We are exposed to claims and litigation arising out of the ordinary course of business and use various methods to resolve these matters in a manner that serves the best interest of our shareholders and other constituents. The dispute resolution methods that we use include vigorous litigation, when necessary, and alternatives such as settlement discussions, where appropriate, to reduce the costs of litigation. Our policy is to fully disclose pending lawsuits and other known claims that we expect may have a material impact on our results of operations or financial condition. However, management, after consulting with legal counsel, does not believe the currently identified claims and litigation meet this criterion. Long-term Debt and Notes Payable At January 31, 2004, no notes payable were outstanding. The average amount of secured and unsecured notes payable outstanding during 2003 was $377 million at a weighted average interest rate of 1.2 percent. Notes payable balances can fluctuate significantly during the year due to seasonal financing needs and other factors. On October 31, 2003, our short-term borrowing reached its highest level for the year of $1,409 million. At February 1, 2003, $100 million of notes payable secured by credit card receivables were outstanding. The average amount of secured and unsecured notes payable outstanding during 2002 was $170 million at a weighted average interest rate of 1.9 percent. During 2002, the highest level of short-term borrowing was $735 million. At January 31, 2004, two committed credit agreements totaling $1.6 billion were in place through a group of 26 banks at specified rates. Of these credit lines, an $800 million credit facility expires in June 2004 and includes a one-year term-out option to June 2005. The remaining $800 million credit facility expires in June 2008. There were no balances outstanding at any time during 2003 or 2002 under these agreements. In 2003, we issued $500 million of long-term debt maturing in 2008 at 3.38 percent, $200 million of long-term debt maturing in 2018 at 4.88 percent and $500 million of long-term debt maturing in 2013 at 4.00 percent. We also called or repurchased $297 million of long-term debt with an average remaining life of 20 years and a weighted average interest rate of 7.8 percent, resulting in a loss of $15 million (approximately $.01 per share). In 2002, we issued $750 million of long-term debt maturing in 2009 at 5.38 percent, $1 billion of long-term debt maturing in 2012 at 5.88 percent and $600 million of long-term debt maturing in 2032 at 6.35 percent. Also during 2002, we issued $750 million of floating rate debt secured by credit card receivables, bearing interest at an initial rate of 1.99 percent maturing in 2007. We also called or repurchased $266 million of long-term debt with an average remaining life of 19 years and a weighted average interest rate of 8.8 percent, resulting in a loss of $34 million ($.02 per share). The portion of long-term debt secured by credit card receivables is $1,500 million at January 31, 2004, $750 million of which matures in July 2004 and is classified as current portion of long-term debt. On February 1, 2003, we had $1,900 million of long-term debt secured by credit card receivables, $400 million of which was classified as current portion of long-term debt. At year-end our debt portfolio, including adjustments related to swap transactions discussed in the following derivatives section, was as follows: * Reflects the weighted average stated interest rate as of year-end, including the impact of interest rate swaps. **The estimated fair value of total notes payable and notes and debentures, using a discounted cash flow analysis based on our incremental interest rates for similar types of financial instruments, was $11,720 million at January 31, 2004 and $11,741 million at February 1, 2003. Long-term Debt and Notes Payable January 31, 2004 February 1, 2003 (millions) Rate * Balance Rate * Balance Notes payable —% $ — 1.4% $ 100 Notes and debentures: Due 2003-2007 2.8 3,498 3.6 4,396 Due 2008-2012 5.3 4,757 5.8 4,249 Due 2013-2017 4.4 560 7.6 60 Due 2018-2022 5.3 410 9.3 217 Due 2023-2027 6.8 200 7.4 495 Due 2028-2032 6.7 1,500 6.7 1,500 Total notes payable,  notes and debentures ** 4.7% $10,925 5.2% $11,017 Capital lease obligations 158 144 Less: current portion (866) (975) Long-term debt and  notes payable $10,217 $10,186 Required principal payments on long-term debt and notes payable over the next five years, excluding capital lease obligations, are $857 million in 2004, $502 million in 2005, $752 million in 2006, $1,323 million in 2007 and $1,451 million in 2008. Derivatives Our derivative instruments are primarily interest rate swaps which hedge the fair value of certain debt by effectively converting interest from a fixed rate to a variable rate. We also hold derivative instruments to manage our exposure to risks associated with the effect of equity market returns on our non-qualified defined contribution plans as discussed on page 36. At January 31, 2004 and February 1, 2003, interest rate swaps were outstanding in notional amounts totaling $2,150 million and $1,450 million, respectively. The change in market value of an interest rate swap as well as the offsetting change in market value of the hedged debt are recognized into earnings in the current period. Ineffectiveness results when changes in the market value of the hedged debt are not completely offset by changes in the market value of the interest rate swap. There was no ineffectiveness recognized in 2003 or 2002 related to these instruments. The fair value of outstanding interest rate swaps and unamortized gains from terminated interest rate swaps was $97 million at January 31, 2004 and $127 million at February 1, 2003. During 2003, we entered into interest rate swaps with notional amounts of $200 million, $500 million and $400 million. We also terminated an interest rate swap with a notional amount of $400 million, resulting in a gain of $24 million that will be amortized into income over the life of the hedged debt. During 2002, we entered into interest rate swaps with notional amounts of $400 million and $500 million. An interest rate swap with a notional amount of 33