Clearwire 2009 Annual Report Download - page 82

I
nterest R
a
te Ris
k
Our pr
i
mary
i
nterest rate r
i
s
ki
s assoc
i
ate
d
w
i
t
h
our
i
nvestment port
f
o
li
o. Our
i
nvestment port
f
o
li
o
i
spr
i
mar
il
y
c
omprised of mone
y
market mutual funds, United States
g
overnment and a
g
enc
y
issues and other debt securities.
Our
i
nvestment port
f
o
li
o
h
as a we
igh
te
d
avera
g
e matur
i
t
y
o
f
3 mont
h
san
d
a mar
k
et
yi
e
ld
o
f
0.08% as o
f
D
ecember 31, 2009. Our primary interest rate risk exposure is to a decline in interest rates which would result in a
decline in interest income. Due to the current market yield, a further decline in interest rates would have a de
minimi
s
i
mpact on earn
i
n
g
s
.
F
oreign Currenc
y
Exc
h
ange Rate
s
We are expose
d
to
f
ore
i
gn currency exc
h
ange rate r
i
s
k
as
i
tre
l
ates to our
i
nternat
i
ona
l
operat
i
ons. We current
ly
do not hed
g
e our currenc
y
exchan
g
e rate risk and, as such, we are exposed to fluctuations in the value of th
e
U
nited States dollar a
g
ainst other currencies. Our international subsidiaries and equit
y
investees
g
enerall
y
use th
e
c
urrency o
f
t
h
e
j
ur
i
s
di
ct
i
on
i
nw
hi
c
h
t
h
ey res
id
e, or
l
oca
l
currency, as t
h
e
i
r
f
unct
i
ona
l
currency. Assets an
dli
a
bili
t
i
es
are trans
l
ate
d
at exc
h
an
g
e rates
i
ne
ff
ect as o
f
t
h
e
b
a
l
ance s
h
eet
d
ate an
d
t
h
e resu
l
t
i
n
g
trans
l
at
i
on a
dj
ustments are
r
ecorded within accumulated other com
p
rehensive income (loss). Income and ex
p
ense accounts are translated at the
average monthly exchange rates during the reporting period. The effects of changes in exchange rates between the
d
es
ig
nate
df
unct
i
ona
l
currenc
y
an
d
t
h
e currenc
yi
nw
hi
c
h
a transact
i
on
i
s
d
enom
i
nate
d
are recor
d
e
d
as
f
ore
ig
n
c
urrenc
y
transact
i
on
g
a
i
ns (
l
osses) an
d
recor
d
e
di
nt
h
e conso
lid
ate
d
statement o
f
operat
i
ons. We
b
e
li
eve t
h
at t
he
fluctuation of forei
g
n currenc
y
exchan
g
e rates did not have a material impact on our consolidated financial
s
tatements.
C
re
d
it Ris
k
At December 31, 2009, we held available-for-sale short-term and long-term investments with a fair value an
d
c
arrying value of
$
2.19 billion and a cost of
$
2.19 billion, comprised of United States government and agency issue
s
an
d
ot
h
er
d
e
b
t secur
i
t
i
es. We re
g
u
l
ar
ly
rev
i
ew t
h
e carr
yi
n
g
va
l
ue o
f
our s
h
ort-term an
dl
on
g
-term
i
nvestments an
d
i
dentify and record losses when events and circumstances indicate that declines in the fair value of such assets below
our accounting basis are other-than-temporary. The estimated fair values of certain of our investments are subject to
sig
n
ifi
cant
fl
uctuat
i
ons
d
ue to vo
l
at
ili
t
y
o
f
t
h
e cre
di
t mar
k
ets
i
n
g
enera
l
, compan
y
-spec
ifi
cc
i
rcumstances, c
h
an
g
e
s
i
n
g
eneral economic conditions and use of mana
g
ement
j
ud
g
ment when observable market prices and parameters
are not fully available
.
O
ther debt securities are variable rate debt instruments whose interest rates are normally reset approximatel
y
e
ver
y
30 or 90
d
a
y
st
h
rou
gh
an auct
i
on process. A port
i
on o
f
our
i
nvestments
i
not
h
er
d
e
b
t secur
i
t
i
es represent
i
nterests
i
nco
ll
atera
li
ze
dd
e
b
to
blig
at
i
ons, w
hi
c
h
we re
f
er to as CDOs, supporte
dby
pre
f
erre
d
equ
i
t
y
secur
i
t
i
es o
f
i
nsurance companies and financial institutions with stated final maturity dates in 2033 and 2034. As of Decem
-
ber 31, 2009 the total fair value and carr
y
in
g
value of our securit
y
interests in CDOs was
$
13.2 million and our cos
t
was
$
9.0 million. We also own other debt securities that are Auction Rate Market Preferred securities issued b
y
a
m
onoline insurance compan
y
and these securities are perpetual and do not have a final stated maturit
y
. In Jul
y
2009,
th
e
i
ssuer’s cre
di
t rat
i
ng was
d
owngra
d
e
d
to CC an
d
Caa2
b
y Stan
d
ar
d
& Poor’s an
d
Moo
d
y’s rat
i
ng serv
i
ces
,
r
espect
i
ve
ly
,an
d
t
h
e tota
lf
a
i
rva
l
ue an
d
carr
yi
n
g
va
l
ue o
f
our Auct
i
on Rate Mar
k
et Pre
f
erre
d
secur
i
t
i
es was wr
i
tte
n
down to $0 as of December 31, 2009. Current market conditions do not allow us to estimate when the auctions for
our ot
h
er
d
e
b
t secur
i
t
i
es w
ill
resume,
if
ever, or
if
a secon
d
ary mar
k
et w
ill d
eve
l
op
f
or t
h
ese secur
i
t
i
es. As a resu
l
t,
our ot
h
er
d
e
b
t secur
i
t
i
es are c
l
ass
ifi
e
d
as
l
ong-term
i
nvestments
.
7
2