Restructuring countries................. - (18) (37) (48) (383)
Other, primarily commercial
and industrial.......................... (10) (3) (45) (82) (40)
------------ ------------- ----------- ----------- ------------
(55) (72) (160) (247) (501)
------------ ------------- ----------- ----------- ------------
Net charge-offs.............................. (1) (27) (100) (214) (471)
Provision for credit losses.................. - - - 55 40
Translation adjustment....................... - 1 (1) (2) -

BALANCE, DECEMBER 31......................... 1 130 1 131 1 157 1 258 1 419
------------ ------------- ----------- ----------- ------------
Specific allocations, primarily
commercial and industrial (a)........... 283 186 283 326 445
Allocation to general risk (b)............... 847 945 874 932 974
------------ ------------- ----------- ----------- ------------
Net charge-offs as % of average
loans (c)............................... 0.01% 0.11% 0.38% 0.74% 1.61%
------------ ------------- ----------- ----------- ------------
</TABLE>

(a) At December 31, 1995 and 1994, the specific allocation of the allowance for
credit losses was as follows: borrowers in the U.S., $224 million and $116
million respectively; borrowers outside the U.S., $59 million and $70
million respectively.
(b) Includes the portion of the allowance that could be considered to be related
to outstandings to restructuring countries, which totaled approximately $310
million, $239 million, $310 million, $426 million, and $424 million at
December 31, 1995, 1994, 1993, 1992, and 1991 respectively.
(c) Excluding restructuring-country net charge-offs and loans, the ratios for
1995, 1994, 1993, 1992, and 1991 would have been 0.05%, 0.13%, 0.37%, 0.68%,
and 0.41% 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.

88
<PAGE>

In millions: December 31 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest-earning deposits with banks:
At overseas branches or subsidiaries of U.S. banks... $ 70 $ 94 $ 23
Other................................................ 1 906 1 258 1 154
Loans..................................................... 12 211 11 249 12 006
Less: allowance for credit losses......................... 716 647 708
------ ------- -------
Net loans................................................. 11 495 10 602 11 298
Investment securities..................................... 4 557 4 442 6 318
Trading account assets.................................... 50 588 40 070 28 535
Customers' acceptance liability........................... 193 342 141
Other assets.............................................. 25 527 19 885 13 083
------ ------- -------
Total foreign-country-related assets...................... 94 336 76 693 60 552
------ ------- -------
</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.

<TABLE>
<CAPTION>
In millions 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1................... $ 647 $ 708 $ 748 $ 807 $1 614
----- ----- ----- ---- ------
Recoveries........................... 17 31 53 26 26
Charge-offs:
Commercial and industrial....... (6) (2) (34) (69) (40)
Restructuring countries......... - (18) (37) (48) (383)
Other........................... (4) (1) (11) (13) -
----- ----- ----- ---- ------
Net charge-offs...................... 7 10 (29) (104) (397)
Provision for credit losses.......... - (1) 9 17 5
Net transfer from (to) U.S.-related
allowance....................... 62 (71) (19) 30 (415)
Translation adjustment............... - 1 (1) (2) -
----- ----- ----- ---- ------
BALANCE, DECEMBER 31................. 716 647 708 748 807
----- ----- ----- ---- ------
</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, 1995, 1994, and 1993, 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.

<PAGE>

Public sector Private sector
------------- --------------
Governments,
government agencies,
central banks, and Commit- Con-
official and Other, ments tingent
international Government-owned 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>
1995 (c)
United Kingdom.................. $ 403 $ 8 $ 12 $1 007 $5 674 $7 104 $6 293 $ 960
France.......................... 208 1 343 533 1 329 342 3 755 1 289 350
-------- ------ ----- ------ ------ ------ ------ -------
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 -
-------- ------ ----- ------ ------ ------ ------ -------
</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, 1995, 1994, and 1993, were
$1,196 million, $1,086 million, and $933 million respectively, less than
0.75% of total assets; commitments to extend credit and contingent
outstandings were $6 million and $1 million at December 31, 1995, $30
million and $11 million at December 31, 1994, and $31 million and $11
million at December 31, 1993. Not included in Mexican cross-border
outstandings are United Mexican States (UMS) bonds, substantially all of
which have been sold forward, which 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, 1995, 1994 and 1993.

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
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................. $ 855 $ 879 $1 112 $1 149 $ 87 $ 88
Due in 2019................. 561 786 985 1 303 670 730
----- ----- ----- ------- ---- ----
</TABLE>

The UMS bonds are collateralized as to principal by zero-coupon U.S.
Treasury securities with a 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 $635 million, $585
million, and $161 million at December 31, 1995, 1994, and 1993, respectively.
The estimated market value of the UMS bonds at December 31, 1995, 1994, and
1993, was $1,298 million, $1,945 million, and $757 million respectively.

At December 31, 1995 and 1993, the amount of impaired loans relating to the
countries listed in the table was immaterial. At December 31, 1994, there were
no impaired loans relating to the countries listed in the above table.
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, 1995, 1994, and 1993.

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.

Total cross-border
In millions: December 31 outstandings
- ------------------------ ------------------
<S> <C>
1995
Switzerland ..................................................... $1 761
------------
</TABLE>
At December 31, 1994 and 1993, there were no foreign-country-related
outstandings between 0.75% and 1% of total assets.

90
<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 risk related to J.P. Morgan's nontrading
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 Five business sectors, and Note 9 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, 1995. 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)
in effect on the swaps at December 31, 1995, 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 $27.7 billion at December
31, 1995. The contractual maturities of these derivative contracts are primarily
less than one year.

By expected maturities

<TABLE>
<CAPTION>
After
Dollars in billions 1996 1997 1998 1999 2000 2000 Total
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS:
U.S. DOLLAR
Receive fixed swaps
Notional amount.......... $ 15.7 $12.4 $ 6.3 $ 3.0 $ 3.1 $ 8.7 $ 49.2
Weighted average:
Receive rate........ 6.5% 6.4% 7.1% 7.4% 6.6% 7.0% 6.7%
Pay rate............ 5.8 5.9 5.9 5.9 5.8 5.9 5.8

Pay fixed swaps
Notional amount.......... $ 19.5 $17.9 $ 7.7 $ 2.9 $ 4.0 $ 7.2 $ 59.2
Weighted average:
Receive rate........ 5.9% 5.9% 5.9% 5.9% 5.9% 6.0% 5.9%
Pay rate............ 6.0 6.3 6.1 7.2 6.0 7.3 6.3
INTEREST RATE SWAPS:
NON-U.S. DOLLAR
Receive fixed swaps
Notional amount.......... $ 35.7 $21.0 $ 8.9 $ 9.6 $ 5.4 $ 7.6 $ 88.2
Weighted average:
Receive rate........ 5.8% 7.0% 6.6% 6.2% 6.9% 7.1% 6.4%
Pay rate............ 4.0 5.1 4.7 4.0 5.2 4.4 4.4

Pay fixed swaps
Notional amount.......... $ 29.2 $22.4 $ 8.5 $ 9.6 $ 5.0 $ 6.7 $ 81.4
Weighted average:
Receive rate........ 4.5% 4.9% 4.7% 4.1% 4.9% 4.9% 4.6%
Pay rate............ 5.8 6.5 6.2 6.1 6.9 7.7 6.3
------- ------ ------ ----- ----- ----- ------
Total notional amount.... $100.1 $73.7 $31.4 $25.1 $17.5 $30.2 $278.0
------- ------ ------ ----- ----- ----- ------
</TABLE>

Not included in the table above are $2.7 billion and $1.6 billion of
notional amounts related to currency swaps and basis swaps respectively.

91
<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>
1995 1994 1993
--------------------- -------------------- --------------------
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 $ 0.9 $ 3.5 $ 0.7 $ 2.2 $ 0.5
Debt investment securities....................... 24.6 3.6 22.7 2.9 19.5 2.6
Trading account assets........................... 69.4 18.3 57.0 11.3 41.3 12.6
Resale agreements and federal
funds sold.................................. 32.2 3.1 21.4 4.4 22.7 3.0
Securities borrowed.............................. 19.8 4.0 12.1 2.4 10.8 2.2
Loans............................................ 23.5 20.7 22.1 18.9 24.4 20.9
Allowance for credit losses...................... (1.1) - (1.1) - (1.2) -
Customers' acceptance liability.................. 0.2 0.2 0.6 0.6 0.4 0.4
Premises and equipment, net...................... 1.9 1.9 2.0 2.0 1.9 1.9
Other assets..................................... 10.9 7.3 14.6 12.0 11.9 9.7
------- ------ ------- ------ ------- -----
Total assets..................................... 184.9 60.0 154.9 55.2 133.9 53.8
Net effect of excluding JPMSI assets
(primarily trading account assets,
resale agreements, and securities
borrowed)................................... (37.3) (5.7) (25.8) (7.8) (26.1) (7.2)
------- ------ ------- ------ ------- -----
Assets, excluding JPMSI.......................... 147.6 54.3 129.1 47.4 107.8 46.6
------- ------ ------- ------ ------- -----
OFF-BALANCE-SHEET EXPOSURES
Commitments to extend credit..................... 55.1 21.3 44.6 16.7 39.0 14.2
Standby letters of credit and guarantees......... 11.7 8.6 9.9 7.8 10.5 8.0
Securities lending indemnifications.............. 1.0 - 19.5 1.8 26.4 1.7
Other credit facilities.......................... 5.7 1.6 0.6 0.2 1.9 0.6
Foreign exchange contracts,
including foreign exchange options.......... 607.1 3.1 494.9 3.5 407.5 2.6
Currency swaps................................... 144.2 3.8 112.7 3.5 96.0 3.2
Interest rate swaps.............................. 1 371.4 6.1 862.2 3.6 567.7 5.1
Interest rate and other contracts................ 1 324.0 4.5 1 002.7 1.8 582.3 1.4
------- ------ ------- ------ ------- -----
Total off-balance-sheet exposures................ 3 520.2 49.0 2 547.1 38.9 1 731.3 36.8
Net effect of excluding JPMSI
off-balance-sheet exposures................. (27.7) (0.2) (58.0) - (51.5) -
------- ------ ------- ------ ------- -----
Off-balance-sheet exposures,
excluding JPMSI............................. 3 492.5 48.8 (a) 2 489.1 38.9 (a) 1 679.8 36.8
------- ------ ------- ------ ------- -----
Gross risk adjusted assets, excluding
JPMSI....................................... 103.1 86.3 83.4
Less: allowance for credit losses not
qualifying as risk-based capital............ - (0.1) (0.1)
------- ------ ------- ------ ------- -----
Risk adjusted assets,
excluding JPMSI............................. 103.1 86.2 83.3
------- ------ ------- ------ ------- -----
</TABLE>

(a) Includes $6.8 billion and $4.6 billion at December 31, 1995 and 1994,
respectively, related to potential future credit exposure as defined in the
risk-based capital framework.

92
<PAGE>

DEPOSITS
Average deposits in offices outside the U.S. are presented in the following
table.

1995 1994 1993
----------------------- ------------------- ------------------
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............... $11 703 6.44% $12 139 5.05% $12 472 6.81%
From foreign governments and
official institutions.................... 10 374 5.55 8 932 4.24 6 362 3.74
Other time.................................... 15 750 6.10 13 114 5.75 10 415 5.78
On demand..................................... 3 935 3.30 3 583 2.76 2 657 3.91
---------- --------- ------- -------- ------ --------
Total interest-bearing deposits in
offices outside the U.S.................. 41 762 5.80 37 768 4.89 31 906 5.62
---------- --------- ------- -------- ------ --------
NONINTEREST-BEARING DEPOSITS
From banks in foreign countries............... 56 183 150
From foreign governments and
official institutions.................... 6 43 78
Other demand.................................. 1 292 1 169 1 037
---------- --------- ------- -------- ------ --------
Total noninterest-bearing deposits in
offices outside the U.S.................. 1 354 1 395 1 265
---------- --------- ------- -------- ------ --------
</TABLE>

Foreign-country-related deposits in offices in the U.S. totaled $1.2 billion at
December 31, 1995, $0.9 billion at December 31, 1994, and $1.9 billion at
December 31, 1993.
A profile of the maturities of time certificates of deposit and other time
deposits in denominations of $100,000 or more at December 31, 1995, is
presented in the following table.

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............. $ 92 $ 2 - $ 206 $ 300
Other time deposits...................... 249 48 - 27 324
------- ------ ----- ------- -------
341 50 - 233 624
------- ------ ----- ------- -------
Offices outside the U.S.:
Time certificates of deposit............. 4 019 864 $ 421 - 5 304
Other time deposits...................... 23 235 1 415 622 565 25 837
------- ------- ----- ------- -------
27 254 2 279 1 043 565 31 141
------- ------- ----- ------- -------
</TABLE>
93
<PAGE>

PURCHASED FUNDS AND OTHER BORROWINGS
Purchased funds and other borrowings are detailed in the following table.

Dollars in millions 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Balance at year-end...................................... $40 803 $30 179 $36 306
Average balance.......................................... 40 245 45 470 47 329
Maximum month-end balance................................ 51 162 51 387 58 425
Average interest rate:
During year......................................... 5.87% 4.55% 4.21%
At year-end......................................... 5.77 5.43 4.29
------- -------- -------
FEDERAL FUNDS PURCHASED (DAY-TO-DAY)
Balance at year-end...................................... $ 4 296 $ 5 589 $ 3 106
Average balance.......................................... 3 414 2 902 1 993
Maximum month-end balance................................ 6 199 5 589 4 412
Average interest rate:
During year......................................... 5.96% 4.35% 3.02%
At year-end......................................... 5.48 5.25 3.02
------- -------- -------
COMMERCIAL PAPER
Balance at year-end...................................... $ 2 801 $ 3 507 $ 2 573
Average balance.......................................... 2 809 4 174 3 412
Maximum month-end balance................................ 3 250 4 882 5 244
Average interest rate:
During year......................................... 6.02% 4.36% 3.19%
At year-end......................................... 5.67 5.89 3.22
------- -------- -------
OTHER LIABILITIES FOR BORROWED MONEY
Federal funds purchased (term)
Balance at year-end................................. $ 442 $ 465 $ 17
Average balance..................................... 461 372 97
Maximum month-end balance........................... 640 516 787
Average interest rate:
During year......................................... 6.27% 4.30% 3.93%
At year-end......................................... 5.95 3.82 3.16
Other
Balance at year-end................................. $14 687 $10 435 $10 110
Average balance..................................... 11 822 10 028 11 071
Maximum month-end balance........................... 13 762 10 823 13 242
Average interest rate:
During year......................................... 6.23% 4.80% 3.98%
At year-end......................................... 5.96 5.82 4.57
------- -------- -------
</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.

94
<PAGE>

SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA
J.P. Morgan & Co. Incorporated

In millions, except per share data 1995 1994
---- ----
Three months ended Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest revenue........................ $2 609 $2 453 $2 405 $2 470 $2 369 $2 142 $2 031 $1 837
Interest expense........................ 2 121 1 946 1 897 1 970 1 851 1 616 1 491 1 440
------- ------ ------ ----- ------- ------ ------ ------
Net interest revenue.................... 488 507 508 500 518 526 540 397
Total noninterest revenue............... 1 030 1 042 941 888 710 906 926 994
Total operating expenses................ 990 1 022 984 1 002 963 941 936 852
------- ------ ------ ----- ------- ------ ------ ------
Income before income taxes.............. 528 527 465 386 265 491 530 539
Income taxes............................ 162 167 150 131 72 164 180 194
------- ------ ------ ----- ------- ------ ------ ------
NET INCOME.............................. 366 360 315 255 193 327 350 345
------- ------ ------ ----- ------- ------ ------ ------
PER COMMON SHARE
Net income (a).......................... $1.80 $1.78 $ 1.56 $ 1.27 $ 0.96 $ 1.63 $ 1.73 $1.69
Dividends declared...................... 0.81 0.75 0.75 0.75 0.75 0.68 0.68 0.68
------- ------ ------ ----- ------- ------ ------ ------
Price range per common
share on the
composite tape:
High............................... $82 1/2 $78 7/8 $74 1/2 $65 5/8 $62 1/2 $66 1/4 $67 1/8 $72
Low................................ 74 5/8 68 7/8 60 1/2 56 1/8 55 1/8 59 3/4 60 60 1/2
Closing price per common
share at quarter-end................... 80 1/4 77 3/8 70 1/8 61 56 1/8 60 3/4 62 62 3/4
----------- ------- ------- ------ ------- ------- --------- -------
</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.

The 1995 fourth quarter results are discussed in J.P. Morgan's earnings release
dated January 11, 1996.

95
<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, 1995

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
Depositary shares representing a one-tenth interest in 6 5/8% Cumulative
Preferred Stock, Series H,
No Par Value, Stated Value $500

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 $15,377,040,281 at February 29, 1996.

The number of shares outstanding of J.P. Morgan's Common Stock, $2.50 Par Value,
at February 29, 1996, totaled 187,811,179 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 1996 Proxy Statement incorporated by reference in Part III of
this Form 10-K.

J.P. Morgan's definitive Proxy Statement dated March 25, 1996, is incorporated
by reference in response to Part III, Items 10, 11, 12, and 13 of Form 10-K.

96
<PAGE>

FORM 10-K CROSS-REFERENCE INDEX

- -------------------------------------------------------------------------------
PART I
1. BUSINESS

Description of business, 6-14, 99-101
Number of employees, 80
Financial information about foreign and
domestic operations, 74-75, 88-90
Distribution of assets, liabilities, and
stockholders' equity; interest rates and interest differential, 82-84
Investment portfolio, 53-55
Loan portfolio, 47, 62-63, 85-90
Summary of loan loss experience, 87-89
Deposits, 82, 84, 93
Return on equity and assets, 80-81
Short-term borrowings, 94

2. PROPERTIES, 101

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,
79, 80-81, 95

6. SELECTED FINANCIAL DATA, 80-81

7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 6-38

8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

Report of independent accountants, 40
J.P. Morgan & Co. Incorporated
Consolidated statement of income, 41
Consolidated balance sheet, 42
Consolidated statement of changes in stockholders' equity, 43
Consolidated statement of cash flows, 44
Morgan Guaranty Trust Company of
New York - Consolidated statement of
condition, 45
Notes to financial statements, 46-79
Selected consolidated quarterly
financial data,(b) 95
Consolidated average balances and net
interest earnings, fourth quarter, 110-111

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), 76-78

- -------------------------------------------------------------------------------
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 (incorporated by reference to
Exhibit 10a to J.P. Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10b. Director stock plan, as amended (incorporated by reference to Exhibit
10b to J.P. Morgan's annual report on Form 10-K for the year ended
December 31, 1994, File No. 1-5885)

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 (incorporated by reference to
Exhibit 10d to J.P. Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10e. 1987 stock incentive plan, as amended (incorporated by reference to
Exhibit 10e to J.P. Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10f. Stock option plan, as amended (incorporated by reference to Exhibit
10f to J.P. Morgan's annual report on Form 10-K for the year ended
December 31, 1994, File No. 1-5885)

10g. Incentive compensation plan, as amended (incorporated by reference to
Exhibit 10g to J.P. Morgan's annual report on Form 10-K for the year
ended December 31, 1994, File No. 1-5885)

10h. Stock option award (incorporated by reference to Exhibit 10h to J.P.
Morgan's quarterly report on Form 10-Q for the quarter ended March
31, 1995, File No. 1-5885)

10i. 1995 stock incentive plan

10j. 1995 executive officer performance plan

12. Statements re computation of ratios (incorporated by reference to
Exhibit 12 to J.P. Morgan's amendment No. 2 to Form S-3, Registration
No. 33-64193)

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 12, 1995,
was filed with the Securities and Exchange Commission during the quarter ended
December 31, 1995, 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, 1995. In addition, Form 8-K dated December 13, 1995, was filed announcing
a dividend increase and stock repurchase program, and Form 8-K dated December
14, 1995, was filed announcing that Michael E. Patterson had been named a vice
chairman of J.P. Morgan.
- -------------------------------------------------------------------------------
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 1995 results are incorporated by reference to the report on
Form 8-K dated January 11, 1996, filed with the Securities and Exchange
Commission.
(c) Incorporated by reference to the definitive Proxy Statement dated March 25,
1996.
(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.

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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
25, 1996, on its behalf by the undersigned, thereunto duly authorized.

J.P. Morgan & Co. Incorporated
Registrant

RACHEL F. ROBBINS
- ---------------------------------
Rachel F. Robbins
Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 25, 1996, by the following persons on behalf of
the registrant in the capacities indicated.

JOHN A. MAYER JR.
- ---------------------------------
John A. Mayer Jr.
Chief Financial Officer
(Principal financial officer)

DAVID H. SIDWELL
- ---------------------------------
David H. Sidwell
Managing Director and Controller
(Principal accounting officer)

Douglas A. Warner III*
Chairman of the Board and Director
Riley P. Bechtel* 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
Michael E. Patterson*
Vice Chairman of the Board and Director
Lee R. Raymond* Director
Richard D. Simmons* Director
Kurt F. Viermetz*
Vice Chairman of the Board and Director
Dennis Weatherstone* Director
Douglas C. Yearley* Director

*BY: MARGARET M. FORAN
- ---------------------------------
Margaret M. Foran
Attorney-in-fact

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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 to corporations,
governments, financial institutions, institutional investors, professional
firms, privately held companies, nonprofit organizations, and financially
sophisticated individuals. Our activities are summarized below. A list of
principal subsidiaries and associated companies appears on page 105.

BUSINESS ACTIVITIES

Finance and Advisory

Finance and Advisory encompasses the sophisticated advisory, capital raising,
and financing work that we do for our broad base of clients around the world.
These clients include corporations, governments, municipalities, and financial
institutions, and the expertise we offer them is based on in-depth knowledge of
their needs and the industries and financial markets in which they operate.
Linking clients to the full range of J.P. Morgan's financial capabilities is a
global network of senior client managers.

In partnership with clients, our advisory professionals explore the risks
and rewards of such strategic alternatives as mergers and acquisitions,
divestitures, privatizations, and recapitalizations. We also advise clients on
their capital structures, looking for ways to unlock value and seize
opportunities.

Our debt underwriting, equities, and credit businesses provide the
capabilities to raise the necessary capital and execute the appropriate
strategies.

In our equities business, underwriting is complemented by our ability to
provide clients with liquidity in the secondary markets through our global sales
and trading network. We also apply our expertise in the equities markets to
structuring equity derivatives as a means of helping clients manage market
volatility. High-quality equity research is integral to all aspects of our
business.

Our credit capabilities include meeting clients' financing needs by issuing
and syndicating loans and other credit facilities.

Sales and Trading

Sales and Trading provides clients with around-the-clock access to global
markets. J.P. Morgan makes markets in fixed income, foreign exchange, and
commodity instruments; we serve as a counterparty to help clients manage risks;
and we provide financial and economic research to help clients assess
opportunities and track performance. To function effectively in our role as a
market-maker, we also take positions. Our clients include corporations, central
banks, governments and their agencies, financial institutions, pension funds,
mutual funds, and leveraged funds.

Our fixed income activities encompass acting as a primary dealer in U.S.
and foreign government securities; making markets in options, money market
instruments, U.S. government agency securities, and corporate debt securities;
and helping clients manage their exposure to fluctuating interest and
foreign exchange rates by structuring, executing, and making markets in risk
management instruments.

Our foreign exchange capabilities include executing spot transactions and
structuring transactions to help clients manage their foreign currency
exposures. In commodities, we make markets in precious metals, base metals, and
energy products and develop hedging and financing strategies for clients.

Our emerging markets activities, while principally related to fixed income
activities, cross all markets, and our worldwide network enables us to fulfill
our role as a market-maker and provide clients with a steady flow of market
information.

In addition to our client-focused businesses, we have a separate
proprietary unit that engages in transactions for our own account across all
markets.

Asset Management and Servicing

Asset Management and Servicing activities encompass designing and executing
investment strategies and providing administrative and brokerage services. Our
clients include corporations, financial and governmental institutions, and high-
net-worth individuals.

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We tailor our asset management capabilities for both institutional and
private clients. For institutional clients, we offer such services as the
management of employee-benefit-plan assets, executing investment strategies
across the spectrum of asset classes in all major markets.

Our private banking group helps high net worth individuals plan and execute
their investment strategies with a broad range of capabilities, which include
managed investment and trust portfolios, Morgan-advised mutual funds, and a
full-service brokerage unit. Credit, deposit, trust, and estate services are
also provided to private clients.

Our exchange traded products professionals provide institutional clients
with worldwide access to major exchanges by acting as futures and options
brokers in executing and clearing contracts.

We provide such operational services as the administration of depositary
receipt programs and global trust and agency services. We operate the Euroclear
System, the world's largest clearance and settlement system for internationally
traded securities, and offer credit and deposit services to Euroclear
participants.

Equity Investments

J.P. Morgan invests its capital in the private equity of rapidly growing
companies, management buyouts, privatizations, and recapitalizations. These
investments are made and managed with the objective of maximizing total return -
both long-term appreciation and net realized gains. While each opportunity for
investment is evaluated to achieve the firm's desired balance between risk and
return, many of these opportunities arise from our client relationships.

Our equity investment portfolio consists of approximately 95 investments
diversified by industry, geography, and year of investment. Our goal is to
maintain a diversified portfolio capable of generating significant returns over
time. This is a high-risk, high-reward business, and we operate under a variety
of legal and regulatory restrictions in managing the portfolio.

Investments are generally held for three to seven years, depending on our
view of when a sale will produce optimal returns. Typically, investments are
harvested through a public offering of securities or the sale of the investment.
While realization of gains in the portfolio accelerates during periods of strong
equity and merger markets, the process of assessing and managing the risks and
rewards of new opportunities and existing investments continues throughout
market cycles.

Asset and Liability Management

Asset and Liability Management activities include managing the firm's interest
rate risk as it relates to nontrading-related assets, liabilities, and off-
balance-sheet activities and managing the firm's overall liquidity risk.

Our objective when it comes to interest rate risk management is to create
longer-term value, which is realized over time primarily as net interest revenue
and net investment securities gains. Our primary focus is on achieving a desired
overall interest rate profile, which may change over time, based on
management's longer-term view of global interest rate trends and economic
conditions. A variety of instruments - in numerous currencies both on- and off-
balance-sheet - 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 investments in the more liquid fixed income
markets worldwide and derivatives. Asset and liability management swaps are used
to hedge exposures; to modify the interest rate characteristics of specified
assets or liabilities; and, in the case of risk-adjusting swaps, to adjust
Morgan's overall interest rate risk profile.

The firm's liquidity risk profile is managed to ensure that even under
adverse conditions, we have the ability to access funds at a reasonable cost. A
strong capital position is therefore an integral part of our liquidity
management because it enables us to raise funds as inexpensively as possible in
a variety of international markets.

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

100
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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
continues to seek ways to expand the limits on such activities, including the
reform of the Glass-Steagall Act, necessary to achieve our strategic 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. In 1996, an application was filed with
the Federal Reserve Bank of New York and the states of New York and Delaware to
merge Morgan Guaranty and J.P. Morgan Delaware. Subject to regulatory approval,
the merger is expected to take place during the second quarter of 1996. 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 advisor 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.

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 14 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 14 to the financial statements, the 60 Wall
Street building is subject to a mortgage in the amount of $400 million.

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MANAGEMENT

Douglas A. Warner III Roberto G. Mendoza
Chairman of the Board Michael E. Patterson
Chief Executive Officer Kurt F. Viermetz
Vice Chairmen

CLIENTS

Thomas B. Ketchum Walter A. Gubert Peter L. Woicke
Americas Europe, Middle East, Africa Asia Pacific

CAPABILITIES AND
SERVICES

Finance and Advisory
Sales and Trading
Asset Management and Servicing
Equity Investments
Asset and Liability Management

Ramon de Oliveira
Equities
Equity Investments

Peter D. Hancock
Fixed Income
Exchange Traded Products

Joseph P. MacHale
Credit

Nicolas S. Rohatyn
Emerging Markets
Foreign Exchange
Commodities

John T. Olds
Private Banking

Keith M. Schappert
Investment Management

Pilar Conde
Michael R. Corey
Proprietary Positioning

Luc Bomans
Euroclear

CORPORATE RESOURCES

Stephen G. Thieke
Corporate Risk Management
Research

Michael Enthoven
Technology and Operations

C. Nicholas Potter
Strategic Planning

John A. Mayer Jr.
Chief Financial Officer

David H. Sidwell
Controller

Edward F. Murphy
Auditor

Rachel F. Robbins
General Counsel

Herbert J. Hefke
Human Resources

Ronald H. Menaker
Corporate Services

Laura W. Dillon
Communication

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<PAGE>

SENIOR OFFICERS

Douglas A. Warner III
Chairman of the Board
Chief Executive Officer

Roberto G. Mendoza
Michael E. Patterson
Kurt F. Viermetz
Vice Chairmen of the Board

CLIENTS Rondy E. Jennings
John B. Jetter
Walter A. Gubert Gregg Johnston
Thomas B. Ketchum Thomas L. Jones
Peter L. Woicke Thomas L. Kalaris
Arthur J. Kalita
Jacques G. Aigrain Toshihide Kawashima
Yasukazu Aiuchi Edward J. Kelly III
Eric Altman Stephen C. Kirmse
Victor M. Arbulu John D. Langlois
Martin R. Atkin W. David Lawson IV
Barbara A. Austell Robin A. Lawther
Stefano Balsamo John W. Littlefield Jr.
Lloyd Bankson Dianne F. Lob
Thaddeus T. Beczak Claus Lowe
David A. Behnke Benjamin B. Lopata
C. Johan Bergendahl C.H. Randolph Lyon
Enrico M. Bombieri Russell A. Mannis
Willard S. Boothby III Michael C. McCall
Octavio C. Branco Ferrell P. McClean
David H. Brigstocke John K. McColloch
Jonathan R. Brown Kenneth S. McCormick
Henry I. Bryant David L. Meyer
Eduardo F. Cepeda Terry R. Mills
Didier Cherpitel D. Leslie A. Morrison
Fernando Chinchurreta John P. Mullen
Suresh C. Chugh Robert H. Muller
Ian M. Clark Sarah E. Nash
Peter T. Clarke El Walid Nsouli
Pierre Colin J. Edward Odegaard
Cezar P. Consing Nicholas B. Paumgarten
William F. Cruger Barrett R. Petty
Guillaume D'Angerville D'Auvrecher Hugh Paton
Antoinette Daridan James R. Peacock
William R. de Jonge Werner C. Pfaffenberger
Susana M. de la Puente Howard F. Powers Jr.
David H. Deming P. Preben Prebensen
Jim H. Derryberry Timothy Purcell
Klaus Diederichs Roberta J. Puschel
Adrian W. Doherty Jr. Pascal J. Ravery
Joseph T. Donohue Gail M. Rogers
Nicholas A. Draper James P. Rutherfurd
Richard R. Duron T. Timothy Ryan Jr.
Terence C. Eccles Purna R. Saggurti
Robert C. Elliott Jaime Salaverri
Frederic A. Escherich Stephen P. Schaible
Yuichi Ezawa Weijian Shan
Jean O. Facon Dag J. Skattum
Kathleen M. Fisher Stephen S. Sloan
John A. Forlines III Damon P. Smith III
Allen R. Friedman Robert Sroka
Kenneth C. Froewiss Ernest Stern
Ronald T. Gault Michael W. Szeto
S. Lane Genatowski Jackson P. Tai
Michael P. George Francis J. Tellier
Jean-Marc Georgy Xavier Tintore
Robert L. Goodman Shu Tomioka
John B. Goodwin Jr. Georges P. van Erck
James M. Grant Joseph A. Walker
Alfredo D. Gutierrez Raymond N. Wareham
Henry Harnischfeger David B. Weir
Maureen A. Hendricks J. Adam L. Wethered
Herman Hintzen David L. White
Henry W. Howell Deborah M. Winshel
Herve Huas Jon H. Zehner
Christian Jacobs Philipp M. Zenz-Spitzweg

CREDIT

Joseph P. MacHale
Roger B. Arner
Barbara J. Asch
Santiago G. Assalini
William R. Barrett Jr.
Bruce N. Carnegie-Brown
Thomas H. Donaldson
Timothy R. Elliott
Michael J. Gibbons
David W. Godfrey
John E. Graham
David S. Hickman
Stephen F. Holcomb
Maria G. Jordan
Kenneth A. Lang
Robert Le Blanc
Carl F. Munana
Charles C. O'Brien
Sheila J. O'Connell
John A. Payne
Joseph A. Sabatini
Mary E. Watkins

EMERGING MARKETS
COMMODITIES
FOREIGN EXCHANGE

Nicolas S. Rohatyn
Frank B. Arisman
Anthony J. Best
John G. Caccavale
Alan R. Collins
Ian R. Dubugras Jr.
Patrick du Pre de Saint-Maur
Goetz Eggelhoefer
Stephanie E. Ercegovic
Peter F. Frey
John B. Fullerton
Modesto Gomez
Miguel Gutierrez
Christopher L. Harvey
Thorkild Juncker
Jorge A. Maortua
Jose A. McLoughlin
Guido A. Mosca
Kurt Muehlbauer
Keith Murphy
Klaus T. Said
Cara L. Schnaper
Stephen A. Sinacore
Glenn J. Smith
Thomas H. Smith
Joseph C. Willing
Jeanette K.Y. Wong

EQUITIES

Ramon de Oliveira
Joseph Anastasio
Edward C. Archer
Molly F. Ashby
Albert C. Bashawaty
Carol Bell
Stephen A. Berenson
Seth P. Bernstein
Catherine S. Bryan
Jolyne K. Caruso-Fitzgerald
Jenifer L. Condit
C. Seth Cunningham
Ronald R. Dewhurst
Pierre Dupont
S. Luke L. Ellis
James R. English
James J. Fuschetti
Michael F. Gambardella
Peter H. Gleason
Robert S. Hanft
Meryl D. Hartzband
Carlos M. Hernandez
Mark A. Husson
Sharon H. Jacquet
Daniel R. Kunstler
Edward F. McCartin
Charles C. Mountain
Brian T. Murphy
Nirmal P. Narvekar
Bintoar Palar
Thomas S. Quinn III
William D. Rabin
Thomas P. Reagan
Clayton S. Rose
Nicholas E. Snee
Thomas M. Snell
Charles P. Soderstrom
James E. Staley
Rene Vanguestaine
Nancy S. Voye
Brian F. Watson

EUROCLEAR

Luc Bomans
Santina Bernardi
Ignace R. Combes
Erwin De Keyzer
Herve de Montlivault
Martine Dinne
Michael J. Fleming
Pierre Francotte
Douglas Marston
Pierre Slechten
Gilbert Swinkels
M. Andrew Threadgold
Yannic Weber

FIXED INCOME
EXCHANGE TRADED PRODUCTS

Peter D. Hancock
Fernando H. Abril
Peter W. Atwater
Thomas J. Aylward IV
Malcolm J. Beane

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Richard D. Berliand
Eric Bertrand
Mark C. Brickell
Bart J. Broadman
Margaret A. Brody
Rowena W. Chu
Russell Church
Joseph P. Cook
John R. Corrie
Baudouin Croonenberghs
John E. Cross
Louis Dehler
William S. Demchak
Etienne Deshormes
W. Scott Downs
Hisham Ezz Al-Arab
Jeanne V. Feldhusen
Alain L. Grisay
Thomas F. Hagerstrom
Stephen D. Heard
Paul J. Hearn
Rachel Hines
Adam H. Howard
Robert J. Hugin
Mary L. Hustings
Richard H. Krollman
Fawzi S. Kyriakos-Saad
Richard G. Leibovitch
Pierre Lenders
Martin K. Matsui
James W. McAleenan
Richard M. McVey
Benjamin Meuli
T. Kelley Millet
Soichiro Miyaki
Satoshi Nagase
David M. Pryde
Eunice T. Reich-Berman
Robert L. Rossman
Mark A. Sheridan
John G. Stathis
Jakob T. Stott
David J. Theobald
Charles M. Trunz III
Alain Younes
Alice Wang
Mark B. Werner
William T. Winters

INVESTMENT MANAGEMENT

Keith M. Schappert
Kenneth W. Anderson
Robert A. Anselmi
George E. Austin
Keith T. Banks
Jean L.P. Brunel
Henry D. Cavanna
John C. Chigounis
William L. Cobb Jr.
Warren K. Corning
Richard S. Davis
Douglas J. Dooley
Roger L. Du Bois
Christopher J. Durbin
Douglas M. Fleming
Gordon B. Fowler Jr.
L. George Gardella
Michael R. Granito
Evelyn E. Guernsey
Andrew Harmstone
Timothy J. Heise
Pieter Hoets
Robert Holland
Andrew J. Hutton
Alistair Jessiman
Dennis M. Kass
Rudolph Leuthold
Gerard W. Lillis
Thomas M. Luddy
Thomas P. Madsen
Timothy J. Manna
Robert J. Miller
Thruston B. Morton III
Edgerton G. North Jr.
James B. Otness
Marian U. Pardo
Wesley I. Paul
William B. Petersen
Judith J. Plows
Roger A. Sayler
Terry Shu
Guenther P. Skrzypek
Laurence R. Smith
M. Steven Soltis
Robert J. Teatom
John R. Thomas
Susan E. Ulick
Gilbert Van Hassel
Hendrik Van Riel
William D. Walker
William L. Warner
Kurt J. Wolfgruber

PRIVATE BANKING

John T. Olds
Sean A. Amery
Carlos M. Arias
Susan G. Bell
Thomas R. Boehlke
Ann D. Borowiec
Wesley R. Brooks
David D. Burrows
Ignacio Cerezo
Joel I. Cohen
Philippe Damas
Daniel W. Drake
John R. Duffy
Benoit Dumont
Daniel M. Fitzpatrick
John A. Gent
Martyn E. Goossen
Stephanie S. Hanbury-Brown
Owen H. Harper
Paul Hicks Jr.
James H. Higgins III
David A. Kelso
Chase W. Landreth
R. Scott Nycum Jr.
William L. Oullin
Elizabeth J. Patrick
Bruce T. Prolow
Susan G. Restler
Wallace B. Reynolds
David B. Robb Jr.
George W. Rowe
Nicholas P. Sargen
John W. Schmidlin
Robert G. Simon
Debra B. Treyz
Alexander G. Zaharoff

PROPRIETARY POSITIONING
Pilar Conde
Michael R. Corey
Christopher C. Belchamber
Kim E. Fox-Moertl
Takeshi Fujimaki
Giovanni Gorno Tempini
Michael J. Henderson
Maureen R. Lee
Lazaros P. Mavrides
Hubert Penot
Georges-Arnaud Saier
Peter T. Schwicht
Guy Van Pelt
Christian Zugel

SECURITIES SERVICES

Charlton H. Chatfield
Jean M. Pellegrini

AUDIT
Edward F. Murphy
John H. Deane

CORPORATE RISK MANAGEMENT

Stephen G. Thieke
Marc E. Berman
Robert S. Butler
Kyung Hee A. Choi
Richard C. Evans
James R. Helvey III
Alastair I. Hunter-Henderson
David L. Roscoe III
Hiromichi Tsubouchi
Stephen A. Tyler

CORPORATE SERVICES

Ronald H. Menaker
John G. Daniello
Theodore V. Farace
Derek G. Hall
Brian S. Howells
William J. Kelly
William J. Schneider, M.D.
David W. Singleton
Richard Speciale
John J. Vahey

CORPORATE STAFF

Charles A. Alexander
Donald R. Brunner
Laura W. Dillon
Travis F. Epes
Diane M. Genova
Dominique George
Dennis C. Hensley
Hugh T. Kemper
Stephen E. Kowitt
A. Dawn Lesh
Robert McGinn
Rachel F. Robbins
David J. Schraa
Hildy J. Simmons
Debra F. Stone
Cory N. Strupp

ECONOMIC RESEARCH

William A. Brown
Paul D. Mastroddi
Philip J. Suttle

FINANCIAL

John A. Mayer Jr.
Gerald F. Baum
Deborah L. Cuny
Michael P. D'Angelo
Richard J. Johnson
Patricia A. Jones
Allan B. Lubarsky
Dean R. Miller
Charles R. Monet
Louis Rauchenberger
David H. Sidwell
Gareth G. Stephens
Edmund H. Sutton

HUMAN RESOURCES

Herbert J. Hefke
Thomas R. Bain
James P. Baughman
Anthony E. Beale
John F. Bradley
Gerard G. Cameron II
Marina Eloy
Nancy Baird Harwood
C. Dixon Kunzelmann
Christopher R. Lowney
Michael W. Ryba
Isabel H. Sloane
Andrew O. Watson

STRATEGIC PLANNING

C. Nicholas Potter
Henry J. Roundell

TECHNOLOGY & OPERATIONS

Michael Enthoven
Michael A. Azarian
John Carlisle
Jeffrey G.J. Chittenden
Charles P. Costa
John W. Field Jr.
Penelope A. Flugger
Kenneth C. Fuller
Martha J. Gallo
Christophe E. Hioco
Denis W. Hocking
Paul Hurley
Pamela V. Huttenberg
Mark L. Kay
Dominick J. Landi
Michael C. Lobdell
Peter A. Miller
Brendan P. O'Sullivan
Cheng Miang Song
M. Alejandra Trigo de Rosetti
Veronique Weill
Olivia C. Wyer

104
<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
J.P. Morgan Community Development Corporation

BOSTON
J.P. Morgan Securities - Boston office

CHICAGO
J.P. Morgan & Co. - Chicago office
J.P. Morgan Securities - Chicago office
J.P. Morgan Futures - Chicago office
Morgan Guaranty - representative office

HOUSTON
J.P. Morgan Securities - Houston office
J.P. Morgan Investment Management -
Houston office

LOS ANGELES
Morgan Guaranty - representative office
J.P. Morgan - Los Angeles office
J.P. Morgan California
J.P. Morgan Investment Management -
Los Angeles office

NEWARK, DELAWARE
J.P. Morgan Services Inc.
J.P. Morgan Overseas Capital Corporation
Morgan Guaranty International Finance
Corporation

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 Capital - San Francisco office
J.P. Morgan Futures - San Francisco office
J.P. Morgan Securities - San Francisco office

WASHINGTON, DC
J.P. Morgan Securities - Washington office

WILMINGTON
J.P. Morgan Delaware
J.P. Morgan Trust Company of Delaware

TORONTO
J.P. Morgan 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 Fonciere Cayman Islands Ltd.
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+

FRANKFURT
Morgan Guaranty - banking office
J.P. Morgan GmbH
J.P. Morgan Investment GmbH
J.P. Morgan Investment Management Inc.
J.P. Morgan Holding Deutschland 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 Iberica S.L.
J.P. Morgan Sociedad de Valores y Bolsa, S.A.

MILAN
Morgan Guaranty - banking office
J.P. Morgan Fondi Italia 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 (Switzerland) Ltd.
J.P. Morgan Securities Ltd. - Zurich office

- ----------------------------------------------
ASIA PACIFIC

TOKYO
Morgan Guaranty - banking and private
banking offices
J.P. Morgan Investment Management -
Tokyo office
J.P. Morgan Trust Bank Ltd.
J.P. Morgan Securities Asia* - Tokyo office

BANGKOK++
J.P. Morgan Securities Asia* - representative office

BEIJING
J.P. Morgan & Co. - representative office

BOMBAY
ICICI Asset Management Company Limited**
ICICI Securities and Finance Company Limited**

HONG KONG
Morgan Guaranty - banking and private
banking offices
J.P. Morgan Futures Hong Kong Ltd.
J.P. Morgan Securities Hong Kong Ltd.
J.P. Morgan International Capital - Hong
Kong office
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
J.P. Morgan Securities Asia* - 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 International Capital Corporation - 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
J.P. Morgan Securities Asia* - representative office

- ----------------------------------------------
LATIN AMERICA

BUENOS AIRES
Morgan Guaranty - banking office
J.P. Morgan Argentina Sociedad de Bolsa 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.
Morgan Guaranty - representative office
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
++ scheduled to open spring 1996

105
<PAGE>

BOARD OF DIRECTORS
J.P. Morgan & Co. Incorporated

DOUGLAS A. WARNER III
Chairman of the Board
Chief Executive Officer
- ----------------------------------------------

RILEY P. BECHTEL
Chairman and Chief Executive Officer
Bechtel Group, Inc.

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

MICHAEL E. PATTERSON
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

KURT F. VIERMETZ
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, Patterson, Viermetz, Weatherstone

AUDIT COMMITTEE
J.P. MORGAN
EXAMINING COMMITTEE
MORGAN GUARANTY
Messrs. Ketelsen (Chairman), Bechtel, Feldstein, 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, Mr. Yearley

COMMITTEE ON EMPLOYMENT POLICIES
AND BENEFITS
MORGAN GUARANTY
Messrs. Simmons (Chairman), Feldstein

106
<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 1995 H. Brewster Atwater Jr., Leszek Balcerowicz, Riley P. Bechtel,
Marcus Bierich, and Ali I. Naimi retired from the Council, and Durk I. Jager,
Alain A. Joly, and Jurgen E. Schrempp joined. Mohammed Abalkhail became a member
of the Council at the beginning of 1996.

HON. GEORGE P. SHULTZ
Chairman of the Council
Distinguished Fellow, Hoover Institution
Stanford University
Stanford, California

- ----------------------------------------------
MOHAMMED ABALKHAIL
Former Minister of Finance and Economy
Kingdom of Saudi Arabia
Riyadh, Saudi Arabia

ROBERT E. ALLEN
Chairman and Chief Executive Officer
AT&T Corporation
Basking Ridge, New Jersey

BO BERGGREN
Chairman
Stora Kopparbergs Bergslags AB
Stockholm, Sweden

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
London, England

THE RT. HON. THE LORD HOWE OF
ABERAVON, PC, QC
House of Lords
London, England

DURK I. JAGER
President and Chief Operating Officer
The Procter & Gamble Company
Cincinnati, Ohio

ALAIN A. JOLY
Chairman
L'Air Liquide S.A.
Paris, France

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

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

JURGEN E. SCHREMPP
Chairman of the Board of Management
Daimler-Benz AG
Stuttgart, Germany

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

107
<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

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

DEWITT 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

JOHN G. SMALE
Chairman of the Executive Committee of the Board
General Motors Corporation
and Retired Chairman of the Board and Chief Executive Officer
The Procter & Gamble Company

OLCOTT D. SMITH
Retired Chairman
Aetna Life and Casualty Company

108
<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
8, 1996, 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

Depositary shares representing a one-tenth interest in 6 5/8% Cumulative
Preferred Stock, Series H of J.P. Morgan are listed on the New York Stock
Exchange. NYSE symbol: JPM Pr H

TRANSFER AGENT AND REGISTRAR
Common Stock, Adjustable Rate Cumulative Preferred Stock, Series A, Depositary
shares on 6 5/8% Cumulative Preferred Stock, Series H:

First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, NJ
07303-2500, 1-800-519-3111

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 1-800-519-3111.

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, J.P. Morgan & Co. Incorporated, 60 Wall Street,
New York, NY 10260-0060.

CONTACTS
Investor Relations: 1-212-648-9446
Media Relations: 1-212-648-9553
Please visit us on the internet: http://www.jpmorgan.com

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.

109

<PAGE>

CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------

Dollars in millions, Three months ended
interest and average rates -----------------------------------------------------------------
on a taxable-equivalent basis December 31, 1995 December 31, 1994
-----------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning deposits with banks,
mainly in offices outside the U.S. $ 1,953 $ 34 6.91% $ 2,079 $ 52 9.92%
Debt investment securities in
offices in the U.S. (a):
U.S. Treasury 1,255 23 7.27 1,336 24 7.13
U.S. state and political
subdivision 1,729 51 11.70 2,205 66 11.88
Other 15,792 272 6.83 11,623 160 5.46
Debt investment securities in offices
outside the U.S. (a) 4,301 76 7.01 5,267 91 6.85
Trading account assets:
In offices in the U.S. 13,247 196 5.87 15,134 270 7.08
In offices outside the U.S. 25,958 495 7.57 26,445 535 8.03
Securities purchased under agreements
to resell and federal funds sold,
mainly in offices in the U.S. 36,814 587 6.33 31,451 442 5.58
Securities borrowed in offices in
the U.S. 18,297 272 5.90 16,703 213 5.06
Loans:
In offices in the U.S. 6,294 124 7.82 7,244 116 6.35
In offices outside the U.S. 18,206 321 7.00 16,140 265 6.51
Other interest-earning assets (b):
In offices in the U.S. 858 41 * 1,047 105 *
In offices outside the U.S. 2,865 140 * 607 61 *
- -----------------------------------------------------------------------------------------------------------
Total interest-earning assets 147,569 2,632 7.08 137,281 2,400 6.94
Allowance for credit losses (1,126) (1,133)
Cash and due from banks 1,706 1,695

Other noninterest-earning assets 41,575 32,896
- -----------------------------------------------------------------------------------------------------------
Total assets 189,724 170,739
- -----------------------------------------------------------------------------------------------------------
</TABLE>

(a) For the three months ended December 31, 1995 and 1994, average debt
investment securities are computed based on historical cost, excluding the
effects of SFAS No. 115 adjustments.

(b) Interest revenue includes the effect of certain off-balance-sheet
transactions.

* Not meaningful

110
<PAGE>

Dollars in millions, Three months ended
interest and average rates -------------------------------------------------------------------
on a taxable-equivalent basis December 31, 1995 December 31, 1994
-------------------------------------------------------------------
Average Average Average Average
balance Interest rate balance Interest rate
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
In offices in the U.S. $ 1,882 $ 22 4.64% $ 1,918 $ 23 4.76%
In offices outside the U.S. 43,996 644 5.81 41,454 537 5.14
Trading account liabilities:
In offices in the U.S. 6,802 99 5.77 8,703 153 6.97
In offices outside the U.S. 13,796 196 5.64 13,404 241 7.13
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices in
the U.S. 49,065 735 5.94 44,884 592 5.23
Commercial paper, mainly in offices
in the U.S. 3,437 50 5.77 4,084 55 5.34
Other interest-bearing liabilities:
In offices in the U.S. 12,639 190 5.96 9,020 124 5.45
In offices outside the U.S. 1,557 42 10.70 1,986 32 6.39
Long-term debt,
Mainly in offices in the U.S. 9,401 143 6.03 6,596 94 5.65

- -----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 142,575 2,121 5.90 132,049 1,851 5.56
Noninterest-bearing deposits:
In offices in the U.S. 3,305 3,384
In offices outside the U.S. 1,319 1,132
Other noninterest-bearing
liabilities 32,371 24,528
- -----------------------------------------------------------------------------------------------------------
Total liabilities 179,570 161,093
Stockholders' equity 10,154 9,646
- -----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 189,724 170,739

Net yield on interest-earning assets 1.37 1.59
- -----------------------------------------------------------------------------------------------------------
Net interest earnings 511 549
- -----------------------------------------------------------------------------------------------------------
</TABLE>

111
<PAGE>

J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0060

<PAGE>

Cover
Photo of arm holding discus.

Page 1
(1) Depicted on the lower left corner of page 1 is a bar chart showing
separately pretax income and income before cumulative effects of accounting
changes and extraordinary gain, in millions of dollars, for each of the five
years in the period from 1991 - 1995. Pretax income is shown as $1,485 for 1991,
$1,749 for 1992, $2,691 for 1993, $1,825 for 1994, and $1,906 for 1995. Income
before cumulative effects of accounting changes and extraordinary gain is shown
as $1,114 for 1991, $1,130 for 1992, $1,723 for 1993, $1,215 for 1994, and
$1,296 for 1995.

(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 1975 - 1995 in four year intervals. The amounts are shown as
follows: 1975 $0.45, 1979 $0.64, 1983 $0.94, 1987 $1.40 1991 $2.03, 1995 $3.06.

Page 3
(1) Depicted in upper left corner is a photo of Douglas A. Warner III.

Page 5
(1) Depicted in upper left corner is a photo of Rodney B. Wagner.

Page 7
(1) Depicted at the top of page 7 is a pie chart showing total revenues by
sector, in millions of dollars, for the year ended December 31, 1995. Finance
and Advisory is shown as $1,475 or 25%, Sales and Trading is shown as $1,649 or
28%, Asset Management and Servicing is shown as $1,258 or 21%, Equity
Investments is shown as $534 or 9%, and Asset and Liability Management is
shown as $1,013 or 17%.

Page 9
(1) Depicted on the upper left side of page 9 is a bar chart showing Finance and
Advisory total revenue, in millions of dollars, for 1994 and 1995. Total revenue
is shown as $1,165 for 1994 and $1,475 for 1995.

Page 10
(1) Depicted on the upper left side of page 10 is a bar chart showing Sales and
Trading total revenue, in millions of dollars, for 1994 and 1995. Total
revenue is shown as $1,299 for 1994 and $1,649 for 1995.

Page 11
(1) Depicted on the upper left side of page 11 is a bar chart showing Asset
Management and Servicing total revenue, in millions of dollars, for 1994 and
1995. Total revenue is shown as $1,232 for 1994 and $1,258 for 1995.

Page 12
(1) Depicted on the upper left side of page 12 is a bar chart showing Equity
Investments total revenue and total return, in millions of dollars, for 1994 and
1995. Total revenue is shown as $663 for 1994 and $534 for 1995. Total return
is shown as $124 for 1994 and $387 for 1995.
<PAGE>

Page 13
(1) Depicted on the upper left side of page 13 is a bar chart showing Asset and
Liability Management total revenue and total return, in millions of dollars, for
1994 and 1995. Total revenue is shown as $965 for 1994 and $1,013 for 1995.
Total return is shown as $395 for 1994 and $494 for 1995.

Page 17
(1) Depicted on the bottom of page 17 is a timeline of Daily Earnings at Risk
for each trading day, as well as the average quarterly DEaR, in millions of
dollars, for each quarter of 1994 and 1995. For 1994, the high was $26, the
low was $10, and the average was $15. For 1995, the high was $31, the low was
$11, and the average was $19. The average DEaR, in millions of dollars, for the
quarters of 1994 is shown as: 1Q $18.9; 2Q $12.6; 3Q $12.8; 4Q $14.4. The
average DEaR, in millions of dollars, for the quarters of 1995 is shown as:
1Q $14.5; 2Q $20.6; 3Q $20.8; 4Q $20.4.

Page 18
(1) Depicted on the center of page 18 is a histogram showing the frequency
distribution of 1995 daily combined trading-related revenue generated by our
trading businesses, in millions of dollars. Daily trading-related revenue
generally fell within 1.65 standard deviations revenue confidence bands,
approximately $18 million, set relative to average daily trading-related
revenue of $7.6 million.

Page 22
(1) Depicted on the upper portion of page 22 is a bar chart showing net interest
revenue, in millions of dollars, for 1993, 1994, and 1995. Net interest revenue
is shown as $1,772 for 1993, $1,981 for 1994, and $2,003 for 1995.

Page 24
(1) Depicted on the upper portion of page 24 is a bar chart showing trading
revenue, in millions of dollars, for 1993, 1994, and 1995. Trading revenue is
shown as $2,059 for 1993, $1,019 for 1994, and $1,376 for 1995.

Page 26
(1) Depicted on the lower portion of page 26 is a bar chart showing credit
exposure on derivatives, in billions of dollars, at December 31, 1993, 1994,
and 1995. Credit exposure is shown as $20.7 for 1993, $19.5 for 1994, and
$22.8 for 1995.

Page 29
(1) Depicted on the lower portion of page 29 is a bar chart showing investment
banking revenue, in millions of dollars, for 1993, 1994, and 1995. Investment
banking revenue is shown as $532 for 1993, $434 for 1994, and $584 for 1995.

Page 30
(1) Depicted on the upper portion of page 30 is a bar chart showing credit-
related fees, in millions of dollars, for 1993, 1994, and 1995. Credit-related
fees are shown as $224 for 1993, $204 for 1994, and $162 for 1995.

Page 31
(1) Depicted on the lower portion of page 31 is a bar chart showing investment
management fees, in millions of dollars, for 1993, 1994, and 1995. Investment
management fees are shown as $464 for 1993, $517 for 1994, and $574 for 1995.
<PAGE>

Page 32
(1) Depicted on the upper portion of page 32 is a bar chart showing operational
service fees, in millions of dollars, for 1993, 1994, and 1995. Operational
service fees are shown as $491 for 1993, $546 for 1994, and $546 for 1995.

Page 34
(1) Depicted on page 34 is a bar chart showing the Technology and communications
expense and Other technology-related costs components of Total technology and
communications spending, in millions of dollars, for 1993, 1994, and 1995. The
Technology and communications expense component is shown as $512 in 1993, $645
in 1994, and $671 in 1995. The Other technology-related costs component is
shown as $296 in 1993, $339 in 1994, and $369 in 1995. Total technology and
communications costs are shown as $808 for 1993, $984 for 1994, and $1,040 for
1995.

Page 37
(1) Depicted on page 37 is a bar chart showing the tier 1 and tier 2 capital
components of the total risk-based capital ratio at December 31, 1993, 1994, and
1995. The tier 1 components are shown as 9.3%, 9.6%, and 8.8% at December 31,
1993, 1994, and 1995, respectively. The tier 2 components are shown as 3.7%,
4.6%, and 4.2% at December 31, 1993, 1994, and 1995, respectively. The total
risk-based capital ratios are 13.0% in 1993, 14.2% in 1994, and 13.0% in 1995.

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

J.P. Morgan Funding Corp.
United Kingdom

J.P. Morgan Funds Management Inc.
Delaware

J.P. Morgan Futures Inc.
Delaware

J.P. Morgan Futures Hong Kong Limited
Crown Colony of Hong Kong

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 Commercial Mortgage Finance Corp.
Delaware

J.P. Morgan Mortgage Pass-Through Corporation
Delaware

J.P. Morgan News Partnership Corporation
Delaware

J.P. Morgan Technology Partnership Corporation
Delaware

JPM Pork Partnership Corporation
Delaware

J.P. Morgan Pine Street Corporation
Delaware

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 Corporation
Delaware

J.P. Morgan Private Investment 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

Trading and Finance Management Limited
United Kingdom

J.P. Morgan Trust Company of Delaware
Delaware

J.P. Morgan Ventures Corporation
Delaware

J.P. Morgan Venezuela S.A.
Venezuela

J.P. Morgan Community Development Corporation
Delaware

Corsair, Inc.
Delaware

Sixty Wall Street SBIC Corporation
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

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

MGT North America Corp.
Delaware

J.P. Morgan V.E. 92 Ltd.
New York

Oil Tankers Leasing Corporation
New York

J.P. Morgan Energy Products Inc.
Delaware

Ship Holding Corp.
New York

Whitkath Inc.
New York

EC Nominees Limited
United Kingdom

Guaranty Nominees Limited
United Kingdom

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 Sociedad de Bolsa S.A. (1)
Argentina

J.P. Morgan Chile Limitada (2)
Chile

Morgan Guaranty Finance Limited
Bermuda

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 Fonds (Luxembourg) S.A.
Grand Duchy of Luxembourg

ICICI Asset Management Company Limited (40% owned)
Bombay, India

ICICI Brokerage Services Limited
Bombay, India

J.P. Morgan Iberica, S.L.
Spain

J.P. Morgan Investimentos e Financas Ltda.
Brazil

J.P. Morgan GmbH (4) (97% owned)
Federal Republic of Germany

J.P. Morgan Holding Deutschland GmbH (5)
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

J.P. Morgan Fund Services S.A. (6)
Grand Duchy of Luxembourg

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

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., Institucion de Banca Multiple,
J.P. Morgan Grupo Financiero
Mexico City, Mexico

J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan
Grupo Financiero
Mexico City, Mexico

J.P. Morgan Fondi Italia S.p.A.
Italy

J.P. Morgan Services Ltd.
Singapore

Financiere Franco-Neerlandaise (10% Owned)
France

FL21 SARL (10% Owned)
France

ICICI Securities and Finance Company Limited (39.4083% Owned)
Bombay, India

Epargne-Interessement (23% Owned)
France

Private Export Funding Corporation (7.5% Owned)
New York

J.P. Morgan Overseas Capital Corporation
Delaware

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. (9)
United Kingdom

J.P. Morgan Securities Canada Inc.
Ontario, Canada

J.P. Morgan 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

Kipps Nominees Ltd.
United Kingdom

J.P. Morgan Societa di Intermediazione Mobiliare S.p.A.
Italy

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

Bank of the Philippine Islands (20.4% Owned)
Philippines

Saudi International Bank Al-Bank Al-Saudi Al-Alami Limited (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) J.P. Morgan & Cie S.A. owns shares carrying 23% of the voting power.

(6) JPMOCC owns a minority interest in company.

(7) JPMOCC owns a minority interest in company.

(8) J.P. Morgan & Cie S.A. owns preferred shares carrying 33.42% of the
voting power.

(9) Morgan Guaranty International Finance Corporation and Morgan Guaranty
International Bank each own a minority interest.

<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, 33-49775, 33-55851, 33-64193,
and 33-01723) and in the Prospectuses constituting part of the
Registration Statements on Form S-8, as amended, (Nos. 33-61167,
33-61181, 33-65065, 33-49267, 33-32659, 33-49419, and 33-63659)
of our report dated January 10, 1996 appearing on Page 40 of the
J.P. Morgan & Co. Incorporated Annual Report on Form 10-K for the
year ended December 31, 1995. 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 25, 1996

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, Michael E. Patterson, 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.