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The following table demonstrates the sensitivity of the Company’s profit before tax to a change in interest rates, with all other variables held constant (through the impact on floating rate borrowings). There is no impact on the Company’s equity except through changes in income. 

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## Foreign currency risk 

High Liner Foods’ Canadian company (the Parent) is a company with a CAD functional currency, meaning that all transactions are recorded in CAD. However, as the reporting currency is USD, the results of the Canadian company are converted into USD for external reporting purposes. Therefore, the Canadian to U.S. exchange rates impact the results reported. 

In looking at the effect on net income, the majority of sales in CAD, being those of the Parent company, have USD denominated input costs. For products produced in Canada, raw material is purchased in USD and flour-based ingredients, cooking oils and transportation costs all have significant commodity components that are traded in USD. However, labour, packaging and ingredient conversion costs, overheads and selling, general and administrative costs are incurred in CAD. A strengthening Canadian dollar has an overall effect of increasing net income in USD terms and conversely, a weakening Canadian dollar has the overall effect of decreasing net income in USD terms. 

The Canadian company hedges forecasted cash flows for purchases of products for its Canadian operations where the purchase price is substantially known in advance (targeted purchases). The policy dictates that cash flows out 15 months are hedged between a minimum and maximum percent that declines by quarter the further in the future the cash flows. The Company does not hedge cash flows on certain seafood purchases in which the ultimate selling prices charged to the Company’s Canadian customers move with changes in exchange rates. It is the Company’s policy to set the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness. The Company also has foreign exchange risk related to the input costs of commodities related to freight surcharges on transportation costs, paper products in packaging, grain and corn products in its breading and batters, and soya and canola bean based cooking oils. The Company hedges these inputs on a small scale, however relying where possible on fixed price contracts in CAD from 3 to 12 months with suppliers. 

At December 28, 2013, the Canadian company hedged 64% (December 29, 2012: 56%) of its targeted foreign currency seafood purchases, extending to December 2014. 

For the fifty-two weeks ended December 28, 2013, approximately 65% of the Canadian company’s costs were based on currencies other than the Company’s functional currency, while almost 95% of the Canadian operation’s sales were denominated in the Company’s functional currency. 

As the Company has operations in Canada, and some assets and liabilities in Canada that are denominated in CAD, assets and liabilities of the consolidated company change as exchange rates fluctuate. A stronger Canadian dollar has the effect of increasing the carrying value of assets and liabilities such as accounts receivable, inventory, fixed assets, and accounts payable of the Canadian operations when translated to USD. The net offset of those changes flow through OCI. Based on the equity of the Canadian company as of December 28, 2013 a one cent increase/(decrease) in the U.S./CAD exchange rate will (decrease)/increase equity by approximately $0.3 million (December 29, 2012: $0.8 million). 

## Credit risk 

The Company trades only with recognized, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are managed and monitored at the corporate level on an ongoing basis with the result that the Company’s exposure to bad debts is not significant. The Company’s top ten customers 

