Notes to Financial Statements pg 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

In June 2001, we sold, in a private offering, convertible debentures having an initial aggregate principal amount at maturity of $492. The proceeds from the offering, net of $7 in offering expenses, were $330. The debentures mature in 20 years and are callable at our option on or after June 27, 2004. Holders may require us to purchase all or a portion of their debentures on June 27, 2004; June 27, 2009; and June 27, 2014, at a purchase price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the date of purchase. The debentures will be convertible into shares of our common stock at a conversion rate of 11.8071 shares per $0.001 initial principal amount at maturity of debentures, equivalent to an initial conversion price of $57.91 per share, if the closing price of our common stock exceeds a specified price for a specified period of time, or otherwise upon the occurrence of certain events. The debentures have an initial yield to maturity of 2.75%, including a cash payment of 1.0% and an initial accretion rate of 1.75%. The yield to maturity may be reset, but 
may not fall below 2.75% or above 3.75%, on Dec. 27, 2003; Dec. 27, 2008; and Dec. 27, 2013. The debentures are guaranteed on an unsecured and unsubordinated basis by Best Buy Stores, L.P., our wholly owned indirect subsidiary. The debentures, the guarantee and the underlying shares of common stock were registered with the Securities and Exchange Commission pursuant to a Registration Statement on Form S-3 that was declared effective on Oct. 9, 2001.

Senior Subordinated Notes
Our Musicland subsidiary had $110 of Senior Subordinated Notes due in 2003 (2003 Notes) and $161 of Senior Subordinated Notes due in 2008 (2008 Notes) outstanding, which were acquired and recorded at their fair value as part of the Musicland acquisition. 

Fair value was based upon the present value of the amounts expected to be paid. Both notes contained change-in-control provisions that required us to offer to repurchase the notes within 30 to 60 days after our 
acquisition of Musicland. Our offer to repurchase both notes was made on Feb. 12, 2001, at 101.0% of the aggregate principal amount of the notes plus accrued interest. The offer expired on March 16, 2001, at which time $94 of the 2003 Notes had been tendered. In the second quarter of fiscal 2002, we retired the remainder of the 2003 notes and all but $5 of the 2008 notes. 

Credit Agreement
We have two credit agreements that provide bank revolving credit facilities under which we can borrow up to $200 and $44, respectively. The $44 facility, which was acquired in connection with the Future Shop acquisition, increases to $53 on a seasonal basis. The $200 facility, entered into in March 2002 which replaced our $100 credit agreement, expires on March 21, 2005, and the $44 facility expires in fiscal 2003. Borrowings under the $200 facility are unsecured and bear interest at rates specified in the credit agreements, as we have elected. Borrowings under the $44 facility are secured by merchandise inventories. We also pay certain facility and agent fees.

The credit agreements contain covenants that require us to maintain certain financial ratios and minimum net worth. The $200 agreement also requires that we have no outstanding principal balance for a period not less than 30 consecutive days, net of cash and cash equivalents. We had no borrowings under the $100 facility during fiscal 2002 or 2001. Future Shop had peak borrowings under the $44 credit facility of $32 and $39 in fiscal 2002 and 2001, respectively.