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

3

Pall Overview

Financial Statistics –F ‘10 Revenue: $2.4B Profits: $241.2M Operating Cash Flow: $377.9M Credit Rating:

Moody’s: Baa1 / P2 S&P : BBB / A2

Operational Overview Pall (NYSE: PLL, S&P500 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

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Treasury Principles

Cash is a corporate assetProtect this assetEnhance shareholder value

Centralized control with decentralized execution

Strategic direction from Corporate Treasury

Tactical execution on transactional level

Execution via Regional Financial Service CentersMacro level overview of responsibilitiesSound control environment governing all cash movementsOptimizing cash resources

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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

Sound Control Structure Effective & standardized global

policies and procedures Consistent administration &

execution Procedures always in place before

execution

Sarbanes Oxley compliant Internal Audit reviews

Information Technology Eliminate redundancies Real-time activity reporting

Consistent application of controls Increased productivity Transcends time zones Internet based portal :

Account opening/closing Self Service Portal

Decentralizedexecution

Centralizedcontrol

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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

Objectives - Centralized Liquidity Management

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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

Centralized Liquidity Management

8

Pall’s Cash Pool

Began operations in July 2008

Pall Global Treasury, Port Washington, New York

Current number of Cash Pool participants: 29

Current number of Cash Pool accounts: 34

Countries: 19

Pooled currencies: 12

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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

Global Cash Pool Benefits

10

Bank “Pledge” as opposed to “Cross-indemnities” thus avoiding inter-company

loans

Intercompany loans eliminatedLegal entities own bank accountsCash Pool bank sends statement to legal entity monthly charging arms-length interestLegal 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

Global Cash Pool Benefits (cont’d)

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Internet based access enables:

Access and visibility to all pooled funds from one platform. Third party

accounts can be included.

Entity funding initiated from one platform

Administrative flexibility

Global Cash Pool Benefits (cont’d)

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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

Global Cash Pool Strategies

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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

Global Cash Pool Strategies

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Global Cash Pool overview

SGDUSD GBP CHF JPYEUR

37 currencies supported

All account balances in multiple currencies are viewed as just one account with one balance = single

transfer to steer pool

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Gro

up

Com

panie

s

Pool bank

Tre

asu

ry

Liquidity management model for companiesIntegrating requirements

Rela

tion

shi

p b

anks

Centra

lizatio

nFu

ndin

g o

rIn

vestm

ent

1

Cash PoolBank account

Cash Pool bankaccount

Japan UK

Local customeraccount

Localcustomeraccount

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Gro

up

Com

panie

s

Tre

asu

ry

Liquidity management model for companies Integrating requirements

Rela

tion

shi

p b

anks

Fundin

g o

rIn

vestm

ent

1

Japan UK

Pool bank

Centra

lizatio

n

Translation

JPY 550M GBP 6M (USD 3M)+ =

2Local customerBMG account

Local customerBMG account

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Gro

up

Com

panie

s

Pool bank

Tre

asu

ry

Liquidity management model for companies Integrating requirements

Rela

tion

shi

p b

anks

Centra

lizatio

nFu

ndin

g o

rIn

vestm

ent

1

Japan UK

2

3

JPY 550M GBP 6M USD 0M+ =USD 3M+

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Global Cash Pool Solution

Local customer account balances

Cash PoolBalance

(3)

USD

CHF

GBP

SGD

EUR

JPY

Cash Pool balance

(1)

USD

TreasuryFunding

(2)

USD

= 0

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Cash Poolconditions

Set-off

USD

USD

USD

Cash Pool USD accountbalances

Step 2 Step 4Step 1

USD

USD

USD

USD

20bp

20bp

20bp

PositiveInterest result

10bp

Global Cash Pool: True interest compensation

Step 3

Investment rate= e.g. 20bp

USDBorrowing rate= e.g. 30bp

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Global Cash Pool - Considerations

Regulatory Law: Thin capitalization rules and stamp duty may apply in case of intercompany loansTransfer Pricing: set Cash Pool margins at arms length and clearly document to avoid penaltiesNotional pooling and full off-set is allowed in the Netherlands. No cross-guarantees required under central banking regulations

Tax: Withholding tax could apply on interest charged. In Netherlands no

withholding imposed Tax authorities could view extended overdrafts on a cash pool account as a

disguised liability Accounting:

No intercompany loan administration and FX Swap contract administration Apply full off-setting on the balance sheet

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Cash Pooling - Is it right for your company?

Gather DataDo a feasibility study – make a case to management via a cost/benefit analysisDefine 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 aspectsReview 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)

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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 3rd party banks

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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

Global Liquidity Management - Netting

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Objectives

Add discipline to intercompany settlement process

Reduce the number of intercompany flows to reduce FX and transfer cost one monthly settlement per group company

Reduce/avoid cut off time and value dating issues guaranteed settlement with proper value date

Improve and simplify the monthly reconciliation process Internet based access for reporting and file upload/download purposes

Integrate netting with other cash management requirements liquidity (investment / funding) management hedge policy

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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)

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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:Transfer costs reduced based on reduction in the number of

settlements (approx.: 80% - 90%)FX cost reduced based on reduction in transactions (approx.: 80% -

90%)Elimination of value day loss 　

Global Netting Benefits

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Gross vs. Net - Intercompany Flows

Average Reduction of Intercompany flows:

Before netting: gross payment volume between group companies ; per annum : USD

1.2B

After netting: net payment volume of intercompany payments between group

companies ; per annum USD 590M

Reduction of 52%!

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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%!

Gross vs. Net - Intercompany Payments

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Global Netting - Mechanics

UK

AU

DE

SG

US

Before

UK

AU

DE

SG

US

After

Nettingcenter

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Global Netting - Transactions

SALES

Trade

Vendor

FINANCIAL

Inter-company loans & interest

Royalties & dividends

Management & service-fees

Internal FX hedging contracts

External FX hedging contracts

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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

Netting: Is it right for you?

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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)

Feasibility study: What is needed?

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Intercompany Transactions for a representative period (e.g. 1 month) of a

selected group of companies

For all countries & currencies

Vendor Payments (International)

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QUESTIONS ?

Pall & BMG