April 30, 2011 April 30, 2010
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Bonds & debentures $ 720 $27,087
Discount notes 16,301 3,009
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$17,021 $30,096
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Carrying values of bonds and debentures and discount notes include accrued interest and approximate market value. Investments in bonds and debentures and discount notes represent holdings in corporate and government short-term marketable securities as at April 30, 2011 and have a maturity date of one year or less.
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company's income or the value of its holding of financial instruments.
Foreign Exchange Risk
The Company's revenues are denominated primarily in U.S. dollars, giving rise to exposure to market risks from changes in foreign exchange rates. The Company is exposed to foreign currency fluctuations on its accounts receivable and future cash flows related to licensing arrangements denominated in U.S. dollars, as well as certain operating expenses and its other long-term liabilities obligations.
The Company's foreign exchange risk management includes the use of foreign exchange forward contracts to fix the exchange rates on certain foreign currency exposures. The Company's objective is to manage and control exposures and secure the Company's profitability on existing contracts and anticipated future cash flows. The Company does not utilize derivative instruments for trading or speculative purposes. The Company formally documents all relationships between derivative instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific firm contractually related commitments or anticipated transactions.
The Company also formally assesses, both at the inception and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in off-setting changes in fair values or cash flows of hedged items. Hedge ineffectiveness is insignificant.
The forward foreign exchange contracts primarily require the Company to sell U.S. dollars for Canadian dollars at contractual rates. The Company had the following forward exchange contracts.
(In thousands of dollars) April 30, 2011
Equivalent to
Type Notional Currency Maturity CDN dollars Fair Value
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less than 3
Sell $ 8,350 USD months $ 8,626 $ 716
Sell $ 5,600 USD 3-12 months $ 5,737 $ 420
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$1,136
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(In thousands of dollars) April 30, 2010
Equivalent to
Type Notional Currency Maturity CDN dollars Fair Value
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less than 3
Sell $12,875 USD months $13,836 $ 759
Sell $21,225 USD 3-12 months $22,890 $1,294
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$2,053
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Buy $(5,000) USD 3-12 months $(6,093) $ (992)
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A one cent strengthening (weakening) of the U.S. dollar against the Canadian dollar would have decreased (increased) other comprehensive income by approximately $48,000 for fiscal 2011.
Interest Rate Risk
The Company is exposed to interest rate risk due to its holdings of interest-bearing marketable securities. It is the Company's policy to invest in securities with a maturity date of 12 months or less and Company practice to hold such securities, when possible, until maturity. A 1% increase (decrease) to the interest rate would result in an approximate $72,000 decrease (increase) in the fair value of the investments held as at the reporting date.
