1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT APRIL 18, 2001 COMMISSION FILE NUMBER 1-5805 J.P. MORGAN CHASE & CO. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-2624428 ------------------------------ ------------------ (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 270 PARK AVENUE, NEW YORK, NEW YORK 10017 - ---------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 270-6000
2 Item 5. Other Events J.P. Morgan Chase & Co. (NYSE: JPM) announced first quarter 2001 operating earnings per share of $0.70, compared with $0.37 in the fourth quarter of 2000 and $1.01 in the first quarter of 2000. Operating income was $1,436 million, compared with $763 million in the fourth quarter of 2000 and $1,988 million one year ago. Reported net income, which includes special items, was $1,199 million, or $0.58 per share, in the first quarter of 2001. This compares with $708 million, or $0.34 per share, and $1,988 million, or $1.01 per share, in the fourth and first quarters of 2000, respectively. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include: the risk of adverse movements or volatility in the debt and equity securities markets or in interest or foreign exchange rates or indices; the risk of adverse impacts from an economic downturn; the risk of a downturn in domestic or foreign securities and trading conditions or markets; the risks associated with increased competition; the risks associated with unfavorable political and diplomatic developments in foreign markets or adverse changes in domestic or foreign governmental or regulatory policies; the risk that the merger integration will not be successful or that the revenue synergies and cost savings anticipated from the merger may not be fully realized or may take longer to realize than expected; the risk that the integration process may result in the disruption of ongoing business or in the loss of key employees or may adversely affect relationships with employees, clients or suppliers; the risk that the credit, market, liquidity, and operational risks associated with the various businesses of JPMorgan Chase are not successfully managed; or other factors affecting operational plans. Additional factors that could cause JPMorgan Chase's results to differ materially from those described in the forward-looking statements can be found in the 2000 Annual Report on Form 10-K of J.P. Morgan Chase & Co., filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). 2
3 SIGNATURE 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 CHASE & CO. ----------------------- (Registrant) Date April 18, 2001 By /s/ Joseph L. Sclafani -------------- ---------------------- Joseph L. Sclafani Executive Vice President and Controller [Principal Accounting Officer] 3
4 EXHIBIT INDEX Exhibit No. Description Page - ----------- ----------- ---- 99.1 Press Release - 2001 First Quarter Earnings 5 4
1 EXHIBIT 99.1 [J.P. Morgan Chase & Co. LOGO] J.P. Morgan Chase & Co. 270 Park Avenue, New York, NY 10017-2070 NYSE symbol: JPM www.jpmorganchase.com News release: IMMEDIATE RELEASE April 18, 2001 JPMORGAN CHASE REPORTS FIRST QUARTER 2001 RESULTS NEW YORK, APRIL 18, 2001 - J.P. Morgan Chase & Co. (NYSE: JPM) today announced first quarter 2001 operating earnings per share of $0.70, compared with $0.37 in the fourth quarter of 2000 and $1.01 in the first quarter of 2000. Operating income was $1,436 million, compared with $763 million in the fourth quarter of 2000 and $1,988 million one year ago. Reported net income, which includes special items, was $1,199 million, or $0.58 per share, in the first quarter of 2001. This compares with $708 million, or $0.34 per share, and $1,988 million, or $1.01 per share, in the fourth and first quarters of 2000, respectively. Amortization of intangibles was $0.08 per share in the first quarter of 2001 and $0.05 per share one year ago. The annualized cash operating return on common equity was 15.6% for the first quarter. See the Financial Highlights exhibit for consolidated results on a cash basis. Results for all periods give effect to the merger of The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated on December 31, 2000. HIGHLIGHTS FOR THE FIRST QUARTER 2001 - - The Investment Bank, Treasury & Securities Services, and Retail & Middle Market Financial Services posted solid results in a weak environment while JPMorgan Partners and Investment Management & Private Banking were adversely affected by the market decline. - - Total operating expenses declined by 3% from the fourth quarter and by 5% from the first quarter of 2000 including Flemings on a pro-forma basis. - - The Investment Bank continued to gain market share in global M&A advisory and high grade bond and syndicated loan underwriting. "Our merger is progressing well, as evidenced by our share gains in the competitive marketplace," said William B. Harrison, Jr., President and Chief Executive Officer. "Our performance in the challenging first quarter environment reinforces our belief that having a broad range of leadership product capabilities matched with a large client base is the right vision. Combining these attributes with disciplined expense and risk management should lead to superior performance over time." Investor Contact: John Borden Media Contact: Jon Diat (212) 270-7318 (212) 270-5089
2 BUSINESS SEGMENT RESULTS THE INVESTMENT BANK'S operating revenues were $4.47 billion in the first quarter of 2001, a 21% increase from the fourth quarter of 2000. First quarter 2001 operating revenues declined by 7% from the first quarter of 2000 pro-forma for Flemings. Investment banking fees totaled $939 million, which represented declines of 10% and 24% from the fourth quarter and the pro-forma first quarter of 2000, respectively. Weak market conditions in equity capital markets and M&A resulted in lower equity underwriting and advisory fees. These declines were partially offset by higher bond underwriting and loan syndication fees. JPMorgan ranked #3 in global announced M&A transactions, up from #6 in full year 2000, and expanded its #1 ranking in U.S. syndicated lending(1). In addition, the firm finished the quarter ranked #2 in U.S. investment grade bond underwriting(2). Trading revenues (including related net interest income) of $2.09 billion in the first quarter increased by 64% from the fourth quarter and declined by 3% from the strong trading results in the pro-forma first quarter of 2000. Growth from the fourth quarter reflected increases across virtually all of the firm's trading activities. Compared to pro-forma first quarter 2000, higher trading revenues in the firm's interest rate derivatives and government securities businesses partially offset lower results in emerging markets and foreign exchange. Fees and commissions of $457 million in the first quarter of 2001 were marginally higher than the fourth quarter and were 13% below pro-forma first quarter 2000. The decline from the pro-forma first quarter of 2000 reflected lower equity brokerage commissions. Securities gains of $166 million reflected the successful execution of the firm's asset/liability management process in a declining rate environment. Cash operating expenses declined by 6% from the fourth quarter of 2000 and by 4% from pro-forma results for the first quarter of 2000. The comparison to each period benefited from reduced levels of incentive compensation, while the comparison to the fourth quarter also reflected lower levels of non-compensation costs. The Investment Bank's cash operating earnings were $1.06 billion in the first quarter of 2001, compared to $498 million in the fourth quarter and $1.23 billion in the first quarter of 2000 pro-forma for Flemings. Improvement from the fourth quarter reflected operating revenue growth of 21% and the 6% expense decline. For the first quarter of 2001, the Investment Bank's cash overhead ratio was 60% and cash ROE was 22%. - -------- (1) Thomson Financial Securities Data (2) Ibid. 2
3 INVESTMENT MANAGEMENT & PRIVATE BANKING had operating revenues of $807 million, 11% below the fourth quarter and down 23% from the pro-forma first quarter of 2000. This decline reflected both the record performance of Flemings and H&Q brokerage in the first quarter of 2000 and the pressures in the current market environment on commissions, mutual fund loads, and management fees. Cash operating expenses of $682 million declined by 5% from the fourth quarter and by 6% from the pro-forma level in the first quarter of 2000. Cash operating earnings were $102 million, down from $128 million in the fourth quarter and the pro-forma level of $207 million in the first quarter of 2000. Investment Management & Private Banking achieved net positive cash flows in the first quarter. Market conditions, however, led to a decline in assets under management from $638 billion at December 31, 2000 to $608 billion at the end of the first quarter. This excludes assets managed in other lines of business and assets attributable to the firm's 45% stake in American Century. TREASURY & SECURITIES SERVICES operating revenues rose to $907 million in the first quarter, a 5% increase from last year. Operating revenues were essentially flat with the fourth quarter as lower asset-based fees and declining short-term interest rates adversely affected results. Offsetting these pressures were new business wins and higher volumes in the Institutional Trust and Treasury Services businesses. Operating expenses increased 1% year-over-year and were flat on a sequential quarter basis. The combination of modest revenue growth and expense management led to cash operating earnings of $177 million, 13% higher than in the first quarter of 2000, and a cash ROE of 25%. JPMORGAN PARTNERS had private equity gains of $132 million in the first quarter, compared to losses of $92 million in the fourth quarter and gains of $654 million in the first quarter of 2000. Included in the first quarter 2001 results were $412 million in realized cash gains from public and private positions compared with realized cash gains of $373 million in the fourth quarter and $392 million in the first quarter of 2000. The realized cash gains were partially offset by net unrealized losses in the first quarter of $280 million, representing both revaluation writedowns in the private portfolio and a net decline in the value of the public portfolio. The quarter was characterized by a challenging market that provided limited exit opportunities. Successful investment realizations in the energy and power sector were significant contributors to JPMP's performance in this environment. 3
4 RETAIL & MIDDLE MARKET FINANCIAL SERVICES operating revenues were $2.57 billion, flat with the fourth quarter and an increase of 7% from the first quarter of 2000. Mortgage servicing fees in the first quarter of 2001 were reduced by approximately $335 million. This reduction was largely offset by the realization of $315 million in securities gains used to economically hedge servicing fees in response to the new requirements of SFAS 133. Cash operating expenses declined by 4% from the fourth quarter and were flat from the first quarter of 2000. Cash operating earnings totaled $443 million in the first quarter, representing a 1% decline from the fourth quarter and an increase of 28% from the first quarter of 2000. Comparisons to each period benefited from favorable operating leverage, although increased credit costs in the 2001 first quarter resulted in the 1% decline in cash earnings when compared with the fourth quarter. Cash ROE improved to 22% in the first quarter, compared to 21% in the fourth quarter and 16% one year ago. Business highlights in the first quarter include record origination volumes in mortgage and auto, a 24% increase in credit card earnings compared to the first quarter of 2000 reflecting higher revenue from an increase in new accounts during the last three quarters, and deposit growth of 5% in both retail and middle market. However, investment revenues were adversely affected by reduced trading volumes at Brown & Co. and lower branch-based investment product sales. In addition, the negative impact of declining interest rates on the deposit business was only partially offset by lower funding costs in the credit businesses. EXPENSES Total operating noninterest expense was $5.60 billion, down 3% from the fourth quarter and down 5% on a pro-forma basis from the first quarter of 2000. Included in this quarter's expense is the amortization of $177 million of intangibles (compared to $186 million in the fourth quarter and $93 million in the first quarter of 2000). Included in reported earnings are $328 million (pre-tax) of previously announced merger and restructuring costs. CREDIT RISK Nonperforming assets totaled $2.23 billion at March 31, 2001 compared to $1.92 billion and $1.84 billion at December 31, 2000 and March 31, 2000, respectively. The increase from December 31 primarily relates to three domestic commercial loans. The allowance for loan losses as of March 31, 2001 was $3.67 billion, substantially unchanged from December 31, 2000. The reported provision for loan losses in the first quarter was $447 million. Net charge-offs were $447 million. COMMERCIAL net charge-offs in the first quarter of 2001 were $148 million, down from $159 million in the fourth quarter but up from $63 million in the first quarter of 2000. The increase from the first quarter of 2000 is primarily related to domestic commercial and industrial loans. 4
5 CONSUMER charge-offs on a managed basis (i.e., including securitizations) were $540 million, an increase from $495 million in the fourth quarter (excluding a non-recurring charge in the fourth quarter of $93 million to conform to a regulatory policy that established uniform guidelines for consumer loan charge-offs). On a managed basis, the credit card net charge-off ratio was 5.05%, an increase from 4.87% (excluding the aforementioned charge) in the fourth quarter. TOTAL ASSETS AND CAPITAL Total assets as of March 31, 2001 were $714 billion, compared with $715 billion as of December 31, 2000 and $676 billion at March 31, 2000. JPMorgan Chase's Tier One capital ratio was 8.7% at March 31, 2001 and 8.5% at December 31, 2000. OTHER FINANCIAL INFORMATION ADVANTA ACQUISITION: Chase Manhattan Mortgage Corporation, a subsidiary of J.P. Morgan Chase & Co., completed the acquisition of the mortgage business of Advanta Corp. on February 28, 2001. The acquisition included Advanta's origination capability and loan servicing and subservicing portfolio. MERGERS OF THE WHOLESALE BROKER DEALERS AND LEAD BANKS: The merger of Chase Securities Inc. and J.P. Morgan Securities, Inc., will occur on May 1, 2001; the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York is currently scheduled to occur in October 2001. SPECIAL ITEMS: Special items in the first quarter of 2001 were $328 million (pre-tax) of merger and restructuring costs and the cumulative effect of a translation adjustment of negative $25 million (after-tax) related to the adoption of SFAS 133 for the accounting for derivative instruments and hedging activities. There were no special items in the first quarter of 2000. J.P. Morgan Chase & Co. is a premier global financial services firm with assets of $714 billion and operations in more than 50 countries. The firm is a leader in investment banking, asset management, private equity, custody and transaction services, retail and middle market financial services, and e-finance. Headquartered in New York, JPMorgan Chase serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients. JPMorgan Chase will hold a presentation for the investment community on Wednesday, April 18, at 11:00 a.m. (Eastern Daylight Time) to review first quarter 2001 financial results. A live audio webcast of the presentation will be available on www.jpmorganchase.com. In addition, persons interested in listening to the presentation by telephone may dial in at (973) 872-3100. 5
6 This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These uncertainties include: the risk of adverse movements or volatility in the debt and equity securities markets or in interest or foreign exchange rates or indices; the risk of adverse impacts from an economic downturn; the risk of a downturn in domestic or foreign securities and trading conditions or markets; the risks associated with increased competition; the risks associated with unfavorable political and diplomatic developments in foreign markets or adverse changes in domestic or foreign governmental or regulatory policies; the risk that the merger integration will not be successful or that the revenue synergies and cost savings anticipated from the merger may not be fully realized or may take longer to realize than expected; the risk that the integration process may result in the disruption of ongoing business or in the loss of key employees or may adversely affect relationships with employees, clients or suppliers; the risk that the credit, market, liquidity, and operational risks associated with the various businesses of JPMorgan Chase are not successfully managed; or other factors affecting operational plans. Additional factors that could cause JPMorgan Chase's results to differ materially from those described in the forward-looking statements can be found in the 2000 Annual Report on Form 10-K of J.P. Morgan Chase & Co., filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). # # # 6
7 J.P. MORGAN CHASE & CO. FINANCIAL HIGHLIGHTS (IN MILLIONS, EXCEPT PER SHARE AND RATIO DATA) EXCLUDING JPMORGAN PARTNERS (d) ------------------------------------------------------------------------------------ FIRST QUARTER ------------------------- OVER/(UNDER) FOURTH QUARTER OVER/(UNDER) 2001 2000 1QTR 2000 2000 4QTR 2000 --------- --------- ------------ -------------- ------------ OPERATING BASIS(a) Revenue $ 8,437 $ 8,422 -- $ 7,715 9% Noninterest Expense 5,496 5,228 5% 5,655 (3%) Credit Costs 688 596 15% 667 3% Earnings 1,463 1,681 (13%) 906 61% Diluted Earnings Per Share 0.71 0.85 (16%) 0.44 61% Return on Average Common Equity (b) 17.0% 25.8% (880)bp 10.6% 640 bp Overhead Ratio(c) 65 62 300bp 73 (800)bp CASH OPERATING BASIS: Cash Earnings $ 1,635 $ 1,772 (8%) $ 1,087 50% Cash Diluted Earnings Per Share 0.80 0.90 (11%) 0.53 51% Shareholder Value Added 645 1,031 (37%) 121 433% Cash Return on Average Common Equity (b) 19.0% 27.2 % (820)bp 12.8% 620 bp Cash Overhead Ratio (c) 63 61 200bp 71 (800)bp INCLUDING JPMORGAN PARTNERS (d) ------------------------------------------------------------------------------------ OPERATING BASIS(a) Revenue $ 8,494 $ 9,023 (6%) $ 7,575 12% Noninterest Expense 5,598 5,353 5% 5,742 (3%) Credit Costs 688 596 15% 667 3% Earnings 1,436 1,988 (28%) 763 88% Diluted Earnings Per Share 0.70 1.01 (31%) 0.37 89% Return on Average Common Equity (b) 13.9% 23.8 % (990)bp 7.3 % 660 bp Overhead Ratio(c) 66 59 700 bp 76 (1,000)bp CASH OPERATING BASIS: Cash Earnings $ 1,613 $ 2,081 (22%) $ 949 70% Cash Diluted Earnings Per Share 0.78 1.06 (26%) 0.46 70% Shareholder Value Added (e) 370 1,067 (65%) (290) NM Cash Return on Average Common Equity (b) 15.6 % 24.9 % (930)bp 9.1 % 650 bp Cash Overhead Ratio (c) 64 58 600 bp 73 (900)bp - --------------------------------------------------------------------------------------------------------------------------------- REPORTED BASIS Revenue $ 8,253 $ 8,769 (6%) $ 8,543 (3%) Noninterest Expense (Excluding Merger and Restructuring Costs) 5,598 5,353 5% 5,742 (3%) Merger and Restructuring Costs 328 -- NM 1,302 (75%) Provision for Loan Losses 447 342 31% 409 9% Net Income(f) $ 1,199 $ 1,988 (40%) $ 708 69% Net Income Per Share: Basic(f) $ 0.60 $ 1.06 (43%) $ 0.36 67% Diluted(f) 0.58 1.01 (43%) 0.34 71% Cash Dividends Declared 0.34 0.32 6% 0.32 6% Share Price at Period End 44.90 58.13 (23%) 45.44 (1%) Book Value at Period End 21.17 18.49 14% 21.17 -- Common Shares Outstanding: Average Common Shares: Basic 1,966.6 1,853.0 6% 1,924.8 2% Diluted 2,032.2 1,945.1 4% 2,007.1 1% Common Shares at Period End 1,984.2 1,837.5 8% 1,928.5 3% Performance Ratios: Return on Average Total Assets(b) 0.67 % 1.23 % (56)bp 0.40 % 27 bp Return on Average Common Equity (b) 11.6 23.8 (1,220)bp 6.8 480 bp Capital Ratios: Tier I Capital Ratio 8.7%(g) 8.5 % 20 bp 8.5 % 20 bp Total Capital Ratio 12.3 (g) 12.2 10 bp 12.0 30 bp Tier I Leverage 5.4 (g) 5.8 (40)bp 5.4 -- bp NOTES: On December 31, 2000, J.P. Morgan & Co. Incorporated ("J.P. Morgan") merged with and into The Chase Manhattan Corporation ("Chase") and became J.P. Morgan Chase & Co. ("JPMorgan Chase" or "the Firm"). The merger was accounted for as a pooling of interests and, accordingly, the information included in this press release reflects the combined results of Chase and J.P. Morgan as if the merger had been in effect for all periods presented. In addition, certain amounts have been reclassified to conform to the current presentation. (a) Operating Basis excludes the impact of credit card securitizations, merger and restructuring costs and special items. See page 11 for a reconciliation of results on a reported and operating basis. (b) Based on annualized amounts. (c) The overhead ratio is noninterest expense as a percentage of the total of net interest income and noninterest revenue (excluding merger and restructuring costs and special items). The cash overhead ratio also excludes the impact of amortization of goodwill and certain other intangibles. (d) JPMorgan Partners ("JPMP") is JPMorgan Chase's private equity business. See page 8 for its line of business results. (e) SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles, which results in cash operating earnings, minus preferred dividends and an explicit charge for capital. An integrated cost of capital was implemented during the first quarter of 2001. A 12% cost of capital has been used for all businesses, except JPMP which has a 15% cost of capital. Prior periods have been restated to conform with current methodologies. (f) Reported basis for the first quarter 2001 includes the cumulative effect of a transition adjustment of $(25) million, net of taxes, related to the adoption of Statement of Financial Accounting Standards ("SFAS") 133 for the accounting for derivative instruments and hedging activities. The impact on each of basic and diluted earnings per share was $(0.01). (g) Estimated NM - Not meaningful Unaudited 7
8 J.P. MORGAN CHASE & CO. LINES OF BUSINESS RESULTS (in millions, except ratios) INVESTMENT BANK INVESTMENT MANAGEMENT & PRIVATE BANKING ------------------------------------------ ------------------------------------------- Proforma Proforma 4Q 2000 1Q 2000 1Q 2000 4Q 2000 1Q 2000 1Q 2000 Operating Basis 1Q 2001 % Change % Change % Change(e) 1Q 2001 % Change % Change % Change(e) - ------------------------------- -------- --------- -------- -------- ------- -------- -------- -------- Investment Banking Fees $ 939 (10%) (20%) (24%) $1 NM (88%) (88%) Trading-Related Revenue 2,085 64% (1%) (3%) 22 (31%) (66%) (66%) Fees and Commissions 457 1% 21% (13%) 598 (9%) 24% (10%) Private Equity Gains 5 NM (74%) (74%) -- NM NM NM Securities Gains 166 NM NM NM 7 NM NM NM Other Revenue 32 (86%) (66%) (76%) 46 (26%) (47%) (68%) Net Interest Income 782 10% 8% 3% 133 (16%) (19%) (21%) -------- ------- Operating Revenue 4,466 21% -- (7%) 807 (11%) -- (23%) Compensation Expense 1,756 (4%) -- (10%) 377 (1%) 14% (11%) Non Compensation Expense 907 (11%) 16% 8% 305 (9%) 29% 2% -------- ------- Cash Expense 2,663 (6%) 5% (4%) 682 (5%) 20% (6%) Cash Operating Earnings $1,060 113% (10%) (14%) $102 (20%) (32%) (51%) ======== ======= Average Common Equity $19,451 1% 18% 4% $6,082 (3%) 150% 1% Average Assets(a) $514,153 5% 11% 8% $35,213 2% 37% 2% Shareholder Value Added (SVA)(b) $475 NM (30%) (29%) $(81) 29% (208%) (412%) Cash Return on Common Equity 21.9% 1,170 bp (660) bp (430) bp 6.6% (140) bp (1,780) bp (720) bp Cash Overhead Ratio 60 (1,700) bp 400 bp 200 bp 85 600 bp 1,500 bp 1,600 bp TREASURY & SECURITIES SERVICES JPMORGAN PARTNERS -------------------------------- ----------------------------- 4Q 2000 1Q 2000 4Q 2000 1Q 2000 Operating Basis 1Q 2001 % Change % Change 1Q 2001 % Change % Change - ------------------------------- -------- --------- -------- ------- -------- -------- Investment Banking Fees $ -- NM NM $(1) NM NM Trading-Related Revenue (1) NM NM -- NM NM Fees and Commissions 503 2% 9% 13 (55%) (7%) Private Equity Gains -- NM NM 132 NM NM Securities Gains -- NM NM -- NM NM Other Revenue 43 (12%) (27%) 2 (91%) (300%) Net Interest Income 362 (2%) 5% (89) (9%) 46% -------- ------- Operating Revenue 907 (1%) 5% 57 NM (91%) Compensation Expense 296 16% 10% 42 40% (26%) Non Compensation Expense 334 (10%) (5%) 53 6% (18%) -------- ------- Cash Expense 630 -- 1% 95 19% (22%) Cash Operating Earnings $ 177 (4%) 13% $(22) (84%) (107%) ======== ======= Average Common Equity $ 2,853 (2%) (2%) $6,757 (6%) (6%) Average Assets(a) $ 17,276 -- 7% $13,167 2% -- Shareholder Value Added (SVA)(b) $ 91 (4%) 34% $(275) (33%) NM Cash Return on Common Equity 24.9% (10) bp 360 bp NM NM NM Cash Overhead Ratio 69 100 bp (300) bp NM NM NM RETAIL & MIDDLE MARKET FINANCIAL SERVICES(d) TOTAL(c) -------------------------------- ------------------------------------------- Proforma 4Q 2000 1Q 2000 4Q 2000 1Q 2000 1Q 2000 Operating Basis 1Q 2001 % Change % Change 1Q 2001 % Change % Change % Change(e) - ------------------------------- -------- --------- -------- ------- -------- -------- -------- Investment Banking Fees $ 4 300% (20%) $941 (10%) (21%) (24%) Trading-Related Revenue (8) NM NM 2,116 56% (4%) (5%) Fees and Commissions 477 (36%) (41%) 2,016 (13%) (5%) (20%) Private Equity Gains -- NM NM 127 NM NM NM Securities Gains 316 109% NM 455 286% NM NM Other Revenue 167 52% 82% 251 (3%) (21%) (39%) Net Interest Income 1,609 3% 8% 2,588 1% 3% 1% -------- ------- Operating Revenue 2,565 -- 7% 8,494 12% (6%) (12%) Compensation Expense 563 3% (1%) 3,357 1% 1% (9%) Non Compensation Expense 731 (8%) -- 2,064 (8%) 7% 1% -------- ------- Cash Expense 1,294 (4%) -- 5,421 (2%) 3% (5%) Cash Operating Earnings $ 443 (1%) 28% $1,613 70% (22%) (27%) ======== ======= Average Common Equity $ 8,158 (2%) (2%) $41,265 2% 24% 6% Average Assets(a) $157,275 3% 11% $747,677 4% 9% 7% Shareholder Value Added (SVA)(b) $197 3% 114% 370 NM (65%) (63%) Cash Return on Common Equity 21.8% 60 bp 540 bp 15.6% 650 bp (930) bp (680) bp Cash Overhead Ratio 50 (200) bp (400) bp 64 (900) bp 600 bp 400 bp - ------------------- Notes: JPMorgan Chase has organized itself into five lines of business. All periods are on a comparable basis, although restatements will occur in future periods to reflect further alignment of management accounting policies. (a) Excludes the impact of credit card securitizations. (b) SVA is JPMorgan Chase's primary performance measure of its businesses. SVA represents operating earnings excluding the amortization of goodwill and certain other intangibles, which results in cash operating earnings, minus preferred dividends and an explicit charge for capital. An integrated cost of capital was implemented during the first quarter of 2001. A 12% cost of capital has been used for all businesses, except JPMP which has a 15% cost of capital. All prior periods have been restated. (c) Total column includes Support Units and the effects remaining at the Corporate level after the implementation of management accounting policies. (d) Retail and Middle Market Financial Services key businesses: OPERATING REVENUE CASH OPERATING EARNINGS ------------------------------ ------------------------------ % Change % Change ------------------ ------------------ 1Q 2001 4Q 2000 1Q 2000 1Q 2001 4Q 2000 1Q 2000 ------- ------- ------- ------- ------- ------- Cardmember Services $990 (1%) 8% $117 (21%) 24% Regional Banking Group 771 (2%) 1% 139 2% (3%) Home Finance 344 4% 7% 83 12% 22% Middle Markets 281 5% 3% 72 16% 7% Chase Auto Finance 110 4% NM 22 -- NM Other 69 NM NM 10 NM NM (e) Proforma results assumes that the purchase of Flemings occurred at the beginning of 2000. NM - Not meaningful bp - basis points Unaudited
9 J.P. MORGAN CHASE & CO. CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) FIRST QUARTER -------------------- % FOURTH QUARTER % 2001 2000 CHANGE 2000 CHANGE ------- ------- ------ -------------- ------ REVENUE Investment Banking Fees $ 941 $ 1,191 (21%) $ 1,051 (10%) Trading Revenue 2,001 1,971 2% 1,142 75% Fees and Commissions 2,065 2,197 (6%) 2,387 (13%) Private Equity - Realized Gains 412 392 5% 373 10% Private Equity - Unrealized Gains (Losses) (285) 282 NM (471) (39%) Securities Gains (Losses) 455 (3) NM 118 286% Other Revenue 246 325 (24%) 1,482 (83%) ------- ------- ------- TOTAL NONINTEREST REVENUE 5,835 6,355 (8%) 6,082 (4%) ------- ------- ------- Interest Income 9,180 8,440 9% 9,922 (7%) Interest Expense 6,762 6,026 12% 7,461 (9%) ------- ------- ------- NET INTEREST INCOME 2,418 2,414 -- 2,461 (2%) ------- ------- ------- REVENUE BEFORE PROVISION FOR LOAN LOSSES 8,253 8,769 (6%) 8,543 (3%) Provision for Loan Losses 447 342 31% 409 9% ------- ------- ------- TOTAL NET REVENUE 7,806 8,427 (7%) 8,134 (4%) ------- ------- ------- EXPENSE Compensation Expense 3,357 3,340 1% 3,310 1% Occupancy Expense 348 308 13% 351 (1%) Technology and Communications 654 580 13% 668 (2%) Merger and Restructuring Costs 328 -- NM 1,302 (75%) Amortization of Intangibles 177 93 90% 186 (5%) Other Expense 1,062 1,032 3% 1,227 (13%) ------- ------- ------- --- TOTAL NONINTEREST EXPENSE 5,926 5,353 11% 7,044 (16%) INCOME BEFORE INCOME TAX EXPENSE AND EFFECT OF ACCOUNTING CHANGE 1,880 3,074 (39%) 1,090 72% Income Tax Expense 656 1,086 (40%) 382 72% ------- ------- ------- --- INCOME BEFORE EFFECT OF ACCOUNTING CHANGE $ 1,224 $ 1,988 (38%) $ 708 73% Net Effect of Change in Accounting Principle (25) -- NM -- NM ------- ------- ------- --- NET INCOME $ 1,199 $ 1,988 (40%) $ 708 69% ======= ======= ======= === NET INCOME APPLICABLE TO COMMON STOCK $ 1,178 $ 1,963 (40%) $ 687 71% ======= ======= ======= === NET INCOME PER SHARE(a) Basic $ 0.60 $ 1.06 (43%) $ 0.36 67% Diluted $ 0.58 $ 1.01 (43%) $ 0.34 71% (a) Basic and diluted earnings per share has been reduced by $(0.01) in the first quarter of 2001 due to the impact of the adoption of SFAS 133 for the accounting for derivative instruments and hedging activities. NM - Not meaningful Unaudited 9
10 J.P. MORGAN CHASE & CO. NONINTEREST REVENUE AND NONINTEREST EXPENSE DETAIL (IN MILLIONS) FIRST QUARTER --------------------------- % FOURTH QUARTER % NONINTEREST REVENUE 2001 2000 CHANGE 2000 CHANGE ------- ------ ------ -------------- ------ INVESTMENT BANKING FEES: Advisory $ 340 $ 362 (6%) $ 407 (16%) Underwriting and Other Fees 601 829 (28%) 644 (7%) ------- ------ ------ Total $ 941 $1,191 (21%) $1,051 (10%) ======= ====== ====== TRADING-RELATED REVENUE: Equities $ 577 $ 566 2% $ 260 122% Debt Instruments 299 398 (25%) 205 46% Foreign Exchange Revenue 249 342 (27%) 259 (4%) Interest Rate Contracts, Commodities and Other 876 665 32% 418 110% ------- ------ ------ Total Trading Revenue $ 2,001 $1,971 2% $1,142 75% Trading-Related NII 115 221 (48%) 214 (46%) ------- ------ ------ Total Trading-Related Revenue $ 2,116 $2,192 (3%) $1,356 56% ======= ====== ====== FEES AND COMMISSIONS: Investment Management, Custody and Processing Services $ 974 $ 798 22% $1,008 (3%) Credit Card Revenue 433 397 9% 460 (6%) Brokerage and Investment Services 363 326 11% 343 6% Mortgage Servicing Fees, Net of Amortization and Writedowns (233) 150 NM 21 NM Other Lending-Related Service Fees 130 150 (13%) 143 (9%) Deposit Service Charges 226 221 2% 238 (5%) Other Fees 172 155 11% 174 (1%) ------- ------ ------ Total $ 2,065 $2,197 (6%) $2,387 (13%) ======= ====== ====== OTHER REVENUE: Gains on Sales of Nonstrategic Assets(a) $ -- $ -- -- $1,226 (100%) Residential Mortgage Origination/Sales Activities 99 44 125% 59 68% All Other Revenue 147 281 (48%) 197 (25%) ------- ------ ------ Total $ 246 $ 325 (24%) $1,482 (83%) ======= ====== ====== - ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE OTHER EXPENSE: Professional Services $ 295 $ 282 5% $ 365 (19%) Outside Services 166 159 4% 171 (3%) Marketing 141 117 21% 173 (18%) Travel and Entertainment 122 112 9% 143 (15%) All Other 338 362 (7%) 375 (10%) ------- ------ ------ Total $ 1,062 $1,032 3% $1,227 (13%) ======= ====== ====== (a) Fourth quarter 2000 includes an $827 million gain on the sale of the Hong Kong retail banking business and a $399 million gain on the transfer of the Firm's interest in Euroclear. NM - Not meaningful Unaudited 10
11 J.P. MORGAN CHASE & CO. OPERATING INCOME RECONCILIATION (IN MILLIONS, EXCEPT PER SHARE DATA) REPORTED CREDIT SPECIAL OPERATING RESULTS CARD ITEMS BASIS FIRST QUARTER 2001 (a) (b) (c) -------------------------------------------- -------- ------ ------- --------- EARNINGS Total Revenue $ 8,253 $241 $ -- $8,494 Noninterest Expense 5,598 -- -- 5,598 ------- ---- ------- ------ Operating Margin 2,655 241 -- 2,896 Credit Costs 447 241 -- 688 ------- ---- ------- ------ Income Before Merger and Restructuring Costs 2,208 -- -- 2,208 Merger and Restructuring Costs 328 -- (328) -- ------- ---- ------- ------ Income Before Income Tax Expense and Effect of Accounting Change 1,880 -- 328 2,208 Tax Expense 656 -- 116 772 ------- ---- ------- ------ Income Before Effect of Accounting Change 1,224 -- 212 1,436 Net Effect of Change in Accounting Principle (25) -- 25 -- ------- ---- ------- ------ Net Income $ 1,199 $ -- $ 237 $1,436 ------- ---- ------- ------ NET INCOME PER SHARE Basic $ 0.60 (d) $ 0.72 Diluted $ 0.58 (d) $ 0.70 -------------------------------------------------------------------------------------------------- FIRST QUARTER 2000 -------------------------------------------- EARNINGS Total Revenue $ 8,769 $254 $ -- $9,023 Noninterest Expense 5,353 -- -- 5,353 ------- ---- ------- ------ Operating Margin 3,416 254 -- 3,670 Credit Costs 342 254 -- 596 ------- ---- ------- ------ Income Before Merger and Restructuring Costs 3,074 -- -- 3,074 Merger and Restructuring Costs -- -- -- -- ------- ---- ------- ------ Income Before Income Tax Expense 3,074 -- -- 3,074 Tax Expense 1,086 -- -- 1,086 ------- ---- ------- ------ Net Income $ 1,988 $ -- $ -- $1,988 ------- ---- ------- ------ NET INCOME PER SHARE Basic $ 1.06 $ 1.06 Diluted $ 1.01 $ 1.01 -------------------------------------------------------------------------------------------------- FOURTH QUARTER 2000 EARNINGS Total Revenue $ 8,543 $258 $(1,226) $7,575 Noninterest Expense 5,742 -- -- 5,742 ------- ---- ------- ------ Operating Margin 2,801 258 (1,226) 1,833 Credit Costs 409 258 -- 667 ------- ---- ------- ------ Income Before Merger and Restructuring Costs 2,392 -- (1,226) 1,166 Merger and Restructuring Costs 1,302 -- (1,302) -- ------- ---- ------- ------ Income Before Income Tax Expense 1,090 -- 76 1,166 Tax Expense 382 -- 21 403 ------- ---- ------- ------ Net Income $ 708 $ -- $ 55 $ 763 ------- ---- ------- ------ NET INCOME PER SHARE Basic $ 0.36 $ 0.39 Diluted $ 0.34 $ 0.37 -------------------------------------------------------------------------------------------------- (a) Represents condensed results as reported in JPMorgan Chase's financial statements. (b) This column excludes the impact of credit card securitizations. For securitized receivables, amounts that previously would have been reported as net interest income and as provision for loan losses are instead reported as components of noninterest revenue. (c) Includes merger and restructuring costs and special items. The 2001 first quarter includes $328 million in merger and restructuring expenses. The 2000 fourth quarter includes an $827 million gain on the sale of the Hong Kong retail banking business, a $399 million gain from the transfer of the Firm's interest in Euroclear, $52 million of restructuring costs associated with previously announced relocation initiatives and $1,250 million in merger expenses. (d) Includes the effect of the accounting change. Excluding the accounting change, basic and diluted net income per share were $0.61 and $0.59, respectively. Unaudited 11
12 J.P. MORGAN CHASE & CO. CONSOLIDATED BALANCE SHEET AND SELECTED AVERAGE BALANCES AND YIELDS (IN MILLIONS) MARCH 31, -------------------------- % DECEMBER 31, % 2001 2000 CHANGE 2000 CHANGE --------- --------- ------ ------------ ------ ASSETS Cash and Due from Banks $ 22,371 $ 18,159 23% $ 23,972 (7%) Deposits with Banks 7,979 8,190 (3%) 8,333 (4%) Federal Funds Sold and Securities Purchased Under Resale Agreements 71,147 70,048 2% 69,474 2% Securities Borrowed 37,264 35,027 6% 32,371 15% Trading Assets: Debt and Equity Instruments 138,270 124,225 11% 139,249 (1%) Derivative Receivables 78,907 78,258 1% 76,373 3% Securities 69,731 72,075 (3%) 73,695 (5%) Loans (Net of Allowance for Loan Losses of $3,672 in March 2001, $3,747 in March 2000 and $3,665 in December 2000) 213,116 198,870 7% 212,385 -- Goodwill and Other Intangibles 15,351 9,858 56% 15,833 (3%) Private Equity Investments 10,877 11,742 (7%) 11,428 (5%) Other Assets 48,611 49,594 (2%) 52,235 (7%) --------- --------- --------- TOTAL ASSETS $ 713,624 $ 676,046 6% $ 715,348 -- ========= ========= ========= LIABILITIES Deposits: Noninterest-Bearing 59,686 55,554 7% 62,713 (5%) Interest-Bearing 212,886 203,441 5% 216,652 (2%) --------- --------- --------- Total Deposits 272,572 258,995 5% 279,365 (2%) Federal Funds Purchased and Securities Sold Under Repurchase Agreements 145,703 139,520 4% 131,738 11% Commercial Paper 16,281 15,031 8% 24,851 (34%) Other Borrowed Funds 28,716 16,271 76% 19,840 45% Trading Liabilities: Debt and Equity Instruments 52,501 54,633 (4%) 52,157 1% Derivative Payables 73,312 72,117 2% 76,517 (4%) Accounts Payable, Accrued Expenses and Other Liabilities (Including the Allowance for Credit Losses of $283 in March 2001 and in December 2000 and $296 in March 2000) 33,575 33,820 (1%) 40,754 (18%) Long-Term Debt 42,609 45,825 (7%) 43,299 (2%) Guaranteed Preferred Beneficial Interests in the Firm's Junior Subordinated Deferrable Interest Debentures 4,439 3,688 20% 3,939 13% --------- --------- --------- TOTAL LIABILITIES 669,708 639,900 5% 672,460 -- --------- --------- --------- PREFERRED STOCK OF SUBSIDIARY 550 550 -- 550 -- --------- --------- --------- STOCKHOLDERS' EQUITY Preferred Stock 1,362 1,622 (16%) 1,520 (10%) Common Stock 1,984 1,625 22% 1,940 2% Capital Surplus 11,569 12,280 (6%) 11,598 -- Retained Earnings 28,592 29,848 (4%) 28,096 2% Accumulated Other Comprehensive Loss (120) (1,266) (91%) (241) (50%) Treasury Stock, at Cost (21) (8,513) (100%) (575) (96%) --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY 43,366 35,596 22% 42,338 2% --------- --------- --------- TOTAL LIABILITIES, PREFERRED STOCK OF SUBSIDIARY AND STOCKHOLDERS' EQUITY $ 713,624 $ 676,046 6% $ 715,348 -- ========= ========= ========= - ---------------------------------------------------------------------------------------------------------------------------------- FIRST QUARTER -------------------------- % FOURTH QUARTER % 2001 2000 CHANGE 2000 CHANGE --------- --------- ------ -------------- ------ SELECTED AVERAGE BALANCES: Loans $ 219,133 $ 203,693 8% $ 215,422 2% Total Interest-Earning Assets 547,619 489,236 12% 540,559 1% Total Assets 730,958 651,596 12% 703,624 4% Interest-Bearing Deposits 216,749 216,462 -- 215,147 1% Total Interest-Bearing Liabilities 505,438 451,518 12% 498,067 1% Total Liabilities 687,656 616,275 12% 661,180 4% Common Stockholders' Equity 41,265 33,149 24% 40,372 2% Total Stockholders' Equity 42,752 34,771 23% 41,894 2% SELECTED YIELDS: Loans 8.27% 7.79% 8.66% Total Interest-Earning Assets 6.81% 6.96% 7.31% Interest-Bearing Deposits 4.93% 4.66% 5.40% Total Interest-Bearing Liabilities 5.43% 5.37% 5.96% Net Yield on Interest-Earning Assets 1.80% 2.00% 1.82% - ------------------------------------------------------- Unaudited 12
13 J.P. MORGAN CHASE & CO. CREDIT RELATED INFORMATION (IN MILLIONS, EXCEPT RATIOS) MARCH 31, ------------------- DECEMBER 31, CREDIT-RELATED ASSETS 2001 2000 % CHANGE 2000 % CHANGE - ------------------------------------ -------- -------- -------- ------------ -------- COMMERCIAL Domestic Commercial Loans $ 73,046 $ 73,850 (1%) $ 76,207 (4%) Foreign Commercial Loans 40,171 42,538 (6%) 43,253 (7%) -------- -------- -------- TOTAL COMMERCIAL LOANS 113,217 116,388 (3%) 119,460 (5%) Derivatives and FX Contracts (a) 78,907 78,258 1% 76,373 3% -------- -------- -------- TOTAL COMMERCIAL CREDIT-RELATED 192,124 194,646 (1%) 195,833 (2%) -------- -------- -------- CONSUMER Credit Card - Reported 19,841 14,142 40% 18,501 7% Credit Card Securitizations (b) 16,625 18,811 (12%) 17,871 (7%) -------- -------- -------- Credit Card - Managed 36,466 32,953 11% 36,372 -- 1-4 Family Residential Mortgages 54,431 46,142 18% 50,594 8% Auto Financings 21,484 18,572 16% 19,824 8% Other Consumer (c) 7,815 7,373 6% 7,671 2% -------- -------- -------- TOTAL CONSUMER LOANS 120,196 105,040 14% 114,461 5% -------- -------- -------- TOTAL MANAGED CREDIT-RELATED $312,320 $299,686 4% $310,294 1% ======== ======== ======== - ------------------------------------------------------------------------------------------------------------------------------ MARCH 31, ------------------- DECEMBER 31, NONPERFORMING ASSETS 2001 2000 % CHANGE 2000 % CHANGE ------ ------ -------- ------ -------- COMMERCIAL Domestic Commercial Loans $1,209 $ 489 147% $ 821 47% Foreign Commercial Loans 428 793 (46%) 613 (30%) ------ ------ ------ TOTAL COMMERCIAL LOANS 1,637 1,282 28% 1,434 14% Derivatives and FX Contracts 109 35 211% 37 195% ------ ------ ------ TOTAL COMMERCIAL CREDIT-RELATED 1,746 1,317 33% 1,471 19% ------ ------ ------ CONSUMER Credit Card - Reported 24 37 (35%) 26 (8%) Credit Card Securitizations (b) -- -- NM -- NM ------ ------ ------ Credit Card - Managed 24 37 (35%) 26 (8%) 1-4 Family Residential Mortgages 257 300 (14%) 273 (6%) Auto Financings 84 74 14% 76 11% Other Consumer (c) 12 9 33% 9 33% ------ ------ ------ TOTAL CONSUMER LOANS 377 420 (10%) 384 (2%) ------ ------ ------ TOTAL MANAGED CREDIT-RELATED $2,123 $1,737 22% $1,855 14% ====== ====== ====== Assets Acquired as Loans Satisfactions 111 106 5% 68 63% ------ ------ ------ TOTAL NONPERFORMING ASSETS(d) $2,234 $1,843 21% $1,923 16% ====== ====== ====== - ------------------------------------------------------------------------------------------------------------------------------ FIRST QUARTER FIRST QUARTER (e) --------------- FOURTH QUARTER ----------------- FOURTH QUARTER (e) NET LOAN CHARGE-OFFS AND RATES 2001 2000 2000 2001 2000 2000 ---- ---- -------------- ---- ---- ------------------ COMMERCIAL Domestic Commercial Loans $126 $ 42 $ 88 0.62% 0.20% 0.42% Foreign Commercial Loans 22 21 71 0.24% 0.26% 0.77% ---- ---- ---- TOTAL COMMERCIAL LOANS 148 63 159 0.50% 0.22% 0.53% ---- ---- ---- CONSUMER Credit Card - Reported 218 194 174 4.44% 5.18% 4.27% Credit Card Securitizations (b) 241 254 245 5.77% 5.57% 5.40% ---- ---- ---- Credit Card - Managed 459 448 419 5.05% 5.39% 4.87% 1-4 Family Residential Mortgages 10 9 10 0.08% 0.08% 0.08% Auto Financings 29 21 26 0.56% 0.45% 0.49% Other Consumer (c) 42 46 40 1.99% 2.31% 1.94% ---- ---- ---- TOTAL CONSUMER LOANS 540 524 495 1.83% 1.98% 1.74% ---- ---- ---- Charge to conform to FFIEC policy revision (f) -- -- 93 NM NM NM ---- ---- ---- TOTAL MANAGED CREDIT-RELATED $688 $587 $747 1.17% 1.06% 1.28% ==== ==== ==== (a) Charge-offs for derivative receivables are included in trading revenue. (b) Represents the portion of JPMorgan Chase's credit card receivables that have been securitized. (c) Consists of installment loans (direct and indirect types of consumer finance), student loans and unsecured lines of credit. (d) Nonperforming assets have not been reduced for credit protection (single name credit default swaps and collateralized loan obligations) aggregating $107 million related to nonperforming counterparties. (e) Annualized. (f) In the fourth quarter 2000, JPMorgan Chase incurred a $93 million charge to conform to the Federal Financial Institutions Examination Council's ("FFIEC") revised policy establishing uniform guidelines for the charge-off of consumer loans to delinquent, bankrupt, deceased and fraudulent borrowers. Of this total amount, $12 million related to reported credit cards, $13 million related to securitized credit cards, $35 million related to residential mortgages, $30 million related to auto financings, and $3 million related to other loans. NM - Not meaningful. Unaudited 13
14 J.P. MORGAN CHASE & CO. JPMORGAN PARTNERS (DOLLARS AND SHARES IN MILLIONS) MARCH 31, 2001 DECEMBER 31, 2000 MARCH 31, 2000 ------------------------ ------------------------ ---------------------- CARRYING CARRYING CARRYING VALUE COST VALUE COST VALUE COST -------- --------- -------- --------- -------- --------- INVESTMENT PORTFOLIO Public Securities (213 companies)(a) $ 1,611 $ 1,018 $ 1,859 $ 967 $ 3,845 $ 1,148 Private Direct Securities (983 companies) 7,144 7,318 7,538 7,480 6,193 6,150 Private Fund Investments (342 funds) 2,122 2,141 2,362 2,379 2,314 2,316 ------- --------- ------- --------- ------- --------- Total Investment Portfolio $10,877 $ 10,477 $11,759 $ 10,826 $12,352 $ 9,614 ======= ========= ======= ========= ======= ========= PUBLIC SECURITIES INVESTMENTS AT MARCH 31, 2001 (b) QUOTED PUBLIC SYMBOL SHARES VALUE COST ------ -------- --------- ------- Triton PCS Holding, Inc. TPCS 20.2 $ 674 $ 89 Telecorp PCS TLCP 11.4 172 8 Northern Border Partners, L.P. NBP 3.1 114 24 American Tower Corp. AMT 5.8 107 15 Fisher Scientific FSH 3.0 104 27 Guitar Center Inc. GTRC 4.7 83 51 Encore Acquisition Company EAC 6.4 82 44 Crown Media Holdings Inc. CRWN 2.7 53 40 Praecis Pharmaceuticals Inc. PRCS 2.5 50 17 Wesco International, Inc. WCC 4.4 40 47 --------- ------ TOP TEN PUBLIC SECURITIES $ 1,479 $ 362 Other Public Securities (203 companies) 703 656 ========= ====== TOTAL PUBLIC SECURITIES(213 companies) $ 2,182 $1,018 ========= ====== - ------------------------------------------------------ (a) Publicly traded positions only. (b) Policy: Public securities held by JPMorgan Partners are marked-to-market at the quoted public value less liquidity discounts, with the resulting unrealized gains/losses included in the income statement. JPMorgan Partners' valuation policy for public securities incorporates the use of these liquidity discounts and price averaging methodologies in certain circumstances to take into account the fact that JPMorgan Partners cannot immediately realize such public quoted values due to the numerous regulatory, corporate and contractual sales restrictions. Private investments are initially carried at cost, which is viewed as an approximation of fair value. The carrying value of private investments is adjusted to reflect valuation changes resulting from unaffiliated party transactions and for evidence of an other-than-temporary decline in value (in which case a realized loss is recorded). Unaudited 14