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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk Our exposure to market risk for changes in interest rates

relates primarily to our investment portfolio and long-term debt obligations. We

do not use derivative financial instruments in our investment portfolio. We

place our investments with high credit quality issuers and, by policy, limit the

amount of credit exposure to any one issuer. As stated in our investment policy,

we are averse to principal loss and ensure the safety and preservation of our

invested funds by limiting default risk and market risk.

We mitigate default risk by investing in only the highest credit quality

securities and by constantly positioning our portfolio to respond appropriately

to a significant reduction in a credit rating of any investment issuer or

guarantor. The portfolio includes only marketable securities with active

secondary or resale markets to ensure portfolio liquidity.

We use proceeds from debt obligations primarily to support general corporate

purposes, including capital expenditures and working capital needs. We have no

variable interest rate exposure on the Convertible Subordinated Notes and the

Senior Secured Notes. At the end of fiscal 2000, the Company was party to a

reverse cancelable interest rate swap with a notional amount of $400 million.

The swap converts the Company's Senior Secured Notes from fixed rate to variable

rate debt.

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2000 1999

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(Thousands) 2001 2002 2003 2004 2005 Thereafter Total Fair value Total

---- ---- ---- ---- ---- ---------- ----- ---------- -----

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Cash equivalents:

Fixed rate amounts $ 200,261 - - - - - $ 200,261 $ 202,010 $ 19,505

Average rate 6.69% - - - - -

Variable rate amounts $ 78,300 - - - - - $ 78,300 $ 78,300 $ 143,000

Average rate 6.60% - - - - -

Short-term investments:

Fixed rate amounts $ 474,797 - - - - - $ 474,797 $ 477,118 $ 175,004

Average rate 6.70% - - - - -

Variable rate amounts $ 224,590 - - - - - $ 224,590 $ 224,590 $ 126,700

Average rate 6.93% - - - - -

Long-term investments:

Equity investments - $ 10,161 - - - - $ 10,161 $ 26,856 $ 6,161

Fixed rate amounts - $ 2,105 - - - - $ 2,105 $ 2,103 $ 1,907

Average rate - 6.85% - - - -

Total investments:

Securities $ 977,948 $ 12,266 - - - - $ 990,214 $ 1,010,977 $ 472,277

Average rate 6.74% 6.85% - - - -

Debt:

Fixed rate amounts $ 41,101 $ 136,630 $ 93,299 $ 76,404 $ 589,019 $ 336 $ 936,789 $ 853,288 $ 1,194,237

Average rate 5.36% 5.32% 8.08% 6.10% 6.07% 9.88%

Variable rate amounts - - - - - - -

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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001