From: Bruce Johnson, Supply Chain Manager To: Katherine Smith, CFO Subject: Risk Mitigation Katherine, I am concerned that the current drought in India is going to cause problems with our tea leaves. According to historical information, in a drought, tea leaves weigh less and are smaller than during a regular monsoon season. Less crop also may be available, which could increase the price of tea leaves. My suggestion is that we consider a hedging method to help us mitigate the effects of these market changes. The highest risk we currently face is currency risk because our products are based on tea. Changes that affect tea prices, whether increases or decreases, affect what we have to sell and how we sell it. With the expectation that the global tea market will continue to grow, I think we should consider expanding the types of green tea we offer at the store. I have found a tea grower in the U.S. who is willing to sign a forward contract, guaranteeing us 10,000 bags of tea leaves for $4 per bag for regular tea leaves, which is the current rate. The grower also has agreed to let us purchase 5,000 bags of herbal