Adobe 2002 Annual Report Download - page 120

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the partnership liquidation, there was no minority interest held by the participating officers. The liquidation of the
partnership did not have any material impact on our financial statements.
The investments in Adobe Ventures L.P.; Adobe Ventures II, L.P.; Adobe Ventures III, L.P.; and Adobe
Ventures IV, L.P., which were established to invest in emerging technology companies strategic to Adobe’s
software business, totaled $1.7 million, $3.1 million, $7.3 million, and $22.7 million, respectively, as of November
29, 2002, and totaled $4.2 million, $7.8 million, $12.8 million, and $11.7 million, respectively, as of November 30,
2001. Our investments in the limited partnerships are adjusted to reflect our equity interest in Adobe Ventures L.P.;
Adobe Ventures II, L.P.; Adobe Ventures III, L.P.; and Adobe Ventures IV, L.P.’s investment income (loss) and
dividend distributions, which totaled $(15.4) million, $(49.2) million, and $0.4 million in fiscal years 2002, 2001,
and 2000, respectively.
We have commitments to the Adobe Venture limited partnerships. The following table shows the capital
commitments and the capital contributed as of November 29, 2002:
Capital Commitment Capital Contributed
Adobe Ventures L.P. $ 40,000 $ 40,476
Adobe Ventures II, L.P. $ 40,000 $ 37,541
Adobe Ventures III, L.P. $ 60,000 $ 57,353
Adobe Ventures IV, L.P. $ 100,000 $ 35,418
The capital commitment is the amount that Adobe has agreed to contribute to the Partnership. The capital
commitment amount is contributed over the term of each Partnership, which is ten years. We can contribute more
than the capital commitment, at our discretion. We can cease funding at any time after the earlier of: a) two years
after the effective date of the Partnership or b) the date on which the Company has made capital contributions to the
Partnership in an amount in excess of $10.0 million, $10.0 million, $20.0 million, and $33.0 million for Adobe
Ventures L.P., Adobe Ventures II, L.P., Adobe Ventures III, L.P., and Adobe Ventures IV, L.P., respectively.
In addition to these venture partnerships, we have direct investments in public and privately-held companies. In
total, as of November 29, 2002, we have invested $213.9 million through our venture partnerships and direct
investments. As of November 29, 2002, net returns were $348.7 million, including stock dividends and net gains in
market value of investments.
The investments in Adobe Ventures are accounted for using the equity method of accounting, and accordingly,
the investments are adjusted to reflect our share of Adobe Ventures’ investment income (loss) and dividend
distributions. Under the terms of the partnership agreements, the general partner has the sole and exclusive right to
manage and control the partnerships. Adobe as the limited partner has certain rights, including replacing the general
partner and approving acquisitions that exceed certain established parameters. However, these rights are considered
to be protective rights and do not suggest an ability to control the partnerships. Adobe Ventures carry their
investments in equity securities at estimated fair market value and unrealized gains and losses are included in
investment income (loss). The stock of a number of technology investments held by the limited partnerships at
November 29, 2002 are not publicly traded, and, therefore, there is no established market for their securities. In
order to determine the fair market value of these investments, we use the most recent round of financing involving
new non-strategic investors or estimates made by Granite Ventures based on their assessment of the current market
value. It is our policy to review the fair value of these investments held by Adobe Ventures on a regular basis to
evaluate the carrying value of the investments in these companies. This policy includes, but is not limited to,
reviewing each companies’ cash position, financing needs, earnings/revenue outlook, operational performance,
management/ownership changes, and competition. The evaluation process is based on information that we request
from these privately-held companies. This information is not subject to the same disclosure regulations as U.S.
publicly traded companies, and as such, the basis for these evaluations is subject to the timing and the accuracy of
the data received from these companies. If we believe that the carrying value of a company is carried at an amount
in excess of fair value, it is our policy to record a reserve in addition to our equity method of accounting and the
related writedown is recorded as an investment loss on our consolidated statements of income.
As of November 29, 2002 and November 30, 2001, our portfolio of investments included in Other Assets had
an estimated fair market value of $35.6 million and $31.7 million.