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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported) September 1, 1999
J.P. MORGAN & CO. INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 1-5885 13-2625764
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
60 WALL STREET, NEW YORK, NEW YORK 10260-0060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 483-2323
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On September 1, 1999, the Registrant and the Boards of Euroclear
Clearance System PLC and Euroclear Clearance System Societe Cooperative (the
"Boards") issued a joint press release announcing that the Registrant and the
Boards have signed a letter of intent to create a new Euroclear bank that will
take over the Registrant's operating and banking roles with respect to the
Euroclear system once the successor bank is established. In addition, the
Registrant issued a separate press release confirming this announcement.
Copies of such press releases are attached hereto as Exhibits 99a and 99b,
respectively.
Also, attached hereto as Exhibit 99c, are the Registrant's segment
results, restated to reflect Euroclear-related revenues and expenses in
Corporate Items, for the first and second quarters of 1999 and 1998, and the
full years 1998, 1997, and 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
NONE.
(b) Pro Forma Financial Information
NONE.
(c) Exhibits
99a. Copy of joint press release of J.P. Morgan & Co. Incorporated,
and the Boards of Euroclear Clearance System PLC and Euroclear
Clearance System Societe Cooperative, dated September 1, 1999.
99b. Copy of press release of J.P. Morgan & Co. Incorporated
dated September 1, 1999.
99c. Restated segment results
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
J.P. MORGAN & CO. INCORPORATED
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(REGISTRANT)
/s/ Grace B. Vogel
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NAME: Grace B. Vogel
TITLE: Chief Accounting Officer
DATE: September 1, 1999
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Exhibit 99a.
[Euroclear letterhead]
Press Release
EUROCLEAR BOARD ANNOUNCES CREATION OF NEW EUROPEAN, MARKET-OWNED BANK
Brussels, September 1, 1999 - The Boards of Euroclear Clearance System PLC and
Euroclear Clearance System Societe Cooperative have signed a letter of intent
with J.P. Morgan & Co. Incorporated whereby a new Euroclear bank will take over
Morgan's operating and banking roles with respect to the Euroclear System.
The new Euroclear bank, based in Brussels, Belgium, will be 100% market owned
and will have approximately EUR 1 billion in capital. Its formation underscores
the commitment of major market participants to the continuing success of the
Euroclear System, particularly as the new bank will have additional financial
backing from major banks to support its growth. The new bank will continue to be
governed by a Board of Directors, consisting of existing representatives of
major worldwide users of the Euroclear System, as well as members of the current
Euroclear management team. It will also continue to be operated by the same
staff.
Commenting on the announcement, Sir Andrew Large, Chairman of the Euroclear
Boards, says: "Today's announcement represents a major step towards the
fulfillment of our strategy: to further strengthen our role as the leading
clearing and settlement system. Indeed, establishing a new, market-owned
European bank will facilitate the achievement of this objective by increasing
business and financial flexibility, and allow us to pursue further partnership
opportunities. The Euroclear System will also serve as an international gateway
for global counterparties, continuing to offer innovative products and services.
The user-owners on our Board - the world's leading banks, custodians, and
broker/dealers - are fully committed to the new bank."
He continues: "J.P. Morgan has created a true industry leader in the more than
30 years that it has operated the Euroclear System, has worked closely with us
to develop this new strategic direction, and is committed to a smooth transition
to the new Euroclear entity."
Michael E. Patterson, Vice Chairman of J.P. Morgan and a Euroclear Board member,
says: "J.P. Morgan is proud to have contributed to the development of the
international capital markets infrastructure in our Euroclear role. As a
continuing user, shareholder, and Board member of the Euroclear System, we are
fully confident in its future success."
Luc Bomans, General Manager and Managing Director, Euroclear Operations Centre,
adds: "Euroclear Participants and the market will derive maximum benefit from
this new position of strength, building on the market-owned structure of the
Euroclear System. Full business continuity will be retained throughout the
transition process and thereafter. Euroclear Participants will work with the
same team of people who have made the Euroclear System the leader it is today.
Moreover, Participants will use the same systems and communications channels as
today, and will have access to the full range of products and services delivered
at the same rigorous risk management standards."
The transition to the new Euroclear bank is subject to the completion of a
definitive agreement, all necessary shareholder and regulatory approvals, and
consultation with the unions. Once a definitive agreement is reached, a
transition period of up to 18 months is expected.
* * * * * *
The Euroclear System is currently operated by Morgan Guaranty Trust Company of
New York, the banking affiliate of J.P. Morgan, under contract with Euroclear
Clearance System Societe Cooperative, a market-owned co-operative corporation,
which oversees the activities of the Euroclear System and represents the
interests of all Euroclear Participants. Morgan Guaranty created the Euroclear
System in 1968 and sold the System to the users in 1972.
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Exhibit 99b.
News release: Immediate September 1, 1999
[J.P. Morgan Letterhead]
J.P. MORGAN CONFIRMS EUROCLEAR ANNOUNCEMENT
J.P. Morgan today confirmed that Morgan and the Euroclear Board have
signed a letter of intent to create a new, market-owned European bank to operate
all aspects of the Euroclear System, the leading clearance and settlement system
for internationally traded securities. The agreement was announced in a joint
news release today by the Board of Directors of the Euroclear group and Morgan.
This agreement in principle anticipates the formation of a European bank in
Brussels to succeed Morgan as operator and banker for the Euroclear System,
facilitating Euroclear's strategy to maintain its leadership and capitalize on
partnership opportunities as market forces reshape the settlement infrastructure
in Europe.
Subject to a definitive agreement being reached, J.P. Morgan will
remain operator of Euroclear until the successor bank is established and play a
key role in that bank's formation, which is expected to take up to 18 months.
After that, Morgan will remain an important participant and shareholder of
Euroclear and retain a seat on its Board. The management and staff of Euroclear,
numbering approximately 1,200 Morgan employees, will transfer to the new entity.
"We are proud of the role Morgan has played in creating and bringing
Euroclear to its current position of leadership," said Michael E. Patterson, a
Euroclear director and the Morgan vice chairman responsible for the firm's
relationship with Euroclear. "And we're equally proud to have helped develop a
strategy to sustain that leadership, in part through the creation of a new
European bank. It's the right direction for Euroclear and the market it serves."
Under the existing Operating Agreement, income from clearance and
settlement operations is earned by the Euroclear System, while Morgan retains
earnings from providing banking services to the System's
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Press contacts:
New York Joseph Evangelisti (212) 648-9589
London Richard Mahony (44-171) 325-4289
Investor contact: Ann Patton (212) 648-9446
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participants. Under the agreement in principle announced today, Morgan will
continue to receive this pretax banking income for three years following the
signing of a definitive agreement, with a minimum of $195 million and maximum of
$295 million per year, whether the income is earned by Morgan prior to the
formation of the new bank or afterward by the new bank. After the new bank is
formed, it will also pay Morgan for certain costs of transition and assets and
know-how that are transferred to it. Pretax income reported by Morgan from
Euroclear was $118 million in the first six months of 1999; $253 million for the
full year 1998; and $218 million for 1997.
J.P. Morgan founded the Euroclear System in 1968 to enable efficient
clearing and settlement of the fast-growing volume of international securities
transactions. Euroclear, the leading system of its kind in the world, ensures
that cash and securities are exchanged simultaneously in the settlement process.
The creation of the Euroclear System is credited with contributing to the rapid
development of the Eurobond market. Morgan sold the Euroclear System to its
participants in 1972; ownership was further expanded in 1986 and now includes
more than 1,500 participant shareholders.
J.P. Morgan is a global financial firm that meets critical financial needs
for business enterprises, governments, and individuals. The firm advises on
corporate strategy and structure, raises capital, makes markets in financial
instruments, and manages investment assets. Morgan also commits its own capital
to promising enterprises and invests and trades to capture market opportunities.
# # #
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Exhibit 99c.
Summary of Sector Results
J.P. Morgan & Co. Incorporated
In connection with the signed letter of intent between J.P. Morgan and the Board
of Directors of the Euroclear group, Morgan will end its role as operator and
banker for the Euroclear system upon the formation of a successor bank to be
owned by Euroclear. Accordingly, segment results have been restated to reflect
Euroclear-related revenues and expenses in Corporate Items. Previously, results
related to our Asset Management and Euroclear activities were included in the
Asset Management & Servicing sector. All amounts in the table below have been
restated to reflect our current reporting structure and policies. For a
description of our segments, please refer to the J.P. Morgan & Co. 1998 Annual
Report.
<TABLE>
<CAPTION>
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Interest Rate
Investment and Credit Credit Global
In millions Banking Equities FX Markets Markets Portfolio Finance
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<S> <C> <C> <C> <C> <C> <C>
Second Quarter 1999
Total revenues $ 320 $ 427 $ 555 $ 361 $ 152 (a) $ 1,815
Total expenses 228 236 321 210 41 1,036
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Pretax income 92 191 234 151 111 779
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First Quarter 1999
Total revenues 258 288 662 696 154 2,058
Total expenses 210 230 359 259 45 1,103
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Pretax income 48 58 303 437 109 955
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Second Quarter 1998
Total revenues 247 244 622 238 167 1,518
Total expenses 175 225 339 204 38 981
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Pretax income 72 19 283 34 129 537
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First Quarter 1998
Total revenues 251 135 613 364 122 1,485
Total expenses 185 191 352 256 29 1,013
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Pretax income 66 (56) 261 108 93 472
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Full Year 1998
Total revenues 1,001 700 2,055 592 367 (d) 4,715
Total expenses 710 777 1,283 730 145 3,645
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Pretax income 291 (77) 772 (138) 222 1,070
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Full Year 1997
Total revenues 768 465 1,752 841 558 4,384
Total expenses 686 692 1,259 735 123 3,495
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Pretax income 82 (227) 493 106 435 889
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Full Year 1996
Total revenues 614 419 1,495 1,012 656 4,196
Total expenses 604 513 1,134 638 80 2,969
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Pretax income 10 (94) 361 374 576 1,227
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</TABLE>
<TABLE>
<CAPTION>
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Asset Proprietary
Management Equity Investing Proprietary Corporate
In millions Services Investments and Trading Investments Items (g) Consolidated
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<S> <C> <C> <C> <C> <C> <C>
Second Quarter 1999
Total revenues $ 343 $ 13 $ 44 $ 57 ($ 24) $ 2,191
Total expenses 276 13 42 55 50 1,417
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Pretax income 67 0 2 2 (74) 774
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First Quarter 1999
Total revenues 309 (22) 119 97 27 2,491
Total expenses 264 14 33 47 153 1,567
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Pretax income 45 (36) 86 50 (126) 924
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Second Quarter 1998
Total revenues 309 102 103 205 121 (b) 2,153
Total expenses 288 15 39 54 93 1,416
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Pretax income 21 87 64 151 28 737
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First Quarter 1998
Total revenues 292 26 264 290 (70) 1,997
Total expenses 273 9 40 49 297 (c) 1,632
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Pretax income 19 17 224 241 (367) 365
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Full Year 1998
Total revenues 1,186 335 706 1,041 13 (e) 6,955
Total expenses 1,099 49 156 205 589 (f) 5,538
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Pretax income 87 286 550 836 (576) 1,417
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Full Year 1997
Total revenues 1,110 399 895 1,294 432 7,220
Total expenses 1,042 47 154 201 328 5,066
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Pretax income 68 352 741 1,093 104 2,154
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Full Year 1996
Total revenues 969 270 934 1,204 486 6,855
Total expenses 821 38 137 175 558 4,523
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Pretax income 148 232 797 1,029 (72) 2,332
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</TABLE>
(a) Second quarter 1999 includes a net reversal of provision for credit losses
of ($70) million.
(b) Second quarter 1998 includes a pretax gain of $131 million related to the
sale of the firm's global trust and agency services business.
(c) First quarter 1998 includes a pretax charge of $215 million related to the
restructuring of business activities.
(d) 1998 includes a net provision for credit losses of $100 million.
(e) Second quarter 1998 includes a pretax gain of $131 million related to the
sale of the firm's global trust and agency services business, and a third
quarter 1998 pretax gain of $56 million related to the sale of the firm's
investment management business in Australia.
(f) 1998 includes pretax charges of $358 million related to the restructuring of
business activities and other cost reduction programs.
(g) Corporate Items includes revenues and expenses related to Euroclear
activities, as follows:
<TABLE>
<CAPTION>
Second Qtr. First Qtr. Second Qtr. First Qtr. Full Year Full Year Full Year
1999 1999 1998 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues $67 $62 $84 $70 $305 $274 $218
Total expenses 3 8 14 15 52 56 60
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Pretax income 64 54 70 55 253 218 158
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</TABLE>
