Management’s Discussion and Analysis 33 Franklin Covey 2000 Annual Report EURO CONVERSION Item 7a. Quantitative and Qualitative Disclosures  About Market Risk MARKET RISK OF FINANCIAL INSTRUMENTS The market price of the common stock has been and may remain volatile. In addition, the stock markets in general have recently experienced increased volatility. Factors such as quarter to quarter variations in revenues and earnings or the failure of the Company to meet analysts’ expectations could have a significant impact on the market price of the common stock. In addition, the price of the common stock can change for reasons unrelated to the performance of the Company. These forward-looking statements are based on manage- ment’s expectations as of the date hereof, and the Company does not undertake any responsibility to update any of these statements in the future. Actual future performance and results will differ and may differ materially from that contained in or suggested by these forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in the Company’s filings with the SEC. The Company has exposure to market risk from foreign currency exchange rates and changes in interest rates. To manage the volatility related to currency exchange rates, the Company entered into limited derivative transactions to manage well-defined foreign exchange risks during fiscal 2000. As of August 31, 2000 the Company had derivative instruments outstanding which were used to hedge foreign exchange risks on certain receivable and payable balances. The foreign exchange contracts were accounted for using existing accounting standards and will be subject to the provisions of SFAS No. 133 and related pronouncements in fiscal 2001. On January 1, 1999, the European Monetary Union (“EMU”), which is comprised of 11 out of the 15 member countries of the European Union, introduced a new com- mon currency, the “Euro.” During the transition period between January 1, 1999 and January 1, 2002, both the Euro and national currencies will coexist. The national currencies will remain legal tender until at least January 1, 2002, but not later than July 1, 2002. The Company currently transacts business in EMU countries using the national currencies and translates the financial results of those countries in accordance with current accounting pronouncements. Further, the Company has not experi- enced, nor does it expect to experience, a material adverse impact on its financial condition, results of operations, or liquidity as a result of the Euro conversion. Corresponding gains and losses on these and other derivative contracts were immaterial for the year ended August 31, 2000. As the Company continues to expand internationally, the Company’s use of foreign exchange contracts may grow in order to manage the foreign currency risks to the Company. As of August 31, 2000, the Company had not entered into derivative instruments to hedge its exposure to interest rate risk.