Dish Network 2011 Annual Report Download - page 82

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
72
72
Market Risks Associated With Financial Instruments
Our investments and debt are exposed to market risks, discussed below.
Cash, Cash Equivalents and Current Marketable Investment Securities
As of December 31, 2011, our cash, cash equivalents and current marketable investment securities had a fair value
of $2.041 billion. Of that amount, a total of $1.681 billion was invested in: (a) cash; (b) VRDNs convertible into
cash at par value plus accrued interest generally in five business days or less; (c) debt instruments of the United
States Government and its agencies; (d) commercial paper and corporate notes with an overall average maturity of
less than one year and rated in one of the four highest rating categories by at least two nationally recognized
statistical rating organizations; and/or (e) instruments with similar risk, duration and credit quality characteristics to
the commercial paper and corporate obligations described above. The primary purpose of these investing activities
has been to preserve principal until the cash is required to, among other things, fund operations, make strategic
investments and expand the business. Consequently, the size of this portfolio fluctuates significantly as cash is
received and used in our business. The value of this portfolio is negatively impacted by credit losses; however, this
risk is mitigated through diversification that limits our exposure to any one issuer.
Interest Rate Risk
A change in interest rates would affect the fair value of our cash, cash equivalents and current marketable
investment securities portfolio, however, we normally hold these investments to maturity. Based on our December
31, 2011 current non-strategic investment portfolio of $1.681 billion, a hypothetical 10% change in average interest
rates would not have a material impact on the fair value due to the limited duration of our investments.
Our cash, cash equivalents and current marketable investment securities had an average annual rate of return for the
year ended December 31, 2011 of 0.5%. A change in interest rates would affect our future annual interest income from
this portfolio, since funds would be re-invested at different rates as the instruments mature. A hypothetical 10%
decrease in average interest rates during 2011 would result in a decrease of approximately $2 million in annual interest
income.
Strategic Marketable Investment Securities
As of December 31, 2011, we held current strategic and financial debt and equity investments of public companies
with a fair value of $360 million. These investments, which are held for strategic and financial purposes, are
concentrated in several companies, are highly speculative and have experienced and continue to experience
volatility. The fair value of our strategic and financial debt and equity investments can be significantly impacted by
the risk of adverse changes in securities markets generally, as well as risks related to the performance of the
companies whose securities we have invested in, risks associated with specific industries, and other factors. These
investments are subject to significant fluctuations in fair value due to the volatility of the securities markets and of
the underlying businesses. In general, the debt instruments held in our strategic marketable investment securities
portfolio are not significantly impacted by interest rate fluctuations as their value is more closely related to factors
specific to the underlying business. A hypothetical 10% adverse change in the price of our public strategic debt and
equity investments would result in a decrease of approximately $36 million in the fair value of these investments.
Restricted Cash and Marketable Investment Securities and Noncurrent Marketable and Other Investment
Securities
Restricted Cash and Marketable Investment Securities
As of December 31, 2011, we had $132 million of restricted cash and marketable investment securities invested in: (a)
cash; (b) VRDNs convertible into cash at par value plus accrued interest generally in five business days or less; (c)
debt instruments of the United States Government and its agencies; (d) commercial paper and corporate notes with an
overall average maturity of less than one year and rated in one of the four highest rating categories by at least two
nationally recognized statistical rating organizations; and/or (e) instruments with similar risk, duration and credit
quality characteristics to the commercial paper described above. Based on our December 31, 2011 investment