Improving working capital performance with Supply Chain Finance September 20, 2012

“ “ Big challenges to working capital performance Despite a global business environment where companies can be harshly punished by Wall Street for even small missteps in predicting revenue or earnings, most large companies say they cannot correctly forecast operational basics like inventory, receivables, payables, and the underlying cash requirements to support them…” “... typical large companies in the annual REL 1000 analysis could generate nearly $2 billion in additional cash annually by optimizing working capital management.” REL Consulting (a division of The Hackett Group, Inc.), Working Capital: Successes, Challenges, and 2012 Objectives, (April 26, 2012) “ Since, on average, roughly 50% of companies’ working capital is tied up in the supply chain, there are very significant benefits to taking a more holistic view of the supply chain...” Ernst & Young insight: Getting the most from your supply chain (March 12, 2012)

How do you improve performance? Payables… Extend Days Payables Outstanding (DPO) Control financing costs Manage A/P processes more efficiently Receivables… Shorten Days Sales Outstanding (DSO) Improve “quality” of receivables Lower financing costs Expand sales markets (revenue growth) Reduce payment and FX risk Inventory… Lower Cost of Goods Sold (COGS) Align procurement terms to match sales terms Accelerate inventory turnover Ensure a predictable supply chain More efficient financing may be the solution

Peer comparison* Working capital benchmarking analysis — an example From a working capital perspective, how would you stack up against your peers? * Standardized in USD MM 360-day calendar, based on the latest FYE results and average two-year balances Source information: 2011 corporate annual reports (available online)

Evolution of finance in the global supply chain Management of the Supply Chain has involved over time to a more holistic view Convergence of the physical and financial supply chains Historically, the Supply Chain has addressed physical aspects: inventory flows, transportation spending Supply Chain Finance (“SCF”) expanded the focus to Inventory control and A/R reduction Today, efficiency in Payables has become a key component of Cash Conversion Cycle discussions Effect of Global Financial Crisis on Working Capital Optimization The Global Financial Crisis illustrated that the cost and availability of capital can change dramatically in a short period of time and underscored the importance of counterparty and supplier risk management As a result, working capital optimization became a renewed area of high interest Best in Class Companies Today most Fortune 500 companies are using programs such as Card Solutions, ePayables, SCF that enable them to generate a value proposition from their payables: Card solutions as a bottom up solution that can extend terms or more often generate fee rebates SCF provides a top down, more cost effective, solution for larger suppliers 5

Overview of Supply Chain Finance Purpose Provides a “Buyer” with a means to stretch out payables or reduce COGS while also offering suppliers the ability to receive payments as quickly as possible Create a “value exchange” that can improve working capital or, alternatively, allow negotiation of pricing concessions Program Suppliers can tap into funds earlier in their receivable cycle by allowing them to secure discounted funds against those receivables Web-based technology can provide a seamless solution for both parties Available to both domestic and international suppliers and can be used for foreign currency purchases Pricing Suppliers bear the on-going cost of the program, at a cost of funds aligned with the Buyer, set as a per annum rate, fixed spread over the relevant LIBOR for the period of the discount Discount rate charged to vendors incorporates the credit spread and the program’s administrative costs Cost is generally lower than the suppliers’ cost of debt and well below their Cost of Capital, WACC or IRR MO True benefits for both supplier and Buyer

for both buyers and suppliers SCF: who it benefits Buyers benefit by… Improving cash flow by extending DPO while maintaining trade payables classification Alternatively use a mechanism to negotiate better pricing Reduced administration through end-to-end payables reconciliation solution Strengthening supplier relationships/sustainability Can be part of an integrated payment network solution Suppliers benefit by… Improving cash flow by reducing DSO in an accounting neutral way Obtaining funding based on receivables as a financial asset, rather than supplier creditworthiness Obtaining financing at rates more favorable than those offered by alternative finance mechanisms Avoiding use of often limited credit availability from their bank Improving cash flow forecasting and flexibility Having a tool to manage the concentration of receivables A win-win for both buyers and suppliers

SCF: how it works Bank System Buyer Supplier Buyer transmits purchase orders to Supplier Supplier submits invoices to Buyer Buyer reconciles and feeds approved invoice file into Bank’s platform (web- based) Supplier selects and requests discount of approved invoices (or auto-discount) – all or part Bank discounts invoices and remits proceeds to Supplier Bank debits Buyer account on invoice maturity date for total due and remits amounts not discounted. Bank System  Approved invoice  Discount request Debit  Payment Buyer Supplier  Invoice Note: Bank receives payment from Buyer at maturity for total of all invoices entered in the system, retaining total of discounted invoices, and remitting remaining funds to supplier.  Purchase order

Traditional negotiation of terms - “zero-sum game” Buyer receivables are a substantial part of its suppliers’ working capital costs Supplier Objective: Increase DPOs Buyer Objective: Decrease DSOs Assets Equity & Liabilities Assets Equity & Liabilities ABC A/R = Buyer A/P ABC A/P Buyer A/R

Supply Chain Finance offers a “win-win” solution SCF enables Buyer suppliers to discount approved invoices at a very competitive rate ABC Company Bank Buyer Benefit: Decreased DSOs Benefit: Increased Lending Benefit: Increased DPOs Assets E&L Assets E&L Assets E&L ABC A/P Buyer A/R Buyer A/R Buyer DPO = 51 (reduce working capital) Supplier DSO = 10 (unlock cash flow) Bank owns A/R 41

Typical financing inefficiencies – both domestically and internationally Many buyers enjoy… Low cost of financing Investment graded Strong balance sheet Access to low cost capital Many banking options While many suppliers face… High cost of debt or other capital alternatives Non-investment graded A/R concentration limit issues Restrictive or limited bank credit lines A Supply Chain Finance (SCF) program can help allocate financing more efficiently to the benefit of both parties * Based on S&P 2012 rating scale

Cash flow improvement — an example Improved cash flow

Example of successful application of Supply Chain Finance Company A multinational company with over $2BN in revenues in the wholesale manufacturing market Objective Dramatically extend its very short supplier terms and improve its Cash Conversion Cycle. Situation Company was well below its peers in both DPO and CCC, had already extracted all possible benefits in inventory control and was being pressed to extend sales terms to its customers Response Through our recently established program the Company expects to achieve the following: Dramatically extend its DPO, which will approach industry leaders Generate approximately $60mm in additional cash flow by year end 2011 and increasing to $150mm by year end 2012 Set a new standard for negotiations with new suppliers as to terms Seek to further extend supplier terms in the future

In Summary Corporate focus on working capital metrics can be a more cost-effective effort than capital raising or increasing bank debt Solutions that benefit both a buyer and a supplier are an easier sell Payables programs can often be easily implemented and should be targeted where supplier adoption is most likely and provides the most benefit Can be part of an overall streamlined and automated payment process designed to generate capital/revenue and reduce administrative burden and cost