NOTES TO FINANCIAL STATEMENTS
NOTE 4 INVESTMENTS
The components of investments, including associated derivatives, were as follows:
| (In millions) | Cost basis | Unrealized gains | Unrealized losses | Recorded basis | Cash and cash equivalents | Short-term investments | Equity and other investments |
|---|---|---|---|---|---|---|---|
| June 30, 2008 | |||||||
| Cash | $)3,274 | $ )– | $ – ) | $ )3,274 | $ )3,274 | $ – , | $ – , |
| Mutual funds | 1,044 | 15 | (8) | 1,051 | 835 | 136 | 80 |
| Commercial paper | 787 | – | – | 787 | 787 | – | – |
| Certificates of deposit | 1,580 | – | – | 1,580 | 1,373 | 207 | – |
| U.S. Government and Agency securities | 4,200 | 37 | (4) | 4,233 | 1,839 | 2,318 | 76 |
| Foreign government bonds | 3,466 | 15 | (62) | 3,419 | – | 3,419 | – |
| Mortgage-backed securities | 3,628 | 31 | (25) | 3,634 | – | 3,634 | – |
| Corporate notes and bonds | 5,013 | 91 | (39) | 5,065 | 2,122 | 2,943 | – |
| Municipal securities | 761 | 4 | (4) | 761 | 109 | 652 | – |
| Common stock and equivalents | 4,508 | 1,215 | (113) | 5,610 | – | – | 5,610 |
| Preferred stock | 307 | 9 | – | 316 | – | – | 316 |
| Other investments | 520 | – | – | 520 | – | 14 | 506 |
| Total | $29,088 | $1,417 | $(255) | $30,250 | $10,339 | $13,323 | $6,588 |
| (In millions) | Cost basis | Unrealized gains | Unrealized losses | Recorded basis | Cash and cash equivalents | Short-term investments | Equity and other investments |
|---|---|---|---|---|---|---|---|
| June 30, 2007 | |||||||
| Cash | $ 3,040 | $ ,– | $ –) | $ 3,040 | $3,040 | $ ,– | $ ,– |
| Mutual funds | 398 | 4 | (1) | 401 | 132 | 205 | 64 |
| Commercial paper | 227 | – | – | 227 | 179 | 48 | – |
| Certificates of deposit | 98 | – | – | 98 | – | 98 | – |
| U.S. Government and Agency securities | 3,085 | 4 | (12) | 3,077 | 1 | 3,002 | 74 |
| Foreign government bonds | 3,845 | 2 | (63) | 3,784 | – | 3,784 | – |
| Mortgage-backed securities | 3,236 | 4 | (49) | 3,191 | – | 3,191 | – |
| Corporate notes and bonds | 7,184 | 14 | (18) | 7,180 | 2,425 | 4,753 | 2 |
| Municipal securities | 2,639 | 3 | (25) | 2,617 | 334 | 2,283 | – |
| Common stock and equivalents | 7,290 | 2,309 | (18) | 9,581 | – | – | 9,581 |
| Preferred stock | 62 | 12 | – | 74 | – | – | 74 |
| Other investments | 258 | – | – | 258 | – | (64) | 322 |
| Total | $31,362 | $ 2,352 | $(186) | $33,528 | $6,111 | $17,300 | $10,117 |
Investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:
| Less than 12 months | 12 months or greater | Total | ||||
|---|---|---|---|---|---|---|
| (In millions) | Fair value | unrealized losses | Fair value | unrealized losses | Total fair value | unrealized losses |
| June 30, 2008 | Data | |||||
| Mutual funds | $ )123 | $ (7) | $ 12 | $ ,(1) | $ ,135 | $ (8) |
| U.S. Government and Agency securities | 342 | (4) | – | – | 342 | (4) |
| Foreign government bonds | 2,241 | (62) | – | – | 2,241 | (62) |
| Mortgage-backed securities | 1,078 | (25) | – | – | 1,078 | (25) |
| Corporate notes and bonds | 807 | (26) | 925 | (13) | 1,732 | (39) |
| Municipal securities | 176 | (3) | 193 | (1) | 369 | (4) |
| Common stock and equivalents | 598 | (106) | 28 | (7) | 626 | (113) |
| Total | $5,365 | $(233) | $ 1,158 | $(22) | $6,523 | $(255) |
| Less than 12 months | 12 months or greater | Total | ||||
|---|---|---|---|---|---|---|
| (In millions) | Fair value | unrealized losses | Fair value | unrealized losses | Total fair value | unrealized losses |
| June 30, 2007 | Data | |||||
| Mutual funds | $ 76 | $ (1) | $ 3 | $ – – | $ ,79 | $ (1) |
| U.S. Government and Agency securities | 1,219 | (8) | 238 | (4) | 1,457 | (12) |
| Foreign government bonds | 3,554 | (63) | 2 | – | 3,556 | (63) |
| Mortgage-backed securities | 2,520 | (43) | 214 | (6) | 2,734 | (49) |
| Corporate notes and bonds | 526 | (14) | 74 | (4) | 600 | (18) |
| Municipal securities | 575 | (9) | 420 | (16) | 995 | (25) |
| Common stock and equivalents | 237 | (17) | 9 | (1) | 246 | (18) |
| Total | $8,707 | $(155) | $960 | $(31) | $9,667 | $(186) |
At June 30, 2008, unrealized losses of $255 million consisted of: $121 million related to investment grade fixed-income securities, $21 million related to investments in high yield and emerging market fixed-income securities, $99 million related to domestic equity securities, and $14 million related to international equity securities. At June 30, 2007, unrealized losses of $186 million consisted of: $161 million related to investment grade fixed-income securities, $7 million related to investments in high yield and emerging market fixed-income securities, $7 million related to domestic equity securities, and $11 million related to international equity securities. Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Unrealized losses from domestic and international equities are due to market price movements. Management does not believe any unrealized losses represent an other-than-temporary impairment based on our evaluation of available evidence as of June 30, 2008.
Common and preferred stock and other investments that are restricted for more than one year or are not publicly traded are recorded at cost. At June 30, 2008, the recorded basis and estimated fair value of these investments was $289 million. At June 30, 2007, the recorded basis and estimated fair value of these investments was $38 million. The estimate of fair value is based on publicly available market information or other estimates determined by management.
The maturities of debt securities, including fixed-maturity securities, at June 30, 2008, were as follows:
| (In millions) | Cost basis | Estimated fair value |
|---|---|---|
| Due in one year or less | $ 3,618 | $ 3,618 |
| Due after one year through five years | 3,805 | 3,858 |
| Due after five years through ten years | 1,582 | 1,559 |
| Due after ten years | 7,831 | 7,846 |
| Total | $16,836 | $16,881 |