Fortress FX Hedging Corporate FX Risk Management Fortress

Fortress FX Hedging Corporate FX Risk Management Fortress Capital, Inc. www. fortresscapitalinc. com

Corporate FX Risk Management • MCDonald’s Corporation (MCD) accepts payment in 120 currencies globally. A US Based corporation, their accounting is done in US Dollars, their functional accounting currency. Without an active FX hedging program, their financials would be impossible to manage, as more than 60% of their revenue comes from outside the US Dollar. • In the early 90’s, Intel corporation one year made more money trading Forex than selling processors, due to a skillful, successful FX desk • About half of public companies don’t hedge. Not hedging, is speculating in FX. Their recent excuse is called “Currency Headwinds”

Who needs FX hedging? • International businesses and organizations • Those who depend on international businesses • Portfolio managers who depend on stock, bond, or other investments denominated in US Dollars • Any contract involving foreign currency (such as an international, multicurrency loan, derivative, or other contract) • Governments, sovereigns, local governments • Retirement plans, employee benefit plans, and other types of pension plans

Approaches to FX Risk Management • Active hedging – Active hedging means creating a strategy for the hedge, including active management. This means that, for example, if a hedged option position is deep in the money due to an FX event, take the profit. Active hedging is NOT speculation, it means making a custom hedging strategy considering your business and the market conditions. • Passive hedging – Passive hedging is a strategy to attempt to perfectly hedge all transactions minus the spread. No forecasting, no dynamic hedges, no complex transactions. • Complex hedging – This means creating a custom, dynamic hedging strategy to suit your needs, which many include the creation of synthetics, custom derivatives, custom structures (such as Captive Insurance Companies, Special Purpose Investment Vehicles, etc. )

Costs, fees, and risks • Depending on the type of hedging program, costs are usually built in to the contracts, such as a commission on the purchase of an FX option. • In some cases, Fortress may charge a flat yearly fee to manage FX risk, as a more transparent fee model. • Costs and fees associated with hedging is a tax deduction according to the IRS • FX hedging DECREASES risk, there isn’t any risk to hedging per se. There’s risk to NOT hedging, as companies are required to have internal controls post Dodd -Frank

Fortress Capital FX Hedging Fortress Capital can structure a hedging program for your business. Fortress Capital is a registered Commodity Trading Advisor (CTA) & Introducing Broker with the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC) and an NFA Member # 0416496. Fortress Capital is a registered Commodity Futures Independent Introducing Broker with the CFTC, a member of the NFA (ID # 0416496), and a Registered Investment Advisor CRD # 152019 To learn more visit www. fortresscapitalinc. com or call 1. 800. 591. 2393