Management’s Discussion and Analysis of Results of Oper ations and Financial Condition factors could have an adverse effect on U.S. Cellular’s competitive position, costs of obtaining new subscribers, liquidity, financial position and results of operations. Investment and other income (expense) totaled ($12.8) million in 2003, ($293.6) million in 2002 and $14.1 million in 2001. Investment income was $52.1 million in 2003, $42.1 million in 2002 and $41.9 million in 2001. Investment income primarily represents  U.S. Cellular’s share of net income from the markets managed by others that are accounted for by the equity method. The aggregate net income of these investment markets increased significantly in 2003, resulting in a corresponding increase in investment income. Interest income totaled $1.6 million in 2003, $4.4 million in 2002  and $10.3 million in 2001. The decreases in 2003 and 2002 are  primarily due to lower average cash balances in those years than in  the respective comparable years. Interest expense totaled $64.6 million in 2003, $47.9 million in 2002 and $35.2 million in 2001. Interest expense is summarized by related debt instrument in the following table: (1) In August 2002, U.S. Cellular entered into a loan agreement with TDS under which it  borrowed $105 million. The loan bears interest at an annual rate of 8.1%, payable quar- terly, and becomes due in August 2008, with prepayments optional. In February 2004, U.S. Cellular repaid all outstanding principal and interest related to this Note. For further information regarding this Note, see “Certain Relationships and Related Transactions.” (2) In May 2002, U.S. Cellular entered into the forward contracts, which were negotiated with third parties relating to its investment in 10.2 million Vodafone American Depositary Receipts. Taken together, the forward contracts allowed U.S. Cellular to borrow an aggre- gate of $159.9 million against the stock. The forward contracts bear interest, payable quarterly, at the London InterBank Offered Rate (“LIBOR”) plus 0.5% for a rate of 1.65% based on the three-month LIBOR rate at December 31, 2003. For further information regarding the forward contracts, see “Market Risk.” In 2003, interest expense related to the revolving credit facilities increased primarily due to the increase in average borrowings outstand- ing. Interest expense on the 8.75% Senior Notes, 8.1% Intercompany Notes and 6.7% Notes increased due to the increased length of time they were outstanding in 2003 compared to 2002. In 2002, interest expense related to the 8.75% Senior Notes, 8.1% Intercompany Note, Forward contracts and 9% Series A Notes increased due to the fact that none of these debt instruments were outstanding during 2001. Income tax expense (benefit) totaled an expense of $37.2 million in 2003, a benefit of $7.5 million in 2002 and an expense of $147.3 million in 2001. The overall effective tax expense (benefit) rate was  35% in 2003, (61%) in 2002 and 44% in 2001. The effective tax rates  Also in 2002, U.S. Cellular recorded a $38.1 million write-down in  the value of notes receivable related to the 2000 sales of certain minor- ity interests. Additionally, U.S. Cellular recorded losses of $8.5 million related to the withdrawal from a partnership in which it had owned  an investment interest and $4.2 million related to the reduction in  value of a land purchase option. In 2002, management determined that the decline in value of certain marketable equity securities relative to their book basis was other  than temporary and charged a $244.7 million loss to the statements of operations. U.S. Cellular has subsequently utilized derivative financial instruments to eliminate any future other than temporary losses related to these marketable equity securities. See “Market Risk” for a discus- sion of other than temporary losses. U.S. Cellular and its subsidiaries hold a substantial amount of marketable equity securities, the majority of which are the result of sales or trades of non-strategic assets. These securities are publicly traded and can have volatile share prices. U.S. Cellular and its subsidiaries do not make direct investments in publicly traded companies and all of these interests were acquired as a result of sales, trades or reorganizations of other assets. U.S. Cellular continues to hold these investments because their associated low tax basis would trigger a substantial taxable gain upon disposal. See “Liquidity and Capital Resources – Marketable Equity Securities and Forward Contracts” for a discussion of marketable equity securities. Loss on marketable equity securities and other investments totaled  $5.2 million in 2003 and $295.5 million in 2002. In 2003, a $3.5 million license impairment loss was recorded related to U.S. Cellular’s invest- ment in a non-operational market in Florida that remained with U.S. Cellular after the exchange with AT&T Wireless was completed. Also in 2003, a $1.7 million impairment loss was recorded related to U.S. Cellular’s minority investment in a wireless market that it accounts for using the cost method. For further information regarding U.S. Cellular’s 8.75% Senior Notes, 6.7% Notes and 9% Series A Notes, see “Liquidity and Capital Resources – Long-Term Financing.” For further information regarding U.S. Cellular’s revolving credit facilities, see “Liquidity and Capital Resources – Revolving Credit Facilities.” For further information on the forward contracts, see “Market Risk.” For information regarding the 8.1% Intercompany Note, see “Certain Relationships and Related Transactions.” The zero coupon convertible debentures, also known as Liquid Yield Option Notes, accrete interest at 6% annually, but do not require current cash payments of interest. All accreted interest is added to the outstanding principal balance on June 15 and December 15 of each year for purposes of calculating interest expense. U.S. Cellular’s $250 million principal amount of 7.25% Notes are unse- cured and become due in August 2007. Interest on the Notes is payable semi-annually on February 15 and August 15 of each year. Investment and Other Income (Expense) Income Taxes 29 Year Ended December 31, 2003 2002 2001 (Dollars in millions) 7.25% Notes $18.5 $18.5 $18.5 8.75% Senior Notes 11.4 1.8 — Revolving credit facilities 9.8 5.8 5.1 6% zero coupon convertible debentures 9.4 8.9 9.8 8.1% Intercompany Note (1) 8.6 3.5 — Forward contracts (2) 2.9 2.1 — 6.7% Notes 2.0 — — 9% Series A Notes — 4.6 — Other 2.0 2.7 1.8 Total Interest Expense $64.6 $47.9 $35.2