The Company has entered into silver forward contracts that are designated as cash flow hedges of price risk related to forecasted worldwide silver purchases. The Company used silver forward contracts to minimize virtually all of its exposure to increases in silver prices in 2000. At December 31, 2000, the Company had open forward contracts, with maturity dates ranging from January 2001 to December 2001, hedging virtually all of its planned silver requirements through the fourth quarter of 2001.

At December 31, 2000, the fair value of open contracts was a pre-tax unrealized loss of $17 million, recorded in other comprehensive income. If this amount were to be realized, $16 million (pre-tax) of this loss would be reclassified into cost of goods sold within the next twelve months. During the year, a realized loss of $3 million (pre-tax) was recorded in cost of goods sold. At December 31, 2000, realized losses of $4 million (pre-tax), related to closed silver contracts, were recorded in other comprehensive income. These losses will be reclassified into cost of goods sold as silver-containing products are sold (all within the next twelve months). Hedge ineffectiveness was insignificant.

A sensitivity analysis indicates that, based on broker-quoted termination values, if the price of silver decreased 10% from spot rates at December 31, 2000 and 1999, the fair value of silver forward contracts would be reduced by $27 million and $5 million, respectively. Such losses in fair value, if realized, would be offset by lower costs of manufacturing silver-containing products.

The Company is exposed to interest rate risk primarily through its borrowing activities and, to a lesser extent, through investments in marketable securities. The Company utilizes U.S. dollar denominated as well as foreign currency denominated borrowings to fund its working capital and investment needs. The majority of short-term and long-term borrowings are in fixed rate instruments. There is inherent roll-over risk for borrowings and marketable securities as they mature and are renewed at current market rates. The extent of this risk is not predictable because of the variability of future interest rates and business financing requirements.

Using a yield-to-maturity analysis, if December 31, 2000 interest rates increased 10% (about 62 basis points) with the current period’s level of debt, the fair value of short-term and long-term borrowings would decrease $2 million and $20 million, respectively. If December 31, 1999 interest rates increased 10% (about 55 basis points) with the December 31, 1999 level of debt, the fair value of short-term and long-term borrowings would decrease $1 million and $18 million, respectively.

The Company’s financial instrument counterparties are high quality investment or commercial banks with significant experience with such instruments. The Company manages exposure to counterparty credit risk by requiring specific minimum credit standards and diversification of counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit exposure at December 31, 2000 was not significant to the Company.