Managing Risk and Opportunity through Uncertainty

Percentage of Net Monetary FX-Denominated Assets and Liabilities Hedged 22% 100% 32% 75-99% 13% 50-75% 8% 25-50% 25% 0-25% FX TRANSLATION RISK FX INSTRUMENTS 27% 28% 27% 19% Do not have the information needed to track exposures accurately Some exposures are small Hedging cost is too high Other Reasons for Hedging Less Than 100%of Existing FX-Denominated Assets and Liabilities 78% of companies reported hedging less than 100% of net monetary FX-denominated assets and liabilities. Apart from costs, another commonly cited reason for hedging less than 100% of existing FX-denominated assets and liabilities was the difficulty in accurately tracking exposures. 78% Per corporate risk management policies, spot, forwards, and swaps remain the most commonly permitted financial instruments. 46% of survey participants reported option- based strategies as being permissible. Policy-Permitted Financial Instruments 88% 87% 82% 46% 45% Spot Swaps Forwards FX Options — Zero Cost FX Options — Premium Payable 47% To hedge uncertain exposures 41% To avoid losses that might occur with forwards 23% To improve hedge performance for high cost of carry currencies 23% To protect budget rates 14% To hedge exposures with no offsetting cash flow (e.g. a net investment exposure) 13% To express a market view Reasons for Choosing an FX Option Strategy 16 17