Costco 2006 Annual Report Download - page 37

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by investing in multiple types of investment-grade securities and through a combination of internal and
third-party investment management. Short-term investments generally have a maturity of three months
to five years from the purchase date. Investments with maturities beyond one year may be classified as
short-term based on their highly liquid nature and because such marketable securities represent the
investment of cash that is available for current operations. As the majority of these instruments are of a
short-term nature, if interest rates were to increase or decrease, there is no material risk of a valuation
adjustment related to these instruments. For those instruments that are classified as available for sale,
the unrealized gains or losses related to fluctuations in interest rates are reflected in accumulated other
comprehensive income or loss. Based on our cash and cash equivalents and short-term investments
balances at September 3, 2006, a 100 basis point increase or decrease in interest rates would result in
an increase or decrease of approximately $9 million to interest income (pre-tax) on an annual basis.
Most transactions of our foreign subsidiaries are conducted in local currencies, limiting our exposure to
changes in currency rates. We periodically enter into short-term forward foreign exchange contracts to
hedge the impact of fluctuations in foreign currency rates on inventory purchases. The notional value of
foreign exchange contracts outstanding at September 3, 2006 was $62 million.
EXECUTIVE OFFICERS OF THE COMPANY
A list of our Directors and nominees for Director is included in Costco’s Proxy Statement for its Annual
Meeting of Shareholders to be held on January 31, 2007. A list of the names and positions of the
Directors, as well as the Executive and Senior Officers of the Company, appears on page 71 of this
report.
The Company has adopted a code of ethics for senior financial officers pursuant to Section 406 of the
Sarbanes-Oxley Act. Copies of the code are available free of charge by writing to Secretary, Costco
Wholesale Corporation, 999 Lake Drive, Issaquah, WA 98027.
Costco’s Form 10-K for its fiscal year ended September 3, 2006, as filed with the Securities and
Exchange Commission, includes the certifications of Costco’s Chief Executive Officer and Chief
Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
Executive Compensation
The information required by this Item is incorporated herein by reference to the Proxy Statement filed
with the Securities and Exchange Commission.
MANAGEMENT’S REPORTS
Management’s Report on the Financial Statements
Our management is responsible for the preparation, integrity and objectivity of the accompanying
consolidated financial statements and the related financial information. The financial statements have
been prepared in conformity with U.S. generally accepted accounting principles and necessarily
include certain amounts that are based on estimates and informed judgments. Our management also
prepared the related financial information included in this Annual Report on Form 10-K and is
responsible for its accuracy and consistency with the financial statements.
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