notes to the Consolidated Financial Statements (cont’d) foreign currency riSk 99 AnnuAl RepoRt 2011 The Company’s equity can fluctuate due to changes in the value of the U.S. dollar, forward exchange contracts and its net investment  in its U.S. subsidiaries. The Company’s forward exchange contracts are summarized in  note 22 , and changes in the U.S. dollar exchange  rate will result in changes to the fair value of these contracts, which flow through comprehensive income. At December 31, 2011, the Company had hedged 55% (January 1, 2011: 60%; January 3, 2010: 50%) of its targeted foreign currency  purchases for its Canadian operations, extending to December, 2013. The Company does not include certain commodity products in  its hedging program due to the commodity nature of the marketplace. Excluding the impact of the Company’s hedges, the sensitivity  to a change in the U.S. dollar exchange rate, with all other variables held constant, of the Company’s profit before tax is approximately  $1.9 million (January 1, 2011: $1.7 million; January 3, 2010: $1.7 million) for a 1-cent increase/(decrease) in the U.S. dollar rate, based on  estimated annual foreign exchange exposure.  The Company hedges forecasted cash flows for purchases of products where the purchase price is substantially known in advance.  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 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 products in its breading and batters, and cooking oils. The Company does not actively hedge these inputs, relying  where possible on fixed price contracts, from three to 12 months with suppliers.  The Company also has transactional currency exposures. Such exposure arises from sales or purchases by the Company in currencies  other than its functional currency. 83% (January 1, 2011: 78%; January 3, 2010: 75%) of the Canadian operation’s cost of sales is  denominated in currencies other than the Company’s functional currency, 37% of the total Company’s cost of sales (January 1, 2011:  38%; January 3, 2010: 35%), while 92% of the Canadian operation’s sales are denominated in the Company’s functional currency  (January 1, 2011: 97%; January 3, 2010: 96%). In addition, the Company’s equity will change as a result of foreign exchange fluctuations as it has a net investment in U.S.  subsidiaries. On December 31, 2011, the Company had $52.9 million designated as a hedge protecting approximately 34% of the  exposure (January 1, 2011: $5 million protecting approximately 16% of the exposure). Based on the net investment as of December 31,  2011, a 1-cent increase/(decrease) in the U.S. exchange rate will increase/(decrease) equity by approximately $1.0 million (January 1,  2011: $0.3 million; January 3, 2010: $0.5 million). As a result of significant investment in operations in the United States through a self-sustaining subsidiary, the Company’s balance  sheet can be affected significantly by movements in the US$/C$ exchange rate. The Company seeks to mitigate some of the effect of  its structural currency exposure by borrowing in U.S. dollars. Between 10% and 40% of the Company’s net investment in non-Canadian  operations is hedged in this manner. Annualized Increase/  (decrease)/ (decrease) increase on profit (Amounts in $000s) US$  CAD$  in basis points  before tax ($000s) December 31, 2011  Current bank loans:  $  –  $  10,182  25/(25)  (25)/25 $  109,924 $  111,793 25/(25)  (279)/279 Long-term debt:  $  250,000 $  254,250 25/(25)  (636)/636 January 1, 2011  Current bank loans:  $  – $  4,735 25/(25)  (12)/12 $  38,500 $  38,292 25/(25)  (96)/96 As at January 3, 2010  Current bank loans:  $  – $  974 25/(25)  (15)/15 $  21,153 $  22,139 25/(25)  (101)/101 Long-term debt: $  4,950 $  5,180 25/(25)  (15)/15