<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------
Date of Report (Date of earliest event reported) January 19, 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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<PAGE> 2
ITEM 5. OTHER EVENTS
On January 19, 1999, the Registrant issued a press release announcing
its earnings for the three-month and twelve-month periods ended
December 31, 1998. A copy of such press release is filed herein as
Exhibit 99a.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
NONE. The financial statements included in this report are not
required to be filed as part of this report.
(b) Pro Forma Financial Information
NONE.
(c) Exhibits
12. Statment re computation of ratios.
99a. Copy of press release of J.P. Morgan & Co.
Incorporated dated January 19, 1999.
99b. Statement of consolidated average balances and net
interest earnings for the three- and twelve month
periods ended December 31, 1998.
<PAGE> 3
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
------------------------------
(REGISTRANT)
/s/ Grace B. Vogel
----------------------------
NAME: Grace B. Vogel
TITLE: Chief Accounting Officer
DATE: January 19, 1999
<PAGE> 1
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
J.P. Morgan & Co. Incorporated
Consolidated
<TABLE>
<CAPTION>
Twelve Months
Dollars in millions 1998
<S> <C>
Earnings:
Net income $ 963
Add: income taxes 454
Less: equity in undistributed income
of all affiliates accounted for by
the equity method 44
Add: fixed charges, excluding interest
on deposits 8 584
- --------------------------------------------------------------------------------
Earnings available for fixed charges,
excluding interest on deposits 9 957
Add: interest on deposits 2 823
- --------------------------------------------------------------------------------
Earnings available for fixed charges,
including interest on deposits 12 780
- --------------------------------------------------------------------------------
Fixed charges:
Interest expense, excluding interest on
deposits 8 537
Interest factor in net rental expense 47
- --------------------------------------------------------------------------------
Total fixed charges, excluding interest
on deposits 8 584
Add: interest on deposits 2 823
- --------------------------------------------------------------------------------
Total fixed charges, including interest
on deposits 11 407
- --------------------------------------------------------------------------------
Ratio of earnings to fixed charges:
Excluding interest on deposits 1.16(a)
Including interest on deposits 1.12(a)
- --------------------------------------------------------------------------------
</TABLE>
(a) For the twelve months ended December 31, 1998, the ratio of earnings to
fixed charges, excluding the fourth quarter 1998 after tax charge of $86 million
($143 million before tax) related to cost reduction programs; third quarter 1998
after tax gain of $34 million ($56 million before tax) related to the sale of
the firm's investment management business in Australia; excluding the second
quarter 1998 after tax gain of $79 million ($131 million before tax) related to
the sale of the firm's global trust and agency services business; and excluding
the first quarter 1998 after tax charge of $129 million ($215 million before
tax) related to restructuring of business activities, was 1.17 excluding
interest on deposits and 1.13 including interest on deposits.
<PAGE> 2
EXHIBIT 12
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
J.P. Morgan & Co. Incorporated
Consolidated
<TABLE>
<CAPTION>
Dollars in Twelve Months
millions 1998
<S> <C>
Earnings:
Net income $ 963
Add: income taxes 454
Less: equity in undistributed income
of all affiliates accounted for by
the equity method 44
Add: fixed charges, excluding interest
on deposits 8 637
- --------------------------------------------------------------------------------
Earnings available for fixed charges,
excluding interest on deposits 10 010
Add: interest on deposits 2 823
- --------------------------------------------------------------------------------
Earnings available for fixed charges,
including interest on deposits 12 833
- --------------------------------------------------------------------------------
Fixed charges:
Interest expense, excluding interest on
deposits 8 537
Interest factor in net rental expense 47
Preferred stock dividends 53
- --------------------------------------------------------------------------------
Total fixed charges, excluding interest
on deposits 8 637
Add: interest on deposits 2 823
- --------------------------------------------------------------------------------
Total fixed charges, including interest
on deposits 11 460
- --------------------------------------------------------------------------------
Ratio of earnings to fixed charges and preferred stock dividends:
Excluding interest on deposits 1.16(a)
Including interest on deposits 1.12(a)
- --------------------------------------------------------------------------------
</TABLE>
(a) For the twelve months ended December 31, 1998, the ratio of earnings to
fixed charges and preferred stock dividends excluding the fourth quarter 1998
after tax charge of $86 million ($143 million before tax) related to cost
reduction programs; third quarter 1998 after tax gain of $34 million ($56
million before tax) related to the sale of the firm's investment management
business in Australia; excluding the second quarter 1998 after tax gain of
$79 million ($131 million before tax) related to the sale of the firm's global
trust and agency services business; and excluding the first quarter 1998 after
tax charge of $129 million ($215 million before tax) related to restructuring of
business activities, was 1.17 excluding interest on deposits and 1.13 including
interest on deposits.
<PAGE> 1
Exhibit 99.A.
[GRAPHIC OMITTED]
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0060
NYSE: symbol: JPM
- -------------------------------------------------------------------------------
NEWS RELEASE: IMMEDIATE January 19, 1999
J.P. MORGAN REPORTS FOURTH QUARTER AND 1998 FULL-YEAR RESULTS
J.P. Morgan today reported fourth quarter operating earnings of $175 million,
before an after-tax charge of $86 million related to expense management
initiatives. Net income after the charge was $89 million, compared with $271
million in the fourth quarter of 1997. Earnings per share in the quarter were
$0.86, or $0.42 including the charge.
Full-year 1998 operating earnings before non-recurring gains and charges were
$1.065 billion, or $5.22 per share. Net income was $963 million, or $4.71 per
share. This compares to $1.465 billion, or $7.17 per share in 1997.
OTHER HIGHLIGHTS FOR 1998:
- - Revenues excluding non-recurring gains decreased 6%. Lower results in
emerging markets, proprietary, and credit-related activities offset growth
in other major business areas
- - Advisory and underwriting revenues rose 20% to $1.291 billion,
underscoring our momentum in investment banking
- - We made significant progress on credit initiatives: Latin American and
Asian exposures were 40% and 50% lower than at year-end 1997, and the
economic capital requirement of our credit portfolio was down 17%
- - Expenses excluding special charges rose 2% over 1997
- - Assets under management increased 20% to $308 billion across distribution
channels
"The market crisis in the second half hurt the year's results," said Douglas A.
Warner III, chairman. "We nevertheless saw solid advances in investment banking,
equities, and asset management, a recovery of markets activities at the end of
the year, and progress on credit and productivity initiatives, all of which are
key to achieving performance gains."
RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Fourth quarter Year
- --------------------------------------------------------------------------------------------------------------
In millions of dollars, except per share data 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,504 $ 1,680 $ 6,955 $ 7,220
Operating expenses (1,391) (1,308) (5,538) (5,066)
Income taxes (24) (101) (454) (689)
- --------------------------------------------------------------------------------------------------------------
Net income 89 271 963 1,465
Net income per share $ 0.42 $ 1.33 $ 4.71 $ 7.17
Dividends declared per share $ 0.99 $ 0.95 $ 3.84 $ 3.59
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Press contact: Joseph M. Evangelisti 212/648-9589
Investor contact: Ann B. Patton 212/648-9446
<PAGE> 2
J.P. Morgan & Co. Incorporated 2
REVENUES BY BUSINESS SECTOR
Growth from client-focused activities in 1998 offset by lower proprietary
results
REVENUES of $1.504 billion in the fourth quarter of 1998 were up 21% from the
third quarter (excluding a non-recurring gain) but were 10% below the 1997
fourth quarter. For the full year, revenues excluding non-recurring gains were
$6.768 billion, down 6% from $7.220 billion in 1997. Both declines principally
were due to lower revenues from our proprietary activities and actions taken as
part of changes in our credit strategy.
Revenues from client-focused activities rebounded in the latter part of the
fourth quarter. Reported in the Finance and Advisory, Market Making, and Asset
Management and Servicing sectors, these activities had revenues of $1.465
billion, compared with $1.328 billion in last year's quarter and $1.109 billion
in the third quarter. For all of 1998, revenues from these activities were
$6.412 billion, up 6% from 1997.
Revenues from Equity Investments and Proprietary Investing and Trading
activities were $214 million in the 1998 fourth quarter, versus $399 million in
the year-ago period and $278 million in the third quarter. Full-year revenues
from these activities for our own account were $921 million, down 28% from 1997.
FINANCE AND ADVISORY (Advisory, Debt and Equity Underwriting, and Credit)
revenues were $424 million, compared with $439 million in the fourth quarter of
last year and $413 million in the third quarter. Revenues for the full year
increased 4% to $1.989 billion.
Advisory and underwriting revenues rose to $349 million, their highest quarterly
level ever and 29% ahead of the 1997 fourth quarter. Full-year 1998 revenues
were also a record, increasing 20% to $1.291 billion. These increases were
driven by strong growth in advisory fees and in revenues from debt and equity
underwriting. Securities Data Co. ranked us sixth in U.S. equity lead
underwriting for 1998, up from tenth in 1997. Our market share increased to 5.6%
from 2.9%. Global market share in completed mergers and acquisitions grew to
12.7% from 10.5%.
Revenues from credit activities in the quarter, including a $25 million net
provision for credit losses, were $75 million compared with $168 million in last
year's quarter; full-year revenues fell to $698 million from $844 million in
1997. In both cases, lower revenues resulting from credit loss provisions and
changes in our credit strategy more than offset significantly higher loan
syndication revenues.
MARKET MAKING (Fixed Income, Emerging Markets, Equities, Foreign Exchange, and
Commodities) revenues totaled $638 million in the fourth quarter, compared with
$453 million in the fourth quarter of 1997 and $260 million in the third
quarter. Full-year revenues grew 9% to $2.737 billion.
Fixed income revenues reached $377 million in the fourth quarter, compared with
$228 million in the 1997 quarter. The increase was due to favorable trading
results in government and agency securities, corporate securities, and
derivatives. Emerging markets had revenues of $51 million compared with $122
million in the 1997 quarter, principally reflecting illiquidity and reduced
client flows in international debt markets. Equities market making revenues in
the fourth quarter were $133 million on strength in cash markets and
derivatives.
<PAGE> 3
J.P. Morgan & Co. Incorporated 3
This compared to a loss of $54 million in the fourth quarter of 1997 related to
managing equity derivative positions. Foreign exchange revenues of $82 million
in the fourth quarter of 1998 were down from a strong 1997 quarter.
ASSET MANAGEMENT AND SERVICING (Institutional Investment Management and Mutual
Funds, Services for Private Clients, and Securities and Futures Services)
revenues were $403 million in the fourth quarter, compared with $436 million in
both the year-ago quarter and the third quarter. 1998 full-year revenues
increased 5% to $1.686 billion.
Revenues from asset management for 1998, excluding the effect of our investment
in American Century, increased 7% over 1997, driven by 11% growth in investment
management fees. Including the impact of American Century, revenues increased to
$1.063 billion in 1998 from $1.035 billion in 1997. Fourth quarter revenues were
$265 million compared with $277 million in the 1997 quarter. Assets under
management approximated $308 billion at December 31, 1998, an increase of 20%
over December 31, 1997.
Revenues from private client services across our business sectors were
approximately $670 million in 1998, an increase of 10% over 1997. This included
$185 million of revenues recorded in other sectors.
Revenues from securities and futures services for the full year increased 8% to
$623 million. In the fourth quarter these revenues were $138 million, versus
$159 million in the fourth quarter of 1997. Stronger results in futures and
options were more than offset by declines in other revenues in the sector and
the sale of our global trust and agency business in June of 1998.
EQUITY INVESTMENTS (Equity Investment Portfolio Management) reported revenues of
$46 million in the fourth quarter. This compares with strong revenues of $164
million and $157 million in the fourth quarter of 1997 and the third quarter of
this year, respectively. Total return - reported revenues and the change in net
unrealized appreciation - was $50 million, compared with $11 million in the 1997
period. For the full year, revenues decreased to $336 million from $403 million,
and included net gains on investments of $316 million.
PROPRIETARY INVESTING AND TRADING (Risk Positioning, Credit Investment
Portfolio, and Capital and Liquidity Management) revenues were $168 million in
the 1998 fourth quarter, compared with $235 million a year ago and up from $121
million in the third quarter. Total return - reported revenues and the change in
net unrealized appreciation - was negative $13 million, compared with $22
million in the 1997 quarter. Total 1998 revenues were $585 million, versus $868
million in 1997.
CORPORATE ITEMS (revenues not allocated to business sectors, intercompany
eliminations, equity in earnings of certain affiliates, taxable-equivalent
adjustments, and the results of sold or discontinued businesses) revenues
decreased by $295 million in 1998. The decrease includes approximately $176
million in lower results from hedges of anticipated revenues and expenses in
foreign currencies. The results of these hedges are partially offset by the
impact of exchange rate movements on business sector revenues and expenses.
<PAGE> 4
J.P. Morgan & Co. Incorporated 4
OPERATING EXPENSES
Operating expenses in 1998 up 2%
Operating expenses were $1.391 billion in the fourth quarter, including a
special charge of $143 million ($86 million after tax) in connection with
previously reported cost reduction programs that are part of our productivity
initiatives. Excluding the charge, total operating expenses increased by 14%
from the third quarter, in line with revenues, driven by higher compensation
accruals. Compared with the fourth quarter of 1997, operating expenses decreased
5%. Costs to prepare for the Year 2000 and European Economic and Monetary Union
(EMU) were $50 million in the quarter, versus $52 million a year ago.
The charge includes $101 million in severance-related expenses in connection
with staff reductions of approximately 800 and $42 million in real estate costs
as a result of consolidation in several European locations. Savings associated
with the initiatives taken during the quarter are estimated to be $160 million
annually, and will help achieve our previously disclosed target of a $400
million reduction in core expenses in 1999.
For the full year 1998, operating expenses excluding special charges of $358
million were $5.180 billion, an increase of 2% over 1997. Year 2000 and
EMU-related expenses were $205 million in 1998 and $96 million in 1997.
CREDIT DEVELOPMENTS
$260 million in revenue reductions for 1998 related to our credit strategy
As previously reported, in 1998 we began to transform our credit business by
helping clients access credit efficiently in the capital markets while reducing
the capital employed in the business. As a result of this new strategy and the
reduction of credit exposures in the emerging markets, firmwide revenues in 1998
were reduced by approximately $260 million. The total includes approximately
$195 million in losses on the sale of loans and investment securities, primarily
in Asia, and approximately $65 million in fees and hedging costs to reduce the
credit risk in our portfolio. In addition, charge-offs related to emerging
market loan sales during 1998 were approximately $100 million. Emerging market
exposures in Asia (excluding Japan) and Latin America were reduced by
approximately 50% and 40%, respectively, in 1998.
The combination of these actions and net roll-offs of credit extensions reduced
risk-adjusted assets by approximately $7 billion between 1997 and 1998, and
reduced the economic capital requirements of our credit portfolio by
approximately 17%.
Net provision for credit losses of $25 million in the fourth quarter
We recorded a net provision for credit losses of $25 million in the quarter,
bringing our allowances for credit losses for traditional credit products to
$595 million. These allowances consist of an allowance against loans of $470
million and an allowance of $125 million, included in other liabilities, against
off-balance sheet instruments such as commitments, standby letters of credit,
and guarantees. By comparison, the allowances for
<PAGE> 5
J.P. Morgan & Co. Incorporated 5
traditional credit products were $589 million ($404 million against loans and
$185 million against other liabilities) at the end of the third quarter.
These allowances for credit losses from traditional credit products exclude the
credit reserve for nonperforming derivatives, which is included in trading
account assets, of $321 million at December 31, 1998, and $325 million at
September 30, 1998. This reserve was previously categorized as the trading
allowance.
Provisions related to loans and off-balance sheet instruments are reflected in
net interest revenue and other revenue, respectively. Changes in the credit
reserve for nonperforming derivatives are reflected in trading revenue. Net
charge-offs in the quarter related to traditional credit products were $19
million and primarily related to exposures in emerging Asia.
Nonperforming loans at December 31, 1998, were $122 million, versus $60 million
at September 30, 1998; the increase primarily related to one counterparty in the
United States. Other nonperforming assets, primarily swaps with certain Asian
counterparties, were essentially unchanged at $535 million. Total nonperforming
assets at December 31, 1998, were $657 million, compared with $593 million at
September 30, 1998.
MARKET RISK DEVELOPMENTS
Reductions in the size of trading positions as well as declining market
volatilities over the fourth quarter led to a downward trend in risk levels
within most trading businesses. Daily earnings at risk (DEaR) in our trading
activities decreased nearly 20% to $35 million at December 31, 1998, from $43
million at September 30. Actual trading volatilities exceeded the DEaR estimates
during the quarter, largely the result of extreme volatilities in October. The
DEaR for our investment portfolio, which consists largely of U.S. government
agency bonds, was $72 million, up from $39 million at September 30. This
increase is entirely due to the extraordinary short-term increase in market
volatilities, which more than offset reductions in the size and underlying risk
in the portfolio.
For 1998, trading DEaR for the firm averaged $38 million, up from the 1997
average of $23 million. The increase reflects the growth of our market
businesses as well as the extraordinarily high volatilities - particularly in
the August to October period. For the year as a whole, our actual trading
volatility was higher than our DEaR estimates.
CAPITAL
At December 31, 1998, under the Federal Reserve Board market risk capital
guidelines for calculation of risk-based capital ratios, J.P. Morgan's estimated
tier 1 and total risk-based capital ratios were 8.0% and 11.6% respectively; the
estimated leverage ratio was 3.9%. At September 30, 1998, J.P. Morgan's tier 1
and total risk-based capital ratios were 7.6% and 11.2%, respectively, and the
leverage ratio was 4.0%.
At December 31, 1998, stockholders' equity included $147 million of net
unrealized appreciation on debt investment and marketable equity investment
securities, net of the related tax liability of $87 million. This compares with
$292 million of net unrealized appreciation at September 30, 1998, net of the
related tax liability
<PAGE> 6
J.P. Morgan & Co. Incorporated 6
of $202 million. The net unrealized appreciation on debt investment securities
was $125 million and $410 million at December 31, 1998, and September 30, 1998,
respectively. The decline primarily related to decreases in the value of U.S.
government and agency securities. The net unrealized appreciation on marketable
equity investment securities was $109 million at December 31, 1998, and $84
million at September 30, 1998.
As previously reported, the Board of Directors of J.P. Morgan & Co. Incorporated
increased the regular quarterly dividend to $0.99 per share from $0.95 per share
on the company's common stock for the quarter ending December 31, 1998. The
Board also approved the purchase of up to $750 million of J.P. Morgan common
stock, subject to market conditions and other factors. These purchases may be
made periodically in 1999 or beyond in the open market or through privately
negotiated transactions.
During 1998, the firm purchased $755 million of its common stock or
approximately 6.6 million shares in total. These purchases were part of the
December 1997 authorization to repurchase 7 million shares to lessen the
dilutive impact of the firm's employee benefit plans on earnings per share.
# # #
J.P. Morgan is a leading 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.
This release may contain forward-looking statements. Our statements, which
reflect management's beliefs and expectations, are subject to risks and
uncertainties that may cause actual results to differ materially from these
statements. For a discussion of the risks and uncertainties, please refer to our
1997 Annual Report.
Attached are the financial summary; interim consolidated financial statements,
which are unaudited; summary of sector results; trading and investment banking
revenue tables; and asset quality tables. J.P. Morgan news releases, including
quarterly financial results, are available on the Internet at www.jpmorgan.com.
<PAGE> 7
J.P. Morgan & Co. Incorporated 7
FINANCIAL SUMMARY
J. P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except share data
Third
Fourth Quarter Quarter Twelve Months
---------------------------------- ---------------- ----------------------------
1998 1997 1998 1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (a) $89 $271 (b) $156 (c) $963 $1,465
PER COMMON SHARE
Net income
Basic (a) $0.44 $1.44 (b) $0.81 (c) $5.08 $7.71
Diluted (a) 0.42 1.33 (b) 0.75 (c) 4.71 7.17
Dividends declared 0.99 0.95 0.95 3.84 3.59
Book value (d) $55.01 $55.99 $56.22
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares issued and outstanding
at period-end 175,006,281 176,317,729 174,951,795
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted-average number of common
and dilutive potential common shares
outstanding 194,155,078 197,357,488 196,395,485 197,201,058 199,318,315
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends declared on common stock $173 $167 $167 $677 $642
Dividends declared on preferred stock 9 8 9 36 35
- ---------------------------------------------------------------------------------------------------------------------------------
Annualized rate of return on average
common stockholders' equity (e) (a) 3.1% 9.7% (b) 5.3% (c) 8.6% 13.4%
As % of period-end total assets:
Common equity 4.0% 4.1% 3.6%
Total equity 4.3 4.4 3.9
- ---------------------------------------------------------------------------------------------------------------------------------
Regulatory capital ratios
Tier 1 risk-based capital ratio 8.0% 8.0% 7.6%
Total risk-based capital ratio 11.6 11.9 11.2
Leverage ratio 3.9 4.4 4.0
Risk-adjusted assets $139,600 $148,474 $148,906
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Debt investment securities (f) $ 30,129 $ 21,375 $ 22,225 $ 24,905 $ 23,553
Loans 28,567 33,151 30,162 30,943 30,636
Total interest-earning assets 205,703 209,870 204,724 207,134 199,049
Total assets 286,486 269,692 284,637 283,184 252,895
Total interest-bearing liabilities 199,579 201,381 201,553 203,195 191,361
Total liabilities 275,378 258,224 272,841 271,674 241,542
Common stockholders' equity 10,413 10,774 11,102 10,815 10,659
Total stockholders' equity 11,107 11,468 11,796 11,509 11,353
Net interest earnings before provision
(fully taxable basis) 347 472 352 1,357 1,944
Net yield on interest-earning assets 0.67% 0.89% 0.68% 0.66% 0.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Employees at period-end 15,674 16,943 16,155
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excluding the 1998 fourth quarter after tax charge of $86 million ($143
million before tax) related to cost reduction programs: net income was $175
million; basic and diluted earnings per share (EPS) were $0.92 and $0.86,
respectively; and the annualized rate of return on average common stockholders'
equity was 6.4% (including the impact of Statement of Financial Accounting
Standards (SFAS) No. 115) and 6.4% (excluding the impact of SFAS No. 115) for
the three months ended December 31, 1998.
(b) Excluding the 1998 third quarter after tax gain of $34 million ($56 million
before tax) related to the sale of the firm's investment management business in
Australia: net income was $122 million; basic and diluted EPS were $0.62 and
$0.58, respectively; and the annualized rate of return on average common
stockholders' equity was 4.0% (including the impact of SFAS No. 115) and 4.2%
(excluding the impact of SFAS No. 115) for the three months ended September 30,
1998.
(c) Excluding the after tax charges of $215 million (related to restructuring of
business activities and other cost reduction programs in the first and fourth
quarters of 1998, respectively) and excluding the after tax gains of $113
million (related to business sales in the second and third quarters of 1998,
respectively): net income was $1,065 million; basic and diluted EPS were $5.64
and $5.22, respectively; and the annualized rate of return on average common
stockholders' equity was 9.5% (including the impact of SFAS No. 115) and 9.8%
(excluding the impact of SFAS No. 115) for the twelve months ended December 31,
1998.
(d) Excluding the impact of SFAS No. 115, the book value per common share was
$54.24, $53.74, and $54.70, at December 31, 1998, December 31, 1997, and
September 30, 1998, respectively.
(e) Excluding the impact of SFAS No. 115, the annualized rate of return on
average common stockholders' equity was 3.1%, 10.2%, and 5.4% for the three
months ended December 31, 1998, December 31, 1997, and September 30, 1998,
respectively, and 8.8% and 14.1% for the twelve months ended December 31, 1998
and 1997, respectively.
(f) Average debt investment securities are computed on historical amortized
cost, excluding the effects of SFAS No. 115 adjustments.
<PAGE> 8
J.P. Morgan & Co. Incorporated
8
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
In millions, except share data
Three months ended
---------------------------------------------------------------------------------
(See note a) December 31 December 31 Increase/ September 30 Increase/
1998 1997 (Decrease) 1998 (Decrease)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $3,024 $3,271 ($247) $3,249 ($225)
Interest expense 2,701 2,816 (115) 2,917 (216)
- -----------------------------------------------------------------------------------------------------------------------------
Net interest revenue 323 455 (132) 332 (9)
Provision for credit losses (85) - (85) (25)(b) (60)
Net interest revenue after provision
for credit losses 238 455 (217) 307 (69)
NONINTEREST REVENUES
Trading revenue 520 306 214 69(b) 451
Investment banking revenue 381 283 98 312 69
Investment management revenue 220 208 12 224 (4)
Fees and commissions 179 179 - 182 (3)
Investment securities revenue (42) 167 (209) 136 (178)
Other revenue 8(c) 82 (74) 71(d) (63)
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest revenues 1,266 1,225 41 994 272
Total revenues, net of interest expense
and provision for credit losses 1,504 1,680 (176) 1,301 203
OPERATING EXPENSES
Employee compensation and benefits 801 729 72 567 234
Net occupancy 124 79 45 84 40
Technology and communications 305 305 - 293 12
Other expenses 161 195 (34) 155 6
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,391(e) 1,308 83 1,099 292
Income before income taxes 113 372 (259) 202 (89)
Income taxes 24 101 (77) 46 (22)
- -----------------------------------------------------------------------------------------------------------------------------
Net income 89 271 (182) 156 (67)
PER COMMON SHARE
Net income
Basic $0.44 $1.44 ($1.00) $0.81 ($0.37)
Diluted 0.42 1.33 (0.91) 0.75 (0.33)
Dividends declared 0.99 0.95 0.04 0.95 0.04
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to July 1, 1998, changes, excluding charge-offs and recoveries, across
balance sheet allowance captions, which included a reserve for trading assets
(derivatives), loans and off-balance sheet financial instruments such as
commitments, standby letters of credit and guarantees, were shown as
reclassifications. Reclassifications had no impact on net income, and
accordingly, were not shown on the income statement. Subsequent to July 1, 1998,
reclassifications across balance sheet captions for allowances are reflected as
provisions and reversals of provisions in the consolidated statement of income.
(b) The third quarter consolidated net provision for credit losses of $75
million has been reclassified to conform to current presentation as follows: $25
million included in net interest revenue related to loans and $50 million
included in trading revenue related to changes in the credit reserve for
nonperforming derivatives.
(c) Fourth quarter 1998 includes a negative provision of $60 million related to
a decrease in our allowance for credit losses for off-balance sheet financial
instruments.
(d) Third quarter 1998 includes a pretax gain of $56 million ($34 million after
tax) related to the sale of the firm's investment management business in
Australia.
(e) Fourth quarter 1998 includes a pretax charge of $143 million ($86 million
after tax) related to cost reduction programs which was recorded as follows:
$101 million in Employee compensation and benefits, related to severance and $42
million in Net occupancy, related to real estate write-offs.
<PAGE> 9
J.P. Morgan & Co. Incorporated
9
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------
In millions, except share data
Twelve months ended
------------------------------------------------------------------------
(See note a) December 31 December 31 Increase/
1998 1997 (Decrease)
------------------------------------------------------------------------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $ 12,641 $ 12,353 $ 288
Interest expense 11,360 10,481 879
- -----------------------------------------------------------------------------------------------------------------------
Net interest revenue 1,281 1,872 (591)
Provision for credit losses (110)(b) -- (110)
Net interest revenue after provision
for credit losses 1,171 1,872 (701)
NONINTEREST REVENUES
Trading revenue 2,362(b) 2,137 225
Investment banking revenue 1,401 1,123 278
Investment management revenue 881 792 89
Fees and commissions 748 647 101
Investment securities revenue 205 409 (204)
Other revenue 187(b)(c) 240 (53)
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest revenues 5,784 5,348 436
Total revenues, net of interest expense
and provision for credit losses 6,955 7,220 (265)
OPERATING EXPENSES
Employee compensation and benefits 3,233 3,027 206
Net occupancy 437 333 104
Technology and communications 1,192 1,025 167
Other expenses 676 681 (5)
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 5,538(d) 5,066 472
Income before income taxes 1,417 2,154 (737)
Income taxes 454 689 (235)
- -----------------------------------------------------------------------------------------------------------------------
Net income 963 1,465 (502)
PER COMMON SHARE
Net income
Basic $ 5.08 $ 7.71 ($2.63)
Diluted 4.71 7.17 (2.46)
Dividends declared 3.84 3.59 0.25
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to July 1, 1998, changes, excluding charge-offs and recoveries, across
balance sheet allowance captions, which included a reserve for trading assets
(derivatives), loans and off-balance sheet financial instruments such as
commitments, standby letters of credit and guarantees, were shown as
reclassifications. Reclassifications had no impact on net income, and
accordingly, were not shown on the income statement. Subsequent to July 1, 1998,
reclassifications across balance sheet captions for allowances are reflected as
provisions and reversals of provisions in the consolidated statement of income.
(b) The third quarter consolidated net provision for credit losses of $75
million has been reclassified to conform to current presentation as follows: $25
million included in net interest revenue related to loans and $50 million
included in trading revenue related to changes in the credit reserve for
nonperforming derivatives. Other revenue also includes a negative provision of
$60 million in the fourth quarter related to a decrease in our allowance for
credit losses for off-balance sheet financial instruments.
(c) Twelve months ended December 31, 1998 includes a third quarter pretax gain
of $56 million ($34 million after tax) related to the sale of the firm's
investment management business in Australia and a second quarter pretax gain of
$131 million ($79 million after tax) related to the sale of the firm's global
trust and agency services business.
(d) Twelve months ended December 31, 1998 includes charges in the first and
fourth quarters totaling $358 million ($215 million after tax) related to the
restructuring of business activities and other cost reduction programs. The
charges were recorded as follows: $241 million in Employee compensation and
benefits, related to severance; $112 million in Net occupancy, related to real
estate write-offs; and $5 million in Technology and communications, related to
equipment write-offs.
<PAGE> 10
J.P. Morgan & Co. Incorporated
10
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
J.P. Morgan & Co. Incorporated
- -----------------------------------------------------------------------------------------------------------------------------------
In millions, except share data December 31 September 30 December 31
1998 1998 1997
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,203 $ 3,405 $ 1,758
Interest-earning deposits with banks 2,371 1,529 2,132
Debt investment securities available-for-sale carried at fair value
(cost: $36,107 at December 1998, $25,231 at September 1998, and
$22,507 at December 1997) 36,232 25,641 22,768
Equity investment securities 1,169 951 1,085
Trading account assets (a) 113,896 128,746 111,854
Securities purchased under agreements to resell 31,731 42,985 39,002
Securities borrowed 30,790 47,744 38,375
Loans, net of allowance for credit losses of $470 at December 1998, $404
at September 1998, and $546 at December 1997 25,025 30,291 31,032
Accrued interest and accounts receivable 7,689 6,888 4,962
Premises and equipment, net of accumulated depreciation of $1,350 at
December 1998, $1,339 at September 1998, and $1,379 at December 1997 1,881 1,888 1,838
Other assets 9,080 8,446 7,353
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 261,067 298,514 262,159
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,242 992 1,482
In offices outside the U.S. 563 776 744
Interest-bearing deposits:
In offices in the U.S. 7,724 3,699 9,232
In offices outside the U.S. 45,499 48,885 47,421
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits 55,028 54,352 58,879
Trading account liabilities 70,643 78,552 71,141
Securities sold under agreements to repurchase ($62,784 at December 1998,
$82,740 at September 1998, and $53,202 at December 1997) and federal
funds purchased 63,368 83,196 57,804
Commercial paper 6,637 12,324 6,622
Other liabilities for borrowed money 12,515 13,940 17,176
Accounts payable and accrued expenses 9,859 12,547 10,865
Long-term debt not qualifying as risk-based capital 23,037 23,284 18,246
Other liabilities, including allowance for credit losses of $125 at December
1998 and $185 at September 1998
and December 1997 2,999 3,035 4,129
- -----------------------------------------------------------------------------------------------------------------------------------
244,086 281,230 244,862
Liabilities qualifying as risk-based capital:
Long-term debt 4,570 4,615 4,743
Company-obligated mandatorily redeemable preferred securities of subsidiaries 1,150 1,150 1,150
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 249,806 286,995 250,755
STOCKHOLDERS' EQUITY
Preferred stock (authorized shares: 10,000,000)
Adjustable rate cumulative preferred stock, $100 par value (issued and
outstanding: 2,444,300) 244 244 244
Variable cumulative preferred stock, $1,000 par value (issued and
outstanding: 250,000) 250 250 250
Fixed cumulative preferred stock, $500 par value (issued and outstanding:
400,000) 200 200 200
Common stock, $2.50 par value (authorized shares: 500,000,000; issued:
200,873,067 at December 1998, 200,809,067 at September 1998, and
200,692,673 at December 1997) 502 502 502
Capital surplus 1,252 1,273 1,360
Common stock issuable under stock award plans 1,460 1,446 1,185
Retained earnings 9,614 9,716 9,398
Accumulated other comprehensive income:
Net unrealized gains on investment securities, net of taxes 147 292 432
Foreign currency translation, net of taxes (46) (38) (22)
- -----------------------------------------------------------------------------------------------------------------------------------
13,623 13,885 13,549
Less: treasury stock (25,866,786 shares at December 1998, 25,857,272 shares
at September 1998, and 24,374,944 shares at December 1997) at cost 2,362 2,366 2,145
- -----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 11,261 11,519 11,404
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 261,067 298,514 262,159
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Trading account assets include the credit reserve for nonperforming
derivatives of $321 million at December 31, 1998, $325 million at September 30,
1998, and $350 million at December 31, 1997. This reserve was previously
categorized as the trading allowance.
Certain prior period amounts have been reclassified to conform with the current
presentation.
<PAGE> 11
J.P. Morgan & Co. Incorporated
11
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CONDITION
Morgan Guaranty Trust Company of New York
- ---------------------------------------------------------------------------------------------------------------------------------
In millions, except share data December 31 December 31
1998 1997
----------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,147 $ 1,663
Interest-earning deposits with banks 2,372 2,195
Debt investment securities available-for-sale carried at fair value 3,634 20,539
Trading account assets (a) 90,770 88,995
Securities purchased under agreements to resell 33,316 28,045
Securities borrowed 8,193 13,831
Loans, net of allowance for credit losses of $470 at December 1998 and
$545 at December 1997 24,876 30,851
Accrued interest and accounts receivable 3,898 4,534
Premises and equipment, net of accumulated depreciation of $1,160 at
December 1998 and $1,208 at December 1997 1,703 1,669
Other assets 5,337 4,096
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 175,246 196,418
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Noninterest-bearing deposits:
In offices in the U.S. 1,232 1,492
In offices outside the U.S. 572 752
Interest-bearing deposits:
In offices in the U.S. 7,749 10,156
In offices outside the U.S. 46,668 48,343
- ---------------------------------------------------------------------------------------------------------------------------------
Total deposits 56,221 60,743
Trading account liabilities 64,776 61,562
Securities sold under agreements to repurchase and federal funds
purchased 14,916 26,017
Other liabilities for borrowed money 8,646 10,433
Accounts payable and accrued expenses 6,123 7,160
Long-term debt not qualifying as risk-based capital 10,358 14,320
Other liabilities, including allowance for credit losses of $125
at December 1998 and $185 at December 1997 542 2,713
- ---------------------------------------------------------------------------------------------------------------------------------
161,582 182,948
Long-term debt qualifying as risk-based capital 3,186 3,037
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 164,768 185,985
STOCKHOLDER'S EQUITY
Preferred stock, $100 par value (authorized shares: 2,500,000) - -
Common stock, $25 par value (authorized shares: 11,000,000; issued
and outstanding: 10,599,027) 265 265
Surplus 3,305 3,155
Undivided profits 6,836 6,927
Accumulated other comprehensive income:
Net unrealized gains on investment securities, net of taxes 118 108
Foreign currency translation, net of taxes (46) (22)
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 10,478 10,433
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity 175,246 196,418
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Trading account assets include the credit reserve for nonperforming
derivatives of $321 million at December 31, 1998 and $350 million at December
31, 1997. This reserve was previously categorized as the trading allowance.
Member of the Federal Reserve System and the Federal Deposit Insurance
Corporation.
<PAGE> 12
12
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Total
Finance Manage- Client- Equity Proprietary Total
and Market ment and Focused Invest- Investing Proprietary Corporate Consol-
In millions Advisory Making Servicing Activities ments and Trading Activities Items idated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOURTH QUARTER 1998
Total revenues $ 424(a) $ 638 $ 403 $1,465 $ 46 $ 168 $ 214 (175) $1,504
Total expenses 316 529 335 1,180 15 38 53 158(b) 1,391
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 108 109 68 285 31 130 161 (333) 113
- ------------------------------------------------------------------------------------------------------------------------------------
FOURTH QUARTER 1997
Total revenues 439 453 436 1,328 164 235 399 (47) 1,680
Total expenses 320 558 372 1,250 13 38 51 7 1,308
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 119 (105) 64 78 151 197 348 (54) 372
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), FOURTH QUARTER 1998 VS. FOURTH QUARTER 1997
Total revenues (15) 185 (33) 137 (118) (67) (185) (128) (176)
Total expenses (4) (29) (37) (70) 2 -- 2 151 83
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income (11) 214 4 207 (120) (67) (187) (279) (259)
- ------------------------------------------------------------------------------------------------------------------------------------
THIRD QUARTER 1998
Total revenues $ 413(c) $ 260 $ 436 $1,109 $ 157 $ 121 $ 278 (86)(d) $1,301
Total expenses 281 387 335 1,003 10 40 50 46 1,099
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 132 (127) 101 106 147 81 228 (132) 202
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), FOURTH QUARTER 1998 VS. THIRD QUARTER 1998
Total revenues 11 378 (33) 356 (111) 47 (64) (89) 203
Total expenses 35 142 -- 177 5 (2) 3 112 292
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income (24) 236 (33) 179 (116) 49 (67) (201) (89)
- ------------------------------------------------------------------------------------------------------------------------------------
TWELVE MONTHS 1998
Total revenues $1,989(e) $2,737 $1,686 $6,412 $ 336 $ 585 $ 921 (378)(f) $6,955
Total expenses 1,318 2,089 1,375 4,782 43 175 218 538 (g) 5,538
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 671 648 311 1,630 293 410 703 (916) 1,417
- ------------------------------------------------------------------------------------------------------------------------------------
TWELVE MONTHS 1997
Total revenues 1,919 2,503 1,610 6,032 403 868 1,271 (83) 7,220
Total expenses 1,316 2,015 1,331 4,662 41 178 219 185 5,066
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 603 488 279 1,370 362 690 1,052 (268) 2,154
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE), TWELVE MONTHS 1998 VS. TWELVE MONTHS 1997
Total revenues 70 234 76 380 (67) (283) (350) (295) (265)
Total expenses 2 74 44 120 2 (3) (1) 353 472
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income 68 160 32 260 (69) (280) (349) (648) (737)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a fourth quarter 1998 net provision for credit losses of $25
million.
(b) Includes a fourth quarter 1998 pretax charge of $143 million related to the
restructuring of business activities.
(c) Includes a third quarter 1998 provision for credit losses and credit reserve
adjustment for nonperforming derivatives totaling $75 million.
(d) Includes a third quarter 1998 pretax gain of $56 million related to the sale
of the firm's investment management business in Australia.
(e) Includes 1998 net provisions for credit losses of $100 million (see notes a
and c).
(f) Includes 1998 pretax gains of $187 million related to business sales.
(g) Includes 1998 pretax charges of $358 million related to the restructuring of
business activities and other cost reduction programs.
We describe the activities of J.P. Morgan using five business sectors. Three of
these sectors - Finance and Advisory, Market Making, and Asset Management and
Servicing - focus on services we provide for clients, including positions taken
to facilitate client transactions. Two sectors comprise proprietary activities
that we conduct exclusively for our own account: Equity Investments and
Proprietary Investing and Trading. The Finance and Advisory sector includes
results of our advisory, debt and equity underwriting, and credit activities.
The Market Making sector includes results of our fixed income, emerging markets,
equities, foreign exchange, and commodities activities. The Asset Management and
Servicing sector includes results of our institutional investment management and
mutual funds, services for private clients, and securities and futures services.
Corporate Items includes revenues and expenses that have not been allocated to
business sectors, intercompany eliminations, equity in earnings of certain
affiliates, taxable-equivalent adjustment, and results of certain discontinued
businesses. For a complete description of our business sectors, please refer to
the J.P. Morgan & Co. Incorporated 1997 Annual report.
METHODOLOGY:
The firm's management reporting system and policies were used to determine the
revenues and expenses directly attributable to each business sector. Earnings on
stockholders' equity were allocated based on management's assessment of the
inherent risk of the components of each sector. In addition, certain overhead
expenses not allocated for management reporting purposes were allocated to each
business 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.
<PAGE> 13
13
SUMMARY OF SECTOR RESULTS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Fourth Fourth Third Twelve Twelve
Quarter Quarter Increase/ Quarter Increase/ Months Months Increase/
In millions 1998 1997 (Decrease) 1998 (Decrease) 1998 1997 (Decrease)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Advisory & Underwriting $349 $271 $78 $268 $81 $1,291 $1,075 $216
Credit 75(a) 168 (93) 145(a) (70) 698(a) 844 (146)
- --------------------------------------------------------------------------------- ---------------------------------------------
FINANCE AND ADVISORY 424 439 (15) 413 11 1,989 1,919 70
- --------------------------------------------------------------------------------- ---------------------------------------------
Fixed Income 377 228 149 56 321 1,270 1,092 178
Emerging Markets 51 122 (71) (56) 107 381 542 (161)
Equities 133 (54) 187 119 14 573 362 211
Foreign Exchange 82 128 (46) 138 (56) 459 430 29
Commodities (5) 29 (34) 3 (8) 54 77 (23)
- --------------------------------------------------------------------------------- ---------------------------------------------
MARKET MAKING 638 453 185 260 378 2,737 2,503 234
- --------------------------------------------------------------------------------- ---------------------------------------------
Asset Management Services 265 277 (12) 270 (5) 1,063 1,035 28
Securities and Futures Services 138 159 (21) 166 (28) 623 575 48
- --------------------------------------------------------------------------------- ---------------------------------------------
ASSET MANAGEMENT AND
SERVICING 403 436 (33) 436 (33) 1,686 1,610 76
- --------------------------------------------------------------------------------- ---------------------------------------------
TOTAL CLIENT-FOCUSED
REVENUES 1,465 1,328 137 1,109 356 6,412 6,032 380
- --------------------------------------------------------------------------------- ---------------------------------------------
EQUITY INVESTMENTS 46 164 (118) 157 (111) 336 403 (67)
- --------------------------------------------------------------------------------- ---------------------------------------------
PROPRIETARY INVESTING AND
TRADING 168 235 (67) 121 47 585 868 (283)
- --------------------------------------------------------------------------------- ---------------------------------------------
TOTAL PROPRIETARY REVENUES 214 399 (185) 278 (64) 921 1,271 (350)
- --------------------------------------------------------------------------------- ---------------------------------------------
CORPORATE ITEMS (175) (47) (128) (86)(b) (89) (378)(b) (83) (295)
- --------------------------------------------------------------------------------- ---------------------------------------------
CONSOLIDATED REVENUES 1,504 1,680 (176) 1,301 203 6,955 7,220 (265)
- --------------------------------------------------------------------------------- ---------------------------------------------
</TABLE>
(a) Includes a third quarter 1998 provision for credit losses and credit reserve
adjustment for nonperforming derivatives totaling $75 million and a fourth
quarter 1998 net provision for credit losses of $25 million.
(b) Includes a second quarter 1998 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.
The activities of our Fixed Income, Emerging Markets, and Equities businesses
are reflected across several sectors.
Aggregate revenues for these businesses for the twelve months ended
December 31 follows:
Fixed Income - $1,802 million (1998) and $1,582 million (1997); Emerging
Markets - $359 million (1998) and $630 million (1997); and, Equities - $945
million (1998) and $700 million (1997).
Private clients accounted for revenues of approximately $165 million and $670
million for the three and twelve months ended December 31, 1998, respectively.
Of this amount, approximately $45 million and $185 million were recorded in the
Finance and Advisory and Market Making sectors for the three and twelve months
ended December 31, 1998, respectively. Private clients accounted for revenues of
approximately $155 million and $610 million for the three and twelve months
ended December 31, 1997, respectively. Of this amount, $40 million and $170
million were recorded in the Finance and Advisory and Market Making sectors for
the three and twelve months ended December 31, 1997, respectively.
Prior period amounts have been reclassified to conform to current period
presentation of management reporting results.
TRADING REVENUE AND RELATED NET INTEREST REVENUE
J.P. Morgan & Co. Incorporated (preliminary)
The following table presents trading revenue, disaggregated by principal product
grouping across all of our business sector activities, and total trading-related
net interest revenue. This revenue reflects only a portion of the total revenues
generated by our activities and excludes other important sources of revenues,
including fees and commissions. As a result, this table does not reflect the
integrated nature of our business.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET
FIXED FOREIGN PROPRIETARY TRADING INTEREST COMBINE
In millions INCOME EQUITIES EXCHANGE COMMODITIES TRADING REVENUE REVENUE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fourth Quarter 1998 $279 $50 $70 ($10) $131 $520 $108 $628
Fourth Quarter 1997 126 (142) 202 32 88 306 110 416
- ------------------------------------------------------------------------------------------------------------------------------
Third Quarter 1998 (145)* (6) 158 5 57 69 92 161
- ------------------------------------------------------------------------------------------------------------------------------
Twelve Months 1998 1,307 210 463 45 337 2,362 383 2,745
Twelve Months 1997 1,138 190 472 64 273 2,137 509 2,646
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Trading revenues have been restated to reflect current presentation. Refer to
page 4, Credit Developments, and page 8, note (a) for more information.
<PAGE> 14
J.P. Morgan & Co. Incorporated
14
INVESTMENT BANKING REVENUE
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
In millions
- ------------------------------------------------------------------------------------------------------------------------
ADVISORY AND UNDERWRITING TOTAL INVESTMENT
SYNDICATION FEES REVENUE BANKING REVENUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter 1998 $212 $169 $381
Fourth Quarter 1997 166 117 283
- ------------------------------------------------------------------------------------------------------------------------
Third Quarter 1998 229 83 312
- ------------------------------------------------------------------------------------------------------------------------
Twelve Months 1998 830 571 1,401
Twelve Months 1997 637 486 1,123
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
J.P. Morgan & Co. Incorporated
ASSET QUALITY
15
NONPERFORMING ASSETS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
December 31, September 30, December 31,
In millions 1998 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonperforming loans:
Commercial and industrial $12 $12 $55
Banks and other financial institutions 2 2 30
Other 108 46 28
- ------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 122 60 113
Other nonperforming assets,
primarily swaps with Asian banking
and other financial institutions 535 533 546
- ------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets 657 593 659
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
ALLOWANCE FOR CREDIT LOSSES
J.P. Morgan & Co. Incorporated
Loans
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter Fourth Quarter Twelve months Twelve months
In millions 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $404 $546 $546 $566
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for credit losses 85 - 110 -
- ---------------------------------------------------------------------------------------------------------------------------------
Reclassifications (a) - 9 (50) (20)
- ---------------------------------------------------------------------------------------------------------------------------------
Recoveries 6 9 19 40
Charge-offs: *
Commercial and industrial (6) (15) (46) (21)
Banks and other financial institutions (17) (3) (83) (17)
Other (2) - (26) (2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (19) (9) (136) -
- ---------------------------------------------------------------------------------------------------------------------------------
Ending balance, December 31 470 546 470 546
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Charge-offs include losses on loan sales, primarily banks and other financial
institutions, of $16 million and $105 million for the three and twelve months
ended December 31, 1998, respectively. There were no losses on loan sales during
1997.
Components of the loan allowance
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
December 31, September 30, December 31,
In millions 1998 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specific counterparty components in the U.S. $ 29 $ 36 $ 55
Specific counterparty components outside the U.S. 5 5 51
- -----------------------------------------------------------------------------------------------------------------------
Total specific counterparty 34 41 106
- -----------------------------------------------------------------------------------------------------------------------
Specific country 93 77 198
Expected loss 228 210 171
General 115 76 71
- -----------------------------------------------------------------------------------------------------------------------
Total allowance 470 404 546
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other liabilities
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter Fourth Quarter Twelve months Twelve months
In millions 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $185 $200 $185 $200
- ----------------------------------------------------------------------------------------------------------------------------------
Negative provision for credit losses (60) - (60) -
- ----------------------------------------------------------------------------------------------------------------------------------
Reclassifications (a) - (15) - (15)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance, December 31 125 185 125 185
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Components of the other liabilities allowance
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
December 31, September 30, December 31,
In millions 1998 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Specific counterparty components in the U.S. $ 1 $ 1 $ -
Specific counterparty components outside the U.S. 2 2 2
- -----------------------------------------------------------------------------------------------------------------------------
Total specific counterparty 3 3 2
- -----------------------------------------------------------------------------------------------------------------------------
Specific country 30 7 58
Expected loss 66 94 53
General 26 81 72
- -----------------------------------------------------------------------------------------------------------------------------
Total allowance 125 185 185
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to July 1, 1998, changes, excluding charge-offs and recoveries, across
balance sheet allowance captions, which included a reserve for trading assets
(derivatives), loans and off-balance sheet financial instruments such as
commitments, standby letters of credit and guarantees, were shown as
reclassifications. Subsequent to July 1, 1998, reclassifications across balance
sheet captions for allowances are reflected as provisions and reversals of
provisions in the consolidated statement of income.
<PAGE> 16
J.P. Morgan & Co. Incorporated
16
EMERGING MARKET CREDIT EXPOSURES
J.P. Morgan & Co. Incorporated
(preliminary)
The following tables present exposures to certain emerging markets based upon
management's view of total exposure as of December 31, 1998.
The management view includes the following cross-border and local exposures: the
notional or contract value of loans, commitments to extend credit, securities
purchased under agreements to resell, interest earning deposits with banks; the
fair values of trading account assets (cash securities and derivatives,
excluding any collateral we may be holding to offset these exposures) and
investment securities; and other monetary assets. It also includes the impact of
credit derivatives, at their notional or contract value, where we have bought or
sold credit protection outside of the respective country. Trading assets reflect
the net of long and short positions of the same issuer. Management's view
differs from bank regulatory rules, which are established by the Federal
Financial Institutions Examination Council (FFIEC), because of its treatment of
credit derivatives, trading account short positions, and the use of fair value
versus cost of investment securities. In addition, management does not net local
funding or liabilities against any local exposures as allowed by the FFIEC.
By type of financial instrument
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Credit
In billions Deriva- Other out- deriva-
December 31, 1998 Loans tives standings tives
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China $ - $0.1 $ - $ -
Hong Kong 0.5 0.1 0.2 (0.1)
Indonesia 0.1 0.1 - -
Malaysia - - 0.1 (0.1)
Philippines - 0.1 0.1 -
Singapore - - 0.2 (0.1)
South Korea 0.4 1.1 0.5 (0.3)
Taiwan - - - -
Thailand - 0.1 0.1 -
Other 0.2 0.1 - -
- -------------------------------------------------------------------------------------------------------------------------------
Total Asia, excluding Japan(a) 1.2 1.7 1.2 (0.6)
- -------------------------------------------------------------------------------------------------------------------------------
Argentina 0.1 0.3 0.7 (0.4)
Brazil 0.5 - 0.7 (0.2)
Chile 0.4 - 0.1 (0.1)
Colombia 0.2 - 0.4 -
Mexico 0.6 0.2 0.3 (0.3)
Other 0.5 0.4 0.2 (0.1)
- -------------------------------------------------------------------------------------------------------------------------------
Total Latin America, excluding the Caribbean 2.3 0.9 2.4 (1.1)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Total
In billions Commit- cross- Local Total
December 31, 1998 ments border exposure exposure
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China $ - $0.1 $ - $0.1
Hong Kong 0.1 0.8 0.8 1.6
Indonesia - 0.2 - 0.2
Malaysia - - - -
Philippines - 0.2 - 0.2
Singapore - 0.1 0.1 0.2
South Korea - 1.7 - 1.7
Taiwan 0.1 0.1 - 0.1
Thailand - 0.2 - 0.2
Other - 0.3 - 0.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total Asia, excluding Japan(a) 0.2 3.7 0.9 4.6
- ---------------------------------------------------------------------------------------------------------------------------------
Argentina - 0.7 0.6 1.3
Brazil - 1.0 0.9 1.9
Chile - 0.4 - 0.4
Colombia - 0.6 - 0.6
Mexico - 0.8 0.4 1.2
Other 0.1 1.1 - 1.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total Latin America, excluding the Caribbean 0.1 4.6 1.9 6.5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
By type of counterparty
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
In billions Govern-
December 31, 1998 Banks ments Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China $ - $ - $0.1 $0.1
Hong Kong - 0.7 0.9 1.6
Indonesia - - 0.2 0.2
Malaysia - - - -
Philippines - - 0.2 0.2
Singapore 0.1 - 0.1 0.2
South Korea 0.8 0.6 0.3 1.7
Taiwan 0.1 - - 0.1
Thailand 0.2 - - 0.2
Other 0.3 - - 0.3
- -----------------------------------------------------------------------------------------------------------------------------
Total Asia, excluding Japan(a) 1.5 1.3 1.8 4.6
- -----------------------------------------------------------------------------------------------------------------------------
Argentina - 0.6 0.7 1.3
Brazil 0.2 0.6 1.1 1.9
Chile - - 0.4 0.4
Colombia - 0.1 0.5 0.6
Mexico 0.1 0.1 1.0 1.2
Other 0.5 - 0.6 1.1
- -----------------------------------------------------------------------------------------------------------------------------
Total Latin America, excluding the Caribbean 0.8 1.4 4.3 6.5
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total exposures to Japan, based upon management's view, were $6.9 billion at
December 31, 1998.
Total exposures to South Africa, based upon management's view, were $1.1
billion at December 31, 1998.
HEDGE FUND EXPOSURES
J.P. Morgan & Co. Incorporated
The net amount owed J.P. Morgan by hedge funds under derivative and foreign
exchange contracts on a mark-to-market basis was approximately $1.3 billion as
of December 31, 1998. Substantially all of this amount is secured by cash and
U.S. Treasury and agency securities, under daily mark-to-market collateral
agreements. We also finance trading positions for hedge funds through reverse
repurchase agreements. The net amount of collateral owed the firm under
derivative and foreign exchange contracts and short-term financing agreements
was approximately $90 million. In addition, we have unsecured loans and
commitments to lend of approximately $6 million.
<PAGE> 1
EXHIBIT 99.B
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
Dollars in millions,
Interest and average rates Three months ended
On a taxable-equivalent basis December 31, 1998 December 31, 1997
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. $ 2,472 $ 58 9.31% $ 2,305 $ 75 12.91%
Debt investment securities in
offices in the U.S. (a):
U.S. Treasury 664 15 8.96 1,219 22 7.16
U.S. state and political
Subdivision 1,916 51 10.56 1,174 34 11.49
Other 26,679 370 5.50 15,957 247 6.14
Debt investment securities in offices
outside the U.S. (a) 870 14 6.38 3,025 57 7.48
Trading account assets:
In offices in the U.S. 31,519 419 5.27 30,292 484 6.34
In offices outside the U.S. 30,117 488 6.43 37,935 676 7.07
Securities purchased under agreements
to resell,
In offices in the U.S. 24,188 322 5.28 15,372 247 6.37
In offices outside the U.S. 15,493 216 5.53 26,705 310 4.61
Securities borrowed,
mainly in offices in the U.S. 40,797 510 4.96 41,221 500 4.81
Loans:
In offices in the U.S. 5,931 107 7.16 5,712 100 6.95
In offices outside the U.S. 22,636 386 6.77 27,439 455 6.58
Other interest-earning assets (b):
In offices in the U.S. 1,646 13 * 943 37 *
In offices outside the U.S. 775 80 * 571 44 *
- ----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 205,703 3,049 5.88 209,870 3,288 6.22
Cash and due from banks 1,639 775
Other noninterest-earning assets 79,144 59,047
- ----------------------------------------------------------------------------------------------------------------
Total assets 286,486 269,692
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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 determine these adjustments was
approximately 41% for the three months ended December 1998 and 1997.
(a) For the three months ended December 31, 1998 and 1997, 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.
* Not meaningful
1
<PAGE> 2
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
Dollars in millions,
Interest and average rates Three months ended
On a taxable-equivalent basis December 31, 1998 December 31, 1997
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. $ 8,730 $ 91 4.14% $ 9,900 $ 137 5.49%
In offices outside the U.S. 46,052 594 5.12 47,620 573 4.77
Trading account liabilities:
In offices in the U.S. 7,798 112 5.70 13,142 236 7.12
In offices outside the U.S. 16,739 211 5.00 16,149 238 5.85
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices in
the U.S. 70,497 923 5.19 68,364 915 5.31
Commercial paper, mainly in offices
in the U.S. 10,627 144 5.38 6,086 84 5.48
Other interest-bearing liabilities:
In offices in the U.S. 10,468 176 6.67 14,410 234 6.44
In offices outside the U.S. 1,657 58 13.89 3,111 56 7.14
Long-term debt,
mainly in offices in the U.S. 27,011 392 5.76 22,599 343 6.02
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 199,579 2,701 5.37 201,381 2,816 5.55
Noninterest-bearing deposits:
In offices in the U.S. 896 1,028
In offices outside the U.S. 564 594
Other noninterest-bearing
liabilities 74,340 55,221
- --------------------------------------------------------------------------------------------------------
Total liabilities 275,379 258,224
Stockholders' equity 11,107 11,468
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
Equity 286,486 269,692
Net yield on interest-earning assets 0.67 0.89
- --------------------------------------------------------------------------------------------------------
Net interest earnings 348 472
- --------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
Dollars in millions,
Interest and average rates Twelve months ended
on a taxable-equivalent basis December 31, 1998 December 31, 1997
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. $ 2,079 $ 294 14.14% $ 2,035 $ 199 9.78%
Debt investment securities in
offices in the U.S. (a):
U.S. Treasury 723 61 8.44 1,296 95 7.33
U.S. state and political
Subdivision 1,535 168 10.94 1,264 148 11.71
Other 21,128 1,185 5.61 17,260 1,095 6.34
Debt investment securities in offices
outside the U.S. (a) 1,519 109 7.18 3,733 273 7.31
Trading account assets:
In offices in the U.S. 30,394 1,837 6.04 25,245 1,587 6.29
In offices outside the U.S. 36,227 2,509 6.93 39,367 2,693 6.84
Securities purchased under agreements
to resell and federal funds sold,
In offices in the U.S. 17,372 939 5.41 15,660 895 5.72
In offices outside the U.S. 21,478 1,092 5.08 24,785 1,164 4.70
Securities borrowed,
mainly in offices in the U.S. 40,680 2,088 5.13 36,287 1,784 4.92
Loans:
In offices in the U.S. 6,452 464 7.19 5,146 381 7.40
In offices outside the U.S. 24,491 1,650 6.74 25,490 1,661 6.52
Other interest-earning assets (b):
In offices in the U.S. 2,112 122 * 774 168 *
In offices outside the U.S. 944 199 * 707 282 *
- ----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 207,134 12,717 6.14 199,049 12,425 6.24
Cash and due from banks 1,429 797
Other noninterest-earning assets 74,621 53,049
- ----------------------------------------------------------------------------------------------------------------
Total assets 283,184 252,895
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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 determine these adjustments was
approximately 41% for the twelve months ended December 31,1998 and 1997.
(a) For the twelve months ended December 31, 1998 and 1997, 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.
* Not meaningful
3
<PAGE> 4
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST EARNINGS
J.P. Morgan & Co. Incorporated
<TABLE>
<CAPTION>
Dollars in millions,
Interest and average rates Twelve months ended
on a taxable-equivalent basis December 31, 1998 December 31, 1997
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. $ 7,674 $ 397 5.17% $ 9,676 $ 538 5.56%
In offices outside the U.S. 49,044 2,426 4.95 46,254 2,215 4.79
Trading account liabilities:
In offices in the U.S. 9,424 665 7.06 11,390 785 6.89
In offices outside the U.S. 15,085 876 5.81 14,291 867 6.07
Securities sold under agreements to
repurchase and federal funds
purchased, mainly in offices in
the U.S. 70,537 3,846 5.45 67,121 3,532 5.26
Commercial paper, mainly in offices
in the U.S. 9,682 539 5.57 4,858 262 5.39
Other interest-bearing liabilities:
In offices in the U.S. 12,323 811 6.58 15,590 958 6.14
In offices outside the U.S. 3,360 263 7.83 4,026 227 5.64
Long-term debt, mainly in offices in the U.S. 26,066 1,537 5.90 18,155 1,097 6.04
- ----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 203,195 11,360 5.59 191,361 10,481 5.48
Noninterest-bearing deposits:
In offices in the U.S. 884 1,033
In offices outside the U.S. 784 452
Other noninterest-bearing
liabilities 66,812 48,696
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 271,675 241,542
Stockholders' equity 11,509 11,353
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
Equity 283,184 252,895
Net yield on interest-earning assets 0.66 0.98
- ----------------------------------------------------------------------------------------------------------------
Net interest earnings 1,357 1,944
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
4
