## Notes to CoNsolidated FiNaNCial statemeNts 

(In thousands of dollars except as noted and per share amounts) 

## 9. FINANCIAL INSTRUMENTS (CONTINUED): 

## Risks (continued): 

(b) Currency risk (continued): 

 Some sales are transacted in U.S. dollars. For these sales, the raw sugar value is not hedged, as the corresponding futures contract is also in U.S. dollars. Only the U.S. dollar refined sugar margin and ocean freight contribution are economically hedged for the currency exposure. 

 Ocean freight for raw sugar is denominated in U.S. dollars and therefore forward exchange contracts are used to cover the foreign exchange exposure. 

(c) Interest rate risk: 

 Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. 

 The Company has short-term and long-term cash borrowings as at September 28, 2013 of $25.0 million and $50.0 million, respectively, as opposed to short-term cash borrowings of $60.0 million as at September 29, 2012. The Company normally enters into a 30 or 90-day Bankers’ Acceptance for an amount varying between $60.0 million to $80.0 million of the borrowings, and will borrow either under prime rate loans or shorter term Bankers’ Acceptances for any other borrowings. To mitigate the risk in future cash flows due to interest rate fluctuations, the Company entered into a new 5-year interest rate swap agreement effective June 28, 2013 at a rate of 2.09% for a value of $50.0 million, decreasing to $40.0 million on June 29, 2015 and to $30.0 million on June 28, 2016. The Company’s previous 5-year interest rate swap agreement of $70.0 million at a rate of 4.005% expired on June 28, 2013.All other borrowings over and above the $50.0 million are therefore exposed to interest rate fluctuations. 

For the year ended September 28, 2013, if interest rates had been 50 basis points higher considering all borrowings not covered by the interest rate swap agreements, net earnings would have been less than $0.1 million lower for both fiscal 2013 and 2012. If interest rates would have been 50 basis points lower, net earnings would have been less than $0.1 million higher for both fiscal 2013 and 2012. 

