Incredimail 2010 Annual Report Download - page 79

The fair value of derivative instruments and the notional amount of the hedged instruments in New Israeli Shekels, as of December 31,
2010 were as follows:
The estimated fair value of marketable securities presented as part of cash, and cash equivalents and marketable securities, which are
subject to risk of changes in interest rate, segregated by maturity dates as of December 31, 2010, were as follows:
In addition, in territories where our prices are based on local currencies, fluctuations in the dollar exchange rate could affect our gross
profit margin. We may compensate for such fluctuations by changing product prices accordingly. We also hold a small part of our financial
investments in other currencies, mainly New Israeli Shekels and Euro. The dollar value of those investments may decline. A revaluation of 1%
of the foreign currencies (i.e. other than U.S. dollar) would not have a material on our income before taxes possibly reducing it by less than $0.1
million.
A majority of our costs, including salaries, expenses and office expenses are incurred in New Israeli Shekels. Inflation in Israel may
have the effect of increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the New Israeli
Shekel, it will become more expensive for us to fund our operations in Israel. A revaluation of 1% of the NIS will affect our income before tax
by less than one percent. The exchange rate of the U.S. dollar to the New Israeli Shekel, based on exchange rates published by the Bank of Israel,
was as follows:
Since 2006 we’
ve engaged a firm to analyze our exposure to the fluctuation in foreign currency exchange rates and are implementing
their recommendations since then. However, due to the market conditions, volatility and other factors, its proposals and their implementation
occasionally prove to be ineffective or can cause additional finance expenses.
Interest Rate Risk
. The primary objective of our investment activities is to preserve principal while maximizing the interest income we
receive from our investments, without increasing risk. Our current investment policy is to invest in dollar denominated or linked debentures, of
limited sums, rated "A" or higher and with an average maturity of no more than 3 years. We are exposed to market risks resulting from changes
in interest rates relating primarily to our financial investments in cash, deposits and marketable securities. We do not use derivative financial
instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets.
However, as interests rates are already very low, we believe any such potential loss would be immaterial to us.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
Notional
Amount
Fair Value
In thousands of US
dollars
Zero
-
cost collar contracts to hedge payroll expenses
1,950
27
Up to 1
year
1
–
3 years
4
–
5 years
Total
In thousands of US dollars
Corporate debentures
-
5,443
1,470
6,913
U.S. government agency debentures
-
-
238
238
U.S. government debentures
10,615
2,663
3,217
16,495
U.S. municipal bonds
-
421
-
421
Total
10,615
8,527
4,835
24,067
Year Ended December 31,
2008
2009
2010
Average rate for period
3.588
3.933
3.713
Rate at year
-
end
3.802
3.775
3.549
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