Revenue  Marketing Investment Earnings Goals BUSINESS OUTLOOK Revenues are expected to grow approximately 14-16% in 2003. Net interest margin is expected to fluctuate somewhat due to the scheduled repricings of certain introductory rate credit card products and a gradual shift towards superprime assets, but is expected to stabilize at approximately 9-10% in 2003. Non-interest income is expected to remain stable in 2003 compared to 2002, consistent with a gradual shift towards higher credit quality assets, which generate less fee income than assets generated by customers at the lower end of the credit spectrum. Risk adjusted margin should also fluctuate as a result of underlying revenue and charge-off dynamics, but is expected to stabilize at approximately 10% in 2003.  This business outlook section summarizes the Company’s expectations for earnings for 2003, and its primary goals and strategies for continued growth. The statements contained in this section are based on management’s current expectations. Certain statements are forward looking, and therefore actual results could differ materially. Factors that could materially influence results are set forth throughout this section and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 (Part I, Item 1, Risk Factors). The Company has historically targeted an annual growth in earnings per share of at least 20%, with 2002 marking the eighth consecutive year that this goal has been achieved. Looking forward, the Company anticipates earnings per share results of approximately $4.55 in 2003, which is approximately 16% growth over the $3.93 earnings per share achieved in 2002. The Company continues to target long-term earnings per share growth of 20%.  As stated previously, marketing expense is expected to be on average approximately $300.0 million per quarter in 2003. A portion of this marketing spending will continue to support our efforts to build a strong brand for the Company. Our “What’s in Your Wallet?” campaign has resulted in the Company achieving brand awareness and brand equity scores among the highest in the credit card industry, as measured by third-party firms. The Company believes the branded franchise that it is building strengthens and enables its IBS and mass customization strategies across product lines. The Company cautions however, that an increase or decrease in marketing expense or brand awareness does not necessarily correlate to a comparable increase or decrease in outstandings balances or accounts due to, among other factors, the long-term nature of brand building, consumer attrition and utilization patterns, and shifts over time in targeting customers and/or products that have varying marketing acquisition costs.  Management expects to vary its marketing across its credit card, installment lending and auto lending products depending on the competitive dynamics of the various markets in which it participates. Currently, among the Company’s various product lines, U.S. credit cards marketed to consumers with the most favorable credit profiles are facing the highest degree of intensity of competition. Accordingly, the Company expects to focus a larger proportion of its marketing expenditures on other products marketed to similar consumer bases, such as installment loans and U.K. credit cards, in the short term. The Company expects to adjust its marketing allocations, however, to target specific product lines that it believes offer the highest response rates and opportunities from time to time.  As a result of overall marketing spending increasing over levels realized in the second half of 2002, the Company expects account growth to resume in 2003, and to result in annual growth of approximately 5-10%. The Company also expects managed loans outstanding to increase by approximately 20-25% in 2003, comprising approximately 25% growth in prime and superprime assets, and approximately 10-15% growth in subprime assets. The Company’s earnings are a function of our revenues (net interest income and non-interest income), consumer usage, payment and attrition patterns, credit quality of our earning assets (which affects fees and chargeoffs) and the Company’s marketing and operating expenses. An overview of trends in these metrics, as well as a discussion of our core IBS and the competitive dynamics of the Company’s three operating segments follow. The Company expects to achieve these results based on the continued success of its business strategies and its current assessment of the competitive, regulatory and funding market environments that it faces (each of which is discussed elsewhere in this Annual Report), as well as the expectation that the geographies in which the Company competes will not experience significant consumer credit quality erosion, as might be the case in an economic downturn or recession.  The Company’s 2003 earnings per share growth target results from our decision in mid-2002 to moderate the growth of our managed loans outstanding to 20-25% in 2003 from 32%, 53% and 46% in 2002, 2001 and 2000, respectively. To slow the growth of the Company’s managed loans outstandings, it reduced marketing spending from $674.0 million in the first half of 2002 to $396.6 million in the second half of 2002. This reduction in spending led to an increase in earnings per share growth in 2002 to 35% from the 20% growth originally forecasted. In 2003, the Company expects marketing spending to increase to approximately $300.0 million per quarter.  41