Adobe 2000 Annual Report Download - page 48

Download and view the complete annual report

Please find page 48 of the 2000 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 79

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79

21
20
An increase (decrease) in the market value of the underlying equities will result in a
corresponding decrease (increase) in the value of the forward contract. The following
table represents the potential decrease to the value of the forward contracts given a per-
centage change in the underlying equities.
Potential Decrease to the Value of the Forward Contracts Given X% Increase in the Stock
Price of the Underlying Equities
FAIR VALUE A S
OF DECEMBER 1
50% 25% 2000
Forward contracts $ (2.6) $ (1.3) $ 10.7
Fixed Income Investments At December 1, 2000, we had an investment portfolio of fixed
income securities, including those classified as cash equivalents, of $368.3 million. These
securities are subject to interest rate fluctuations. An increase in interest rates could
adversely affect the market value of our fixed income securities.
A sensitivity analysis was performed on our investment portfolio as of December 1, 2000.
This sensitivity analysis was based on a modeling technique that measures the hypothetical
market value changes that would result from a parallel shift in the yield curve of plus 50,
100, or 150 basis points over six-month and twelve-month time horizons. The market
value changes for a 50, 100, or 150-basis point increase in short-term treasury security
yields were not material due to the limited duration of our portfolio.
We do not use derivative financial instruments in our investment portfolio to manage
interest rate risk. We do, however, limit our exposure to interest rate and credit risk by
establishing and strictly monitoring clear policies and guidelines for our fixed income
portfolios. At the present time, the maximum duration of all portfolios is limited to 2.3
years. The guidelines also establish credit quality standards, limits on exposure to one
issue, issuer, as well as the type of instrument. Due to the limited duration and credit risk
criteria established in our guidelines, we do not expect the exposure to market and credit
risk to be material.
Facility Leases We are exposed to interest rate risk associated with leases of our facilities
whose payments are tied to the LIBOR and have evaluated the hypothetical changes in
lease obligations arising from selected hypothetical changes in the LIBOR. Market
changes reflected immediate hypothetical parallel shifts in the LIBOR curve of plus or
minus 50, 100, and 150 basis points for a twelve-month period. Based on this analysis,
such charges would not be material to our results of operations or financial position.