Microsoft 2012 Annual Report Download - page 55

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Credit
Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We use credit default swap
contracts, not designated as hedging instruments, to manage credit exposures relative to broad-based indices and to
facilitate portfolio diversification. We use credit default swaps as they are a low cost method of managing exposure to
individual credit risks or groups of credit risks. As of June 30, 2012, the total notional amounts of credit contracts
purchased and sold were $318 million and $456 million, respectively. As of June 30, 2011, the total notional amounts of
credit contracts purchased and sold were $532 million and $281 million, respectively.
Commodity
We use broad-based commodity exposures to enhance portfolio returns and to facilitate portfolio diversification. We use
swap, futures, and option contracts, not designated as hedging instruments, to generate and manage exposures to broad-
based commodity indices. We use derivatives on commodities as they can be low-cost alternatives to the purchase and
storage of a variety of commodities, including, but not limited to, precious metals, energy, and grain. As of June 30, 2012,
the total notional amounts of commodity contracts purchased and sold were $1.5 billion and $445 million, respectively. As
of June 30, 2011, the total notional amounts of commodity contracts purchased and sold were $1.9 billion and $502
million, respectively.
Credit-Risk-Related Contingent Features
Certain of our counterparty agreements for derivative instruments contain provisions that require our issued and
outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain a minimum
liquidity of $1.0 billion. To the extent we fail to meet these requirements, we will be required to post collateral, similar to
the standard convention related to over-the-counter derivatives. As of June 30, 2012, our long-term unsecured debt rating
was AAA, and cash investments were in excess of $1.0 billion. As a result, no collateral was required to be posted.