ADAMA Ltd.
Feasibility Analysis Report on Derivatives Hedging
Transactions
I. Background of Derivatives Hedging
ADAMA Ltd. and its subsidiaries (hereinafter combined as “the Company”) conduct crop protection
business in dozens of countries. In many countries, the business is settled in local currencies while the
relevant local subsidiaries are nominated in USD. In addition, one of the Company’s major
subsidiaries issued corporate bonds denominated in Israeli Shekel and linked to Israeli Consumer
Price Index (CPI). Given the global nature of its operational activities and the composition of its
assets and liabilities, the Company, in the ordinary course of its business, is expected to use
derivatives to hedge exposures related to foreign exchange rates and CPI.
II. Overview of Derivatives Hedging
The derivatives transactions of the Company are for the purpose of hedging only and will match the
size and term of the accounting exposure and economic exposure of the Company. All the Company’s
hedging transactions are expected to be through banks in certain countries where the Company is
present. The hedging tools include (inter alia) Forwards, Swaps, Loans and Deposits, Options, Exotic
Options, and Options Strategies (including sell and buys). The Company expects that the maximum
outstanding contract value of derivatives transactions on any single trading day in the next twelve
months since the approval by Shareholders’ Meeting (validity duration) should not exceed USD 5
billion. The transaction limits shall be valid and can be recycled within the validity duration.
III. Necessity and Feasibility of Derivatives Hedging
As the Company’s business covers dozens of countries and is settled in local currencies in many
countries, volatility of foreign exchange rates and CPI, being affected by international political and
economic environments, can have big impacts on the Company's business performance. The hedging
business is expected to effectively offset the risks caused by exchange rate and CPI fluctuations and
thus help to strengthen the Company’s financial stableness. Therefore, it is necessary to conduct
derivative hedging transactions.
The hedging transactions are based on the Company’s ordinary course of business and match the size
and term of the accounting exposure and economic exposure of the Company. The Company has
formulated the Derivatives Hedging Management Policy as the internal control system. The Policy
specified decision-making authority and procedures, operative organizations, reporting mechanisms
and monitoring measures. The Company has professional teams for conducting the transactions and
monitoring risks. The Company has the funding and risk resistance capabilities aligned with hedging
transactions.
IV. Risk Analysis for Derivatives Hedging Transactions
been complicated and volatile with ongoing geopolitical conflicts escalating, may cause drastic
fluctuations in exchange rates and consumer price index and result in significant increase in the
Company's hedging costs and consequently, potential losses.
involve customer credit as is customary in each market. A portion of these credit lines is insured,
while the remainder are exposed to risk, particularly during economic slowdowns in the relevant
markets. Any overdue accounts receivable from customers, or failure of money collection within the
forecasted payback period may affect the Company's cash flow and result in the actual cash flow
incurred not being able to fully match the term or amount of the foreign exchange derivatives
business that has been operated.
and its relevant subsidiaries’ collection and payment in foreign currency as well as assets and
liabilities in local and foreign currencies. Such transactions do not take up the available funds, but
there is the risk of having to pay spreads to the banks due to losses on closing out and chopping down
positions for various reasons.
trading are banks with good credit and long-term business relationship, so the occurrence of such risk
is relatively low.
result in improper execution of contracts and bring losses to the Company.
V. Risk Control Measures
control system for managing foreign exchange and index risk hedging, which clearly stipulates the
principles, approval authority, operating institutions and processes as well as risk control procedures
of the derivatives trading, to ensure a comprehensive supervision over each link from pre-emptive
prevention, in-process monitoring to post-processing.
with compliant qualifications and good credibility, strictly follows the laws and regulations in the
relevant fields in each country to avoid possible legal risks and fully takes into account settlement,
liquidity and FX volatility related to the transactions.
transactions in a timely manner through weekly, monthly and quarterly meetings; any significant
change in the market or significant floating losses, whenever it occurs, will be timely reported to the
Company's management team and the Board of Directors as appropriate, so as to activate a
contingency mechanism to respond and handle the situation appropriately.
system) theoretical pricing and/or banks/brokers quotes, as the case may be.
and transactions.
transactions and is responsible for monitoring and checking the compliance of both the Company and
its subsidiaries in the decision-making, management and execution of relevant transactions.
VI. Conclusion of the Feasibility Study of Derivatives Hedging Transactions
The Company has formulated the Derivatives Hedging Management Policy as the internal control
system for managing foreign exchange and index risk hedging. The hedging transactions are closely
related to the Company’s ordinary course of business and will match the size and term of the
accounting exposure and economic exposure of the Company. They are expected to enhance the
Company's financial soundness and reduce the adverse impact of foreign exchange rate and index
fluctuations on the Company's operating results. Therefore, the expected derivatives hedging
transactions are necessary and feasible.
ADAMA Ltd.
December 22, 2025
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