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42 Symantec 2003
Hypothetical Fair Market Values Given an
Interest Rate Increase (Decrease) of X Basis Points (bps)
Investment and Debt Portfolios Fair Value (75 bps) (25 bps) 50 bps 100 bps 150 bps
USD Portfolios (in U.S. $) 762.9 767.1 764.3 760.1 757.3 754.6
EURO Portfolios (in EURO) 653.5 656.3 654.6 650.6 647.9 645.1
CAD Portfolios (in Canadian $) 188.0 188.4 188.1 187.7 187.4 187.1
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to fluctuations in market prices,
interest rates, and foreign currency exchange rates. We use certain
derivative financial instruments to manage these risks. All financial
instruments used are in accordance with our global investment policy
and global foreign exchange policy. We do not use derivative financial
instruments for trading purposes.
We also hold equity interests in six privately-held companies. These
investments were recorded at cost, and are classified as other long-term
assets on the Consolidated Balance Sheets. These investments are
inherently risky and we could lose our entire initial investment in these
companies. As of March 31, 2003, these investments had a carrying
value of approximately $10.5 million.
INTEREST RATE SENSITIVITY
We consider investments in highly liquid instruments purchased with
an original maturity of 90 days or less to be cash equivalents. All of our
cash equivalents and short-term investments are classified as available-
for-sale as of the balance sheet dates. These securities are reported at
fair market value and any unrealized gains and losses are included as a
component in stockholders’ equity in accumulated other comprehensive
income (loss). Our cash equivalents and short-term investments consist
primarily of corporate securities, taxable auction rate securities, U.S.
government and government-sponsored securities, money market funds
and asset backed securities.
The following table presents the fair value and hypothetical changes in
fair market values of the financial instruments held as of March 31,
2003 that are sensitive to changes in interest rates (in millions):
The modeling technique used above measures the change in fair mar-
ket value arising from selected potential changes in interest rates.
Market changes reflect immediate hypothetical parallel shifts in the
yield curve of minus 75 basis points, minus 25 basis points, plus 50
basis points, plus 100 basis points and plus 150 basis points, which
are representative of the movements in the United States Federal
Funds Rate, Euro Area ECB Rate and Canada Overnight Rate.
During October 2001, we issued $600.0 million of 3% convertible sub-
ordinated notes. The notes pay interest semi-annually and mature on
November 1, 2006. As of March 31, 2003, we had approximately
$600.0 million principal amount of notes outstanding.
EXCHANGE RATE SENSITIVITY
We conduct business in 30 international currencies through our world-
wide operations. We believe that the use of foreign exchange forward
contracts should reduce the risks that arise from conducting business
in international markets.
We hedge risks associated with certain foreign currency cash, invest-
ments, receivables and payables in order to minimize the impact of
changes in foreign currency fluctuations on these assets and liabilities
denominated in foreign currencies. Foreign exchange forward con-
tracts as of March 31, 2003 were as follows (in millions):
Resulting Increase (Decrease) in Future Value of
Foreign Forward Exchange Contracts Given X%
Appreciation (Devaluation) of Foreign Currency
Foreign Forward Notional
Exchange Contracts Amount 10% 5% (5)% (10)%
Purchased $ 0.9 $ 0.1 $ – $ – $ –
Sold 66.4 (6.0) (3.2) 3.5 7.4
We believe that these foreign exchange forward contracts do not subject
us to undue risk from the movement of foreign exchange rates because
gains and losses on these contracts are offset by losses and gains on the
underlying assets and liabilities. All contracts have a maturity of no
more than 35 days. Gains and losses are accounted for as other expense,
net each period. We regularly review our hedging program and may
make changes as a result of this review.