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” 1/16/2019 www.fortresscapitalinc.com

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 1/16/2019 www.fortresscapitalinc.com

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.) 1/16/2019 www.fortresscapitalinc.com

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 1/16/2019 www.fortresscapitalinc.com

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 1/16/2019 www.fortresscapitalinc.com