CISCO SYSTEMS, INC. | 2013 | FY | 3


Investments
(a)
Summary of Available-for-Sale Investments
The following tables summarize the Company’s available-for-sale investments (in millions):  
July 27, 2013
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
27,814

 
$
22

 
$
(13
)
 
$
27,823

U.S. government agency securities
3,083

 
7

 
(1
)
 
3,089

Non-U.S. government and agency securities
1,094

 
3

 
(2
)
 
1,095

Corporate debt securities
7,876

 
55

 
(50
)
 
7,881

Total fixed income securities
39,867

 
87

 
(66
)
 
39,888

Publicly traded equity securities
2,063

 
738

 
(4
)
 
2,797

Total
$
41,930

 
$
825

 
$
(70
)
 
$
42,685

 
 
 
 
 
 
 
 
July 28, 2012
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
24,201

 
$
41

 
$
(1
)
 
$
24,241

U.S. government agency securities
5,367

 
21

 

 
5,388

Non-U.S. government and agency securities
1,629

 
9

 

 
1,638

Corporate debt securities
5,959

 
74

 
(3
)
 
6,030

Total fixed income securities
37,156

 
145

 
(4
)
 
37,297

Publicly traded equity securities
1,107

 
524

 
(11
)
 
1,620

Total
$
38,263

 
$
669

 
$
(15
)
 
$
38,917


U.S. government agency securities include corporate debt securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC), while non-U.S. government and agency securities include agency and corporate debt securities that are guaranteed by non-U.S. governments.
(b)
Gains and Losses on Available-for-Sale Investments
The following table presents the gross realized gains and gross realized losses related to the Company’s available-for-sale investments (in millions):
Years Ended
July 27, 2013
 
July 28, 2012
 
July 30, 2011
Gross realized gains
$
264

 
$
561

 
$
322

Gross realized losses
(216
)
 
(460
)
 
(143
)
Total
$
48

 
$
101

 
$
179

The following table presents the realized net gains (losses) related to the Company’s available-for-sale investments by security type (in millions):
Years Ended
July 27, 2013
 
July 28, 2012
 
July 30, 2011
Net gains on investments in publicly traded equity securities
$
17

 
$
43

 
$
88

Net gains on investments in fixed income securities
31

 
58

 
91

Total
$
48

 
$
101

 
$
179


Impairment charges on available-for-sale investments were not material for the periods presented.
The following tables present the breakdown of the available-for-sale investments with gross unrealized losses and the duration that those losses had been unrealized at July 27, 2013 and July 28, 2012 (in millions):
 
UNREALIZED LOSSES
LESS THAN 12 MONTHS
 
UNREALIZED LOSSES
12 MONTHS OR GREATER
 
TOTAL
July 27, 2013
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross 
Unrealized 
Losses
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government securities 
$
7,865

 
$
(13
)
 
$

 
$

 
$
7,865

 
$
(13
)
U.S. government agency securities
294

 
(1
)
 

 

 
294

 
(1
)
Non-U.S. government and agency securities
432

 
(2
)
 

 

 
432

 
(2
)
Corporate debt securities
3,704

 
(50
)
 
4

 

 
3,708

 
(50
)
Total fixed income securities
12,295

 
(66
)
 
4

 

 
12,299

 
(66
)
Publicly traded equity securities
278

 
(4
)
 

 

 
278

 
(4
)
Total
$
12,573

 
$
(70
)
 
$
4

 
$

 
$
12,577

 
$
(70
)
 
 
 
 
 
 
 
 
 
 
 
 
 
UNREALIZED LOSSES
LESS THAN 12 MONTHS
 
UNREALIZED LOSSES
12 MONTHS OR GREATER
 
TOTAL
July 28, 2012
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross 
Unrealized 
Losses
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government securities 
$
5,357

 
$
(1
)
 
$

 
$

 
$
5,357

 
$
(1
)
Corporate debt securities
603

 
(3
)
 
14

 

 
617

 
(3
)
Total fixed income securities
5,960

 
(4
)
 
14

 

 
5,974

 
(4
)
Publicly traded equity securities
167

 
(8
)
 
20

 
(3
)
 
187

 
(11
)
Total
$
6,127

 
$
(12
)
 
$
34

 
$
(3
)
 
$
6,161

 
$
(15
)

As of July 27, 2013, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of July 27, 2013, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the year ended July 27, 2013.
The Company has evaluated its publicly traded equity securities as of July 27, 2013 and has determined that there was no indication of other-than-temporary impairments in the respective categories of unrealized losses. This determination was based on several factors, which include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value.
(c)
Maturities of Fixed Income Securities
The following table summarizes the maturities of the Company’s fixed income securities at July 27, 2013 (in millions): 
 
Amortized Cost
 
Fair Value
Less than 1 year
$
15,903

 
$
15,918

Due in 1 to 2 years
11,115

 
11,144

Due in 2 to 5 years
12,706

 
12,681

Due after 5 years
143

 
145

Total
$
39,867

 
$
39,888



Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.
(d)
Securities Lending
The Company periodically engages in securities lending activities with certain of its available-for-sale investments. These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. The average daily balance of securities lending for fiscal 2013 and 2012 was $0.7 billion and $0.5 billion, respectively. The Company requires collateral equal to at least 102% of the fair market value of the loaned security in the form of cash or liquid, high-quality assets. The Company engages in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify the Company against collateral losses. The Company did not experience any losses in connection with the secured lending of securities during the periods presented. As of July 27, 2013 and July 28, 2012, the Company had no outstanding securities lending transactions.

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