Dish Network 2010 Annual Report Download - page 74

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
67
67
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, 2010, our cash, cash equivalents and current marketable investment securities had a fair value
of $2.940 billion. Of that amount, a total of $2.729 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. Based on our December 31, 2010 current non-strategic investment portfolio of
$2.729 billion, a hypothetical 10% increase in average interest rates would result in a decrease of approximately $14
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, 2010 of 0.7%. 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 2010 would result in a decrease of approximately $2 million in annual interest
income.
Strategic Marketable Investment Securities
As of December 31, 2010, we held strategic and financial debt and equity investments of public companies with a
fair value of $211 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 $21 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, 2010, we had $144 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