New York Cash Exchange 2011 Pall Corporation Approach

New York Cash Exchange 2011 Pall Corporation Approach to Managing Global Liquidity Pall Corporation Kevin Kilkelly Assistant Treasurer Bank Mendes Gans N. V. Mrs. K. I. Kombrink Executive Vice President

Global Liquidity Management - Notional Cash Pooling

Pall Overview Financial Statistics –F ‘ 10 § § Revenue: $2. 4 B Profits: $241. 2 M Operating Cash Flow: $377. 9 M Credit Rating: § Moody’s: Baa 1 / P 2 § S&P : BBB / A 2 Operational Overview § Pall (NYSE: PLL, S&P 500 company) is a leading supplier of filtration, separation and purification technologies across the broad spectrum of life sciences and industry. § The company’s engineered products enable process and product innovation and minimize emissions and waste. § Pall conducts business in over 30 countries worldwide 3

Treasury Principles § Cash is a corporate asset üProtect this asset üEnhance shareholder value § Centralized control with decentralized execution üStrategic direction from Corporate Treasury üTactical execution on transactional level § Execution via Regional Financial Service Centers üMacro level overview of responsibilities üSound control environment governing all cash movements üOptimizing cash resources 4

Requirements for Operational Success Visibility & Transparency § Daily Cash Reporting § Working Capital Needs § Cash Flow Forecasting (Pool Participants) Centralized Liquidity Management § Global Cash Pooling § In-Country Target Balances § Global Settlements § Global Funding Centralized control Sound Control Structure Decentralized Information Technology § Effective & standardized global execution § Eliminate redundancies policies and procedures § Real-time activity reporting § Consistent administration & § Consistent application of controls execution § Increased productivity § Procedures always in place before § Transcends time zones execution § Internet based portal : § Sarbanes Oxley compliant § Account opening/closing § Self Service Portal § Internal Audit reviews 5

Objectives - Centralized Liquidity Management § Create a global account structure, while streamlining & maintaining a local banking infrastructure § Obtain centralized visibility and control to access global cash to fund business growth § Eliminate all in-country borrowing facilities § Enable multi-currency off-set and eliminate FX transactions to manage liquidity § Improve returns on overnight deposits/reduce costs on borrowings § Establish global reporting capabilities of all global bank accounts § Adopt a solution that complies with internal standards and security requirements § Manage overall Cash Pool position via a single currency § Overcome local resistance to a global solution 6

Centralized Liquidity Management Solution § Implement a Global Multi-Currency Cash Pool § Meets Treasury’s requirements § Global Cash Pool keeps local infrastructure intact but has the flexibility to enable changes as dictated by business needs Criteria for participation § Currency is freely convertible § Legal entity is permitted to open an account (local and/or foreign currency) offshore 7

Pall’s Cash Pool § Began operations in July 2008 ü Pall Global Treasury, Port Washington, New York ü Current number of Cash Pool participants: 29 ü Current number of Cash Pool accounts: 34 ü Countries: 19 ü Pooled currencies: 12 8

Global Cash Pool Benefits § Provides visibility and control of global cash § Provides high flexibility to meet short & long term cash needs § Multiple currencies can be pooled daily from every region of the globe § Automated connectivity between Cash Pool accounts and local bank accounts § All cash in excess of working capital no longer remains idle in-country § Short-term funding vehicle for participating group companies § Eliminated most non-US external debt § Simplified new revolving credit facility § Treasury can invest/borrow in currency of choice 9

Global Cash Pool Benefits (cont’d) § Bank “Pledge” as opposed to “Cross-indemnities” thus avoiding inter-company loans § Intercompany loans eliminated ü Legal entities own bank accounts ü Cash Pool bank sends statement to legal entity monthly charging arms-length interest ü Legal entity reconciles g/l to the bank statement as if it were a typical in-country bank account § Ability to access the overall Cash Pool balance in a single currency § Advantageous borrowing rates for local entities (eliminate local bank margins) § Full interest compensation rather than interest enhancement (one currency rate per currency based on overall currency position) § Use the Cash Pool for acquisition finance transactions 10

Global Cash Pool Benefits (cont’d) § Internet based access enables: üAccess and visibility to all pooled funds from one platform. Third party accounts can be included. üEntity funding initiated from one platform üAdministrative flexibility 11

Global Cash Pool Strategies § Utilization of Cash Pool for funding requirements § Pay down external debt § Eliminate in-country credit lines § Withholding Taxes on account overdrafts § Monitor tax treaties with internal tax to assure the most advantageous treaty network is applied § Accounting § “Buy-in” from all disciplines to assure the Cash Pool did not create accounting entry complications § Replacing Inter-company loans with deposits/overdrafts within Cash Pool § Potential to offset on a consolidated basis § Local Legal Entity Buy-In § Economic benefit § Education and communication with local entities to assure compliance with the new structure 12

Global Cash Pool Strategies § Establishing automated two-way transfers § Detailed process required assistance from local entity, local bank in conjunction with BMG and Corporate Treasury § Continual adjustments to targets/ triggers to assure minimal liquidity remains in-country. Excess funds no longer remain in local bank accounts, but in cash pool accounts. Accurate cash forecasting is critical. § Diversify investments § Use Cash Pool to hedge currency exposures via plain vanilla FX Spot deals 13

Global Cash Pool overview All account balances in multiple currencies are viewed as just one account with one balance = single transfer to steer pool 37 currencies supported USD GBP EUR CHF 14 JPY SGD

Liquidity management model for companies Integrating requirements Treasury Funding or Investment Pool bank Centralization Local customer account Cash Pool bank account Cash Pool Bank account UK Japan 15 Relationship banks Group Companies 1

Liquidity management model for companies Integrating requirements Treasury Funding or Investment Pool bank Local customer BMG account Translation Local customer BMG account JPY 550 M + GBP 6 M = (USD 3 M) Centralization 2 1 Group Companies Relationship banks UK Japan 16

Liquidity management model for companies Integrating requirements 3 Treasury Funding or Investment Pool bank JPY 550 M + GBP 6 M + USD 3 M = USD 0 M Centralization 2 1 Group Companies Relationship banks UK Japan 17

Global Cash Pool Solution U S D E U R G B P U S D J P Y S G D U S D Local customer account balances Cash Pool balance (1) C H F 18 Treasury Funding (2) =0 Cash Pool Balance (3)

Global Cash Pool: True interest compensation Cash Pool USD account balances Set-off Step 1 Positive Interest result Cash Pool conditions Step 2 Step 3 Step 4 Investment rate = e. g. 20 bp USD USD USD Borrowing rate = e. g. 30 bp 19 20 bp USD 10 bp

Global Cash Pool - Considerations § Regulatory Law: üThin capitalization rules and stamp duty may apply in case of intercompany loans üTransfer Pricing: set Cash Pool margins at arms length and clearly document to avoid penalties üNotional pooling and full off-set is allowed in the Netherlands. No crossguarantees required under central banking regulations § Tax: ü Withholding tax could apply on interest charged. In Netherlands no withholding imposed ü Tax authorities could view extended overdrafts on a cash pool account as a disguised liability § Accounting: ü No intercompany loan administration and FX Swap contract administration ü Apply full off-setting on the balance sheet 20

Cash Pooling - Is it right for your company? § Gather Data üDo a feasibility study – make a case to management via a cost/benefit analysis üDefine an effective solution – work closely with corporate tax and legal advisors (physical/notional or both, Cash Pool leader, pool margins, countries, etc) § Analyze Tax and Regulatory aspects üReview each country’s jurisdiction specific rules § Negotiate fixed Cash Pool fees with provider § Obtain Crucial “Buy-In” From global operations § Step-by-step Implementation – account set-up, legal documentation, set authorities, define processes for participants § Manage from a central location (USA, Europe) 21

Feasibility Study Required Information: § Balances (debit & credit) for a representative period (e. g. 1 month) of a selected group of companies § For all accounts (local and foreign currency) including local bank interest conditions § Working capital loans you would like to dismantle § Local credit lines and cost thereof § Local deposits with 3 rd party banks 22

Cash Pooling - High Level Summary § A centralized Treasury fosters: § Global adoption of standardized policies and procedures § A common approach towards global liquidity management § A sound foundation that enables the implementation of a robust global Cash Pool product § Global Cash Pool enables: § Aggregation of different currencies from different countries into one common currency § Cash in excess of working capital at the in-country level to no longer remain “trapped” or subject to local investment/borrowing vehicles § Short term funding in the currency of choice without the traditional reliance of inter-company loan structures 23

Global Liquidity Management - Netting

Objectives § Add discipline to intercompany settlement process § Reduce the number of intercompany flows to reduce FX and transfer cost ü one monthly settlement per group company § Reduce/avoid cut off time and value dating issues ü guaranteed settlement with proper value date § Improve and simplify the monthly reconciliation process ü Internet based access for reporting and file upload/download purposes § Integrate netting with other cash management requirements ü liquidity (investment / funding) management ü hedge policy 25

Global Multilateral Netting § Multilateral netting is management of cross-border payments among multiple entities, resulting in a single net receipt or payment to each participant in the participants' functional currency. § The a process designed to organize and simplify the settlement of inter-company payments on a fixed customized periodic schedule. (third party payments can be included) 26

Global Netting Benefits Pall implemented Netting in November 2008 § No bank accounts need to be opened § Increased efficiency in managing inter-company flows § Imposes standardization and discipline across the group § Reduce payments between legal entities § Centralized versus decentralized FX § Cost savings in: üTransfer costs reduced based on reduction in the number of settlements (approx. : 80% - 90%) üFX cost reduced based on reduction in transactions (approx. : 80% - 90%) üElimination of value day loss　 27

Gross vs. Net - Intercompany Flows Average Reduction of Intercompany flows: § Before netting: § gross payment volume between group companies ; per annum : USD 1. 2 B § After netting: § net payment volume of intercompany payments between group companies ; per annum USD 590 M Reduction of 52%! 28

Gross vs. Net - Intercompany Payments Average Reduction of Intercompany payments: § Number of payments before netting: § Per annum : 6, 405 § Number of payments after netting: § Per annum : 674 Reduction of 89%! 29

Global Netting - Mechanics Before After AU US DE UK DE SG Netting center UK SG 30

Global Netting - Transactions § SALES üTrade üVendor § FINANCIAL üInter-company loans & interest ü Royalties & dividends ü Management & service-fees ü Internal FX hedging contracts ü External FX hedging contracts 31

Global Netting – Monthly Schedule 1: Send inter-company and vendor invoice payments to Netting center 2: View preliminary results and make changes when needed 3: Execute Final netting FX Spot deals 4: Run final netting 5: Execute all Netting settlements same day value 6: Reconcile AP&AR 32

Netting: Is it right for you? § Gather Data § Do a feasibility study – make a case to management via a cost/benefit analysis § Define an effective solution – work closely with Accounting (Cash Netting leader, currencies, countries, etc) § Obtain “Buy-In” From global operations § Step-by-step Implementation, legal documentation, set authorities, define processes for participants. § Manage from a central location (USA, Europe) 33

Feasibility study: What is needed? § Intercompany Transactions for a representative period (e. g. 1 month) of a selected group of companies § For all countries & currencies § Vendor Payments (International) 34

Pall & BMG QUESTIONS ? 35