Morgan J P & Co Inc, et al. – ‘424B2’ on 10/19/00

On:  Thursday, 10/19/00, at 5:01pm ET   ·   Accession #:  950123-0-9548   ·   File #s:  333-38633, -01

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Prospectus   —   Rule 424(b)(2)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B2       Prospectus Supplement                                166±   646K 

Document Table of Contents

424B2
1st “Page” of 104
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
                                                Filed pursuant to Rule 424(b)(2)
                                               Registration Nos. 333-38633 and
                                                                333-38633-01

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS  
   PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN
 OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE   
SECURITIES LAWS OF ANY SUCH STATE.                                        

Subject to completion,
Dated October [  ], 2000
PROSPECTUS SUPPLEMENT                                                           
(To Prospectus dated July 14, 1998)                                             
$[49,025,000]                                                                   

CONSUMER PRICE INDEXED SECURITIES (CPIS), SERIES C PREFERRED SECURITIES         
ISSUED BY: J.P.  MORGAN INDEX FUNDING COMPANY I                                 

[1,850,000] SHARES OF SERIES C PREFERRED SECURITIES AT $[26.50] PER SHARE       
INDEXED TO THE NON-SEASONALLY ADJUSTED U.S. CONSUMER PRICE INDEX OR "CPI" (AS   
DEFINED IN THIS PROSPECTUS SUPPLEMENT); GUARANTEED TO THE EXTENT SET FORTH IN   
THIS PROSPECTUS SUPPLEMENT BY                                                   
J.P. MORGAN & CO. INCORPORATED                                                  
------------------------

ISSUER:                                                                         
- A statutory business trust formed by J.P. Morgan for the purpose of issuing   
  securities, including the Series C Securities and other securities of separate
series, and lending the proceeds of such issuances to Morgan Guaranty, the  
principal banking subsidiary of J.P. Morgan. J.P. Morgan, through its       
obligations described in this Prospectus Supplement, will provide a full and
unconditional guarantee, on a subordinated basis, of all payments due on the
 CPIS. This guarantee does not guarantee the return of the Issue Price, rather
it guarantees the payment of a calculated amount, indexed to the CPI, which 
may be more or less than the Face Amount or the Issue Price.                

GENERAL:                                                                        
- Issue Price of $[26.50] per share                                             
- Face Amount at maturity of [$40.00] per share                                 
- Full principal-at-risk security with no guaranteed return                     
- The CPIS do not pay any dividends or interest                                 
- January 15, 2010 final redemption date                                        
- CPIS represent an undivided beneficial interest in a note issued by Morgan    
Guaranty, the value of which is indexed to the CPI. Thus the CPIS have the  
market risk of the CPI and the credit risk of J.P. Morgan                   
- Applied for listing on American Stock Exchange under the symbol "JPI"         

PAYMENT AT MATURITY:                                                            
- Face Amount plus (Ending Index minus Forward Index); but not less than zero   
- The Forward Index = [213.0], roughly [120-126%] of the Reference CPI level (as
 defined herein) on the day of pricing. The Ending Index will be the Reference
CPI level at maturity                                                       

INDEX:                                                                          
- "Reference CPI" is a 3 month lagged version of CPI used by the United States  
Department of the Treasury to calculate the inflation indexed principal for 
 its inflation indexed securities. The CPI is the non-seasonally adjusted U.S.
 City Average All Items Consumer Price Index for All Urban Consumers published
monthly by the Bureau of Labor Statistics of the U.S. Department of Labor.  

BEFORE YOU DECIDE TO INVEST IN THE CPIS, CAREFULLY READ THIS PROSPECTUS         
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, ESPECIALLY THE RISK FACTORS         
BEGINNING ON PAGE S-9.                                                          

The CPIS are indexed securities; they are not a fund, nor are they bank         
deposits. The CPIS are not insured by the FDIC or any other Federal agency. The 
CPIS are not futures contracts and do not represent an actual investment in     
futures contracts. The CPIS are obligations of the issuer.                      

Neither the Securities and Exchange Commission nor any state securities         
commission has approved or disapproved the CPIS or passed upon the adequacy of  
this Prospectus Supplement or the attached Prospectus. Any representation to the
contrary is a criminal offense.                                                 

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------------------
                                                  PUBLIC            PROCEEDS TO THE TRUST    UNDERWRITING  
                                                  OFFERING PRICE    (BEFORE EXPENSES)        COMMISSIONS(1)
-----------------------------------------------------------------------------------------------------------
                                                                                                           
Per Series C Preferred Security                   $[26.50]          $[26.50]                 $[     ]      
-----------------------------------------------------------------------------------------------------------
Total                                             $[49,025,000]     $[49,025,000]            $[     ]      
-----------------------------------------------------------------------------------------------------------

(1) Because the proceeds of the CPIS will be used to purchase an obligation of  
Morgan Guaranty, Morgan Guaranty has agreed to pay the Underwriters a   
commission.                                                             
------------------------

The CPIS offered hereby are offered by the Underwriters subject to various      
conditions. The Underwriters expect to deliver the CPIS in book-entry form only 
through the Depository Trust Company on or about November [  ], 2000. If you    
purchase at least 30,000 CPIS in any single transaction and you comply with the 
holding period requirement described under "Underwriting--Supplemental          
Information Concerning the Plan of Distribution" in this Prospectus Supplement, 
the price will be [25.97] per CPIS ([98]% of the Issue Price). In that case, the
underwriting discounts and commission will be [     ] per CPIS.                 
J.P. MORGAN & CO.                                                               
November [  ], 2000                                                             

424B2
2nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 2nd

TABLE OF CONTENTS 

                                                                [Download Table]
                                                 
STRUCTURAL OVERVIEW.......................    S-3
SUMMARY OF THE PRINCIPAL TERMS OF THE            
  OFFERING................................    S-4
SUMMARY INFORMATION--Q&A..................    S-5
  What are the CPIS?......................    S-5
  What is the Consumer Price Index or            
     CPI?.................................    S-5
  What is the Reference CPI?..............    S-5
  What will I receive at the Stated              
     Maturity?............................    S-5
  Can I opt to redeem early?..............    S-6
  Can the Ending Index be determined             
     early?...............................    S-6
  Are there other redemption                     
     provisions?..........................    S-6
  Will I receive dividends or interest?...    S-6
  Can you tell me about the issuer and           
     guarantees?..........................    S-6
  Tell me about the related note and use         
     of proceeds?.........................    S-7
  Where will the CPIS be listed?..........    S-7
  Do I have any voting rights?............    S-7
  What about taxes?.......................    S-7
  Are there any risks associated with my         
     investment?..........................    S-7
  In what form will the CPIS be issued?...    S-7
WHERE CAN YOU FIND MORE INFORMATION?......    S-8
  Consolidated Ratio of J.P. Morgan's            
     Earnings to Fixed Charges............    S-8
  Consolidated Ratio of J.P. Morgan's            
     Earnings to Combined Fixed Charges          
     and Preferred Stock Dividends........    S-8
RISK FACTORS..............................    S-9
  Indexation of the Redemption Value......    S-9
  Special Event Redemption................    S-9
  Early Redemption Value..................    S-9
  Limited Voting Rights...................    S-9
  Listing May Not Ensure Liquid Market and       
     Trading Price May not Reflect Actual        
     Economic Value.......................    S-9
  Early Determination of Ending Index.....    S-9
  Factors Affecting the Value of the             
     CPIS.................................   S-10
  Imposition of Bank Regulatory                  
     Restrictions.........................   S-10
  Effect of Trading in U.S. Inflation            
     Linked Notes, Treasury Notes and            
     Other Instruments....................   S-10
  Potential for Adverse Interests.........   S-11
  Risk of Index Contingencies.............   S-11
  Changes and Improvements in CPI                
     Methodology..........................   S-12
  Reference CPI is Lagged 3 Months........   S-12
  J.P. Morgan Cannot Control the Bureau of       
     Labor Statistics or Treasury                
     Department...........................   S-12
  Volatility of and Adverse Changes to           
     CPI..................................   S-12
  Market Disruption Events................   S-14
  Extension of Settlement Date or Stated         
     Maturity.............................   S-14
  Historical Correlations May Not Prevail        
     in the Future........................   S-14
  Changes in Laws or Regulations or              
     Interpretations......................   S-14
  Certain Considerations Regarding               
     Hedging..............................   S-14
  Limitation on Rights under the                 
     Guarantee, the Related Note Guarantee       
     and the Declaration..................   S-14
  Uncertain Tax Consequences..............   S-15
J.P. MORGAN & CO. INCORPORATED............   S-16
J.P. MORGAN INDEX FUNDING COMPANY I.......   S-16
USE OF PROCEEDS...........................   S-20
DESCRIPTION OF THE CPIS...................   S-21
DESCRIPTION OF THE RELATED NOTE...........   S-35
DESCRIPTION OF THE GUARANTEE..............   S-37
DESCRIPTION OF THE RELATED NOTE                  
  GUARANTEE...............................   S-39
EFFECT OF OBLIGATIONS UNDER THE GUARANTEE,       
  THE RELATED NOTE GUARANTEE AND THE             
  RELATED NOTE............................   S-40
UNITED STATES FEDERAL INCOME TAXATION.....   S-41
UNDERWRITING..............................   S-44
LEGAL MATTERS.............................   S-46
EXPERTS...................................   S-46
STABILIZATION.............................   S-46
CONTENT OF PROSPECTUS.....................   S-46
LIMITATION ON OFFERS AND SOLICITATIONS....   S-46
GLOSSARY OF TERMS.........................   SA-1

PROSPECTUS

                                                                [Download Table]

                                               PAGE
                                               ----
                                                   
Available Information........................    2 
Incorporation of Certain Documents by              
  Reference..................................    2 
J.P. Morgan & Co. Incorporated...............    3 
J.P. Morgan Index Funding Company I..........    5 
Use of Proceeds..............................   10 
Consolidated Ratios of J.P. Morgan...........   10 
Description of All Securities................   10 
Description of the ComPS.....................   11 
Risk Factors with Respect to All Preferred         
  Securities.................................   20 
Risk Factors with Respect to ComPS...........   22 
The Underlying Markets.......................   27 

                                                                [Download Table]

                                               PAGE
                                               ----
                                                   
The JPM Indices..............................   30 
JPMCI Policy Committee.......................   41 
Description of the Related Notes.............   42 
Description of the Guarantee.................   43 
Description of the Related Note Guarantee....   45 
Plan of Distribution.........................   46 
Legal Matters................................   47 
Experts......................................   47 
                      ANNEX I                      
Glossary of Terms............................  A-1 

 S-2

424B2
3rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 3rd

STRUCTURAL OVERVIEW 

[DIAGRAM] 

1.  THE TRUST.  The issuer of the CPIS is a Delaware statutory business trust   
formed by J.P. Morgan for the purpose of issuing the Series C Securities and    
other securities of separate series and lending the proceeds thereof to Morgan  
Guaranty Trust Company. J.P. Morgan will own 100% of the Series C Common        
Securities. The Trust will be disregarded for United States Federal income tax  
purposes.                                                                       

2.  THE CPIS.  The CPIS issued by the trust represent undivided beneficial      
preferred interests in certain assets of the trust consisting of the Related    
Note and the proceeds thereof. The Redemption Value and the Early Redemption    
Value are indexed to the CPI. The Redemption Value and Early Redemption Value   
may be more or less than the Face Amount. The Trust intends to issue additional 
series of Securities and already has Series A and B Securities outstanding. No  
holder of Securities of a series shall have any claim on, or any right to, any  
assets allocated to, or associated with, Securities of any other series.        

3.  CPIS PROCEEDS USED TO PURCHASE AN OBLIGATION OF MORGAN GUARANTY.  Proceeds  
of the CPIS and related Series C Common Securities will be used by the Trust on 
behalf of holders of the Series C Securities to purchase from Morgan Guaranty   
the Related Note with a maturity of January 15, 2010 and having the same        
economic terms as the CPIS.                                                     

4.  REPAYMENT OF RELATED NOTE.  Morgan Guaranty will repay the Related Note in  
whole or part to the extent required to repay Series C Securities upon any Early
Redemption Date and in whole at Stated Maturity (subject to extension in case of
a Market Disruption Event).                                                     

5.  RELATED NOTE GUARANTEE.  J.P. Morgan will guarantee to the Trust, on a      
subordinated basis, the payments on the Related Note as provided pursuant to the
terms of the Related Note.                                                      

6.  GUARANTEE.  J.P. Morgan will guarantee to the holders of the CPIS, on a     
subordinated basis, the payment of (i) the Early Redemption Value or the        
Redemption Value to the extent that, in each case, Morgan Guaranty has made     
payment of amounts due on the Related Note and (ii) upon liquidation of the     
Trust, the lesser of (a) the sum of the Early Redemption Value and (b) the      
amount of assets of the Trust consisting of the Related Note and the proceeds   
thereof available for distribution to holders of the CPIS.                      

J.P. Morgan's obligations under the Guarantee, the Related Note Guarantee and   
the Declaration constitute a full and unconditional guarantee with respect to   
the CPIS. This guarantee does not guarantee the return of principal; rather it  
guarantees the payment of a calculated amount, indexed to the CPI, which may be 
more or less than the Issue Price.                                              

On September 13, 2000, The Chase Manhattan Corporation and J.P. Morgan announced
that they have agreed to merge. The merged firm will be named J.P. Morgan Chase 
& Co. The merger is expected to close in the first quarter of 2001 and is       
subject to approval by shareholders of both companies, as well as by U.S.       
Federal and state and foreign regulatory authorities. Once the merger is        
complete, the CPIS will be guaranteed by the new entity, J.P. Morgan Chase & Co.

7.  MORGAN GUARANTY.  Morgan Guaranty, a trust company with full banking powers 
organized under the laws of the State of New York, is a wholly-owned subsidiary 
of J.P. Morgan.                                                                 

 S-3

424B2
4th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 4th

SUMMARY OF THE PRINCIPAL TERMS OF THE OFFERING

SECURITIES OFFERED..........                                                    
                         Series C Preferred Securities (the "CPIS") indexed to
  the U.S. Consumer Price Index.

ISSUER......................                                                    
                        J.P. Morgan Index Funding Company I (the "Trust"), a
                         Delaware statutory business trust and a subsidiary of
                   J.P. Morgan & Co. Incorporated ("J.P. Morgan").

GUARANTOR...................                                                    
                        J.P. Morgan on a subordinated basis. Morgan Guaranty
                      Trust Company of New York ("Morgan Guaranty"), the
                      issuer of the Related Note held by the Trust, is a
                        wholly-owned subsidiary of J.P. Morgan. On September
                       13, 2000, the Chase Manhattan Corporation ("Chase")
                       and J.P. Morgan announced their agreement to merge.
                        The merger is expected to close in the first quarter
                  of 2001, subject to shareholder and regulatory
                    approval. (Where appropriate, references to J.P.
                        Morgan include references to the merged entity, J.P.
Morgan Chase & Co.)         

INITIAL OFFERING PRICE PER                                                      
CPIS                                                                            
(THE "ISSUE PRICE").......                                                  
                         [$26.50]; although certain large initial buyers which
                         satisfy a holding period requirement will purchase at
98% of this amount.         

AGGREGATE ISSUE PRICE.......                                                    
$[49,025,000].              

STATED MATURITY.............                                                    
                         January 15, 2010, subject to extension in the case of
a Market Disruption Event.  

REDEMPTION VALUE............                                                    
                          At Stated Maturity, the Face Amount plus Index Amount;
but not less than zero.     

FACE AMOUNT...............                                                  
[$40.00].                   

INDEX AMOUNT..............                                                  
                         Ending Index minus Forward Index (the result of which
 may be positive or negative).

FORWARD INDEX...........                                                
                  [213.0] or approximately [120% to 126%] of the
    Reference CPI level at issuance.

ENDING INDEX............                                                
                        The Reference CPI level at the Stated Maturity. Such
                      level is the 3 month lagged CPI level as described
herein.                     

INDEX.......................                                                    
                    U.S. Consumer Price Index or CPI. The CPI is the
                       non-seasonally adjusted U.S. City Average All Items
                        Consumer Price Index for All Urban Consumers ("CPI")
                          published monthly by the Bureau of Labor Statistics of
                      the U.S. Department of Labor (the "Bureau of Labor
Statistics").               

CALCULATION AGENT...........                                                    
Morgan Guaranty.            

DIVIDENDS...................                                                    
                      No dividends or interest will be paid on the CPIS.

CASH REDEMPTION PRIOR TO                                                        
STATED MATURITY:                                                                

OPTIONAL REDEMPTION.......                                                  
                         At the holders' option, on January 15, 2002, and each
                          January 15 thereafter prior to Stated Maturity, at the
               Early Redemption Value as described herein.

SPECIAL EVENT                                                               
REDEMPTION..................                                                    
                         Under certain circumstances, upon the occurrence of a
                          Tax Event or an Investment Company Event, at the Early
         Redemption Value as described herein.

EARLY DETERMINATION OF                                                          
ENDING INDEX................                                                    
                       Upon the occurrence of certain events affecting the
                      liquidity of (i) the 4.25% U.S. Treasury Inflation
                  Protected Securities due January 15, 2010 (the
                      "Reference TIPS"), or (ii) the 6.50% U.S. Treasury
                  Security due February 15, 2010 (the "Reference
                        Government Notes", together with the Reference TIPS,
                       the "Reference Treasuries", and either a "Reference
                      Treasury"), the Ending Index may be fixed and such
                      fixed value will be used upon any subsequent early
                          redemption and at Stated Maturity. See "Description of
                       the CPIS--Early Determination of the Ending Index".

EARLY REDEMPTION VALUE......                                                    
                 The discounted present value of the estimated
                       Redemption Value on the applicable Early Redemption
                       Date (such amount may be more or less than the Face
                        Amount, but not less than zero). See "Description of
                       the CPIS--Optional Redemption" and "--Special Event
Redemption".                

VOTING RIGHTS...............                                                    
                       Holders of the CPIS will have limited voting rights
                          but will not be entitled to vote to appoint, remove or
                       replace the trustees of the Trust or to increase or
                        decrease the number of trustees. See "Description of
the CPIS--Voting Rights".   

USE OF PROCEEDS.............                                                    
                       The proceeds to the Trust from the sale of the CPIS
                          and related Series C Common Securities will be used to
                       purchase the Related Note from Morgan Guaranty (the
                      "Related Note"), and Morgan Guaranty will use such
                   proceeds for general corporate purposes and for
                       hedging its obligations under the Related Note. See
"Use of Proceeds".          

FEDERAL INCOME TAX                                                              
TREATMENT...................                                                    
                  The U.S. Federal income tax consequences of an
                         investment in the CPIS are complex and uncertain. The
                      CPIS represent an interest in the Related Note for
                        Federal income tax purposes. Morgan Guaranty and the
                       holders of the CPIS will agree to treat the Related
                          Note as a contract claim that is not an option, unless
                       otherwise required by the IRS. Morgan Guaranty also
                      intends to take the position that holders that are
                       U.S. persons will not have to accrue any amounts in
                    income with respect to the CPIS before receiving
                       payments with respect thereto except possibly on an
                       early determination of the Ending Index or when the
                         Ending Index can be determined in the month preceding
                      the Stated Maturity. It is possible, however, that
                      other tax results might arise. In particular, U.S.
                          holders may be required to accrue income over the life
                        of the CPIS or may be required to mark-to-market the
                    CPIS each year. The Trust will withhold 30% from
                          amounts paid to non-U.S. holders of the CPIS in excess
                 of the Issue Price of the CPIS. Pension plans
                     (including individual retirement accounts) should
                         consult their tax advisors concerning the application
                       of the "unrelated business taxable income" rules to
income from the CPIS.       

 S-4

424B2
5th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 5th

SUMMARY INFORMATION--Q&A

This summary includes questions and answers that highlight selected information 
from the Prospectus and this Prospectus Supplement to help you understand the   
CPIS. You should carefully read the Prospectus and this Prospectus Supplement to
fully understand the terms of the CPIS, the CPI, the Reference CPI and the tax  
and other considerations that are important to an investor in making a decision 
about whether to invest in the CPIS. You should carefully review the "Risk      
Factors" section, which highlights certain risks associated with an investment  
in the CPIS, to determine whether an investment in the CPIS is appropriate for  
you.                                                                            

WHAT ARE THE CPIS?                                                              
The CPIS represent undivided beneficial preferred interests in certain assets of
the Trust consisting of the Related Note and the proceeds thereof. The Related  
Note has identical economic terms as the CPIS. The CPIS are indexed such that   
the Redemption Value and the Early Redemption Value may be more or less than the
Face Amount, but may not be less than zero.                                     

The Stated Maturity of the CPIS is January 15, 2010. However, upon the          
occurrence of certain Market Disruption Events, the final redemption may be     
delayed. See "Description of the CPIS--Market Disruption Events". The CPIS may  
be redeemed earlier due to certain special events, which are described in this  
Prospectus Supplement, or annually, at the option of a holder, beginning on     
January 15, 2002.                                                               

WHAT IS THE CONSUMER PRICE INDEX OR CPI?                                        
The CPIS are indexed to the consumer price index or CPI. The CPI for these      
purposes is the non-seasonally adjusted U.S. City Average All Items Consumer    
Price Index published monthly by the Bureau of Labor Statistics of the U.S.     
Department of Labor. The CPI is a measure of the average change in consumer     
prices over time in a fixed market basket of goods and services, including food,
clothing, shelter, fuels, transportation, charges for doctors' and dentists'    
services, and drugs. User fees (such as water and sewer service) and sales and  
excise taxes paid by the consumer are also included. Income taxes and investment
items (such as stocks, bonds, and life insurance) are not included.             

The CPI includes expenditures by urban wage earners and clerical workers,       
professional, managerial, and technical workers, the self-employed, short-term  
workers, the unemployed, retirees and others not in the labor force. In         
calculating the index, the Bureau of Labor Statistics calculates price changes  
for the various items and these price changes are averaged together with weights
that represent their importance in the spending of urban households in the      
United States. The contents of the market basket of goods and services and the  
weights assigned to the various items are updated periodically by the Bureau of 
Labor Statistics to take into account changes in consumer expenditure patterns. 
The CPI is expressed in relative terms based on a reference period for which the
level is set at 100 (currently the base reference period used by the Bureau of  
Labor Statistics is 1982-1984).                                                 

WHAT IS THE REFERENCE CPI?                                                      
The CPI level used to determine the Redemption Value or Early Redemption Value  
is referred herein as Reference CPI. It is a 3 month lagged version of the CPI. 
Reference CPI means, for the first day of any calendar month, the CPI for the   
third preceding calendar month (which is typically released and published by the
Bureau of Labor Statistics in the second preceding calendar month). Such        
Reference CPI is the same CPI used by the United States Treasury Department in  
connection with its U.S. Treasury Inflation Protected Securities.               

For example, the Reference CPI for April 1 in any year is the CPI for January of
such year, which is usually released and published by the Bureau of Labor       
Statistics in February of such year. The Reference CPI for any day of a month,  
other than the first day of such month, is the linear interpolation between the 
Reference CPI for the first day of that month and the first day of the          
immediately following month. For the CPIS, we will round the applicable         
Reference CPI to two decimal places.                                            

WHAT WILL I RECEIVE AT STATED MATURITY?                                         
The CPIS are full principal-at-risk securities and you may receive more or less 
than the Face Amount. At Stated Maturity, unless previously redeemed as         
described below, an investor will receive the Redemption Value, which is equal  
to the Face Amount plus the Index Amount (which equals the Ending Index minus   
the Forward Index). Although this result can be negative, in no circumstances   
will the Redemption Value be less than zero. Certain Market Disruption Events   
could delay the determination and payment of the Redemption Value. See          
"Description of the CPIS--Redemption at Maturity".                              

The Redemption Value of the CPIS is linked directly to the performance of the   
CPI. If, at Stated Maturity, the Reference CPI has decreased or has not         
increased to at least the Forward Index level set on the day of pricing, then   
the Redemption Value will be less than the Face Amount. For example, if the     
Reference CPI at Stated Maturity is 40 points higher than the Forward Index, the
Redemption Value will be $40 higher than the Face Amount. If the Reference CPI  
at Stated Maturity is 30 points lower than the Forward Index, then the          
Redemption Value will be $30 lower than the Face Amount. The Reference CPI must 
increase by approximately [2.30%] per year for the Redemption Value to equal the
Face Amount (in other words, for the Reference CPI at Stated Maturity to equal  
the Forward Index).                                                             

 S-5

424B2
6th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 6th

Hypothetical Examples                                                           
As noted above, the Redemption Value is dependent on the Ending Index (the      
Reference CPI at Stated Maturity), and is calculated by the equation:           

Redemption Value = Face Amount +
Ending Index - Forward Index. 

The following four examples show hypothetical Redemption Values (1) greater than
the Face Amount, (2) equal to the Face Amount, (3) less than the Face Amount and
(4) at zero value. In each of the examples the Face Amount equals $40.00, the   
Forward Index equals 213.0, the term equals 9.167 years (9 years and 2 months), 
and the Reference CPI on the Issue Date equals 173.0, thus only the Ending Index
is needed to determine the Redemption Value.                                    

Example 1 (Redemption Value greater than the Face Amount):  If the Reference CPI
increases by an average of approximately 4% per year over the life of the CPIS, 
then the Ending Index will equal 247.85. Thus, for this example:                

Redemption Value = $40.00 + 247.85 - 213.0, or
Redemption Value = $74.85.

Example 2 (Redemption Value equal to the Face Amount): If the Reference CPI     
increases by an average of approximately 2.30% per year over the life of the    
CPIS, then the Ending Index will equal 213.0. Thus, for this example:           

Redemption Value = $40.00 + 213.0 - 213.0, or 
Redemption Value = 40.00. 

Example 3 (Redemption Value less than the Face Amount): If the Reference CPI    
increases by an average of approximately 1% per year over the life of the CPIS, 
then the Ending Index will equal 189.52. Thus for this example:                 

Redemption Value = $40.00 + 189.52 - 213.0, or
Redemption Value = $16.52.

Example 4 (Redemption Value equals zero):  If the Reference CPI does not        
increase or decreases over the life of CPIS, then the CPIS will be redeemed at  
no value. For example, if the Reference CPI decreases by an average of          
approximately 1% per year over the life of the CPIS, then the Ending Index will 
equal 157.77 at Stated Maturity. Thus for this example:                         

Redemption Value = $40.00 + 157.77 - 213.0, therefore 
Redemption Value = $0.00. 

As Example 4 demonstrates, even though the above equation actually equals       
$-15.23, the Redemption Value cannot be less than zero.                         

CAN I OPT TO REDEEM EARLY?                                                      
Beginning in 2002, each holder of the CPIS may cause the Trust to redeem some or
all of such holder's CPIS at the Early Redemption Value. Holders wishing to     
redeem early must give notice as specified in this Prospectus Supplement        
approximately one month prior to the Early Redemption Date. The Early Redemption
Value represents the discounted present value of the projected Redemption Value 
determined on the Early Determination Date (five Business Days prior to such    
Early Redemption Date) in accordance with the terms described in this Prospectus
Supplement. However, it is likely, under usually-prevailing market conditions,  
that the Early Redemption Value will be less than amount a holder could have    
realized by selling such CPIS on such Early Determination Date in the market    
(excluding commission costs), since the formula for determining the Early       
Redemption Value does not account for any time premium and uses a conservative  
methodology including a 30 basis point Buyback Spread which results in a lower  
Early Redemption Value.                                                         

CAN THE ENDING INDEX BE DETERMINED EARLY?                                       
Yes.  Upon the occurrence of certain events affecting the outstanding amount    
either of the Reference Treasuries, Morgan Guaranty has the right to cause the  
Ending Index to be fixed. Such Fixed Ending Index is determined using the same  
methodology for determining the Early Ending Index for an Optional Redemption   
(including the 30 basis point Buyback Spread). Following such an event, the     
Ending Index will remain fixed and will be used in calculating the Redemption   
Value or Early Redemption Value.                                                

ARE THERE OTHER REDEMPTION PROVISIONS?                                          
Yes.  Upon the occurrence and during the continuation of certain special events 
(either a Tax Event or an Investment Company Event, each as defined in this     
Prospectus Supplement), Morgan Guaranty will have the right to redeem the       
Related Note in whole or in part, and thus cause the Trust to redeem a similar  
amount of the CPIS.                                                             

WILL I RECEIVE DIVIDENDS OR INTEREST?                                           
No.  The CPIS do not pay any dividends or interest.                             

CAN YOU TELL ME ABOUT THE ISSUER AND GUARANTEES?                                
The issuer is J.P. Morgan Index Funding Company I, a statutory business trust   
formed by J.P. Morgan for the purpose of issuing the Series C Securities and    
other Securities of separate series and lending the proceeds from such issuances
to Morgan Guaranty. J.P. Morgan, through its obligations under the Guarantee,   
the Related Note Guarantee and the Declaration, taken together, will provide a  
full and unconditional guarantee, on a subordinated basis, of all payments due  
on the CPIS.                                                                    

Previously, J.P. Morgan Index Funding Company, LLC (the "Company"), a Delaware  
limited liability company, was merged into the Trust. As a result of such       
merger, the Trust has succeeded to all rights and obligations of the Company,   
including any rights and obligations in respect of the 2.5% Series A Securities 
that were issued by the Company prior to the merger. Additionally, the Trust    
issued Series B Securities on March 3, 1999.                                    

On September 13, 2000, The Chase Manhattan Bank Corporation and J.P. Morgan     
announced that they have                                                        

 S-6

424B2
7th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 7th

agreed to merge. The merged firm will be named J.P. Morgan Chase & Co. The      
merger is expected to close in the first quarter of 2001 and is subject to      
approval by shareholders of both companies, as well as by U.S. Federal and state
and foreign regulatory authorities. Once the merger is complete, the CPIS will  
be guaranteed by the new entity, J.P. Morgan Chase & Co.                        

TELL ME ABOUT THE RELATED NOTE AND USE OF PROCEEDS?                             
The Related Note will be issued as an unsecured obligation of Morgan Guaranty.  
The timing and amount of payments on the Related Note mirror the aggregate      
financial terms of the CPIS.                                                    

The Trust will use the proceeds from the sale of the CPIS to purchase the       
Related Note from Morgan Guaranty. Morgan Guaranty will use the proceeds thereof
for general corporate purposes and for hedging its obligations under the Related
Note.                                                                           

WHERE WILL THE CPIS BE LISTED?                                                  
We have applied for listing of the CPIS on the American Stock Exchange (the     
"AMEX") under the symbol "JPI". Trading of the CPIS on the American Stock       
Exchange is expected to commence within a 30-day period after the date of this  
Prospectus Supplement. Prior to this offering, there has been no market for the 
CPIS. You should be aware that listing the CPIS on the American Stock Exchange  
will not necessarily ensure that a liquid trading market will be available for  
the CPIS.                                                                       

DO I HAVE ANY VOTING RIGHTS?                                                    
Very limited.  Holders of the CPIS will have certain voting rights, but will not
be entitled to vote to appoint, remove, or replace the Trustees of the Trust or 
to increase or decrease the number of Trustees.                                 

WHAT ABOUT TAXES?                                                               
The U.S. Federal income tax consequences of an investment in the CPIS are       
complex and uncertain. The CPIS represent an interest in the Related Note for   
U.S. Federal income tax purposes. Pursuant to the terms of the CPIS, Morgan     
Guaranty and you will agree to treat the Related Note as a contract claim that  
is not an option, unless otherwise required by the IRS. Morgan Guaranty also    
intends to take the position that you will not be required to accrue any amounts
in income with respect to the CPIS before receiving payments with respect       
thereto except possibly on an early determination of the Ending Index or when   
the Ending Index can be determined in the month preceding the Stated Maturity.  
Assuming these positions concerning the CPIS are respected, you will likely have
ordinary gain or loss upon the payment of the CPIS at maturity or upon          
redemption, although you may have capital gain or loss upon the sale or other   
disposition of the CPIS to a third party.                                       

It is possible, however, that other tax results might arise. For example, the   
Related Note could be treated as a cash settled option, in which case you would 
be required to mark-to-market the CPIS each year. Alternatively, the Related    
Note could be treated as a contingent payment debt obligation, in which case you
would be required to accrue original issue discount in income over the life of  
the CPIS.                                                                       

Pension plans (including individual retirement accounts) should consult their   
tax advisors concerning the application of the "unrelated business taxable      
income" rules to income from the CPIS.                                          

In the case of non-U.S. holders of the CPIS, the Trust will withhold 30% from   
amounts paid to such holders in excess of the Issue Price. Non-U.S. holders can,
however, apply to the Internal Revenue Service for a refund of any amounts so   
withheld on the theory that no withholding tax was due. No assurance can be     
given that any such refund claim will be successful.                            

For further information, see "United States Federal Income Taxation" in this    
Prospectus Supplement.                                                          

ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?                              
Yes.  An investment in the CPIS is subject to certain risks, including full     
principal risk. Please refer to the section "Risk Factors" in this Prospectus   
Supplement.                                                                     

IN WHAT FORM WILL THE CPIS BE ISSUED?                                           
The CPIS will be represented by one or more global securities that will be      
deposited with and registered in the name of Depository Trust Company or its    
nominee. This means you will not receive a certificate for your security.       

 S-7

424B2
8th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 8th

WHERE CAN YOU FIND MORE INFORMATION?

J.P. Morgan files reports, proxy statements and other information with the SEC. 
Its SEC filings are also available over the Internet at the SEC's web site at   
HTTP://WWW.SEC.GOV. You may also read and copy any document J.P. Morgan files at
the SEC's public reference rooms in Washington, D.C., New York, New York and    
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on
the public reference rooms and their copying charges. You may also inspect J.P. 
Morgan's SEC reports and other information at the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York, 10005.                                     

We will send you copies of its SEC filings, excluding exhibits, at no cost upon 
request. Please address your request to the Office of the Secretary, J.P. Morgan
& Co. Incorporated, 60 Wall Street, New York, New York 10260-0060; telephone    
number (212) 648-3380.                                                          

More information about the Treasury Department's inflation linked securities and
the Bureau of Labor Statistics determination and methodology for the CPI may be 
found at WWW.PUBLICDEBT.TREAS.GOV and WWW.BLS.GOV respectively.                 

CONSOLIDATED RATIO OF J.P. MORGAN'S EARNINGS TO FIXED CHARGES 

                                                        [Enlarge/Download Table]

                                --------------------------------------------------------
                                SIX MONTHS ENDED          YEAR ENDED DECEMBER 31,       
                                 JUNE 30, 2000      1999    1998    1997    1996    1995
                                ----------------    ----    ----    ----    ----    ----
                                                                                        
Excluding Interest on Deposits        1.40          1.42    1.16(a) 1.27    1.35    1.35
Including Interest on Deposits        1.32          1.32    1.12    1.20    1.26    1.24

---------------                                                                 
(a) 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; excluding the
 third quarter 1998 after tax gain of $34 million ($56 million before tax)
related to the sale of J.P. Morgan'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 J.P. Morgan'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.                                         

CONSOLIDATED RATIO OF J.P. MORGAN'S EARNINGS TO 
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

                                                        [Enlarge/Download Table]

                                --------------------------------------------------------
                                SIX MONTHS ENDED          YEAR ENDED DECEMBER 31,       
                                 JUNE 30, 2000      1999    1998    1997    1996    1995
                                ----------------    ----    ----    ----    ----    ----
                                                                                        
Excluding Interest on Deposits        1.40          1.42    1.16(a) 1.27    1.35    1.35
Including Interest on Deposits        1.32          1.32    1.12    1.20    1.26    1.24

---------------                                                                 
(a) For the twelve months ended December 31, 1998, the ratio of earnings to     
  combined 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; excluding the third quarter 1998 after
    tax gain of $34 million ($56 million before tax) related to the sale of J.P.
  Morgan'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 J.P. Morgan'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.

 S-8

424B2
9th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 9th

RISK FACTORS

Your investment in the CPIS will involve certain risks. The CPIS are not        
principal-protected. At Stated Maturity, if the Ending Index is less than the   
Forward Index, the Redemption Value will be less than the Face Amount, and may  
be as low as zero (but not less than zero). In addition, your investment in the 
CPIS entails risks not associated with investment in conventional debt or       
preferred securities or even other inflation linked securities. You should      
consider carefully the following discussion of risks before you decide that an  
investment in the CPIS is suitable for you.                                     

INDEXATION OF THE REDEMPTION VALUE                                              

The CPIS are full principal-at-risk securities. The Redemption Value payable at 
Stated Maturity will be determined, pursuant to the terms described in this     
Prospectus Supplement, by adding the Face Amount to the difference between the  
Ending Index (the Reference CPI level at Stated Maturity) and the Forward Index.
At Stated Maturity, if the Reference CPI level has decreased or has not         
increased by more than [20-30]%, the Redemption Value will be less than the Face
Amount. To reach the Forward Index level, the Reference CPI must rise           
approximately [2.30%] per year over the term of the CPIS. In the event of no    
inflation or sustained deflation (negative inflation or falling price levels),  
the CPIS may have no value at Stated Maturity.                                  

SPECIAL EVENT REDEMPTION                                                        

Upon the occurrence of a Tax Event (as described herein), Morgan Guaranty will  
have the right to, or in the case of an Investment Company Event (as described  
herein) be obligated to, redeem the Related Note for cash in whole or, if a     
partial redemption will end such Special Event, in an amount sufficient to end  
such Special Event, with the result that the Trust will redeem a similar        
proportion of the CPIS for cash at the Early Redemption Value. As described in  
more detail below, a Special Event may occur at any time. See "Description of   
the CPIS--Special Event Redemption" for more detail. It is possible that the    
occurrence of a Special Event could cause the market price of the CPIS in any   
existing secondary market to decline.                                           

EARLY REDEMPTION VALUE                                                          

The CPIS may be redeemed prior to their Stated Maturity upon (1) the occurrence 
of a Special Event or (2) annually beginning in 2002, at the option of the      
holders, on an Optional Redemption Date. In the case of a Special Event         
Redemption, the Early Redemption Value may be less than what the Redemption     
Value would have otherwise been had the Special Event not caused the CPIS to be 
redeemed early. In the case of an Optional Redemption, it is likely, under      
usually-prevailing market conditions, that the Early Redemption Value will be   
less than the amount a holder could have realized by selling such CPIS on such  
Early Determination Date (excluding commission costs), since the early          
redemption formula does not account for any time premium and uses conservative  
methodology (including a 30 basis point Buyback Spread), which reduces the Early
Redemption Value.                                                               

LIMITED VOTING RIGHTS                                                           

Holders of the CPIS will have certain voting rights relating to a payment       
default on or an adverse change to the CPIS, but will not be entitled to vote to
appoint, remove or replace the Trustees of the Trust or to increase or decrease 
the number of Trustees, which voting rights are vested exclusively with J.P.    
Morgan as the holder of the Series C Common Securities and other series of      
common securities issued by the Trust. See "Description of the CPIS--Voting     
Rights".                                                                        

LISTING MAY NOT ENSURE LIQUID MARKET AND TRADING PRICE MAY NOT REFLECT ACTUAL   
ECONOMIC VALUE                                                                  

We have applied for listing of the CPIS on the AMEX under symbol "JPI", subject 
to official notice of issuance. Trading of the CPIS on the AMEX is expected to  
commence within a 30-day period after the date of this Prospectus Supplement.   
Prior to this offering there has been no market for the CPIS. Listing the CPIS  
on the AMEX does not necessarily ensure that a liquid trading market will       
develop for the CPIS.                                                           

If the trading market for the CPIS is limited, there may be a limited number of 
buyers when you decide to sell your CPIS if you do not wish to hold your        
investment until the Stated Maturity. This may affect the price you receive upon
such sale.                                                                      

EARLY DETERMINATION OF ENDING INDEX                                             

If either or both of the Reference Treasuries are subject to a buyback or are   
called by the Department of Treasury or the outstanding amount of such Reference
Treasury is reduced by at least 10% from the greatest outstanding amount since  
issuance of the CPIS (each a "Reference Treasury Event"), then Morgan Guaranty  
has the right, but not the obligation, within 30 days of such Reference Treasury
Event, to permanently fix the Ending Index (the "Fixed Ending Index").          
Currently, there                                                                

 S-9

424B2
10th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 10th

are approximately [$11.5] billion in Reference TIPS and $[23.3] billion in      
Reference Government Notes issued and outstanding. The value of the Fixed Ending
Index will be determined using the then current market inputs and the           
methodology used for determining the Early Ending Index in the event of an      
Optional Redemption. However, the CPIS will not be redeemed or called and will  
remain outstanding until Stated Maturity or an early redemption. Such early     
fixation of the Ending Index may adversely affect the trading value of the CPIS 
and their Redemption Value relative to what it may have been if such early      
fixation had not occurred. Morgan Guaranty will be the Calculation Agent and may
have interests adverse to the holders of the CPIS in determining whether to fix 
the Ending Index early.                                                         

FACTORS AFFECTING THE MARKET VALUE OF THE CPIS                                  

The value of the CPIS in the secondary market will be affected by the supply of 
and demand for the CPIS and other key factors including, but not limited to: the
level of the CPI, the market's forecast for future inflation ("expected         
inflation"), volatility of the CPI, the remaining time to Stated Maturity,      
interest rates and the perceived credit quality of Morgan Guaranty and J.P.     
Morgan. Assuming all other conditions remain constant, a change in a specific   
factor, as discussed below, could impact the market value of the CPIS:          

- CPI Level:  We expect the market value of the CPIS to depend on the level of  
the CPI. As discussed under "Description of the CPIS", decreases in the     
  Reference CPI should directly correlate to adverse changes in the value of the
CPIS.                                                                       

- Expected Inflation:  We expect the market value of the CPIS will also depend  
  on the expected inflation for the remaining term of the CPIS. Here, we use the
 term expected inflation to mean the rate of inflation that the market expects
through Stated Maturity and which can be approximated as the difference     
 between the yields on U.S. Government Treasury Notes and TIPS with maturities
 similar to that of the CPIS. Reductions in the market's forecast for expected
 inflation should cause an adverse change in the value of the CPIS as it would
lower the expected payout at maturity. For example, at some point prior to  
  Stated Maturity, although the Reference CPI level may have increased at a rate
 greater than [2.30]% per year (the rate of increase required over the life of
the CPIS for the Redemption Value to equal the Face Amount) from issuance,  
expected inflation for the remaining term may have fallen such that the CPIS
could trade at a price lower than the Issue Price.                          

- Volatility of the CPI:  Volatility is the term used to describe the size and  
frequency of fluctuations in a particular index or market. If the volatility
of the CPI increases or decreases, the trading value of the CPIS may be     
adversely affected.                                                         

- Remaining Time to Stated Maturity:  The CPIS may trade at a value above that  
which would be expected based on the Reference CPI level, expected inflation
and interest rates. Any such difference may reflect a time premium resulting
from expectations concerning the value of the CPI during the period to the  
 Stated Maturity. However, as the time remaining to Stated Maturity decreases,
the time premium may decrease, adversely affecting the trading value of the 
CPIS.                                                                       

- Interest Rates:  The trading value of the CPIS may be affected by changes in  
interest rates. In general, if interest rates increase (and inflation and   
expected inflation stay the same), the trading value of the CPIS may be     
adversely affected.                                                         

- Credit Quality:  A decline in the perceived credit quality of Morgan Guaranty 
or J.P. Morgan could cause the trading price of the CPIS to decline.        

In addition, cumulative early redemptions which reduce the number of outstanding
CPIS to very low levels and reduce liquidity could result in the eventual       
delisting of the CPIS from the AMEX.                                            

IMPOSITION OF BANK REGULATORY RESTRICTIONS                                      

The Trust's ability to make redemptions and other payments on the CPIS is       
dependent upon Morgan Guaranty making payments on the Related Note as and when  
required, or the collection of such payments by the Trust, on behalf of the CPIS
holders, under the Related Note Guarantee. Although there is no current         
restriction on Morgan Guaranty's ability to make payments under the Related     
Note, certain transactions with affiliates, including the Trust, could become   
subject to restrictions imposed by bank regulatory authorities. As noted in the 
accompanying Prospectus under "J.P. Morgan & Co. Incorporated--Regulation",     
Morgan Guaranty is subject to examination and regulation by U.S. Federal and    
state banking authorities.                                                      

EFFECT OF TRADING IN U.S. INFLATION LINKED NOTES, U.S. GOVERNMENT TREASURY NOTES
AND OTHER INSTRUMENTS                                                           

Morgan Guaranty and other affiliates of J.P. Morgan are actively involved in the
trading of TIPS (including the Reference TIPS), U.S. Government Treasury Notes  
(including the Reference Government Notes) and other instruments and derivative 
S-10

424B2
11th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 11th

products based thereon. Morgan Guaranty in particular is an active participant  
in inflation linked swaps and related derivatives markets. J.P. Morgan          
Securities Inc. ("JPMSI") and other affiliates of J.P. Morgan and Morgan        
Guaranty may also issue or underwrite or assist unaffiliated entities in the    
issuance or underwriting of other securities or financial instruments with      
returns indexed to the CPI or another inflation index.                          

Trading in the above referenced securities, contracts and instruments by Morgan 
Guaranty, its affiliates (including JPMSI) and unaffiliated third parties could 
adversely affect the trading value of the CPIS by, among other effects,         
influencing the level of expected inflation or the market demand for CPI linked 
securities. Also, additional issuances of securities linked or referenced to the
CPI or similar inflation indices could adversely affect the value of the CPIS.  

POTENTIAL FOR ADVERSE INTERESTS                                                 

As noted above, certain of our subsidiaries and affiliates expect to engage in  
trading activities related to inflation linked securities and other instruments 
or derivative products based on or related to the CPI, for their accounts and   
for other accounts under their management. Certain of our subsidiaries and      
affiliates, as well as unaffiliated third parties, may also engage in other     
activities related to the CPI, as discussed above. Because Morgan Guaranty will 
issue the Related Note to the Trust, all such activities could create interests 
of Morgan Guaranty adverse to the holders of the CPIS. For example, the         
introduction of competing products into the marketplace, such as other          
securities linked to the CPI, could adversely affect the value of the CPIS. To  
the extent that J.P. Morgan or one of its affiliates serves as issuer, agent or 
underwriter for such securities, their interests with respect to such products  
may be adverse to those of the holders of the CPIS.                             

Morgan Guaranty will serve as Calculation Agent with respect to the CPIS and as 
such will be responsible for calculating the Reference CPI and redemption       
amounts. Morgan Guaranty will also be responsible for determining whether a     
Market Disruption Event has occurred. In performing these duties, Morgan        
Guaranty may have interests adverse to the interests of the holders of the CPIS,
such as instances when Morgan Guaranty as the Calculation Agent is required to  
exercise discretion.                                                            

We have entered into an arrangement with one of our subsidiaries to hedge the   
market risk associated with our obligation to pay any redemption amount. Such   
subsidiary expects to make a profit in connection with such arrangement. We did 
not seek competitive bids for such an arrangement from unaffiliated parties.    

RISK OF INDEX CONTINGENCIES                                                     

We will use the same index contingencies the Treasury Department uses for the   
Reference TIPS (as described in 31 CFR 356 "Department of the Treasury Circular,
Public Debt Series No. 1--93" (the "U.S. Public Debt Circular")). These index   
contingencies include how the Reference CPI will be affected by (1) revisions in
previously reported CPI levels, (2) rebasing of the CPI by the Bureau of Labor  
Statistics to a new reference period, (3) material adverse changes, in the      
judgement of the Treasury Secretary, to the CPI by legislation or Executive     
Order or (4) delays in reporting the CPI. We will use the index contingency     
remedies as pronounced by the Treasury Department even if such remedies produce 
lower Reference CPI levels than might otherwise have occurred and adversely     
affect holders of the CPIS. Determinations of the Secretary of Treasury in this 
regard will be final.                                                           

At present, according to the Treasury Department, only certain fundamental      
changes are considered "index contingencies". For example, a change in the CPI  
would be considered fundamental and become an index contingency if it affected  
the character of the CPI. However, technical changes made by the Bureau of Labor
Statistics to the CPI to improve its accuracy as a measure of the cost of living
would not be considered fundamental. Technical changes include, but are not     
limited to: (1) the specific items (e.g., apples or major appliances) priced for
the Index; (2) the way individual price quotations are aggregated to construct  
component price indices for these items, (3) the method for combining these     
component price indices to obtain the comprehensive, all-items CPI and (4) the  
procedures for incorporating new goods into the Index and making adjustments for
quality changes in existing goods. Determinations by the Secretary of Treasury  
as to what constitutes a fundamental change and therefore what constitutes an   
index contingency will be final.                                                

For example, in September 2000, the Bureau of Labor Statistics reissued and     
revised the previously published monthly CPI levels for the year 2000. The      
reported index number for each month from January, 2000, through August, 2000,  
was increased by 0.0 to 0.2 index points. Such revisions altered the previously 
reported percentage change in the CPI from December, 1999, to August, 2000, from
2.6% to 2.7%. The Bureau of Labor Statistics said the revisions reflected an    
error in adjusting for quality improvement when a housing unit changed its air  
conditioning system. The error actually extended back to January 1999, but      
Bureau of Labor Statistics officials concluded that the impact on the 1999 data 
would be too small to merit revising the whole series back that far (the change 
would have affected each month's reported value by 0.1 at most). According to   
the U.S. Public Debt Circular a CPI revision would not change Reference CPI that
has been already reported by the                                                

S-11

424B2
12th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 12th

Treasury and thus the Treasury will continue to use the previously reported     
(lower) CPI levels. If such a CPI revision were to occur in the future and      
affected a Reference CPI level used to determine a payment for the CPIS we will 
continue to use the Reference CPI level used by the Treasury even if it produced
a lower valuation for the holder of the CPIS.                                   

CHANGES AND IMPROVEMENTS IN CPI METHODOLOGY                                     

The Bureau of Labor Statistics has made numerous changes and improvements to the
CPI over the last 25 years and is likely continue to do so. Examples of         
methodological improvements include the technical changes described in the      
previous paragraph, the use of regression models to adjust for the quality      
improvements in various goods (TVs, PCs, etc.), the introduction of geometric   
averages to account for consumer substitution within CPI categories and changing
the housing/shelter formula to improve rental equivalence estimation. These and 
future changes could reduce the level of increase in the CPI and could lower the
value of the CPIS.                                                              

The Bureau of Labor Statistics occasionally rebases the CPI. The current        
standard reference base period is 1982-1984 = 100. The CPI was last rebased in  
January, 1988. Prior to the release of the CPI for January 1988, the standard   
reference base was 1967 = 100. If the Bureau of Labor Statistics rebases the CPI
during the time the CPIS are outstanding, we will continue to calculate the     
Reference CPI using the existing base year in effect for the CPI used at        
issuance of the CPIS as long as the old version is published. The conversion to 
a new reference base will not affect the measurement of the percent changes in  
the Index from one time period to another, except for rounding differences. Thus
rebasing will affect the published "headline" number often quoted in the        
financial press, however the Reference CPI calculation should not be adversely  
affected by any such rebasing. Determinations of the Secretary of Treasury in   
regard to all Reference CPI levels, contingencies and remedies, including       
possible changes due to rebasing, will be final.                                

REFERENCE CPI IS LAGGED 3 MONTHS                                                

The Reference CPI level used to determine the Redemption Value of the CPIS is   
the same Reference CPI level used in the Reference TIPS. The Reference TIPS and 
the CPIS use a Reference CPI for the first day of each calendar month that is   
the CPI for the third preceding calendar month. For example, the CPI that we use
for April 1 in any year is the CPI for January in such year, which is typically 
reported in February of such year. The Reference CPI for any date other than the
first day of a given month is determined by a linear interpolation between the  
CPI for the first day of the month and the CPI on the first day of the next     
month. Because the Reference CPI at maturity is not the most recently published 
CPI level, the Redemption Value could be less than if the most recently         
published CPI level at maturity was used.                                       

J.P. MORGAN CANNOT CONTROL THE BUREAU OF LABOR STATISTICS OR TREASURY DEPARTMENT

J.P. Morgan has no control over consumer prices, the Reference CPI or the       
agencies involved in its calculation. These agencies could make changes to the  
calculation of the CPI or decisions relating to Index Contingencies which       
adversely affect the holders of the CPIS. Also, the Treasury Department could   
call its debt and reduce the amount of Reference TIPS outstanding. Currently    
there are approximately [ $11.5 ] billion in Reference TIPS and $[23.3] billion 
in Reference Government Notes outstanding. A reduction of either such           
outstanding Reference Treasury by 10% or more from their greatest outstanding   
amount from issuance of the CPIS could cause Morgan Guaranty to fix the Ending  
Index early. For more information concerning early determination of the Ending  
Index and its effect on the CPIS, see "Description of the CPIS--Early           
Determination of the Ending Index".                                             

VOLATILITY OF AND ADVERSE CHANGES TO CPI                                        

Consumer prices can be volatile. Historical changes in the CPI should not be    
taken as an indication of future performance during the term of the CPIS. The   
following tables set forth the monthly level of the CPI for the past 5 years    
(Table 1) and the December year end level since 1947 (Table 2) as published by  
the Bureau of Labor Statistics. Potential investors in the CPIS should note that
inflation has not risen every year. Specifically, in 1949 the CPI fell 2.1% and 
in 1954 the CPI fell 0.7%.                                                      

S-12

424B2
13th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 13th

TABLE 1: MONTHLY CPI LEVELS FROM 1995 AS REPORTED BY BUREAU OF LABOR STATISTICS 

                                                        [Enlarge/Download Table]

      ---------------------------------------------------------------------------------------------
       JAN     FEB     MAR     APR     MAY     JUN     JUL     AUG     SEP     OCT     NOV     DEC 
      -----   -----   -----   -----   -----   -----   -----   -----   -----   -----   -----   -----
                                                                                                   
1995  150.3   150.9   151.4   151.9   152.2   152.5   152.5   152.9   153.2   153.7   153.6   153.5
1996  154.4   154.9   155.7   156.3   156.6   156.7   157.0   157.3   157.8   158.3   158.6   158.6
1997  159.1   159.6   160.0   160.2   160.1   160.3   160.5   160.8   161.2   161.6   161.5   161.3
1998  161.6   161.9   162.2   162.5   162.8   163.0   163.2   163.4   163.6   164.0   164.0   163.9
1999  164.3   164.5   165.0   166.2   166.2   166.2   166.7   167.1   167.9   168.2   168.3   168.3
2000  168.8   169.8   171.2   171.3   171.5   172.4   172.8   172.8   173.7                        

The above Table 1 shows the CPI for each month over the past five years as      
reported by Bureau of Labor Statistics. The Reference CPI is lagged three       
months, thus the Reference CPI for April 1 of any year would be the January     
levels shown in the table for such year.                                        

TABLE 2: YEAR-END DECEMBER CPI LEVELS REPORTED BY BUREAU OF LABOR STATISTICS.   
ANNUAL CHANGE AND 9 YEAR CHANGE.                                                

                                                                [Download Table]

      -----------------------
              ANNUAL    9 YR 
YEAR   CPI    CHANGE   CHANGE
----  -----   ------   ------
                             
1947   23.4      --       -- 
1948   24.1     3.0%      -- 
1949   23.6    -2.1%      -- 
1950   25.0     5.9%      -- 
1951   26.5     6.0%      -- 
1952   26.7     0.8%      -- 
1953   26.9     0.7%      -- 
1954   26.7    -0.7%      -- 
1955   26.8     0.4%      -- 
1956   27.6     3.0%    17.9%
1957   28.4     2.9%    17.8%
1958   28.9     1.8%    22.5%
1959   29.4     1.7%    17.6%
1960   29.8     1.4%    12.5%
1961   30.0     0.7%    12.4%
1962   30.4     1.3%    13.0%
1963   30.9     1.6%    15.7%
1964   31.2     1.0%    16.4%
1965   31.8     1.9%    15.2%
1966   32.9     3.5%    15.8%
1967   33.9     3.0%    17.3%
1968   35.5     4.7%    20.7%
1969   37.7     6.2%    26.5%
1970   39.8     5.6%    32.7%
1971   41.1     3.3%    35.2%
1972   42.5     3.4%    37.5%
1973   46.2     8.7%    48.1%

                                                                [Download Table]

      -----------------------
              ANNUAL    9 YR 
YEAR   CPI    CHANGE   CHANGE
----  -----   ------   ------
                             
1974   51.9    12.3%    63.2%
1975   55.5     6.9%    68.7%
1976   58.2     4.9%    71.7%
1977   62.1     6.7%    74.9%
1978   67.7     9.0%    79.6%
1979   76.7    13.3%    92.7%
1980   86.3    12.5%   110.0%
1981   94.0     8.9%   121.2%
1982   97.6     3.8%   111.3%
1983  101.3     3.8%    95.2%
1984  105.3     3.9%    89.7%
1985  109.3     3.8%    87.8%
1986  110.5     1.1%    77.9%
1987  115.4     4.4%    70.5%
1988  120.5     4.4%    57.1%
1989  126.1     4.6%    46.1%
1990  133.8     6.1%    42.3%
1991  137.9     3.1%    41.3%
1992  141.9     2.9%    40.1%
1993  145.8     2.7%    38.5%
1994  149.7     2.7%    37.0%
1995  153.5     2.5%    38.9%
1996  158.6     3.3%    37.4%
1997  161.3     1.7%    33.9%
1998  163.9     1.6%    30.0%
1999  168.3     2.7%    25.8%

Sources: Bureau of Labor Statistics and Morgan Guaranty. Both Tables 1 and 2    
show the CPI for 1982-84 base period.                                           

With respect to the foregoing CPI levels reported by Bureau of Labor Statistics,
past performance is not necessarily indicative of future performance and levels.

S-13

424B2
14th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 14th

MARKET DISRUPTION EVENTS                                                        

Market Disruption Events may delay the determination of the Redemption Value or 
Early Redemption Value. If a Market Disruption Event occurs on an Early         
Determination Date or at Stated Maturity, the repayment of the early or final   
redemption amounts may be delayed. In certain circumstances involving continuing
Market Disruption Events, the Calculation Agent may use its discretion to       
determine the Reference CPI. The Reference CPI determined by the Calculation    
Agent under such circumstances may be lower than the actual Reference CPI       
eventually reported (or determined by the Treasury Department). This would      
result in investors receiving less than they would otherwise have been entitled 
to receive. Such determinations by the Calculation Agent will be final absent   
manifest error. See "Description of the CPIS--Market Disruption Events".        

EXTENSION OF SETTLEMENT DATE OR STATED MATURITY                                 

If the Reference CPI cannot be determined on any Early Determination Date or at 
Stated Maturity due to a Market Disruption Event, the applicable settlement date
for the payments determined on such dates would be postponed until the later of 
the applicable redemption date or 5 business days after the determination of    
such Reference CPI for such date. Such delay could be of indefinite duration,   
during which time a holder of the CPIS will not receive the Early Redemption    
Value or Redemption Value thereof, as applicable.                               

HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE                           

Although historically the CPI has shown some negative correlation with returns  
on other securities, such as stocks and bonds, there can be no assurance that   
such correlations will prevail in the future. As a result, investors who invest 
in the CPIS in reliance on these correlations should individually assess the    
likelihood of such correlations continuing.                                     

TABLE 3: CORRELATION(R) OF QUARTERLY PERCENTAGE CHANGES FOR TWO 10-YEAR PERIODS,
FOR CPI VERSUS.                                                                 

                                                                [Download Table]

                                                 ----------------------
                                                 1980-1989    1990-1999
                                                 ---------    ---------
                                                                       
U.S. large capitalization equities total return     -14%         -47%  
U.S. Government bond index total return             -29%         -19%  

Source: Morgan Guaranty                                                         

CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS                               

The value of the CPIS are highly dependent upon the level of the CPI over time. 
The CPI has been subject to public debate and congressional hearings in the past
and may continue to be so in the future. Also, new laws and regulations could be
passed which adversely affect the CPI and thus adversely affect the holders of  
the CPIS.                                                                       

Additionally, upon the occurrence of certain events affecting the amount of     
Reference Treasuries outstanding, Morgan Guaranty has the right to cause the    
Ending Index to be fixed. Following such an event, the Ending Index will remain 
fixed and will be used in calculating any early or final redemption amount.     

CERTAIN CONSIDERATIONS REGARDING HEDGING                                        

Prospective purchasers of the CPIS who intend to hedge against the risk         
associated with inflation should recognize the complexities of utilizing the    
CPIS in this manner. Although the CPIS are designed to produce a pre-tax real   
rate of return which rises and falls in conjunction with movements in the       
Reference CPI level, the formulas under which the Redemption Value and Early    
Redemption Value are calculated are not guaranteed to produce distributions to  
holders having readily definable relationships with other CPI indexed           
instruments and products. There can be no assurance that the CPI level will rise
at all during the life of the instrument. Also, investing in the CPIS should not
be considered a complete investment program.                                    

LIMITATION ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE    
DECLARATION                                                                     

Each of the Guarantee and the Related Note Guarantee has certain limitations. In
addition, J.P. Morgan's obligations under the Guarantee, the Related Note       
Guarantee and the Declaration are subordinated to its debtors and pari passu    
with certain other equity holders. Taken together, these obligations of J.P.    
Morgan provide a full and unconditional, subordinated guarantee of the payments 
due on the CPIS. See "Description of the Guarantee" and "Description of the     
Related Note Guarantee".                                                        

S-14

424B2
15th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 15th

On September 13, 2000, Chase and J.P. Morgan announced that they have agreed to 
merge. The merged firm will be named J.P. Morgan Chase & Co. The merger is      
expected to close in the first quarter of 2001 and is subject to approval by    
shareholders of both companies, as well as by U.S. Federal and state and foreign
regulatory authorities. Once the merger is complete, the CPIS will be guaranteed
by the new entity, J.P. Morgan Chase & Co.                                      

UNCERTAIN TAX CONSEQUENCES                                                      

The U.S. Federal income tax consequences of an investment in the CPIS are       
complex and uncertain. Prospective purchasers may be required to accrue income  
in each year over the life of the CPIS or pay tax based on the market value of  
the CPIS each year, even though no cash will be paid on the CPIS until their    
maturity or early redemption. In addition, any gain on the redemption of the    
CPIS will likely be ordinary income rather than capital gain, and any gain upon 
the sale or other disposition of the CPIS may be ordinary income rather than    
capital gain. As to holders of the CPIS that are not U.S. persons, the Trust    
will withhold 30% from amounts paid to them in excess of the Issue Price.       

For holders of CPIS that are pension plans (including individual retirement     
accounts) the application of the "unrelated business taxable income" rules to   
income from the CPIS is uncertain.                                              

S-15

424B2
16th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 16th

J.P. MORGAN & CO. INCORPORATED

J.P. Morgan, whose origins date to a merchant banking firm founded in London in 
1838, is the holding company for subsidiaries engaged globally in providing a   
wide range of financial services to institutions, corporations, governments and 
individuals. J.P. Morgan's activities are summarized in the Prospectus.         

On September 13, 2000, Chase and J.P. Morgan announced that they have agreed to 
merge. The merged firm will be named J.P. Morgan Chase & Co. The merger is      
expected to close in the first quarter of 2001 and is subject to approval by    
shareholders of both companies, as well as by U.S. Federal and state and foreign
regulatory authorities.                                                         

J.P. MORGAN INDEX FUNDING COMPANY I 

J.P. Morgan Index Funding Company I is a statutory business trust formed on     
December 12, 1996 under the Delaware Business Trust Act (the "Business Trust    
Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan 
and (ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on December 12, 1996, which was restated pursuant to the      
filing of a restated certificate of trust with the Secretary of State of the    
State of Delaware on September 30, 1997. On March 26, 1998, J.P. Morgan, as     
sponsor, and the Trustees entered into an amended and restated declaration of   
trust, dated as of March 26, 1998 (the "Declaration"), filed as an exhibit to   
the Registration Statement relating to this Prospectus Supplement and the       
Prospectus. J.P. Morgan will acquire all series of Common Securities, including 
the Series C Common Securities, of the Trust. The Declaration will be qualified 
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").  
The Trust currently has Series A and Series B Securities outstanding.           

The following description summarizes the material terms of the Declaration and  
is qualified in its entirety by reference to the Declaration, which has been    
filed as an exhibit to the Registration Statement of which this Prospectus      
Supplement is a part, and the Trust Indenture Act.                              

SERIES C SECURITIES                                                             

Upon issuance of the CPIS, the holders thereof will own all the issued and      
outstanding Series C Preferred Securities, and J.P. Morgan will own all the     
issued and outstanding Series C Common Securities. Each Series C Security will  
represent a fractional undivided beneficial interest in certain assets of the   
Trust consisting of the Related Note and the proceeds thereof. J.P. Morgan will 
acquire the Series C Common Securities in a principal amount equal to 0.001% of 
the total principal amount of the Series C Securities and will own all the      
issued and outstanding Common Securities of the Trust which will represent      
0.001% of the total capital of the Trust. The CPIS and the Series C Common      
Securities will rank pari passu with each other and will have equivalent payment
terms; provided that (i) if a Note Event of Default (as defined herein) under   
the Related Note occurs and is continuing, the holders of the CPIS will have    
priority over holders of Series C Common Securities with respect to payments in 
respect of distributions and payments upon liquidation, redemption and maturity 
and (ii) holders of Series C Common Securities have the exclusive right (subject
to the terms of the Declaration) to appoint, remove or replace the Trustees and 
to increase or decrease the number of Trustees. A Note Event of Default under   
the Related Note will not prohibit payments in respect of distributions and     
payments upon liquidation, redemption and maturity under a related note         
corresponding to any other series of Securities or under such Securities. No    
holder of Securities of any series shall have any claim on, or right to, any    
assets allocated to, or associated with, any other series (except if, and to the
extent that, such holder is also a holder of Securities of such other series).  
The Trust exists for the purposes of (a) issuing Securities, including the      
Series C Securities, (b) investing the gross proceeds from the sale of such CPIS
and the Series C Common Securities in the Related Note and investing the        
proceeds of such other Securities in other debt obligations of Morgan Guaranty  
and (c) engaging in only such other activities as are necessary, convenient or  
incidental thereto. The rights of the holders of the Series C Securities,       
including economic rights, rights to information and voting rights, are set     
forth in the Declaration (which term shall include any supplement to the        
Declaration), the Business Trust Act and the Trust Indenture Act.               

POWERS AND DUTIES OF TRUSTEES                                                   

The number of trustees (the "Trustees") of the Trust shall initially be five.   
Three of such Trustees (the "Regular Trustees") are individuals who are         
employees or officers of J.P. Morgan. The fourth such Trustee will be U.S. Bank 
Trust National Association, which is unaffiliated with J.P. Morgan and which    
will serve as the property trustee (the "Property Trustee") and act as the      
indenture trustee for purposes of the Trust Indenture Act. The fifth such       
Trustee is Wilmington Trust Company, which has its principal place of business  
in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration, 
legal title to the Related Note will be held by the Property Trustee for the    
benefit of the holders of the Series C Securities, and the                      

S-16

424B2
17th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 17th

Property Trustee will have the power to exercise all rights, powers and         
privileges with respect to the Related Note. In addition, the Property Trustee  
will maintain exclusive control of a separate, segregated, non-interest-bearing 
bank account for the Series C Securities (the "Property Account") to hold all   
payments in respect of the Related Note for the benefit of the holders of the   
Series C Securities. The Property Trustee will promptly make distributions to   
the holders of the Series C Securities out of funds from the Property Account.  
The Guarantee is separately qualified under the Trust Indenture Act and will be 
held by U.S. Bank Trust National Association, acting in its capacity as         
indenture trustee with respect thereto, for the benefit of the holders of the   
CPIS and other Preferred Securities. As used in this Prospectus Supplement, the 
term "Property Trustee" with respect to the Trust refers to U.S. Bank Trust     
National Association acting either in its capacity as a Trustee under the       
Declaration and the holder of legal title to the Related Note or in its capacity
as indenture trustee under and the holder of the Guarantee, as the context may  
require. J.P. Morgan, as the owner of all of the Common Securities, will have   
the exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace Trustees and to increase or decrease the number of Trustees, provided
that the number of Trustees shall be at least five and the majority of Trustees 
shall be Regular Trustees. The Regular Trustees are authorized and directed to  
take such action as they deem reasonable in order that the Trust will not be    
deemed to be an "investment company" required to be registered under the 1940   
Act and that the Trust will not be classified for United States Federal income  
tax purposes as an association taxable as a corporation or a partnership and    
will be treated as a grantor trust for United States Federal income tax         
purposes. In this connection, the Regular Trustees are authorized to take any   
action, not inconsistent with applicable law, the certificate of trust of the   
Trust or the Declaration, that the Regular Trustees determine in their          
discretion to be reasonable and necessary or desirable for such purposes, as    
long as such action does not adversely affect the interests of holders of the   
Securities. The term of the Trust will be until November 21, 2105, but the Trust
may terminate earlier as provided in the Declaration.                           

The duties and obligations of the Trustees of the Trust will be governed by the 
Declaration. Under the Declaration, the Trust (on behalf of a series of         
Securities or otherwise) shall not, and the Trustees of the Trust shall not     
cause the Trust (on behalf of a series of Securities or otherwise) to, engage in
any activity other than in connection with the purposes of the Trust or other   
than as required or authorized by the Declaration. In particular, the Trust (on 
behalf of a series of Securities or otherwise) shall not, and the Trustees of   
the Trust shall cause the Trust (on behalf of a series of Securities or         
otherwise) not to, (a) invest any proceeds received by the Trust from holding   
the Related Note, but shall promptly distribute from the Property Account all   
such proceeds to holders of the Series C Securities pursuant to the terms of the
Declaration and of the Series C Securities; (b) acquire any assets other than as
expressly provided in the Declaration; (c) possess Trust Property for other than
a Trust purpose; (d) make any loans, other than loans represented by the Related
Note and other debt obligations corresponding to other series of Securities; (e)
exercise any power or otherwise act in such a way as to vary the assets of the  
Trust or the terms of the Series C Securities or other series of Securities in  
any way whatsoever; (f) issue any securities or other evidences of beneficial   
ownership of, or beneficial interests in, the Trust other than the Series C     
Securities or other series of Securities associated with other debt obligations 
of Morgan Guaranty; (g) incur any indebtedness for borrowed money; or (h)(1)    
direct the time, method and place of exercising any trust or power conferred    
upon the Property Trustee of the Trust with respect to the Series C Securities  
or other series of Securities, (2) waive any past default that is waivable under
the Related Note (or other related notes) or the Declaration, (3) exercise any  
right to rescind or annul any declaration that the principal of the Related Note
(or other related notes) deposited in the Trust as trust assets shall be due and
payable or (4) consent to any amendment, modification or termination of the     
Related Note (or other debt obligations) or the Declaration, in each case where 
such consent shall be required, unless in the case of this clause; (h) the      
Property Trustee shall have received (1) an unqualified opinion of nationally   
recognized independent tax counsel recognized as expert in such matters to the  
effect that such action will not cause the Trust to be classified for United    
States Federal income tax purposes as an association taxable as a corporation or
a partnership and that the Trust will continue to be classified as a grantor    
trust for United States Federal income tax purposes and (2) if required, the    
approval of the holders of the Series C Securities or other series of Securities
for the taking of any such action. See "--Voting" and "Description of the       
CPIS--Voting Rights".                                                           

BOOKS AND RECORDS                                                               

The books and records of the Trust will be maintained at the principal office of
the Trust and will be open for inspection by a holder of Preferred Securities or
such holder's representative for any purpose reasonably related to such holder's
interest in the Related Note held by the Trust, on behalf of holders of         
Securities of the applicable series, during normal business hours. Separate and 
distinct books and records will be maintained by the Trust for each series of   
Securities, and the assets associated with, or related to, any such series will 
be held and accounted for separately from the assets of the Trust generally or  
from the assets associated with, or related to, any other series of Securities. 

S-17

424B2
18th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 18th

VOTING                                                                          

Except as set forth below, under "--Events of Default", under "Description of   
the CPIS--Voting Rights" and as provided under the Business Trust Act, the      
Declaration and the Trust Indenture Act, holders of the CPIS will have no voting
rights.                                                                         

If any proposed amendment to the Declaration provides for, or the Regular       
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of  
amendment to the Declaration or otherwise or (ii) the dissolution or bankruptcy 
of the Trust, then the holders of outstanding Securities will be entitled to    
vote on such amendment or proposal as a class and such amendment or proposal    
shall not be effective except with the approval of the holders of Securities    
representing a majority in principal amount of such Securities (for these       
purposes, the principal amount of the CPIS shall equal the Early Redemption     
Value on the date of any such vote); provided, however, that if any amendment or
proposal referred to in clause (i) above would adversely affect only certain    
series of the Preferred Securities or certain series of the Common Securities,  
then only the affected series or class, as applicable, will be entitled to vote 
on such amendment or proposal and such amendment or proposal shall not be       
effective except with the approval of a majority in principal amount of such    
series or class, as applicable, of Securities.                                  

THE PROPERTY TRUSTEE                                                            

The Property Trustee, for the benefit of holders of the Series C Securities, is 
authorized under the Declaration to exercise all rights with respect to the     
Related Note deposited with the Property Trustee as a trust asset, including its
rights as the holder of the Related Note to enforce the Trust's rights under the
Related Note upon the occurrence of a Note Event of Default. The Property       
Trustee is also authorized to enforce the rights of the Trust under the Related 
Note Guarantee. Holders of at least a majority in Face Amount of the outstanding
CPIS will have the right to direct the Property Trustee for the Trust with      
respect to certain matters under the Declaration and the Related Note Guarantee;
provided that (a) such direction would not conflict with any applicable law or  
the Declaration and would not result in any personal liability or expense to the
Property Trustee and (b) such direction would not cause the Trust not to be     
properly classified as a grantor trust for U.S. Federal income tax purposes. The
Property Trustee may take any other action deemed proper by the Property Trustee
which is not inconsistent with such direction. In addition, under certain       
circumstances, a holder of the outstanding CPIS may institute a direct action   
against J.P. Morgan without first instituting a legal proceeding against the    
Trust, the Property Trustee or any other person or entity. See "Risk            
Factors--Limitations on Rights Under the Guarantee, the Related Note Guarantee  
and the Related Note", "--Events of Default", "Description of the CPIS--General"
and "Description of the Related Note Guarantee--Remedies of the Trust and       
Holders of the CPIS". The Declaration provides that J.P. Morgan, as the sponsor,
will pay the Property Trustee's fees and expenses and will indemnify the        
Property Trustee in respect of certain matters. The Property Trustee is a       
depository for funds and performs other services for, and transacts other       
banking business with, J.P. Morgan in the normal course of business.            

DISTRIBUTIONS                                                                   

Pursuant to the Declaration, distributions on the Series C Securities must be   
paid on the dates payable to the extent that the Property Trustee has cash on   
hand in the Property Account to permit such payment. The funds available for    
distribution to the holders of the Series C Securities will be limited to       
payments received by the Property Trustee in respect of the Related Note. If    
Morgan Guaranty does not make payments on the Related Note, the Property Trustee
will not make distributions on the Series C Securities. Under the Declaration,  
except as set forth below, if and to the extent Morgan Guaranty does make       
payments on the Related Note, the Property Trustee is obligated to make         
distributions on the Series C Securities on a Pro Rata Basis (as defined below).
The payment of distributions on the CPIS is guaranteed by J.P. Morgan on a      
subordinated basis as and to the extent set forth under "Description of the     
Guarantee". The Guarantee, when taken together with J.P. Morgan's obligations   
under the Related Note Guarantee and its obligations under the Declaration,     
provides a full and unconditional guarantee from the time of issuance of the    
CPIS of amounts due on the CPIS. Such Guarantee itself, however, covers         
distributions on the CPIS only to the extent that Morgan Guaranty has made a    
payment to the Property Trustee on the Related Note. As used in this Prospectus 
Supplement, the term "Pro Rata Basis" shall mean pro rata to each holder of     
Series C Securities according to the aggregate value of all Series C Securities 
held by the relevant holder unless, in relation to a payment, a Note Event of   
Default under the Related Note has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each holder of the  
CPIS pro rata according to the aggregate Early Redemption Value of the CPIS held
by the relevant holder on the date of such payment, and only after satisfaction 
of all amounts owed to the holders of the CPIS to each holder of Series C Common
Securities pro rata according to the aggregate value of the Series C Common     
Securities held by the relevant holder.                                         

S-18

424B2
19th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 19th

EVENTS OF DEFAULT                                                               

In the event that the Trust fails to pay distributions on the Series C          
Securities for 30 days following the date on which such payment is due in       
accordance with the terms of such Series C Securities or if a Note Event of     
Default occurs and is continuing with respect to the Related Note (a "Note Event
of Default"), an Event of Default under the Declaration will occur and be       
continuing with respect to any outstanding Series C Securities. In such event,  
the Declaration provides that (a) holders of a majority in Face Amount of the   
CPIS, acting as a single class, may cause the Trust, on behalf of holders of the
Series C Securities, by written direction to the Property Trustee, to waive any 
such Note Event of Default or to enforce the Trust's rights under the Related   
Note against Morgan Guaranty or under the Related Note Guarantee against J.P.   
Morgan or, in the case of any failure to pay distributions, to cause the Trust  
to declare and pay such distributions; provided that such payments shall be paid
solely from the proceeds of interest or other payments made on the Related Note 
and received by the Trust on behalf of holders of the Series C Securities and   
(b) in the case of a Note Event of Default that is attributable to the failure  
of Morgan Guaranty to make payments on the Related Note on the date such        
payments are otherwise due, any holder of the outstanding CPIS may institute a  
direct action on or after the date of the occurrence of such Note Event of      
Default without first instituting a legal proceeding against the Trust, the     
Property Trustee or any other person or entity. Notwithstanding any payments    
made to such holder of the CPIS by J.P. Morgan in connection with such direct   
action, J.P. Morgan shall remain obligated to make payments on the CPIS, and the
rights of J.P. Morgan, as Guarantor, shall be subrogated to the rights of such  
holder of the CPIS with respect to payments on the CPIS to the extent of any    
payment made by J.P. Morgan to such holder of the CPIS in such direct action.   
The right of any holder of Series C Securities to receive payments or           
distributions on such Series C Securities in accordance with the terms of the   
Declaration or such Series C Securities on or after the respective payment dates
therefor, or to institute suit for the enforcement of any such payment on or    
after such payment dates, shall not be impaired without the consent of such     
holder.                                                                         

RECORD HOLDERS                                                                  

The Declaration provides that the Trustees of the Trust may treat the person in 
whose name a certificate representing the CPIS is registered on the books and   
records of the Trust as the sole holder thereof and of the CPIS represented     
thereby for purposes of receiving distributions and for all other purposes and, 
accordingly, shall not be bound to recognize any equitable or other claim to or 
interest in such certificate or in the CPIS represented thereby on the part of  
any person, whether or not the Trust shall have actual or other notice thereof. 
The CPIS will be issued in fully registered form and will be represented by a   
global certificate registered on the books and records of the Trust in the name 
of The Depositary Trust Company ("DTC") or its nominee. Under the Declaration:  
(i) the Trust and the Trustees shall be entitled to deal with DTC (or any       
successor) for all purposes, including the payment of distributions and         
receiving approvals, votes or consents under the Declaration and, except as set 
forth in the Declaration with respect to the Property Trustee, shall have no    
obligation to persons owning a beneficial interest in any of the CPIS (the "CPIS
Beneficial Owners") registered in the name of and held by DTC or its nominee;   
and (ii) the rights of the CPIS Beneficial Owners shall be exercised only       
through DTC (or any successor) and shall be limited to those established by law 
and agreements between such CPIS Beneficial Owners and DTC and/or its           
participants. With respect to any of the CPIS registered in the name of and held
by DTC or its nominee, all notices and other communications required under the  
Declaration shall be given to, and all distributions on such CPIS shall be given
or made to, DTC (or its successor).                                             

DEBTS AND OBLIGATIONS                                                           

The Declaration provides that any person or entity extending credit to,         
contracting with, or having any claim against, the Trust with respect to any    
series of Securities may look only to the assets of the Trust associated with   
such series to satisfy or enforce any debt, liability, obligation or expense    
incurred, contracted for or otherwise existing with respect to such series. In  
the Declaration, J.P. Morgan has agreed to pay for all debts and obligations    
(other than with respect to the Securities) and all costs and expenses of the   
Trust, including the fees and expenses of its Trustees and any taxes and all    
costs and expenses with respect thereto, to which the Trust may become subject, 
except for United States withholding taxes. The foregoing obligations of J.P.   
Morgan under the Declaration are for the benefit of, and shall be enforceable   
by, any person to whom any such debts, obligations, costs, expenses and taxes   
are owed a (a "Creditor"), whether or not such Creditor has received notice     
thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly 
against J.P. Morgan, and J.P. Morgan has irrevocably waived any right or remedy 
to require that any such Creditor take any action against the Trust or any other
person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the     
Declaration to execute such additional agreements as may be necessary or        
desirable in order to give full effect to the foregoing.                        

The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall
Street, New York, New York 10260-0060, telephone number (212) 648-2323.         

S-19

424B2
20th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 20th

USE OF PROCEEDS 

The Trust will invest the proceeds from the sale of the CPIS and the related    
Series C Common Securities in the Related Note of Morgan Guaranty, the proceeds 
of which will be used by Morgan Guaranty for general corporate purposes and for 
hedging its obligations under the Related Note.                                 

At the time of the pricing of the CPIS, Morgan Guaranty hedged its anticipated  
exposure under the Related Note and, subject to market conditions, Morgan       
Guaranty expects that it will continue to hedge its exposure under the Related  
Note from time to time following the offering of the CPIS by taking long and    
short positions in Reference Treasuries, U.S. Government Treasury Notes or in   
listed or over-the-counter futures or options contracts or other derivative or  
synthetic instruments related to the CPI. There can be no assurance that Morgan 
Guaranty's initial hedging did not, and that its continued hedging will not,    
affect the price for the CPIS, the TIPS, U.S. Government Treasury Notes or the  
economic terms of the CPIS. In addition, J.P. Morgan and its affiliates may from
time to time purchase or otherwise acquire a long or short position in the CPIS 
and may, in their sole discretion, hold or resell the CPIS. Morgan Guaranty may 
also take positions in U.S. Government Treasury Notes and in other types of     
appropriate financial instruments that may become available in the future. To   
the extent Morgan Guaranty has a long hedge position in the Reference TIPS or   
other derivative contracts or synthetic instruments related to the CPI, Morgan  
Guaranty may liquidate a portion or all of its holdings, as applicable, at or   
about the time of any early determination date or the stated maturity of the    
Related Note (which correspond to any Early Determination Dates and the Stated  
Maturity of the CPIS). Depending on, among other things, future market          
conditions, the aggregate amount and the composition of those positions are     
likely to vary over time. Profits or losses from any such position cannot be    
ascertained until that position is closed out and any offsetting position or    
positions are taken into account. However, none of the contracts or securities  
acquired in connection with any hedging activity will be held for the benefit of
holders of the CPIS.                                                            

S-20

424B2
21st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 21st

DESCRIPTION OF THE CPIS 

You will find information about the CPIS in two documents: this Prospectus      
Supplement and the accompanying Prospectus. The Prospectus describes general    
information about the Trust and J.P. Morgan. This Prospectus Supplement         
describes the CPIS and how they work. Since the CPIS differ in some respects    
from the general securities described in the Prospectus, in all cases you should
rely on the information provided in this Prospectus Supplement and disregard any
contradictory information in the Prospectus. Specifically, the CPIS are not     
ComPS (as described in the Prospectus) and do not use the indices or            
methodologies of the ComPS.                                                     

SUMMARY                                                                         

The Redemption Value payable at the Stated Maturity (the "Redemption Value") is 
the sum of the Face Amount plus the Index Amount (which is equal to the Ending  
Index minus the Forward Index). Such Redemption Value may be more or less than  
the Face Amount but not less than zero.                                         

The CPIS may be redeemed on an Early Redemption Date upon an Optional Redemption
by a holder of the CPIS or upon the occurrence of a Special Event by the Trust. 
Such Early Redemption Value will be determined, pursuant to the terms herein, by
estimating what the Ending Index level would have been at Stated Maturity using 
then current market inputs and the methodology described herein (the "Early     
Ending Index"), using that amount to estimate what the Redemption Value would   
have been at Stated Maturity and then determining the present value of that     
amount. Such Early Redemption Value may be more or less than the Face Amount but
may not be less than zero. See "--Index" for more information on the CPI and    
"--Optional Redemption" for more details on the early redemption calculations.  

Upon the occurrence of a Reference Treasury Event, the Ending Index may be      
permanently fixed (the "Fixed Ending Index") thereby fixing the amount repayable
at Stated Maturity. Upon such Reference Treasury Event , the Fixed Ending Index 
shall be determined in the same manner as the Early Ending Index. Once fixed,   
the Fixed Ending Index shall be used to determine any Redemption Value or Early 
Redemption Value. See "--Early Determination of the Ending Index".              

As described herein, the Reference CPI used to determine any redemption amount  
will be the CPI level used to adjust the inflation indexed principal amount in  
the Reference TIPS. Such Reference CPI is a 3 month lagged version of CPI,      
subject to adjustment as described herein. Although the CPIS use the same       
Reference CPI as the TIPS, unlike the TIPS, the CPIS are full principal-at-risk 
securities.                                                                     

GENERAL                                                                         

The CPIS will be issued pursuant to the Declaration, a copy of which is filed as
an exhibit to the Registration Statement relating to this Prospectus Supplement 
and the Prospectus. The Declaration authorizes the Trust to issue Common and    
Preferred Securities. All Common Securities will be owned by J.P. Morgan.       
Redemptions of the CPIS and the related Series C Common Securities will be made 
on a pro rata basis among the CPIS and the related Series C Common Securities,  
except that upon the occurrence and during the continuance of a Note Event of   
Default or upon the occurrence of a liquidation of the Trust, the rights of the 
holders of the Series C Common Securities to receive payments upon liquidation, 
redemption or otherwise will be subordinated to the rights of the holders of the
CPIS. The Guarantee does not permit the incurrence of any indebtedness by the   
Trust (other than any Preferred Securities thereof) while any Preferred         
Securities are outstanding. The payment of redemptions out of money held by the 
Trust, and payments upon liquidation of the Trust, are guaranteed by J.P. Morgan
to the extent described under "Description of the Guarantee". The Guarantee does
not cover payments in respect of the CPIS when Morgan Guaranty has not made     
payment of principal on the Related Note. In such event, the remedy of a holder 
of the CPIS is to direct the Trust to enforce its rights under the Related Note 
and the Related Note Guarantee. In addition, upon the occurrence and during the 
continuation of a Note Event of Default that is attributable to the failure of  
Morgan Guaranty to make payments on the Related Note on the date such amounts   
are otherwise payable (or in the case of a redemption, on the Redemption Date), 
any holder of the outstanding CPIS may institute a direct action on or after the
date of the occurrence of such Note Event of Default without first instituting a
legal proceeding against the Trust, the Property Trustee or any other person or 
entity. Notwithstanding any payments made to such holder of the CPIS by J.P.    
Morgan in connection with a direct action, J.P. Morgan shall remain obligated to
make payments on the CPIS, and the rights of J.P. Morgan, as Guarantor, shall be
subrogated to the rights of such holder of the CPIS with respect to payments on 
the CPIS to the extent of any payment made by J.P. Morgan to such holder of the 
CPIS in such direct action. See "--Voting Rights" and "Effect of Obligations    
Under the Guarantee, the Related Note Guarantee and the Related Note".          

S-21

424B2
22nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 22nd

ISSUE PRICE AND FACE AMOUNT                                                     

The CPIS will have an Issue Price of $[26.50] each and a Face Amount of         
$[40.00].                                                                       

DIVIDENDS AND INTEREST                                                          

No dividends or interest on the CPIS will be paid.                              

REDEMPTION AT MATURITY                                                          

Unless previously redeemed by an Optional or Special Event Redemption, the CPIS 
will mature on [January 15, 2010], unless postponed due to a Market Disruption  
Event; see "--Market Disruption Events". At Stated Maturity, the holders of the 
CPIS will be entitled to receive cash per CPIS equal to the sum of:             

Face Amount plus Index Amount (which equals the Ending Index minus the Forward  
Index); or, with numbers written in:                                            

$[40.00] + (Ending Index - [213.0]);                                            

provided that the above Redemption Value cannot be less than zero. (Note, it is 
possible for the Ending Index to be less than the Forward Index and thus for the
CPIS to pay less than the Face Amount.)                                         

The Ending Index is the Reference CPI level at Stated Maturity and will be the  
same Reference CPI used to calculate the inflation indexed principal in the     
Reference TIPS. Thus, the Reference CPI for the first day of any calendar month 
for the Reference TIPS and CPIS is the CPI for the third preceding calendar     
month, as reported by the Bureau of Labor Statistics in the second preceding    
calendar month. For example, the Reference CPI for April 1 in any year is the   
CPI for January of such year, which is usually published in February of such    
year. The Reference CPI for any day in a month other than the first day of such 
month is the linear interpolation between the Reference CPI for the first day of
the month and the first day of the immediately following month. Thus the        
Reference CPI for the Stated Maturity is lagged 3 months and should be          
determinable at least one month prior to Stated Maturity. The determination of  
the Reference CPI is subject to various Index Contingencies. See "--Index       
Contingencies" for further details.                                             

The Forward Index is [213.0] and was set on the day of pricing. It was          
approximately [120-126]% of the spot level of Reference CPI at pricing.         

The Redemption Value of the CPIS is linked directly to the performance of the   
CPI. For example, if the Ending Index (the Reference CPI level at Stated        
Maturity) is 40 points higher than the Forward Index, the Redemption Value will 
be $40 higher than the Face Amount. If the Ending Index at Stated Maturity is 30
points lower than the Forward Index then the Redemption Amount will be $30 lower
than the Face Amount. If, by the Stated Maturity of the CPIS, the CPI does not  
increase to at least the Forward Index level set on the day of pricing, then the
Redemption Value will be less than the Face Amount. The CPI must rise           
approximately [2.30%] per year until Stated Maturity to reach the Forward Index.

If at the Stated Maturity, a Market Disruption Event shall have occurred and be 
continuing, the Determination Date shall be the day on which there no longer    
exists a Market Disruption Event as determined by the Calculation Agent in its  
sole discretion. See "--Market Disruption Events".                              

HYPOTHETICAL RETURNS                                                            

Over the past 50 years the 9-year CPI change has varied from approximately 12%  
to 121%. There can be no assurance that the actual CPI change over the life of  
the CPIS will be in this range or that the CPI will rise at all.                

TABLE 4: HYPOTHETICAL REDEMPTION TABLE                                          

The table below illustrates, for a range of hypothetical Ending Index levels, on
the Stated Maturity (assuming a term of 9.17 years (9 years and 2 months), an   
Issue Price of $26.50, a Face Amount of $40.00, a Reference CPI at issuance of  
173.0 and a Forward Index of 213.0) the following:                              

- the change in the Reference CPI level over the life of the instrument,        

- the implied annual compound inflation rate over the life of the instrument to 
achieve the ending CPI level from the assumed beginning level,              

- the hypothetical Redemption Value,                                            

- the hypothetical Redemption Value as a percentage of the Issue Price,         
S-22

424B2
23rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 23rd

- the hypothetical pre-tax rate of return on the CPIS and                       

- the hypothetical pre-tax real rate of return on the CPIS (derived by          
discounting the hypothetical redemption by the increase in CPI to create a  
deflated or "real" principal redemption amount to used to calculate a real  
rate of return).                                                            

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------
                            IMPLIED    HYPOTHETICAL                                             
                           INFLATION      VALUE         REDEMPTION                              
HYPOTHETICAL   CHANGE IN   RATE PER     REDEMPTION      VALUE AS %       PRETAX      PRETAX CPIS
ENDING INDEX     INDEX       YEAR         VALUE       OF ISSUE PRICE   CPIS IRR(A)   REAL IRR(B)
------------   ---------   ---------   ------------   --------------   -----------   -----------
                                                                                                
 129.8           -25.0%      -3.09%      $  0.00            0.0%         -100.0%       -100.0%  
 138.4           -20.0%      -2.40%      $  0.00            0.0%         -100.0%       -100.0%  
 147.1           -15.0%      -1.76%      $  0.00            0.0%         -100.0%       -100.0%  
 155.7           -10.0%      -1.14%      $  0.00            0.0%         -100.0%       -100.0%  
 164.4            -5.0%      -0.56%      $  0.00            0.0%         -100.0%       -100.0%  
 173.0             0.0%       0.00%      $  0.00            0.0%         -100.0%       -100.0%  
 181.7             5.0%       0.53%      $  8.65           32.6%          -11.5%        -12.0%  
 190.3            10.0%       1.05%      $ 17.30           65.3%           -4.5%         -5.5%  
 199.0            15.0%       1.54%      $ 25.95           97.9%           -0.2%         -1.7%  
 199.5            15.3%       1.57%      $ 26.50          100.0%            0.0%         -1.5%  
 207.6            20.0%       2.01%      $ 34.60          130.6%            3.0%          0.9%  
 213.0            23.1%       2.30%      $ 40.00          150.9%            4.6%          2.2%  
 216.3            25.0%       2.46%      $ 43.25          163.2%            5.5%          3.0%  
 224.9            30.0%       2.90%      $ 51.90          195.8%            7.6%          4.6%  
 233.6            35.0%       3.33%      $ 60.55          228.5%            9.4%          5.9%  
 242.2            40.0%       3.74%      $ 69.20          261.1%           11.0%          7.0%  
 250.9            45.0%       4.14%      $ 77.85          293.8%           12.5%          8.0%  
 259.5            50.0%       4.52%      $ 86.50          326.4%           13.8%          8.9%  
 268.2            55.0%       4.90%      $ 95.15          359.1%           15.0%          9.6%  
 276.8            60.0%       5.26%      $103.80          391.7%           16.1%         10.3%  
 285.5            65.0%       5.61%      $112.45          424.3%           17.1%         10.9%  
 294.1            70.0%       5.96%      $121.10          457.0%           18.0%         11.4%  
 302.8            75.0%       6.30%      $129.75          489.6%           18.9%         11.9%  
 311.4            80.0%       6.62%      $138.40          522.3%           19.8%         12.3%  
 320.1            85.0%       6.94%      $147.05          554.9%           20.6%         12.7%  
 328.7            90.0%       7.25%      $155.70          587.5%           21.3%         13.1%  
 337.4            95.0%       7.56%      $164.35          620.2%           22.0%         13.5%  
 346.0           100.0%       7.85%      $173.00          652.8%           22.7%         13.8%  
 354.7           105.0%       8.15%      $181.65          685.5%           23.4%         14.1%  
 363.3           110.0%       8.43%      $190.30          718.1%           24.0%         14.4%  
 372.0           115.0%       8.71%      $198.95          750.8%           24.6%         14.6%  
 380.6           120.0%       8.98%      $207.60          783.4%           25.2%         14.9%  

---------------                                                                 

                                                                [Download Table]
                                                     
                                             1       
                                            ----     
                       Redemption Price     term     
(a) Pre-tax IRR =   (  ----------------  )        - 1
                         Issue Price                 

                                                                [Download Table]
                                                              
                                                      1       
                             Redemption Price        ----     
                            -------------------      term     
(b) Pre-tax Real IRR =  ((  1 + Change in Index ))         - 1
                            -------------------               
                                Issue Price                   

The above table is for illustration purposes only. The actual Redemption Value  
and the resulting total, pre-tax nominal, and pre-tax real rate of return will  
depend entirely on the actual Reference CPI determined at Stated Maturity and   
the terms of the CPIS.                                                          

S-23

424B2
24th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 24th

THE CONSUMER PRICE INDEX                                                        

The CPIS are indexed to the same Reference CPI level used to calculate the      
inflation indexed principal in the 4.25% Treasury Inflation Protected Securities
due January 15, 2010, issued by the United States Department of the Treasury.   
The CPI for these purposes is the non-seasonally adjusted U.S. City Average All 
Items Consumer Price Index published monthly by the Bureau of Labor Statistics  
of the U.S. Department of Labor. The CPI is a measure of the average change in  
consumer prices over time in a fixed market basket of goods and services,       
including food, clothing, shelter, fuels, transportation, charges for doctors'  
and dentists' services, and drugs. User fees (such as water and sewer service)  
and sales and excise taxes paid by the consumer are also included. Income taxes 
and investment items such as stocks, bonds, and life insurance are not included.
The CPI includes expenditures by urban wage earners and clerical workers,       
professional, managerial, and technical workers, the self-employed, short-term  
workers, the unemployed, retirees and others not in the labor force. In         
calculating the Index, price changes for the various items are averaged together
with weights that represent their importance in the spending of urban households
in the United States. The contents of the market basket of goods and services   
and the weights assigned to the various items are updated periodically to take  
into account changes in consumer expenditure patterns. The CPI is expressed in  
relative terms based on a reference period for which the level is set at 100    
(currently the base reference period used by the Bureau of Labor Statistics is  
1982-1984). For example, since the CPI for the 1982-84 reference period is 100, 
an increase of 16.5 percent from that period would be shown as 116.5.           

The Bureau of Labor Statistics has made numerous technical and methodological   
improvements and changes to the CPI over the last 25 years, and it is likely to 
continue to do so. Technical changes made by the Bureau of Labor Statistics to  
the CPI to improve its accuracy include, but are not limited to, changes in: (1)
the specific items (e.g., apples or major appliances) to be priced for the      
Index; (2) the way individual price quotation are aggregated to construct       
component price indices for these items; (3) the method for combining these     
component price indices to obtain the comprehensive, all-items CPI; and (4) the 
procedures for incorporating new goods into the Index and making adjustments for
quality changes in existing goods. Examples of recent methodological            
improvements include the use of regression models to adjust for the quality     
improvements in various goods (TVs, PCs, etc.), the introduction of geometric   
averages to account for consumer substitution within CPI categories, and        
changing the housing/shelter formula to improve rental equivalence estimation.  
These changes and any future changes could reduce the level of the CPI and hence
lower the Redemption Value of the CPIS.                                         

The Bureau of Labor Statistics occasionally rebases the CPI. The current        
standard reference base period is 1982-1984 = 100. The CPI was last rebased in  
January, 1988. Prior to the release of the CPI for January 1988, the standard   
reference base was 1967 = 100. If the Bureau of Labor Statistics rebases the CPI
during the time the CPIS are outstanding, we will continue to calculate the     
Reference CPI using the existing base year in effect for the CPI used at        
issuance of the CPIS as long as the old CPI is still published. The conversion  
to a new reference base does not affect the measurement of the percent changes  
in a given index series from one time period to another, except for rounding    
differences. Thus rebasing will affect the published "headline" number often    
quoted in the financial press, however, the Reference CPI calculation for the   
CPIS should not be adversely affected by any such rebasing since the old-based  
CPI can be calculated by using the percent changes of the new rebased CPI to    
calculate the levels of the old CPI series (since the two series should have the
same percent changes). Determinations of the Secretary of Treasury in regard to 
all Reference CPI levels, contingencies, and remedies will be final.            

REFERENCE CPI                                                                   

The Reference CPI for the first day of any calendar month is the CPI for the    
third preceding calendar month, as is usually reported by Bureau of Labor       
Statistics in the second preceding calendar month. For example, the Reference   
CPI applicable to April 1 in any year is the CPI for January of such year, as   
reported in February of such year. The Reference CPI for any day of the month   
other than the first day of such month is the linear interpolation between the  
Reference CPI for the first day of the month and the first day of the           
immediately following month. Thus the Reference CPI at the Stated Maturity,     
because it is lagged 3 months, should be determinable prior to Stated Maturity. 

For purposes of interpolation, calculations with regard to the Reference CPI by 
the U.S. Treasury Department for a specific date are truncated to six decimal   
places and rounded to five decimal places. The formula for the Reference CPI for
a specific date using linear interpolation is:                                  

                                                        [Enlarge/Download Table]
                                                                                            
                                            t-1                                             
Reference CPI(Date) = Reference CPI(M) + (  ---  ) (Reference CPI(M + 1)- Reference CPI(M)).
                                             D                                              

Where:                                                                
- Reference CPI(Date) = the determination date;                       

- D = the number of days in the month in which the Reference CPI(Date)
falls;                                                            

- t = the calendar day corresponding to the Reference CPI(Date);      
S-24

424B2
25th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 25th

    - Reference CPI(M) = Reference CPI for the first day of the calendar month
in which the Reference CPI(Date) falls;                           

  - Reference CPI(M + 1) = Reference CPI for the first day of the calendar
month immediately following the Reference CPI(Date).              

For example, the Reference CPI for April 15, 1996 is calculated as follows:     

                                                        [Enlarge/Download Table]
                                                                                                                                  
                                                                15-1                                                              
Reference CPI(April 15, '96) = Reference CPI(April 1, '96) + (  ----  ) (Reference CPI(May 1, '96) - Reference CPI(April 1, '96)).
                                                                 30                                                               

Where:                                                                

- D = 30;                                                             

- t = 15;                                                             

  - Reference CPI(April 1, 1996) = 154.40, the non-seasonally adjusted CPI
for January 1996;                                                 

    - Reference CPI(May 1, 1996) = 154.90, the non-seasonally adjusted CPI for
February 1996.                                                    

Putting these values in the equation above:                                     

                                                                [Download Table]
                                                                        
                                            14                          
Reference CPI(April 15, '96 )= 154.40 + (   --   ) (154.90 - 154.40), or
                                            30                          

Reference CPI(April 15, '96) = 154.633333.                                      

For the CPIS, we will round such level to two decimal places or 154.63 in the   
above example. (The Reference CPI as used in the TIPS is rounded to five decimal
places.)                                                                        

The above figures are for illustration purposes only.                           

INDEX CONTINGENCIES                                                             

We will use the same Index Contingencies that the Treasury Department uses for  
the Reference TIPS (as described in the U.S. Public Debt Circular). These Index 
Contingencies include how the Reference CPI will be affected by (1) revisions in
previously reported CPI levels, (2) rebasing of the CPI by the Bureau of Labor  
Statistics to a new reference period, (3) material adverse changes to the CPI by
legislation or Executive Order, as determined by the Secretary of Treasury, or  
(4) delays in reporting the CPI. We will use the Index Contingency remedies as  
pronounced by the Treasury Department even if such remedies produce lower       
Reference CPI levels than might otherwise have occurred, which in turn may      
adversely affect holders of the CPIS. Determinations of the Secretary of        
Treasury in this regard will be final.                                          

According to the Treasury Department, only certain fundamental changes in the   
CPI are considered "Index Contingencies". A change in the CPI would be          
considered fundamental and become an Index Contingency if it affected the       
character of the CPI. However, according to the Treasury Department, technical  
changes made by the Bureau of Labor Statistics to the CPI to improve its        
accuracy as a measure of the cost of living would not be considered fundamental 
and so, could not be Index Contingencies.                                       

Technical changes include, but are not limited to changes in: (1) the specific  
items (e.g., apples or major appliances) to be priced for the Index, (2) the way
individual price quotations are aggregated to construct component price indices 
for these items, (3) the method for combining these component price indices to  
obtain the comprehensive, all-items CPI, and (4) the procedures for             
incorporating new goods into the Index and making adjustments for quality       
changes in existing goods. Determinations by the Secretary of Treasury as to    
what constitutes a fundamental change will be final.                            

S-25

424B2
26th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 26th

Fundamental changes or events which constitute Index Contingencies and how such 
contingencies would be treated will follow the Treasury Department's rules      
concerning Index Contingencies and its TIPS. Currently, as listed in the U.S.   
Public Debt Circular, these include:                                            

- If a previously reported CPI is revised by the Bureau of Labor Statistics, the
 Treasury will continue to use the previously reported CPI and not the revised
CPI.                                                                        

- If the CPI is rebased to a different year, the Treasury Department will       
 continue to use the CPI based on the base reference period in effect when the
 security (in this case, the Reference TIPS) was first issued, as long as that
CPI continues to be published by the Bureau of Labor Statistics.            

- If the applicable CPI is (1) discontinued, (2) in the judgment of the         
  Secretary of Treasury, fundamentally altered in a manner materially adverse to
the interests of an investor in the TIPS or (3) in the judgment of the      
Secretary of Treasury, altered by legislation or Executive Order in manner  
materially adverse to the interests of an investor in the TIPS, the Treasury
Department, after consulting with the Bureau of Labor Statistics or any     
successor agency will substitute an appropriate alternative index. The      
Treasury Department will then notify the public of the substitute index and 
how it will be applied. Determinations of the Secretary of Treasury in this 
regard will be final.                                                       

- If the CPI for a particular month is not reported by the last day of the      
following month, the Treasury Department will announce an index number based
 on the last twelve-month change in the CPI available. Any calculations of the
Treasury Department's payment obligations on the TIPS that rely on that     
  month's CPI will be based on the index number that the Treasury Department has
announced.                                                                  

For example, if the CPI for a particular month M is not reported on a timely    
basis by the last day of the following month, the formula for calculating the   
index number used by the Treasury Department for TIPS is:                       

CPI(M) = CPI(M-1) X (CPI(M-1)/CPI(M-13))(1/12).                                 

Generalizing for the last reported CPI issued N months prior to month M:        

CPI(M) = CPI(M-N) X (CPI(M-N)/CPI(M-N - 12))(N/12).                             

If it is necessary to use these formulas to calculate an index number, it will  
be used for all subsequent calculations that rely on that month's index number  
and will not be replaced by the actual CPI when it is reported (except that when
it becomes necessary to use the above formulas to derive an index number, the   
last CPI that has been reported will be used to calculate CPI numbers for months
which the CPI has not been timely reported).                                    

Using the historical data in the following table, we can look at an example of  
how the Reference CPI would be calculated assuming the Bureau of Labor          
Statistics delayed reporting the CPI and the Treasury Department determined the 
applicable Reference CPI using the above formula:                               

TABLE 5: HISTORICAL CPI FOR EACH MONTH                                          

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------------------------------------
                        JAN      FEB      MAR      APR      MAY      JUN      JUL      AUG      SEP      OCT      NOV      DEC 
                       -----    -----    -----    -----    -----    -----    -----    -----    -----    -----    -----    -----
                                                                                                                               
1997                   159.1    159.6    160.0    160.2    160.1    160.3    160.5    160.8    161.2    161.6    161.5    161.3
1998                   161.6    161.9    162.2    162.5    162.8    163.0    163.2    163.4    163.6    164.0    164.0    163.9

Assume the December 1998 level as reported by the Bureau of Labor Statistics    
(usually reported one month later in January 1999) was delayed and not reported 
as of February 1, 1999. Because the Reference CPI is lagged three months, the   
Reference CPI for March 1999 is the December 1998 level. If the Bureau of Labor 
Statistics delayed publishing such level, the Treasury Department would have    
determined the Reference CPI for March 1999 using the above general formula.    
Since the delay is just 1 month, the formula is:                                

CPI(Dec 1998) = (CPI(Nov 1998)) X (CPI(Nov 1998)/CPI(Nov 1997))(1/12).          

Thus, if the Bureau of Labor Statistics had failed to publish CPI for December  
1998 in a timely manner, Reference CPI for March 1999 would have been:          

164.0 X (164.0/161.5)(1/12) = 164.21.                                           

Such a delay in reporting of CPI will only affect the CPIS if such delayed CPI  
level would affect a Reference CPI used for the calculation of the Redemption   
Value, Early Ending Index or Fixed Ending Index.                                
S-26

424B2
27th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 27th

The above figures are for illustration purposes only. Again, determinations of  
the Secretary of Treasury as to what constitutes an Index Contingency and its   
remedies will be final.                                                         

OPTIONAL REDEMPTION                                                             

Beginning in 2002, the CPIS will be subject to Optional Redemption prior to     
their Stated Maturity at the election of the holders thereof on each January 15 
(each an "Optional Redemption Date"). In order to effect an Optional Redemption,
any redeeming holder will be required to provide notice to a Participant or     
Direct Participant in DTC of the number of the CPIS to be redeemed by such      
holder on such Optional Redemption Date and such Participant or Direct          
Participant must communicate such notice to DTC no earlier than 20 scheduled    
Business Days prior and no later than 10 scheduled Business Days prior to the   
applicable Optional Redemption Date. The DTC will then provide notice to the    
Trust (which will notify the Property Trustee) or its Transfer Agent of the     
total number of CPIS to be redeemed on the Optional Redemption Date (the        
"Applicable Notice"). Each Applicable Notice will be provided by DTC to the     
Trust by 12:30 pm New York time on the first Business Day following the last day
of the applicable notice period.                                                

Each Applicable Notice will be irrevocable upon receipt by the Trust or its     
Transfer Agent, and may not be withdrawn or modified after such receipt.        
Additionally, the Early Determination Date, five scheduled Business Days, prior 
to the Early Redemption Date, unless extended by a Market Disruption Event, will
not commence until the Trust has received the Applicable Notice and the         
applicable Optional Redemption Date will be subject to extension in the event   
that a Market Disruption Event delays the determination of the Early Redemption 
Value. The redeeming holders will be entitled to the Early Redemption Value for 
all such CPIS redeemed.                                                         

If a Market Disruption Event shall have occurred on the Early Determination     
Date, the Early Determination Date shall be the day on which there no longer    
exists a Market Disruption Event as determined by the Calculation Agent in its  
sole discretion.                                                                

The Early Redemption Value will be determined by making a conservative          
projection of what the Early Ending Index would be at the Stated Maturity, using
then current market inputs and the methodology described herein, subtracting the
Forward Index and adding that result (which may be a negative number) to the    
Face Amount, giving an estimate of what the Redemption Value would be at Stated 
Maturity. The present value of this amount is then estimated, giving the Early  
Redemption Value.                                                               

The early redemption formula is a conservative estimate of the present value of 
the forecasted redemption amount using current interest rates and credit spreads
for discounting. The formula for the Early Ending Index is conservatively       
determined and includes a 30 basis point Buyback Spread which further reduces   
the value determined. Because of the conservatism, investors should be aware    
that it is likely, under usually-prevailing market conditions, that the Early   
Redemption Value will be less than the amount a holder could have realized by   
selling such CPIS on such Early Determination Date (excluding commission costs) 
in any secondary market that may exist.                                         

The Early Redemption Value ("ERV") will be determined using the following       
formula:                                                                        

ERV = (FA + EI(Early) - FI) X PVF.                                              

Where:                                                                
- FA = Face Amount = $[40.00];                                        
- EI(Early) = Early Ending Index (derived below);                     
- FI = Forward Index = [213.0];                                       
- PVF = Present Value Factor (derived below).                         

EI(Early) is derived using the formula: EI(Early) = RCPI X FIF.       

Where:                                                          
- RCPI = Reference CPI on the Early Determination Date;     
- FIF = Future Inflation Factor (derived below).            

S-27

424B2
28th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 28th

FIF is derived using the formula: (1 + EIR)(N).                 

Where:                                                          
   - N = Number of years remaining until Stated Maturity (2N = 2 X N);
- EIR = Expected Inflation Rate (derived below).                

                                                                [Download Table]
                                                                       
                                                  BY                   
                                              1 + ---                  
                                                   2            2      
EIR = is derived using the formula: ( ------------------------ )  - 1 .
                                          TY    Buyback Spread         
                                      1 + --- + --------------         
                                           2          2                

Where:                                                
            - BY = Base Yield = The ask side yield on the Reference Government
        Notes (6.50% due Feb. 15, 2010) as determined by polling 3
dealers in such instruments;                      
         - TY = TIPS Yield = The bid side yield on the Reference TIPS as
  determined by polling 3 dealers in such instruments;
- Buyback Spread = 30 basis points (0.30%).           

       The Expected Inflation Rate (EIR) is derived from the Fischer
Relation, which states:                               
        (1 + Nominal Rate) = (1 + Real Rate) x (1 + Expected Inflation
      Rate). In this case, we are using the yield on the Reference
           Government Notes as a proxy for the Nominal Rate and the yield on
             the Reference TIPS as a proxy for the Real Rate. Thus, the expected
    inflation rate is readily determinable. (Note, because the
       convention in the U.S. for quoting yields assumes semi-annual
      compounding, so each yield must divided by 2 and the results
squared).                                             

                                                        [Enlarge/Download Table]
                                                                                            
                                                                    BY                      
                                                                1 + ---                     
                                                                     2            2      N  
So, substituting the EIR into the FIF equation: ( 1 + ( ------------------------ )  - 1 )  ,
                                                            TY    Buyback Spread            
                                                        1 + --- + --------------            
                                                             2          2                   

                                                                [Download Table]
                                                             
                                           BY                
                                       1 + ---               
                                            2            2N  
which simplifies to (FIF =): ( ------------------------ )   .
                                   TY    Buyback Spread      
                               1 + --- + --------------      
                                    2          2             

                                                                [Download Table]
                                                                     
                                                   BY                
                                               1 + ---               
                                                    2            2N  
Thus, the EI      becomes: R C P I x ( ------------------------ )   .
            Early                          TY    Buyback Spread      
                                       1 + --- + --------------      
                                            2          2             

                                                                [Download Table]
                                                                      

                                              1                       
PVF = Present Value Factor: ---------------------------------------- .
                                  Zero Yield   Applicable Spread  2N  
                            ( 1 + ---------- + ----------------- )    
                                      2                2              

Where:                                                          

    - Zero Yield = The semi-annual compound rate implied in the discount
    factor to Stated Maturity determined by the Calculation Agent by
    polling 3 swap dealers, one of which may be Morgan Guaranty. The
         discount factor represents the value the swap dealers would pay today
         for the right to receive $1 at the Stated Maturity. Zero Yield solves
the equation:                                               

                                                                [Download Table]
                                        

                            1           
discount factor = -------------------- .
                        Zero Yield  2N  
                  ( 1 + ---------- )    
                            2           

S-28

424B2
29th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 29th

        - The "Applicable Spread" will equal to (1) in the case of a liquidation
          of J.P. Morgan, zero, or (2) in the case of all other redemptions, the
         greater of zero and the difference between the Funding Spread and the
      Swap Spread. If the Swap Spread is greater than the Funding Spread
then the Applicable Spread will be zero.                    

        - Swap Spread refers to the difference between the swap rate for a given
   maturity and the yield of the benchmark government bond in that
          maturity sector. The "Swap Spread" for these purposes will be equal to
          the offer side U.S. dollar swap spread for the maturity closest to the
     Remaining Maturity as determined by the Calculation Agent (except
          that, in the case of determination for which the Remaining Maturity is
        one year or less, the difference between then current yields on U.S.
 Dollar LIBOR-based deposits and yields on Treasury Bills with
          maturities approximately equal to the remaining maturity as determined
by the Calculation Agent).                                  

      - The Funding Spread shall be the yield spread between (1) the average
   quotations from three dealers in such instruments chosen in the
   discretion of the Calculation Agent, one of which may be Morgan
          Guaranty, for notional issuances of debt securities by Morgan Guaranty
   in a notional amount equal to the Face Amount of the CPIS being
      redeemed at such time (or, if such notional amount is smaller than
   commercially practicable, the smallest commercially practicable
   amount) and having a similar maturity and similar subordination
provisions as those contained in the Related Note and (2) US
      government securities of approximately similar maturities, as such
       yield spread may be reasonably determined by the Calculation Agent.

        - If the source supplying any of the yield or spread data is unavailable
        or ceases to report such data, the Calculation Agent shall calculate
such yield or spread in good faith.                         

                                                        [Enlarge/Download Table]
                                                                                                               
                                         BY                                                                    
                                     1 + ---                                                                   
                                          2            2N                               1                      
Thus ERV = ( FA + ( RCPI x ( ------------------------ )   ) - FI ) x ---------------------------------------- ,
                                 TY    Buyback Spread                      Zero Yield   Applicable Spread  2N  
                             1 + --- + --------------                ( 1 + ---------- + ----------------- )    
                                  2          2                                 2                2              

                                                                [Download Table]
                                                                              
                                                       BY                     
                                                   1 + ---                    
                                                        2            2N       
                             FA + RCPI x ( ------------------------ )   - FI  
                                               TY    Buyback Spread           
                                           1 + --- + --------------           
                                                2          2                  
which simplifies to (ERV =): ----------------------------------------------- .
                                      Zero Yield   Applicable Spread  2N      
                                ( 1 + ---------- + ----------------- )        
                                          2                2                  

The Reference CPI on the applicable Early Determination Date will be determined 
for such day by interpolation as described in "-- Reference CPI".               

For all interim calculations we will round to 6 decimals. The final result (the 
Early Redemption Value) will be rounded to 2 decimals.                          

HYPOTHETICAL OPTIONAL REDEMPTION                                                

An example calculation of the Early Redemption Value is as follows:             

Assumptions:                                                          

- Face Amount = $40.00;                                               

- Forward Index = 213.0;                                              

- Reference CPI on the Early Determination Date = 185.0;              

- Remaining Term (years) = 7;                                         

- Base Yield = 6.1%;                                                  

- TIPS Yield = 4.1%;                                                  

- Zero Yield = 6.85%;                                                 

S-29

424B2
30th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 30th

- Applicable Spread = 0.05%;                                          

- Buyback Spread = 30 basis points (0.30%).                           

                                                                [Download Table]
                                                                           
                                      0.061                                
                                  1 + -----                                
                                        2        2x7                       
Thus, the EI      = 185.0 x ( ----------------- )    , which equals 207.75.
            Early                 0.041   0.003                            
                              1 + ----- + -----                            
                                    2       2                              

                                                                [Download Table]
                                                   
                      1                            
The PVF = -------------------------- , or 0.621975.
                0.0685   0.0005  2x7               
          ( 1 + ------ + ------ )                  
                  2        2                       

As a result, the ERV = (40.00 + 207.75 - 213.0) x 0.621975, which equals $21.61.

The above figures are for illustration purposes only.                           

EARLY DETERMINATION OF THE ENDING INDEX                                         

If the Reference Treasuries are subject to a buyback or are called by the       
Treasury Department or if the outstanding amount of either such Reference       
Treasury is reduced by 10% or more from the greatest outstanding amount since   
issuance of the CPIS (a "Reference Treasury Event") then Morgan Guaranty has the
right, but not the obligation, on such date or within 30 days of such date, to  
permanently fix the Ending Index (the "Fixed Ending Index"). However, the CPIS  
will not be redeemed or called and will remain outstanding until Stated Maturity
or a Special Event or Optional Redemption. Currently, there are approximately   
[$11.5] billion in Reference TIPS and [$23.3] billion in Reference Government   
Notes issued and outstanding. Such early determination of the Ending Index may  
adversely affect the trading value of the CPIS and its redemption value relative
to what it may have been if such early fixing of the Ending Index had not       
occurred. Morgan Guaranty will be the Calculation Agent and may have interests  
adverse to the holders of the CPIS in determining whether to fix the Ending     
Index early.                                                                    

The value of the Fixed Ending Index will be fixed using the same methodology for
determining the Early Ending Index in an Optional Redemption. Thus, the Fixed   
Ending Index ("EI(Fixed)") will be derived per the following formula:           

                                                                [Download Table]
                                                 
                               BY                
                           1 + ---               
                                2            2N  
EI      = RCPI x ( -------------------------)   .
  Fixed                TY    Buyback Spread      
                   1 + --- + --------------      
                        2          2             

Where:                                                          

- RCPI = Reference CPI on the Early Determination Date;         

        - BY = Base Yield = The ask side yield on the Reference Government Notes
        (6.50% due Feb. 15, 2010) as determined by polling 3 dealers in such
instruments;                                                

- TY = TIPS Yield = The bid side yield on the Reference TIPS as 
determined by polling 3 dealers in such instruments;        

- Buyback Spread = 30 basis points (0.30%);                     

   - N = Number of years remaining until Stated Maturity (2N = 2 x N).

When determining the Fixed Ending Index under the above circumstances, Morgan   
Guaranty may, at it sole discretion, reduce the Buyback Spread, however it is   
not obligated to do so. By reducing the Buyback Spread, Morgan Guaranty would   
increase the value of the Fixed Ending Index relative to the value it would have
calculated if such Buyback Spread was not reduced. (See "-- Optional Redemption"
for further details on the determination of the Early Ending Index.)            

Once the Fixed Ending Index has been derived as the result of a Reference       
Treasury Event, it will be used in any determination of a Redemption Value or   
Early Redemption Value (replacing the Early Ending Index in an Optional or      
Special Event Redemption).                                                      

S-30

424B2
31st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 31st

SPECIAL EVENT REDEMPTION                                                        

The CPIS will be subject to redemption by the Trust prior to Stated Maturity    
upon the occurrence of a Tax Event or an Investment Company Event (each, a      
"Special Event"), as described herein. The Early Redemption Value payable to the
holders of the CPIS on such Special Event Redemption shall be determined in the 
same manner as an Optional Redemption.                                          

"Tax Event" means that the Trust shall have obtained an opinion of nationally   
recognized independent tax counsel experienced in such matters (a "Tax Opinion")
to the effect that, as a result of (a) any amendment to, or change (including   
any announced prospective change) in, the laws (or any regulations thereunder)  
of the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an interpretation or application of
any such laws or regulations by any legislative body, court, governmental agency
or regulatory authority (including the enactment of any legislation and the     
publication of any judicial decision or regulatory determination), (c) any      
interpretation or pronouncement that provides for a position with respect to    
such laws or regulations that differs from the theretofore generally accepted   
position or (d) any action taken by any governmental agency or regulatory       
authority, which amendment or change is enacted, promulgated, issued or         
announced or which interpretation or pronouncement is issued or announced or    
which action is taken, in each case on or after the date of this Prospectus     
Supplement, there is more than an insubstantial risk that at such time or within
90 days of the date thereof (i) the Trust is or would be subject to United      
States Federal income tax with respect to income accrued or received on the     
Related Note, (ii) any amount payable on the Related Note in excess of the      
amount received by Morgan Guaranty for the Related Note is not, or would not be,
deductible by Morgan Guaranty for United States Federal income tax purposes or  
(iii) the Trust is or would be subject to more than a de minimis amount of other
taxes, duties, assessments or other governmental charges.                       

"Investment Company Event" means that the Trust shall have received an opinion  
of a nationally recognized independent counsel experienced in such matters to   
the effect that, as a result of the occurrence of a change in law or regulation,
a written change in interpretation or application of law or regulation by any   
legislative body, court, governmental agency or regulatory authority or the     
expiration or revocation of any exemption from any provisions of the Investment 
Company Act of 1940, as amended (the "1940 Act"), obtained by the Trust (a      
"Change in 1940 Act Law"), there is more than an insubstantial risk that the    
Trust is or will be considered an "investment company" that is required to be   
registered as such under the 1940 Act, which Change in 1940 Act Law becomes     
effective on or after the date of this Prospectus Supplement.                   

If at any time a Special Event shall occur and be continuing, J.P. Morgan shall:

(a) in the case of an Investment Company Event, direct, within 90 days following
   the occurrence of such Special Event, Morgan Guaranty to redeem the Related
Note in whole or in part, upon not less than 10 scheduled Business Days'
 notice to DTC, in which case the Trust shall redeem in cash on a pro rata
 basis the CPIS and related Series C Common Securities having an aggregate
  amount equal to the amount of the Related Note so redeemed, at a price per
CPIS of the Early Redemption Value; provided, that Morgan Guaranty shall
only be entitled to redeem the Related Note in part if such partial     
redemption is sufficient to cause such Special Event to cease; or       

(b) in the case of a Tax Event, either apply the terms of clause (a) or allow   
    the Related Note and the CPIS to remain outstanding, indemnify the Trust for
all taxes payable by it as a result of such Tax Event (if any);         

provided that, if at the time there is available to the Trust the opportunity to
eliminate, within such 90-day period, the Special Event by taking some          
ministerial action, such as filing a form or making an election, or pursuing    
some other similar reasonable measure, that has no adverse effect on the Trust, 
J.P. Morgan, Morgan Guaranty or the holders of the CPIS, the Trust will pursue  
such measure in lieu of redemption; provided further that Morgan Guaranty shall 
have no right to redeem the Related Note while the Trust is pursuing any such   
ministerial action or reasonable measure unless the Special Event shall not have
been so eliminated by the 85th day following the occurrence thereof, in which   
case J.P. Morgan shall be permitted to direct Morgan Guaranty to provide notice 
to the Trust of the redemption of the Related Note.                             

Under current United States Federal income tax law, a redemption of the CPIS    
upon the occurrence of a Special Event, whether or not upon dissolution of the  
Trust, would be a taxable event to such holders. See "United States Federal     
Income Taxation".                                                               

REDEMPTION PROCEDURES                                                           

In the case of an Optional Redemption by a holder of the CPIS on an Optional    
Redemption Date, any such redeeming holder will be required to provide notice of
the number of the CPIS to be redeemed on such Optional Redemption Date to a     
Participant in DTC, and such Participant must communicate such notice to DTC no 
earlier than 20 scheduled Business Days prior to, but no later than 10 scheduled
Business Days prior to, the applicable Optional Redemption Date.                

S-31

424B2
32nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 32nd

In the case of a redemption of the CPIS upon the occurrence of a Special Event, 
the Trust will provide notice of such redemption to the Transfer Agent and to   
DTC on a date not less than 10 scheduled Business Days prior to such Early      
Redemption Date stating, among other things, the date of such redemption.       

The related Series C Common Securities will be redeemed on a Pro Rata Basis with
the CPIS except that, in the case of any dissolution or liquidation in which the
assets of the Trust consisting of the Related Note and the proceeds thereof are 
insufficient to repay in full the Early Redemption Value on all the CPIS then   
outstanding, all the CPIS will be redeemed prior to the redemption of any Series
C Common Securities. CPIS registered in the name of and held by DTC (as defined 
herein) or its nominee will be redeemed in accordance with DTC's standard       
procedures. See "--Book-Entry Only Issuance--The Depository Trust Company".     

Payment of the Redemption Value or Early Redemption Value, as applicable, is    
conditioned upon delivery or book-entry transfer of such CPIS (together with    
necessary endorsements) to the Trust at any time (whether prior to, on or after 
the relevant Redemption Date) after the required notice is given (to the extent 
such notice is required). See "--Book-Entry Only Issuance--The Depository Trust 
Company". Payment of the Redemption Value or the Early Redemption Value, as     
applicable, will be made by the delivery of cash no later than the applicable   
Settlement Date with respect to such CPIS (subject to delay in the case of a    
Market Disruption Event) or, if later, the time of delivery or book-entry       
transfer of such CPIS. If the Trust, on behalf of holders of Series C Securities
holds money sufficient to pay the Redemption Value or the Early Redemption      
Value, as applicable, of the CPIS on the applicable Settlement Date, then       
immediately at the close of business on such Settlement Date, such CPIS will    
cease to be outstanding whether or not such CPIS are delivered to the Trust, and
all rights of the holder of such CPIS shall terminate and lapse, other than the 
right to receive the Redemption Value or the Early Redemption Value, as         
applicable, upon delivery of the CPIS.                                          

Provided that Morgan Guaranty has paid to the Trust, on behalf of holders of    
Series C Securities the required amount of cash due upon any redemption or at   
the maturity of the Related Note, the Trust, on behalf of holders of Series C   
Securities will irrevocably deposit with DTC no later than the close of business
on the applicable Settlement Date funds sufficient to pay the Redemption Value  
or the Early Redemption Value, as applicable, payable with respect to the CPIS  
on such date and will give DTC irrevocable instructions and authority to pay    
such amount to the holders of the CPIS entitled thereto. See "--Book-Entry Only 
Issuance--The Depository Trust Company". In the event that any Settlement Date  
is not a Business Day, then payment of the Redemption Value or the Early        
Redemption Value, as applicable, payable on such date will be made on the next  
succeeding Business Day with the same force and effect as if made on such date, 
except that, if such Business Day falls in the next calendar year such payment  
will be made on the immediately preceding Business Day.                         

If a partial redemption as a result of a Special Event Redemption by Morgan     
Guaranty of a part or all of the Related Note would result in the delisting of  
the CPIS by any national securities exchange (or automated inter-dealer         
quotation system, including The Nasdaq Stock Market ("Nasdaq")) on which the    
CPIS are then listed, Morgan Guaranty may only redeem the Related Note in whole 
and, as a result, the Trust may only redeem the CPIS in whole.                  

Subject to the foregoing and to applicable law (including, without limitation,  
United States Federal securities laws), J.P. Morgan or its affiliates may, at   
any time and from time to time, purchase outstanding CPIS by tender, in the open
market or by private agreement.                                                 

MARKET DISRUPTION EVENTS                                                        

A Market Disruption Event with respect to a Reference CPI level will occur on   
any day if the Calculation Agent determines, in its sole discretion, that the   
Reference CPI level may not be obtained or has not been promulgated by the      
Treasury Department (in the event of a delay by the Bureau of Labor Statistics  
in publishing the CPI) or the Treasury Department has not cured an existing     
Index Contingency for such day. Such Market Disruption Event may continue       
indefinitely. However, if such Market Disruption Event remains in effect for    
longer than 20 consecutive Business Days and, in the sole discretion of the     
Calculation Agent, such Market Disruption Event is likely to remain in effect,  
then the applicable Reference CPI may be determined in good faith by the        
Calculation Agent (however, it has no obligation to determine such applicable   
Reference CPI).                                                                 

Additionally, a Market Disruption Event with respect to an Early Determination  
Date shall occur (a) if the U.S. treasury market is not open on such Early      
Determination Date or (b) if an input in the early redemption calculation (i) is
not available or (ii) the input data are potentially subject to extraordinary   
influences, in the sole discretion of the Calculation Agent, due to the fact    
that the underlying instrument on which such data is based is subject to an     
issuer buyback or early call (e.g., the Treasury Department is buying back the  
U.S. Government Notes used for determining the Base Yield in the early          
redemption calculation). Such market disruption may require the Calculation     
Agent to determine certain inputs in good faith and such                        

S-32

424B2
33rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 33rd

determinations may be delayed or cause a delay in the Early Determination Date  
and payment of the Early Redemption Value. See "Description of the              
CPIS--Optional Redemption" for further information on the early redemption      
calculation.                                                                    

LIQUIDATION DISTRIBUTION UPON DISSOLUTION                                       

In the event of any dissolution of the Trust (a "Liquidation Event"), whether   
voluntary or involuntary, the holders of CPIS on the date of such Liquidation   
Event will be entitled to be paid out of the assets of the Trust consisting of  
the Related Note and the proceeds thereof, and after satisfaction of liabilities
to creditors of the Trust with respect to Series C Securities, the Liquidation  
Distribution. The "Liquidation Distribution" will be equal to the Early         
Redemption Value with respect to such CPIS (treating the date of such           
distribution as the Early Redemption Date). To the extent such assets of the    
Trust are insufficient to repay all amounts due to holders of all the CPIS,     
holders of the CPIS then outstanding will be entitled to a pro rata share of    
such assets of the Trust. In addition, in the event that such assets of the     
Trust exceed the amount necessary to pay to all holders of CPIS the full amount 
of the Liquidation Distribution, such excess will be paid to the holders of the 
Series C Common Securities, in an amount sufficient to cover the Liquidation    
Distribution in respect of all Series C Common Securities, and thereafter pro   
rata to the holders of the CPIS and the Series C Common Securities.             

Pursuant to the Declaration, the legal existence of the Trust shall terminate on
November 21, 2105.                                                              

VOTING RIGHTS                                                                   

Except as described herein and under "--Modification of the Declaration" and    
under "J.P. Morgan Index Funding Company I--Voting", and as otherwise required  
by law and the Declaration, the holders of the CPIS will have no voting rights. 

Pursuant to the provisions of the Guarantee, certain amendments to or           
modifications of the Guarantee may only be effected with the approval of a      
majority in aggregate Face Amount at such time of the CPIS and all other        
affected Preferred Securities. See "Description of the Guarantee--Modification  
of the Guarantee".                                                              

Pursuant to the provisions of the Related Note, the Related Note Guarantee and  
the Declaration, certain amendments to or modifications of the Related Note or  
the Related Note Guarantee may only be effected with the approval of a majority 
in aggregate Face Amount at such time of the CPIS. See "Description of the      
Related Note--Modification of the Related Note".                                

Notwithstanding that holders of the CPIS are entitled to vote or consent under  
any of the circumstances described above, any of the CPIS that are owned at such
time by J.P. Morgan or any entity directly or indirectly controlling or         
controlled by, or under direct or indirect common control with, J.P. Morgan,    
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if such CPIS were not outstanding.                       

The procedures by which holders of the CPIS may exercise their voting rights are
described below under "--Book-Entry Only Issuance--The Depository Trust Company"
and in the Declaration.                                                         

MODIFICATION OF THE DECLARATION                                                 

The Declaration may be amended or modified if approved by a written instrument  
executed by a majority in interest of the holders of Common Securities (all of  
which will be held by J.P. Morgan); provided that, if any proposed amendment    
provides for (i) any action that would adversely affect the powers, preferences 
or special rights of the CPIS or (ii) the dissolution of the Trust other than   
pursuant to the terms of the Declaration, then the holders of all affected      
outstanding Preferred Securities (or, in the case of an event described in      
clause (ii), all Preferred Securities, including the CPIS), voting together as a
single class will be entitled to vote on such amendment or proposal and such    
amendment or proposal shall not be effective except with the approval of holders
of not less than a majority in aggregate principal amount (which, for these     
purposes, shall equal Early Redemption Value on the date of such vote) of all   
affected outstanding Preferred Securities (or, in the case of an event described
in clause (ii), all Preferred Securities) of the Trust affected thereby.        

The Declaration further provides that it may be amended without the consent of  
the holders of the CPIS to (i) cure any ambiguity, (ii) correct or supplement   
any provision in the Declaration that may be defective or inconsistent with any 
other provision of the Declaration, (iii) add to the covenants, restrictions or 
obligations of J.P. Morgan, (iv) conform to changes in, or a change in          
interpretation or application of, certain requirements of the 1940 Act by the   
Commission and (v) conform to certain requirements of the Code with respect to  
the characterization of the Trust for U.S. Federal income tax purposes, so long 
as such amendment does not adversely affect the rights, preferences or          
privileges of the holders of the CPIS.                                          

S-33

424B2
34th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 34th

LISTING                                                                         

We have applied for listing of the CPIS on the AMEX under the symbol "JPI".     
Trading of the CPIS on the AMEX is expected to commence within a 30-day period  
after the date of this Prospectus Supplement. Prior to this offering, there has 
been no market for the CPIS.                                                    

ACCOUNTING TREATMENT                                                            

The financial statements of the Trust will be included in the consolidated      
financial statements of J.P. Morgan, with the CPIS included on the balance sheet
as "trading liabilities", with a footnote disclosing that (1) the Trust is a    
wholly-owned subsidiary of J.P. Morgan, (2) the sole assets of the Trust are the
Related Note and other similar notes, specifying the principal amount, interest 
rate and maturity of each, and (3) considered together, the Guarantee and the   
Related Note Guarantee and J.P. Morgan's obligations under the Declaration      
constitute a full and unconditional guarantee by J.P. Morgan with respect to the
CPIS.                                                                           

MERGERS, CONSOLIDATIONS OR AMALGAMATIONS                                        

The Trust may not consolidate, amalgamate, merge with or into or be replaced by,
or convey, transfer or lease its properties and assets substantially as an      
entirety to, any corporation or other entity.                                   

BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY                          

DTC will act as securities depositary for the CPIS. The CPIS will be issued only
as fully-registered securities registered in the name of Cede & Co. (DTC's      
nominee). One or more fully-registered global CPIS certificates, representing   
the total aggregate number of CPIS, will be issued and will be deposited with   
DTC.                                                                            

DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a      
member of the Federal Reserve System, a "clearing corporation" within the       
meaning of the New York Uniform Commercial Code, and a "clearing agency"        
registered pursuant to the provisions of Section 17A of the Securities Exchange 
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its     
participants ("Participants") deposit with DTC. DTC also facilitates the        
settlement among Participants of securities transactions, such as transfers and 
pledges, in deposited securities through electronic computerized book-entry     
changes in Participants' accounts, thereby eliminating the need for physical    
movement of securities certificates. Direct Participants include securities     
brokers and dealers, banks, trust companies, clearing corporations and certain  
other organizations ("Direct Participants"). DTC is owned by a number of its    
Direct Participants and by the New York Stock Exchange, the American Stock      
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access  
to the DTC system is also available to others, such as securities brokers and   
dealers, banks and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant either      
directly or indirectly ("Indirect Participants"). The rules applicable to DTC   
and its Participants are on file with the Commission.                           

Purchases of the CPIS within the DTC system must be made by or through Direct   
Participants, which will receive a credit for the CPIS on DTC's records. The    
ownership interest of each actual purchaser of each Series C Preferred Security 
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect       
Participants' records. Beneficial Owners will not receive written confirmation  
from DTC of their purchases, but Beneficial Owners are expected to receive      
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Participants or Direct Participants      
through which the Beneficial Owners purchased the CPIS. Transfers of ownership  
interests in the CPIS are to be accomplished by entries made on the books of    
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not  
receive certificates representing their ownership interests in the CPIS, except 
in the event that use of the book-entry system for the CPIS is discontinued.    

To facilitate subsequent transfers, all CPIS deposited by Participants with DTC 
are registered in the name of DTC's nominee, Cede & Co. The deposit of the CPIS 
with DTC and their registration in the name of Cede & Co. effect no change in   
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of   
the CPIS. DTC's records reflect only the identity of the Direct Participants to 
whose accounts such CPIS are credited, which may or may not be the Beneficial   
Owners. The Participants will remain responsible for keeping account of their   
holdings on behalf of their customers.                                          

Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants and by Direct and Indirect         
Participants to Beneficial Owners will be governed by arrangements among them,  
subject to any statutory or regulatory requirements that may be in effect from  
time to time.                                                                   

S-34

424B2
35th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 35th

In the case of a Special Event Redemption, redemption notices shall be sent to  
Cede & Co. If less than all of the CPIS are being redeemed, DTC will reduce the 
amount of the interest of each Direct Participant in such CPIS in accordance    
with its procedures. In the case of an Optional Redemption, redemption notices  
shall be provided by Beneficial Owners and Participants to DTC in accordance    
with its procedures. DTC will then provide the Applicable Notice to the Trust or
its Transfer Agent of the number of CPIS to be redeemed on the applicable       
Optional Redemption Date. The Applicable Notice will be irrevocable upon receipt
by the Trust or its Transfer Agent, and may not be withdrawn or modified after  
such receipt.                                                                   

Although voting with respect to the CPIS is limited, in those cases where a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to the CPIS. Under its usual procedures, DTC would mail an Omnibus Proxy to the 
Trust as soon as possible after the record date. The "Omnibus Proxy" assigns    
Cede & Co. consenting or voting rights to those Direct Participants to whose    
accounts the CPIS are credited on the record date (identified in a listing      
attached to the Omnibus Proxy). J.P. Morgan and the Trust believe that the      
arrangements among DTC, Direct and Indirect Participants and Beneficial Owners  
will enable the Beneficial Owners to exercise rights equivalent in substance to 
the rights that can be directly exercised by a holder of an interest in the     
assets of the Trust consisting of the Related Note and the proceeds thereof.    

DTC may discontinue providing its services as securities depositary with respect
to the CPIS at any time by giving reasonable notice to the Trust. Under such    
circumstances, in the event that a successor securities depositary is not       
obtained, CPIS certificates are required to be printed and delivered.           
Additionally, the Trust may decide to discontinue use of the system of          
book-entry transfers through DTC (or any successor depositary) with respect to  
the CPIS. In that event, certificates for the CPIS will be printed and          
delivered.                                                                      

The information in this section concerning DTC and DTC's book-entry system has  
been obtained from sources that J.P. Morgan believes to be reliable, but neither
J.P. Morgan nor the Trust takes responsibility for the accuracy thereof.        

REGISTRAR, TRANSFER AGENT AND PAYING AGENT                                      

In the event the CPIS do not remain in book-entry only form, the following      
provisions will apply:                                                          

Payment of amounts due on the CPIS will be payable and the transfer of the CPIS 
will be registrable at the principal corporate trust office of the Property     
Trustee in The City of New York; provided that payment of distributions may be  
made at the option of the Regular Trustees on behalf of the Trust by check      
mailed to the address of the persons entitled thereto and that the payment on   
redemption of the CPIS will be made only upon surrender of such CPIS to the     
Property Trustee.                                                               

U.S. Bank Trust National Association or one of its affiliates will act as       
registrar and transfer agent for the CPIS. U.S. Bank Trust National Association 
will also act as paying agent and, with the consent of the Regular Trustees, may
designate additional paying agents.                                             

Registration of transfers of the CPIS will be effected without charge by or on  
behalf of the Trust, but upon payment (with the giving of such indemnity as the 
Trust may require) in respect of any tax or other governmental charges that may 
be imposed in relation to it.                                                   

The Trust will not be required to register or cause to be registered the        
transfer of CPIS after such CPIS have been called for redemption.               

GOVERNING LAW                                                                   

The Declaration and the CPIS will be governed by and interpreted in accordance  
with the laws of the State of Delaware.                                         

DESCRIPTION OF THE RELATED NOTE 

Set forth below is a summary of the terms of the Related Note in which the Trust
will invest the proceeds from the issuance and sale of the CPIS and the related 
Series C Common Securities. The following description does not purport to be    
complete and is subject to, and is qualified in its entirety by reference to,   
the Prospectus and the Related Note, the form of which is filed as an exhibit to
the Registration Statement relating to this Prospectus Supplement and the       
Prospectus. Certain capitalized terms are used herein as defined in the Related 
Note.                                                                           

S-35

424B2
36th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 36th

GENERAL                                                                         

The Related Note will be issued as an unsecured, unsubordinated obligation of   
Morgan Guaranty, limited in initial amount to approximately $[49,025,490], such 
amount being the sum of the aggregate Public Offering Price shown on the cover  
page hereof for the CPIS and the related Series C Common Securities issued in   
connection therewith.                                                           

The Related Note is not subject to a sinking fund provision. The Related Note   
will mature and become due and payable at Stated Maturity (subject to extension 
in the case of a Market Disruption Event), subject to the prior redemption of   
the Related Note in whole or in part upon the occurrence of an Optional         
Redemption by one or more holders of the CPIS or upon the occurrence of a       
Special Event. If Morgan Guaranty redeems the Related Note in whole or in part, 
the Trust must redeem on a Pro Rata Basis the CPIS and related Series C Common  
Securities having an aggregate value equal to the value of the Related Note so  
redeemed at the Early Redemption Value. See "Description of the CPIS--Optional  
Redemption" and "Description of the CPIS--Special Event Redemption".            

RELATED NOTE REDEMPTION VALUE                                                   

The amount payable under the Related Note by Morgan Guaranty to the Property    
Trustee, on behalf of holders of Series C Securities, at any time shall equal   
(a) at any time prior to the Stated Maturity, the Early Redemption Value of the 
CPIS or (b) at the Stated Maturity (or any time thereafter if delayed by a      
Market Disruption Event), the Redemption Value of the CPIS (the "Related Note   
Redemption Value"). The timing and amount of payments on the Related Note mirror
the aggregate financial terms of the CPIS.                                      

SUBORDINATION                                                                   

Morgan Guaranty's obligations under the Related Note are effectively            
subordinated to all liabilities (including indebtedness) of its consolidated and
unconsolidated subsidiaries. Moreover, Morgan Guaranty's subsidiaries may incur 
indebtedness and other liabilities and have obligations to third parties.       
Generally, the claims of such third parties to the assets of Morgan Guaranty's  
subsidiaries will be superior to those of Morgan Guaranty as a stockholder, and,
therefore, the Related Note may be deemed to be effectively subordinated to the 
claims of such third parties.                                                   

Upon any payment or distribution of all or substantially all of the assets of   
Morgan Guaranty or in the event of any insolvency, bankruptcy, receivership,    
liquidation, dissolution, reorganization or other similar proceeding, whether   
voluntary or involuntary, relative to Morgan Guaranty or its creditors, the     
holders of all Senior Indebtedness of Morgan Guaranty will be entitled to       
receive payment pari passu and pro rata with the Trust. However, depositors in  
Morgan Guaranty will have a preference over holders of Senior Indebtedness of   
Morgan Guaranty upon any such event.                                            

As used in the Related Note, the term "Senior Indebtedness" means the principal 
of, premium, if any, and interest on (a) all indebtedness of Morgan Guaranty for
money borrowed, whether outstanding as of the date hereof or hereafter created, 
issued or incurred (other than Morgan Guaranty's obligations to its depositors),
except any indebtedness expressly subordinated to such Senior Indebtedness, and 
(b) any deferrals, renewals or extensions of any such Senior Indebtedness. The  
Related Note does not limit the amount of Senior Indebtedness which Morgan      
Guaranty may incur.                                                             

INTEREST                                                                        

The Related Note shall not bear interest.                                       

OPTIONAL REDEMPTION                                                             

The Trust shall have the right to call for redemption prior to each Optional    
Redemption Date an amount of the Related Note sufficient to allow it to pay the 
Early Redemption Value to any holders of the CPIS who exercise their right to   
redeem any or all of such holders' CPIS and in respect of a pro rata portion of 
the related Series C Common Securities. See "Description of the CPIS--Optional  
Redemption".                                                                    

SPECIAL EVENT REDEMPTION                                                        

Upon the occurrence of a Special Event, Morgan Guaranty (a) in the case of an   
Investment Company Event, redeem the Related Note at the Related Note Redemption
Value or (b) in the case of a Tax Event, either apply clause (a) or allow the   
Related Note to remain outstanding and indemnify the Trust for any taxes payable
by it as a result of such Tax Event. See "Description of the CPIS--Special Event
Redemption".                                                                    

S-36

424B2
37th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 37th

EVENTS OF DEFAULT                                                               

The Note Events of Default are described in "Description of the Related         
Notes--Note Events of Default" in the Prospectus of which this Prospectus       
Supplement constitutes a part. A default or event of default under any Senior   
Indebtedness would not constitute a default or event of default under the       
Related Note. A default or event of default under the Related Note would not    
constitute a default or event of default under any related note pertaining to   
any other series of Securities.                                                 

MODIFICATION OF THE RELATED NOTE                                                

The Related Note contains provisions permitting Morgan Guaranty and the Property
Trustee, with the consent of the holders of not less than a majority in Face    
Amount of the outstanding CPIS, to modify the Related Note, subject to certain  
exceptions. See "Description of the Related Notes--Modification of the Related  
Notes" in the Prospectus of which this Prospectus Supplement constitutes a part.

CONSOLIDATION, MERGER AND SALE                                                  

The Related Note provides that Morgan Guaranty may, without the consent of the  
Trust or the holders of the CPIS, consolidate or merge with or into, or sell or 
transfer all or substantially all of its property or assets to any corporation  
or association; provided that (i) the corporation (if other than Morgan         
Guaranty) or association formed by or resulting from any such consolidation or  
merger or which shall have received such property or assets shall have assumed  
Morgan Guaranty's obligations under the Related Note and (ii) immediately after 
giving effect to such transaction, Morgan Guaranty or such successor corporation
shall not be in default under the terms of the Related Note.                    

GOVERNING LAW                                                                   

The Related Note will be governed by, and construed in accordance with, the laws
of the State of New York.                                                       

MISCELLANEOUS                                                                   

Morgan Guaranty will have the right at all times to assign any of its rights or 
obligations under the Related Note to J.P. Morgan or to a direct or indirect    
wholly-owned subsidiary of Morgan Guaranty; provided that, in the event of any  
such assignment, Morgan Guaranty will remain jointly and severally liable for   
all such obligations. Subject to the foregoing, the Related Note will be binding
upon and inure to the benefit of the parties thereto and their respective       
successors and assigns. The Related Note is not a deposit or other obligation of
a bank and is not insured by the Federal Deposit Insurance Corporation or any   
other Federal agency. The obligations of Morgan Guaranty under the Related Note 
are pari passu with all present and future Senior Indebtedness of Morgan        
Guaranty (as defined herein) and are junior to Morgan Guaranty's obligations to 
its depositors in the event of a receivership. In addition, J.P. Morgan's       
obligations under the Guarantee and the Related Note Guarantee and Morgan       
Guaranty's obligations under the Related Note are effectively subordinated to   
all liabilities (including indebtedness) of the respective consolidated and     
unconsolidated subsidiaries of each.                                            

DESCRIPTION OF THE GUARANTEE

Set forth below is a summary of information concerning the Guarantee delivered  
by J.P. Morgan for the benefit of the holders of the CPIS as well as holders of 
other Preferred Securities. The terms of the Guarantee are set forth therein.   
The following summary does not purport to be complete and is subject in all     
respects to the provisions of, and is qualified in its entirety by reference to,
the Prospectus and the Guarantee Agreement, a copy of which is filed as an      
exhibit to the Registration Statement relating to this Prospectus Supplement and
the Prospectus. The Guarantee is qualified under the Trust Indenture Act and    
held by the Property Trustee, acting in its capacity as indenture trustee with  
respect thereto.                                                                

GENERAL                                                                         

Pursuant to the Guarantee, J.P. Morgan irrevocably and unconditionally agrees,  
on a subordinated basis, to pay in full to the holders of the CPIS the Guarantee
Payments (as defined herein) (except to the extent paid by the Trust), as and   
when due, regardless of any defense, right of set-off or counterclaim that the  
Trust may have or assert. The following payments with respect to the CPIS issued
by the Trust (the "Guarantee Payments"), to the extent not paid by the Trust,   
will be subject to the Guarantee (without duplication): (i) the Redemption Value
or the Early Redemption Value, as applicable, but if and only to the extent     
that, in each case, Morgan Guaranty has made payments on the Related Note and   
(ii) upon a Liquidation Event (other than in connection with the redemption of  
all of the CPIS at Stated Maturity or redemption in whole of the Related Note)  
the                                                                             

S-37

424B2
38th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 38th

lesser of (a) the Liquidation Distribution to the extent the Trust has funds    
available therefor and (b) the amount of assets of the Trust consisting of the  
Related Note and the proceeds thereof remaining available for distribution to   
holders of the CPIS upon such Liquidation Event. J.P. Morgan's obligation to    
make a Guarantee Payment may be satisfied by direct payment of the required     
amounts by J.P. Morgan to the holders of the CPIS or by causing the Trust to pay
such amounts to such holders. The Guarantee will be effective with respect to   
the CPIS from the time of issuance of the CPIS to the extent Morgan Guaranty has
made payments under the Related Note. If Morgan Guaranty does not make payments 
on the Related Note, the Trust may not make payments on the CPIS and may not    
have funds available therefor. See "Description of the Related Note".           

So long as any CPIS or other Preferred Securities remain outstanding, J.P.      
Morgan will not declare or pay dividends on, or redeem, purchase, acquire or    
make a distribution or liquidation payment with respect to, any of its common   
stock or preferred stock or make any Guarantee Payment with respect thereto if  
at such time (i) J.P. Morgan shall be in default with respect to its Guarantee  
Payments or other payment obligations under the Guarantee or (ii) there shall   
have occurred any event of default under the Declaration; provided, however,    
that the foregoing restrictions shall not apply to (a) dividends, redemptions,  
purchases, acquisitions, distributions or payments made by J.P. Morgan by way of
issuance of shares of its capital stock, (b) payments of accrued dividends by   
J.P. Morgan upon the redemption, exchange or conversion of any preferred stock  
of J.P. Morgan as may be outstanding from time to time in accordance with the   
terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of 
delivering fractional shares upon the redemption, exchange or conversion of any 
preferred stock of J.P. Morgan as may be outstanding from time to time in       
accordance with the terms of such preferred stock, (d) repurchases, redemptions 
or other acquisitions of shares of capital stock of J.P. Morgan in connection   
with any employment contract, benefit plan or other similar arrangement with or 
for the benefit of employees, officers, directors or consultants or (e) any     
declaration of a dividend in connection with the implementation of a            
stockholders' rights plan, or the issuance of stock under any such plan in the  
future, or the redemption or repurchase of such rights pursuant thereto.        

MODIFICATION OF THE GUARANTEE; ASSIGNMENT                                       

Except with respect to any changes that do not adversely affect the rights of   
holders of Preferred Securities (in which case no consent will be required), the
Guarantee may be amended by J.P. Morgan and the Property Trustee only with the  
prior approval of the holders of not less than a majority in aggregate principal
amount at such time of the holders of each series of affected Preferred         
Securities, voting as a single class. For the purposes of the proceeding        
sentence, the principal amount of each CPIS shall equal the Early Redemption    
Value as of the date of such vote, and the principal amount of any other        
Preferred Securities shall equal the "Principal Amount" of such series as       
defined in the Declaration. All guarantees and agreements contained in the      
Guarantee shall bind the successors, assignees, receivers, trustees and         
representatives of J.P. Morgan and shall inure to the benefit of the holders of 
the CPIS.                                                                       

REMEDIES OF HOLDERS                                                             

The Guarantee will be deposited with U.S. Bank Trust National Association, as   
indenture trustee, to be held for the benefit of holders of the CPIS and other  
Preferred Securities. U.S. Bank Trust National Association shall enforce such   
Guarantee on behalf of holders of the CPIS and other Preferred Securities. The  
holders of not less than a majority in aggregate principal amount of the CPIS   
and Preferred Securities of each affected series have the right to direct the   
time, method and place of conducting any proceeding for any remedy available in 
respect of the Guarantee, including the giving of directions to U.S. Bank Trust 
National Association. In addition, any holder of the CPIS or other Preferred    
Securities may institute a legal proceeding directly against J.P. Morgan to     
enforce its right under the Guarantee, without first instituting a legal        
proceeding against the Trust, the Guarantee Trustee or any other person or      
entity. Subject to the award by a court of competent jurisdiction of legal fees 
in connection with any such legal proceeding, each holder will be required to   
bear its own costs in connection with instituting a legal proceeding directly   
against J.P. Morgan, which cost may be significant.                             

TERMINATION OF THE GUARANTEE                                                    

The Guarantee will terminate with respect to the CPIS upon full payment of the  
aggregate Early Redemption Value or Redemption Value, as applicable, or upon    
full payment of the amounts payable in accordance with the Declaration upon     
liquidation of the Trust. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the CPIS must      
restore payment of any sums paid under such CPIS or the Guarantee (e.g., upon a 
subsequent bankruptcy of Morgan Guaranty or J.P. Morgan).                       

S-38

424B2
39th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 39th

STATUS OF THE GUARANTEE                                                         

The Guarantee will constitute an unsecured obligation of J.P. Morgan and will   
rank (i) subordinate and junior in right of payment to all other liabilities of 
J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock 
outstanding as of the date hereof of J.P. Morgan and with respect to obligations
under other guarantee agreements which J.P. Morgan may enter into from time to  
time to the extent that such agreements provide for comparable guarantees by    
J.P. Morgan of payment on other preferred securities issued by the predecessor  
of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to    
J.P. Morgan's common stock. The terms of the CPIS provide that each holder of   
the CPIS by acceptance thereof agrees to the subordination provisions and other 
terms of the Guarantee.                                                         

The Guarantee will constitute a guarantee of payment and not of collection (that
is, the guaranteed party may institute a legal proceeding directly against the  
guarantor to enforce its rights under the Guarantee without instituting a legal 
proceeding against any other person or entity).                                 

GOVERNING LAW                                                                   

The Guarantee will be governed by and construed and interpreted in accordance   
with the laws of the State of New York.                                         

DESCRIPTION OF THE RELATED NOTE GUARANTEE 

Set forth below is a summary of information concerning the Related Note         
Guarantee delivered by J.P. Morgan for the benefit of the Property Trustee for  
the benefit of the holders of Securities of various series. The terms of the    
Related Note Guarantee are set forth therein. The following summary does not    
purport to be complete and is subject in all respects to the provisions of, and 
is qualified in its entirety by reference to, the Prospectus and the Related    
Note Guarantee, a copy of which is filed as an exhibit to the Registration      
Statement relating to this Prospectus Supplement and the Prospectus. The Related
Note Guarantee is held by the Property Trustee (for the benefit of holders of   
Series C Securities), as the holder of the Related Note.                        

GENERAL                                                                         

Pursuant to the Related Note Guarantee, J.P. Morgan irrevocably and             
unconditionally agrees, on a subordinated basis, to pay in full to the Property 
Trustee for the benefit of holders of Series C Securities, any amount payable by
Morgan Guaranty under the Related Note, as and when payable by Morgan Guaranty  
(the "Related Note Guarantee Payments") regardless of any defense, right of     
set-off or counterclaim that Morgan Guaranty may have or assert with respect to 
its obligation to make such Related Note Guarantee Payments. J.P. Morgan's      
obligation to make a Related Note Guarantee Payment may be satisfied by direct  
payment of the required amounts by J.P. Morgan to the Property Trustee for the  
benefit of holders of Series C Securities or by causing Morgan Guaranty to pay  
such amounts to the Property Trustee for the benefit of holders of Series C     
Securities. The Related Note Guarantee will be a full and unconditional         
guarantee with respect to the Related Note from the time of issuance of the     
Related Note.                                                                   

MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT                          

The Related Note Guarantee may be amended only with the prior approval of the   
Property Trustee; provided that no such amendment shall adversely affect the    
holders of the CPIS or other Preferred Securities without the consent of a      
majority in aggregate principal amount at such time of the holders of Preferred 
Securities of each affected series, voting as a single class. For the purposes  
of the preceding sentence, the principal amount of each CPIS shall equal the    
Early Redemption Value as of the date of such vote, and the principal amount of 
any other Preferred Securities shall equal the "Principal Amount" of such series
as defined in the Declaration. All guarantees and agreements contained in the   
Related Note Guarantee shall bind the successors, assignees, receivers, trustees
and representatives of J.P. Morgan and shall inure to the benefit of the        
Property Trustee (for the benefit of holders of Series C Securities) as the     
holder of the Related Note.                                                     

REMEDIES OF THE TRUST AND HOLDERS OF THE CPIS                                   

The Trust has the right to direct the time, method and place of conducting any  
proceeding for any remedy available to it in respect of the Related Note        
Guarantee. Pursuant to the Declaration, the holders of a majority in Face Amount
of the CPIS in certain circumstances (including a payment default under the     
Related Note Guarantee by J.P. Morgan) have the right to direct the Trust,      
through the Property Trustee, to exercise certain of its rights as the holder of
the Related Note Guarantee. In addition, upon the occurrence and during the     
continuance of a Note Event of Default that is attributable to the failure of   
Morgan Guaranty to make payments on the Related Note on the date such payments  
are otherwise due, J.P. Morgan                                                  

S-39

424B2
40th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 40th

acknowledges that a holder of the outstanding CPIS may institute a direct action
against J.P. Morgan on or after the date of the occurrence of such Note Event of
Default. Notwithstanding any payments made to such holder of the CPIS by J.P.   
Morgan in connection with any such direct action, J.P. Morgan shall remain      
obligated to make payments on the CPIS, and the rights of J.P. Morgan, as       
Guarantor, shall be subrogated to the rights of such holder of the CPIS with    
respect to payments on the CPIS to the extent of any payment made by J.P. Morgan
to such holder of CPIS in such direct action.                                   

TERMINATION OF THE RELATED NOTE GUARANTEE                                       

The Related Note Guarantee will terminate with respect to the Related Note upon 
full payment of the Related Note Redemption Value. The Related Note Guarantee   
will continue to be effective or will be reinstated with respect to the Related 
Note, as the case may be, if at any time the Property Trustee, on behalf of     
holders of Series C Securities, must restore payment of any sums paid under the 
Related Note or the Related Note Guarantee (e.g., upon a subsequent bankruptcy  
of J.P. Morgan).                                                                

STATUS OF THE RELATED NOTE GUARANTEE                                            

The Related Note Guarantee will constitute an unsecured obligation of J.P.      
Morgan and will rank (i) subordinate and junior in right of payment to all other
liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or   
preference stock outstanding as of the date hereof of J.P. Morgan and (iii)     
senior to J.P. Morgan's common stock. The terms of the CPIS provide that each   
holder of the CPIS by acceptance thereof agrees to the subordination provisions 
and other terms of the Related Note Guarantee.                                  

The Related Note Guarantee will constitute a guarantee of payment and not of    
collection (that is, the Property Trustee may institute a legal proceeding      
directly against J.P. Morgan to enforce its rights under the Related Note       
Guarantee without instituting a legal proceeding against Morgan Guaranty).      

GOVERNING LAW                                                                   

The Related Note Guarantee will be governed by and construed and interpreted in 
accordance with the laws of the State of New York.                              

EFFECT OF OBLIGATIONS UNDER THE GUARANTEE,
THE RELATED NOTE GUARANTEE AND THE RELATED NOTE 

As set forth in the Declaration, the sole purpose of the Trust is to issue the  
Series C Securities and other Securities of separate series, and to invest the  
proceeds from such issuances in the Related Note and other debt obligations of  
Morgan Guaranty.                                                                

As long as payments are made when due on the Related Note, such payments will be
sufficient to cover payments due on the CPIS because of the following factors:  
(i) the value of the Related Note will be equal to the sum of the aggregate     
value of the CPIS and the related Series C Common Securities outstanding at any 
time; (ii) the payment dates on the Related Note will match the payment dates   
for the CPIS and the related Series C Common Securities; (iii) J.P. Morgan shall
pay all, and the Trust shall not be obligated to pay, directly or indirectly,   
any, costs and expenses of the Trust other than the Redemption Value or Early   
Redemption Value of the CPIS; and (iv) the Declaration further provides that the
J.P. Morgan shall not cause the Trust (on behalf of a series of Securities or   
otherwise) to, among other things, engage in any activity that is not consistent
with the purposes of the Trust.                                                 

Payments due on the CPIS (to the extent Morgan Guaranty has made payment of     
principal and other amounts on the Related Note) are guaranteed by J.P. Morgan  
as and to the extent set forth under "Description of the Guarantee" herein and  
in the Prospectus. The Guarantee is a full and unconditional guarantee but does 
not apply to payments unless and until Morgan Guaranty has made payments on the 
Related Note.                                                                   

If Morgan Guaranty fails to make payments on the Related Note when due, the     
Declaration provides a mechanism whereby the holders of the CPIS, using the     
procedures described in the Declaration, may direct the Property Trustee, on    
behalf of holders of the Series C Securities, to enforce its rights under the   
Related Note and the Related Note Guarantee. If J.P. Morgan fails to perform any
of its payment or other obligations with respect to the CPIS under the          
Guarantee, any holder of the CPIS may institute a legal proceeding directly     
against J.P. Morgan to enforce such holder's rights under the Guarantee without 
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.                                                     

The Related Note Guarantee by J.P. Morgan guarantees to the Property Trustee the
payment of amounts due the Related Note as provided pursuant to the terms of the
Related Note, at such times and in such amounts as provided therein. In         
addition,                                                                       

S-40

424B2
41st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 41st

upon the occurrence and during the continuance of a Note Event of Default that  
is attributable to the failure of Morgan Guaranty to make payments on the       
Related Note on the date such amounts are otherwise payable, J.P. Morgan        
acknowledges that a holder of the outstanding CPIS may directly institute a     
proceeding under the Related Note Guarantee with respect to the CPIS against    
J.P. Morgan for enforcement of payments to such holder of the related Redemption
Value or Early Redemption owed such holder on or after the date of the          
occurrence of such Note Event of Default. Notwithstanding any payments made to  
such holder of the CPIS by J.P. Morgan in connection with such direct action,   
J.P. Morgan shall remain obligated to pay the principal of the CPIS, and the    
rights of J.P. Morgan, as Guarantor, shall be subrogated to the rights of such  
holder of the CPIS with respect to payments on the CPIS to the extent of any    
payment made by J.P. Morgan to such holder of the CPIS in such direct action.   
J.P. Morgan's obligations under the Related Note Guarantee will be subordinated 
and junior in right of payment to all liabilities of J.P. Morgan, pari passu    
with the most senior preferred stock outstanding as of the date hereof of J.P.  
Morgan and senior to the common stock of J.P. Morgan.                           

The Declaration provides that J.P. Morgan will pay, or cause to be paid, all    
debts and obligations (other than with respect to the CPIS and other Preferred  
Securities to the extent set forth herein and in the Prospectus) and all costs  
and expenses of the Trust, including any taxes and all costs and expenses with  
respect thereto, to which the Trust may become subject. The Declaration provides
that any person to whom such debts, obligations, costs and expenses are owed    
will have the right to enforce J.P. Morgan's obligations in respect of such     
debts, obligations, costs and expenses directly against J.P. Morgan without     
first proceeding against the Trust.                                             

J.P. Morgan, through its obligations under the Guarantee, the Related Note      
Guarantee and the Declaration, taken together, will provide a full and          
unconditional guarantee, on a subordinated basis, of payments due on the CPIS.  
See "Description of the Guarantee--General" and "Description of the Related Note
Guarantee--General" herein and in the accompanying Prospectus.                  

Upon any voluntary or involuntary dissolution of the Trust, the holders of      
Series C Securities will be entitled to receive, after satisfaction of          
liabilities to creditors of the Trust with respect to Series C Securities, the  
Liquidation Distribution. Holders of the CPIS will be entitled to the benefits  
of the Guarantee with respect to the Liquidation Distribution. See "Description 
of the CPIS--Liquidation Distribution Upon Dissolution". Upon any voluntary or  
involuntary liquidation or bankruptcy of Morgan Guaranty, the Property Trustee  
as holder of the Related Note on behalf of the Trust would rank equally in right
of payment with creditors of Morgan Guaranty (other than any depositors         
therein), including all Senior Indebtedness, and would be entitled to receive   
payment in full of principal, premium, if any, and interest, before any         
stockholders of Morgan Guaranty receive payments of distributions.              

UNITED STATES FEDERAL INCOME TAXATION 

GENERAL                                                                         

The following is a summary of the material United States Federal income tax     
consequences of the purchase, ownership and disposition of the CPIS by U.S.     
Holders (as defined below). This summary deals only with the CPIS held as       
capital assets by holders who purchase them upon original issuance.             

This summary does not address tax considerations applicable to investors that   
may be subject to special U.S. Federal income tax treatment, such as dealers in 
securities or persons that will hold the CPIS as a position in a "straddle"     
(within the meaning of Section 1092 of the Code), or as part of a "conversion   
transaction" (within the meaning of Section 1258 of the Code) or "synthetic     
security" or other integrated investment comprised of the CPIS and one or more  
other investments. This summary also does not address the tax consequences to   
persons that have a functional currency other than the U.S. dollar or the tax   
consequences to shareholders, partners or beneficiaries of a holder of the CPIS.
Further, it does not include any description of any alternative minimum tax     
consequences or the tax laws of any state or local government or of any foreign 
government that may be applicable to a holder of the CPIS.                      

This summary is based on the Code, Treasury regulations thereunder and          
administrative and judicial interpretations thereof, as of the date hereof, all 
of which are subject to change, possibly on a retroactive basis.                

For purposes of this summary, a "U.S. Holder" means a holder who is (i) a       
citizen or resident of the United States (or any state thereof), (ii) a         
corporation, or other entity taxable as a corporation, created or organized in  
or under the laws of the United States or any political subdivision thereof or  
(iii) an estate or trust, the income of which is subject to U.S. Federal income 
tax regardless of its source. If a partnership holds the CPIS, the tax treatment
of a partner will generally depend upon the status of the partner and upon the  
activities of the partnership. If you are a partner of a partnership holding the
CPIS, you should consult your own tax advisor.                                  

S-41

424B2
42nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 42nd

CLASSIFICATION OF THE TRUST                                                     

In the opinion of Cravath, Swaine & Moore, special tax counsel to J.P. Morgan   
and the Trust ("Tax Counsel"), the Trust will be classified as a "grantor trust"
for U.S. Federal income tax purposes. As a result, a holder of the CPIS will be 
treated as owning an undivided beneficial interest in the Related Note.         
Accordingly, for U.S. Federal income tax purposes, each holder will be required 
to report income, gain or loss as if the holder directly held its pro rata share
of the Related Note. To the extent income accrues or is paid with respect to the
Related Note (see the discussion under "--U.S. Holders of CPIS" below), no      
portion of such income will be eligible for the corporate dividends received    
deduction.                                                                      

CLASSIFICATION OF THE RELATED NOTE                                              

There are no regulations, published rulings, judicial decisions or other        
authorities concerning the proper characterization of an instrument such as the 
Related Note for U.S. Federal income tax purposes, and no ruling is being       
requested from the Internal Revenue Service (the "IRS"). As a result, the proper
tax characterization of the Related Note is uncertain, and Tax Counsel can      
express no opinion on this matter. While alternative characterizations are      
possible, unless otherwise required by the IRS, Morgan Guaranty will take the   
position for U.S. Federal income tax purposes that the Related Note is a        
contract claim that is not an option. Each holder of a CPIS, by acquiring a     
CPIS, will agree to treat the Related Note in this manner.                      

U.S. HOLDERS OF CPIS                                                            

TAX REPORTING POSITION                                                          

Morgan Guaranty intends to take the position that U.S. Holders will not         
generally be required to accrue any amounts in income with respect to the CPIS  
before receiving payments with respect thereto.                                 

Even under this position, a different rule may apply if (i) Morgan Guaranty     
makes an early determination of the Ending Index as described in "Description of
the CPIS--Early Determination of the Ending Index" or (ii) when the Ending Index
can be determined in the month preceding the Stated Maturity, based on the      
announcement of the monthly CPI that determines the Reference CPI on the        
Maturity Date. At such times, the amount payable at the maturity of the CPIS    
becomes fixed. In such cases, if you are an accrual method taxpayer, you        
probably will be required at such time to include in income the full amount, if 
any, payable at maturity in excess of your tax basis in the CPIS. If you are a  
cash method taxpayer, you may be required at that time to include all or part of
such amount in income. In addition, if you are an accrual method taxpayer, you  
might be entitled at that time to a loss to the extent the fixed amount payable 
at maturity is less than your tax basis. Income or loss recognized under this   
paragraph is probably ordinary income or loss.                                  

Under Morgan Guaranty's tax reporting position, unless the preceding paragraph  
applies, when you receive a payment with respect to the CPIS, either at maturity
or upon early redemption or sale of a CPIS, you generally will recognize income,
gain or loss equal to the difference between the amount you receive with respect
to the CPIS and your tax basis in the CPIS. Any such income, gain or loss you   
realize on the payment of a CPIS at maturity or upon early redemption will      
probably be ordinary income or loss rather than capital gain or loss. If you    
sell or otherwise dispose of a CPIS before maturity, it is possible that any    
gain or loss will be capital gain or loss. However, this is not clear, and any  
such gain may be ordinary.                                                      

POSSIBLE ALTERNATIVE TAX CONSEQUENCES                                           

It is possible that the Related Note may not be properly treated as a contract  
claim that is not an option. It is also possible that Morgan Guaranty may be    
incorrect in its position that you do not have to accrue any income with respect
to the CPIS before the time described in "-- Tax Reporting Position" above. In  
either such case, under a variety of theories, you could be required to report  
income with respect to the CPIS in advance of your receipt of any cash with     
respect thereto.                                                                

For example, the CPIS might be considered cash settled options on the Reference 
CPI. In that case, the CPIS would probably constitute "nonequity options" within
the meaning of Section 1256 of the Code, with the result that U.S. Holders would
be required to mark-to-market their CPIS. Gain or loss would be recognized each 
year that you hold the CPIS based on the increase or decrease in market value of
the CPIS during that year. Of such gain or loss, 40% would be treated as        
short-term capital gain or loss, and 60% would be treated as long-term capital  
gain or loss. The same treatment would apply to any gain or loss upon the sale  
or redemption or other disposition of the CPIS.                                 

Alternatively, the Related Note might be treated as a contingent payment debt   
instrument issued by Morgan Guaranty. In such event, regardless of whether you  
are an accrual method or cash method taxpayer, you would be required to accrue  
original issue discount ("OID") into income as ordinary income each year that   
you hold the CPIS. OID would accrue at a rate equal to the "comparable yield" on
the issue date of the CPIS. This is a rate equal to the greater of (i) the      
"Applicable Federal Rate"                                                       

S-42

424B2
43rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 43rd

(a rate for Treasury obligations of maturities comparable to the CPIS) and (ii) 
the fixed rate on a hypothetical, non-contingent debt instrument issued by      
Morgan Guaranty with comparable maturity and other terms. The amount of OID     
accrued would increase the U.S. Holder's tax basis in the CPIS. Upon the sale or
redemption of a CPIS, any gain would be ordinary income, while any loss would be
ordinary loss, but only to the extent of OID previously accrued.                

Even if the Related Note is treated as a contract claim that is not an option,  
you could be required to report income with respect to the CPIS in advance of   
your receipt of cash with respect thereto. For example, if you are an accrual   
method taxpayer, the "all events test" might require you to include amounts in  
income to the extent that the Face Amount plus the current value of the CPI     
minus the Forward Index is greater than the amount you paid for the CPIS. The   
reason is that any such amount will necessarily be taxable profit to you in the 
absence of a future net decrease in the CPI due to deflation. Other theories,   
such as the requirement that a method of accounting "clearly reflect income",   
might apply to require either cash or accrual method taxpayers to include       
amounts in income prior to their receipt of cash on the CPIS.                   

NON-U.S. HOLDERS                                                                

If you are a holder of the CPIS that is not a U.S. Holder and if the            
characterization of the Related Note as a contract claim that is not an option  
is respected, payments made to you with respect to the CPIS may be subject to   
U.S. withholding tax at a 30% rate. To protect the Trust from separate liability
for the withholding tax, the Trust will withhold 30% from amounts paid on the   
CPIS to non-U.S. Holders in excess of the Issue Price.                          

If the Related Note were an option subject to the mark-to-market rules of       
Section 1256 of the Code, any payment made to a non-U.S. Holder with respect to 
the CPIS would not be subject to U.S. withholding tax. Similarly, if the Related
Note were a contingent payment debt obligation, any payment made to a non-U.S.  
Holder with respect to the CPIS should not be subject to U.S. withholding tax;  
provided that the non-U.S. Holder were to comply with applicable certification  
requirements.                                                                   

Although the Trust will withhold 30% of a portion of the amounts paid on the    
CPIS to non-U.S. Holders, such holders can apply to the IRS for a refund of the 
tax withheld on the theory that no withholding tax was due. Neither Tax Counsel 
nor Morgan Guaranty can give any assurance to non-U.S. Holders that such a      
refund claim will be successful.                                                

Under any characterization of the Related Note, gain realized upon the sale of  
the CPIS by a non-U.S. Holder generally would be subject to U.S. Federal income 
tax under general U.S. tax principles if (i) such gain is effectively connected 
with a U.S. trade or business of such holder, or (ii) in the case of an         
individual, such individual is present in the United States for 183 days or more
in the taxable year of the sale and certain other conditions are satisfied. In  
addition, depending on the proper characterization of the Related Note, it is   
possible that all gain on the sale or disposition of the CPIS by any non-U.S.   
Holder would be subject to U.S. Federal income tax, regardless of whether the   
conditions of the preceding sentence are satisfied.                             

BACKUP WITHHOLDING AND INFORMATION REPORTING                                    

Payments made on, and proceeds from the sale of, the CPIS may be subject to a   
"backup" withholding tax at a rate of 31% unless the holder complies with       
certain identification requirements. Non-U.S. holders are generally exempt from 
backup withholding but may be required to certify their status in order to prove
their exemption. Any amounts withheld will be allowed as a credit against the   
holder's U.S. Federal income tax, provided that the required information is     
furnished to the IRS.                                                           

THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE      
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. THE TAX CONSEQUENCES 
TO HOLDERS OF OWNING THE CPIS ARE UNCLEAR AND COMPLEX. MORGAN GUARANTY, THE     
TRUST AND TAX COUNSEL STRONGLY RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR  
ABOUT THE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF THE CPIS,     
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS   
AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. 

ERISA MATTERS FOR PENSION PLANS AND INSURANCE COMPANIES                         

Each fiduciary of a pension, profit-sharing or other employee benefit plan (a   
"Plan") subject to ERISA should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment 
in the CPIS. Accordingly, among other factors, the fiduciary should consider    
whether the investment would satisfy the prudence and diversification           
requirements of ERISA and would be consistent with the documents and instruments
governing the Plan.                                                             
S-43

424B2
44th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 44th

Section 406 of ERISA and Section 4975 of the Code prohibits Plans, as well as   
individual retirement accounts and Keogh plans subject to Section 4975 of the   
Code, from engaging in certain transactions involving plan assets with persons  
who are "parties in interest" under ERISA or "disqualified persons" under the   
Code with respect to such Plan.                                                 

J.P. Morgan, Morgan Guaranty and JPMSI and their affiliates may each be         
considered a "party in interest" within the meaning of ERISA, or a "disqualified
person" within the meaning of the Code, with respect to certain employee benefit
plans. Prohibited transactions within the meaning of ERISA or the Code may      
arise, for example and without limitation, if the CPIS are acquired by or with  
the assets of a pension or other employee benefit plan with respect to which    
Morgan, Morgan Guaranty and JPMSI or their affiliates are service providers,    
unless the CPIS are acquired pursuant to an exemption from the prohibited       
transaction rules.                                                              

The U.S. Department of Labor ("DOL") has issued certain prohibited transaction  
class exemptions ("PTCEs") that may provide exemptive relief for direct or      
indirect prohibited transactions. The acquisition of the CPIS may be eligible   
for one of the exemptions noted below if such acquisition: (a) is made solely   
with the assets of a bank collective investment fund and satisfies the          
requirements and conditions of PTCE 91-38; (b) is made solely with assets of an 
insurance company pooled separate account and satisfies the requirements and    
conditions of PTCE 90-1; (c) is made solely with assets managed by a qualified  
professional asset manager and satisfies the requirements and conditions of PTCE
84-14; (d) is made solely with assets of a governmental plan (as defined in     
Section 3(32) of ERISA) which is not subject to the provisions of Section 401 of
the Code; (e) is made solely with assets of an insurance company general account
and satisfies the requirements and conditions of PTCE 95-60; or (f) is made     
solely with assets managed by an in-house asset manager and satisfies the       
requirements and condition of PTCE 96-23.                                       

Under ERISA, the assets of a pension or other employee benefit plan may include 
assets held in the general account of an insurance company which has issued an  
insurance policy to such plan or assets of an entity in which the plan has      
invested. Thus, any insurance company, pension or other employee benefit plan or
entity holding assets of a Plan proposing to invest in the CPIS should consult  
with its legal counsel prior to such investment.                                

Pension or other employee benefit plans (including individual retirement        
accounts) should also consult their counsel concerning whether income, gain or  
loss with respect to the CPIS will be "unrelated business taxable income" under 
Section 512 of the Code. Exemptions from such income apply to certain kinds of  
investment income, and to all gains or losses on the sale or other disposition  
of property. However, no assurance can be given that these exemptions would     
apply to any or all income, gains or losses realized with respect to the CPIS.  

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement dated
as of the date hereof (the "Underwriting Agreement"), the Trust has agreed to   
sell to the underwriters named below (the "Underwriters") and such Underwriters,
for whom JPMSI is acting as representative (the "Representative"), have         
severally agreed to purchase, the respective number of CPIS set forth opposite  
their names below. In the Underwriting Agreement, the Underwriters have agreed, 
subject to the terms and conditions set forth therein, to purchase all the CPIS 
offered hereby if any of the CPIS are purchased. Under certain circumstances,   
the commitments of nondefaulting Underwriters may be increased as set forth in  
the Underwriting Agreement.                                                     

                                                                [Download Table]

                                                              -------
                                                              NUMBER 
UNDERWRITER                                                   OF CPIS
-----------                                                   -------
                                                                     
J.P. Morgan Securities Inc.                                   [     ]
[     ]                                                       [     ]
[     ]                                                       [     ]
[     ]                                                       [     ]
          Total                                               [     ]

The Underwriters initially propose to offer the CPIS, in part, directly to the  
public at the initial public offering price set forth on the cover page of this 
Prospectus Supplement, and, in part, to certain securities dealers at such price
less a concession of $[     ] per CPIS. After the initial offering, the public  
offering price and such concession may be changed.                              

In connection with the offering, the Underwriters may engage in transactions    
that stabilize, maintain or otherwise affect the price of the CPIS.             
Specifically, the Underwriters may over allot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, in the 
open market to cover syndicate shorts or to stabilize the price of the CPIS.    
Finally, the underwriting syndicate may reclaim selling concessions allowed for 
distributing the CPIS in the offering, if the                                   

S-44

424B2
45th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 45th

syndicate repurchases previously distributed CPIS in syndicate covering         
transactions, in stabilization transactions or otherwise. Any of these          
activities may stabilize or maintain the market price of the CPIS above         
independent market levels. The Underwriters are not required to engage in these 
activities, and may end any of these activities at any time.                    

In view of the fact that the proceeds of the sale of the CPIS and Series C      
Common Securities will ultimately be used to purchase the Related Note of Morgan
Guaranty, the Underwriting Agreement provides that Morgan Guaranty will pay as  
compensation ("Underwriters' Compensation") to the Underwriters $[          ]   
per CPIS (or $[          ] in the aggregate) for the account of the             
Underwriters.                                                                   

We have applied to list the CPIS on the AMEX under the symbol "JPI". Trading of 
the CPIS on the Amex is expected to commence within a 30-day period after the   
date of this Prospectus Supplement. Prior to this offering, there has been no   
market for the CPIS.                                                            

The Trust and J.P. Morgan have agreed to indemnify the Underwriters against     
certain liabilities, including liabilities under the Securities Act of 1933, as 
amended.                                                                        

This Prospectus Supplement and the related Prospectus may be used by direct or  
indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and 
sales related to secondary market transactions in the CPIS. Such subsidiaries   
may act as principal or agent in such transactions. Such sales will be made at  
prices related to prevailing market prices at the time of a sale.               

The Underwriters, certain agents and their associates may be customers of,      
engage in transactions with, and perform services for, J.P. Morgan in the       
ordinary course of business.                                                    

The Representative is an indirect, wholly-owned subsidiary of J.P. Morgan. The  
participation of the Representative in the offer and sale of the CPIS complies  
with the requirements of Rule 2720 of the Rules of Conduct of the National      
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting of  
securities of an affiliate and complies with any restrictions imposed on such   
Representative by the Board of Governors of the Federal Reserve System.         

Because the NASD is expected to view the CPIS offered hereby as interests in a  
direct participation program, the offering is being made in compliance with Rule
2810 of the NASD's Rules of Conduct. Offers and sales of the CPIS will be made  
only to (i) "qualified institutional buyers", as defined in Rule 144A under the 
Securities Act of 1933 (the "Act"); (ii) institutional "accredited investors",  
as defined in Rule 501(a) (1)-(3) of Regulation D under the Act or (iii)        
investors for whom an investment in non-convertible investment grade            
inflation-indexed preferred securities is appropriate. The Underwriters may not 
confirm sales to any accounts over which they exercise discretionary authority  
without the prior written approval of the transaction by the customer.          

SUPPLEMENTAL INFORMATION CONCERNING THE PLAN OF DISTRIBUTION                    

The Representative proposes to offer the CPIS at the public offering price set  
forth on the cover page hereof; provided that the price will be $[25.97] per    
CPIS and the underwriting discounts and commissions will be $[     ] per CPIS   
for purchasers of greater than or equal to [30,000] CPIS at the initial public  
offering, subject to the holding period requirements described below.           

Delivery of approximately [98]% of the CPIS to a purchaser of [30,000] or more  
CPIS at the reduced price (the "Discounted CPIS") will be made on the date of   
delivery of the CPIS referred to on the cover of this pricing supplement. The   
balance of approximately [2]% of the CPIS (the "Escrowed CPIS") purchased by    
each such investor will be held in escrow by JPMSI for the benefit of the       
investor and delivered to the broker-dealer on behalf of such investor if, in   
the judgment of the Broker-dealer, the investor and any accounts in which the   
investor may have deposited any of its Discounted CPIS have held all of the     
Discounted CPIS for [  ] calendar days following the date of the Prospectus     
Supplement or any shorter period deemed appropriate by the Representative. If an
investor or any account in which the investor has deposited any of its          
Discounted CPIS fails to satisfy the holding period requirement, as determined  
by the broker-dealer, all of the investor's Escrowed CPIS will be forfeited by  
the investor and not delivered to it. The Escrowed CPIS will instead be         
delivered to the Representative for sale to investors. This forfeiture will have
the effect of increasing the purchase price per Discounted CPIS for such        
investors to 100% of the amount of the CPIS. Should investors who are subject to
the holding period requirement sell their CPIS once the holding period is no    
longer applicable, the market price of the CPIS may be adversely affected.      

S-45

424B2
46th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 46th

LEGAL MATTERS 

Certain matters of Delaware law relating to the validity of the Series C        
Securities will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, 
Delaware, special Delaware counsel to the Trust. The validity of the Series C   
Securities offered hereby will be passed upon by Gene A. Capello, Vice President
and Assistant General Counsel of J.P. Morgan, and by Cravath, Swaine & Moore,   
New York, New York, counsel for the Representative.                             

EXPERTS 

The audited financial statements contained in J.P. Morgan's Annual Report on    
Form 10-K for the year ended December 31, 1999 (included in J.P. Morgan's Annual
Report to Stockholders), are incorporated by reference in this Prospectus       
Supplement in reliance on the report of Price Waterhouse LLP, independent       
accountants, given on the authority of said firm as experts in auditing and     
accounting.                                                                     

STABILIZATION 

JPMSI as lead underwriter, may engage in transactions that stabilize, maintain  
or otherwise affect the price of the CPIS. Such transactions may include        
stabilizing and the purchase of the CPIS to cover short positions. For a        
description of these activities see "Underwriting".                             

CONTENT OF PROSPECTUS 

You should rely on the information contained in this document or in documents   
referenced herein that we have filed with the SEC. We have not authorized anyone
to provide you with different information. You should not assume that the       
information in the Prospectus or Prospectus Supplement is accurate as of any    
date other than the date on the front of this document.                         

LIMITATION ON OFFERS AND SOLICITATIONS

We do not intend this document to be an offer or solicitation:                  

(a) if used in a jurisdiction in which such offer or solicitation is not        
authorized                                                              

(b) if the person making such offer or solicitation is not qualified to do so;  
or                                                                      

(c) if such offer or solicitation is made to anyone to whom it is unlawful to   
make such offer or solicitation.                                        

S-46

424B2
47th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 47th

ANNEX I 
GLOSSARY OF TERMS 

The following are abbreviated definitions of certain capitalized terms used in  
the Prospectus Supplement. The Declaration, the Guarantee, the Related Note     
Guarantee and the Related Note may contain more complete definitions of certain 
of the terms defined herein, as well as definitions of certain other terms not  
defined herein, and reference should be made to the Declaration, the Guarantee, 
the Related Note Guarantee and the Related Note, as applicable, for complete    
definitions of such terms.                                                      

BUSINESS DAY                        Any day other than a Saturday, Sunday or any
                                  other day on which banking institutions in
                           The City of New York, New York, are
                                   permitted or required by any applicable law
 to close.

CPI                                 Consumer Price Index. Specifically, for our 
                                purposes, is the non-seasonally adjusted
                            U.S. City Average All Items Consumer
                                published monthly by the Bureau of Labor
                                   Statistics of the U.S. Department of Labor.
                                  The CPI is a measure of the average change
                               in consumer prices over time in a fixed
                            market basket of goods and services,
                                 including food, clothing, shelter, fuels,
                                transportation, charges for doctors' and
                         dentists' services, and drugs. In
                                    calculating the index, price changes for the
                                various items are averaged together with
                                  weights that represent their importance in
                               the spending of urban households in the
                                 United States. The contents of the market
                                    basket of goods and services and the weights
                                 assigned to the various items are updated
                                    periodically to take into account changes in
                                 consumer expenditure patterns. The CPI is
                                    expressed in relative terms in relation to a
                                time base reference period for which the
                                  level is set at 100.0. For example, if the
                               CPI for the 1982-84 reference period is
                                    100.0, an increase of 16.5 percent from that
                                period would be shown as 116.5. The base
                                  reference period for the Notes will be the
                                    1982-1984 average equal to 100.0. The CPI is
                             published by the U.S. Bureau of Labor
                        Statistics (the "Bureau of Labor
     Statistics").

CODE                                The Internal Revenue Code of 1986, as       
amended.

COMMISSION                          The Securities and Exchange Commission.     

COMMON SECURITIES                   The Series C Common Securities and any other
                                 common securities issued by the Trust (or
         its predecessor).

DECLARATION                         The Amended and Restated Declaration of     
                                    Trust among J.P. Morgan, as sponsor, and the
                                    trustees named therein dated as of March 26,
1998.   

DETERMINATION DATE                  The Stated Maturity, subject to delay for a 
                Market Disruption Event.

DTC                                 The Depository Trust Company.               

EARLY DETERMINATION DATE            Five Business Days prior to the Early       
                               Redemption Date, subject to delay for a
                Market Disruption Event.

EARLY ENDING INDEX                  In the event of an Optional or Special Event
                                    Redemption, the projected Ending Index on an
                                  Early Redemption Date using a conservative
                               methodology and the then current market
   conditions.

EARLY REDEMPTION DATE               Either an Optional Redemption Date or, in   
                                   the case of a Special Event Redemption, the
                                  date, within 30 scheduled Business Days of
                             the Special Event, selected by Morgan
                            Guaranty for redemption of the CPIS.

SA-1

424B2
48th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 48th

EARLY REDEMPTION VALUE              The discounted present value of the         
                                    estimated Redemption Value on the applicable
                                 Early Redemption Date (such amount may be
                                  more or less than the Face Amount, but not
        less than zero).

ENDING INDEX                        The Reference CPI at Stated Maturity.       

ERISA                               The Employee Retirement Income Security Act 
            of 1974, as amended.

EXCHANGE ACT                        The Securities Exchange Act of 1934, as     
amended.

FACE AMOUNT                         Face Amount at maturity or [$40.00].        

FIXED ENDING INDEX                  Upon the occurrence of a Reference Treasury 
                                Event, the projected Ending Index on the
                                  date Morgan Guaranty elects to permanently
                              fix the Ending Index based on the then
                  current market conditions.

FORWARD INDEX                       Set on day of pricing, equal to [213.0].    

GUARANTEE                           The Guarantee Agreement executed by J.P.    
                               Morgan on behalf of the holders of each
                       series of Preferred Securities.

GUARANTEE PAYMENTS                  Without duplication, (i)(A) any accrued and 
                                    unpaid distributions that are required to be
                                    paid on the Preferred Securities and (B) the
                                   Preferred Redemption Price, but if and only
                                   to the extent that, in each of case, Morgan
                                  Guaranty has made a payment of interest or
                             principal, as the case may be, on the
                                Related Note and (ii) upon a Liquidation
                                Event (other than in connection with the
                                  redemption of all the Preferred Securities
                              upon the maturity or redemption of the
                                   applicable Related Note), the lesser of (A)
                                  the Liquidation Distribution to the extent
                                   the Trust has funds available therefor, and
                             (B) the amount of assets of the Trust
                               remaining available for distribution to
                                holders of the Preferred Securities upon
               such Liquidation Event.

INDEX AMOUNT                        The Ending Index minus the Forward Index.   

INDEX CONTINGENCIES                 Various events which affect the calculation 
                               of Reference CPI. We use the same Index
                                  Contingencies as TIPS. Index contingencies
                                include how Reference CPI is affected by
                                    revisions to previously reported CPI, delays
                              in reported CPI by the Bureau of Labor
                        Statistics, rebasing of the CPI,
                                  discontinuance or material and fundamental
                            changes to the character of the CPI.

INITIAL HOLDERS                     Holders who purchase any Preferred          
                          Securities upon original issuance.

INVESTMENT COMPANY EVENT            The receipt by the Trust of an opinion of a 
                                 nationally recognized independent counsel
                                 experienced in such matters to the effect
                                that, as a result of the occurrence of a
                              change in law or regulation, a written
                                  change in interpretation or application of
                                  law or regulation by any legislative body,
                                court, governmental agency or regulatory
                                    authority or the expiration or revocation of
                                any applicable exemption obtained by the
                                    Trust (a "Change in 1940 Act Law"), there is
                                more than an insubstantial risk that the
                         Trust is or will be considered an
                                   "investment company" that is required to be
                                   registered under the 1940 Act, which Change
                               in 1940 Act Law becomes effective on or
                          after the date of this Prospectus.

IRS                                 Internal Revenue Service.                   

ISSUE DATE                          As set forth in the applicable Prospectus   
   Supplement.

LIQUIDATION DISTRIBUTION            In respect of any Liquidation Event, the sum
                                   of (a) the Early Redemption Value or stated
                                   liquidation preference, as applicable, plus

SA-2

424B2
49th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 49th

                            (b) the amount of accrued and unpaid
                                   distributions on such Preferred Security to
                          but excluding the date of payment.

LIQUIDATION EVENT                   Any dissolution of the Trust, whether       
                 voluntary or involuntary.

MARKET DISRUPTION EVENTS            A Market Disruption Event with respect to a 
                                    Reference CPI level will occur on any day if
                             the Calculation Agent determines that
                                  Reference CPI level may not be obtained or
                                    has not been promulgated by Treasury (in the
                               event of a delay by the Bureau of Labor
                                Statistics in publishing the CPI) or the
                                Treasury has not cured an existing Index
                                 Contingency for such day. Additionally, a
                                  Market Disruption Event with respect to an
                                  early determination date shall occur a) if
                                  the US treasury market is not open on such
                                  early determination date or b) if an input
                                 in the early redemption calculation is i)
                               not available or ii) the input data are
                            potentially subject to extraordinary
                                 influences, in the sole discretion of the
                                   Calculation Agent, due to the fact that the
                                   underlying instrument on which such data is
                                based is subject to an issuer buyback or
                                    early call (e.g., the Treasury Department is
                                 repurchasing the US Government Notes used
                                   for determining the Base Yield in the early
                            redemption calculation). Such market
                                    disruption may require the Calculation Agent
                                 to determine certain inputs in good faith
                                 and such determinations may be delayed or
                                    cause a delay in the early determination and
                 early redemption payment.

1940 ACT                            The Investment Company Act of 1940, as      
amended.

NOTE EVENT OF DEFAULT               Either:  (i) a default for 30 days in the   
                             payment of interest on the applicable
                                  Related Note; (ii) a default in payment of
                                  principal amount at the Stated Maturity or
                                 any amount payable upon any redemption of
                              the applicable Related Note; (iii) the
                                    failure by Morgan Guaranty for 90 days after
                                  receipt of notice to it to comply with any
                                   of its covenants or agreements contained in
                             the applicable Related Note; and (iv)
                                 certain events of bankruptcy, insolvency,
                                receivership or reorganization involving
                              Morgan Guaranty or certain affiliates.

OPTIONAL REDEMPTION                 The redemption of the CPIS, at the holders' 
                                    option, on January 15, 2002 and each January
                                  15 thereafter prior to Stated Maturity, at
                   the Early Redemption Value.

OPTIONAL REDEMPTION DATE            Each January 15, beginning in 2002, prior to
        Stated Maturity.

PREFERRED SECURITIES                Preferred Securities of any series of the   
                                   Trust, representing an undivided beneficial
                                    interest in the corresponding series Related
Note.   

REDEMPTION DATE                     Either the Stated Maturity or an Early      
                       Redemption Date, as applicable.

REDEMPTION VALUE                    At Stated Maturity, the Face Amount plus    
                             Index Amount; but not less than zero.

REFERENCE CPI                       We use the same three month lagged version  
                                  of CPI used by the Treasury Department for
                                  TIPS. "Reference CPI" for the first day of
                                   any calendar month is the CPI for the third
                                preceding calendar month, as reported by
                                Bureau of Labor Statistics in the second
                                  preceding calendar month. For example, the
                                  Reference CPI applicable to April 1 in any
                             year is the CPI for January, which is
                                   reported in February. The Reference CPI for
                                  any other date is the linear interpolation
                                   between the Reference CPI for the first day
                             of the month and the first day of the
                             immediately following month. Thus the
                                Reference CPI for the stated maturity is
                                  lagged 3 months and should be determinable
                 prior to stated maturity.

SA-3

424B2
50th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 50th

REFERENCE GOVERNMENT NOTES          The 6.50% U.S. Treasury Securities due      
          February 15, 2010.

REFERENCE TIPS                      The 4.25% U.S. Treasury Inflation Protected 
                        Securities due January 15, 2010.

REFERENCE TREASURY                  The Reference Government Notes or Reference 
                                  TIPS, together the "Reference Treasuries".

REFERENCE TREASURY EVENT            The buyback or call by the Treasury         
                                  Department or the reduction in outstanding
                                    amount of either of the Reference Treasuries
                                    by 10% or more from the greatest outstanding
                          amount since issuance of the CPIS.

RELATED NOTE                        The debt obligation of Morgan Guaranty      
                                related to, and having the same economic
           terms as, the CPIS.

RELATED NOTE GUARANTEE              The related Note Guarantee Agreement        
                                  executed by J.P. Morgan for the benefit of
                                   the property trustee for the benefit of the
                             holders of each series of securities.

SECRETARY OF THE TREASURY           The Secretary of the Treasury is a cabinet  
                                    level position appointed by the President of
                              the United States and confirmed by the
Senate. 

SECURITIES                          The Common Securities and the Preferred     
   Securities.

SECURITIES ACT                      The Securities Act of 1933, as amended.     

SENIOR INDEBTEDNESS                 With respect to Morgan Guaranty, as         
                              specified in the applicable Prospectus
   Supplement.

SERIES C COMMON SECURITIES          The common securities of any series of the  
                                  Trust representing an undivided beneficial
                                    interest in the corresponding series Related
                         Note, to be owned by J.P. Morgan.

SERIES C SECURITIES                 The CPIS and the Series C Common Securities.

SPECIAL EVENT                       Either a Tax Event or an Investment Company 
Event.  

SPECIAL EVENT REDEMPTION            Upon the occurrence and during the          
                               continuation of a Special Event, Morgan
                                  Guaranty will have the right to redeem the
                               applicable Related Note for cash at the
                               Related Note Redemption Price, with the
                                   result that the Trust will redeem Preferred
                               Securities and Common Securities of the
                                 applicable series on a Pro Rata Basis for
                               cash at the Preferred Redemption Price.

STATED MATURITY                     January 15, 2010.                           

SWAP                                A contract between two counterparties to    
                                    exchange two sets of payments over a certain
       period of time.

SWAP RATE                           The interest rate that market-makers will   
                               pay/receive versus LIBOR in the current
                                   market; same as the quoted rate for a plain
     vanilla swap.

SWAP SPREAD                         The difference between the swap rate for a  
                           given maturity and the yield of the
                                  benchmark government bond in that maturity
sector. 

TAX COUNSEL                         Cravath, Swaine & Moore, special tax counsel
                     to J.P. Morgan and the Trust.

TAX EVENT                           The receipt by the Trust of an opinion of   
                             nationally recognized independent tax
                                   counsel experienced in such matters (a "Tax
                                    Opinion") to the effect that, as a result of
                                  (a) any amendment to, or change (including
                                 any announced prospective change) in, the
                                   laws (or any regulations thereunder) of the
                                  United States or any political subdivision
                                   or taxing authority thereof or therein, (b)
                          any amendment to, or change in, an
                                  interpretation or application of such laws
             or regulations by any

SA-4

424B2
51st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 51st

                                    legislative body, court, governmental agency
                              or regulatory authority (including the
                            enactment of any legislation and the
                               publication of any judicial decision or
                          regulatory determination), (c) any
                            interpretation or pronouncement that
                                    provides for a position with respect to such
                                 laws or regulations that differs from the
                                  theretofore generally accepted position or
                                (d) any action taken by any governmental
                             agency or regulatory authority, which
                                    amendment or change is enacted, promulgated,
                                   issued or announced or which interpretation
                                  or pronouncement is issued or announced or
                                 which action is taken, in each case on or
                         after the date of this Prospectus
                              Supplement, that there is more than an
                               insubstantial risk that at such time or
                                  within 90 days of the date thereof (i) the
                              Trust is or would be subject to United
                                 States Federal income tax with respect to
                                 income accrued or received on any Related
                                    Note, (ii) any amount payable on the Related
                                Note in excess of the amount received by
                                   Morgan Guaranty for the Related Note is not
                            or would not be deductible by Morgan
                                 Guaranty for United States Federal income
                                   tax purposes or (iii) the Trust is or would
                                   be subject to more than a de minimis amount
                                    of other taxes, duties or other governmental
charges.

THE INDEX                           The CPI.                                    

TIPS                                Treasury Inflation Protected Securities. The
                                  inflation indexed securities issued by the
               US Treasury Department.

TREASURY DEPARTMENT                 The United States Department of the Treasury
                               includes the Office of the Secretary of
                             Treasury and the Departmental Offices
                                (including the Internal Revenue Service,
                                   Bureau of Engraving and Printing, Bureau of
                                 the Public Debt, U.S. Customs Service and
                                    Bureau of Alcohol, Tobacco and Firearms, and
                                   US Secret Service. The Bureau of the Public
                                    Debt responsible for processing the sale and
                               redemption of Treasury bonds, notes and
                                    bills (including inflation linked securities
 or TIPS).

TRUST INDENTURE ACT                 The Trust Indenture Act of 1939, as amended.

U.S. GOVERNMENT NOTES               The non-inflation indexed securities issued 
                   by the Treasury Department.

SA-5

424B2
52nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 52nd

------------------------------------------------------                          
------------------------------------------------------                          

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY      
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR        
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN    
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS 
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED   
UPON AS HAVING BEEN AUTHORIZED BY J.P. MORGAN, THE TRUST OR THE UNDERWRITERS.   
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY   
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN       
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF J.P. MORGAN, OR THE 
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO   
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH    
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.                                                

------------------------

TABLE OF CONTENTS 

PROSPECTUS SUPPLEMENT 

                                                                [Download Table]

                                                 PAGE 
                                                 -----
                                                      
Summary of the Offering........................    S-4
The Offering...................................    S-5
Risk Factors...................................    S-9
J.P. Morgan & Co. Incorporated.................   S-16
J.P. Morgan Index Funding Company..............   S-16
Use of Proceeds................................   S-20
Description of the CPIS........................   S-21
Description of the Related Note................   S-35
Description of the Guarantee...................   S-37
Description of the Related Note Guarantee......   S-39
Effect of Obligations Under the Guarantee, the        
  Related Note Guarantee and the Related              
  Note.........................................   S-40
United States Federal Income Taxation..........   S-41
Underwriting...................................   S-44
Legal Matters..................................   S-46
Experts........................................   S-46
Stabilization..................................   S-46
Content of Prospectus..........................   S-46
Limitation on Offers and Solicitations.........   S-46

ANNEX I 

                                                                [Download Table]
                                                      
Glossary of Terms..............................   SA-1

PROSPECTUS

                                                                [Download Table]
                                                      
Available Information..........................      2
Incorporation of Certain Documents by                 
  Reference....................................      2
J.P. Morgan & Co. Incorporated.................      3
J.P. Morgan Index Funding Company LLC..........      5
Use of Proceeds................................     10
Consolidated Ratios of J.P. Morgan.............     10
Description of All Preferred Securities........     10
Description of the ComPS.......................     11
Risk Factors with Respect to All Preferred            
  Securities...................................     20
Risk Factors with Respect to ComPS.............     22
The Underlying Markets.........................     27
The JPM Indices................................     30
Description of the Related Notes...............     42
Description of the Guarantee...................     43
Description of the Related Note Guarantee......     45
Plan of Distribution...........................     46
Legal Matters..................................     47
Experts........................................     47

ANNEX I 

                                                                [Download Table]
                                                      
Glossary of Terms..............................    A-1

------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          

CONSUMER PRICE
INDEXED SECURITIES (CPIS),
SERIES C PREFERRED
SECURITIES

J.P. MORGAN INDEX 
FUNDING COMPANY I 

GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY 

J.P. MORGAN & CO. 
INCORPORATED

PROSPECTUS SUPPLEMENT 

$[49,025,000] 

NOVEMBER [   ], 2000
------------------------------------------------------                          
------------------------------------------------------                          

424B2
53rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 53rd

PROSPECTUS                                                                      
$650,000,000                                                                    
J.P. MORGAN INDEX FUNDING COMPANY I                                             
Preferred Securities guaranteed to the extent set forth herein by               

J.P. MORGAN & CO. INCORPORATED                                                  
------------------------

J.P. Morgan Index Funding Company I (the "Trust"), a Delaware statutory business
trust, may offer, from time to time, preferred securities of separate series    
representing undivided beneficial interests in certain assets of the Trust      
("Preferred Securities"). The payment of periodic cash distributions            
("distributions") with respect to Preferred Securities out of moneys held by the
Trust and payments on liquidation, redemption or otherwise with respect to such 
Preferred Securities will be guaranteed on a subordinated basis by J.P. Morgan &
Co. Incorporated, a Delaware corporation ("J.P. Morgan"), to the extent         
described herein (the "Guarantee"). See "Description of the Guarantee". The     
Trust, on behalf of holders of Securities (as defined below) of each series,    
will invest the proceeds from the issuance of Preferred Securities and related  
common securities (the "Common Securities" and, together with the Preferred     
Securities, the "Securities") in unsecured notes associated with each such      
series (each, a "Related Note") of Morgan Guaranty Trust Company of New York    
("Morgan Guaranty"), a trust company with full banking powers organized under   
the laws of the State of New York, and payments to the Trust on liquidation,    
redemption or otherwise with respect to the Related Notes will be guaranteed on 
a subordinated basis by J.P. Morgan to the extent described herein (the "Related
Note Guarantee"). See "Description of the Related Note Guarantee". J.P. Morgan's
obligations under the Guarantee and Related Note Guarantee are subordinate and  
junior in right of payment to all other liabilities of J.P. Morgan and rank pari
passu with the most senior preferred stock outstanding as of the date hereof of 
J.P. Morgan. Related Notes associated with a series of Securities may be issued 
and sold from time to time by Morgan Guaranty to the Trust in connection with   
the investment of the proceeds from the offering of Preferred Securities and    
Common Securities of such series of the Trust. J.P. Morgan, through its         
obligations under the Guarantee, the Related Note Guarantee and the Amended and 
Restated Declaration of Trust, taken together, will provide a full and          
unconditional guarantee, on a subordinated basis, of payments due on the        
Preferred Securities.                                                           

Specific terms of the Preferred Securities in respect of which this Prospectus  
is being delivered (the "Offered Securities") will be set forth in an           
accompanying Prospectus Supplement (the "Prospectus Supplement") with respect to
such Offered Securities, which will describe, without limitation and where      
applicable, the following: (i) in the case of Preferred Securities, the         
designation, number of securities, liquidation preference per security          
(including, without limitation, a description of any indexation thereof),       
initial public offering price, any listing on a securities exchange,            
distribution rate (or method of calculation thereof), dates on which            
distributions shall be payable and dates from which distributions shall accrue, 
any voting rights, terms for any conversion or exchange into other securities,  
any redemption, exchange or sinking fund provisions, any other rights,          
preferences, privileges, limitations or restrictions relating to the Preferred  
Securities and the terms upon which the proceeds of the sale of the Preferred   
Securities shall be used to purchase a specific Related Note of Morgan Guaranty;
(ii) in the case of the applicable Related Note, the specific designation,      
aggregate principal amount (including, without limitation, a description of any 
indexation thereof), denomination, maturity, premium, if any, any exchange,     
conversion, redemption or sinking fund provisions, if any, interest rate (which 
may be fixed or variable), if any, the time and method of calculating interest  
payments, if any, dates on which premium, if any, and interest, if any, will be 
payable, the right of Morgan Guaranty, if any, to defer payment of interest on  
the Related Note and the maximum length of such deferral period, and (iii) the  
initial public offering price, subordination terms, and other specific terms of 
the offering.                                                                   

The Offered Securities may be offered in amounts, at prices and on terms to be  
determined at the time of offering; provided, however, that the aggregate       
initial public offering price of all Offered Securities shall not exceed        
$650,000,000. Any Prospectus Supplement relating to any series of Offered       
Securities will contain information concerning certain United States Federal    
income tax considerations, if applicable, for purchasers and holders of the     
Offered Securities.                                                             

SEE "RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES" ON PAGE 25 AND "RISK
FACTORS WITH RESPECT TO COMPS" ON PAGE 26 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN ANY PREFERRED SECURITIES OR COMPS, AS APPLICABLE. AN INVESTOR IN  
COMPS COULD LOSE ITS ENTIRE INVESTMENT.                                         

The Trust may sell the Offered Securities directly, through agents designated   
from time to time or through underwriters or dealers. See "Plan of              
Distribution". If any agents of the Trust or any underwriters or dealers are    
involved in the sale of the Offered Securities, the names of such agents,       
underwriters or dealers and any applicable commissions and discounts will be set
forth in any related Prospectus Supplement.                                     

No dealer, salesperson or any other individual has been authorized by the Trust 
or J.P. Morgan to give any information or to make any representation other than 
those contained or incorporated by reference in this Prospectus or any          
accompanying Prospectus Supplement and, if given or made, such information or   
representation must not be relied upon as having been authorized. This          
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to   
whom it is unlawful to make such offer or solicitation in such jurisdiction.    
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the  
affairs of J.P. Morgan, Morgan Guaranty or the Trust since the date hereof.     

THE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT      
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL       
AGENCY.                                                                         

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES   
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF        
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.                       

July 14, 1998.                                                                  

424B2
54th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 54th

AVAILABLE INFORMATION 

This Prospectus constitutes a part of a Registration Statement on Form S-3      
(together with all amendments and exhibits thereto, the "Registration           
Statement") filed by J.P. Morgan and the Trust with the Securities and Exchange 
Commission (the "Commission") under the Securities Act of 1933, as amended (the 
"Securities Act"), with respect to the Offered Securities. This Prospectus does 
not contain all of the information set forth in such Registration Statement,    
certain parts of which are omitted in accordance with the rules and regulations 
of the Commission. Reference is made to such Registration Statement and to the  
exhibits relating thereto for further information with respect to J.P. Morgan,  
the Trust and the Offered Securities. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission or incorporated by reference herein are  
not necessarily complete, and, in each instance, reference is made to the copy  
of such document so filed for a more complete description of the matter         
involved. Each such statement is qualified in its entirety by such reference.   

J.P. Morgan is subject to the informational requirements of the Securities      
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports, proxy statements and other information with the        
Commission. Such reports, proxy statements and other information concerning J.P.
Morgan may be inspected and copied at the public reference facilities maintained
by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,        
Washington, D.C. 20549, and at the Commission's regional offices located at     
Northeast Regional Office, Seven World Trade Center, Suite 1300, New York, New  
York 10048 and Midwest Regional Office, Citicorp Center, 500 West Madison       
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The         
Commission maintains a website that contains reports, proxy and information     
statements and other materials that are filed through the Commission's          
Electronic Data Gathering, Analysis and Retrieval (EDGAR) System. This website  
can be accessed at http:/www.sec.gov. Information provided to or filed with the 
Commission by J.P. Morgan pursuant to the Exchange Act can be located by        
reference to the Commission file number 1-5885. Such reports, proxy statements  
and other information may also be inspected at the offices of the New York Stock
Exchange, on which J.P. Morgan common stock is traded, at 20 Broad Street, New  
York, New York 10005.                                                           

No separate financial statements of the Trust have been included herein. J.P.   
Morgan does not consider that such financial statements would be material to    
holders of the Preferred Securities because (i) all of the voting securities of 
the Trust will be owned by J.P. Morgan, a reporting company under the Exchange  
Act, (ii) the Trust has no independent operations and exists for the sole       
purpose of issuing securities and investing the proceeds thereof in Related     
Notes to be issued by Morgan Guaranty, and (iii) the obligations of the Trust   
under the Preferred Securities that may be issued from time to time are fully   
and unconditionally guaranteed, on a subordinated basis, by J.P. Morgan to the  
extent that the Trust has funds available to meet such obligations. See         
"Description of the Related Notes", "Description of the Guarantee" and          
"Description of the Related Note Guarantee".                                    

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

J.P. Morgan hereby incorporates by reference in this Prospectus J.P. Morgan's   
Annual Report on Form 10-K for the year ended December 31, 1997 (included in its
Annual Report to Stockholders) and J.P. Morgan's Reports on Form 8-K dated      
January 15, 1998, February 19, 1998, March 27, 1998, April 14, 1998 and May 5,  
1998 heretofore filed pursuant to Section 13 of the Exchange Act.               

In addition, all reports and definitive proxy or information statements filed   
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to 
the date of this Prospectus and prior to the termination of the offering of the 
Securities shall be deemed to be incorporated by reference into this Prospectus 
and to be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by  
reference herein shall be deemed to be modified or superseded for purposes of   
this Prospectus to the extent that a statement contained herein or in any       
subsequently filed document which also is or is deemed to be incorporated by    
reference herein or in the accompanying Prospectus Supplement modifies or       
supersedes such statement. Any such statement so modified or superseded shall   
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.                                                                     

J.P. MORGAN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF  
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED   
HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS). WRITTEN REQUESTS   
SHOULD BE DIRECTED TO THE OFFICE OF THE SECRETARY, J.P. MORGAN & CO.            
INCORPORATED, 60 WALL STREET, NEW YORK, NEW YORK 10260-0060. TELEPHONE REQUESTS 
MAY BE DIRECTED TO (212) 648-3380.                                              

 2

424B2
55th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 55th

J.P. MORGAN & CO. INCORPORATED

J.P. Morgan, whose origins date to a merchant banking firm founded in London in 
1838, is the holding company for subsidiaries engaged globally in providing a   
wide range of financial services to institutions, corporations, governments,    
financial institutions, institutional investors, professional firms, privately  
held companies, nonprofit organizations and financially sophisticated           
individuals. J.P. Morgan's activities are summarized as follows:                

FINANCE AND ADVISORY                                                            

The Finance and Advisory sector encompasses the sophisticated advisory, capital 
raising, and financing work that J.P. Morgan does for its broad base of clients 
around the world -- including corporations, financial institutions, governments,
municipalities, and individuals. J.P. Morgan's expertise is based on an in-depth
knowledge of its clients' needs and of the industries and financial markets in  
which they operate.                                                             

In partnership with clients, J.P. Morgan's advisory professionals analyze the   
risks and rewards of such strategic alternatives as merger, acquisition,        
divestiture, privatization, and recapitalization. J.P. Morgan also looks for    
ways to unlock value when analyzing a client's capital structure. J.P. Morgan's 
debt and equities underwriting business provides clients with the capability to 
raise the capital necessary to execute their strategies. High-quality research  
is an integral part of this business.                                           

J.P. Morgan's credit activities include meeting clients' financing needs by     
arranging and syndicating loans and other credit facilities. They also include  
the responsibility for managing the firm's credit risk arising from traditional 
credit activities as well as J.P. Morgan's derivatives trading activities.      

MARKET MAKING                                                                   

J.P. Morgan's market making activities provide clients with around-the-clock    
access to global markets. J.P. Morgan makes markets in fixed income, equities,  
foreign exchange, commodity instruments, and derivatives in both developed and  
emerging markets. J.P. Morgan also develops customized transactions to assist   
clients in managing risk and enhancing returns. J.P. Morgan provides research to
help clients assess opportunities and track performance. J.P. Morgan takes      
positions to facilitate client transactions and to benefit from its role as a   
market maker.                                                                   

J.P. Morgan's clients include banks, other nonbanks, financial institutions,    
corporations, governments and their agencies, leveraged funds, pension funds,   
mutual funds, and individuals.                                                  

J.P. Morgan's fixed income activities include acting as a primary dealer in U.S.
and foreign government securities; making markets in money market instruments,  
U.S. government agency securities, corporate debt securities, swaps and other   
derivatives; and helping clients manage their exposure to interest rate and     
foreign exchange risk.                                                          

J.P. Morgan's emerging markets activities include acting as a dealer and market 
maker in securities and derivatives from non-G-10 countries in Latin America,   
Eastern Europe, Asia, and Africa. While many of J.P. Morgan's emerging market   
activities involve fixed income securities, J.P. Morgan deals in many other     
markets and instruments.                                                        

J.P. Morgan's equities market making activities include acting as both agent and
principal to facilitate clients' transactions in exchange-listed and            
over-the-counter securities. J.P. Morgan also structures equity derivatives for 
clients.                                                                        

J.P. Morgan's foreign exchange capabilities include making markets in spot,     
options, and short-term interest rate products, in order to help clients manage 
their foreign currency exposures.                                               

J.P. Morgan's commodities activities include advising clients on developing     
hedging, investment, and commodity-linked financing strategies. J.P. Morgan also
provides commodity services which may include the settlement of physical trades 
in various metal and oil markets and metal borrowing and lending services.      

ASSET MANAGEMENT AND SERVICING                                                  

J.P. Morgan provides a wide range of investment-related services, including:    
global asset management for pension plans, governments, endowments, and         
foundations; integrated financial services for high-net worth individuals; fully
bundled services for defined contribution pension plans through American Century
Companies; and mutual fund distribution to intermediaries.                      

J.P. Morgan's global dedicated research capabilities support portfolio          
management across all asset classes and markets. With the acquisition of        
O'Connor Realty Advisors, a real estate investment firm, J.P. Morgan has further
broadened its expertise and ability to bring a full range of investment options 
to its clients. This spectrum of capabilities is delivered to institutional and 
individual investors in both discretionary account and mutual fund form.        

 3

424B2
56th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 56th

In July 1997, J.P. Morgan agreed to purchase a 45% interest in American Century 
Companies, the fourth largest U.S. no-load direct mutual fund company. With this
investment, which was concluded in January 1998, J.P. Morgan has gained scale   
expertise in technology and operations for distribution and servicing, as well  
as complementary investment capabilities that broaden its product offerings     
significantly. J.P. Morgan has formed a business partnership with American      
Century to pursue jointly the growing retirement plan market, distribution of   
mutual funds to third parties such as financial advisors, and other             
opportunities in integrated personal financial services.                        

J.P. Morgan offers ultra high-net worth clients an advice-based integrated array
of financial services that includes tax-advantaged asset structures; a wide     
range of investment options, including managed portfolios and brokerage; and    
credit and liquidity services. These capabilities form the foundation for an    
expansion of services to investors that will be pursued selectively.            

J.P. Morgan's futures and options brokerage group provides institutional clients
with worldwide access to major exchanges by acting as brokers in executing and  
clearing contracts. Currently, J.P. Morgan has dealers on 51 exchanges around   
the world. J.P. Morgan operates, under contract, the Euroclear System, the      
world's largest clearance and settlement system for internationally traded      
securities. J.P. Morgan provides credit and deposit services to Euroclear       
participants. In addition, J.P. Morgan provides certain operational services    
such as the administration of American depository receipt (ADR) programs.       

EQUITY INVESTMENTS                                                              

J.P. Morgan invests for its own account on a global basis in private equity and 
equity-related securities in leveraged and unleveraged acquisitions,            
privatizations, recapitalizations, rapidly growing companies, expansion         
financings, turnaround situations, and other special equity situations. These   
investments are made with the objective of maximizing total return, which is a  
measure of both long-term appreciation and net recognized gains.                

The Equity Investments group works closely with other areas of J.P. Morgan to   
capture the competitive advantage of J.P. Morgan's global presence and expertise
in sourcing, evaluating, managing, and exiting investments. Opportunities often 
develop through relationships with clients. J.P. Morgan has also managed initial
public offerings and high-yield debt issues, arranged credit facilities, and    
provided mergers and acquisitions advice to portfolio companies at later stages 
of their development.                                                           

PROPRIETARY INVESTING AND TRADING                                               

J.P. Morgan takes market and credit risk positions for our own account using    
both relative value and directional risk-taking strategies to enhance the value 
of the firm. J.P. Morgan uses a relative value strategy when they anticipate    
changes in relationships between markets and classes of instruments (e.g., a    
change in prices between bonds and swaps) or when they believe certain assets   
are fundamentally mispriced by the market. J.P. Morgan uses directional         
strategies in an attempt to profit from its anticipation of how it believes a   
market will move (e.g., absolute rates or prices will go up or down).           
Experienced market professionals manage these strategies and use them over many 
currencies and types of instruments, including fixed income securities, foreign 
exchange, equity securities, commodity products, and related derivatives.       

Positions may be held for long or short periods of time, depending on the       
strategy and actual market performance. Certain longer-term strategies are      
considered to be investment activities and tend to utilize government,          
mortgage-backed, and corporate debt securities.                                 

J.P. Morgan also manages its liquidity and capital profile to ensure it has     
access to funding at a reasonable cost, even under adverse circumstances, to    
support all the business activities of the firm. A strong capital position is an
integral part of J.P. Morgan's liquidity management because it enables the firm 
to raise funds as inexpensively as possible in a variety of international       
markets.                                                                        

REGULATION                                                                      

J.P. Morgan is subject to regulation under the Bank Holding Company Act of 1956 
(the "Bank Act"). Under the Bank Act, J.P. Morgan is required to file reports   
with the Board of Governors of the Federal Reserve System (the "Board"). J.P.   
Morgan is also subject to examination by the Board. The Bank Act prevents J.P.  
Morgan and its subsidiaries from engaging in activities not related to banking, 
and limits the amount of securities it can acquire of a company engaging in     
nonbanking activities. An exception may be made if the Board determines that the
company's activities are closely related to banking. Federal law and Board      
interpretations limit the extent to which J.P. Morgan can engage in certain     
aspects of the securities business. The Glass-Steagall Act prohibits bank       
affiliates that are members of the Federal Reserve System -- including J.P.     
Morgan Securities Inc. ("JPMSI"), a "Section 20" subsidiary, -- from being      
engaged principally in bank-ineligible underwriting and dealing activities      
 4

424B2
57th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 57th

(mainly corporate debt and equity securities). This prohibition restricts       
JPMSI's gross revenues from these activities to a maximum of 25% of total gross 
revenues.                                                                       

J.P. Morgan's largest subsidiary, Morgan Guaranty Trust Company of New York     
("Morgan Guaranty"), is a member of the Federal Reserve System and a member of  
the Federal Deposit Insurance Corporation ("FDIC"). Its business is subject to  
both U.S. federal and state law. It is examined and regulated by U.S. federal   
and state banking authorities. J.P. Morgan and its nonbank subsidiaries are     
affiliates of Morgan Guaranty within the meaning of the applicable federal      
statutes. Morgan Guaranty is subject to restrictions on loans and extensions of 
credit to J.P. Morgan and certain other affiliates. It is also restricted on    
some other types of transactions with J.P. Morgan, or involving J.P. Morgan's   
securities.                                                                     

Among other wholly owned subsidiaries:                                          

JPMSI is a broker-dealer registered with and subject to regulation by the       
Securities and Exchange Commission and is a member of the National Association  
of Securities Dealers, the New York Stock Exchange, and other exchanges.        

J.P. Morgan Futures Inc. is subject to regulation by the Commodity Futures      
Trading Commission, the National Futures Association, and the commodity         
exchanges and clearinghouses of which it is a member.                           

J.P. Morgan Investment Management Inc. is registered with the Securities and    
Exchange Commission as an investment advisor under the Investment Advisers Act  
of 1940, as amended.                                                            

J.P. Morgan subsidiaries conducting business in other countries are also subject
to regulations and restrictions imposed by those jurisdictions, including       
capital requirements.                                                           

The principal executive office of J.P. Morgan is located at 60 Wall Street, New 
York, New York 10260-0060, and its telephone number is (212) 483-2323.          

As used in this Prospectus, unless the context otherwise requires, the term     
"J.P. Morgan" refers to J.P. Morgan & Co. Incorporated and its consolidated and 
unconsolidated subsidiaries.                                                    

J.P. MORGAN INDEX FUNDING COMPANY I 

J.P. Morgan Index Funding Company I, is a statutory business trust formed on    
December 12, 1996 under the Delaware Business Trust Act (the "Business Trust    
Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan 
and (ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on December 12, 1996, which was restated pursuant to the      
filing of a restated certificate of trust with the Secretary of State of the    
State of Delaware on September 30, 1997. On March 26, 1998, J.P. Morgan, as     
sponsor, and the Trustees entered into an amended and restated declaration of   
trust, dated March 26, 1998 (the "Declaration"), filed as an exhibit to the     
Registration Statement of which this Prospectus form a part. The Declaration    
will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust 
Indenture Act"). J.P. Morgan Index Funding Company LLC, a Delaware limited      
liability company (the "Company") has been merged into the Trust (the "Merger") 
pursuant to (i) an Agreement and Plan of Merger between the Trust and the       
Company and (ii) a Certificate of Merger merging the Company into the Trust     
filed with the Secretary of State of the State of Delaware. By operation of law,
the Trust has become the owner of all assets of the Company, including any      
outstanding Related Notes, and has succeeded to all the obligations of the      
Company, including any outstanding Preferred Securities, and Common Securities  
theretofore issued by the Company, including the 2.5% Series A Securities, and  
all the rights of the Company, including in respect of any related note         
guarantee executed in connection with such Securities. Following the            
effectiveness of the Merger, any such outstanding Preferred Securities and      
Common Securities represent an undivided beneficial interest in the             
corresponding Related Note.                                                     

This description summarizes the material terms of the Declaration and is        
qualified in its entirety by reference to the form of Declaration, which has    
been filed as an exhibit to the Registration Statement of which this Prospectus 
is a part, and the Trust Indenture Act.                                         

SECURITIES                                                                      

Upon issuance of any Preferred Securities of any series, the holders thereof    
will own all of the issued and outstanding Preferred Securities of such series, 
and J.P. Morgan will own all of the issued and outstanding Common Securities of 
such series. The certificates for each series will represent a fractional       
undivided beneficial interest in certain assets of the Trust consisting of the  
corresponding Related Note of Morgan Guaranty and the proceeds thereof, all     
monies due and to become due under such Related Note, and the right to receive a
portion of the payments of principal of and interest on such Related Note. J.P. 
Morgan will acquire the Common Securities of each series in a principal amount  
equal to 0.001% of the total principal                                          

 5

424B2
58th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 58th

amount of such series and will own all the issued and outstanding Common        
Securities of the Trust which will represent 0.001% of the total capital of the 
Trust. The Preferred Securities of any series and the Common Securities of such 
series will rank pari passu with each other and will have equivalent payment    
terms; provided that (i) if a Note Event of Default (as defined herein) under   
the Related Note of such series occurs and is continuing, the holders of        
Preferred Securities of such series will have a priority over holders of Common 
Securities of such series with respect to payments in respect of distributions  
and payments upon liquidation, redemption and maturity and (ii) holders of      
Common Securities have the exclusive right (subject to the terms of the         
Declaration) to appoint, remove or replace the Trustees and to increase or      
decrease the number of Trustees. A Note Event of Default under a Related Note of
one series will not prohibit payments in respect of distributions and payments  
upon liquidation, redemption and maturity under a Related Note corresponding to 
any other series of Securities or under such Securities. No holder of Securities
of any series shall have any claim on, or right to, any assets allocated to, or 
associated with, any other series (except if, and to the extent that, such      
holder is also a holder of Securities of such other series). The Trust exists   
for the exclusive purposes of (a) issuing its series of Securities, (b)         
investing the gross proceeds from the sale of the Securities in Related Notes of
Morgan Guaranty and (c) engaging in only such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of any series of the
Securities, including economic rights, rights to information and voting rights, 
are set forth in the Declaration (which term shall include any Declaration      
Supplement), the Business Trust Act and the Trust Indenture Act.                

POWERS AND DUTIES OF TRUSTEES                                                   

The number of trustees (the "Trustees") of the Trust shall initially be five.   
Three of such Trustees (the "Regular Trustees") are individuals who are         
employees or officers of J.P. Morgan. The fourth such trustee will be U.S. Bank 
Trust National Association, which is unaffiliated with J.P. Morgan and which    
will serve as the property trustee (the "Property Trustee") and act as the      
indenture trustee for purposes of the Trust Indenture Act. The fifth such       
trustee is Wilmington Trust Company, which has its principal place of business  
in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration, 
legal title to each Related Note will be held by the Property Trustee for the   
benefit of the holders of the corresponding series of the Securities, and the   
Property Trustee will have the power to exercise all rights, powers and         
privileges with respect to such Related Notes. In addition, the Property Trustee
will maintain exclusive control of a separate segregated non-interest-bearing   
bank account for each series of Securities (the "Property Account") to hold all 
payments in respect of the corresponding Related Note for the benefit of the    
holders of each such series of Securities. The Property Trustee will promptly   
make distributions to the holders of a series of Securities of the Trust out of 
funds from the corresponding Property Account. The Guarantee is separately      
qualified under the Trust Indenture Act and will be held by U.S. Bank Trust     
National Association, acting in its capacity as indenture trustee with respect  
thereto, for the benefit of the holders of the Preferred Securities. As used in 
this Prospectus and any accompanying Prospectus Supplement, the term "Property  
Trustee" with respect to the Trust refers to U.S. Bank Trust National           
Association acting either in its capacity as a Trustee under the Declaration and
the holder of legal title to the Related Notes or in its capacity as indenture  
trustee under, and the holder of, the Guarantee, as the context may require.    
J.P. Morgan, as the owner of all the series of Common Securities, will have the 
exclusive right (subject to the terms of the Declaration) to appoint, remove or 
replace Trustees and to increase or decrease the number of Trustees, provided   
that the number of Trustees shall be at least five and the majority of Trustees 
shall be Regular Trustees. The Regular Trustees are authorized and directed to  
take such action as they deem reasonable in order that the Trust will not be    
deemed to be an "investment company" required to be registered under the 1940   
Act or that the Trust will not be classified for United States Federal income   
tax purposes as an association taxable as a corporation or a partnership and    
will be treated as a grantor trust for United States Federal income tax         
purposes. In this connection, the Regular Trustees are authorized to take any   
action, not inconsistent with applicable law, the certificate of trust of the   
Trust or the Declaration, that the Regular Trustees determine in their          
discretion to be reasonable and necessary or desirable for such purposes, as    
long as such action does not adversely affect the interests of holders of the   
Securities. The term of the Trust will be until November 21, 2105, but the Trust
may terminate earlier as provided in the Declaration.                           

The duties and obligations of the Trustees of the Trust will be governed by the 
Declaration. Under the Declaration, the Trust (on behalf of a series of         
Securities or otherwise) shall not, and the Trustees of the Trust shall not     
cause the Trust (on behalf of a series of Securities or otherwise) to, engage in
any activity other than in connection with the purposes of the Trust or other   
than as required or authorized by the Declaration. In particular, the Trust (on 
behalf of a series of Securities or otherwise) shall not, and the Trustees of   
the Trust shall cause the Trust (on behalf of a series of Securities or         
otherwise) not to, (a) invest any proceeds received by the Trust from holding   
the Related Notes, but shall promptly distribute from the applicable Property   
Account all such proceeds to holders of the corresponding series of its         
Securities pursuant to the terms of the Declaration and of such series of       
Securities; (b) acquire any assets other than as expressly provided in the      
Declaration; (c) possess Trust Property for other than a Trust purpose; (d) make
any loans, other than loans represented by such Related Notes; (e) exercise any 
power or otherwise act in such a way as to vary the assets of the Trust or the  
terms of its Securities in any way                                              

 6

424B2
59th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 59th

whatsoever; (f) issue any securities or other evidences of beneficial ownership 
of, or beneficial interests in, the Trust other than its Securities; (g) incur  
any indebtedness for borrowed money or (h) (i) direct the time, method and place
of exercising any trust or power conferred upon the Property Trustee of the     
Trust with respect to any series of its Securities, (ii) waive any past default 
that is waivable under the applicable Related Note or the Declaration, (iii)    
exercise any right to rescind or annul any declaration that the principal of all
the Related Note associated with any series deposited in the Trust as trust     
assets shall be due and payable or (iv) consent to any amendment, modification  
or termination of any such Related Note or the Declaration, in each case where  
such consent shall be required, unless in the case of this clause (h) the       
Property Trustee shall have received (i) an unqualified opinion of nationally   
recognized independent tax counsel recognized as expert in such matters to the  
effect that such action will not cause the Trust to be classified for United    
States Federal income tax purposes as an association taxable as a corporation or
a partnership and that the Trust will continue to be classified as a grantor    
trust for United States Federal income tax purposes and (ii) if required, the   
approval of the holders of the Securities for the taking of any action. See     
"J.P. Morgan Index Funding Company I -- Voting" and "Description of the         
ComPS -- Voting Rights".                                                        

BOOKS AND RECORDS                                                               

The books and records of the Trust will be maintained at the principal office of
the Trust and will be open for inspection by a holder of Preferred Securities or
such holder's representative for any purpose reasonably related to such holder's
interest in the applicable Related Note held by the Trust during normal business
hours. Separate and distinct books and records will be maintained by the Trust  
for each series of Securities, and the assets associated with, or related to,   
any such series will be held and accounted for separately from the assets of the
Trust generally or from the assets associated with, or related to, any other    
series of Securities.                                                           

VOTING                                                                          

Except as set forth below and under "Description of the ComPS -- Voting Rights" 
and under "Events of Default" below and as provided under the Business Trust    
Act, the Declaration and the Trust Indenture Act, holders of Preferred          
Securities will have no voting rights.                                          

If any proposed amendment to the Declaration provides for, or the Regular       
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of  
amendment to the Declaration or otherwise, or (ii) the dissolution or bankruptcy
of the Trust, then the holders of outstanding Securities will be entitled to    
vote on such amendment or proposal as a class and such amendment or proposal    
shall not be effective except with the approval of the holders of Securities    
representing a majority in principal amount of such Securities; provided,       
however, that if any amendment or proposal referred to in clause (i) above would
adversely affect only certain series of the Preferred Securities or certain     
series of the Common Securities, then only the affected series or class, as     
applicable, will be entitled to vote on such amendment or proposal and such     
amendment or proposal shall not be effective except with the approval of a      
majority in principal amount of such series or class, as applicable, of         
Securities.                                                                     

THE PROPERTY TRUSTEE                                                            

The Property Trustee, for the benefit of the holders of the Securities, is      
authorized under the Declaration to exercise all rights with respect to each    
Related Note deposited in the Trust as trust assets, including its rights as the
holder of any such Related Note to enforce the Trust's rights under such Related
Note upon the occurrence of a Note Event of Default. The Property Trustee is    
also authorized to enforce the rights of the Trust under the Related Note       
Guarantee. Holders of at least a majority in principal amount of the Preferred  
Securities of all series or of the affected series, as applicable, of the Trust 
will have the right to direct the Property Trustee for the Trust with respect to
certain matters under the Declaration and the Related Note Guarantee; provided  
that (a) such direction would not conflict with any applicable law or the       
Declaration and would not result in any personal liability or expense to the    
Property Trustee, (b) such direction would not cause the Trust not to be        
properly classified as a grantor trust for U.S. Federal income tax purposes and 
(c) the Property Trustee may take any other action deemed proper by the Property
Trustee which is not inconsistent with such direction. In addition, under       
certain circumstances, a holder of the outstanding ComPS may directly institute 
Direct Action against J.P. Morgan without first instituting a legal proceeding  
against the Trust, the Property Trustee or any other person or entity. See "J.P.
Morgan Index Funding Company I -- Events of Default", "Risk Factors With Respect
to All Preferred Securities -- Limitations on Rights Under the Guarantee, the   
Related Note Guarantee and the Related Note" and "Description of the Related    
Note Guarantee -- Remedies of the Trust and Holders of the ComPS". The          
Declaration will provide that the Sponsor will pay the Property Trustee's fees  
and expenses and will indemnify the Property Trustee in respect of certain      
matters.                                                                        

 7

424B2
60th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 60th

The Property Trustee is a depository for funds and performs other services for, 
and transacts other banking business with, J.P. Morgan in the normal course of  
business.                                                                       

DISTRIBUTIONS                                                                   

Pursuant to the Declaration, distributions on any series of Securities must be  
paid on the dates payable to the extent that the Property Trustee has cash on   
hand in the Property Account relating to such series to permit such payment. The
funds available for distribution to the holders of any series of Securities will
be limited to payments received by the Property Trustee in respect of the       
Related Note of such series. If Morgan Guaranty does not make interest payments 
on the Related Note of any series, the Property Trustee will not make           
distributions on the corresponding series of Securities. Under the Declaration, 
except as set forth below, if and to the extent Morgan Guaranty does make       
interest payments on the Related Note of any series, the Property Trustee is    
obligated to make distributions on the corresponding series of Securities on a  
Pro Rata Basis (as defined below). The payment of distributions on each series  
of the Preferred Securities is guaranteed by J.P. Morgan on a subordinated basis
as and to the extent set forth under "Description of the Guarantee." The        
Guarantee, when taken together with J.P. Morgan's obligations under the Related 
Note Guarantee and its obligations under the Declaration, provides a full and   
unconditional guarantee from the time of issuance of each series of the         
Preferred Securities of amounts due on such Preferred Securities. Such Guarantee
itself, however, covers distributions and other payments on such series of      
Preferred Securities only if and to the extent that Morgan Guaranty has made a  
payment to the Property Trustee of interest or principal on the Related Note of 
such series. As used in this Prospectus, the term "Pro Rata Basis" shall mean   
pro rata to each holder of any series of Securities according to the aggregate  
principal amount of all Securities of such series held by the relevant holder in
relation to the aggregate principal amount of the Securities of such series     
outstanding unless, in relation to a payment, a Note Event of Default under the 
Related Note of such series has occurred and is continuing, in which case any   
funds available to make such payment shall be paid first to each holder of the  
Preferred Securities of such series pro rata according to the aggregate         
principal amount of the Preferred Securities of such series held by the relevant
holder in relation to the aggregate principal amount of all the Preferred       
Securities of such series outstanding, and only after satisfaction of all       
amounts owed to the holders of such Preferred Securities of such series to each 
holder of Common Securities of such series pro rata according to the aggregate  
principal amount of such Common Securities of such series held by the relevant  
holder in relation to the aggregate principal amount of all Common Securities of
such series outstanding.                                                        

EVENTS OF DEFAULT                                                               

In the event that the Trust fails to pay dividends or other distributions on the
Securities of any series for 30 days following the date on which such payment   
was due in accordance with the terms of such Securities or if a Note Event of   
Default occurs and is continuing with respect to the Related Note of any series 
(a "Note Event of Default"), an Event of Default under the Declaration will     
occur and be continuing with respect to any outstanding Securities of such      
series. In such event, the Declaration provides that (a) holders of a majority  
in principal amount of Preferred Securities of such series, acting as a single  
class, may cause the Trust, on behalf of holders of Securities of such series,  
by written direction to the Property Trustee, to waive any such Note Event of   
Default or to enforce the Trust's rights, on behalf of holders of Securities of 
such series, under the applicable Related Note against Morgan Guaranty or under 
the Related Note Guarantee against J.P. Morgan or, in the case of any failure to
pay dividends or other distributions, to cause the Trust to declare and pay such
dividends or distributions; provided, that such payments shall be paid solely   
from the proceeds of interest or other payments made on the applicable Related  
Note and received by the Trust on behalf of such holders and (b) in the case of 
a Note Event of Default that is attributable to the failure of Morgan Guaranty  
to pay principal of or interest on the Related Note on the date such principal  
or interest is otherwise payable (or in the case of a redemption, on the        
redemption date) any holder of the outstanding Preferred Securities may directly
institute a proceeding under the Related Note Guarantee with respect to the     
Preferred Securities against J.P. Morgan for enforcement of payment to such     
holder of the related principal amount of or interest on the Preferred          
Securities of such holder (a "Direct Action") on or after the date of the       
occurrence of such Note Event of Default without first instituting a legal      
proceeding against the Trust, the Property Trustee or any other person or       
entity. Notwithstanding any payments made to such holder of Preferred Securities
by J.P. Morgan in connection with a Direct Action, J.P. Morgan shall remain     
obligated to pay the principal of and interest on the Preferred Securities, and 
the rights of J.P. Morgan, as Guarantor, shall be subrogated to the rights of   
such holder of Preferred Securities with respect to payments on the Preferred   
Securities to the extent of any payment made by J.P. Morgan to such holder of   
Preferred Securities in such Direct Action. Notwithstanding the foregoing, the  
right of any holder of Securities of any series to receive payments or          
distributions on such series of Securities in accordance with the terms of the  
Declaration or such Securities on or after the respective payment dates         
therefor, or to institute suit for the enforcement of any such payment on or    
after such payment dates, shall not be impaired without the consent of such     
holder.                                                                         

 8

424B2
61st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 61st

RECORD HOLDERS                                                                  

The Declaration provides that the Trustees of the Trust may treat the person in 
whose name a certificate representing Preferred Securities is registered on the 
books and records of the Trust as the sole holder thereof and of the Preferred  
Securities represented thereby for purposes of receiving distributions and for  
all other purposes and, accordingly, shall not be bound to recognize any        
equitable or other claim to or interest in such certificate or in the Preferred 
Securities represented thereby on the part of any person, whether or not the    
Trust shall have actual or other notice thereof. Preferred Securities will be   
issued in fully registered form and will be represented by a global certificate 
registered on the books and records of the Trust in the name of The Depositary  
Trust Company ("DTC") or its nominee. Under the Declaration:                    

         (i) the Trust and the Trustees shall be entitled to deal with DTC (or
     any successor) for all purposes, including the payment of distributions and
     receiving approvals, votes or consents under the Declaration and, except as
  set forth in the Declaration with respect to the Property Trustee, shall
     have no obligation to persons owning a beneficial interest in any Preferred
    Securities ("Preferred Security Beneficial Owners") registered in the name
of and held by DTC or its nominee; and                                

    (ii) the rights of Preferred Security Beneficial Owners shall be
     exercised only through DTC (or any successor) and shall be limited to those
established by law and agreements between such Preferred Security     
Beneficial Owners and DTC and/or its participants. With respect to any
Preferred Securities registered in the name of and held by DTC or its 
nominee, all notices and other communications required under the      
Declaration shall be given to, and all distributions on such Preferred
Securities shall be given or made to, DTC (or its successor).         

The specific terms of the depositary arrangement with respect to the Preferred  
Securities of the Trust will be disclosed in the applicable Prospectus          
Supplement.                                                                     

DEBTS AND OBLIGATIONS                                                           

The Declaration provides that any person or entity extending credit to,         
contracting with, or having any claim against, the Trust with respect to any    
series of Securities may look only to the assets of the Trust associated with   
such series to satisfy or enforce any debt, liability, obligation or expense    
incurred, contracted for or otherwise existing with respect to such series. In  
the Declaration, J.P. Morgan has agreed to pay for all debts and obligations    
(other than with respect to the Securities) and all costs and expenses of the   
Trust, including the fees and expenses of its Trustees and any taxes and all    
costs and expenses with respect thereto, to which the Trust may become subject, 
except for United States withholding taxes. The foregoing obligations of J.P.   
Morgan under the Declaration are for the benefit of, and shall be enforceable   
by, any person to whom any such debts, obligations, costs, expenses and taxes   
are owed a (a "Creditor"), whether or not such Creditor has received notice     
thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly 
against J.P. Morgan and J.P. Morgan has irrevocably waived any right or remedy  
to require that any such Creditor take any action against the Trust or any other
person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the     
Declaration to execute such additional agreements as may be necessary or        
desirable in order to give full effect to the foregoing.                        

The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall
Street, New York, New York 10260-0060, telephone number (212) 648-2323.         

 9

424B2
62nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 62nd

USE OF PROCEEDS 

The proceeds to the Trust from the sale of the Preferred Securities offered from
time to time hereby and related Common Securities will be invested in one or    
more Related Notes of Morgan Guaranty, the proceeds of which will be used by    
Morgan Guaranty for general corporate purposes and for hedging its obligation   
under the relevant Related Note, except as may otherwise be set forth in the    
applicable Prospectus Supplement.                                               

CONSOLIDATED RATIOS OF J.P. MORGAN

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES 

                                                        [Enlarge/Download Table]

                                                                        Year ended December 31,            
                                                             --------------------------------------------- 
                                                             --------------------------------------------- 
                                                             1997    1996     1995       1994      1993(a) 
                                                             ----    ----    -------    -------    ------- 
                                                                                                           
Excluding Interest on Deposits.............................. 1.27    1.35     1.35       1.40       1.70(a)
Including Interest on Deposits.............................. 1.20    1.26     1.24       1.28       1.46(a)

---------------                                                                 

  (a) For the year ended December 31, 1993, the ratio of earnings to fixed
charges, including the cumulative effect of a change in the method of accounting
for postretirement benefits other than pensions, was 1.64 excluding interest on 
deposits and 1.43 including interest on deposits.                               

CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS 

                                                        [Enlarge/Download Table]

                                                                        Year ended December 31,            
                                                             --------------------------------------------- 
                                                             --------------------------------------------- 
                                                             1997    1996     1995       1994      1993(a) 
                                                             ----    ----    -------    -------    ------- 
                                                                                                           
Excluding Interest on Deposits.............................. 1.26    1.34     1.34       1.39       1.69(a)
Including Interest on Deposits.............................. 1.20    1.25     1.23       1.27       1.46(a)

---------------                                                                 

     (a) For the year ended December 31, 1993, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the cumulative effect of 
a change in the method of accounting for postretirement benefits other than     
pensions, was 1.63 excluding interest on deposits and 1.42 including interest on
deposits.                                                                       

DESCRIPTION OF ALL SECURITIES 

The Trust is authorized by the Declaration to issue, from time to time, one or  
more series of Securities having terms described in the Prospectus Supplement   
relating to each. Each series of Securities will have such terms, including     
distributions, redemption, voting, liquidation rights and such other preferred  
or other special rights or such restrictions, as shall be set forth in the      
Prospectus Supplement relating to such Securities, including (i) the distinctive
designation of such Securities, (ii) the number of Securities issued in such    
series, (iii) the annual distribution rate (or method of determining such rate) 
for such Securities and the date or dates upon which such distributions shall be
payable, (iv) whether distributions on such Securities shall be cumulative, and,
in the case of Securities having such cumulative distribution rights, the date  
or dates or method of determining the date or dates from which distributions on 
such Securities shall be cumulative, (v) the amount or amounts (or the method   
for determining such amount or amounts) which shall be paid out of the assets of
the Trust associated with such series of Securities to the holders of such      
Securities upon voluntary or involuntary dissolution of the Trust, (vi) the     
obligation, if any, of the Trust to purchase or redeem, and the option of the   
holders of Securities, if any, to redeem Securities issued by the Trust and the 
price or prices at which, the period or periods within which and the terms and  
conditions upon which such Securities shall be purchased or redeemed, in whole  
or in part, pursuant to such obligation, (vii) the voting rights, if any, of    
such Securities in addition to those required by law, including the number of   
votes per Security and any requirement for the approval by the holders of       
Securities as a condition to specified action or amendments to the Declaration, 
and (viii) any other relevant rights, preferences, privileges, limitations or   
restrictions of Securities consistent with the Declaration and with applicable  
law.                                                                            

All Preferred Securities offered hereby will be guaranteed, on a subordinated   
basis, by J.P. Morgan to the extent set forth below under "Description of the   
Guarantee".                                                                     

10

424B2
63rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 63rd

Certain United States federal income tax considerations applicable to any       
offering of Preferred Securities will be described in the Prospectus Supplement 
relating thereto.                                                               

In connection with the issuance from time to time of Preferred Securities of any
series, the Trust will issue related Common Securities. Upon an event of        
liquidation of the Trust, the rights of the holders of the Common Securities of 
such series to payments in respect of distributions and payments upon           
liquidation, redemption and otherwise will be subordinated to the rights of the 
holders of the Preferred Securities of such series. All of the Common Securities
will be owned by J.P. Morgan, the sponsor of the Trust.                         

Each series of Securities will be subject to redemption prior to the Stated     
Maturity thereof upon the occurrence of a Tax Event or an Investment Company    
Event (each, a "Special Event") upon the terms set forth in the applicable      
Prospectus Supplement.                                                          

DESCRIPTION OF THE COMPS

Among the types of Preferred Securities currently contemplated for issuance by  
the Trust are one or more series of Preferred Securities sharing the            
characteristics described below (each such series, "ComPS"). The following      
description is a general description of all series of ComPS, and prospective    
purchasers of any series of ComPS should consult the applicable Prospectus      
Supplement for such series and other documents referred to or incorporated by   
reference therein (including, without limitation, any public documents filed    
after the date hereof and any amendments to any document referred to herein).   

GENERAL                                                                         

The Principal Amount of each series of ComPS to be paid upon any amortization of
principal and at the Stated Maturity of such series (the "Redemption Value")    
will be determined with reference to, and will fluctuate based on, the level of 
a commodity index (referred to herein as the "Applicable Index" or collectively 
as the "Applicable Indices"), as specified in the applicable Prospectus         
Supplement.                                                                     

The Applicable Index will be one of the following types: (i) an "excess return" 
index, the change in value of which will be calculated with reference to the    
changes in value of certain futures contracts on the relevant commodity (the    
"Benchmark Contracts"), which contracts are replaced regularly as the           
determinant of change in value of the Applicable Index according to the         
methodology used in calculating the JPM Indices as described herein (such index 
referred to herein as an "Excess Return Index"), (ii) a "total return" index,   
calculated in the same manner as an Excess Return Index but including an        
additional component of return (the "Collateral Return") arising from interest  
accrued on the fluctuating value of the Applicable Index (such index referred to
herein as a "Total Return Index") or (iii) the price of the relevant commodity  
as reported in the pricing source identified in the Prospectus Supplement, which
may be the settlement prices for futures contracts on the underlying commodity  
or prices of the underlying commodity determined by the relevant market         
participants, reporting services or associations at the official price          
determination, in each case during the applicable distribution period, Early    
Determination Period or Determination Period (such index referred to herein as a
"Price Reference Index"). ComPS for which the Applicable Index is a Price       
Reference Index in which all distributions and the Principal Amount are indexed 
to the value at any time in U.S. dollars (the "Dollar Equivalent Value") of     
bullion (i.e., gold, silver, platinum or palladium) will be referred to as      
"Bullion ComPS". For the purposes of this Prospectus, "Principal Amount" shall  
mean (a) in the case of Bullion ComPS, the applicable portion of the applicable 
fixing price of the applicable amount of the applicable bullion commodity at any
time (the "Bullion ComPS Principal Amount"), (b) in the case of all other       
Preferred Securities, the Redemption Value, Early Redemption Value or stated    
liquidation preference thereof, as applicable, as if determined as of such time,
and (c) in the case of any Related Note, the principal amount thereof at such   
time determined pursuant to the terms thereof.                                  

Each commodity underlying the Applicable Index will be one of the commodities   
included in the J.P. Morgan Commodity Index (the "JPMCI") (i.e., aluminum,      
copper, nickel, zinc, heating oil, natural gas, unleaded gasoline, crude oil,   
gold, silver and platinum), one of the JPMCI sub-indices (including corn,       
soybeans and wheat), palladium or such other commodity as may be specified in   
the applicable Prospectus Supplement. As described herein, the JPMCI is computed
on an excess return and a total return basis. The variations of the JPMCI,      
including the permutations of the JPMCI in the form of sub-indices, that may be 
based upon one or more commodities (whether computed on an excess return or     
total return basis) and that have been or may be originated and calculated by   
Morgan Guaranty, are collectively referred to herein as the "JPM Indices". JPM  
Indices that are based upon only one underlying commodity (whether computed on  
an excess return or total return basis) are referred to as "JPM Individual      
Indices". JPM Indices that are based upon at least two or more underlying       
commodities (whether computed on an excess return or total return basis) are    
referred to as "JPM Basket Indices".                                            

11

424B2
64th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 64th

ComPS are principal-at-risk securities linked directly to the performance of an 
Applicable Index. For Bullion ComPS, if the index rises from the starting value 
(which is set on the day of pricing), the Redemption Value of such ComPS will be
greater than the original issue price. If the Applicable Index declines from the
starting value, the Redemption Value of such ComPS will be less than the        
original issue price. For Excess Return or Total Return ComPS, if the Applicable
Index decreases over the life of the ComPS, or if the percentage increase in the
Applicable Index is less than the amount of the Factor, the Redemption Value of 
such ComPS will be less than the Issue Price. If the percentage increase in the 
Applicable Index is greater than the amount of the Factor, the Redemption Value 
will be greater than the Issue Price. In no circumstances will the Redemption   
Value of the ComPS be less than zero, but the Redemption Value could be more or 
less than the issue price. Because an investor's principal redemption is linked 
to the performance of an Applicable Index calculation, it is important to       
understand on what the Applicable Index calculation is based. Subject to the    
more specific discussion of each item elsewhere in this Prospectus and in the   
relevant Prospectus Supplement, following is a general summary of Bullion ComPS,
Excess Return ComPS and Total Return ComPS:                                     

BULLION COMPS                                                     

Bullion ComPS, which are linked to the cash price of bullion (i.e., gold,       
silver, platinum or palladium), pay both dividends and principal based on the   
price of the applicable bullion. The Principal Amount of a Bullion ComPS is the 
Dollar Equivalent Value of a certain number or fraction of ounces of the        
applicable bullion. Each dividend is calculated as a percentage rate of the     
Principal Amount (which will fluctuate) Each full dividend will be equal to the 
applicable fraction of the annual dividend rate times the Dollar Equivalent     
Value of the spot price of the applicable bullion at such time in the London    
bullion market multiplied by the fractional number of ounces to which each      
Bullion ComPS is linked. Thus, the amount of each dividend will vary. Upon      
redemption, the Redemption Value will be equal to the Dollar Equivalent Value of
the 10-day average of the spot price of the applicable bullion in the London    
bullion market multiplied by the number or fraction of ounces of the applicable 
bullion to which each Bullion ComPS is linked. Therefore, both the dividend     
payments and the Redemption Value will fluctuate based on the spot price of the 
applicable bullion determined in the London bullion markets. Any events which   
adversely affect the spot price of the applicable bullion will adversely affect 
both the dividend payments on and the Redemption Value of such Bullion ComPS.   

EXCESS RETURN COMPS                                               

ComPS which are linked to an Excess Return Index pay a fixed or floating        
dividend rate on the Face Amount of such ComPS (which will equal the initial    
price) and the Redemption Value of such ComPS is linked to the performance of   
the applicable Excess Return Index, reduced by the applicable Factor. At        
maturity, an investor will receive a principal amount determined by the         
following formula: Face Amount X (the 10-day average of the Applicable Index/the
Applicable Index set on the day of pricing, minus the Factor). Thus, the        
Redemption Value is linked directly to the performance of the applicable Excess 
Return Index, reduced by the applicable Factor (e.g., if the ending average     
ending value of the Applicable Index is twice the beginning value, the          
Redemption Value will be twice the initial price, reduced by the applicable     
Factor). The Factor is a percentage which reduces the principal amount to       
account for the planned expenses to be incurred by the issuer in replicating the
Applicable Index and issuing the ComPS.                                         

An Excess Return Index for JPM Individual Indices, which is described more fully
herein under "The JPM Individual Indices--Excess Return Methodology", represents
the cumulative return of holding an unlevered position in the designated nearby 
commodity futures contracts underlying such Applicable Index. Generally, since  
each Individual Excess Return Index is linked directly (i.e., on a one-to-one   
basis) to the underlying futures contracts, a 1% change on any day in the value 
of the specific underlying designated futures contract will create a 1% change  
in the value of the Applicable Index for such day. Because the designated       
futures contracts underlying the Excess Return indices have maturities          
(generally less than three months) which are shorter than the maturity of the   
ComPS, the index calculation methodology replaces the underlying contract used  
to determine the daily change in the value of the Applicable Index with the next
designated contract of the same commodity on a periodic basis. This process of  
replacement is called "rolling", and the 5-day period during which the          
replacement occurs is called the "Rollover Period". For any month during which a
roll occurs, the daily change in value of an Excess Return Index for all days   
prior to the Rollover Period is calculated as 100% of the daily change of the   
existing ("old") underlying designated contract. Beginning with the first day   
after the beginning of the Rollover Period, the daily change in an Excess Return
Index is calculated based 80% on the percentage change of the old contract and  
20% on the percentage change in the replacement ("new") designated contract.    
Similar 20% adjustments are made in the weights attributable to each contract's 
change such that, by the day after the Rollover Period ends and for all         
subsequent days until the next Rollover Period, 100% of the daily index change  
is attributable to the price change of the newly-designated contract.           

12

424B2
65th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 65th

An Excess Return Index for JPM Basket Indices which is described more fully     
herein under "The JPM Basket Indices--Excess Return Methodology", represents the
cumulative return of holding a basket weighted position in the designated nearby
commodity futures contracts underlying such Applicable Index. Each Basket Excess
Return Index is defined by a strategy that holds futures positions in each of   
the basket's commodities for a one month period and then rebalances the volume  
of commodities held for the following month based on a constant dollar weighting
scheme. The rebalancing, in which the new volumes are calculated using the      
basket's pre-defined percentage weights for each commodity in the basket, occurs
each month on the Rebalance Date. The new contract used to rebalance is the     
designated contract for the next month. Because the designated futures contracts
underlying the Basket Excess Return indices have maturities (generally less than
three months) which are shorter than the maturity of the ComPS, the index       
calculation methodology replaces the underlying contract used to determine the  
daily change in the value of the index with the next designated contract of the 
same commodity on a periodic basis. This process of replacement is called       
"rolling", and the 5-day period during which the replacement occurs is called   
the "Rollover Period". For any month during which a roll occurs, the daily      
change in value of a Basket Excess Return Index for all days prior to the       
Rollover Period is calculated using the sum for all commodities of the old      
contract volumes multiplied by the price change of the old contracts (the sum of
which is the basket's change due to its underlying futures profit and losses or 
"Futures P&L"). Beginning with the first day after the beginning of the Rollover
Period, the Futures P&L of a Basket Excess Return Index is calculated based on  
80% of the old volume multiplied by the price change of the old contract plus   
20% of the new volume multiplied by the price change in the new contract.       
Similar 20% adjustments are made in the volumes attributable to each commodity's
contracts price change each day of the Rollover Period such that, by the day    
after the Rollover Period ends and all subsequent days until the next Rollover  
Period, the daily index change attributable to futures (Futures P&L) is equal to
100% of the sum of the new volume multiplied by the price change in the new     
contract for each commodity in the basket.                                      

Therefore, ComPS linked to an Excess Return Index pay dividends which are a     
fixed or floating percentage of the Face Amount, and pay a principal amount upon
redemption or at maturity which varies directly with the performance of an      
Excess Return Index, reduced by the applicable Factor. The change in an Excess  
Return Index is linked directly to the price change in the designated contracts 
underlying such index. Thus, any events which affect the designated contracts   
underlying such Excess Return Index may affect the Redemption Value of such     
ComPS.                                                                          

TOTAL RETURN COMPS                                                

ComPS which are linked to a Total Return Index may pay a fixed or floating      
dividend, if any, based on the Face Amount (i.e., the initial price) of such    
ComPS and the principal receivable upon redemption or at maturity is directly   
linked to the performance of a Total Return Index, reduced by the applicable    
Factor. At maturity, an investor in Total Return ComPS will receive a principal 
amount determined by the following formula: Face Amount X (the 10-day average of
the Applicable Index/the Applicable Index set on the day of pricing, minus the  
Factor). The Factor is a percentage which reduces the principal amount to       
account for the planned expenses to be incurred by the issuer in replicating the
Applicable Index and issuing the ComPS. Thus, the Redemption Value is linked    
directly to the performance of the applicable Total Return Index (e.g., if the  
average ending value of the Applicable Index is twice the beginning value, the  
Redemption Value will be twice the initial price reduced by the Factor).        
However, the Redemption Value may never be less than zero.                      

A Total Return Index for JPM Individual Indices, which is described more fully  
herein under "The JPM Individual Indices--Total Return Methodology", represents 
the cumulative return of holding an unlevered position in the designated nearby 
commodity futures contracts underlying such Individual Total Return Index, plus 
a collateral yield on such fluctuating index value using the most recently      
auctioned 3-month rate for U.S. Treasury bills. Like an Individual Excess Return
Index, a Total Return Index is linked directly to the underlying futures        
contracts, a 1% change on any day in the specific underlying designated futures 
contract will result in a 1% change in the applicable Total Return Index for    
such day; however the Individual Total Return Index daily change will also      
include a change in value resulting from the daily Collateral Yield. The        
designated futures contracts underlying Individual Total Return Indices must    
also be "rolled" as described above under "Individual Excess Return ComPS".     

A Total Return Index for JPM Basket Indices which is described more fully herein
under "The JPM Basket Indices--Total Return Methodology", represents the        
cumulative return of holding a basket weighted position in the designated nearby
commodity futures contracts underlying such Applicable Index plus a collateral  
yield on such fluctuating index value using the most recent weekly auctioned    
3-month rate for U.S. Treasury Bills. Like the Basket Excess Return Indices,    
each Basket Total Return Index is defined by a strategy that holds futures      
positions in each of the basket's commodities for a one month period and then   
rebalances the volume of commodities held for the following month based on a    
constant dollar weighting scheme. However, the Basket Total Return Indices have 
an additional return component equal to the 3 month Treasury Bill collateral    

13

424B2
66th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 66th

yield on the fluctuating index value. The designated futures contracts          
underlying the Basket Total Return Indices must be "rebalanced" and "rolled" as 
described above under "Basket Excess Return ComPS."                             

Therefore, ComPS linked to a Total Return Index may bear dividends, if any,     
which are a fixed or floating percentage of the Face Amount, and the principal  
payable upon redemption or at maturity is linked directly to the performance of 
a Total Return Index (less the Factor). The change in each Total Return Index is
linked directly to the price change in the designated contracts underlying such 
index, plus the collateral yield on the most recently auctioned 3-month U.S.    
Treasury bill rate. Thus, any events which affect the designated contracts      
underlying any Total Return Index may affect the Redemption Value of such ComPS.

CALCULATION OF REDEMPTION VALUE                                                 

The Redemption Value of any particular series of ComPS will be determined in    
accordance with one of the following methodologies (however, such Redemption    
Value will never be less than zero):                                            

       Excess Return Index.  In the case of ComPS for which the Applicable
     Index is an Excess Return Index, the Redemption Value payable in respect of
the ComPS on the Settlement Date will be determined by the Calculation
Agent based on the following formula:                                 

                                                                [Download Table]
                                                                               
                              Applicable Index Settlement Value                
Redemption Value = FA X  (  -------------------------------------  - Factor  ) 
                             Applicable Index Commencement Value               

    where "FA" refers to the Face Amount of the ComPS, "Applicable Index
       Settlement Value" refers to the arithmetic average of the values of the
 Applicable Index for the 10 consecutive days on which open-outcry
   trading on either the New York Mercantile Exchange ("NYMEX") or the
        London Metal Exchange (the "LME") is scheduled to occur or occurs (each,
a "Trading Day") and on which no Market Disruption Event occurs 
     immediately following the 20th scheduled Business Day prior to Stated
  Maturity (such 10 days, the "Determination Period") (calculated in
      accordance with the methodology described below under the caption "The
JPM Indices--Excess Return Index"); provided, that if a Market  
 Disruption Event remains in effect for longer than 20 consecutive
  Trading Days (or such period as may be specified in the applicable
      Prospectus Supplement) falling within such Determination Period and in
       the reasonable judgment of Morgan Guaranty such Market Disruption Event
   is likely to remain in effect, then the Applicable Index Settlement
      Value for such days may be determined by Morgan Guaranty in good faith
    based on alternative pricing sources reasonably believed by it to be
     indicative of then-prevailing prices for transactions with a notional
        principal amount equal to the Principal Amount of the outstanding ComPS,
    although it will have no obligation to do so, and such value will be
  utilized in the calculation of the Redemption Value for such days;
       "Applicable Index Commencement Value" means the value of the Applicable
       Index determined on the date of issuance of such ComPS, as specified in
    the applicable Prospectus Supplement; and Factor shall be the amount
    provided in the Applicable Prospectus Supplement. In the case of any
        Prospectus Supplement providing for an early determination of Applicable
 Index Settlement Value, upon the occurrence of such an event, the
     Applicable Index Settlement Value shall have the value so determined.

      Total Return Index.  In the case of ComPS for which the Applicable
   Index is a Total Return Index, the Redemption Value payable in respect of
 such ComPS on the Settlement Date will be determined by the Calculation
Agent based on the following formula:                                 

                                                                [Download Table]
                                                                               
                              Applicable Index Settlement Value                
Redemption Value = FA X  (  -------------------------------------  - Factor  ) 
                             Applicable Index Commencement Value               

       where each of "FA", "Applicable Index Settlement Value" and "Applicable
       Index Commencement Value" refer to the respective definitions set forth
above under Excess Return Index, except that in the case of the 
    Applicable Index Settlement Value, such value shall be determined in
      accordance with the methodology described below under the caption "The
  JPM Indices--Total Return Index", and "Factor" shall be the amount
    provided in the applicable Prospectus Supplement. In the case of any
        Prospectus Supplement providing for an early determination of Applicable
      Index Settlement Value upon the occurrence of certain events, upon the
        occurrence of such an event, the Applicable Index Settlement Value shall
have the value so determined.                                   

         Price Reference Index.  In the case of ComPS for which the Applicable
   Index is a Price Reference Index, the Redemption Value payable in respect
    of such ComPS on the Settlement Date will be determined by the Calculation
     Agent (i) in the case of Bullion ComPS, by taking the arithmetic average of
 the Dollar Equivalent Value of the applicable portion of the applicable
    fixing price for the applicable amount of the applicable bullion commodity
during the Determination                                              

14

424B2
67th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 67th

   Period, and (ii) in the case of all other Price Reference Index ComPS, by
  multiplying (a) the Face Amount of such ComPS by (b) the quotient of (I)
     the arithmetic average of the closing prices of the underlying commodity as
reported in the pricing source identified in the applicable Prospectus
   Supplement for each day of the Determination Period (i.e., the Applicable
    Index Settlement Value), divided by (II) the Applicable Index Commencement
Value (as defined above). The Redemption Value calculations for Price 
Reference Index ComPS will also be subject to Market Disruption Events
     similar to those described above, as specified in the applicable Prospectus
Supplements.                                                          

The Calculation Agent in its sole discretion will be responsible for determining
if a Market Disruption Event has occurred. In no event shall the Redemption     
Value payable in respect of any series of ComPS be less than zero, although the 
Redemption Value of any series of ComPS may be more or less than the Face Amount
of such series.                                                                 

MODIFICATIONS TO JPM INDICES                                                    

Morgan Guaranty reserves the right at its discretion to make any modifications  
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.  
The JPMCI Policy Committee advises Morgan Guaranty with respect to, among other 
things, the composition of the JPM Indices, the price sources upon which the JPM
Indices are based (i.e., the Benchmark Contracts), and the weightings and       
calculation methodology of the JPM Indices, with a view toward maintaining the  
JPM Indices as appropriate commodity investment benchmarks that serve as a      
measure of performance of the commodity markets. Currently, the inclusion       
requirements for the futures contracts underlying the JPM Indices require that  
such contracts be sufficiently liquid and representative price sources. It is   
possible, however, that any such underlying contract could become less liquid or
representative and, as a result, the JPMCI Policy Committee may recommend a     
modification in the calculation methodology or the contracts underlying the JPM 
Indices and, therefore, the Applicable Index. Any such replacement contract (i) 
will be required to satisfy the JPMCI Inclusion Criteria, as described below and
under the caption "The JPMCI Policy Committee", (ii) must be traded in a market 
or with a self-regulator which has established either (a) a comprehensive       
information sharing agreement with the exchange, if any, on which the ComPS are 
then traded or (b) suitable alternative arrangements with the Commission and    
(iii) will be with respect to the same general commodity type as the contract   
being replaced (e.g., assuming the JPMCI Policy Committee recommends a          
modification and assuming the requirements of clauses (i) and (ii) are satisfied
"The ComPS Benchmark Contract Replacement Criteria", a NYMEX crude oil futures  
contract may be replaced by an International Petroleum Exchange crude oil       
futures contract). Under no circumstances will the general commodity type       
underlying the futures contract be changed (e.g., a crude oil futures contract  
may not be replaced by a gold futures contract).                                

FOR JPM INDIVIDUAL INDICES:                                                 
 EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE

If at any time no contracts satisfying both clauses (i) and (ii) of the ComPS   
Benchmark Contract Replacement Criteria can be found to serve as a Benchmark    
Contract for any series of ComPS the Applicable Index for which is a JPM        
Individual Excess Return Index or a Total Return Index, the Applicable Index    
Settlement Value of such ComPS will be determined at such time (in accordance   
with the methodology set forth in the applicable Prospectus Supplement) as if   
the last date of the inclusion of the final Benchmark Contract with respect to  
such Applicable Index in the JPM Indices were the Stated Maturity. However, such
ComPS will not be redeemed on such date; rather, such ComPS will remain         
outstanding to Stated Maturity thereof, will continue to be entitled to         
dividends and will be redeemed at Stated Maturity for a Redemption Value        
calculated using the Applicable Index Settlement Value determined at such time  
as no contract satisfying clauses (i) and (ii) of the previous paragraph was    
able to be found. Such ComPS will also be subject to redemption upon the        
occurrence of a Special Event and optional redemption on each Early Redemption  
Date if specified in the applicable Prospectus Supplement (treating the         
Applicable Index Settlement Value determined pursuant to the terms of this      
paragraph as the Applicable Index Early Settlement Value for any such Early     
Redemption Date).                                                               

Additionally, if at any time the Benchmark Contracts then serving as the basis  
for calculating the Applicable Index with respect to any series of ComPS the    
Applicable Index for which is a JPM Individual Excess Return Index or a Total   
Return Index, or the trading thereof, become subject to any increased cost or   
additional tax, whether imposed by any exchange or otherwise, Morgan Guaranty   
reserves the right to (x) designate a replacement Benchmark Contract, satisfying
both clauses (i) and (ii) of the second preceding paragraph, which contract is  
subject to an amount of cost or tax less than or equal to such increased amount 
or (y) if no contract satisfying clause (x) of this paragraph is designated by  
Morgan Guaranty, to cause, at its option, the Applicable Index Settlement Value 
of such ComPS to be determined at such time (in accordance with the methodology 
set forth in the applicable Prospectus Supplement) as if the date of such       
increase in cost or tax (or, in Morgan Guaranty's discretion, the last calendar 
day of the month in which the determination of the Applicable Index Settlement  
Value is completed) were the Stated Maturity. However, such ComPS will not be   
redeemed on such date; rather, such ComPS will                                  
15

424B2
68th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 68th

remain outstanding to Stated Maturity thereof, will continue to be entitled to  
dividends and will be redeemed at Stated Maturity for a Redemption Value        
calculated using the Applicable Index Settlement Value determined pursuant to   
the terms of this paragraph. Such ComPS will also be subject to redemption upon 
the occurrence of a Special Event and optional redemption on each Early         
Redemption Date if specified in the applicable Prospectus Supplement (treating  
the Applicable Index Settlement Value determined pursuant to the terms of this  
paragraph as the Applicable Index Early Settlement Value for any such Early     
Redemption Date). See "Risk Factors With Respect to ComPS--Potential            
Modifications to the JPM Indices and/or the Applicable Index."                  

FOR JPM BASKET INDICES: CHANGE IN JPM BASKET INDEX WEIGHTING                

If at any time no contracts satisfying both clauses (i) and (ii) of the ComPS   
Benchmark Contract Replacement Criteria can be found to serve as a Benchmark    
Contract for any series of ComPS the Applicable Index for which is a JPM Basket 
Index Excess Return Index or Total Return Index, the Benchmark Contract will be 
removed from the basket. Unlike the ComPS on JPM Individual Indices, the        
Applicable Index Settlement Value for a ComPS for which the Applicable Index is 
a JPM Basket Index will not be determined early. Rather the Applicable Index    
will continue to be calculated using the JPM Basket Index calculation           
methodology by excluding the removed commodity, and using the new weights as    
determined by Morgan Guaranty under the advice of the JPMCI Policy Committee.   
The new weights will adjust only for the removed commodity, taking its old      
arithmetic percentage weight in the Applicable Index and dividing it up among   
one or more of its same subindex group members (subindex groups are energy,     
precious metals, base metals, and agricultural). Thus, for example, the removal 
of an energy-related commodity will not change the energy related weighting in  
the JPMCI basket, but it will change the individual weightings of some or all of
the remaining energy components within the energy subindex. For example, if     
Natural Gas is removed from the JPM Indices, its 7% weight in the JPMCI Basket  
will be divided among the 3 remaining energy commodities (crude oil, heating    
oil, and unleaded gasoline) as determined by Morgan Guaranty with the advice of 
the JPMCI Policy Committee and the energy subindex weight will remain at 55% for
the basket.                                                                     

Additionally, if at any time the Benchmark Contracts then serving as the basis  
for calculating the Applicable Index with respect to any series of ComPS the    
Applicable Index for which is a JPM Basket Excess Return Index or Total Return  
Index, or the trading thereof, become subject to any increased cost or          
additional tax, whether imposed by any exchange or otherwise, Morgan Guaranty   
reserves the right to (x) designate a replacement Benchmark Contract, satisfying
both clauses of the ComPS Benchmark Contract Replacement Criteria which contract
is subject to an amount of cost or tax less than or equal to such increased     
amount or (y) if no contract satisfying clause (x) of this paragraph is         
designated by Morgan Guaranty, to cause at its option the removal of the        
affected Benchmark Contract from the JPM Indices. Unlike the ComPS on JPM       
Individual Indices, the Applicable Index Settlement Value for a ComPS for which 
the Applicable Index is a JPM Basket Index will not be determined early. Rather 
the Applicable Index will continue to be calculated using the JPM Basket Index  
calculation methodology by excluding the removed commodity, and using new       
weights as determined by Morgan Guaranty with the advice of the JPMCI Policy    
Committee. The new weights will adjust only for the removed commodity, taking   
the removed commodity's old arithmetic percentage weight in the Applicable Index
and dividing it up among one or more of its subindex group members (subindex    
groups are energy, precious metals, base metals, and agricultural). Thus, for   
example, the removal of an energy-related commodity will not change the energy  
related weighting in the JPMCI basket, but it will change the weightings some or
all of the remaining energy components. For example, if Natural Gas is removed  
from the JPM Indices, its 7% weight in the JPMCI Basket will be divided among   
the 3 remaining energy commodities (crude oil, heating oil, and unleaded        
gasoline) as determined by Morgan Guaranty with the advice of the JPMCI Policy  
Committee and the energy subindex weight will remain at 55% for the basket.     

As discussed below, in order to satisfy the JPMCI Inclusion Criteria, a futures 
contract must (i) be priced in U.S. dollars, or if priced in a foreign currency,
the exchange on which the contract is traded must publish an official exchange  
rate for conversion of the futures contract price into U.S. dollars and such    
currency must be freely convertible into U.S. dollars; (ii) be traded on a      
regulated futures exchange located in the United States, Canada, the United     
Kingdom, Japan, Singapore or any country which at such time is a member of the  
Organization of Economic Cooperation and Development (an "O.E.C.D. country") and
(iii) have a minimum annual trading volume of 300,000 contracts or $500,000,000 
for all contract months.                                                        

EARLY REDEMPTION UPON THE OCCURRENCE OF A SPECIAL EVENT                         
OR AT THE ELECTION OF THE HOLDERS OF THE COMPS                                  

The ComPS will be subject to redemption prior to their Stated Maturity upon the 
occurrence of a Special Event (a "Special Event Redemption") or, if so indicated
in the applicable Prospectus Supplement, at the election of the holders of such 
series of ComPS (an "Optional Redemption") on any one of the dates set forth in 
the applicable Prospectus Supplement (each such date, an "Optional Redemption   
Date"; each such date and each date on which a Special Event Redemption or a    
Liquidation                                                                     

16

424B2
69th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 69th

Distribution shall occur being referred to herein as an "Early Redemption       
Date"). In order to effect an Optional Redemption, the holder of such ComPS will
be required to provide notice to DTC (or, in the case of Preferred Securities   
which are not solely book-entry securities, the Trust's transfer agent) as      
specified in the applicable Prospectus Supplement. In the case of notice        
provided through DTC, the notice provided by DTC to the Trust or its transfer   
agent (the "Applicable Notice") shall be final and irrevocable upon receipt. The
redemption value of ComPS redeemed prior to their Stated Maturity (the "Early   
Redemption Value") shall be determined during the 10 consecutive Trading Days   
which are Business Days on which U.S. Treasury bond markets are open and on     
which no Market Disruption Event occurs immediately following the 20th scheduled
Business Day prior to the applicable Early Redemption Date (such ten days, the  
"Early Determination Period"), provided, however, that the Early Redemption     
Period will not begin until the day after the Trust has received the Applicable 
Notice. The Early Redemption Value shall be equal to the average for the 10 days
of the Early Determination Period of the sum for each such day of the results of
the following (to be calculated with respect to each portion of the Face Amount 
of such ComPS which must be redeemed on the same date):                         

                                                                [Download Table]
                                                                        
                                             IESV             )         
FA X [(Dividend + Unused costs) X AF +   (   ----  - Factor       X PVF]
                                             ICV                        

      Where "FA" means (i) in the case of Bullion ComPS, each portion of the
    Bullion ComPS Principal Amount thereof which must be redeemed on the
      same date and (ii) in the case of all other ComPS, each portion of the
 Face Amount of the ComPS which must be redeemed on the same date.

In the case of ComPS for which the entire Face Amount matures on the same date, 
the average for each day of the Early Determination Period of such equation     
shall equal the Early Redemption Value. In the case of ComPS for which portions 
of the Face Amount must be redeemed on different dates, the Early Redemption    
Value shall equal the average over the Early Redemption Period of the sum of the
results for each day of such equation for each such portion of the Face Amount. 
The Trust shall pay the Early Redemption Value, together with all accrued but   
unpaid dividends from quarterly periods prior to the Early Redemption Date, on  
the Early Redemption Date. The Early Redemption Value shall never be less than  
zero. Other terms used in the formula above shall have the meanings set forth   
below (with each Factor, yield, lease rate, rate and percentage rate expressed  
in decimal form (e.g., 3% equals 0.03)):                                        

For all ComPS                                                         

        "Dividend" means the per annum rate of dividends on the Face Amount (or,
        in the case of Bullion ComPS, the Principal Amount), as specified in the
applicable Prospectus Supplement.                               

        "AF" means the Annuity Factor for the term remaining from the applicable
       Early Redemption Date until the mandatory redemption of such portion of
    the Face Amount (such remaining term being referred to herein as the
       "Remaining Maturity"), which shall be determined in accordance with the
following formula:                                              

(1-V(N))/y

        where "V" is equal to (1/(1 + y/4)) and "y" is the yield which shall
     be equal to the Base Yield (as defined below) plus the Applicable
   Spread (as defined below), converted to an annualized quarterly
       compounded rate calculated on the basis of a 360-day year of twelve
         30-day months. The "Base Yield" will equal (i) in the case of Bullion
         ComPS, the single lowest lease rate obtained by polling three dealers
     in such loans for a loan to Morgan Guaranty (or, in the case of a
   Liquidation Distribution, to a notional counterparty rated A or
        higher) of such bullion in the same notional Bullion ComPS Principal
        Amount, terms, amortization and maturity as such ComPS (which may be
         the same rate for all days and/or for each Remaining Maturity) or, if
         there is no such rate, as calculated by the Calculation Agent in good
         faith, and (ii) in the case of any other ComPS, the Constant Maturity
          Treasury Rate for the Remaining Maturity among the applicable Constant
         Maturity Treasury Rates set forth in Statistical Release H.15(519) as
        such appears on Telerate Page 7051 under the heading "Daily Treasury
 Constant Maturities from the Economic Bulletin Board" (or its
       successor or such other pricing source as the Calculation Agent may
          reasonably select) for each date of the Early Determination Period. If
      the applicable rate for the Remaining Maturity is not published on
       such page, the applicable rate will be determined by calendar month
        weighted linear interpolation between one Constant Maturity Treasury
   rate with respect to a maturity up to or equal to the Remaining
          Maturity and the other Constant Maturity Treasury rate with respect to
       a maturity greater than the Remaining Maturity. If such information
      ceases to be provided or is not available for any day of the Early
       Determination Period by the end of the Business Day next succeeding
      the last day of the Early Determination Period, the Base Yield for
          such day will be calculated by the Calculation Agent by calendar month
        weighted linear interpolation among the rates it shall have obtained
for such applicable date by polling                         

17

424B2
70th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 70th

       three dealers of such instruments in New York, New York for the bid
        side yield to maturity of the most recently issued on-the-run direct
     non-callable fixed rate obligations of the United States Treasury
         ("U.S. Government Securities") with a maturity equal to the Remaining
       Maturity or, if no such maturity exists, by calendar month weighted
         linear interpolation among rates so obtained with a maturity up to or
   equal to the Remaining Maturity and a maturity greater than the
Remaining Maturity.                                         

   The "Applicable Spread" will equal (i) for all ComPS other than
     Bullion ComPS, (a) in the case of a Liquidation Distribution, the
      offer side U.S. dollar swap spread for the maturity closest to the
     Remaining Maturity as published by International Financing Review
          ("IFR") Corporate Eye on Telerate Page 42276 (or such successor as the
         Calculation Agent may reasonably determine) for each day of the Early
         Determination Period (except that, in the case of a determination for
         which the Remaining Maturity is one year or less, "Applicable Spread"
        will equal the difference between then-current yields on U.S. dollar
     LIBOR-based deposits and yields on Treasury Bills with maturities
      approximately equal to the Remaining Maturity as determined by the
          Calculation Agent) (the "Swap Spread") or (b) in the case of all other
    redemptions, the greater of the Swap Spread and the yield spread
    between (I) the average of quotations from three dealers in such
     instruments chosen in the discretion of the Calculation Agent for
          notional issuances of debt securities of Morgan Guaranty in a notional
       amount equal to the Face Amount of the ComPS being redeemed at such
  time (or, if such notional amount is smaller than commercially
         practicable, the smallest commercially practicable amount) and having
    a similar maturity and similar subordination provisions as those
     contained in the applicable Related Note and (II) U.S. Government
        Securities of approximately similar maturities, as such yield spread
     may be reasonably determined by the Calculation Agent (such yield
       spread, the "Funding Spread") or (ii) for Bullion ComPS, (x) in the
         case of a Liquidation Distribution, zero, and (y) in all other cases,
      the difference between the Funding Spread and the Swap Spread, but
          never less than zero. If the Telerate Page (or any successor) referred
          to in clause (a) of the preceding sentence is unavailable or ceases to
       report such swap spread, the Calculation Agent shall calculate such
        spread based on (i) a source supplying the equivalent information or
          (ii) if no such source is available, the average quotations from three
       dealers in U.S. dollar swaps chosen by the Calculation Agent in its
         reasonable discretion. As of the date of this Prospectus, J.P. Morgan
         is among the six dealers of such instruments currently polled for the
       purpose of calculating the swap spread published by IFR on Telerate
Page 42276.                                                 

        "PVF" means the Present Value Factor for Remaining Maturity, which shall
be determined as follows:                                       

(1/(1+y/4)(N))

          where "y" has the meaning set forth above in the definition of Annuity
Factor.                                                     

        "ICV" means the Applicable Index Commencement Value, or the value of the
     Applicable Index determined on the date of issuance of the applicable
      series of ComPS, as specified in the applicable Prospectus Supplement.

        "N" means the number of full quarterly periods in the Remaining Maturity
(e.g., one year = N = 4).                                       

For ComPS calculated based on a Price Reference Index:                

"Unused costs" means zero.                                      

        "IESV" means the Applicable Index Early Settlement Value, which shall be
        equal to (i) in the case of Bullion ComPS, the ICV, and (ii) in the case
       of all other Price Reference Index ComPS, the Applicable Index for such
day of the Early Determination Period.                          

For ComPS calculated based on an Excess Return Index:                 

   "Unused costs" means the number specified as such in the applicable
Prospectus Supplement.                                          

        "IESV" means the Applicable Index Early Settlement Value, which shall be
     equal to the Applicable Index for such day of the Early Determination
Period (which, if an Applicable Index Settlement Value has been 
     permanently determined for such ComPS prior to such time, shall equal
the value so determined).                                       

"Factor" means the number specified in the applicable Prospectus
Supplement.                                                     

For ComPS calculated based on a Total Return Index:                   

   "Unused costs" means the number specified as such in the applicable
Prospectus Supplement.                                          

18

424B2
71st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 71st

       "IESV" means the product of Applicable Index for such day multiplied by
      (ii) the Future Value Factor (which, if an Applicable Index Settlement
        Value has been permanently determined for such ComPS prior to such time,
shall equal the value so determined).                           

"Future Value Factor" shall be determined with reference to the 
following formula:                                              

(1 + BY/4)(N) 

       where BY is the Base Yield (as determined for such day), computed on an
  annualized, quarterly compounded basis, expressed in decimal form.

"Factor" means the number specified in the applicable Prospectus
Supplement.                                                     

DETERMINATION PERIOD AND SETTLEMENT DATE                                        

Unless otherwise specified in the applicable Prospectus Supplement, the term    
"Determination Period" with respect to Excess Return, Total Return and Price    
Reference Indices shall mean the period of ten consecutive Trading Days on which
no Market Disruption Event occurs commencing immediately following the twentieth
scheduled Business Day prior to the Stated Maturity of such ComPS.              

The date on which the Early Redemption Value or Redemption Value, as applicable,
will first be payable (the "Settlement Date") in respect of any series of ComPS 
will be the later of the date on which such ComPS are eligible for redemption   
(the "Redemption Date") or the fifth Business Day after the completion of the   
Early Determination Period or the Determination Period, as applicable.          

MARKET DISRUPTION EVENTS                                                        

As determined by Morgan Guaranty, the occurrence of one or more of the following
events on any Trading Day shall constitute a "Market Disruption Event" with     
respect to a relevant commodity (a "Relevant Commodity"), any benchmark contract
underlying the Applicable Index (a "Relevant Contract"), the market participants
or association responsible for determining the price of a commodity (the "Fixing
Association") which determines the price of a Relevant Commodity (a "Relevant   
Fixing Association") or an exchange on which a Relevant Contract is traded (a   
"Relevant Exchange"): (a) a day on which the fluctuation of the price of the    
applicable commodity or commodity futures contract is materially limited by the 
rules of the Relevant Exchange or Relevant Fixing Association setting the       
maximum or minimum price for such day (a "Limit Price"); (b) a day on which the 
Settlement Price is the Limit Price; (c) the failure of the Relevant Exchange or
Relevant Fixing Association to determine, announce or publish the Settlement or 
Fixing price with respect to the Relevant Contract or commodity (as the case may
be); (d) the material suspension of trading in the Relevant Commodity by members
of the Relevant Fixing Association or otherwise or any Relevant Contract with   
respect to such commodity or in any other futures contract affecting the        
Relevant Contract with respect to such commodity on the Relevant Exchange; (e)  
the failure of trading to commence, or the permanent discontinuation of trading,
in the Relevant Commodity by the members of the Relevant Fixing Association or  
otherwise or any Relevant Contract on the Relevant Exchange and (f) the         
imposition of any material limitation on trading in the Relevant Commodity by   
the members of the Relevant Fixing Association or otherwise or any Relevant     
Contract on the Relevant Exchange.                                              

If a Market Disruption Event occurs and is continuing during the Determination  
Period or any Early Determination Period with respect to any series of ComPS,   
the Determination Period or such Early Determination Period will be extended,   
with the result that the calculation of the Applicable Index Settlement Value   
and the settlement of such ComPS may be delayed for an indefinite period of time
including, in the case of an extension of the Determination Period, an          
indefinite period of time after the Stated Maturity. With respect to ComPS for  
which the Applicable Index is either a Price Reference Index or an Excess Return
Index, in the event that the payment of the Redemption Value is postponed beyond
the Stated Maturity, no distributions or dividends will accrue or be payable    
with respect to such ComPS, but interest will accrue on the Face Amount from and
including the Stated Maturity to but excluding the last day of the Determination
Period at a rate equal to the day-weighted average of the Fed Effective Rate    
until the end of the Determination Period, as reported on Telerate Page 118 (or 
its successor or such other pricing source as the Calculation Agent may         
reasonably select), less in each case 0.25%, calculated on the basis of a year  
of 360 days and payable for the actual number of days elapsed. Payment of such  
interest amount and the Redemption Value will be made on the fifth Business Day 
following the last day of the Determination Period. With respect to ComPS for   
which the Applicable Index is a Total Return Index, in the event that the       
payment of the Redemption Value is postponed beyond the Stated Maturity, no     
distributions will be payable, and no interest or dividend in respect of such   
ComPS will accrue or be payable, after the Stated Maturity. With respect to all 
ComPS, in the event that the payment of the Early                               

19

424B2
72nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 72nd

Redemption Value is postponed beyond the applicable Early Redemption Date, no   
distributions will be payable, and no interest or dividends in respect of such  
ComPS will accrue or be payable, after such Early Redemption Date.              

CALCULATIONS                                                                    

As discussed above, the Trust will appoint Morgan Guaranty as Calculation Agent 
for the purpose of determining the Applicable Index Settlement Value, as        
described herein, and calculating the Early Redemption Value and Redemption     
Value and, if applicable, the dividends payable in respect of any ComPS. The    
Calculation Agent will determine the Applicable Index Settlement Value and the  
Early Redemption Value and Redemption Value of any ComPS and, if applicable,    
dividends payable in good faith, which determination shall be final and binding 
on the Trust and the holders of such ComPS. Morgan Guaranty as Calculation Agent
will also (i) determine when a Market Disruption Event on any Early             
Determination Day or Determination Day is sufficiently material to not use such 
day in the applicable calculation and (ii) be responsible for the choice of an  
alternative price source (if any) upon a Market Disruption Event of sufficient  
length, as described in the applicable Prospectus Supplement. Also, Morgan      
Guaranty and its affiliates may from time to time engage in transactions with   
and perform services for the Trust in the ordinary course of business.          

LICENSE OF APPLICABLE INDEX                                                     

Morgan Guaranty will enter into a license agreement (the "License Agreement")   
granting the Trust a non-exclusive license to use the Applicable Index in       
connection with each series of ComPS the Applicable Index for which is an Excess
Return Index or a Total Return Index. The License Agreement will provide that,  
in the event that Morgan Guaranty fails to provide the Applicable Index to the  
Trust on a regular basis with the result that the Trust is unable to determine  
the Applicable Index Settlement Value and the Early Redemption Value and        
Redemption Value payable in respect of such ComPS, the Trust, its Calculation   
Agent or its authorized designee (which shall be a major accounting firm        
appointed by the Trust) shall be authorized to calculate the Applicable Index.  
In such event, Morgan Guaranty will provide the Trust, its Calculation Agent or 
such accounting firm with any and all information which may be necessary in     
order to enable the Trust, its Calculation Agent or such accounting firm to     
perform such calculations pursuant to the same methodology to be applied by     
Morgan Guaranty.                                                                

Morgan Guaranty may also enter into license agreements with any or all of the   
exchanges on which any Benchmark Contract or commodity is traded with respect to
the information provided by such exchanges. However, no such license agreement  
will contain any obligation or liability provisions with respect to provision of
such information by the relevant exchange. Furthermore, no exchange on which any
Benchmark Contract or commodity is traded is or will be an issuer, underwriter  
or guarantor of any Preferred Security, nor has any such exchange approved the  
Preferred Securities or any terms thereof, nor is any such exchange responsible 
for the calculation of any Applicable Index. However, any such exchange may from
time to time change any rule or bylaw or take emergency action under its rules  
which could affect settlement prices of the futures contracts or commodities    
underlying an Applicable Index. Any such change which causes a decrease in such 
settlement prices could adversely effect the value of such Applicable Index.    

RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES 

LIMITATIONS ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE   
RELATED NOTE                                                                    

The Guarantee will be effective with respect to each series of Preferred        
Securities from the time of issuance of such Preferred Securities but will not  
apply to any payment of distributions or other amounts due in respect of such   
Preferred Securities to the extent Morgan Guaranty has failed to make a payment 
of principal or interest on the applicable Related Note. To the extent Morgan   
Guaranty were to default on its obligation to pay amounts payable on the        
applicable Related Note, the Trust, on behalf of holders of the Securities of   
the applicable series, would lack available funds for the payment of            
distributions on or amounts payable on redemption of such Preferred Securities  
and, in such event, holders of such Preferred Securities would not be able to   
rely on the Guarantee for payment of such amounts. Instead, holders of such     
Preferred Securities would rely on the enforcement by the Trust, on behalf of   
holders of the Securities of the applicable series, of its rights as holder of  
the applicable Related Note against Morgan Guaranty and of its rights under the 
Related Note Guarantee against J.P. Morgan. In addition, upon the occurrence and
during the continuance of a Note Event of Default that is attributable to the   
failure of Morgan Guaranty to pay principal of or interest on the Related Note  
on the date such principal or interest is otherwise payable (or in the case of a
redemption, on the redemption date), any holder of the outstanding Preferred    
Securities may directly institute a Direct Action on or after the date of the   
occurrence of such Note Event of Default without first instituting a legal      
proceeding against the Trust, the Property Trustee or any other person or       
entity. Notwithstanding any payments made to such holder of Preferred Securities
by J.P. Morgan in connection with a Direct Action, J.P. Morgan shall remain     
obligated to pay the                                                            

20

424B2
73rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 73rd

principal of and interest on the Preferred Securities, and the rights of J.P.   
Morgan, as Guarantor, shall be subrogated to the rights of such holder of       
Preferred Securities with respect to payments on the Preferred Securities to the
extent of any payment made by J.P. Morgan to such holder of Preferred Securities
in such Direct Action. J.P. Morgan, through its obligations under the Guarantee,
the Related Note Guarantee and the Declaration, taken together, will provide a  
full and unconditional guarantee, on a subordinated basis, of payments due on   
the Preferred Securities. See "Description of the Guarantee" and "Description of
the Related Note Guarantee".                                                    

SPECIAL EVENT REDEMPTION                                                        

Upon the occurrence of a Special Event, unless waived by Morgan Guaranty or     
subject to cure as specified in the applicable Prospectus Supplement, Morgan    
Guaranty shall have the right to redeem any or all Related Notes, in whole or in
part, in which event the Trust will redeem the related Preferred Securities and 
Common Securities on a pro rata basis to the same extent as the Principal Amount
of the Related Notes is redeemed by Morgan Guaranty.                            

A Special Event is either (i) a Tax Event or (ii) an Investment Company Event. A
Special Event may occur at any time.                                            

In the case of any series of ComPS, upon the occurrence of a Special Event it is
possible that the market price of such ComPS in any existing secondary market   
will decline.                                                                   

LIMITED VOTING RIGHTS                                                           

Holders of Preferred Securities will have certain voting rights relating to a   
payment default on or adverse change to the Preferred Securities, but will not  
be entitled to vote to appoint, remove or replace the Trustees of the Trust or  
to increase or decrease the number of Trustees, which voting rights are vested  
exclusively in the holders of the Common Securities.                            

TRADING PRICE MAY NOT REFLECT ACTUAL ECONOMIC VALUE                             

Preferred Securities are expected to trade at a price that takes into account   
the value, if any, of accrued and unpaid distributions; thus, purchasers will   
not pay and sellers will not receive any accrued and unpaid interest with       
respect to their pro rata interests in the applicable Related Note owned through
the applicable Preferred Securities that is not already included in the trading 
price of the applicable Preferred Securities.                                   

POSSIBLE ILLIQUIDITY OF PREFERRED SECURITIES                                    

It is possible that no secondary market will develop and continue to exist with 
respect to any series of Preferred Securities. If no such market develops, the  
liquidity of such Preferred Securities may be adversely affected. Furthermore,  
there can be no assurance as to the market prices for any Preferred Securities  
in any secondary market which does develop. Accordingly, any Preferred          
Securities that an investor may purchase, whether pursuant to the offer made    
hereby or in any such secondary market, may trade at a discount to the price    
that the investor paid to purchase the Preferred Securities offered hereby.     

RIGHT TO INTEREST ON RELATED NOTE                                               

Because holders of Preferred Securities are essentially investing in a pro rata 
share of a Related Note, prospective purchasers of Preferred Securities are also
making an investment decision with regard to such Related Note and should       
carefully review all the information regarding the Related Note contained herein
and in the relevant Prospectus Supplement. Investors in Preferred Securities    
have a direct right to direct interest distributions on the applicable Related  
Note.                                                                           

IMPOSITION OF BANK REGULATORY RESTRICTIONS                                      

The Trust's ability on behalf of holders of Securities of any series to make    
distributions and other payments on the Preferred Securities is dependent upon  
Morgan Guaranty's making interest and other payments on each Related Note as and
when required or collection with respect to such Related Note under the Related 
Note Guarantee. As noted herein, Morgan Guaranty is subject to examination and  
regulation by U.S. federal and state banking authorities, and although there is 
no current restriction on Morgan Guaranty's ability to make payments under any  
Related Note, certain other transactions with affiliates, including the Trust,  
are or may in the future become subject to restrictions imposed by bank         
regulatory authorities.                                                         

21

424B2
74th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 74th

RISK FACTORS WITH RESPECT TO COMPS

INDEXATION OF PRINCIPAL AMOUNT                                                  

The Principal Amount of each series of ComPS, which is initially equal to the   
Face Amount of such series, will vary until Stated Maturity of such ComPS in    
relation to an Applicable Index, reduced by the Factor. The Principal Amount    
repayable on any Optional Redemption Date, upon the occurrence of any Special   
Event Redemption or in connection with any Liquidation Distribution or at Stated
Maturity of such ComPS will be determined, pursuant to the terms described in   
the applicable Prospectus Supplement, by comparing the level of the Applicable  
Index at the date of issuance of such ComPS with the level determined pursuant  
to the terms thereof for any such date of redemption, reduced by the Factor.    
Accordingly, the Principal Amount of a series of ComPS to be received upon any  
date of redemption will fluctuate based on the Applicable Index for such series 
(reduced by the Factor) and may be lower than the Face Amount for such series.  
Thus, if the Applicable Index for a series of ComPS decreases over the life of  
such ComPS, or if the percentage increase in the Applicable Index for such      
series is less than the amount of the Factor for such series, the Redemption    
Value for such series will be less than the Face Amount for such series. If the 
percentage increase in the Applicable Index for such series is greater than the 
amount of the Factor for such series, the Redemption Value for such series will 
be greater than the Face Amount for such series.                                

EFFECT OF TRADING IN THE FUTURES CONTRACTS AND RELATED COMMODITIES AND          
INSTRUMENTS                                                                     

Morgan Guaranty and other affiliates of J.P. Morgan are and will be actively    
involved in the trading of the futures contracts or the commodities underlying  
the Applicable Index and other instruments and derivative products based        
thereon. Morgan Guaranty, in particular, is an active participant in various    
commodity markets including the physical petroleum, precious and base metals and
related derivatives markets. JPMSI and other affiliates may also issue or       
underwrite, or authorize unaffiliated entities to issue or underwrite, other    
securities or financial instruments with returns indexed to the Applicable Index
or one or more of the JPM Indices. Morgan Guaranty has licensed, and may in the 
future license, the Applicable Index, the JPM Indices, and related indices and  
sub-indices for use by affiliated and unaffiliated parties, for publication in  
newspapers and periodicals, for distribution by information and data            
dissemination services and for other purposes. Morgan Guaranty currently intends
to publish individual commodity sub-indices for each of the commodities included
in the JPM basket and sub-indices using the same calculation methodology as that
described below. The Applicable Index may be similar or identical to the sub-   
index having the same underlying commodity.                                     

Trading in the foregoing contracts and commodities by Morgan Guaranty, its      
affiliates (including JPMSI) and unaffiliated third parties could adversely     
affect the value of the Applicable Index, which could in turn adversely affect  
the return on and the value of the ComPS. See "The Applicable Index".           
Furthermore, additional issuances of securities linked or referenced to similar 
indices, futures contracts or commodities could adversely affect the value of   
similar outstanding ComPS.                                                      

POTENTIAL FOR ADVERSE INTERESTS                                                 

As noted above, Morgan Guaranty, JPMSI and their affiliates expect to engage in 
trading activities related to the futures contracts or the commodities          
underlying the Applicable Index and other instruments or derivatives products on
or related to the Applicable Index, for their accounts where permitted or for   
other accounts under their management. Morgan Guaranty, JPMSI and their         
affiliates, as well as unaffiliated third parties, may also engage in other     
activities related to the Applicable Index, as discussed above. Because Morgan  
Guaranty will issue the Related Notes to the Trust on behalf of holders of the  
Securities, all such activities could create interests of Morgan Guaranty       
adverse to those of the holders of ComPS. For example, the issuance of other    
securities indexed to the Applicable Index, i.e., the introduction of competing 
products into the marketplace, could adversely affect the value of the ComPS. To
the extent that J.P. Morgan or its affiliates serve as issuer, or JPMSI or one  
of its affiliates serves as agent or underwriter, for such securities or other  
instruments, their interests with respect to such products may be adverse to    
those of the holders of the ComPS. Morgan Guaranty will serve as Calculation    
Agent with respect to the ComPS and, accordingly, will in good faith calculate  
the Applicable Index, which could present certain conflicts of interest (for    
example, in instances where the Calculation Agent is required to exercise       
discretion).                                                                    

RISK OF CARRYING AND ROLLING COMMODITY FUTURES                                  

As discussed above, if the Applicable Index is an Excess Return Index or a Total
Return Index, the Redemption Value of the ComPS will be calculated with         
reference to the Applicable Index (less the applicable Factor), the value of    
which is designed to replicate to the extent provided herein the cumulative     
return of holding a continuous investment in the futures contracts on the       
relevant commodity underlying the Applicable Index. At any given time, the      
Applicable Index will be calculated based on the change in value of certain     
futures contracts on the relevant commodity for delivery in the near term (the  
"shorter-dated                                                                  

22

424B2
75th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 75th

contracts"). The Applicable Index will continue to be calculated based on the   
change in value of such shorter-dated contracts until they approach maturity, at
which time the Applicable Index will, as described below, cease to be calculated
based on the change in value of such shorter-dated contracts and begin to be    
calculated based on the change in value of the subsequent futures contract (the 
"longer-dated contracts") on a regular periodic basis so as to be continuously  
indexed to the change in value of the futures contracts on the relevant         
commodity. The period during which each such replacement of shorter-dated       
contracts with longer-dated contracts as the basis for the calculation of the   
change in value of the Applicable Index occurs is referred to herein as the     
"Rollover Period", as further defined below. If the market for the commodity    
futures contract underlying the Applicable Index is in "contango" (i.e., the    
prices of longer-dated contracts are above the prices of shorter-dated          
contracts), the return on the Applicable Index may be adversely affected. The   
Applicable Index would decline if (i) the price of the longer-dated contracts   
underlying the Applicable Index during the Rollover Period were more than the   
price of the shorter-dated contracts which they will replace and (ii) the price 
of the longer-dated contracts were to decline as such contracts approach        
maturity (i.e., the price of the longer-dated contracts were to converge toward 
the price of the replaced shorter-dated contracts) (only, in the case of a Total
Return Index, if each declines by more than the amount of the Collateral Return 
Component). While many of the commodities included in the JPM Indices have      
historically exhibited periods of both "backwardation" (i.e., the prices of     
longer-dated contracts are below the prices of shorter-dated contracts) and     
contango, there can be no assurance that backwardation will exist at any or all 
times. If the Applicable Index is an Excess Return Index or a Total Return      
Index, the absence of backwardation in the market for the commodity underlying  
the Applicable Index could adversely affect the Applicable Index and,           
correspondingly, could adversely affect the value of the ComPS. Additionally,   
the issuance and/or the trading of the ComPS could adversely affect the market  
for the benchmark contracts underlying such Applicable Index and, accordingly,  
could adversely affect the value of such ComPS and could result in a substantial
loss to the holders thereof. See "Description of the ComPS--Calculation of      
Redemption Value".                                                              

VOLATILITY OF COMMODITY AND COMMODITY FUTURES PRICES                            

Prices of commodities and commodity futures contracts are extremely volatile and
can be affected by a variety of factors, including weather, governmental        
programs and policies, national and international political and economic events,
changes in interest and exchange rates and trading activity in such commodities 
and commodity futures contracts. Volatility in the benchmark contracts          
underlying any Applicable Index will correlate directly to volatility in such   
Applicable Index. Such volatility could lead some investors in the futures      
market to withdraw from the applicable futures markets, which could adversely   
affect the liquidity of such markets and could adversely affect the value of    
such Applicable Index and, correspondingly, the value of the ComPS.             

EFFECT OF ADVERSE CHANGES IN COMMODITY PRICES                                   

The Applicable Index is designed to replicate, to the extent provided herein,   
the performance of investing in the markets for the underlying commodity or     
futures contracts on the underlying commodity over time. In the event of sudden 
disruptions in the supplies of the relevant constituent commodity for the       
Applicable Index, such as those caused by war, accidents, weather, or acts of   
terrorism, prices of the relevant constituent commodity, and, consequently, the 
value of the Applicable Index, could become extremely volatile and              
unpredictable. Also, sudden and dramatic declines in commodity and commodity    
futures contract prices as may occur, for example, upon a cessation of          
hostilities that may exist in countries producing the relevant commodity or upon
the discovery of significant additional sources or reserves of the relevant     
commodity or the introduction of new or previously withheld supplies into the   
market or the introduction of substitute products or commodities, could have a  
significant adverse effect on the value of the Applicable Index and on the value
of any ComPS. In addition, the prices of certain commodities have on occasion   
been subject to very rapid short-term changes due to speculative activities     
which, if such activities result in a price decrease, may cause the value of    
ComPS referenced to such commodities or the related futures contracts to        
decrease. See "Calculation of Redemption Value".                                

CHANGE OF EXCHANGE METHODOLOGY                                                  

Any exchange on which any Benchmark Contract or commodity is traded or which    
provides information relevant to the calculation of an Applicable Index may from
time to time change any rule or bylaw, or take emergency action under its rules,
which could affect the settlement prices of the futures contracts or commodities
underlying an Applicable Index. Any such change which causes a decrease in such 
settlement prices could adversely affect the value of such Applicable Index.    

23

424B2
76th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 76th

SUSPENSION OR MATERIAL DISRUPTION OF COMPS, FUTURES OR                          
COMMODITIES TRADING; TEMPORARY DISTORTIONS                                      

The futures markets and the markets for the commodities underlying the          
Applicable Index are subject to temporary distortions or other disruptions due  
to conditions of illiquidity in the markets, the participation of speculators,  
government regulation and intervention and the other factors referred to in the 
preceding paragraph. In addition, U.S. futures exchanges have regulations, and  
the LME and certain foreign exchanges on which replacement Benchmark Contracts, 
if any, may trade (which exchanges must have information-sharing arrangements   
with the Securities and Exchange Commission and be regulated exchanges located  
in the United States, Canada, the United Kingdom, Japan, Singapore or an        
O.E.C.D. country) may have regulations, which limit the amount of fluctuation of
futures contracts prices which may occur during a single trading day or the     
settlement spread between adjoining contracts. Such price limits are generally  
referred to as "daily price fluctuation limits" or, more commonly, "daily       
limits", and such limitations on settlement spreads are generally referred to as
"spread limits", and the maximum or minimum price of a contract on any given    
day, as a result of the effect of such limits, is referred to as a "limit       
price", as discussed below. In a particular futures contract, once the limit    
price has been reached in such a contract, no trades may be made on that day at 
a price above or below the limit price, as the case may be. Limit prices may    
have the effect of precluding trading in a particular contract for all or a     
portion of a trading day or forcing the liquidation of contracts at             
disadvantageous times or prices. Such circumstances, particularly if they occur 
during the Rollover Period for the Applicable Index (which is an Excess Return  
Index or a Total Return Index) or during the Early Determination Period or the  
Determination Period (as defined herein) for such ComPS, could adversely affect 
the value of the Applicable Index and/or could constitute a Market Disruption   
Event (as defined herein) and, therefore, could adversely affect the value of   
such ComPS.                                                                     

Additionally, because it is intended that each series of ComPS will be listed on
a stock exchange, and because ComPS will likely trade as equity securities in   
any such secondary market, trading in ComPS may be subject to interruption or   
delay due to extreme volatility in the trading prices of equity securities      
generally in any such secondary market, notwithstanding the specific price      
movements of the ComPS.                                                         

MARKET DISRUPTION EVENTS                                                        

Depending on the period of time over which a Market Disruption Event continues, 
the correlation between changes in the value of the Applicable Index and changes
in the general level of prices of the relevant commodities may be adversely     
affected. Under such circumstances, the value of the Applicable Index (if the   
Applicable Index is an Excess Return Index, a Total Return Index or a Price     
Reference Index the pricing source for which is one or more futures contract    
Settlement Prices), and the value of the ComPS, may be adversely affected.      

In the event of a Market Disruption Event during the Early Determination Period 
or the Determination Period, the Early Redemption Value or Redemption Value, as 
applicable, payable in respect of the ComPS will be calculated using the        
Applicable Index on the Trading Day or Days immediately following the           
termination of such Market Disruption Event. However, if such Market Disruption 
Event remains in effect for longer than 20 consecutive Trading Days and, in the 
reasonable judgment of the Calculation Agent such Market Disruption Event is    
likely to remain in effect, then the Applicable Index Settlement Value for each 
day subject to a Market Disruption Event may be determined in good faith by the 
Calculation Agent based on alternative pricing sources reasonably believed by it
to be indicative of then-prevailing prices for notional transactions in futures 
contracts or commodities equal in size to the Applicable Index Settlement Value.
Because Morgan Guaranty's obligations under the related Related Note will also  
be based on the Applicable Index Settlement Value, Morgan Guaranty may have an  
adverse interest with respect to such determination.                            

HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE                           

Although historically the JPMCI and many of the commodities underlying the JPM  
Indices have shown a positive correlation with inflation, some positive         
correlation with industrial growth and negative correlations with stock and bond
returns (in each case for the United States), there can be no assurance that    
such correlations will prevail in the future. As a result, investors who invest 
in ComPS in reliance on these correlations should individually assess the       
likelihood of such correlations continuing.                                     

CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS THEREOF                       

Prices of commodities and commodity futures contracts may be adversely affected 
by the promulgation of new laws or regulations or by the reinterpretation of    
existing laws or regulations (including, without limitation, those relating to  
taxes and duties on commodities or commodity components) by one or more         
governments, governmental agencies or instrumentalities, courts or other        
official bodies. Any such event could adversely affect the value of the         
Applicable Index and, correspondingly, could adversely affect the value of the  
ComPS.                                                                          
24

424B2
77th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 77th

EXTENSION OF SETTLEMENT DATE OR STATED MATURITY                                 

If any futures contract or constituent commodity included in the Applicable     
Index were to be affected by a Market Disruption Event during any Early         
Determination Period or the Determination Period, the applicable Settlement Date
would be postponed until the later of fifth Business Day after the last day of  
the applicable Early Determination Period or the Determination Period and their 
respective Early Determination Date or Stated Maturity. Such delay could be of  
indefinite duration, during which time a holder of ComPS will not receive the   
Early Redemption Value or Redemption Value thereof, as applicable. With respect 
to ComPS for which the Applicable Index is either a Price Reference Index or an 
Excess Return Index, in the event that payment of the Redemption Value is       
postponed beyond the Stated Maturity, interest will accrue on the Face Amount in
the manner described herein, but no distributions will be payable on such ComPS 
after the Stated Maturity thereof. With respect to ComPS for which the          
Applicable Index is a Total Return Index, in the event that the payment of the  
Redemption Value is postponed beyond the Stated Maturity, no interest, dividends
or distributions in respect of such ComPS will accrue or be payable after the   
Stated Maturity. With respect to all ComPS, no dividends or distributions will  
be payable, and no interest will accrue or be payable, if payment of the ComPS  
Early Redemption Price is postponed beyond any applicable Early Redemption Date.
See "Market Disruption Event" above.                                            

DISCONTINUANCE OF PUBLISHING OF THE RELEVANT JPM INDEX                          

In the event that Morgan Guaranty discontinues publication of the JPM Indices or
the relevant sub-index, the Calculation Agent will continue to calculate in good
faith the Applicable Index for each series of ComPS during the remaining term of
such ComPS, based on the methodology described herein under "Description of the 
ComPS". However, such change of calculation methodology may result in a ComPS   
Redemption Price for such ComPS which is less than the ComPS Redemption Price   
for such ComPS had it been calculated on the basis of the JPM Indices or the    
relevant sub-index.                                                             

POTENTIAL MODIFICATIONS TO THE JPM INDICES AND/OR THE APPLICABLE INDEX          

Morgan Guaranty reserves the right at its discretion to make any modifications  
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.  
As described above under "Description of the ComPS--Early Determination of      
Applicable Index Settlement Value and Redemption Value", if the Benchmark       
Contract for any series of ComPS becomes less liquid or representative, the     
JPMCI Policy Committee could recommend a replacement Benchmark Contract. Such a 
change from a less liquid to a more liquid contract may result in a lower       
Redemption Value for such ComPS than would have been the case if the less liquid
contract had remained the benchmark.                                            

FOR JPM INDIVIDUAL INDICES                                                      

If at any time no replacement contracts can be found to serve as a Benchmark    
Contract with respect to the Applicable Index for any series of ComPS the       
Applicable Index for which is a JPM Individual Excess Return Index or a Total   
Return Index, the Applicable Index Settlement Value of such ComPS will be       
determined at such time as described above under "Description of the            
ComPS--Early Determination of Applicable Index Settlement Value and Redemption  
Value". Such an early determination of the Applicable Index Settlement Value    
with respect to any series of ComPS may result in the holders of such ComPS     
receiving an amount that is less than what indicative commodity and futures     
prices prevailing at any Early Redemption Date or at the Stated Maturity thereof
would otherwise imply. Because Morgan Guaranty will be the Calculation Agent,   
such early determination may raise adverse interests.                           

Additionally, if at any time the Benchmark Contracts then serving as the basis  
for calculating the Applicable Index with respect to any series of ComPS, or the
trading thereof, become subject to any increased cost or additional tax, Morgan 
Guaranty reserves the right to designate a replacement Benchmark Contract or, if
no such contract is designated, to cause, at its option, the Applicable Index   
Settlement Value of such ComPS to be determined at such time as described above 
under "Description of the ComPS--Early Determination of Applicable Index        
Settlement Value and Redemption Value". Because Morgan Guaranty will, at the    
time any Benchmark Contract then serving as the basis for calculating any       
Applicable Index becomes subject to such increased cost or tax, in its          
discretion decide whether or not to cause an early determination of the         
Applicable Settlement Value of any such ComPS, exercise of such option may raise
an adverse interest. Such a change in contracts due to the imposition of any    
increased cost or additional tax may result in a lower Redemption Value for such
ComPS than would have been the case if the contract on which such increased cost
or additional tax were imposed had remained the benchmark.                      

Any early determination of the Applicable Index Settlement Value may cause the  
trading price of ComPS in any secondary market which then exists to decline.    

25

424B2
78th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 78th

FOR JPM BASKET INDICES                                                          

If at any time no replacement contracts can be found to serve as a Benchmark    
Contract with respect to an Applicable Index for any series of ComPS the        
Applicable Index for which is a JPM Basket Excess Return Index or Total Return  
Index, the Benchmark Contract will be removed from the JPM Indices. The basket  
Applicable Index will continue to be calculated using the JPM Basket Index      
calculation methodology by excluding the removed commodity using new weights    
(which sum to 100% for the remaining commodities in the Applicable Index)       
determined by Morgan Guaranty with the advice of the JPMCI Policy Committee. The
new weights will be published by Morgan Guaranty and will remain in effect until
further notice. Such removal of the affected commodity and new weightings for   
the affected Applicable Indices may result in the holders of such ComPS         
receiving an amount that is less than what would have been received if the index
methodology was not changed. Because Morgan Guaranty will be the Calculation    
Agent, such early determination may raise adverse interests.                    

Additionally, if at any time the Benchmark Contracts then serving as the basis  
for Calculating the Applicable Index with respect to any series of ComPS the    
Applicable Index for which is a JPM Basket Excess Return Index or Total Return  
Index, or the trading thereof, become subject to any increased cost or          
additional tax, Morgan Guaranty reserves the right to designate a replacement   
Benchmark Contract or, if no such contract is designated, to cause at its option
the removal of the affected Benchmark Contract from the JPM Indices as described
above under "Description of the ComPS--Change in JPM Basket Index Weightings".  
Because Morgan Guaranty will, at the time any Benchmark Contract then serving as
the basis for calculating any Applicable Index becomes subject to such increased
cost or tax, in its discretion decide whether or not to cause the removal of the
affected commodity and subsequent reweighting of the Applicable Index, exercise 
of such option and discretion may raise an adverse interest. Such removal of    
contracts due to the imposition of any increased cost or tax may result in a    
lower Redemption Value for such ComPS than would have been the case if the      
contract on which such increased cost or tax were imposed had remained the      
benchmark or in the JPM Basket Indices, as the case may be.                     

Any removal or change in contracts underlying the JPM Indices will not cause the
affected indices to drop or rise in value on the day of such change. Rather such
removal or change will cause the Applicable Indices to have their subsequent    
daily changes calculated using a new contract or weights as the case may be.    
Such removal or change in contracts could cause some holders of the ComPS the   
Applicable Index of which is affected by such change or removal to sell their   
ComPS and the trading price of such ComPS in any secondary market which then    
exists to decline.                                                              

EARLY REDEMPTION                                                                

All ComPS may be redeemed by the Trust prior to their Stated Maturity upon the  
occurrence of a Special Event or, if so specified in the applicable Prospectus  
Supplement, redeemed at the option of the holders thereof at certain times. In  
the case of a redemption upon the occurrence of a Special Event, the Early      
Redemption Value paid by the Trust at such time may be significantly less than  
the Redemption Value that would otherwise have been payable had such ComPS not  
been redeemed prior to their Stated Maturity and the occurrence of such Special 
Event may cause the market price of such ComPS in any existing secondary market 
to decline. In the case of an optional redemption by holders of any ComPS       
subject to such provisions, it is likely, under prevailing market conditions,   
that the Early Redemption Value paid by the Trust will be less than the amount  
such holder could have realized by selling such ComPS in an existing secondary  
market, if any. Delay in payment of the ComPS Early Redemption Price due to the 
occurrence of a Market Disruption Event will not entitle holders of such ComPS  
to additional distributions on such ComPS or the accrual of any interest on such
ComPS Early Redemption Price.                                                   

SECONDARY TRADING IN THE COMPS; POSSIBLE ILLIQUIDITY OF THE COMPS               

It is intended that each series of ComPS be listed on a stock exchange; however,
it is not possible to predict whether the necessary number of holders will      
purchase and, for the remaining term of each series of ComPS, continue to hold  
such ComPS in order that a secondary market for each series of ComPS will       
develop and remain in existence, or how any ComPS will trade in any such market 
which does develop. The Underwriters of any issuance of ComPS will not obligated
to make a market for such ComPS; therefore, it is possible that no active       
secondary market for any ComPS will develop.                                    

VALUE OF THE COMPS                                                              

The value of any series of ComPS at any time will depend upon the interaction of
at least two key factors: (i) the value of the Applicable Index and (ii) the    
credit quality of Morgan Guaranty and J.P. Morgan. As discussed above under     
"Description of the ComPS", adverse changes in the Applicable Index will        
directly correlate to adverse changes in the value of the ComPS. A decline in   
the credit quality of Morgan Guaranty and J.P. Morgan could cause the trading   
price of any ComPS in any secondary market then existing to decline. Also, an   
increase in the prevailing interest rates could cause the trading price of      
Excess Return ComPS which pay a fixed rate dividend in any secondary market then
existing to decline.                                                            
26

424B2
79th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 79th

CERTAIN CONSIDERATIONS REGARDING HEDGING                                        

Prospective purchasers of ComPS who intend to hedge against the risks associated
with the market for commodity futures or commodities should recognize the       
complexities of utilizing ComPS in this manner. The formula under which the     
Principal Amount is calculated is not guaranteed to produce distributions to    
holders having readily definable relationships with other commodity futures and 
commodity instruments and products. As described above, in the case of ComPS for
which the Applicable Index is an Excess Return Index or a Total Return Index,   
the value of such ComPS will reflect not only the price of the benchmark        
contracts or the relevant commodity but also, in the case of an Applicable Index
based on futures contracts, the state of the market in which such futures       
contracts are traded (i.e., whether such market is in "backwardation" or        
"contango" over time), all reduced by the Factor. Also, under certain           
circumstances, amounts payable on the ComPS may be based on the good faith      
determination of Morgan Guaranty and not on the Applicable Index. For these     
reasons, investors should be cautious in using ComPS in a hedging program. The  
risks associated with utilizing the ComPS in a hedging program may be magnified 
in periods of substantial futures or commodities price volatility, since        
properly correlating such ComPS either as a hedge of other assets or correlating
such ComPS to the hedge thereof may become more difficult.                      

THE UNDERLYING MARKETS

FUTURES MARKETS                                                                 

An exchange-traded futures contract is a bilateral agreement providing for the  
purchase and sale of a specified type and quantity of a commodity or financial  
instrument during a stated delivery month for a fixed price or, in the case of a
futures contract on an index, providing for the payment and receipt of a cash   
settlement. By its terms, a futures contract provides for a specified settlement
month in which the commodity or financial instrument is to be delivered by the  
seller (whose position is therefore described as "short") and acquired by the   
purchaser (whose position is therefore described as "long") or in which the cash
settlement amount is required to be paid. Prior to the date on which delivery is
to be made under a futures contract, the exchange clearing house will require   
the holders of short positions to state their intentions with respect to        
delivery and, to the extent that such holders elect to make delivery (as opposed
to cash settlement), the clearing house will match them with holders of long    
positions, who will then be required to accept delivery.                        

No purchase price is paid or received on the purchase or sale of a futures      
contract. Instead, an amount of cash or cash equivalents, which varies based on 
the requirements imposed by the exchange clearing houses, but which may be as   
low as 5% or less of the value of the contract, must be deposited with a broker 
as "initial margin". This margin deposit collateralizes the obligations of the  
parties to the futures contract to perform their obligations under such         
contract. Subsequent payments to and from the broker, referred to as "variation 
margin", are then normally made on a daily basis as the price of the futures    
contract fluctuates, thereby making existing positions in the futures contract  
more or less valuable, a process known as "marking to the market". By depositing
and/or receiving margin in the most advantageous form (which may vary depending 
on the exchange, clearing house or broker involved), a market participant may be
able to earn interest on its margin funds, thereby increasing the potential     
total return which may be realized from an investment in futures contracts.     

Futures contracts are traded on organized exchanges, known as "contract markets"
in the U.S., through the facilities of a centralized clearing house and a       
brokerage firm which is a member of the clearing house (a "clearing member").   
The clearing house guarantees the performance of each clearing member which is a
party to a futures contract by, in effect, taking the opposite side of the      
transaction. At any time prior to the expiration of a futures contract, subject 
to the availability of a liquid secondary market, a trader may elect to close   
out its position by taking an opposite position on the exchange on which the    
position entered into, which operates to terminate the position and fix the     
trader's profit or loss. U.S. contract markets, as well as brokers and market   
participants, are subject to regulation by the Commodity Futures Trading        
Commission. Futures markets outside the U.S. are generally subject to regulation
by comparable regulatory authorities.                                           

The principal non-U.S. futures market on which the futures contracts which may  
underlie the Applicable Index are traded is the London Metal Exchange (the      
"LME"). The LME, which is subject to the regulation of the Securities and       
Investments Board and the Securities and Futures Authority (a self-regulatory   
organization), is a primary international exchange for futures contracts on     
aluminum, copper, nickel and zinc (which are included in the JPMCI) and for lead
and tin. Unlike most other futures exchanges (including those in the U.S.), the 
LME is a "principal's market". This means that when a clearing member of the LME
enters into a trade with a client or non-clearing member, there will not        
necessarily be an offsetting contract on the exchange. Rather, such clearing    
member remains liable on such trade, though it may then enter into an offsetting
contract with another member having substantially similar, if not necessarily   
identical, terms. In addition, official LME trading is conducted by open outcry 
during two daily trading sessions of short duration rather than by means of     
continuous trading, as used on most                                             

27

424B2
80th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 80th

exchanges. In addition to such open outcry trading, trading takes place during  
the rest of the day directly between members by means of a telephone trading    
system. Settlement prices for contracts with specified settlement dates are     
determined by a committee selected by the directors of the LME (the "Quotations 
Committee") promptly following the morning trading session, based on the last   
bid and offer prices for the relevant commodity at such trading session or, if  
the Quotations Committee determines there were no such prices, at such other    
level as the Quotations Committee may in its discretion determine at the end of 
each LME trading day. The Quotations Committee is similarly responsible for     
determining LME closing prices. If the Quotations Committee fails to determine  
such closing prices on any LME trading day, such closing prices shall be        
determined by the London Clearing House, which is the clearinghouse for the LME.

United States commodity futures exchanges typically have similar procedures for 
determining end-of-day settlement prices, although each exchange or type of     
commodity may have slightly different procedures. All exchanges have quotations 
or settlement price committees which determine the settlement prices using      
prescribed formulaic methodologies. However, such committees may, if they       
believe the application of the formulaic methodology would yield a settlement   
price which is inappropriate, in their own discretion determine a settlement    
price which is appropriate.                                                     

For precious metals futures contracts, exchanges typically determine the        
settlement price for the most active month contract as the average of the       
highest and lowest prices of trades reported in the closing period. All other   
contracts settlement prices are determined as a spread from this active contract
using spreads determined in the closing range. For energy contracts, exchanges  
typically determine the settlement prices for the "more active contracts" (i.e.,
contracts which meet certain open interest percentage thresholds) as the average
price of all outright transactions during the closing range for such contract.  
In all other contracts, the settlement prices are usually determined as spread  
relationships to the more active contracts.                                     

For agricultural contracts, the formulaic rule to determine the proposed        
settlement price uses the middle "tick" or price within the closing range (e.g.,
if there were an odd number of ticks (i.e., separate price levels at which the  
contract could trade) in the closing range then the middle tick is chosen; if   
there were an even number of ticks within the range, then, of the two middle    
ticks, the tick closest to the previous days settlement price is chosen, if     
there is no range or only one price then that last price is chosen).            

PRECIOUS METALS SPOT MARKETS                                                    

In the case of Bullion ComPS, it may be the case that the value of the Bullion  
ComPS Principal Amount and the Applicable Index (and thus the Redemption Value  
of and distributions on such ComPS) will be determined with reference to the    
Fixing Price of the relevant Fixing Association. The relevant Fixing Association
for gold and silver is the London Bullion Market Association (the "LBMA"); in   
the case of platinum and palladium, the relevant Fixing Association is the      
London Platinum and Palladium Market (the "LPPM"). The Fixing Price represents  
the spot price for the relevant underlying commodity as determined in accordance
with the procedures of the relevant Fixing Association. The fixing procedures   
for the LBMA and the LPPM are similar. Fixings occur twice each trading day for 
gold, platinum and palladium and once each trading day for silver. At the       
commencement of the fixing, an opening price is announced by the presiding      
official. This price is relayed to the dealing rooms of the members of the      
relevant Fixing Association. The price is in turn relayed to the customers of   
such members and on the basis of orders received, such members declare as a     
buyer or a seller. Provided that both buying and selling interests are declared,
members are then asked to state the amount they wish to trade. If the amounts of
buying and selling do not balance, the same procedure is followed again at      
higher or lower prices until a balance is achieved. The chairperson of the      
relevant Fixing Association may exercise some discretion in determining the     
final Fixing Price. Because members of the LBMA must submit fixed orders for    
silver (i.e., no additional attempts at buying or selling occur as described in 
the second preceding sentence), trade imbalances may arise from time to time in 
the determination of the Fixing Price for silver.                               

The LBMA is regulated by the Bank of England in accordance with the provisions  
of the London Code of Conduct. The London Code of Conduct is issued by the Bank 
of England and sets out the standards that firms are expected to meet when      
trading in the London wholesale bullion and money markets. In addition, all     
market marking members of the LBMA, in common with all U.K.-based banks, are    
subject to capital adequacy and liquidity requirements and regular supervisory  
meetings to consider the adequacy of their management, systems and controls. The
Bank of England takes an active role in the LBMA gold market, including holding 
certain gold for delivery in its vaults and holding gold in accounts.           

INVESTING IN THE COMMODITIES AND COMMODITY FUTURES MARKETS                      

Investments in commodities and commodity futures markets offer potential returns
from several sources and strategies, two of which are as follows: (i) the change
in price of the underlying commodity or commodity futures contract ("Price      
Return") and (ii) the cumulative return created by a continuous investment in   
the same type of futures contract by buying, holding and then                   
28

424B2
81st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 81st

selling such contracts as they approach expiration and reinvesting the notional 
proceeds of such sale in the same type of contract with a more distant          
expiration date (such cumulative return, "Excess Return", is the sum of the     
price returns for all such contracts held during their holding period, and such 
Excess Return is often described or accounted for as the sum of Spot Return plus
Roll Return).                                                                   

      Price Return.  Price Return is the return that arises from changes
over time in prices of futures contracts or in the prices of the      
     commodities themselves, as applicable. Thus, if on the first day of a given
   month the price of the futures contract is $15.00, and on the 30th day of
 such month the price of the futures contract is $15.50, the investor in
  such contract has earned a price return of 3.33% on the initial notional
amount of $15.00.                                                     

       Excess Return.  Excess Return is the cumulative return of holding a
     continuous investment in commodity futures contracts. Excess Return is just
     the cumulative return of the individual Price Returns of the contracts held
during their holding period. Thus, Excess Return is calculated as the 
   return of holding a certain contract and, as it nears expiration, selling
such contract and reinvesting the notional proceeds of the sale into  
another contract with a more distant expiration date. Commodity market
  participants often describe Excess Return as the sum of Spot Return plus
     Roll Return. Describing Excess Return as Spot Return plus Roll Return helps
     describe the cumulative price returns of the contracts held in terms of (a)
   overall trends in the spot or nearby futures prices (Spot Return) and (b)
the average shape of the forward curve during the roll days over the  
holding period (Roll Return).                                         

"Spot Return" is defined as the change in the price of the nearest to expiration
contract underlying the Excess Return calculation from the beginning of the     
calculation period to the end of the calculation period (without regard to the  
actual underlying contract referenced).                                         

"Roll Return" is the number that, when added to the Spot Return, gives the true 
Excess Return. Roll Return represents the portion of return on a continuous     
investment in nearby futures that one might attribute to the average shape over 
the holding period of the forward curve during the roll days (i.e., whether the 
forward contracts that were rolled into were so rolled at a premium or a        
discount to the nearer to expiration contracts).                                

EXAMPLE                                                           

The following table illustrates the calculation of the Excess Return of a       
continuous investment in nearby futures over a 2 period holding period and shows
how Spot Return plus Roll Return are defined and calculated so that the sum     
thereof equals the actual Excess Return calculation.                            

                                                        [Enlarge/Download Table]

                                                                      END OF        END OF            
                                                             DAY 1   PERIOD 1      PERIOD 2      TOTAL
                                                             ------  --------      --------      -----
                                                                                                      
Futures #1.................................................. $15.00  $  15.00                         
Futures #2.................................................. $14.75  $  14.50      $  15.00           
Return on Futures #1........................................             0.00%                        
Return on Futures #2........................................               NA          3.45%          
Return on Excess Return.....................................             0.00%(a)      3.45%(b)  3.45%

---------------                                                                 

 (a) return on Futures #1 for first month holding period, rounded to two
decimal places                                                                  
  (b) return on Futures #2 for second month holding period, rounded to two
decimal places                                                                  

In the preceding example, if the change in value of an index had been calculated
entirely based on Futures #1 beginning on day 1, had ceased to be based on such 
contract at the end of Period 1 and had begun to be calculated entirely based on
Futures #2 on such day, and had continued to be based entirely on such contract 
to expiration at the end of Period 2, the index would have appreciated by 3.45%,
despite the fact that the price of Futures #1 on day 1 and the price of Futures 
#2 at the end of Period 2 were equal (i.e. Spot Return was 0.00%). Thus, while  
Futures #1 yielded no price return, Futures #2 yielded a price return of 3.45%  
during its holding period. Such a continuous investment in nearby futures       
contracts produced a return of 3.45% over the two period holding period, which  
can be accounted for as a Spot Return of 0.00% plus a Roll Return of 3.45%. Spot
Return is (($15.00/$15.00) -1) or 0.00%, since the beginning price of Futures #1
is $15.00 and the ending price of Futures #2 is $15.00 over the total holding   
period. Because Roll Return is the number that, when added to the Spot Return   
calculation, gives the true Excess Return, and because Excess Return is 3.45% in
the above example, Roll Return must be Excess Return minus Spot Return          
(3.45%-0.00%), or 3.45%. However, this is only one example of a possible futures
market alignment; in any market, Excess Return, or the sum of Spot Return plus  
Roll Return, could be positive or negative over any given holding period.       

29

424B2
82nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 82nd

The price of the longer-dated position may be higher or lower than the price of 
the shorter-dated position based on a variety of factors, including the cost of 
borrowing, transportation, storage and insurance of commodities, the            
expectations of market participants with respect to future price trends and     
general inventory, supply and demand trends.                                    

Investors may also calculate the "total return" from an unlevered, continuous   
investment in nearby commodity futures contracts by adding to the futures return
a component of return calculated based on the notional amount of their          
investment in commodity futures, as it changes from time to time, would earn if 
invested as cash. Such return (the "Collateral Return Component") can be added  
to (and thus reinvested in) the futures return component to calculate the "total
return" from such an unlevered, continuous investment.                          

The following table illustrates a simplified calculation of the total return of 
a continuous investment in nearby commodity futures contracts over a 2 period   
holding period. The example uses the futures return from the table above and    
assumed Collateral Return Components:                                           

Total Return Example                                                            

                                                        [Enlarge/Download Table]

                                                             PERIOD 1  PERIOD 2  TOTAL 
                                                             --------  --------  ----- 
                                                                                       
Return attributable to change in value of futures                                      
  contracts.................................................   0.00%     3.45%         
Return attributable to Collateral Yield Component...........   0.50%     0.55%         
Total Return................................................   0.50%     4.00%   4.52%*

---------------                                                                 
* 4.52% equals the total return from compounding: (1 + 0.005) X (1 + 0.04) - 1  

In the above example, if the futures return had been as calculated in the Excess
Return Example and the Collateral Yield Component was as specified, the total   
return over the two period holding period would be 4.52%.                       

THE JPM INDICES 

The JPM Indices have been developed and are calculated by Morgan Guaranty as    
indices proprietary to J.P. Morgan. The JPMCI basket, the primary commodities   
index calculated by Morgan Guaranty, is the arithmetic weighted average of the  
cumulative returns afforded by notional investments in exchange-traded futures  
contracts on certain industrial, non-financial commodities (including base      
metals, energy products and precious metals). Each of the JPM Indices is        
designed as a measure of the performance over time of the markets for the       
applicable commodities.                                                         

Morgan Guaranty calculates two investable versions of the JPM Indices, the      
Excess Return Indices and the Total Return Indices. Subject to the specific     
terms of each methodology set forth below, each methodology represents a method 
for determining the cumulative change in value of notional positions in certain 
commodities or commodity futures contracts, and does not represent an actual    
investment in commodities or commodity futures contracts. Calculations for the  
JPM Indices are based on end-of-day futures settlement prices for energy,       
precious metal and agriculture components and on LME end-of-day closing prices  
for third Wednesday dates for base metal components. JPM Indices which are based
upon only one underlying commodity (whether computed on an excess return or     
total return basis) are referred to as "JPM Individual Indices". JPM Indices    
which are based upon at least two or more underlying commodities (whether       
computed as an excess return or a total return basket) are referred to as "JPM  
Basket Indices".                                                                

As long as any series of ComPS is outstanding, Morgan Guaranty will cause the   
Applicable Index relating to such series of ComPS to be published by one or more
public reporting entities as a JPM Index. At the date of this Prospectus, such  
information is available on both Reuters and Bloomberg.                         

JPM INDIVIDUAL INDICES                                                          

EXCESS RETURN METHODOLOGY                                                       

The actual methodology applied by Morgan Guaranty in calculating Excess Return  
JPM Individual Indices is set forth below. If the Applicable Index of any series
of ComPS is an Excess Return Index, the following methodology will be applied by
the Calculation Agent in calculating the Applicable Index:                      

The value of the relevant Excess Return Index on any Trading Day not subject to 
a Market Disruption Event will be determined with reference to the following    
formula:                                                                        

I(t) = I(t-1) + Change(t) 

30

424B2
83rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 83rd

    Where "I(t)" is the value of the relevant Excess Return Index on the
      date of determination (such date being referred to as "(t)"); "I(t-1)"
       is the value of the relevant Excess Return Index on the Trading Day not
      subject to a Market Disruption Event immediately preceding the date of
       determination (such date being referred to as "(t-1)"); and "Change(t)"
      is equal to the product of (i) I(t-1) and (ii) the sum of the weighted
  percentage changes on the date of determination of the U.S. dollar
     prices of the futures contracts underlying the Applicable Index. Each
        such weighted percentage change shall be equal to the product of (a) the
       U.S. dollar percentage gain or loss on such underlying contracts to the
        date of determination from the immediately preceding Trading Day that is
not subject to a Market Disruption Event multiplied by (b) the  
     applicable futures contract's weight in the Applicable Index for such
  date of determination. The methodology behind the weighting of the
  futures contracts is set forth under the caption "Rebalance of JPM
Indices".                                                       

For example, to calculate the value of an Excess Return Index (I(t)) on a       
Trading Day not subject to a Market Disruption Event for which I(t-1) equals 100
and on which the only Benchmark Contract moves in value from $14.50 to $15.00   
(resulting in an Index change of 3.4482759%),                                   

I(t) = 100 + (100 X 0.034482759)

I(t) = 100 + 3.4482759

I(t) = 103.4482759

TOTAL RETURN METHODOLOGY                                                        

The methodology applied by Morgan Guaranty in calculating Total Return JPM      
Individual Indices is set forth below. If the Applicable Index of any series of 
ComPS is a Total Return Index, the following methodology will be applied by the 
Calculation Agent in calculating the Applicable Index:                          

The value of the relevant Total Return Index for any Trading Day not subject to 
a Market Disruption Event will be determined with reference to the following    
formula:                                                                        

I(t) = I(t-1) + Change(t) + R(t)

        Where "I(t)" is the value of the relevant Total Return Index on the date
        of determination (such date being referred to as "(t)"); "I(t-1)" is the
       value of the relevant Total Return Index on the Trading Day not subject
to a Market Disruption Event immediately preceding the date of  
       determination (such date being referred to as "(t-1)"); and "Change(t)"
      is equal to the product of (i) I(t-1) and (ii) the sum of the weighted
  percentage changes on the date of determination of the U.S. dollar
     prices of the futures contracts underlying the Applicable Index. Each
        such weighted percentage change shall be equal to the product of (a) the
       U.S. dollar percentage gain or loss on such underlying contracts to the
        date of determination from the immediately preceding Trading Day that is
not subject to a Market Disruption Event multiplied by (b) the  
     applicable futures contract's weight in the Applicable Index for such
        date of determination. Also, "R(t)" is the return arising for the period
   from (t-1) to (t) from interest payable on the nominal value of the
  Applicable Index, which shall be based on the rate determined with
reference to the following formula:                             

R(t) = I(t-1) X Y(t)

       Where "I(t-1)" has the meaning set forth in the preceding paragraph and

Y(t) = [1/(1-Q)](Days/91) - 1 

    Where "Q" equals the most recently available noncompetitive discount
   rate on 13-week U.S. Treasury Bills (updated on weekly auction), as
        found in the H.15(519) report published by the Board of Governors of the
   Federal Reserve System (or, if unavailable, a successor rate with a
   maturity equal to or less than three months, as Morgan Guaranty may
      determine in its reasonable discretion), multiplied by the quotient of
      91/360, and "Days" equals the number of calendar days from Trading Day
(t-1) to (t).                                                   

31

424B2
84th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 84th

For example, to calculate the value of a Total Return Index for any Trading Day 
not subject to a Market Disruption Event for which I(t-1) equals 100, on which  
the only Benchmark Contract moves from $14.50 to $15.00, on which the Q (the    
applicable discount rate (5.00%) multiplied by 91/360) equals 1.26388889% and   
for which "Days" equals 1,                                                      

I(t) = 100 + (100 X 0.0344827586) + 100 X [(1/(1-0.0126388889)](1/91) - 1)

I(t) = 100 + 3.44827586 + (100 X 0.0001397838)

I(t) = 100 + 3.44827586 + .01397838 

I(t) = 103.46225424 

REBALANCE OF JPM INDICES                                                        

Because the JPM Indices are measures of a continuous investment in commodity    
futures contracts, and because most futures contracts have maturities (generally
from one to three months) which are shorter than the life of any ComPS, the     
futures contracts serving as bases from which to calculate the change in value  
of the JPM Indices must be replaced on a periodic basis during the applicable   
Rollover Period (as defined below) for each. If the Applicable Index for any    
series of ComPS is an Excess Return Index or Total Return Index, the futures    
contracts on the commodity underlying the Applicable Index will similarly be    
replaced during the Rollover Period. The "Rollover Period" is the period of five
consecutive Trading Days commencing on the fifth Trading Day of the month in    
which such replacement occurs. During each day of the Rollover Period, a portion
of change in value of the Applicable Index ceases as of the end of such day to  
be based on the change in value of existing contracts (the "Old Contracts") and 
begins as of the beginning of the next day to be based on the change in value of
the New Contracts. The "New Contracts" are those contracts which are the nearest
designated futures contract which (i) have a termination of trading at least ten
Trading Days into the month following the Rollover Period and (ii) have a first 
"notice day" or "delivery date" at least ten Trading Days into the month        
following the Rollover Period. The "notice day" is the first day on which       
persons holding a short position on such futures contract must inform the       
exchange on which such contract is traded that they will deliver under such     
contract. The "delivery date" is the date on which a delivery of the physical   
commodity is contemplated under the terms of the contract.                      

32

424B2
85th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 85th

In the case of energy products for which there exist designated futures         
contracts for delivery in each month of the year, the New Contracts will be     
different from the Old Contracts. As indicated in the table below, which lists  
each of the designated contracts, the rebalancing procedure will occur on a less
frequent basis for precious metals and base metals, and as a result the New     
Contracts and Old Contracts for any Rollover Period may be the same.            

--------------------------------------------------------------------------------

Table: Benchmark Contracts Underlying Excess Return and Total Return Indices    

                                                                [Download Table]

                                       Applicable                                
No.       Commodity Name/Units          Delivery     Exchange  Units per Contract
---------------------------------------------------------------------------------
                                                                                 
 1    Aluminum $/MT (Metric Tonne)   LME Warehouses  LME       25 tonnes         
      (High Grade Primary Aluminum)  Worldwide                                   
 2    Copper $/MT                    LME Warehouses  LME       25 tonnes         
      (Copper Grade A)               Worldwide                                   
 3    Nickel $/MT                    LME Warehouses  LME       6 tonnes          
      (Primary Nickel)               Worldwide                                   
 4    Zinc $/MT                      LME Warehouses  LME       25 tonnes         
      (Special High Grade Zinc)      Worldwide                                   
 5    Heating Oil #2, cent/gal       New York        NYMEX     42,000 gallons    
                                     Harbor                                      
 6    Natural Gas $/MM BTU           Henry Hub,      NYMEX     10,000 MM BTU     
                                     Louisiana                                   
 7    Unleaded Gasoline cent/gal     New York        NYMEX     42,000 gallons    
                                     Harbor                                      
 8    Light "Sweet" Crude Oil $/BBL  Cushing,        NYMEX     1,000 bbl         
                                     Oklahoma                                    
 9    Gold $/troy oz                 COMEX-          COMEX     100 troy oz       
      (.995 fineness)                approved                                    
                                     vaults                                      
10    Silver cent/troy oz            COMEX-          COMEX     5,000 troy oz     
      (.999 fineness)                approved                                    
                                     vaults                                      
11    Platinum $/troy oz             NYMEX-          NYMEX     50 troy oz        
                                     approved                                    
                                     vaults                                      
12    No. 2 Yellow Corn cent/bushel  CBOT Delivery   CBOT      5,000 bushels     
                                     Sites                                       
13    No. 2 Yellow Soybeans          CBOT Delivery   CBOT      5,000 bushels     
      cent/bushel                    Sites                                       
14    Hard Winter Wheat cent/bushel  CBOT Delivery   CBOT      5,000 bushels     
                                     Sites                                       



No.                  Designated Contract                                         
---  ----------------------------------------------------                        
                                                                                 
 1   Third Wednesday of every March, June, September,                            
     December(1)                                                                 
 2   Third Wednesday of every March, June, September,                            
     December                                                                    
 3   Third Wednesday of every March, June, September,                            
     December                                                                    
 4   Third Wednesday of every March, June, September,                            
     December                                                                    
 5   Every month                                                                 
 6   Every month                                                                 
 7   Every month                                                                 
 8   Every month                                                                 
 9   February, April, June, August, December                                     
10   March, May, July, September, December                                       
11   January, April, July, October                                               
12   March, May, July, December                                                  
13   January, March, May, July, November                                         
14   March, July, December                                                       

Additional underlying futures contracts may from time to time be added to the   
JPM Indices and may thereafter serve as Applicable Indices. Information         
substantially similar to that disclosed in the preceding table will be disclosed
in any Prospectus Supplement relating to such additional Applicable Indices.    

As discussed above, for JPM Individual Indices and for the Applicable Indices,  
the replacement of the contracts serving as the basis for the calculation of    
index change will be effected on a proportionate basis over the five day        
Rollover Period in order to avoid the risks of effecting such replacement       
entirely on a single day (e.g., a day on which the applicable market displays   
unusual volatility).                                                            

As a result of such process of replacement, the weighting of contracts in the   
Applicable Indices shall be such that for the Trading Days in any month up to   
and including the first day of the Rollover Period for such month, the Change(t)
(as described above) will be calculated as 100% of the daily change of the      
underlying Old Contracts. The Change(t) for the second Trading Day of the       
Rollover Period (assuming no Market Disruption Event) shall be calculated based 
80% on the change attributable to the Old Contracts plus 20% on the change for  
the New Contacts, with similar adjustments made for each day of the Rollover    
Period.                                                                         

---------------                                                                 

(1) The LME trades contracts on every business day for three months and monthly 
  contracts maturing on the third Wednesday of each of the next 12 or more
 months. The most actively traded contracts are the 3-month forward, the
cash, and the contract maturing the third Wednesday of each month.    
33

424B2
86th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 86th

Accordingly, the relative weights of the Old Contracts and the New Contacts     
during any given day of a calendar month for calculation of the Change(t) on    
such day will be as follows:                                                    

--------------------------------------------------------------------------------

Standard Rollover Period

                                                                [Download Table]

                     Trading Day                          Old Contract  New Contract
                       of Month                             Weight %      Weight %  
                     -----------                          ------------  ------------
                                                                                    
  1-4....................................................     100             0     
  5......................................................     100             0     
  6......................................................      80            20     
  7......................................................      60            40     
  8......................................................      40            60     
  9......................................................      20            80     
10.......................................................       0           100     
11-month end.............................................       0           100     

The occurrence of a Rollover Period does not, by itself, create a change in the 
value of the Applicable Index. The occurrence of a Rollover Period merely causes
the index change calculation, over the course of the Rollover Period, to be     
calculated using a new underlying futures contract. For example, assuming a     
constant Old Contract value of $15.00 and a constant New Contract value of      
$14.00 throughout the Rollover Period (and thus a daily percentage change for   
each day of 0%) and a starting Applicable Index value of 100, the following     
indicates the change in the futures-related portion of the value of the         
Applicable Index (I(t)) during such Rollover Period:                            

--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                         Old Contract          New Contract                
                                                     --------------------  --------------------    Index   
Trading Day                                          Weight %    % Change  Weight %    % Change  Change(t)*
-----------                                          --------    --------  --------    --------  ----------
                                                                                                           
     5..............................................   100          0          0          0          0     
     6..............................................    80          0         20          0          0     
     7..............................................    60          0         40          0          0     
     8..............................................    40          0         60          0          0     
     9..............................................    20          0         80          0          0     
    10..............................................     0          0        100          0          0     

    * Index change(t) is zero for each day because the percentage price change
of the underlying futures contracts is zero for each day                        

However, if a Market Disruption Event occurs during a Rollover Period (i.e., on 
any day on which a replacement is otherwise scheduled to take place), such      
replacement will be postponed until the next Trading Day of the Rollover Period 
on which the Market Disruption Event ceases to be in effect. On the Trading Day 
such Market Disruption Event ceases to be in effect, the replacement for that   
day and for all preceding days during which such Market Disruption Event was    
continuing will be effected. The Change(t) for all Trading Days from the day    
first subject to a Market Disruption Event to the first Trading Day not subject 
to a Market Disruption Event shall use the contract weights for the Trading Day 
on which the Market Disruption Event began. If the Market Disruption Event      
remains in effect for the remainder of the Rollover Period, the Old Contract    
will be replaced by the New Contract to the full extent not previously replaced 
at the end of the next succeeding Trading Day on which such Market Disruption   
Event ceases to be in effect. The following chart illustrates the replacement   
process for a Rollover Period including the occurrence of a Market Disruption   
Event (indicated as an "MDE") on the seventh Trading Day of the month:          

34

424B2
87th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 87th

--------------------------------------------------------------------------------

Example of Rollover Period with Market Disruption Event 

                                                        [Enlarge/Download Table]

                        Trading Day                           Old Contract  New Contract
                          of Month                              Weight %      Weight %  
------------------------------------------------------------  ------------  ------------
                                                                                        
      1-4...................................................      100             0     
      5.....................................................      100             0     
      6.....................................................       80            20     
      7 (MDE)...............................................       60            40     
      8.....................................................       60            40     
      9.....................................................       20            80     
     10.....................................................        0           100     
     11-month end...........................................        0           100     

For an Applicable Index which is an Excess Return Index or a Total Return Index,
because of the occurrence of the Market Disruption Event on Trading Day 7, the  
Index would not be officially calculated and no roll would occur. Since no      
Market Disruption Event occurs on Trading Day 8, an index value is determined   
for Trading Day 8, and the Change(t) is calculated using the relative contract  
weights applicable to the Trading Day first subject to the Market Disruption    
Event (in this example, Trading Day 7) using the index level on Trading Day 6   
(the immediately preceding Trading Day not subject to a Market Disruption Event)
as I(t-1).                                                                      

JPM BASKET INDICES                                                              

JPM Basket Indices are arithmetic weighted baskets consisting of 2 or more      
commodities. The base metal, energy, and precious metals JPM Basket Indices have
component weights that are in the same proportion as their weights within the   
JPMCI Basket Index. The agricultural JPM Basket Index has equally weighted      
components.                                                                     

The JPMCI subindex component weights are in the same proportion as they are in  
the JPMCI basket (e.g., the base metals basket component relative weights are   
the same as their relative weight within the JPMCI basket). The JPM Basket Index
arithmetic weights are shown below. Column C shows the weights for the JPMCI    
Basket Indices, while column E shows the weights for the JPMCI sub-indices: base
metals, energy, precious metals, and agricultural.                              

35

424B2
88th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 88th

--------------------------------------------------------------------------------

TABLE OF SUBINDEX WEIGHTS:                                                      

                                                                [Download Table]

A         B                  C                       E              
                             JPMCI   D                              
                             BASKET    MEMBER OF         WEIGHT     
EXCHANGE      COMPONENT      WEIGHT  WHICH SUBINDEX   IN SUBINDEX*  
--------      ---------      ------  --------------   ------------  
                                                                    
LME       Aluminum           9%      Base metals     9/22 or 40.91% 
LME       Copper             8       Base metals     8/22 or 36.36% 
LME       Nickel             2       Base metals     2/22 or 9.09%  
LME       Zinc               3       Base metals     3/22 or 13.64% 
                                                     ----           
                                                     22/22 or 100%  
NYMEX     Crude Oil          33      Energy          33/55 or 60.00%
NYMEX     Heating Oil        10      Energy          10/55 or 18.18%
NYMEX     Unleaded Gasoline  5       Energy          5/55 or 9.09%  
NYMEX     Natural Gas        7       Energy          7/55 or 12.73% 
                                                     ----           
                                                     55/55 or 100%  
COMEX     Gold               15      Precious        15/23 or 65.22%
COMEX     Silver             5       Precious        5/23 or 21.74% 
NYMEX     Platinum           3       Precious        3/23 or 13.04% 
                             ----                    ----           
                             100%                    23/23 or 100%  
CBOT      Corn               na      Agricultural    1/3 or 33.33%  
CBOT      Soybeans           na      Agricultural    1/3 or 33.33%  
CBOT      Wheat              na      Agricultural    1/3 or 33.33%  
                                                     -----          
                                                     3/3 or 100%    

---------------                                                                 
* Subindex percentage weights are shown rounded to two decimal places.          

The JPMCI arithmetic weights for the JPM Basket Indices will not change except  
under circumstances described herein resulting in the removal of a commodity    
from the JPM Indices.                                                           

BASKET CALCULATION METHODOLOGY                                                  

Each basket's return will be calculated using the JPMCI basket calculation      
methodology. For a Total Return Index the Index calculation is as follows (the  
Excess Return Index calculation is the same except that it excludes the daily   
collateral interest):                                                           

Index (today) = Index (prior) + Futures P&L + Daily Collateral Interest         

where.                                                                          

Daily Collateral Interest = Index (prior) X Tbill Return = R(t) as defined in   
                                                  Total Return
                                                 Methodology
                                                          under JPM Individual
                                             Indices

and                                                                             

Futures P&L = the futures profit and loss (P&L) for any basket is the sum of    
          individual Futures P&L calculations for all commodities in the
basket. The futures P&L calculation is of the form: 

           P&L equals [volume X change in price of designated contract(s)]

REBALANCING JPM BASKET INDICES. To keep a continuous investment in the          
commodity, the JPM Basket Indices must periodically change the contract         
underlying the Future P&L calculation as the referenced contract nears its      
expiration. To accomplish this the index transfers its Future P&L attribution   
from the expiring contract to the next nearby designated contract. Such change  
in Future P&L attribution does not change the index value, rather it changes the
underlying contract referenced for the following day's Future P&L changes. Each 
month, the index implements this over a predefined 5 day "roll period" in which 
the volume attributed to the expiring contract is reduced 20% each day (until   
zero) while the volume attributed to the new designated contract is increased   
20% each day (until 100%). For the JPM Basket Indices, the volumes each month   
are determined on the first good trading day preceding the beginning of the Roll
Period on which none of the                                                     

36

424B2
89th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 89th

eleven commodities comprising the JPMCI Basket are subject to a Market          
Disruption Event (the "Rebalance Date"), typically the 4th trading day of the   
month. The volumes for each commodity in the baskets are determined by taking   
the index value multiplied by the commodity weight in the basket divided by the 
commodity price on the Rebalance Date, i.e.,                                    

Volume = [Index Value X Commodity Weight]/Commodity Price.                      

Mathematically this is achieved as detailed below:                              

We adopt the following notation: (the subscript i always refers by number to the
commodities in JPMCI)                                                           

                                                                [Download Table]

NO.      OFFICIAL NAME      EXCHANGE
---      -------------      --------
                                    
1      Aluminum             LME     
2      Copper               LME     
3      Nickel               LME     
4      Zinc                 LME     
5      Heating Oil          NYMEX   
6      Natural Gas          NYMEX   
7      Unleaded Gasoline    NYMEX   
8      Crude Oil            NYMEX   
9      Gold                 COMEX   
10     Silver               COMEX   
11     Platinum             NYMEX   
12     Corn                 CBOT    
13     Soybeans             CBOT    
14     Wheat                CBOT    

w(i) = Constant rebalancing weight for commodity i, e.g. w(3) = 0.02 or 2%      
nickel for the JPMCI Basket                                                     
V(Oi) = The prior (or "old") number of units of commodity i held before         
rebalancing                                                                     
V(Ni) = The new number of units of commodity i held forward after rebalancing   
P(it) = Defined spot price of commodity i at time t                             
O(it) = Old price of commodity i at time t (e.g. the 1st nearby futures)        
N(it) = New price of commodity i at time t (e.g. the 2nd nearby futures)        
I(t) = Index value at time t                                                    
C = Variable on current rebalancing date                                        
RTB = The most recently available offer discount rate on 13-week U.S. treasury  
      bill as found in the H.15 (519) report published by the Board of Governors
of the Federal Reserve System.                                      
Q = Quarterly discount rate calculated from RTB                                 
Y = The collateral yield based on Q from (t-1) to (t) where (t) is the date of  
 determination (not subject to a Market Disruption Event) and (t-1) is the
  Trading Day not subject to a Market Disruption Event immediately preceding
the date of determination.                                              

(1) Y = [1/(1-Q)] (Days/91) - 1                                                 
Q = RTB X 91/360                                                        

Days = The number of calendar days from Trading Day (t-1) to (t)                

On the Rebalancing Date, the volumes are reset according to the following       
formulae:                                                                       

(2) I(C) = I(t)                                                                 
(3) V(NiC) = w()I(C) /N(iC,) for all i = 1,2,3... for all commodities in the    
JPMCI-style basket                                                              

To determine V(NiC) for any of the component sub-indices the relevant sub-index 
value is used and the weight term is changed so that the sum of commodities in  
the subindex still equals 1 (as shown in Column E of the table of Subindex      
Weights on page [43]). for example, in the precious metals subindex the         
component weights are: Gold: 65.22%; Silver: 21.74% and Platinum: 13.04% (15/23,
5/23, and 3/23 respectively).                                                   

Note that neither the index nor sub-index values change at the rebalancing time.
The rebalancing sets the volumes for the new monthly period.                    

37

424B2
90th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 90th

To determine the index value for the JPMCI-style baskets at any time within the 
month the following equations are used:                                         

For the JPM Basket (Excess Return Indices)                                      

(4a)I(t) = I(t-1) + Combined Futures P/L                                        

For the JPM Basket (Total Return Indices)                                       
(4b)I(t) = I(t-1) + Combined Futures P/L + Daily Collateral Interest(t)         

(5) Daily Collateral Interest(t) = I(t-1) X Y(t) = R(t)                         

Equation (5) accrues the interest for the JPM Basket Total Return Indices. The  
collateral interest is based on the yield (equation (1)) and the initial value  
of the index for such period (i.e. settlement value for the Index at (t-1), the 
last good Trading Day not subject to a Market Disruption Event), reflecting the 
fact that this is the position that would have been collateralized. Futures P/L 
on weekends and exchange holidays is zero. Interest accrues on an actual days   
basis over weekends and holidays at the previous day's rate applicable to the   
index (I(t-1)).                                                                 

(6) Individual-Futures P/L Calculation for JPM Basket Indices                   

                                                        [Enlarge/Download Table]

        End of Trading Day  P/L Calculation for Trading Day not subject to a Market Disruption Event
                                                                                                    
5                           (O(i5) - O(i4) )V(Oi)                                                   
6                           0.8(O(i6) - O(i5) )V(Oi) + 0.2(N(i6) - N(i5) )V(Ni)                     
7                           0.6(O(i7) - O(i6) )V(Oi) + 0.4(N(i7) - N(i6) )V(Ni)                     
8                           0.4(O(i8) - O(i7) )V(Oi) + 0.6(N(i8)- N(i7) )V(Ni)                      
9                           0.2(O(i9) - O(i8) )V(Oi) + 0.8(N(i9) - N(i8) )V(Ni)                     
10                          (N(i10) - N(i9) )V(Ni)                                                  
j (j>10 or j<5)             (N(ij) - N(ij-1) )V(Ni)                                                 

The Combined Futures P&L for the applicable basket is the sum of individual     
Futures P&L calculations for all commodities in the basket. The Futures P&L     
calculations shown from trading day ten above continue into and include the     
fourth trading day of the next month in determining the value of the index at   
any given time. The calculation on Trading Days five through ten reflects the   
effect of rolling from the old contract into the new over a five day period.    
Although 20% of the volume is rolled on the fifth Trading Day the amount held at
the start of the day is 100% of the old contract, as the roll will only occur at
the end of the Trading Day at the settlement price. Therefore, to determine the 
profit or loss on that fifth Trading Day the index uses 100% of the old contract
volume, as that was the contract held during the course of the day by the index.

MARKET DISRUPTION EVENT ADJUSTMENTS:                                            

For any commodity in the basket, if any day during the roll period is subject to
a Market Disruption Event for such commodity, the roll for such commodity will  
not take place on such day, however the roll for all unaffected commodities will
take place. Although some commodity rolls are taking place, the Futures P&L     
calculation is defined as zero for the Applicable Index for any Trading Day     
subject to a Market Disruption Event, and the Applicable Index is not officially
calculated. For the affected commodity, the Futures P&L calculation will        
continue to use the volume fraction in place on the first Trading Day subject to
a Market Disruption Event for such commodity. The change in volumes for the     
affected commodity will be postponed until the next Trading Day of the Rollover 
Period on which a Market Disruption Event affecting such commodity ceases to be 
in effect. On such Trading Day, the replacement for that day and all preceding  
days will be effected for such affected commodity at the end of the day. If the 
Market Disruption Event remains in effect for the remainder of the Rollover     
Period, the affected commodity's old contract volume will be replaced with the  
new contract volume to the full extent not previously replaced at the end of the
next succeeding Trading Day on which such Market Disruption Event cease to be in
effect.                                                                         

On the first Trading Day not subject to a Market Disruption Event for all       
commodities in the Applicable Index, such day referred to as "(t)", the Futures 
P&L Calculation for the period from (t-1) to (t) will be implemented using the  
sum of the daily P&L Calculations for all commodities from the first Trading Day
subject to a Market Disruption Event until Trading Day (t). However such daily  
P&L Calculations are subject to adjustments for the price changes and volume    
fractions used as follows:                                                      

(I)    price changes for each commodity during this period are subject to the   
    following adjustments: (a) for any Trading Day on which a commodity is
    subject to a Market Disruption Event the change in price is defined as
       zero (whether a settlement price was published or not), (b) for the first
Trading Day on which such commodity was not subject to a Market   
       Disruption Event the price change is defined as the price change over the
       time period the commodity was subject to a Market Disruption Event (i.e.,
  it is the price change from the Trading Day immediately prior to the
onset of the Market                                               

38

424B2
91st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 91st

    Disruption Event affecting such commodity to the first Trading Day not
       subject to such Market Disruption Event affecting the commodity), and (c)
      for commodities not subject to a Market Disruption Event on such day and
       the immediately preceding Trading Day, price changes for such Trading Day
are the same daily price change as noted in Equation (6).         

(II)   volume fractions used for each daily P&L Calculation during this period  
     are (a) for any Trading Day on which a commodity is subject to a Market
   Disruption Event, or for the first Trading Day such commodity was not
   subject to such Market Disruption Event, the volume fraction used for
       such commodity is the same volume fraction in effect on the first Trading
      Day on which the commodity became subject to the Market Disruption Event
      as noted in Equation (6) and (b) for commodities not subject to a Market
Disruption Event on such Trading Day and the immediately preceding
      Trading Day, the volume fraction is the same volume fraction as noted in
Equation (6) for such Trading Day.                                

Example of a Rollover Period with a Market Disruption Event for a commodity in a
Basket Index:                                                                   

                                                        [Enlarge/Download Table]

                                                                                               Price Change for      
                             Old Contract     New Contract    Old Contract  New Contract      affected commodity     
      Trading Day of Month  Volume Fraction  Volume Fraction     Price         Price      Old Contract   New Contract
                                                                                                                     
1-4                               100%               0%            20            22                                  
5                                 100                0             20            22       $0             $0          
6                                  80               20             21            24       1              2           
7 (MDE*)                           60               40            23*           23*       0(defined)     0(defined)  
8                                  60               40             23            22       2(23-21)       -2(22-24)   
9                                  20               80             21            22       -2             0           
10                                  0              100             20            22       -1             0           
11-month end                                                                                                         

In the example above, for an applicable basket excess or total return index,    
because of the occurrence of a Market Disruption Event on Trading Day 7, the    
basket index would not be officially calculated and no roll would occur for such
affected commodities (however the roll would occur using the usual scheduled    
volume fractions for all unaffected commodities in the index). Since no Market  
Disruption Event occurs on Trading Day 8, an index value is determined on       
Trading Day 8, and the affected commodity's P&L calculation would use a price   
change from Trading Day 6 to Trading Day 8 for the affected commodity and the   
volume fraction of 60% (the scheduled volume fraction applicable for the Trading
Day 7, the first day on which the Market Disruption Event began). Thus the index
is defined on Trading Day 6; not defined on Trading Day 7 due to the occurrence 
of a market Disruption Event, and then defined again on Trading Day 8. Trading  
Day 8's index [I(t)] would equal I(t-1), the index on Trading Day 6, plus the   
sum of the P&L Calculations for each commodity for Trading Days 7 and 8, plus   
(if a total return index) the Collateral Return Component calculated using      
I(t-1) as the notional index level, for the days from (t-1) to (t), and using   
the Tbill rate applicable for Trading Day 7, the first day subject to the Market
Disruption Event.                                                               

The actual methodology applied by Morgan Guaranty in calculating Excess and     
Total Return JPM Basket Indices is set forth above. If the Applicable Index of  
any series of ComPs is a JPM Basket Index, such methodology will be applied by  
the Calculation Agent in calculating the Applicable Index.                      

For JPM Basket Excess Return Indices, the value of the relevant JPM Basket      
Excess Return Index for any Trading Day not subject to a Market Disruption Event
will be determined with reference to the following formula:                     

I(t) = I(t-1) + Combined Futures P&L

    Where "I(t)" is the value of the relevant Excess Return Index on the
      date of determination (such date being referred to as "(t)"); "I(t-1)"
       is the value of the relevant Excess Return Index on the Trading Day not
      subject to a Market Disruption Event immediately preceding the date of
     determination (such date being referred to as "(t-1)"); and "Combined
Futures P&L" is equal to the sum of equation (6) above for the  
commodities in the relevant Applicable Index, subject to Market 
Disruption Event adjustments. Equation (6) shows the Futures P&L
       calculation for the relevant Trading Days applicable for each commodity
    in the relevant Applicable Index, subject to Market Disruption Event
adjustments for volume, fraction and price changes.             

39

424B2
92nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 92nd

For example, to calculate the value of a JPM Basket Excess Return Index (I(t))  
which has three equally weighted component commodities on a Trading Day not     
subject to a Market Disruption Event for which I(t-1) equals 100 and assuming   
(i) the volumes attributable to the three commodities are 5, 10 and 8 and (ii)  
the change in the relevant Benchmark Contracts are $1.00, $0.00 and $(0.50),    
respectively, would be:                                                         

I(t) = 100 + [(5 X 1) + (10 X 0) + (8 X (0.5)]

I(t) = 100 + 1

I(t) = 101

FOR JPM BASKET TOTAL RETURN INDICES                                             

The value of the relevant Total Return Index for any Trading Day not subject to 
a Market Disruption Event will be determined with reference to the following    
formula:                                                                        

I(t) = I(t-1) + Combined Futures P&L + R(t) 

        Where "I(t)" is the value of the relevant Total Return Index on the date
        of determination (such date being referred to as "(t)"); "I(t-1)" is the
       value of the relevant Total Return Index on the Trading Day not subject
to a Market Disruption Event immediately preceding the date of  
     determination (such date being referred to as "(t-1)"); and "Combined
Futures P&L" is equal to the sum of equation (6) above for the  
commodities in the relevant Applicable Index, subject to Market 
Disruption Event adjustments. Equation (6) shows the Futures P&L
       calculation for the relevant Trading Days applicable for each commodity
    in the relevant Applicable Index, subject to Market Disruption Event
     adjustments for volume, fraction and price changes. And "R(t)" is the
        return arising for the period from (t-1) to (t) from interest payable on
      the nominal value of the Applicable Index, which shall be based on the
rate determined with reference to the following formula:        

R(t) = I(t-1) X Y(t)

       Where "I(t-1)" has the meaning set forth in the preceding paragraph and

Y(t) = [1/(1-Q)](Days/91) - 1 

    Where "Q" equals the most recently available noncompetitive discount
   rate on 13-week U.S. Treasury Bills (updated on weekly auction), as
        found in the H.15(519) report published by the Board of Governors of the
   Federal Reserve System (or, if unavailable, a successor rate with a
   maturity equal to or less than three months, as Morgan Guaranty may
      determine in its reasonable discretion), multiplied by the quotient of
      91/360, and "Days" equals the number of calendar days from Trading Day
(t-1) to (t).                                                   

For example, to calculate the value of a JPM Basket Total Return Index for any  
Trading Day not subject to a Market Disruption Event for which I(t-1) equals 100
which has three equally weighted component commodities and assuming (i) the     
volumes attributable to the three commodities are 5, 10 and 8 and (ii) the      
change in the relevant Benchmark Contracts are $1.00, $0.00 and $(0.50)         
respectively, on which the Q (the applicable discount rate (5.00%) multiplied by
91/360) equals 1.26388889% and for which "Days" equals 1,                       

I(t) = 100 + [(5 X 1) + (10 X 0) + (8 X (0.5)] + 100 X
[(1/(1-0.0126388889)](1/91) - 1)

I(t) = 100 + 1.0 + (100 X 0.0001397838) 

I(t) = 100 + 1.0 + .01397838

I(t) = 101.01397838 

THE JPMCI POLICY COMMITTEE                                                      

Morgan Guaranty has established the JPMCI Policy Committee to advise and make   
recommendations with respect to the determination of the JPM Indices and, to the
extent appropriate, the Applicable Indices. The JPMCI Policy Committee meets on 
an ad hoc basis at the request of Morgan Guaranty in order to discuss policy    
matters relating to the operation of the JPM Indices and, to the extent         
appropriate, the Applicable Indices. The JPMCI Policy Committee will advise     
Morgan Guaranty with respect to, among other things, the effectiveness of the   
JPMCI as an appropriate commodity investment benchmark; the effectiveness of the
JPMCI as a measure of commodity market performance; the need for changes in the 
weights, composition, price sources or calculation methodology of the JPMCI or  
the Applicable Indices; the need for creation or elimination of sub-indices of  
the JPMCI or other commodity indices, drawing either from the existing          
components of the JPMCI or new commodity components and the treatment of issues 
relating to market disruptions issues. Morgan Guaranty may at any time act at   
its                                                                             

40

424B2
93rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 93rd

discretion to make any modifications to the JPMCI based on recommendations of   
the JPMCI Policy Committee. Membership of the JPMCI Policy Committee will be    
subject to change from time to time, and no member will be permitted to purchase
or hold any ComPS during his or her term on the Committee. At the time of this  
Prospectus, the JPMCI Policy Committee consists of the following members:       

JPMCI POLICY COMMITTEE

                                                        [Enlarge/Download Table]

                NAME                               TITLE                            FUNCTION          
                ----                               -----                            --------          
                                                                                                      
John Coulter (Chairman).............. Managing Director, J.P. Morgan    Global Commodities, London    
Victor S. Filatov.................... President, Smith Barney Global    Chief Investment Officer      
                                      Capital Management Inc.                                         
Martin B. Greenberg.................. Chairman of the Board and         Former Chairman of the        
                                      President of Sterling             Commodities Exchange, Inc     
                                      Commodities                                                     
Philip K. Verleger, Jr............... Senior Consultant, Brattle Group  Economic Consultant and former
                                                                        Visiting Fellow, Institute of 
                                                                        International Economics       
Jeanne Feldhusen..................... Managing Director, J.P. Morgan    Head of Fixed Income Research 

Each of the futures contracts included in the JPM Indices must satisfy each of  
the following JPMCI Inclusion Criteria: the futures contracts must (i) be priced
in U.S. dollars, or if priced in a foreign currency, the exchange on which the  
contract is traded must publish an official exchange rate for conversion of the 
futures price into U.S. dollars and such currency must be freely convertible    
into U.S. dollars; (ii) be traded on a regulated futures exchange located in the
United States, Canada, the United Kingdom, Japan, Singapore or an O.E.C.D.      
country and (iii) have a minimum annual trading volume of 300,000 contracts or  
$500,000,000 for all contract months. If a contract included in the JPM Indices 
ceases to satisfy the JPMCI Inclusion Criteria, the JPMCI Policy Committee shall
meet to consider the substitution of a replacement futures contract for such    
contract. If no appropriate replacement contract can be found, the JPMCI Policy 
Committee may recommend the removal of such contract from the JPM Indices.      
Morgan Guaranty reserves the right to act at its discretion to make any         
modifications to the JPM Indices based on the recommendations of the JPMCI      
Policy Committee.                                                               

CHANGES IN JPM INDICES DESIGNATED CONTRACTS                                     

Before implementing a change in definition or price sources for a designated    
contract in the JPM Indices, the JPMCI Policy Committee shall consider the      
following: (i) the effectiveness of the JPMCI and JPM Indices as appropriate    
commodity investment benchmarks, (ii) the effectiveness of the JPMCI and JPM    
Indices as a measure of commodity market performance and (iii) the respective   
contract volumes, U.S. dollar volumes, open interest, liquidity and transaction 
costs of the proposed replacement and existing benchmark contracts.             

The JPMCI Policy Committee may recommend a change in one or more of the         
benchmark contracts underlying the JPM Indices if, in the majority opinion of   
the committee members, the proposed replacement benchmark contract better meets 
the objectives set forth in clauses (i) and (ii) above and has higher annual    
contract volumes or U.S. dollar volumes. However, as noted above, Morgan        
Guaranty may cause a change in one or more of such contracts if any increased   
cost or tax is imposed on holding or trading such contracts if such contract    
meets the applicable inclusion rules even though such contract does not have    
higher annual contract volumes or U.S. dollar volumes.                          

After consideration of the above (and other) issues the JPMCI Policy Committee  
may recommend to Morgan Guaranty a change in the composition of the JPM Indices.
Morgan Guaranty reserves the right to act at its discretion to make any         
modifications to the JPMCI based on recommendations of the policy committee.    
Such changes, including the implementation date and details, shall be published 
and disseminated by Morgan Guaranty through its usual research distribution     
network.                                                                        

THE APPLICABLE INDEX                                                            

The Prospectus Supplement for any series of ComPS will specify and provide      
details with respect to the Applicable Index and the commodity underlying the   
Applicable Index. As discussed above, the Applicable Index will be an Excess    
Return Index calculated in the same manner as those of the Excess Return JPM    
Indices, a Total Return Index calculated in the same manner as those of the     
Total Return JPM Indices or a Price Reference Index. Each such Prospectus       
Supplement will also contain information with regard to the historical          
performance of the Applicable Index.                                            

41

424B2
94th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 94th

DESCRIPTION OF THE RELATED NOTES

The Related Notes may be issued from time to time in respect of one or more     
series of Securities. The following description sets forth certain general terms
and provisions of each Related Note to which any series of Securities may       
relate. The particular terms of the Related Note included in any Prospectus     
Supplement and the extent, if any, to which such general provisions may apply to
such Related Note will be described in the Prospectus Supplement relating to the
Securities of such series. The following description does not purport to be     
complete and is subject to, and is qualified in its entirety by reference to,   
any Prospectus Supplement relating to any Related Note and the other documents  
incorporated by reference herein. Certain capitalized terms are used herein as  
defined in the relevant Related Note.                                           

GENERAL                                                                         

Each Related Note will be an unsecured, unsubordinated obligation of Morgan     
Guaranty. No Related Note will limit the principal amount of Related Notes that 
may be issued by Morgan Guaranty. The financial terms of the Related Notes,     
including, among other things, the maturity and principal of and interest and   
any premium on any Related Note (or the method of calculating any of the        
foregoing), will be set forth in the Prospectus Supplement related thereto and  
will mirror the aggregate financial terms of the related series of Securities,  
including as to timing and amount of payments. References made herein to the    
Related Note refer to each Related Note that may be issued from time to time.   

No Related Note will contain any provisions that would limit the ability of     
Morgan Guaranty to incur indebtedness. Reference is made to any Prospectus      
Supplement relating to the Related Note offered thereby for information with    
respect to any deletions from, modifications of or additions to the events of   
default or covenants of Morgan Guaranty applicable to the Related Note that is  
referred to therein.                                                            

Under terms of each Related Note, Morgan Guaranty will have the ability to issue
Related Notes with terms different from those of Related Notes previously issued
without the consent of the holders of previously issued Related Notes, in an    
aggregate principal amount determined by Morgan Guaranty.                       

SUBORDINATION                                                                   

The Related Notes will be subordinated and junior in right of payment to certain
other indebtedness of subsidiaries of Morgan Guaranty to the extent set forth in
each Prospectus Supplement that will accompany this Prospectus.                 

NOTE EVENTS OF DEFAULT                                                          

If any Note Event of Default shall occur with respect to any Related Note and be
continuing, the Property Trustee on behalf of holders of Securities of the      
applicable series will have the right to declare the principal of and the       
interest on such Related Note and any other amounts payable under the applicable
Related Note to be forthwith due and payable and to enforce its other rights as 
a creditor with respect to such Related Note as applicable. A "Note Event of    
Default" with respect to any Related Note is defined as: (i) default for 30 days
in the payment of interest on such Related Note; (ii) default in payment of the 
principal amount at Stated Maturity or any amount payable upon any redemption of
such Related Note; (iii) failure by Morgan Guaranty for 90 days after receipt of
notice to it by the Trust to comply with any of its covenants or agreements     
contained in the relevant Related Note; and (iv) certain events of bankruptcy,  
insolvency, receivership or reorganization involving Morgan Guaranty or certain 
affiliates. If any Note Event of Default described in clause (i), (ii) or (iii) 
above occurs and is continuing, the Property Trustee, on behalf of holders of   
Securities of the applicable series, may declare the relevant Related Note to be
due and payable and, upon any such declaration, the relevant Related Note shall 
become immediately due and payable along with any accrued and unpaid interest.  
If any Note Event of Default described in clause (iv) above occurs and is       
continuing, all Related Notes shall become immediately due and payable along    
with any accrued and unpaid interest. Under certain conditions the Property     
Trustee, on behalf of holders of Securities of the applicable series, may waive 
certain past defaults and their consequences with respect to such Related Note. 
Pursuant to the Declaration, the holders of Preferred Securities in certain     
circumstances have the right to direct the Property Trustee to exercise on their
behalf certain of its rights as the holder of the relevant Related Note. A      
default or event of default under a Related Note corresponding to one series of 
Securities will not constitute a default or event of default under a Related    
Note corresponding to any other series of Securities.                           

MODIFICATION OF ANY RELATED NOTE                                                

Morgan Guaranty and the Property Trustee may, without the consent of the holders
of any Securities, enter into senior notes supplemental to any Related Note for,
among others, one or more of the following purposes: (i) to evidence the        
succession of another person to, and the assumption by such successor of, Morgan
Guaranty's obligations under such Related Note; (ii) to                         

42

424B2
95th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 95th

add covenants of Morgan Guaranty, or surrender any rights of Morgan Guaranty,   
for the benefit of the Property Trustee; and (iii) to cure any ambiguity, or    
correct any inconsistency in, such Related Note.                                

Each Related Note will contain provisions permitting Morgan Guaranty and the    
Property Trustee, with the consent of the holders of the not less than a        
majority in Principal Amount of the outstanding Preferred Securities relating to
such Related Note, to modify such Related Note; provided that no such           
modification may, without the consent of the holders of all outstanding         
Preferred Securities affected thereby, (i) reduce the amount of Preferred       
Securities of such series the holders of which must consent to any amendment,   
supplement or waiver of such Related Note; (ii) reduce the rate of or extend the
time for the payment of interest on the Related Note; (iii) alter the method of 
calculation of, or reduce, the amount paid at Stated Maturity or extend the     
Stated Maturity of such Related Note (other than pursuant to the terms of such  
Related Note) or (iv) make any Related Note payable in money or property other  
than that stated in the Related Note.                                           

GOVERNING LAW                                                                   

Each Related Note will be construed in accordance with the laws of the State of 
New York.                                                                       

MISCELLANEOUS                                                                   

Related Notes will not be deposits or other obligations of a bank and will not  
be insured by the Federal Deposit Insurance Corporation or any other federal    
agency.                                                                         

DESCRIPTION OF THE GUARANTEE

Set forth below is a summary of information concerning the Guarantee that will  
be executed and delivered by J.P. Morgan for the benefit of the holders, from   
time to time, of Preferred Securities. The terms of the Guarantee will be those 
set forth in the Guarantee. The summary set forth herein does not purport to be 
complete and is subject in all respects to the provisions of, and is qualified  
in its entirety by reference to, the form of Guarantee, which is filed as an    
exhibit to the Registration Statement of which this Prospectus forms a part. The
Guarantee will be separately qualified under the Trust Indenture Act and will be
held by U.S. Bank Trust National Association, acting in its capacity as         
indenture trustee with respect thereto.                                         

GENERAL                                                                         

Pursuant to the Guarantee, J.P. Morgan will irrevocably and unconditionally     
agree, on a subordinated basis to the extent set forth therein, to pay in full  
to the holders of the applicable Preferred Securities the Guarantee Payments (as
defined herein), without duplication of amounts paid by the Trust, as and when  
due, regardless of any defense, right of set-off or counterclaim that the Trust 
may have or assert. The following payments with respect to each series of       
Preferred Securities (the "Guarantee Payments"), to the extent not paid by the  
Trust, will be subject to the Guarantee (without duplication): (i)(A) any       
accrued and unpaid distributions that are required to be paid on such Preferred 
Securities and (B) in the case of ComPS, the ComPS Early Redemption Price or the
ComPS Redemption Price, as applicable, and in the case of all other Preferred   
Securities, the Preferred Redemption Price, in each case including all accrued  
and unpaid distributions, but if and only if to the extent that, in each case,  
Morgan Guaranty has made payment to the Trust, on behalf of holders of          
Securities of such series, of interest or principal on the Related Note         
associated with such Preferred Securities, and (ii) upon a voluntary or         
involuntary dissolution of the Trust (other than in connection with the         
redemption of all of the Preferred Securities upon maturity or redemption of the
applicable Related Note) the lesser of (A) the Liquidation Distribution with    
respect to such Preferred Securities to the extent the Trust has funds available
therefor and (B) the amount of assets of the Trust consisting of the Related    
Note associated with such Preferred Securities and the proceeds thereof         
remaining available for distribution to holders of such Preferred Securities    
upon such dissolution of the Trust. J.P. Morgan's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by J.P.      
Morgan to the holders of Preferred Securities or by causing the Trust to pay    
such amounts to such holders.                                                   

The Guarantee will be a guarantee with respect to the Preferred Securities of   
each series issued by the Trust from the time of issuance of such Preferred     
Securities, but will not apply to any payment of distributions except to the    
extent Morgan Guaranty has made the related payment on the Related Note         
underlying such Preferred Securities. If Morgan Guaranty does not make interest 
payments on the applicable Related Note, the Trust will not pay distributions on
the related Preferred Securities and will not have funds available therefor. See
"Description of the Related Notes".                                             

So long as any Preferred Securities remain outstanding, J.P. Morgan will not    
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred    
stock or make any                                                               

43

424B2
96th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 96th

Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be 
in default with respect to its Guarantee Payments or other payment obligations  
under the Guarantee or (ii) there shall have occurred any event of default under
the Declaration; provided, however, that the foregoing restrictions shall not   
apply to (a) dividends, redemptions, purchases, acquisitions, distributions or  
payments made by J.P. Morgan by way of issuance of shares of its capital stock, 
(b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange  
or conversion of any preferred stock of J.P. Morgan as may be outstanding from  
time to time in accordance with the terms of such preferred stock, (c) cash     
payments made by J.P. Morgan in lieu of delivering fractional shares upon the   
redemption, exchange or conversion of any preferred stock of J.P. Morgan as may 
be outstanding from time to time in accordance with the terms of such preferred 
stock, (d) repurchases, redemptions or other acquisitions of shares of capital  
stock of J.P. Morgan in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,       
directors of consultants, or (e) any declaration of a dividend in connection    
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such      
rights pursuant thereto.                                                        

MODIFICATION OF THE GUARANTEE; ASSIGNMENT                                       

Except with respect to any changes that do not adversely affect the rights of   
holders of Preferred Securities (in which case no consent will be required), the
Guarantee may be amended by J.P. Morgan and the Property Trustee only with the  
prior approval of the holders of not less than a majority in aggregate Principal
Amount at such time of the holders of each series of affected Preferred         
Securities, voting as a single class. The manner of obtaining any such approval 
of holders of such Preferred Securities will be set forth in an accompanying    
Prospectus Supplement. All guarantees and agreements contained in the Guarantee 
shall bind the successors, assignees, receivers, trustees and representatives of
J.P. Morgan and shall inure to the benefit of the holders of the applicable     
Preferred Securities then outstanding.                                          

REMEDIES OF HOLDERS                                                             

The Guarantee will be deposited with U.S. Bank Trust National Association, as   
indenture trustee, to be held for the benefit of holders of the Preferred       
Securities. U.S. Bank Trust National Association shall enforce such Guarantee on
behalf of the holders of the Preferred Securities. The holders of not less than 
a majority in aggregate principal amount of the Preferred Securities of each    
affected series have the right to direct the time, method and place of          
conducting any proceeding for any remedy available in respect of the Guarantee, 
including the giving of directions to U.S. Bank Trust National Association. In  
addition, any holder of Preferred Securities may institute a legal proceeding   
directly against J.P. Morgan to enforce its rights under the Guarantee, without 
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. Subject to the award by a court of competent        
jurisdiction of legal fees in connection with any such legal proceeding, each   
holder will be required to bear its own costs in connection with instituting a  
legal proceeding directly against J.P. Morgan, which cost may be significant.   

TERMINATION OF THE GUARANTEE                                                    

The Guarantee will terminate as to the applicable Preferred Securities upon full
payment of the ComPS Early Redemption Price, the ComPS Redemption Price, the    
Preferred Redemption Price of all such Preferred Securities or upon full payment
of the amounts payable upon liquidation of the Trust, as applicable. The        
Guarantee will continue to be effective or will be reinstated as to any         
Preferred Securities, as the case may be, if at any time any holder of the      
applicable Preferred Securities must restore payment of any sums paid under such
Preferred Securities or the Guarantee (e.g., upon a subsequent bankruptcy of    
Morgan Guaranty or J.P. Morgan).                                                

STATUS OF THE GUARANTEE                                                         

The Guarantee will constitute an unsecured obligation of J.P. Morgan and will   
rank (i) subordinate and junior in right of payment to all other liabilities of 
J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock 
outstanding as of the date hereof of J.P. Morgan and with respect to obligations
under other guarantee agreements which J.P. Morgan may enter into from time to  
time to the extent that such agreements provide for comparable guarantees by    
J.P. Morgan of payment on other preferred securities issued by the predecessor  
of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to    
J.P. Morgan's common stock. The terms of the Preferred Securities provide that  
each holder of Preferred Securities by acceptance thereof agrees to the         
subordination provisions and other terms of the applicable Guarantee.           

The Guarantee will constitute a guarantee of payment and not of collection (that
is, the guaranteed party may institute a legal proceeding directly against the  
guarantor to enforce its rights under the Guarantee without instituting a legal 
proceeding against any other person or entity).                                 

44

424B2
97th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 97th

GOVERNING LAW                                                                   

The Guarantee will be governed by and construed and interpreted in accordance   
with the laws of the State of New York.                                         

DESCRIPTION OF THE RELATED NOTE GUARANTEE 

Set forth below is a summary of information concerning the Related Note         
Guarantee that will be executed and delivered by J.P. Morgan in respect of each 
Related Note for the benefit of the Property Trustee, for the benefit of holders
of Securities of various series. The terms of the Related Note Guarantee will be
those set forth in the Related Note Guarantee. The summary set forth herein does
not purport to be complete and is subject in all respects to the provisions of, 
and is qualified in its entirety by reference to, the form of the Related Note  
Guarantee, which is filed as an exhibit to the Registration Statement of which  
this Prospectus forms a part. The Related Note Guarantee will be held by the    
Property Trustee for the benefit of holders of the Securities.                  

GENERAL                                                                         

Pursuant to the Related Note Guarantee, J.P. Morgan will irrevocably and        
unconditionally agree, on a subordinated basis to the extent set forth therein, 
to pay in full to the Property Trustee, for the benefit of holders of           
Securities, as the holder of each Related Note, the Related Note Guarantee      
Payments (as defined herein), without duplication of amounts paid by Morgan     
Guaranty, as and when due, regardless of any defense, right of set-off or       
counterclaim that Morgan Guaranty may have or assert with respect to the        
obligation to make such Related Note Guarantee Payments. The following payments 
with respect to the applicable Related Note (the "Related Note Guarantee        
Payments"), to the extent not paid by Morgan Guaranty, will be subject to the   
Related Note Guarantee (without duplication): (i) any accrued and unpaid        
distributions that are required to be paid on such Related Note and (ii) any    
principal payable by Morgan Guaranty, as and when payable by Morgan Guaranty.   
J.P. Morgan's obligation to make a Related Note Guarantee Payment may be        
satisfied by direct payment of the required amounts by J.P. Morgan to the       
Property Trustee, for the benefit of holders of Securities, or by causing Morgan
Guaranty to pay such amounts to the Property Trustee, for the benefit of holders
of Securities.                                                                  

The Related Note Guarantee will be a full and unconditional guarantee with      
respect to each Related Note issued by Morgan Guaranty from the time of issuance
of such Related Note.                                                           

MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT                          

The Related Note Guarantee may be amended only with the prior approval of the   
Property Trustee; provided that no such amendment shall adversely affect the    
holders of the Preferred Securities without the consent of a majority in        
aggregate Principal Amount at such time of the holders of Preferred Securities  
of each affected series, voting as a single class. All guarantees and agreements
contained in the Related Note Guarantee shall bind the successors, assignees,   
receivers, trustees and representatives of J.P. Morgan and shall inure to the   
benefit of the Property Trustee, for the benefit of holders of Securities of    
each series, as the holder of each Related Note then outstanding.               

REMEDIES OF THE TRUST AND HOLDERS OF COMPS                                      

The Trust has the right to direct the time, method and place of conducting any  
proceeding providing for any remedy available to it in respect of the Related   
Note Guarantee. Pursuant to the Declaration, the holders of Preferred Securities
in certain circumstances (including a payment default under the Related Note    
Guarantee by J.P. Morgan) have the right to direct the Trust, through the       
Property Trustee, to exercise certain of its rights as the holder of the Related
Note Guarantee. In addition, upon the occurrence and during the continuance of a
Note Event of Default that is attributable to the failure of Morgan Guaranty to 
pay the principal of or interest on the Related Note on the date such principal 
or interest is otherwise payable (or in the case of a redemption, on the        
redemption date), J.P. Morgan acknowledges that a holder of the outstanding     
Preferred Securities may directly institute Direct Action on or after the date  
of the occurrence of such Note Event of Default. Notwithstanding any payments   
made to such holder of Preferred Securities by J.P. Morgan in connection with a 
Direct Action, J.P. Morgan shall remain obligated to pay the principal of and   
interest on the Preferred Securities, and the rights of J.P. Morgan, as         
Guarantor, shall be subrogated to the rights of such holder of Preferred        
Securities with respect to payments on the Preferred Securities to the extent of
any payment made by J.P. Morgan to such holder of Preferred Securities in such  
Direct Action.                                                                  

45

424B2
98th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 98th

TERMINATION OF THE RELATED NOTE GUARANTEE                                       

The Related Note Guarantee will terminate as to any Related Note upon full      
payment of the Related Note Redemption Price (as defined below) of such Related 
Note. The Related Note Guarantee will continue to be effective or will be       
reinstated with respect to any Related Note, as the case may be, if at any time 
the Property Trustee, on behalf of holders of Securities of each applicable     
series, must restore payment of any sums paid under the Related Note or under   
the Related Note Guarantee with respect to such Related Note (e.g., upon a      
subsequent bankruptcy of J.P. Morgan).                                          

STATUS OF THE RELATED NOTE GUARANTEE                                            

The Related Note Guarantee will constitute an unsecured obligation of J.P.      
Morgan and will rank (i) subordinate and junior in right of payment to all other
liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or   
preference stock outstanding as of the date hereof of J.P. Morgan, and (iii)    
senior to J.P. Morgan's common stock. The terms of the Preferred Securities     
provide that each holder of Preferred Securities by acceptance thereof agrees to
the subordination provisions and other terms of the Related Note Guarantee.     

The Related Note Guarantee will constitute a guarantee of payment and not of    
collection (that is, the Property Trustee may institute a legal proceeding      
directly against J.P. Morgan to enforce its rights under the Related Note       
Guarantee without instituting a legal proceeding against Morgan Guaranty).      

GOVERNING LAW                                                                   

The Related Note Guarantee will be governed by and construed and interpreted in 
accordance with the laws of the State of New York.                              

PLAN OF DISTRIBUTION

The Trust may sell the Preferred Securities in one or more of the following ways
from time to time: (i) to or through underwriters or dealers, (ii) directly to  
purchasers or (iii) through agents. The Prospectus Supplement with respect to   
any Offered Securities will set forth (a) the terms of the offering of the      
Offered Securities, including the name or names of any underwriters, dealers or 
agents, (b) the purchase price of the Offered Securities and the proceeds to the
Trust from such sale, (c) any underwriting discounts and commissions or agency  
fees and other items constituting underwriters' or agents' compensation, (d) any
initial public offering prices, (e) any discounts or concessions allowed or paid
to dealers and (f) any securities exchange on which such Offered Securities may 
be listed. Any initial public offering price, discounts or concessions allowed  
or reallowed or paid to dealers may be changed from time to time.               

If underwriters are used in the sale, the Offered Securities will be acquired by
the underwriters for their own account and may be resold from time to time in   
one or more transactions, including negotiated transactions, at a fixed public  
offering price or at varying prices determined at the time of sale. The Offered 
Securities may be offered to the public either through underwriting syndicates  
represented by one or more managing underwriters or directly by one or more     
firms acting as underwriters. The underwriter or underwriters with respect to a 
particular underwritten offering of Offered Securities will be named in the     
Prospectus Supplement relating to such offering and, if an underwriting         
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the      
Prospectus Supplement relating thereto, the obligations of the underwriters to  
purchase the Offered Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all the Offered Securities if
any are purchased.                                                              

If dealers are utilized in the sale of Offered Securities, the Trust will sell  
such Offered Securities to the dealers as principals. The dealers may then      
resell such Offered Securities to the public at varying prices to be determined 
by such dealers at the time of resale. The names of the dealers and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.

Any series of Preferred Securities may be sold from time to time either directly
by the Trust or by agents of the Trust designated by the Trust. Any agent       
involved in the offer or sale of the Offered Securities with respect to which   
this Prospectus is delivered will be named, and any commissions payable by the  
Trust to such agent will be set forth, in the applicable Prospectus Supplement  
relating thereto. Unless otherwise indicated in the applicable Prospectus       
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.                                                             

46

424B2
99th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 99th

The Preferred Securities may be sold directly by the Trust to institutional     
investors or others who may be deemed to be underwriters within the meaning of  
the Securities Act with respect to any resale thereof. The terms of any such    
sales will be described in the Prospectus Supplement relating thereto.          

If so indicated in the Prospectus Supplement, the Trust will authorize agents,  
underwriters or dealers to solicit offers from certain types of institutions to 
purchase Offered Securities from the Trust at the public offering price set     
forth in the Prospectus Supplement pursuant to delayed delivery contracts       
providing for payment and delivery on a specified date in the future. Such      
contracts will be subject only to those conditions set forth in the Prospectus  
Supplement, and the Prospectus Supplement will set forth the commission payable 
for solicitation of such contracts.                                             

Agents, dealers and underwriters may be entitled under agreements with J.P.     
Morgan or the Trust to indemnification by J.P. Morgan or the Trust against      
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers or underwriters 
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for J.P.      
Morgan or the Trust in the ordinary course of business.                         

Each series of Offered Securities will be a new issue of securities and will    
have no established trading market. Any underwriters to whom Offered Securities 
are sold for public offering and sale may make a market in such Offered         
Securities, but such underwriters will not be obligated to do so and may        
discontinue any market making at any time without notice. The Offered Securities
may or may not be listed on a national securities exchange. No assurance can be 
given that there will be a market for the Offered Securities.                   

This Prospectus and the related Prospectus Supplement may be used by direct or  
indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and 
sales related to secondary market transactions in the ComPS. Such subsidiaries  
may act as principal or agent in such transactions. Such sales will be made at  
prices related to prevailing market prices at the time of a sale.               

LEGAL MATTERS 

Certain matters of Delaware law relating to the validity of the Securities will 
be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware,       
special Delaware counsel to the Trust. The validity of the Securities offered   
hereby will be passed upon by Gene A. Capello, Vice President and Assistant     
General Counsel of J.P. Morgan, and by Cravath, Swaine & Moore, New York, New   
York, counsel for any underwriters, selling agents and certain other purchasers.

EXPERTS 

The audited financial statements contained in J.P. Morgan's Annual Report on    
Form 10-K for the year ended December 31, 1997 (included in J.P. Morgan's Annual
Report to Stockholders), are incorporated by reference in this Prospectus in    
reliance on the report of Price Waterhouse LLP, independent accountants, given  
on the authority of said firm as experts in auditing and accounting.            

47

424B2
100th “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 100th

ANNEX I 

GLOSSARY OF TERMS 

The following are abbreviated definitions of certain capitalized terms used in  
the Prospectus Supplement. The Declaration, the Guarantee, the Related Note     
Guarantee and any Related Note may contain more complete definitions of certain 
of the terms defined herein, as well as definitions of certain other terms not  
defined herein, and reference should be made to the Declaration, the Guarantee, 
the Related Note Guarantee and the relevant Related Note, as applicable, for    
complete definitions of such terms.                                             

BACKWARDATION............                                                       
                      describes a period during which the prices of longer-dated
                     Benchmark Contracts are below the prices of shorter-dated
contracts.                          

BENCHMARK CONTRACTS......                                                       
             with respect to any Applicable Index, the futures
                      contracts on the relevant commodity the change in value of
                  which serve as the basis for calculating the change in
value of such Applicable Index.     

BULLION COMPS............                                                       
                     ComPS for which the Applicable Index is a Price Reference
                  Index in which all distributions and the Bullion ComPS
                     Principal Amount are indexed to the value at such time in
                   U.S. dollars (the "Dollar Equivalent Value") of bullion
        (i.e., gold, silver, platinum or palladium).

BULLION COMPS                                                                   
PRINCIPAL AMOUNT.........                                                       
                    the Dollar Equivalent Value of the applicable portion of
                    the applicable fixing price for the applicable amount of
          the applicable bullion commodity at such time.

BUSINESS DAY.............                                                       
                     any day other than a Saturday, Sunday or any other day on
                 which banking institutions in New York, New York, are
                 permitted or required by any applicable law to close.

CODE.....................                                                       
          the Internal Revenue Code of 1986, as amended.

COLLATERAL RETURN                                                               
COMPONENT................                                                       
                      with respect to any Total Return ComPS, a component of the
                     value of the Applicable Index computed on the fluctuating
                  index value of the Applicable Index at the most recent
               auction rate for 3-month U.S. Treasury Bills or any
                      successor rate thereto with a maturity of 3 months or less
                  or, if no such rate has been determined in the 13 days
                      prior to the date of determination, as Morgan Guaranty may
   determine in its reasonable discretion.

COMMISSION...............                                                       
   the Securities and Exchange Commission.

COMMON SECURITIES........                                                       
            the common securities of any series of the Trust
                representing an undivided beneficial interest in the
                  corresponding series Related Note, to be owned by J.P.
Morgan.                             

CONTANGO.................                                                       
                      describes a period during which the prices of longer-dated
                     Benchmark Contracts are above the prices of shorter-dated
contracts.                          

DECLARATION..............                                                       
                    the Amended and Restated Declaration of Trust among J.P.
                    Morgan, as sponsor, and the trustees named therein dated
as of March 26, 1998.               

DISTRIBUTIONS............                                                       
             if any, as specified in the applicable Prospectus
Supplement.                         

DTC......................                                                       
the Depository Trust Company.       

EARLY REDEMPTION                                                                
VALUE....................                                                       
                  The average for the 10 days of the Early Determination
                 Period of the discounted present value of the indexed
             Principal Amount of the ComPS, as set forth under
            "Description of ComPS--Early Redemption Upon the
                   Occurrence of a Special Event or at the Election of the
Holders of the ComPS".              

ERISA....................                                                       
                   the Employee Retirement Income Security Act of 1974, as
amended.                            

EXCHANGE ACT.............                                                       
            the Securities Exchange Act of 1934, as amended.

FACE AMOUNT..............                                                       
                 as set forth in the applicable Prospectus Supplement.

 A-1

424B2
101st “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 101st

FACTOR...................                                                       
                     as specified in the applicable Prospectus Supplement, the
                      amount by which the Redemption Value is reduced to account
                      for certain costs of issuing Excess Return or Total Return
ComPS.                              

GUARANTEE................                                                       
                     the Guarantee Agreement executed by J.P. Morgan on behalf
                  of the holders of each series of Preferred Securities.

GUARANTEE PAYMENTS.......                                                       
              without duplication, (i)(A) any accrued and unpaid
             distributions that are required to be paid on the
                 Preferred Securities and (B) the Preferred Redemption
                 Price, but if and only to the extent that, in each of
                   case, Morgan Guaranty has made a payment of interest or
                  principal, as the case may be, on the Related Note and
                   (ii) upon a Liquidation Event (other than in connection
                    with the redemption of all the Preferred Securities upon
                the maturity or redemption of the applicable Related
                    Note), the lesser of (A) the Liquidation Distribution to
                      the extent the Trust has funds available therefor, and (B)
                     the amount of assets of the Trust remaining available for
                    distribution to holders of the Preferred Securities upon
such Liquidation Event.             

INITIAL HOLDERS..........                                                       
              holders who purchase any Preferred Securities upon
original issuance.                  

INTEREST PAYMENT DATE....                                                       
                 with respect to any Related Note, as specified in the
applicable Prospectus Supplement.   

INVESTMENT COMPANY                                                              
EVENT....................                                                       
                  the receipt by the Trust of an opinion of a nationally
                      recognized independent counsel experienced in such matters
                  to the effect that, as a result of the occurrence of a
            change in law or regulation, a written change in
                     interpretation or application of law or regulation by any
                      legislative body, court, governmental agency or regulatory
            authority or the expiration or revocation of any
                    applicable exemption obtained by the Trust (a "Change in
                    1940 Act Law"), there is more than an insubstantial risk
                  that the Trust is or will be considered an "investment
                     company" that is required to be registered under the 1940
                     Act, which Change in 1940 Act Law becomes effective on or
after the date of this Prospectus.  

IRS......................                                                       
Internal Revenue Service.           

ISSUE DATE...............                                                       
                 as set forth in the applicable Prospectus Supplement.

JPM BASKET INDICES.......                                                       
                JPM Indices that are based upon at least two or more
                 underlying commodities (whether computed on an excess
return or total return basis).      

JPM INDICES..............                                                       
                      variations of the JPMCI, including the permutations of the
                    JPMCI in the form of sub-indices, that may be based upon
                  one or more commodities (whether computed on an excess
                      return or total return basis) and that have been or may be
         originated and calculated by Morgan Guaranty.

JPM INDIVIDUAL INDICES...                                                       
               JPM Indices that are based upon only one underlying
                    commodity (whether computed on an excess return or total
return basis).                      

JPMCI....................                                                       
the J.P. Morgan Commodity Index.    

LIQUIDATION                                                                     
DISTRIBUTION.............                                                       
                   in respect of any Liquidation Event, the sum of (a) the
                    Early Redemption Value or stated liquidation preference,
                    as applicable, plus (b) the amount of accrued and unpaid
                     distributions on such Preferred Security to but excluding
the date of payment.                

LIQUIDATION EVENT........                                                       
              any dissolution of the Trust, whether voluntary or
involuntary.                        

NASDAQ...................                                                       
The Nasdaq Stock Market.            

1940 ACT.................                                                       
           the Investment Company Act of 1940, as amended.

NOTE EVENT OF                                                                   
DEFAULT..................                                                       
                     (i) default for 30 days in the payment of interest on the
               applicable Related Note; (ii) default in payment of
                 principal amount at the Stated Maturity or any amount
                 payable upon any redemption of the applicable Related
                    Note; (iii) failure by Morgan Guaranty for 90 days after
             receipt of notice to it to comply with any of its
               covenants or agreements contained in the applicable
                Related Note; and (iv) certain events of bankruptcy,
                insolvency, receivership or reorganization involving
  Morgan Guaranty or certain affiliates.

 A-2

424B2
102nd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 102nd

PREFERRED                                                                       
REDEMPTION                                                                      
PRICE....................                                                       
                 On any date of redemption, an amount equal to (i) the
                     Principal Amount per Preferred Security plus (ii) accrued
                 and unpaid distributions to but excluding the date of
redemption.                         

PREFERRED SECURITIES.....                                                       
            Preferred Securities of any series of the Trust,
                representing an undivided beneficial interest in the
corresponding series Related Note.  

PRINCIPAL AMOUNT.........                                                       
                   at any time, (i) in the case of any Preferred Security,
                 the Bullion ComPS Principal Amount, Redemption Value,
                   Early Redemption Value or stated liquidation preference
                     thereof, as applicable, as if determined as of such time,
                   and (ii) in the case of any Related Note, the principal
                  amount thereof at such time determined pursuant to the
terms thereof.                      

REDEMPTION DATE..........                                                       
                      either the Stated Maturity or an Early Redemption Date, as
applicable.                         

REDEMPTION VALUE.........                                                       
                    with respect to any series of ComPS, the average for the
                    Determination Period of the Principal Amount thereof, as
                 described under "Description of ComPS--Calculation of
Redemption Value".                  

RELATED NOTE.............                                                       
                  an unsecured, unsubordinated debt obligation of Morgan
               Guaranty, as described in the applicable Prospectus
Supplement.                         

SECURITIES...............                                                       
               the Common Securities and the Preferred Securities.

SECURITIES ACT...........                                                       
   the Securities Act of 1933, as amended.

SENIOR INDEBTEDNESS......                                                       
                with respect to Morgan Guaranty, as specified in the
applicable Prospectus Supplement.   

SPECIAL EVENT............                                                       
              either a Tax Event or an Investment Company Event.

SPECIAL REDEMPTION.......                                                       
                      if specified in the applicable Prospectus Supplement, upon
                   the occurrence and during the continuation of a Special
                    Event, Morgan Guaranty will have the right to redeem the
                applicable Related Note for cash at the Related Note
                 Redemption Price, with the result that the Trust will
                    redeem Preferred Securities and Common Securities of the
                 applicable series on a Pro Rata Basis for cash at the
Preferred Redemption Price.         

SPECIAL REDEMPTION                                                              
DATE.....................                                                       
                any date in respect of which upon the occurrence and
                continuation of a Tax Event or an Investment Company
                      Event, Morgan Guaranty shall have called for redemption in
                   whole or in part the Related Notes, and the Trust shall
              have called for redemption in whole or in part the
             Preferred Securities and Common Securities of the
applicable series.                  

STATED MATURITY..........                                                       
                      with respect to any series of Preferred Securities, as set
          forth in the applicable Prospectus Supplement.

TAX COUNSEL..............                                                       
                Cravath, Swaine & Moore, special tax counsel to J.P.
Morgan and the Trust.               

TAX EVENT................                                                       
                the receipt by the Trust of an opinion of nationally
                  recognized independent tax counsel experienced in such
                     matters (a "Tax Opinion") to the effect that, as a result
             of (a) any amendment to, or change (including any
              announced prospective change) in, the laws (or any
               regulations thereunder) of the United States or any
                political subdivision or taxing authority thereof or
           therein, (b) any amendment to, or change in, an
                     interpretation or application of such laws or regulations
                  by any legislative body, court, governmental agency or
                regulatory authority (including the enactment of any
                    legislation and the publication of any judicial decision
                   or regulatory determination), (c) any interpretation or
                      pronouncement that provides for a position with respect to
                      such laws or regulations that differs from the theretofore
                      generally accepted position or (d) any action taken by any
              governmental agency or regulatory authority, which
                  amendment or change is enacted, promulgated, issued or
                 announced or which interpretation or pronouncement is
                      issued or announced or which action is taken, in each case
                    on or after the date of this Prospectus Supplement, that
                      there is more than an insubstantial risk that at such time
                     or within 90 days of the date thereof (i) the Trust is or
                     would be subject to United States Federal income tax with
                      respect to income accrued or received on any Related Note,
                   (ii) the interest payable on any Related Note is not or
      would not be deductible by Morgan Guaranty

 A-3

424B2
103rd “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 103rd

                    for United States Federal income tax purposes, (iii) the
                    contingent principal in excess of the Face Amount of any
                  series of Preferred Securities (if any) payable on any
                    Related Note is not or would not be deductible by Morgan
                     Guaranty for United States Federal income tax purposes or
                   (iv) the Trust is or would be subject to more than a de
          minimis amount of other taxes, duties or other
governmental charges.               

TRADING DAY..............                                                       
                    any day on which open-outcry trading on either the NYMEX
       or the LME is scheduled to occur or occurs.

TRUST....................                                                       
J.P. Morgan Index Funding Company I.

TRUST INDENTURE ACT......                                                       
        the Trust Indenture Act of 1939, as amended.

 A-4

424B2
Last “Page” of 104
TOC
1st
Previous
Next
↓Bottom
Just 104th

------------------------------------------------------                          
------------------------------------------------------                          

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY      
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR        
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN    
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS 
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED   
UPON AS HAVING BEEN AUTHORIZED BY J.P. MORGAN, THE TRUST OR THE UNDERWRITERS.   
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY   
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN       
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF J.P. MORGAN, OR THE 
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO   
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH    
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.                                                

------------------------

TABLE OF CONTENTS 

PROSPECTUS SUPPLEMENT 

                                                                [Download Table]

                                                 PAGE 
                                                 -----
                                                      
Summary of the Offering........................    S-4
The Offering...................................    S-5
Risk Factors...................................    S-9
J.P. Morgan & Co. Incorporated.................   S-16
J.P. Morgan Index Funding Company..............   S-16
Use of Proceeds................................   S-20
Description of the CPIS........................   S-21
Description of the Related Note................   S-35
Description of the Guarantee...................   S-37
Description of the Related Note Guarantee......   S-39
Effect of Obligations Under the Guarantee, the        
  Related Note Guarantee and the Related              
  Note.........................................   S-40
United States Federal Income Taxation..........   S-41
Underwriting...................................   S-44
Legal Matters..................................   S-46
Experts........................................   S-46
Stabilization..................................   S-46
Content of Prospectus..........................   S-46
Limitation on Offers and Solicitations.........   S-46

ANNEX I 

                                                                [Download Table]
                                                      
Glossary of Terms..............................   SA-1

PROSPECTUS

                                                                [Download Table]
                                                      
Available Information..........................      2
Incorporation of Certain Documents by                 
  Reference....................................      2
J.P. Morgan & Co. Incorporated.................      3
J.P. Morgan Index Funding Company LLC..........      5
Use of Proceeds................................     10
Consolidated Ratios of J.P. Morgan.............     10
Description of All Preferred Securities........     10
Description of the ComPS.......................     11
Risk Factors with Respect to All Preferred            
  Securities...................................     20
Risk Factors with Respect to ComPS.............     22
The Underlying Markets.........................     27
The JPM Indices................................     30
Description of the Related Notes...............     42
Description of the Guarantee...................     43
Description of the Related Note Guarantee......     45
Plan of Distribution...........................     46
Legal Matters..................................     47
Experts........................................     47

ANNEX I 

                                                                [Download Table]
                                                      
Glossary of Terms..............................    A-1

------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          
------------------------------------------------------                          

CONSUMER PRICE
INDEXED SECURITIES (CPIS),
SERIES C PREFERRED
SECURITIES

J.P. MORGAN INDEX 
FUNDING COMPANY I 

GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY 

J.P. MORGAN & CO. 
INCORPORATED

PROSPECTUS SUPPLEMENT 

$[49,025,000] 

NOVEMBER [   ], 2000
------------------------------------------------------                          
------------------------------------------------------                          

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B2’ Filing		Date		First		Last			Other Filings
		2/15/10		4		50
		1/15/10		1		50
		1/15/02		4		49
Filed on:		10/19/00							425,  8-K,  DEFA14A,  DEFR14A
		9/13/00		3		16			DEFA14A
		12/31/99		46					10-K,  13F-HR
		3/3/99		6					SC 13G/A
		2/1/99		26					424B3
		12/31/98		8					10-K,  13F-E
		7/14/98		1		53			8-K
		5/5/98		54					8-K
		4/14/98		54					8-K
		3/27/98		54					424B3,  8-K
		3/26/98		16		100
		2/19/98		54					424B3,  8-K,  SC 13G/A
		1/15/98		54					8-K
		12/31/97		54		99			10-K,  13F-E,  13F-E/A
		9/30/97		16		57			10-Q,  13F-E,  13F-E/A
		12/12/96		16		57			8-K
		5/1/96		25
		4/15/96		25
		4/1/96		25					424B3,  SC 13G
		12/31/93		62
									List all Filings