Dish Network 2009 Annual Report Download - page 79

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Continued
69
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. Based on our December 31, 2009 current non-strategic investment portfolio of
$1.975 billion, a hypothetical 10% increase in average interest rates would result in a decrease of approximately $33
million in fair value of this portfolio. We normally hold these investments to maturity; however, the hypothetical
loss in fair value would be realized if we sold the investments prior to maturity.
Our cash, cash equivalents and current marketable investment securities had an average annual rate of return for the
year ended December 31, 2009 of 0.8%. 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 2009 would result in a decrease of approximately $1 million in annual interest
income.
Strategic Marketable Investment Securities
As of December 31, 2009, we held strategic and financial debt and equity investments of public companies with a
fair value of $164 million. These investments, which are held for strategic and financial purposes, are concentrated
in a small number of 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 $16 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, 2009, we had $141 million of restricted cash and marketable investment securities invested in: (a)
cash; (b) debt instruments of the United States Government and its agencies; (c) 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 (d) instruments with similar risk, duration and credit
quality characteristics to the commercial paper described above. Based on our December 31, 2009 investment
portfolio, a hypothetical 10% increase in average interest rates would not have a material impact in the fair value of our
restricted cash and marketable investment securities.
Noncurrent Auction Rate and Mortgage Backed Securities
As of December 31, 2009, we held investments in auction rate securities (“ARS”) and mortgage backed securities
(“MBS”) of $121 million, which are reported at fair value. Events in the credit markets have reduced or eliminated
current liquidity for certain of our ARS and MBS investments. As a result, we classify these investments as noncurrent
assets as we intend to hold these investments until they recover or mature, and therefore interest rate risk associated
with these securities is mitigated. A hypothetical 10% adverse change in the price of these investments would result in
a decrease of approximately $12 million in the fair value of these investments.