Symantec 1999 Annual Report Download - page 48

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34
Item 7A: Quantitative and Qualitative Disclosures about Market Risk.
We do not have significant exposure to changing interest rates because of the low levels of marketable securities on our
balance sheet. We do not undertake any specific actions to cover our exposure to interest rate risk and we are not a
party to any interest rate risk management transactions. We do not purchase or hold any derivative financial
instruments for trading purposes.
Interest Rate Sensitivity .
As of March 31, 1999, the fair market value of our financial instruments with exposure to interest risk was
approximately $249 million. Sensitivity analysis for a six-month horizon was performed on our floating rate and fixed
rate financial investments and floating rate liabilities. Parallel shifts in the yield curve of both +/-50 basis point (+/-
10% of our weighted average interest rate) would result in fair market values for investments of approximately $255
million, as well as with a 50 basis point increase and 50 basis point decrease in interest rates. Fair market values of
floating rate financial obligations would increase by less than $1 million for a 50 basis point rise and decrease by less
than $1 million with a 50 basis point decrease in interest rates.
Exchange Rate Sensitivity .
We conduct business in 31 international currencies through our worldwide operations. We have established a foreign
currency hedging program, utilizing foreign currency forward exchange contracts, or forward contracts, of one fiscal
month duration to hedge various foreign currency transaction exposures. Under this program, increases or decreases in
our foreign currency transactions are offset by gains and losses on the forward contracts to mitigate the risk of material
foreign currency transaction losses. We do not use forward contracts for trading purposes. At the end of each fiscal
month, all foreign currency assets and liabilities are revalued using the month end spot rate of the maturing forward
contracts and the realized gains and losses are recorded and included in net income as a component of other income
(expense).
We believe that the use of foreign currency financial instruments should reduce the risks that arise from conducting
business in international markets. We employ established policies and procedures governing the use of financial
instruments to manage our exposure to such risks.
We use sensitivity analysis to quantify the impact market risk exposure may have on the fair market values of our
financial instruments. The financial instruments included in the sensitivity analysis consist of all of our foreign
currency assets and liabilities and all derivative instruments, principally forward contracts.
The sensitivity analysis assesses the risk of loss in fair market values from the impact of hypothetical changes of
instantaneous, parallel shifts in exchange rates and interest rates yield curves on market sensitive instruments over a six
month horizon. Exchange rates rarely move in the same direction. The assumption that exchange rates change in a
parallel fashion may overstate the impact of changing exchange rates on assets and liabilities denominated in a foreign
currency.
As of March 31, 1999, the net fair value liability of our financial instruments with exposure to foreign currency risk
was approximately $86 million. A 10% movement in the levels of foreign currency exchange rates against the U.S.
dollar would result in a decrease in the fair value of our financial instruments by approximately $8 million or an
increase in the fair value of our financial instruments by approximately $9 million.
This quantification of exposure to the market risk associated with foreign exchange financial instruments does not take
into account the offsetting impact of changes in the fair value of our foreign denominated assets, liabilities and firm
commitments.