Pricing Supplement No. 31 Dated February 7, 1997
(To Prospectus Supplement dated February 20, 1996
and Prospectus dated January 31, 1996)
Pursuant to Rule 424(b)(3)
Registration Statement No. 33-64193
J.P. Morgan & Co. Incorporated
Medium-Term Notes, Series A
(Subordinated Floating Rate Notes)
Principal Amount: $200,000,000
CUSIP: 61688A AE8
Trade Date: February 6, 1997
Settlement Date: February 14, 1997
Maturity Date: February 15, 2012
If principal amount is other than
U.S. dollars, equivalent in U.S. dollars: N/A
Exchange Agent: N/A
Price to Public (Issue Price): 100%
Net Proceeds to Issuer: 99.31%
Interest Rate (per annum): see below
Interest Rate Basis:
( ) Commercial Paper Rate ( ) Federal Funds Rate
( ) LIBOR (Reuters) ( ) Treasury Rate Note
( ) LIBOR (Telerate) (X) Other: see below
( ) Prime Rate
Interest Payment Date(s): August 15 and February 15 of each year
commencing August 15, 1997 following Business Day convention with
no adjustments to period end dates.
Record Date(s): (X) The fifteenth day (whether or not a Business
Day) next preceding each Interest Payment Date.
( ) Other
Initial Interest Rate Per Annum: see below
Interest Payment Period: ( ) Annual (X) Semi-Annual ( ) Monthly
( ) Quarterly
Interest Reset Periods: see below
( ) Daily ( ) Weekly ( ) Monthly ( ) Quarterly
( ) Semi-annually; on each Interest Payment Date
( ) Annually; the third Wednesday of:
Interest Reset Dates: August 15 and February 15 of each year
commencing August 15, 1997.
Interest Determination Dates, if other than stated in the Prospectus
Supplement: Seventh Business Day preceding the Interest Payment Date
Interest Calculation:
( ) Regular Floating Rate
( ) Inverse Floating Rate (Fixed Interest Rate: ___%)
(X) Other Floating Rate (See below)
Spread (plus/minus): see below Spread Multiplier: N/A
Index Maturity: N/A Index Currency: N/A
Maximum Interest Rate: N/A Minimum Interest Rate: 0.00%
Calculation Date if other than stated in the Prospectus
Supplement: N/A
Right of Payment:
(X) Subordinated ( ) Unsubordinated
Senior Indebtedness:
The Notes are subordinate in right of payment to Senior Indebtedness
and, in certain circumstances relating to the bankruptcy or
insolvency of the Company, to Derivative Obligations of the
Company. At December 31, 1996 the amount of indebtedness constituting
Senior Indebtedness was approximately $9.4 billion and the
amount of Derivative Obligations was immaterial.
Day Count Basis: ( ) 30/360 (Commercial Paper Rate Notes,
Federal Funds Rate Notes, Prime
Rate Notes and LIBOR Notes)
( ) Actual (Treasury Rate Notes)
(X) See below
Form: (X) Book-Entry Note (DTC)
( ) Certificated Note
Denomination: $1,000 with $1,000 integral multiples thereafter.
Redemption:
(X) The Notes may not be redeemed prior to stated maturity.
( ) The Notes may be redeemed prior to maturity.
Sinking Fund: None
Extendible Note: ( ) Yes (X) No
Amortization Schedule: N/A
Original Issue Discount: N/A
Amount of OID:
Yield to Maturity:
Interest Accrual Date:
Initial Accrual Period OID:
Indexed Note: (X) Yes ( ) No
Calculation Agent(s): ( ) First Trust of New York, National Association
(X) Morgan Guaranty Trust Company of New York
Plan of Distribution:
The Company will sell the aggregate principal amount of the
Notes to J.P. Morgan Securities Inc. ("JPMSI") at a price of
99.31% of the principal amount of the Notes.
The Company has agreed to indemnify JPMSI against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Additional Terms:
Interest:
For each Interest Payment Period, interest payable on the
Notes will be adjusted for changes in the level of inflation at
specified dates associated with such Interest Payment Period. The
index for measuring the inflation rate at such specified dates
for purposes of calculating the interest payable on the Notes
will be the non-seasonally adjusted U.S. City Average All Items
Consumer Price Index for All Urban Consumers ("CPI" or "CPI-U")
published monthly by the Bureau of Labor Statistics of the U.S.
Department of Labor (the "BLS"). The actual amount received on
any Interest Payment Date will depend on the difference between
the Reference CPI (as defined below) for the current Interest
Payment Period and the Reference CPI for the prior Interest
Payment Period. In accordance with the formula below, the per
annum rate of interest payable on the Notes on an Interest
Payment Date will exceed 4% if the Reference CPI for that
Interest Payment Date has increased relative to the Reference CPI
for the immediately preceding Interest Payment Date. The per
annum rate of interest payable on the Notes on an Interest
Payment Date will be less than 4% if the Reference CPI for that
Interest Payment Date decreased relative to the reference CPI for
the immediately preceding Interest Payment Date, but will not be
less than 0%. If the Reference CPI for the relevant Interest
Payment Date has remained the same relative to the Reference CPI
for the immediately preceding Interest Payment Date, the per
annum rate of interest payable on the Notes for that Interest
Payment Date will be 4%.
The CPI is a measure of the average change in consumer
prices over time in a fixed market basket of goods and services,
including food, clothing, shelter, fuels, transportation, charges
for doctors' and dentists' services, and drugs. In calculating
the index, price changes for the various items are averaged
together with weights that represent their importance in the
spending of urban households in the United States. The contents
of the market basket of goods and services and the weights
assigned to the various items are updated periodically to take
into account changes in consumer expenditure patterns.
The CPI is expressed in relative terms in relation to a time
base reference period for which the level is set at 100.0. For
example, if the CPI for the 1982-84 reference period is 100.0, an
increase of 16.5 percent from that period would be shown as
116.5. The base reference period for the Notes will be the 1982-
1984 average equal to 100.0.
For any given Interest Payment Period, the interest payable
on the Notes will be calculated in accordance with the following
formula but, in no event, shall it be less than zero:
Actual Days in period Reference CPIn
max [Principal x [(4.0% x ---------------------)+(-------------------- -1)] ,0]
Actual Days in year Reference CPIn-1
"Reference CPI" for the first day of any calendar month is
the CPI for the third preceding calendar month, as reported by
BLS in the second preceding calendar month. For example, the
Reference CPI applicable to April 1 in any year is the CPI for
January, which is reported in February.
"Reference CPIn" shall mean the sum of (i) the Reference CPI
applicable to the Interest Payment Month (as defined below) and
(ii) the product of (A) the difference between the Reference CPI
applicable to the month immediately following the Interest
Payment Month and the Reference CPI applicable to the Interest
Payment Month and (B) the ratio of the actual number of days in
the Calculation Period (as defined below) to the actual number of
days in the Interest Payment Month.
"Reference CPIn-1" shall mean the Reference CPIn applicable
to the immediately preceding Interest Payment Period.
"Calculation Period" for purposes of determining Reference
CPIn and Reference CPIn-1 , shall mean the period commencing with
the first day of the Interest Payment Month and ending with but
not including the Interest Reset Date.
"Interest Payment Month" shall mean the month in which the
applicable Interest Payment Date falls.
In connection with the above calculation, intermediate
calculations will be truncated to six decimal places and rounded
to five decimal places.
The following is a hypothetical example of the interest
calculation for the Notes for a given Interest Payment Period
using hypothetical CPI-U data and the indicative spread of 400
basis points:
Settlement Date: February 14, 1997
First Coupon Date: August 15, 1997
Spread over CPI-U: 400 basis points
Principal: $200,000,000
Nov-96 Dec-96 May-97 Jun-97
CPI-U (hypothetical) 158.690 158.693 160.807 161.246
Reference CPIn-1 = Reference CPI2/14/97
= CPI-UNov+(CPI-UDec-CPI-UNov)*(Feb 14-Feb 1)/(actual # of days in Feb))
= 158.690 + (158.693-158.690)*13/28
= 158.69139
Reference CPIn = Reference CPI8/15/97
= CPI-UMay + (CPI-UJun-CPI-UMay)*((Aug 15- Aug1)/(actual # of days in Aug))
= 160.807 + (161.246 - 160.807)*14/31
= 161.00526
CPI Component = (161.00526/158.69139)-1
= 1.45809%
Spread = 4.00%
First Coupon = $200,000,000 [(4.00%)(182/365) + (1.45809%)]
(hypothetical) = $200,000,000 [3.45261%]
= $6,905,220.00.
First Coupon per $1,000 = $34.52610
(hypothetical)
THE FOREGOING EXAMPLE IS ILLUSTRATIVE ONLY. NO
REPRESENTATION IS MADE AS TO WHAT THE FIRST INTEREST PAYMENT, OR
ANY INTEREST PAYMENT, ON THE NOTES WILL BE.
Index Contingencies:
If a previously reported CPI is revised, the previously
reported CPI will continue to be used in calculating the interest
payments on the Notes.
If the CPI is rebased to a different year and 1982-84 CPI is
no longer used, the base reference period for the Notes will
continue to be the 1982-84 reference period as long as that CPI
continues to be published. If such CPI is no longer published,
and the discontinuation of publication occurs before the maturity
date of the U.S. Treasury 10-Year Inflation-Indexed Notes, Series
A-2007 dated, 3 3/8%, CUSIP Number 9128272M3 (the "Inflation-
Linked Treasuries"), the base reference period will be that used
for the Inflation-Linked Treasuries. If the discontinuation of
publication occurs after the maturity date of the Inflation-Link
Treasuries, the base reference period will be that used in any
other inflation-indexed notes that have been issued by the U.S.
Treasury that remain outstanding at that time or if no such notes
are outstanding will be determined in accordance with general
market practice at the time
If the monthly CPI required for interest calculation is not
available by the interest determination date, the Reference CPI
for such month shall be based on the previous twelve-month change
in the CPI available. For example, if the CPI for the month M is
not available, the formula for calculating the index number to be
used is:
Ref CPIM = CPIM-1 x [CPIM-1/CPIM-13]1/12
If, while the Notes are outstanding, the CPI is
discontinued, or substantially altered before the maturity date
of the Inflation-Linked Treasuries, the applicable substitute
index for the Notes will be that chosen by the Secretary of
Treasury for the Inflation-Linked Treasuries as described in the
6Z Federal Register 846-874 (January 6, 1997). If the CPI is
discontinued after the maturity date of the Inflation-Linked
Treasuries, the substitute index will be that used in any other
inflation-indexed notes that have been issued by the U.S.
Treasury that remain outstanding at that time or if no such notes
are outstanding will be determined in accordance with general
market practice at the time.
INVESTMENT CONSIDERATIONS
Interest Variability
An investment in the Notes involves factors not associated
with an investment in a fixed interest security. Such factors
may include, without limitation, the possibility that the
inflation index may be subject to significant changes, that
changes in the index may or may not correlate to changes in
interest rates generally or with changes in other indices, that
the resulting interest may be greater or less than that payable
on other securities of similar maturities, and that, in the event
of sustained deflation, the amount of the semi-annual interest
payments may decrease. The interest calculation for the Notes
incorporates a three-month lag period on the CPI which may have
an impact on the trading prices of the Notes, particularly during
periods of significant, rapid changes in the CPI.
Holders of Notes will receive interest payments that will be
affected by changes in the CPI. Such changes may be significant.
Changes in the CPI are a function of the changes in consumer
prices over time which result from the interaction of many
factors over which the Issuer has no control.
Illiquidity of Notes; Secondary Trading in the Notes
The Notes are a new issue of securities with no established
trading market. The Notes will not be traded on any exchange and
there can be no assurance that a secondary market for the Notes
will develop or, if developed, will continue or be liquid.
Lesser liquidity and fewer market participants may result in
larger spreads between bid and asked prices for the Notes than
the bid-asked spreads for fixed interest securities with the same
maturity. Larger bid-asked spreads normally result in higher
transaction costs and/or lower overall returns.
The secondary market for the Notes will be affected by a
number of factors independent of the creditworthiness of the
Issuer, including the volatility of the CPI, the amount of other
securities linked to the CPI, and the level, direction and
volatility of market interest rates generally. No investor
should purchase the Notes unless such investor understands and is
able to bear the risk that the Notes may not be readily salable,
that the value of the Notes may fluctuate over time and that such
fluctuations may be significant.
CAPITALIZED TERMS USED IN THIS PRICING SUPPLEMENT WHICH ARE
DEFINED IN THE PROSPECTUS SUPPLEMENT OR THE PROSPECTUS SHALL HAVE
THE MEANINGS ASSIGNED TO THEM IN THE PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS.
