In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (FIN 45) which provides accounting and disclosure requirements for certain guarantees. The accounting provisions of FIN 45, which are effective for certain guarantees issued or modified beginning January 1, 2003, will impact the company based upon the fair value amount of guarantees that are issued or modified beginning at that time. The company is still evaluating the impact of adopting FIN 45 on the Consolidated Financial Statements; the disclosure requirements of FIN 45 are addressed in Note 11 to the Consolidated Financial Statements. In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46), which addresses consolidation by business enterprises of variable interest entities (VIEs). The accounting provisions and expanded disclosure requirements for VIEs existing at December 31, 2002, are fully effective for reporting periods beginning after June 15, 2003.  An entity shall be subject to consolidation according to the provisions of FIN 46, if, by design, either (i) the total equity invest- ment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or, (ii) as a group, the holders of the equity investment at risk lack: (a) direct or indirect ability to make decisions about an entity’s activities; (b) the obligation to absorb the expected losses of the entity if they occur; or (c) the right to receive the expected residual return of the entity if they occur. In general, FIN 46 will require a VIE to be consolidated when an enter- prise has a variable interest that will absorb a majority of the VIE’s expected losses or receive a majority of the VIE’s expected residual return.  It is likely that the company will either consolidate or disclose additional information about VIEs when FIN 46 becomes fully effective in the third quarter of 2003. The entities primarily impacted by FIN 46 relate to structured investments, including CDOs and secured loan trusts (SLTs), which are both managed and partially owned by the company’s AEFA operating seg- ment. The application of FIN 46 for CDOs and SLTs will have no effect on the cash flows of the company. The CDO entities contain debt issued to investors, which are non-recourse to the company and are solely supported by portfolios of high-yield bonds and loans. AEFA manages the portfolios of high-yield bonds and loans with a fair value at December 31, 2002 of approximately $3.0 billion for the benefit of the $3.7 billion in CDO debt investors and often retains an interest in the residual and rated debt tranches of the CDO structures. The company’s interest in the rated debt tranches along with rated tranches of non-managed CDOs were placed in a securitization trust described in Note 2. The SLTs provide returns to investors primarily based on the performance of an underlying portfolio of $3.4 billion in high-yield loans with a market value at December 31, 2002 of $3.1 billion, which are generally managed by the company. While the potential consolidation of these entities may impact the results of operations at adoption and for each reporting period thereafter, the company’s maximum exposure to economic loss as a result of its investment in these entities is repre- sented by the carrying values at December 31, 2002 because any further reduction in the value of the assets will be absorbed by third-party investors. The CDO residual tranches have an adjusted cost basis of $28 million and the SLTs have an adjusted cost basis of $684 million. The company continues to evaluate other relationships and interests in entities that may be considered VIEs, including afford- able housing investments. The impact of adopting FIN 46 on the Consolidated Financial Statements is still being reviewed.  The following is a summary of investments at December 31: Note 2 INVESTMENTS (Millions) 2002 2001 Available-for-Sale, at fair value $ 49,102 $ 42,225 Investment loans (fair value: 2002, $4,405; 2001, $4,195) 3,981 4,024 Trading 555 239 Total $ 53,638 $ 46,488 I 63 AXP I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS