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Financing your Global Expansion Glen Dooley (for Ruth Bender) June 18, 2003

Financing your Global Expansion Glen Dooley (for Ruth Bender) June 18, 2003. Profile of An International Bank - WACHOVIA Understanding and Managing Risk Trade Finance/Letters of Credit. Structured Trade Credit Asset-Based Finance Clean Credit. Scope.

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Financing your Global Expansion Glen Dooley (for Ruth Bender) June 18, 2003

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  1. Financing your Global Expansion Glen Dooley (for Ruth Bender) June 18, 2003

  2. Profile of An International Bank - WACHOVIA Understanding and Managing Risk Trade Finance/Letters of Credit Structured Trade Credit Asset-Based Finance Clean Credit Scope

  3. MANAGEMENT:G. Kennedy Thompson –Chairman, President and CEO HEADQUARTERS: Charlotte, North Carolina US RANKINGS: Largest deposit share on the East Coast, secondlargest U.S. share Second largest cash management provider Third largest branch network Fifth largest in assets Fifth largest brokerage firm based on registered representatives TOTAL ASSETS:$342 billion MARKET CAP: $ 49 billion BRANCHES: 2800 ATMs:4600 EMPLOYEES:Over 84,000 WACHOVIACORPORATION - SUPERIOR MARKET SHARE AND A DISTRIBUTION POWERHOUSE (As of 12/31/02)

  4. Asset Size of Banks Dollars in Billions Market Capitalization of Banks Dollars in Billions Citigroup $180.9 Bank of America 104.4 Wells Fargo 79.0 Wachovia49.4 J.P. Morgan Chase 47.9 Bank One 42.5 U.S. Bancorp 40.6 Fifth Third Bancorp 33.6 FleetBoston Financial 25.5 Bank of New York 17.4 BB&T 17.4 National City Corp 16.7 SunTrust 16.0 PNC Financial 11.9 KeyCorp 10.6 Citigroup $1,097.1 J.P. Morgan Chase 758.8 Bank of America 660.4 Wells Fargo 349.2 Wachovia 341.8 Bank One 277.3 FleetBoston Financial 190.4 U.S. Bancorp 180.0 National City Corp 118.2 SunTrust 117.3 KeyCorp 85.2 Fifth Third Bancorp 80.8 BB&T 80.2 Bank of New York 77.1 PNC Financial 66.3 WACHOVIA CORPORATION As of 12/31/02

  5. Wachovia International Division A Global Presence London Hamburg Frankfurt Paris Milan New York Seoul Istanbul Winston- Salem Philadelphia Beijing Tokyo Madrid Washington, D.C. Los Angeles Guangzhou Dubai Shanghai Charlotte San Diego Cairo Miami Hong Kong Taipei Bangkok Mexico City Manila Mumbai Cebu Kuala Lumpur Bogota Singapore Jakarta Guayaquil Sao Paulo Johannesburg Sydney Santiago Buenos Aires Overseas Branches Global Government Banking Offices International Processing Centers

  6. Understanding and Managing Risk • Risk Mitigation Begins With Identification and Measurement - Credit Risk - Liquidity Risk - Market Risk - Operational Risk - Reputational Risk - Settlement Risk - Sovereign Risk

  7. Understanding and Managing Risk…… • Correspondent Bank Infrastructure • Credit Appetite For Letter of Credit Confirmation • Deposit Products-USD & Foreign Currency • FX - Global Netting and Pooling • Economic Analysis (Wachovia ResourcesAvailable toYou) • Lending Services

  8. wachovia.com/international

  9. Expert International Commentary Jay Bryson provides analysis on financial markets and macroeconomic developments in foreign economies. Before joining Wachovia, Dr. Bryson was an economist in the Division of International Finance at the Federal Reserve Board in Washington, DC where he monitored and analyzed developments in the foreign exchange market. Subscribe via: Denise.LaMartina@wachovia.com

  10. Trade Finance/Letters of Credit • Methods of Payment/Credit Sales • The Trade Letter of Credit • Pre-export and Bankers Acceptance Financing • A Body of Governing Laws and Regulations • The World of E-Commerce

  11. Comparison of Various Methods of Payment

  12. Export Letter of Credit Issuing and Advising

  13. Export Letters of Credit Presentation

  14. Structured Trade Credit

  15. GOVERNMENT PROGRAMS • Export Import Bank of the United States (“EX-IM BANK”) • Overseas Private Investment Corporation (“OPIC”) • Commodity Credit Corporation (“CCC”) • Small Business Administration (“SBA”) • USAID - Developmental aid via grants, loans and project support • U.S. Department of Commerce - Trade Advocacy Center • State Sponsored Trade Promotion Centers • Multilateral Agencies (World Bank, IMF, IFC, IDB, ADB, EBRD)

  16. U.S. EX-IM BANK The Export Import Bank of the United States • Independent Agency of the U.S. Government • “Full Faith & Credit” of the U.S. Government • Promotes Exports of U.S. Goods & Services • Not an AID or Development Agency • Requires “Reasonable Assurance of Repayment” • Does not Compete with U.S. Banks

  17. EX-IM BANK PROGRAMS • Short Term Programs (Up to 360 Days) - Most U.S. exports are eligible • Working Capital Guarantees: 90% guarantees to U.S. banks for export related financing facilities to U.S. exporters • Export Credit Insurance: 90% risk protection provided to U.S. exporters on their foreign accounts receivables. • Bank LC Insurance: 95% risk protection provided to banks on their LC confirmation risks. • Medium/Long Term Programs (Up to 12 years) – U.S. capital goods/services • Project Finance: Larger projects supported by project cash flows & pre-established off-takes (usually deals of $50 million +) • Direct Loans: Loans from Ex-Im to a foreign borrower, often government to government (usually deals of $50 million +) • Guarantees: Guarantees to lenders on loans to buyers of U.S. goods • Medium Term Insurance: Risk protection to lenders (< $10 million)

  18. OPIC Overseas Private Investment Corporation • Independent Agency of the U.S. Government (“Full Faith & Credit”) • Promotes U.S. Investments Overseas • Programs: Direct Loans/Guarantees - financing the new plant and expansion of U.S. joint ventures or offshore projects with U.S. equity interests Political Risk Insurance - coverage of offshore assets of U.S. investors Investment Funds - participation in investment funds focused on emerging markets SME’s - increased focus on supporting small & medium sized U.S. companies expanding overseas including partnership with SBA and pilot program with Wachovia announced in 2002

  19. OPIC Wachovia - SME Pilot Program Program: $100mm Framework Agreement Purpose: To support overseas investments of U.S. small and medium businesses (sales up to $350 million) Borrower: Local Banks or Corporate Borrowers Projects: New plant or project development involving eligible U.S. investors in OPIC eligible Countries Term:Up to 10 years Coverage: For years 1-3: 50% (U.S. Obligor) 75% (Offshore*) For years 3-5: 75% (U.S. Obligor) 90% (Offshore*) For years 5+: 90% (U.S. Obligor) 90% (Offshore*) *100% Currency Inconvertibility Loan Size: $100,000 - $15,000,000 Spread: Set deal by deal based on underlying project

  20. Commodity Credit Corporation GSM(102/103) Programs Program: U.S. Department of Agriculture Guarantee Program Products: Bulk agricultural commodities exported from the U.S. Borrower: Local Banks approved by CCC in more than 40 countries around the world. Term: GSM-102 Program - LC refinancings to 3 years GSM-103 Program - LC refinancings to 10 years Coverage: 98% of principal & partial interest protection Average Size: $250,000 - $25,000,000 Benefits: Lower pricing and longer tenors than would otherwise be available in the private markets.

  21. Export Credit Insurance • Providers: Specialized insurance offered by Ex-Im & private insurers such as AIG, FCIA, EIC, Euler, Coface, NCM, Zurich • Coverage: Comprehensive coverage for non-payment that is conditioned on insured performance (premium payment, valid debt obligations, no product disputes, etc...) • Uses: Risk Protection on short term foreign a/r’s against bankruptcy, refusal to pay, and/or country events Financing/Liquidity Qualifying foreign a/r’s for commercial banking collateral Bank purchases of insured foreign a/r’s Securitization of larger pools of insured foreign a/r’s

  22. Political Risk Insurance • Providers: Specialized insurance offered by Ex-Im, OPIC, MIGA and private insurers such as AIG, Chubb, Sovereign, Zurich • Coverage: Coverage against certain defined country risks such as war, insurrection, terrorism, nationalization, confiscation, currency inconvertibility • Uses: - Protection of assets located in offshore markets - Risk mitigation component in a Project Finance structure - Piercing “Sovereign Ceiling” in Intl. Securitizations

  23. Trade Related Asset Sales • LC Discounts: Post negotiation prepayment of LC of the obligations of confirming, accepting or issuing bank. • Forfaiting: Purchase of promissory notes, drafts, debt instruments Often guaranteed (avaled) by a local bank. Typically larger $ size & longer tenors ($1mm+/1 year+). Offered by international banks & forfaiting boutiques • Factoring: Purchase of open account receivables U.S./European debtors Typically smaller in $ size & shorter tenors Offered by specialized factoring companies (CIT, GE,)

  24. Asset-Based Finance • Secured Working Capital (inventory and accounts receivable) Credit • Factoring • Fixed-Asset Finance and Leasing • Asset Securitizations - Mortgages - Collateral Loan Obligations - Future Flow Transactions

  25. Clean Credit • Requires Well-Developed Commercial Laws, Detailed, Accurate and Timely Financial Reporting and Cash Flow-Oriented Lenders • Typically Not Available in Emerging Markets • Unsecured Lenders Stand Last in the Queue for Repayment • Personal Guarantees and the Pledging of Outside Assets May be Required

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