Financial Instruments

Short-term investments

Fair value as of June 25, 2011 were as follows:



	June 25, 2011
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Available‑for‑sale investments
Government agency securities	$	49,826	$	520	$	—	$	50,346
Total available‑for‑sale investments	$	49,826	$	520	$	—	$	50,346

Short-term investments as of June 26, 2010 ; none held.

Maxim did not recognize any impairment charges on such investments in fiscal years 2011, 2010 and 2009.

Contractual maturities of investments in available-for-sale debt securities at June 25, 2011 were as follows:



	June 25, 2011
	Amortized Cost		Estimated Fair Value
	(in thousands)
Due February 26, 2013	$	49,826	$	50,346
	$	49,826	$	50,346

The Company's interest (expense) income and other, net of $(11.4) million, $8.0 million and $17.2 million in fiscal years 2011, 2010 and 2009, respectively, include interest income and amortization and accretion of discounts and premiums, as well as realized gains and losses.

Gross gains and losses realized upon the sale of marketable securities were immaterial during fiscal years 2011, 2010 and 2009.

Derivative instruments and hedging activities

Foreign Currency Risk

The Company generates revenues in various global markets based on orders obtained in non-U.S. currencies, primarily the Japanese Yen, the Euro and the British Pound. Maxim incurs expenditures denominated in non-US currencies, principally Philippine Pesos and Thailand Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and expenditures for sales offices and research and development activities undertaken outside of the U.S. Maxim is exposed to fluctuations in foreign currency exchange rates primarily on orders and accounts receivable from sales in these foreign currencies and cash flows for expenditures in these foreign currencies. Maxim has established risk management strategies designed to reduce the impact of volatility of future cash flows caused by changes in the exchange rates for these currencies. These strategies reduce, but do not entirely eliminate, the impact of currency exchange rates movements. Maxim does not use derivative financial instruments for speculative or trading purposes. The Company routinely hedges its exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. If a financial counter party to any of the Company's hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, the Company may experience financial losses.

For derivative instruments that are designated and qualify as cash flow hedges under ASC No. 815- Derivatives and hedging, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings into the same financial statement line as the item being hedged, and in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in interest and other (expense) income, net.

For derivative instruments that are not designated as hedging instruments under ASC No. 815, gains and losses are recognized in interest and other (expense) income, net. All derivatives are foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivatives largely offset the changes in the fair value of the assets or liabilities being hedged.

Fair Value of Derivative Instruments in the Consolidated Balance Sheets

Maxim estimates the fair value of derivatives primarily based on pricing models using current market rates and records all derivatives on the balance sheet at fair value. The gross notional and fair value of derivative financial instruments in the Consolidated Balance Sheets were recorded as follows:



	As of June 25, 2011						As of June 26, 2010
	Gross Notional (1)		Other Current Assets		Accrued Expenses		Gross Notional (1)		Other Current Assets		Accrued Expenses
	(in thousands)
Derivatives designated as hedging instruments
Cash flow hedges:
Foreign exchange contracts	$	35,629	$	53	$	287	$	20,085	$	2	$	237

Derivatives not designated as hedging instruments
Foreign exchange contracts	26,342		273		22		32,281		16		614
Total derivatives	$	61,971	$	326	$	309	$	52,366	$	18	$	851

(1) Represents the face amounts of contracts that were outstanding as of June 25, 2011 and June 26, 2010, respectively.

Derivatives designated as hedging instruments

The following table provides the balances and changes in the accumulated other comprehensive income (loss) related to derivative instruments during the years ended June 25, 2011 and June 26, 2010.



	June 25, 2011			June 26, 2010
	(in thousands)
Beginning balance	$	(235	)	$	—
Loss reclassified to income	514			—
Amount recorded in other comprehensive loss	(513		)	(235		)
Ending balance	$	(234	)	$	(235	)

Maxim expects to reclassify an estimated net accumulated other comprehensive loss of $0.2 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions in association with cash flow hedges.

The before-tax effect of cash flow derivative instruments for the years ended June 25, 2011 and June 26, 2010 was as follows:



	Gain (Loss) Reclassified from Accumulated OCI into Income (Effective portion)
		Year Ended
	Location	June 25, 2011			June 26, 2010
		(in thousands)
Cash Flow hedges:
Foreign exchange contracts	Net Revenues	$	(1,152	)	$	—
Foreign exchange contracts	Cost of goods sold	638			—
Total cash flow hedges		$	(514	)	$	—

The before-tax effect of cash flow derivative instruments not designated as hedging instruments on the Consolidated Statements of Income for the year ended June 25, 2011 and June 26, 2010 was as follows:



	Gain ( Loss) Recognized in Income on Derivative Instrument
		Years Ended
	Location	June 25, 2011			June 26, 2010
		(in thousands)
Foreign exchange contracts	Interest and other (expense) income, net	$	(1,893	)	$	1,444
Total		$	(1,893	)	$	1,444

Volume of Derivative Activity

Total net U.S. Dollar notional amounts for foreign currency forward contracts, presented by net currency purchase (sell), are as follows:



In United States Dollars	June 25, 2011			June 26, 2010
	(in thousands)
Euro	$	1,542		$	(17,874	)
Japanese Yen	(5,156		)	(17,923		)
British Pound	(10,928		)	(3,512		)
Philippine Peso	17,140			6,576
Thai Bhat	3,523			2,327
Total	$	6,121		$	(30,406	)

Long- term debt

On June 17, 2010, the Company completed a public offering of $300 million aggregate principal amount of the Company's 3.45% senior unsecured and unsubordinated notes (the "Notes") due on June 14, 2013, with an effective interest rate of 3.49%. Interest on the Notes is payable semi-annually in arrears on June 14 and December 14 of each year, commencing December 14, 2010. The Notes are governed by a base and supplemental indenture dated June 10, 2010 and June 17, 2010, respectively, between the Company and Wells Fargo Bank, National Association, as trustee. The Company accounts for the Notes based on their amortized cost. The discount and expenses are being amortized to Interest and other (expense) income, net over the life of the Notes. Interest expenses associated with the Notes was $10.4 million and $0.3 million in fiscal years 2011 and 2010 , respectively, and is recorded in Interest (expense) income and other, net in the Consolidated Statements of Income.

The estimated fair value of Maxim's long-term debt was approximately $311 million at June 25, 2011. The estimated fair value of the debt is based primarily on quoted market prices observed for comparable notes that were recently traded as of the Balance sheet date.

As of June 25, 2011, Maxim had the capacity to issue an unspecified amount of additional debt securities, common stock, preferred stock, warrants, rights and units under the 2010 Shelf Registration Statement.

Other Financial Instruments

For the balance of Maxim's financial instruments, cash equivalents, accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.