JP Morgan Chase 2003 Annual Report Download - page 112

Notes to consolidated financial statements
J.P. M organ Chase & Co.
110 J.P. Morgan Chase & Co./ 2003 Annual Report
By remaining contractual maturity at December 31, Under After 2003 2002
(in millions) 1 year 1-5 years 5 years total total
Parent company
Senior debt: Fixed rate $2,525 $ 11,205 $ 1,314 $ 15,044 $11,516
Variable rate(a) 2,558 7,856 282 10,696 8,657
Interest rates(b) 1.29 – 6.75% 0.96 – 7.50% 1.06 – 6.00% 0.96 – 7.50% 0.96% – 7.50%
Subordinated debt: Fixed rate $715 $ 3,863 $ 9,804 $ 14,382 $13,839
Variable rate — 384 129 513 1,083
Interest rates(b) 6.88 – 7.63% 4.78 – 7.88% 5.00 – 8.25% 4.78 – 8.25% 4.35% – 8.50%
Subtotal $5,798 $ 23,308 $ 11,529 $ 40,635 $35,095
Subsidiaries
Senior debt: Fixed rate $513 $ 829 $ 1,487 $ 2,829 $2,848
Variable rate(a) 322 2,890 630 3,842 725
Interest rates(b) 6.63 – 7.04% 2.41 – 10.95% 1.13 – 13.00% 1.13 – 13.00% 1.55% – 13.00%
Subordinated debt: Fixed rate $— $708 $— $708 $805
Variable rate — — — —278
Interest rates(b) — % 6.13 – 7.00% — % 6.13 – 7.00% 4.20% – 7.00%
Subtotal $835 $ 4,427 $ 2,117 $ 7,379 $4,656
Total long-term debt $6,633 $27,735 $ 13,646 $ 48,014(e)(f)(g) $39,751
FIN 46 long-term beneficial interests:(c)(d)
Fixed rate $— $249 $104 $ 353 NA
Variable rate 17 511 1,548 2,076 NA
Interest rates(b) 1.12% 1.39 – 10.00% 1.77 – 6.35% 1.12 – 10.00% NA
Total FIN 46 long-term beneficial interests $17$760 $ 1,652 $ 2,429 NA
(a) Included are various equity-linked or other indexed instruments. Embedded derivatives separated from hybrid securities in accordance with SFAS 133 are reported at fair value and shown net with the host
contract on the balance sheet. Changes in fair value of separated derivatives are recorded in Trading revenue.
(b) The interest rates shown are the range of contractual rates in effect at year-end, including non-U.S. dollar fixed and variable rate issuances which excludes the effects of related derivative instruments.
The use of these derivative instruments modifies JPMorgan Chase’s exposure to the contractual interest rates disclosed in the table above. Including the effects of derivatives, the range of modified rates
in effect at December 31, 2003, for total long-term debt was 0.14% to 10.95% , versus the contractual range of 0.96% to 13.00% presented in the table above.
(c) Included on the Consolidated balance sheet in Beneficial interests issued by consolidated variable interest entities.
(d) Not applicable for years prior to 2003 since the Firm adopted FIN 46 during 2003.
(e) At December 31, 2003, long-term debt aggregating $2.0 billion was redeemable at the option of JPMorgan Chase, in whole or in part, prior to maturity, based on the terms specified in the respective notes.
(f) The aggregate principal amount of debt that matures in each of the five years subsequent to 2003 is $6.6 billion in 2004, $9.3 billion in 2005, $5.8 billion in 2006, $6.7 billion in 2007 and $5.9 billion
in 2008.
(g) Includes $1.1 billion of outstanding zero-coupon notes at December 31, 2003. The aggregate principal amount of these notes at their respective maturities is $4.6 billion.
The w eighted-average contractual interest rate for total long-
term debt w as 4.71% and 5.51% as of December 31, 2003
and 2002, respectively. In order to modify exposure to interest
rate and currency exchange rate movements, JPM organ Chase
utilizes derivative instruments, primarily interest rate and cross-
currency interest rate swaps, in conjunction w ith some of its
debt issues. The use of these instruments modifies the Firm’s
interest expense on the associated debt. The modified w eight-
ed-average interest rate for total long-term debt, including the
effects of related derivative instruments, w as 2.79% and 3.42%
as of December 31, 2003 and 2002, respectively.
JPM organ Chase has guaranteed certain debt of its subsidiaries,
including both long-term debt and structured notes sold as part
of the Firm’s trading activities. These guarantees rank on a pari-
ty w ith all other unsecured and unsubordinated indebtedness of
JPM organ Chase. Guaranteed liabilities totaled $509 million and
$1.5 billion at December 31, 2003 and 2002, respectively.
Junior subordinated deferrable interest debentures
held by trusts that issued guaranteed capital debt
securities
At December 31, 2003, the Firm had previously established
w holly-ow ned Delaware statutory business trusts (“ issuer
trusts” ) that issued guaranteed preferred beneficial interests in
the Firm’s junior subordinated deferrable interest debentures.
Prior to FIN 46, these issuer trusts were consolidated subsidiaries
of JPM organ Chase; the preferred securities w ere included in
JPM organ Chase’s Consolidated balance sheet in the Liabilities
section, under the caption “ Guaranteed preferred beneficial
interests in capital debt securities issued by consolidated trusts,”
and the retained common capital securities of the issuer trusts
w ere eliminated against the Firm’s investment in the issuer
trusts. Distributions on the preferred securities w ere recorded as
Interest expense on the Consolidated statement of income.
As a result of the adoption of FIN 46, JPM organ Chase decon-
solidated all the issuer trusts. As a result, the junior subordinat-
ed deferrable interest debentures issued by JPM organ Chase
to the issuer trusts, totaling $6.8 billion, are reflected in the
Firm’s Consolidated balance sheet in the Liabilities section at