QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Investment and Interest Rate Risk We are subject to investment risk, interest rate risk, and foreign exchange rate risk as described below. Our exposure to interest rate and general market risks relates principally to our investment portfolio, which as of September 30, 2011 consisted of the following (in thousands): Cash and cash equivalents (time deposits and money market funds) .................. $410,087 Restricted cash (time deposits and certificates of deposit) .......................... 712 Available for sale securities (auction rate securities) ............................... 2,288 $413,087 The main objective of our investment activities is the liquidity and preservation of capital. In general, our cash and cash equivalent investments have short-term maturity periods which dampen the impact of significant market or interest rate risk. Credit risk associated with our investments is not material as our investment policy prescribes high credit quality standards and limits the amount of credit exposure to any one issuer. We currently do not use derivative instruments for trading, speculative or investment purposes; however, we may use derivatives in the future. We are subject to overall financial market risks, such as changes in market liquidity, credit quality and interest rates. Available for sale securities carry a longer maturity period (contractual maturities exceed ten years). Our short-term debt at September 30, 2011 consists of $26.7 million aggregate principal amount of our remaining 2007 Convertible Notes which are due in March 2012. The 2007 Convertible Notes contain cash settlement provisions should the share price of the Company’s common stock exceed $9.52. It has been the Company’s historical practice to cash settle the principal and interest components of convertible debt instruments, and it is our intention to continue to do so in the future. As of September 30, 2011, based on the closing stock price on September 30, 2011 of $17.96, the actual “if converted” value of the remaining Convertible Notes was $50.3 million which exceeds the related principal amount by approximately $23.6 million. The actual amount of the cash premium will be calculated based on the 20 day average stock price prior to maturity. A $1.00 change in our stock price would change the “if converted” value of the cash premium of the total aggregate principle amount of the remaining convertible notes by approximately $2.8 million. We do not believe that investment or interest rate risk is material to our business or results of operations. Our cash and cash equivalents at September 30, 2011 consisted of $335.3 million held domestically, with the remaining balance of $75.5 million held by foreign subsidiaries. There may be adverse tax effects upon repatriation of these funds to the United States. Substantially all sales to customers and arrangements with third-party manufacturers provide for pricing and payment in United States dollars, thereby reducing the impact of foreign exchange rate fluctuations on our results. A small percentage of our international operational expenses are denominated in foreign currencies. Exchange rate volatility could negatively or positively impact those operating costs. For the fiscal years ended September 30, 2011, October 1, 2010, and October 2, 2009, the Company had foreign exchange gains/(losses) of $0.3 million, $(0.6) million, and $0.7 million, respectively. Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us. Fluctuations in currency exchange rates could have a greater effect on our business in the future to the extent our expenses increasingly become denominated in foreign currencies. Exchange Rate Risk Page 86 Skyworks / Annual Report 2011