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Based on the Company’s overall interest rate exposure as of and during the year ended June 30, 2002, including derivative and other instruments sensitive to interest rates, the Company does not believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would materially affect the Company’s financial statements. 

## Currency Rate Exposure 

The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The primary purpose of the Company’s foreign currency hedging activities is to reduce the risk that the Company’s financial position will be adversely affected by short-term changes in exchange rates. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with maturities of less than 18 months. 

In addition, the Company enters into certain foreign currency swaps with maturities of up to five years to hedge intercom- pany financing transactions. The Company also utilizes purchased foreign currency options with maturities of gener- ally less than 18 months and forward exchange contracts to hedge against the effect of exchange rate fluctuations on royalties and income from international operations. 

Based on the Company’s overall currency rate exposure as of and during the year ended June 30, 2002, including deriva- tive and other instruments sensitive to foreign currency movements, the Company does not believe a near-term change in currency rates, at a 95% confidence level based on historical currency rate movements, would materially affect the Company’s financial statements. 

## Commodity Price Exposure 

Raw materials used by the Company are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. The Company uses futures, options and swap contracts to manage the volatility related to the above exposures. Commodity hedging activity is not considered material to the Company’s financial statements. 

## Restructuring Program 

In 1999, concurrent with a reorganization of its operations into product-based global business units, the Company 

initiated a multi-year restructuring program. The program is designed to accelerate growth and deliver cost reductions by streamlining management decision-making, manufactur- ing and other work processes and discontinuing under-per- forming businesses and initiatives. Technology improvements, as well as standardization of manufacturing and other work processes allow the Company to streamline its operations. This resulted in the consolidation of manufacturing activity and various business processes. 

The total cost of the program is expected to be $5.6 billion before tax ($4.4 billion after tax). Through 2002, cumulative charges are $4.1 billion before tax ($3.3 billion after tax). The remaining charges are expected to continue through fiscal 2004. Given the nature and duration of the program, costs to be incurred in future years are subject to varying degrees of estimation for key assumptions, such as actual timing of execution, currency effects, enrollment impacts and other variables. All restructuring costs are reported in the corporate segment. 

## Summary of Restructuring Charges 

<img src='content_image/19318.jpg'>

Separations represent the cost of packages offered to employees, which are generally accrued upon employee acceptance. The separation packages, predominantly volun- tary, are formula driven based on salary levels and past service. Separation costs are charged to cost of products sold for manufacturing employees and marketing, research, administrative and other for all other employees. 

Approximately 16,600 separation packages have been provided for through June 30, 2002: 7,400 in 2002 and 9,200 from 1999 to 2001. While all geographies and businesses are impacted by the enrollment reduction programs, a higher number of United States employees are affected, given the concentration of operations. Net enroll- ment for the Company may decline by less than the total separations, as terminations will be offset by increased enrollment at remaining sites, acquisitions and other impacts. 

