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## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) 

the Company exceeding the ratio at certain times throughout the fiscal year. The Directors of the Company have also decided that this range can be exceeded on a temporary basis as a result of the recent acquisitions. 

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## NOTE 25 Financial risk management objectives and policies 

The Company’s principal financial liabilities, other than derivatives, comprise bank loans and overdrafts, letters of credit, notes payable, finance leases, and trade payables. The only purpose of these financial liabilities is to finance the Company’s operations. The Company has various financial assets such as trade receivables, other accounts receivable, and cash, which arise directly from its operations. 

The Company also enters into derivative transactions, primarily interest rate swaps and forward currency contracts. Their purpose is to manage the interest rate and currency risks arising from the Company’s operations and its sources of financing. The Company’s policy is and has been throughout 2013 and 2012 that no speculative trading in derivatives shall be undertaken. 

The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Audit Committee of the Board of Directors reviews and approves policies for managing each of these risks, which are summarized below. 

## Interest rate risk 

The Company’s exposure to the risk of changes in market interest rates arises out of the Company’s debt obligations with floating interest rates. For both of fiscal 2013 and 2012 the Company’s policy is to manage interest cost using a mix of fixed and variable rate debts. The Company’s objective is to keep between 35% and 55% of its borrowings at fixed rates of interest. To manage this, the Company enters into fixed rate debt facilities or interest rate swaps, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designated to hedge underlying debt obligations. Interest rate options that effectively fix the maximum rate of interest that the Company will pay may also be used to manage this exposure. At December 28, 2013, 54% of the outstanding long-term debt was hedged (December 29, 2012: 50%) and 53% of the Company’s borrowings, including the asset-based facility, are either hedged or at a fixed rate of interest (December 29, 2012: 57%). 

