down. The company does not expect a pay down to occur. While virtually no financial statement impact would result from a pay down, an alternate source of funding for $4.8 billion of receivables would have to be obtained. With respect to both the Trust and the Master Trust, a decline in the actual or implied short-term credit rating of TRS below A-1/P-1 will trigger a requirement that TRS, as servicer, transfer collections on the securitized assets to investors on a daily, rather than a monthly, basis or make alternative arrangements with the rating agencies so as to allow TRS to continue to transfer collections on a monthly basis. Such alternative arrangements include obtaining appropriate guarantees for the performance of the payment and deposit obligations of TRS, as servicer. TRS also securitizes equipment lease receivables. At December 31, 2002 and 2001, the amount sold and outstanding to third party investors was $254 million and $675 million, respectively. These sales result in a reduction of interest expense and provisions for losses, as well as servicing revenue, all of which are insignificant to the company’s results of operations. TRS, primarily through Credco, maintained commercial paper outstanding of approximately $11.2 billion at an average interest rate of 1.3% and approximately $18.0 billion at an average interest rate of 1.9% at December 31, 2002 and 2001, respectively. Additionally, during 2002, Credco issued an aggregate of $6.8 billion of medium-term notes at fixed and floating rates with maturities of one to three years. This reflects a shift in the funding strategy as the company is placing less reliance  on short-term debt. In early 2003, Credco issued an additional $2 billion of floating rate medium-term notes, with maturities of one year that can be extended by the holders to up to five years. Bank notes issued and Fed Funds purchased by Centurion Bank totaled approximately $8 billion during 2002. Borrowings under bank lines of credit totaled $1.2 billion and $1.3 billion at December 31, 2002 and 2001, respectively. As of December 31, 2002, Credco had the ability to issue approximately $3.2 billion of debt securities under a shelf registra- tion statement filed with the SEC, which amount was increased to approximately $18.2 billion in early 2003. In addition, approximately $10 billion of the company’s unused lines of credit supporting TRS’ commercial paper borrowings were allocated to Credco at December 31, 2002. These lines expire in increments from 2003 through 2007. Also, TRS had $2.6 billion in committed back-up lines of credit available at December 31, 2002 for other corporate purposes. For TRS’ charge card and fixed rate lending products, interest rate exposure is managed through a combination of shifting the mix of funding toward fixed rate debt and through the use of derivative instruments, with an emphasis on interest rate swaps, that effectively fix TRS’ interest expense for the length of the swap. The company endeavors to lengthen the maturity of interest rate hedges in periods of falling interest rates and to shorten their maturity in periods of rising interest rates. For the majority of its cardmember loans, which are linked to a floating rate base and generally reprice each month, TRS uses floating rate funding. TRS regularly reviews its strategy and may modify it. Nontrading interest rate products, primarily interest rate swaps, with notional amounts of approximately $44 billion (a portion of which extends to 2005) were outstanding at December 31, 2002. The detrimental effect on TRS’ pretax earnings of a hypothetical 100 basis point increase in interest rates would be approxi- mately $50 million ($40 million related to the U.S. dollar) and $48 million ($31 million related to the U.S. dollar), based on 2002 and 2001 year-end positions, respectively. This effect is primarily a function of the extent of variable rate funding of charge card and fixed rate lending products, to the degree that interest rate exposure is not managed by derivative financial instruments. TRS’ foreign exchange risk arising from cross-currency charges and balance sheet exposures is managed primarily by entering into agreements to buy and sell currencies on a spot or forward basis. At December 31, 2002, foreign currency products with total notional amounts of approximately $6.4 billion were outstanding, including foreign currency forward sales with notional amounts of $645 million which were contracted to manage a substantial portion of anticipated cash flows from operations in major overseas markets for 2003. Based on the year-end 2002 and 2001 foreign exchange positions, but excluding the forward contracts managing the antici- pated overseas operating results for the subsequent year, the effect on TRS’ earnings of a hypothetical 10 percent strengthening of the U.S. dollar would be immaterial. With respect to the forward contracts related to anticipated overseas operating results for the subsequent year, a 10 percent strengthening would create hypothetical pretax gains of $59 million and $29 million I 42 AXP I FINANCIAL REVIEW Risk Management Other Financing Activities