1. Expanding into Global Markets
An introduction into the world of international treasury management, global liquidity, regulations and industry key trends 29

2. International Market Growth
Economic Trends
International Market Growth 1

3. Proprietary and Confidential
CFO Survey
CFO Outlook Resources -
CFO Survey
73% of U.S. companies surveyed do business internationally
10 minute Learning module – link
Proprietary and Confidential

4. Proprietary and Confidential
Macro Trends Growth Varies Significantly by Region, Uncertainty, Corporate Cash All Time High
The global economic outlook is mixed
Emerging markets 2013 GDP growth forecasted to outpace developed markets (5.5% vs. 0.9%)
US will see mid 1% GDP growth. Continued high unemployment, despite low interest rates
Europe will see slow growth, with EU flat
Pacific Rim slowing to 5.9%, but still driven by India and China expansion
Latin America remains solid in the 3% range
Driven by aforementioned concerns, corporate cash is now greater than $1.7 trillion, a 20%+ increase since 2009
US Corporate Cash
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
2010
2011
2012
2013
2014
2015
US Interest Rates
Fed Funds
1 ML
3 ML
5 Yr Rolling Swap
Drivers
Emerging market growth
Technology innovation
Reduction in poverty, emergence of global middle class
High levels of Corporate Cash to invest
Headwinds
Euro crisis
Changing tax policies
Middle East unrest
Potential global recession
Source: Bank of America Merrill Lynch Global Research, iQdatabase as of Nov 27, 2012 2
Proprietary and Confidential

5. Globalization of business into new markets creates…
Companies are discovering new locations to set up manufacturing, distribution and sales offices. These opportunities require upfront capital in an attempt to generate positive cash flows and returns.
Expansion Opportunities
Access to New Suppliers
Global sourcing has been one of the biggest drivers of international growth with more goods and services being imported every day.
New Customers
Emerging market economies are experiencing tremendous growth, despite the current slowdown in the global economy. Companies are discovering new customer bases to market to. 1

6. And leads to… 2 New Business Environments Currency Exposure
Entering new markets brings entrance into new business climates and cultures. These cultures often bring new and “foreign” complexities, particularly from the liquidity management and funds movement perspective.
Currency Exposure
For USD-functional companies, doing business in foreign countries creates exposure to currency fluctuations.
Trapped Cash
Due to restrictions on certain currencies, companies that operate in these jurisdictions may have difficulty in moving funds across borders. 2

7. The Basics

8. Why is International CM Different?
Every Country is Different
Regulations
Business Practices
Tax Issues
Currency
Risk – Country, Commercial, FX, etc.
Cash Management Products and Practices
Banking Systems
Clearing Systems
Time Zone

9. Global Expansion Life Cycle
Foreign Exchange and Cross Border Payments
Centralized Currency Accounts
Local Currency Accounts
Liquidity
Management
International CM Needs
Occasional International
Sale
Regular
International
Sale
Paying and
receiving in
same currency
Overseas
operations
Multiple
overseas
locations
Company Life Cycle

10. Cross Border Payment Considerations
Type of Payment (Commercial, treasury, payroll, tax, intercompany)
Currency
Value and urgency
Frequency and volume
Logistics and control
Information
Treasury Alliance Group, LLC 10

11. International Payment Challenges
Settlement across different time zones
Holiday Schedules
Cut off times
Value dates
Lifting charges / intermediary bank charges
Exchange control regulations
Foreign language & characters
Information
Treasury Alliance Group, LLC 11

12. The Role of SWIFT
Society for Worldwide Financial Telecommunication (SWIFT)
A highly secure telecommunications network that facilitates the exchange of financial messages
A co-operative organization founded in 1973 created and owned by its members
A standards body
NOT a payment system
Most common SWIFT message types for International Cash Management
MT100 Series - Customer Payments
MT103 (Single Customer Credit Transfer)
MT101 (Request for Transfer)
MT900 Series - Balance and Transaction Reporting
MT940 (Customer Statement Message – Previous Day)
MT941 (Balance Report - Intraday)
MT942 (Interim Transaction Report- Intraday)

13. Single Euro Payment Area
SEPA

14. Single European Payments Area (SEPA)
The Single European Payments Area (SEPA) project was designed to:
Create a single platform for electronic cross-border EUR payments within Europe
Allow Corporates & Individuals to make EUR payments from a single account to anywhere within the SEPA environment under consistent rules and costs.
Eventually replace local, domestic EUR clearing with a single clearing structure
SEPA consists of:
32 countries – All EU members (27), and: Switzerland, Monaco, Liechtenstein, Iceland, Norway.
SEPA Credit Transfers
SEPA Direct Debits
The Project

15. Improved efficiency and scale
SEPA complements key treasury trends
Centralisation
Pathway to a single account, in a single location. Natural balance consolidation.
Standardisation and interoperability
Common instruments and technical standards, standardised clearing, settlement and value dating; harmonised legal basis.
Improved efficiency and scale
Rationalisation of relationships
Potentially no need to maintain local banking relationships. All 32 countries reachable to/from a single location.
Systems integration
ERP vendors have invested in response to SEPA. Single file format. Facilitates automated reconciliation.

16. Key Trends

17. Going Global…Being Global
Globalization
Treasury operating models are changing from local to regional to global, with a spotlight on increasing control. Rationalization and consolidation of providers is a key focus.
Global banking technology
Increased automation, outsourcing and centralization of cash and liquidity management. Increased efficiency and doing more with less.
Risk management
Cash is King – the lifeblood of our clients’ organizations. Who has access to what?
Foreign Exchange Risk Management
Market forces – ‘credit crunch’ & ‘European contagion’
Increased need to gain control over internal liquidity, decrease dependency on external funding and manage risk.

18. Trends in Banking Examinations
Rationalization
What is purpose of each bank account? Can we close or consolidate any accounts? Do we have any pockets of idle cash? How many systems must we log into around the world?
Global Control & Consistently
Ensure all account ownership and fully visibility exists from head office. Establish proper controls and permissions on all bank accounts around the world. Create a standardized structure allowing for quick movement on any changes.
Increase Efficiency
Leverage technology to produce STP environment which will eliminate manual functions and allow treasury to focus strategically.
Reduce Costs
Leverage global volumes for reduced fees while eliminating unnecessary or redundant bank accounts. Utilize a global bank to reduce “hidden” transaction and correspondent fees.

19. Best Practices

20. International Cash Management Best Practices
Involve key partners early; be proactive
Coordination and communication among tax, legal, accounting, and treasury is key
Build a highly capable treasury staff with strategic thinking skills, project management acumen, international knowledge and the ability to work in a dynamic environment
It is essential to build a capital and repatriation strategy from the outset of your expansion into these markets. It i critical to think through exactly how you wish to incorporate in a specific market, including how you fund the initial capital injection. The decisions made at the start impact your options throughout the future.
Continue migration from paper to electronic payments and receipts and leveraging banking relationships and tools that can enhance straight-through processing
Automate information reporting and analytics and improve visibility into your cash positions globally with a fully integrated web-based global banking portal.
Create an efficient global bank structure that enables you to view, manage and optimize your funds everywhere and effectively position your business for success in foreign markets.
Leverage your local banking, accounting, legal, and tax advisors to build as much knowledge of each market prior to expansion

21. Global Liquidity Management

22. Global Liquidity Management
Cash manager’s basic responsibility is to ensure that the company has sufficient liquidity to meet all known obligations and allow it to continue to function.
Liquidity Management Objectives:
Visibility and clear reporting over the organization's cash position
Technology: systems provide the required information (including multi-bank reporting)
Strong global liquidity management strategy
Recent developments such as automated rules-based sweeping take the uncertainty out of the process while allowing treasurers to focus on strategic initiatives
Investing cash can be an effective means of maintaining sufficient funds for the company’s short-term requirements, while benefiting from yield pick-up by investing strategic cash in longer-term investments
A strong investment policy, accurate cash flow forecasting capability and centralized control over the company’s cash are all important ingredients of best practice liquidity management.
Strong global liquidity management strategy should enable cash to be repatriated to a regional hub or to the central treasury
Investing - (i.e. segmenting of cash into tiers including strategic, reserve and operational )

23. Global Liquidity Management
Risk Mitigation
Enhance Liquidity Optimization
Working Capital Efficiencies
Investment Alternatives
Long-term operating and reserve cash management:
Regional concentration of funds
Transparency and visibility of cash positions
Flexibility to manage liquidity across units/regions
Effective risk management, improved working capital and investment returns
Managed Treasury and Liquidity Solutions
Cross Region Sweeping
Multi Currency Notional Pooling
Single Currency Notional Pooling
In-country sweeping
Cross-border sweeping
Multi Bank Sweeping
Interest Optimisation
Cash Inflow
Cash Outflow
Receipts
Accounts
Payments
Debt
Transactions
Portal(s) and Information Reporting 33

24. Global Liquidity Management
Essential cash management techniques are used by companies for cross-border liquidity management: notional pooling & cash concentration
Balances are consolidated to optimize interest, but there is no physical movement of funds.
Bank allows positive balances in the accounts of a company or its subsidiaries to offset debit balances in other company accounts for the purpose of determining interest earned or owed.
Notional pooling is also referred to as interest offset pooling or interest compensation.
Balances in participating accounts concentration are swept to a concentration account (or cash pool) in order to better manage liquidity.
Surplus funds are physically concentrated into the account and debit balances are covered by transfers from the concentration account in order to minimize overdraft interest.
Cash concentration is also referred to as zero-balancing, target balancing or sweeping.

25. Globalization of the Chinese Renminbi36

26. Local Currency: To Pay or Not to Pay . . .
Trend
Impact
Globalization of the Renminbi
Advent of the CNH Market
Local Currency Invoicing
Foreign suppliers are no longer content with receiving USD
Risk Management
More companies are accessing the local markets for hedging
Central Bank Agendas
Active management in currency markets and regulations
Shortage of credit and higher cost of funds resulting in increased focus on maintaining excess cash and improving efficiency of balance sheet activities
Centralization of treasury activities for effective governance and cutting of costs
Improved visibility of payments and receipts to manage daily liquidity and optimize returns
Geography/time zones
Fragmented technology platforms
Segregation of treasury and financial processes across international units of the company
Lack of real-time information
Organizational issues:  decentralized, non-standard processes, corporate culture, local routines
Resources
Tax/Legal/Regulatory
Senior Management Buy-In 23

27. RMB Cross-border Settlement
Background
Pilot Program for Cross-border Trade settlement in RMB launched in July 2009
In August 2011, RMB cross border settlement expanded to all the provinces and cities in Mainland China
All the enterprise in Mainland China are eligible for RMB settlement for import of goods, service trade and other current account settlement
Approved MDEs in Mainland China are eligible for RMB settlement for export of goods  
67,359 MDEs (Mainland Designated Enterprises)
Participating Banks
All banks, including their branches, registered in the pilot provinces are permitted to apply to become settlement banks and clearing banks
Bank of China serves as the sole clearing bank in Hong Kong and Macau
Offshore banks, including branches, can open an account with clearing bank and become participating banks in the respective regions
2009
2010
2011
Onshore
5 cities
Offshore
Hong Kong , Macau and 10 ASEAN countries
Onshore
20 provinces
Offshore
All countries
Onshore
Whole country
Offshore
All countries

28. RMB Transactions – Onshore vs. Offshore
CNY versus CNH markets
“CNY” and “CNH” both refer to “RMB” as a currency and the nomenclature is used just for the convenience.
“CNY” continues to designate Chinese Yuan trading, both in Mainland and offshore markets.
“CNH” is newly designated for Chinese Yuan offshore trading.
“CNH” is not regulated by the PBOC, hence will reflect market conditions in Hong Kong and other offshore markets.
1 CNY = 1 CNH
RMB Transactions – Onshore vs. Offshore
Onshore Trade Related
Offshore Activities
To settle payments of eligible Chinese enterprises in RMB for trade transactions
Supporting documents required for Mainland China bank and regulatory review to ensure genuine trade transactions
Free movement of funds outside of Mainland China
RMB is subject to liquidity conditions in the offshore market
No requirement for supporting documents
Ability to open RMB Non-Resident Accounts in China and Hong Kong
Ability for offshore companies to conduct trade in RMB without the need of an account in China
Ability to buy and hold RMB off-shore for investment purposes
Competitive, non-regulated RMB interest rates available in off-shore markets
Ability for RMB to participate in liquidity structures (off-shore)
RMB Bond Market in Hong Kong is developing (Dim Sum Bonds) as an avenue for raising capital and additional investment alternatives
Once off-shore RMB can be freely converted

29. Questions? 36

30. John Mullett Vice President, International Treasury Solutions Officer
Bank of America Merrill Lynch
Office:
John Mullett is the east coast Regional Vice President of Global Commercial Banking International Treasury Services for Bank of America Merrill Lynch and is based in Miami, FL. In this role, he works with multinational corporations to deliver treasury, liquidity and custody solutions to clients across the globe, including Middle Market Banking and Business Banking.
Mr. Mullett joined Bank of America in Prior to this position, he worked as a Portfolio Management Analyst for an international mutual fund of Columbia Management, based in Chicago, IL.
John has spoken on international banking topics at numerous events around the country including the Windy City Treasury Management Conference, EuroFinance Miami, the Wisconsin Treasury Management Association Annual Conference, the Washington DC AFP Conference, and numerous other industry events.
John is a graduate of the College of Charleston School of Business.

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