Marco Ligonzo

Cash Management

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Indice

Why Cash Management?

Definition, Purpose and Potential Customers

Benefits for Customers

Types and Methods of Cash Management

In-depth Analysis: Cash Pooling

Cash Management Methods: Sum Up

Cash Management in the UBI Group

SCORE - Standardised Corporate Environment

Agreement between banks – requirements to exchange MT101

Bilateral Agreement and Designation Account Sheet

Examples:

Passive Cash Management at the customer’s initiative Active Cash Management at the customer’s initiative Active automated Cash Pooling

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Why Cash Management?

Companies operate in a market environment where the management of liquidity and financial

requirements is a critical success factor for maintaining profitability and, sometimes, for the very survival of

the company.

Lack of market liquidity Difficulty in accessing credit Excessive costs of loans

In recent years, companies have found themselves having to operate in markets that are characterised by the following features:

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Definition, Purpose and Potential Customers Cash Management is the set of services, ancillary to the current account, which support the systematic activities of liquidity management by a business Group (or individual company with a number of accounts). The Cash Pooling service is essential for this purpose; this consists of centralising to a single legal entity the management of cash availability of a corporate group with the aim of simplifying the management of corporate cash in relation to relationships existing between all companies belonging to the group and the credit institutions.

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Cash Management services target corporate Groups (or individual companies) with a number of accounts at one or more Banks, in Italy and abroad, that need to:

manage their accounts remotely concentrate cash flows into a single account to optimise their daily cash position

Cash Management enables companies to measure and more easily manage the cash required to fulfil its commitments through: i.accounts reporting services: receive information relating to balances and account movements ii.order services: send payment orders * Accounts reporting and order services can be used to perform cash pooling

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By way of example, some types of customers that may be interested in these products are: Groups strongly focused upon foreign markets (which are therefore highly likely to have account relationships with foreign banks) Corporate groups with foreign subsidiaries Multinationals Italian and foreign companies with a permanent establishment (i.e. branches, representative offices) abroad or in Italy Corporate groups, even medium-sized, characterised by strong delocalisation Companies using multiple banks Companies with a number of accounts at the Group Banks

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Benefits for Customers

account account 22

account account 11

account account 33

Availability of a single tool for receiving prompt information and sending payment orders on current accounts held with Italian and foreign banks

Full control of cash liquidity at central level

Optimisation of financial management

Possibility of covering deficit situations without having to use a bank loan with consequent reduction in costs

Improvement in efficiency of the administrative structure of the Group and Control of the assets of decentralised organisational units

account account 22

Account Account 11

account account 33

Reduction of costs and risks and increased efficiency

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With reference to the role of the UBI Group Bank, Cash Management can be classified as follows:

Types and Methods of Cash Management (1/3)

The customer decides to use a third party bank as manager of its Cash Management. The customer decides to open any so-called master account (“centralised” cash account) at the third party bank. The UBI Group bank (passive Bank) provides the third party bank with information relating to the current account held with it. The third party bank makes that information visible to the customer which can consequently send outgoing payment orders to the current accounts held at UBI.

PASSIVE Cash Management

The customer decides to use a UBI Group bank as manager of its Cash Management. The customer decides to open any so-called master account at a UBI Group bank (active Bank). The customer arranges for information relating to the current accounts held at other banks to be sent to the UBI Group bank. UBI makes that information visible to the customer which can consequently send outgoing payment orders from the current accounts held at the UBI Group bank to other banks

ACTIVE Cash Management

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Types and Methods of Cash Management (2/3)

The customer manually sends both requests for information and payment orders in relation to its changing needs

Cash Management Customer’s Initiative

The customer contractually establishes all the rules that regulate the service of requests for information and sending of payment orders. The bank automatically performs the orders, complying with pre-established rules.

Automated Cash Management

Cash Management End of Day

Cash Management Intraday

The accounts reporting service of balances and movements is completed at the end of the day via exchange of MT 940 messages.

The service of reporting on balances (MT 941) and movements (MT942) is performed at pre-established times during the course of the day via exchange of messages. This service follows the request for information sent to the bank via MT 920.

With reference to the initiator of the orders Cash Management can be classified as follows:

With regard to the time of implementation of the requests for information, Cash Management can be classified as follows:

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INTERBANK Cash Management

INTERGROUP Cash Management

DOMESTIC Cash Management

INTERNATIONAL Cash Management

Types and Methods of Cash Management (3/3)

account account 33

account account 11 account account 22

account account 33

account account 11 account account 22

account account 33

account account 11 account account 22

account account 33

account account 11 account account 22

The accounts involved in the service are all held with a UBI Group bank

The accounts involved in the service are held with a number of banks all belonging to the UBI Group

The accounts involved in the service are held with banks belonging to the UBI Group and with other Italian* banks

The accounts involved in the service are held with banks belonging to the UBI Group and with other banks including at least one foreign* bank

With reference to the credit institutions involved Cash Management can be classified as follows:

* In order for the service to be activated with a bank, it is necessary for the Bank in question to be able to process incoming and outgoing information messages and orders and to have signed a bilateral agreement with UBI Banca

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Cash Management in the UBI Group

Automated service targeting Italian and foreign companies that need to create a centralised and automated cash pool, with cash flows concentrated on one or more accounts to optimise its daily cash position or that of its establishments (branches, affiliates, subsidiaries), without the need to complete transactions each time

Accounts reporting servicesAccounts reporting services (MT 940 / MT 941 / MT 942)(MT 940 / MT 941 / MT 942)

Accounts reporting services that send information on accounts held by the customer at its own member institutions. In particular:

MT940: balances and list of movements at end of day MT941: intraday balances (at pre-established times during the day) MT942: intraday movements (at pre-established times during the day)

Cash PoolingCash Pooling

SCORESCORE

A service that allows Italian and foreign companies which have a connection to the Swift network to use that channel to exchange messages sending information and/or orders, rapidly and securely and with any bank connected to the same network and subscribing to the service. This service occurs via two protocols:

FIN XML20022

OrderOrder ServicesServices (MT (MT 101)101)

Request for funds transfer exchanged with Italian or foreign banks via Swift message

Incoming MT101: payment order received with debit to the account held with UBI Outgoing MT101: payment order with debit to the account held with the third party bank receiving the message

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SWIFT SCORE - Standardised Corporate Environment

The Score Service is provided by Swift and enables Italian and foreign companies (even unlisted) that have a connection to the Swift

network to use that channel to exchange, with any bank connected to the same network and subscribing to the service, messages with

information and/or orders on banking relationships held by the company. That service is possible through the following two protocols: (i)

FIN and (ii) XML20022

Benefits for companiesBenefits for companies

Interface for all messages and Swift files

Maximum reliability and security

Accessibility to all Swift participants on a global scale

Optimal, completely automated processing thanks to use of standardised formats

Reduced costs and risks

UBI Banca OfferUBI Banca Offer

Receive daily accounts from UBI reporting via Swift messages in FIN format Send payment orders to UBI via Swift MT101 FIN messages

Send payment orders to UBI in XML 20022 format

This is the standard XML format that enables a reduction of costs compared to the FIN format and to manage multiple orders in a single message

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Agreement between banks – requirements to exchange MT101

The Bilateral Agreement is an essential requirement for the following services:The Bilateral Agreement is an essential requirement for the following services:

1) Order Services: Incoming MT101: payment order received with debit to the account held with UBI Outgoing MT101: payment order with debit to the account held with the third party bank receiving the message

2) International Cash Pooling: Automated service targeting Italian and foreign companies that need to create a centralized and automated cash pool, with cash flows concentrated on one or more accounts to optimize its daily cash position or that of its establishments (branches, affiliates, subsidiaries), without the need to complete transactions each time.

To allow mutual end customer to send or receive MT 101 (Request for Funds Transfer), banks have to establish communications roles.

UBI Banca normally signed with Foreign Banks a Bilateral Agreement, based on the Service Level Master Agreement (SLMA) and its

Schedule roles of SWIFT with additional specific conditions to govern the bilateral relationship between the Signatories when participating

in a Request for Transfer.

The MT 101 “Request for transfer” is a specific SWIFT service under the “Service Level Master Agreement” (SLMA), developed to support

the need for centralised cash management services. Because of the quality of the Request for Transfer Service, UBI Banca has accepted

and signed the roles of the SLMA and the “Request for Transfer” of SWIFT in order to provide common and equal roles to Customers, in

particular with respect of the execution times, remittance information and charging arrangements.

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Bilateral Agreement and Designation Account Sheet The body of the Bilateral Agreement reports the following structure: 1.General condition: The Executing Bank will provide the Forwarding Bank information only in so far as the Originator has given its explicit authorisation to do so, provided that the information necessary to duly execute the Request for Transfer are given.

1.Appendix I: Technical features. MT101 Format & Technical Specifications for each bank.

1.Appendix II: The Bilateral Agreement is applicable to all offices/branches of the Signatories as specified in Appendix II hereto which may be amended from time to time; Appendix II also contains details of contact persons for such offices/branches.

1.Appendix III Designated Account Sheet to be exchanged by the Signatories for each customer.

Designation Account SheetDesignation Account Sheet

Any Signatory will only start to process as Forwarding Bank (credit

institution acting for the Beneficiary) ”Request for Transfer”

instructions with any Instructing Party (Beneficiary), after it has

received from the Executing Bank (credit institution acting for the

Payer) the name and account number(s) of the respective Originator

(Payer). This information will be forwarded by the Executing Bank to

the Forwarding Bank by means of a separate account sheet listing the

account(s) of the Originator which shall be subject to the Request for

Transfer Service.

Executing Bank / Payer Bank

Originator / Payer

Beneficiary Bank Payer Bank

Data of the payer

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French Bank

French Bank

UBI Banca sends the French Bank - via Swift, and upon instructions from Auto Italia - all necessary information (statements/movements) relating to the current account opened at UBI by way of MT940. The French Bank proceeds to make that information visible to the customer.

Auto France S.A., on the basis of the information received, provides the French Bank with debit orders (by way of MT101 or MT103) for the current accounts held both with the French Bank and with UBI.

UBI completes the orders received, making transfers or sending funds via MT103 to another bank or to the French Bank itself

Examples Passive Cash Management at the customer’s initiative

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Auto Italia S.p.A.

Auto France S.A.

Auto France S.A.

“Ordinary” use of own accounts

Other Bank

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UBI

MT 940: Information on balance at end of day MT 101: payment order to transfer funds

MT 103: transfer funds on behalf of customer

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Active Side Passive Side

Bon/MT103 $

MT103 $

MT103 $

MT103 $

MT940 i

MT101 d

MT101 d

MT940 i

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UBI

Examples Active Cash Management at the customer’s initiative

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Divani Polska Divani Polska Divani S.p.a.

“Ordinary” use of own accounts

Other Bank

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Polish Bank Polish Bank

MT 940: Information on balance at end of day MT 101: payment order to transfer funds

MT 103: transfer funds on behalf of customer

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Active Side Passive Side

Bon/MT103 $

MT103 $

MT103 $

MT103 $

MT940 i

MT101 d

MT101 d

MT940 i

The Polish Bank sends UBI Banca, via Swift, all necessary information (statements/movements) relating to the current accounts opened with it (by way of MT 940). UBI Banca proceeds to make that information visible to the customer by way of QUI UBI Imprese together with information relating to the current account held at UBI.

The Polish Bank will complete the orders received by domestic transfer or by an MT 103 to another bank or to UBI itself

Divani S.p.A., on the basis of the information received, will provide UBI with orders (by way of MT101 or MT103) on the current accounts held with the Polish Bank.

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On the basis of rules established with Auto S.p.A., UBI, via the Cash Management platform, sends an MT920 Swift message to the Polish Bank and to the French Bank containing the request to receive information on movement and/or balance of the accounts held with them. That request may be sent during the day or at the end of the day.

The Polish Bank and the French Bank send the statements requested relating to balances and/or movements to the UBI platform by way of MT940 /941/942 Swift messages.

On the basis of the information received via MT940/941/942, and the rules provided by the customer, the UBI platform may: 1. send transfers (via MT103) to transfer funds

from UBI - Banco di Brescia to third party banks (i.e. to replenish the current accounts with balances lower than the target at the Polish Bank and the French Bank)

2. send payment orders (MT101) to passive banks to transfer funds between passive banks themselves or to UBI.

The customer can view the end of day account movements and balance received from the two banks via the Qui UBI Imprese Service

Examples Active Automated Cash Pooling

Auto S.p.A.

PLATFORM PLATFORM

CustomerCustomer//ActiveActive BankBank

MT1

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Auto France Auto Polska

MT1

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/10

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MT 920: Request for information on balance and/or movement of current accounts during the day

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Polish Bank French Bank