Adobe 2003 Annual Report Download - page 20

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20
Adobe software classes. We sponsor workshops, work with professional associations and user groups, and conduct
regular beta-testing programs.
Investments
We own limited partnership interests in four venture capital limited partnerships, Adobe Ventures L.P., Adobe
Ventures II, L.P., Adobe Ventures III, L.P., and Adobe Ventures IV, L.P. (collectively “Adobe Ventures”), that
invest in early stage companies with innovative technologies. We also make direct investments in privately held
companies. In addition to the potential for financial returns, our venture activities often increase our knowledge of
emerging markets and technologies, as well as expand our opportunities to provide Adobe products and services.
The partnerships are managed by Granite Ventures, an independent venture capital firm and sole general partner of
Adobe Ventures.
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 the ability to approve
the replacement of the general partner and investments that exceed certain established parameters. However, these
rights are considered 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 gain (loss) on our consolidated statements of income. The stocks of a number of technology
investments held by Adobe Ventures at November 28, 2003 are not publicly traded and, therefore, there is no
established market for these 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 of current market value made by
Granite Ventures. It is our policy to review the fair value of these investments held by Adobe Ventures, as well as
our direct investments, on a regular basis to evaluate the carrying value of the investments in these companies. This
evaluation includes, but is not limited to, reviewing each company’s 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 the
carrying value of a company is in excess of fair value, it is our policy to write-down the investment to reduce its
carrying value to fair value.