Gap (GPS)

Changes in our credit ratings may have a negative or positive impact on our financing costs and structure in future periods.

In November 2001, we issued $500 million aggregate principal amount of debt securities at an original annual interest rate of 8.80%, due December 15, 2008 (the “Notes”), of which only $138 million remained outstanding as of February 3, 2007. The interest rate payable on the Notes is subject to adjustment from time to time if either Moody’s Investors Service (“Moody’s”) or Standard & Poor’s Rating Service (“Standard & Poor’s”) reduces the rating ascribed to the Notes below Baa2, in the case of Moody’s, or below BBB+, in the case of Standard & Poor’s. The interest rate on the Notes increases by 0.25% for each rating category downgrade by either rating agency. In addition, if Moody’s or Standard & Poor’s subsequently increases the rating ascribed to the Notes, the ongoing interest rate then payable on the Notes decreases by 0.25% for each rating category upgrade by either rating agency up to Baa2, in the case of Moody’s, or BBB+, in the case of Standard & Poor’s. In no event will the interest rate be reduced below the original interest rate payable on the Notes. As a result of changes to our long-term credit ratings, the interest rate payable by us on the Notes has varied from 8.80% to 10.55% per annum. The interest rate on the Notes as of January 29, 2006 was 9.55%. On November 17, 2006, Standard & Poor’s downgraded our long term credit rating to BB+ which increased the interest rate payable on the Notes to 9.80% effective as of December 15, 2006. On February 5, 2007, Moody’s downgraded our long term credit rating to Ba1 which will increase the interest rate payable on the Notes to 10.05% effective as of June 15, 2007. Given our current credit ratings, we do not have meaningful access to the commercial paper market. Any future reduction in our long-term senior unsecured credit rating could result in reduced access to the capital markets and higher interest costs on future financings.

For further information on our credit rating including outlook see the section entitled “Debt and Credit Facility” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Part II, Item 7.

Changes in our credit ratings may have a negative or positive impact on our financing costs and structure in future periods.

In November 2001, we issued $500 million aggregate principal amount of debt securities of which only $138 million remains outstanding at an original annual interest rate of 8.80 %, due December 15, 2008 (the “notes”). The interest rate payable on the notes is subject to adjustment from time to time if either Moody’s Investors Service (“Moody’s”) or Standard & Poor’s Rating Service (“Standard & Poor’s”) reduces the rating ascribed to the notes below Baa2, in the case of Moody’s, or below BBB+, in the case of Standard & Poor’s. The interest rate on the notes increases by 0.25 % for each rating category downgrade by either rating agency. In addition, if Moody’s or Standard & Poor’s subsequently increases the rating ascribed to the notes, the ongoing interest rate then payable on the notes decreases by 0.25% for each rating category upgrade by either rating agency up to Baa2, in the case of Moody’s, or BBB+, in the case of Standard & Poor’s. In no event will the interest rate be reduced below the original interest rate payable on the notes. As a result of downgrades to our long-term credit ratings, the interest rate payable by us on the notes increased to 10.05% per annum as of January 29, 2005. On February 10, 2005, Standard & Poor’s upgraded our long term credit rating which will decrease the interest rate payable on the notes to 9.80% effective June 15, 2005. Given our current credit ratings, we do not have meaningful access to the commercial paper market. Any future reduction in our long-term senior unsecured credit rating could result in reduced access to the capital markets and higher interest costs on future financings.

For further information on our credit rating including outlook see the section entitled “Credit Facility and Debt” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Part II, Item 7 of this form by reference to page 31 our 2004 Annual Report to Shareholders.