Dish Network 2010 Annual Report Download - page 102

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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-17
Marketable Investment Securities
Our marketable investment securities portfolio consists of various debt and equity instruments, all of which
are classified as available-for-sale (see Note 2).
Current Marketable Investment Securities - VRDNs
Variable rate demand notes (“VRDNs”) are long-term floating rate municipal bonds with embedded put
options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are
secured by a pledged liquidity source. Our VRDN portfolio is comprised of investments in many
municipalities, which are backed by financial institutions or other highly rated companies that serve as the
pledged liquidity source. While they are classified as marketable investment securities, the put option
allows VRDNs to be liquidated generally on a same day or on a five business day settlement basis.
Current Marketable Investment Securities - Strategic
Our current strategic marketable investment securities include strategic and financial investments in public
companies that are highly speculative and have experienced and continue to experience volatility. As of
December 31, 2010, a significant portion of our strategic investment portfolio consisted of securities of several
issuers, and the value of that portfolio depends on those issuers.
We account for certain debt securities acquired at a discount under the cost recovery method, partial
accrual or full accrual methods based on management’s quarterly evaluation of these securities. These debt
securities were purchased at a discount due to their credit quality. As a result, the yield that may be
accreted (accretable yield) is limited to the excess of our estimate of undiscounted expected principal,
interest, and other cash flows (including the effects of prepayments) expected to be collected over our
initial investment. The face value of these securities as of December 31, 2010 and 2009 was $16 million
and $137 million, respectively. The carrying value, which is equal to fair value, of these securities as of
December 31, 2010 and 2009 was $16 million and $80 million, respectively. The total discount on these
securities was $3 million as of December 31, 2010 with $3 million classified as accretable yield. The total
discount on these securities was $91 million as of December 31, 2009 with $12 million classified as
accretable yield and the remaining $79 million classified as non-accretable yield. As a result of current
developments, in December 2010, we reclassified our $56 million investment in DBSD North America’s
7.5% Convertible Senior Secured Notes due 2009 from current assets included in “Marketable investment
securities” to noncurrent assets included in “Marketable and other investment securities.”
Current Marketable Investment Securities - Other
Our current marketable investment securities portfolio includes investments in various debt instruments
including corporate and government bonds.
Restricted Cash and Marketable Investment Securities
As of December 31, 2010 and 2009, our restricted marketable investment securities, together with our
restricted cash, included amounts required as collateral for our letters of credit or surety bonds. Restricted
cash and marketable investment securities as of December 31, 2010 and 2009 included $62 million related
to our litigation with Tivo, respectively.