Blizzard 2009 Annual Report Download - page 41

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29
portfolio.Ourinvestmentportfolioconsistsprimarilyofdebtinstrumentswithhighcreditqualityand
relativelyshortaveragematuritiesandmoneymarketfundsthatinvestinsuchsecurities.Asshortterm
securitiesmaturerelativelyquicklyandmustbereinvestedatthethencurrentmarketrates,interestincome
onaportfolioconsistingofcash,cashequivalents,orshorttermsecuritiesismoresubjecttomarket
fluctuationsthanaportfoliooflongertermsecurities.Conversely,thefairvalueofsuchaportfolioisless
sensitivetomarketfluctuationsthanaportfoliooflongertermsecurities.AtDecember31,2009,our
$2,768millionofcashandcashequivalentswerecomprisedprimarilyofmoneymarketfunds.At
December31,2009,our$477millionofshortterminvestmentsincluded$389millionofU.S.government
agencysecurities,$2millionofmortgagebackedsecurities,$54millionofauctionratesecuritiesclassified
astrading,and$32millionofrestrictedcash.Wehad$23millioninauctionratesecuritiesatfairvalue
classifiedaslongterminvestmentsatDecember31,2009.Mostofourinvestmentportfolioisinvestedin
shorttermorvariableratesecurities.Accordingly,webelievethatasharpchangeininterestrateswould
nothaveamaterialeffectonourshortterminvestmentportfolio.
ForeignCurrencyExchangeRateRisk
Wetransactbusinessinmanydifferentforeigncurrenciesandmaybeexposedtofinancialmarket
riskresultingfromfluctuationsinforeigncurrencyexchangerates.Currencyvolatilityismonitored
frequentlythroughouttheyear.WeenterintocurrencyforwardcontractsandswapswithVivendi,
generallywithmaturitiesoftwelvemonthsorless,tomitigateourriskassociatedwithourforeigncurrency
exchangerateexposureresultingfromourforeigncurrencydenominatedfinancialassetsandliabilities
(e.g.intercompanyreceivablesandpayables)andearnings.Weexpecttocontinuetouseeconomichedge
programsinthefuturetoreducefinancialmarketrisksifitisdeterminedthatsuchhedgingactivitiesare
appropriatetoreducerisk.Wedonotholdorpurchaseanyforeigncurrencycontractsfortradingor
speculativepurposes.Allforeigncurrencyeconomichedgingtransactionsarebacked,inamountandby
maturity,byanidentifiedeconomicunderlyingitem.
Thegrossnotionalamountofoutstandingforeignexchangeswapswas$120millionat
December31,2009.Thenotionalamountsofoutstandingforwardforeignexchangecontractsandforeign
exchangeswapswere$126millionand$118million,respectively,atDecember31,2008.Apretaxnet
unrealizedlossof$2millionandgainof$3millionfortheyearsendedDecember31,2009and2008,
respectively,resultedfromtheforeignexchangecontractsandswapswithVivendiandwererecognizedin
theConsolidatedStatementsofOperations.
CONTROLSANDPROCEDURES
DefinitionandLimitationsofDisclosureControlsandProcedures.
Ourdisclosurecontrolsandprocedures(assuchtermisdefinedinRules13a15(e)and15d15(e)
undertheExchangeAct)aredesignedtoreasonablyensurethatinformationrequiredtobedisclosedinour
reportsfiledundertheExchangeActis(i)recorded,processed,summarized,andreportedwithinthetime
periodsspecifiedintheSEC’srulesandformsand(ii)accumulatedandcommunicatedtomanagement,
includingourprincipalexecutiveofficerandprincipalfinancialofficer,asappropriate,toallowtimely
decisionsregardingrequireddisclosures.Acontrolsystem,nomatterhowwelldesignedandoperated,can
provideonlyreasonableassurancethatitwilldetectoruncoverfailureswithintheCompanytodisclose
materialinformationotherwiserequiredtobesetforthinourperiodicreports.Inherentlimitationstoany
systemofdisclosurecontrolsandproceduresinclude,butarenotlimitedto,thepossibilityofhumanerror
andthecircumventionoroverridingofsuchcontrolsbyoneormorepersons.Inaddition,wehavedesigned
oursystemofcontrolsbasedoncertainassumptions,whichwebelievearereasonable,aboutthelikelihood
offutureevents,andoursystemofcontrolsmaythereforenotachieveitsdesiredobjectivesunderall
possiblefutureevents.
EvaluationofDisclosureControlsandProcedures.
Ourmanagement,withtheparticipationofourprincipalexecutiveofficerandprincipalfinancial
officer,hasevaluatedtheeffectivenessofourdisclosurecontrolsandproceduresatDecember31,2009,the
endoftheperiodcoveredbythisreport.Basedonthisevaluation,theprincipalexecutiveofficerand