3. CASH AND CASH EQUIVALENTS AND INVESTMENTS

The Company’s cash and cash equivalents as of March 30, 2013, and March 31, 2012 are as follows (in thousands):



	March 30, 2013		March 31, 2012
Cash	$	2,938	$	3,407
Cash equivalents:
Money market funds		13,476		16,453
Total cash and cash equivalents	$	16,414	$	19,860

The Company’s portfolio of short-term and long-term investments as of March 30, 2013 and March 31, 2012 is as follows (in thousands):



	March 30, 2013
		Amortized		Unrealized		Unrealized		Carrying
		Cost		Gain		Loss		Value
Short-term investments:
Trading securities:
Equity mutual funds related to NQDCP	$	9,673	$	-	$	-	$	9,673
Available-for-sale securities:
Municipal bonds		58,524		156		(22)		58,658
Corporate bonds		25,667		161		(3)		25,825
Government agency bonds		16,106		82		(1)		16,187
Certificates of deposits		7,758		5		(4)		7,759
Commercial Papers		5,743		2		-		5,745
Total short-term investments	$	123,471	$	406	$	(30)	$	123,847

Long-term investments:
Available-for sale securities	$	15,050	$	-	$	(1,250)	$	13,800
						.
	March 31, 2012
		Amortized		Unrealized		Unrealized		Carrying
		Cost		Gain		Loss		Value
Short-term investments:
Trading securities
Equity mutual funds related to NQDCP	$	8,650	$	-	$	-	$	8,650
Available-for-sale securities:
Municipal bonds		32,250		39		(21)		32,268
Corporate bonds		36,912		68		(33)		36,947
Government agency bonds		25,984		33		(7)		26,010
Certificates of deposits		7,267		4		(9)		7,262
Total short-term investments	$	111,063	$	144	$	(70)	$	111,137

Long-term investments:
Available-for sale securities	$	28,050	$	-	$	(2,150)	$	25,900

The Company’s short-term and long-term investments by contractual maturities are as follows (in thousands):



	March 30, 2013		March 31, 2012
Short-term investment:
Trading securities:
Due in 12 months or less	$	9,673	$	8,650
Available-for-sale securities:
Due in 12 months or less		45,190		62,504
Due in 12 to 24 months		23,019		29,903
Due in 24 to 36 months		32,345		2,682
Due in 36 to 49 months		13,620		7,398
Total short-term investments	$	123,847	$	111,137
Long-term investment:
Available-for-sale securities at fair value:
Due after ten years	$	13,800	$	25,900
Total long-term investments	$	13,800	$	25,900

Short-term investments classified as trading securities for fiscal years 2013 and 2012 consisted entirely of investments in mutual funds held by the NQDCP. Unrealized gain on trading securities was $806,000 for the fiscal year ended March 30, 2013, compared to $250,000 for the fiscal year ended March 31, 2012.

The Company’s available-for-sale portfolio in fiscal 2013 was comprised of municipal bonds, corporate bonds, ARS, government agency bonds, commercial papers and certificates of deposits.

During the fiscal year ended March 30, 2013, the Company disposed of short-term available-for-sale securities totaling $95,883,000 at par. During the fiscal years ended March 31, 2012 and April 2, 2011, the Company disposed of short-term available-for-sale securities totaling $166,681,000 and $142,098,000, respectively. The realized gains and losses of these transactions were immaterial.

Historically, given the liquidity created by auctions, the Company’s ARS were presented as current assets under short-term investments on the Company’s balance sheet. However, since the fourth quarter of fiscal 2008 the ARS held by the Company have experienced failed auctions due to sales orders exceeding purchase orders, so the Company’s ARS are considered illiquid until there is a successful auction for them.

Accordingly, ARS with a par value of $15,050,000 and $28,050,000 were classified as non-current assets and were presented in long-term investments at fair value of $13,800,000 and $25,900,000, respectively, as of March 30, 2013 and March 31, 2012.

The ARS are investments with contractual maturities generally between 24 to 28 years. They are in the form of auction rate bonds, whose interest rates had historically been reset every seven to thirty-five days through an auction process. At the end of each reset period, investors could sell or continue to hold the securities at par. These ARS held by the Company are primarily backed by pools of student loans and a significant portion are collateralized and guaranteed by the United States Department of Education. Until February 2012, the Company's ARS were rated by the major independent rating agencies as AAA. However, one of the securities was downgraded by S&P in February 2012 to AA+, then in June 2012 to A with a negative outlook and was downgraded by Fitch in May 2013 to A with a watch negative. Also in May 2013, the other ARS was downgraded from AAA to AAA with a watch negative by Fitch. The Company believes these downgrades have no impact on the fair value of this ARS.

As of March 30, 2013, all of the Company’s long-term investment securities were reported at fair value. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of ARS, the fair value was estimated based on a discounted cash flow model. The assumptions used in the discounted cash flow model include estimates for interest rates, timing and amounts of cash flows, liquidity of the underlying security, expected holding periods, and contractual terms of the security.

The Company concluded that the decline in the fair value of ARS investments as of March 30, 2013, was not other than temporary in part due to the following:

·	the decline in the fair value is due to unusual general market conditions;

·	these investments are of high credit quality and a significant portion of them are collateralized and are guaranteed by the US Department of Education;

·	as of March 30, 2013, there have been no defaults on the ARS held by the Company;

·	the Company’s ARS holdings are all rated at least A with a watch negative;

·	the Company has the intent and ability to hold these investments until the anticipated recovery in market value occurs; and

to the extent the Company’s ARS have been redeemed, they were redeemed at par value. The Company received redemptions of $13,000,000, $4,700,000 and $36,450,000, all at par value in fiscal 2013, 2012 and 2011, respectively. Subsequent to March 30, 2013, redemptions on the Company's two ARS were received at par value, one fully redeemed for $12,800,000 and the other partially redeemed for $150,000.

If uncertainties in the credit and capital markets continue or these markets deteriorate further, the Company may incur additional impairments to its ARS holdings. The Company will continue to monitor its ARS holdings and may be required to record an impairment charge through the income statement if the decline in fair value is determined to be other-than-temporary or the credit ratings of its ARS holdings decline. We have not recorded any losses due to deteriorated credit quality.

During the quarter ended December 29, 2012 the Company loaned $300,000 under a convertible promissory note to a private startup company developing products based on new technology. This private startup company currently intends to use the Company's ICs for its prototype systems. Sales to date have not been material for the Company. This loan was recorded as a long-term asset as of March 30, 2013. This unsecured loan accrues at a 5% annual interest rate with principle and interest convertible to preferred stock at a discount and matures on December 31, 2013. The Company has the right to invest an additional $1,700,000 in the Company's next financing round and convert its current loan to equity at a discount. As of March 30, 2013 the Company had no ownership in this startup company and management believes that this loan of $300,000 is 100% realizable.