Table of Contents Item 7A: Quantitative and Qualitative Disclosures About Market Risk Applied is exposed to interest rate risk related to its investment portfolio and debt issuances. Applied’s investment portfolio includes fixed- income securities with a fair value of approximately $2.0 billion at October 27, 2019. These securities are subject to interest rate risk and will decline in value if interest rates increase. Based on Applied’s investment portfolio at October 27, 2019, an immediate 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of approximately $29 million. While an increase in interest rates reduces the fair value of the investment portfolio, Applied will not realize the losses in the consolidated statement of operations unless the individual fixed- income securities are sold prior to recovery or the loss is determined to be other-than-temporary. At October 27, 2019, the aggregate principal of long-term debt issued by Applied was $4.8 billion with an estimated fair values of $5.5 billion. A hypothetical decrease in interest rates of 100 basis points would result in an increase in the fair value of Applied’s long-term debt issuances of approximately $549 million at October 27, 2019. Certain operations of Applied are conducted in foreign currencies, such as Japanese yen, Israeli shekel, euro and Taiwanese dollar. Applied enters into currency forward exchange and option contracts to hedge a portion of, but not all, existing and anticipated foreign currency denominated transactions generally expected to occur within the next 24 months. Gains and losses on these contracts are generally recognized in income at the time that the related transactions being hedged are recognized. Because the effect of movements in currency exchange rates on currency forward exchange and option contracts generally offsets the related effect on the underlying items being hedged, these financial instruments are not expected to subject Applied to risks that would otherwise result from changes in currency exchange rates. Applied does not use derivative financial instruments for trading or speculative purposes. The consolidated financial statements required by this Item are set forth on the pages indicated at Item 15(a). None. Item 8: Financial Statements and Supplementary Data Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52