SanDisk 2004 Annual Report Download - page 43

Table of Contents
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The
primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk.
This is accomplished by investing in widely diversified short−term investments, consisting primarily of investment grade securities,
substantially all of which either mature within the next twelve months or have characteristics of short−term investments. As of
January 2, 2005, a hypothetical 50 basis point increase in interest rates would result in an approximate $2.8 million decline (less than
0.5%) in the fair value of our available−for−sale debt securities.
Foreign Currency Risk. A substantial majority of our revenue, expense and capital purchasing activity is transacted in U.S. dollars.
However, we do enter into transactions in other currencies, primarily the Japanese yen. Movements in currency exchange rates,
especially the Japanese yen, could cause variability in our revenues, expenses or other income (expense), net. See “Factors That May
Affect Future Results−We are exposed to foreign currency risks” and “Factors That May Affect Future Results−Because of our
international business and operations, we must comply with numerous international laws and regulations, and we are vulnerable to
political instability, currency fluctuations and other risks related to international operations.”
Market Risk. We also hold available−for−sale equity securities in equity investments in semiconductor wafer manufacturing
companies. As of January 2, 2005, a reduction in prices of 10% of these marketable equity securities would result in a decrease in the
fair value of our investments in marketable equity securities of approximately $2.0 million.
All of the potential changes noted above are based on sensitivity analysis performed on our financial position at January 2, 2005.
Actual results may differ materially.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning at page F−1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a−15(e) and 15d−15(e) under the Securities Exchange Act of 1934 as of the end of the period
covered by this report (the “Evaluation Date”). Based upon the evaluation, our principal executive officer and principal financial
officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective. Disclosure controls are controls
and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act,
such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls include controls and procedures designed to reasonably ensure that such information is accumulated and
communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure. Our quarterly evaluation of disclosure controls includes an evaluation of some components of
our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual
basis for purposes of providing the management report which is set forth below.
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