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Realize a World of Opportunity

Realize a World of Opportunity. Presentation to Kawartha Manufacturers Association September 23, 2008. MOSCOW. WARSAW. OTTAWA. BEIJING. NEW DELHI. SHANGHAI. MONTERREY. ABU DHABI. MEXICO CITY. MUMBAI. SINGAPORE. RIO DE JANEIRO. SÃO PAULO. SANTIAGO. EDC’s Global Footprint.

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Realize a World of Opportunity

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  1. Realize a World of Opportunity Presentation to Kawartha Manufacturers AssociationSeptember 23, 2008

  2. MOSCOW WARSAW OTTAWA BEIJING NEW DELHI SHANGHAI MONTERREY ABU DHABI MEXICOCITY MUMBAI SINGAPORE RIO DE JANEIRO SÃO PAULO SANTIAGO EDC’s Global Footprint CANADA:St. John’s – Moncton - Halifax Quebec City - Montreal Windsor - London – Mississauga - Toronto Calgary – Edmonton – Vancouver - Winnipeg

  3. Expanding Canada’s Global Trade In 2007, EDC … Served 6,963 customers … • 84% of which were small- or medium-sized businesses • Operated in 183 markets • Facilitated $77.7 billion in global trade … • 27% of which was in emerging markets

  4. Canadian Company Export Sales Imported Inputs Imported Inputs Foreign Suppliers Foreign Customers Outbound Direct Investment Affiliate Sales Foreign-sourced Inputs Canadian Foreign Affiliate The Integrative Trade Model

  5. Knowing the Game:International Trade Rules • International Trade Terms – Incoterms (International Chamber of Commerce) • Dispute Settlement • Negotiation, mediation, arbitration, litigation • Technical Standards • Safety • Packaging • Labeling • Quality • Health and Environmental Regulations • Documentation

  6. Global Logistics • Transporting goods – ocean, air, rail, truck, train • Custom clearance • Documentation • Storage • Delivery

  7. Market Entry and Market Distribution • Product • Place • Price • Promotion • Distribution channels • Plant and warehouse locations

  8. Legal Considerations • Dispute resolution • Limitation on damages • Location of arbitration or court proceedings • Intellectual property – Patents • Civil Law, Common Law, Religious Law (i.e. Sharia Law)

  9. Business Cultures • Phone vs. face to face • Traditional vs. non-traditional • Verbal communication vs. non verbal • Language and interpreters • Hospitality and gift giving • Art of Negotiating

  10. Political and Financial Risks • Currency fluctuations • Currency conversion • Payment methods and techniques • Performance bonds • Cancellation of import/export permits • Expropriation AND MOST IMPORTANT OF ALL……

  11. Getting PAID!!!!

  12. Why Go Global? • Opened doors to unprecedented opportunities • Access to global supply chains • Producing for a world market instead of a merely local one • a manufacturer can develop economies of scale • lower production costs • lower prices • mitigate risk • Diverse trading partners helps safeguard against an economic crisis i.e.. “Credit Crunch” in the U.S.) • Where is your competition?

  13. Case Study - Kawartha Export Inc. • Electrical control equipment for water treatment industry w/world-class software to manage the system • Sales: $8 million / Equity: $3.2 million / Op LOC: $2 million – OK for normal day-to-day ops Situation • US$2 million contract to supply a system to a buyer in Brazil. This is 2x the size of normal contract, but standard technology • Terms: 85% net 60 shipment / 15% @ commissioning + delivery of a 24-month warranty bond • Buyer has requested 5-year financing • Chinese subcontractor needs advance payment & payment by ILC before starting • Manufacturing costs = $1.25 million • Cash flow over 9-month manufacturing period = - $1.25 million

  14. Contract Signing Final Payment Shipment 9 months 60d Non-payment Risk (85%) Advance Payment Non-payment Risk (15%) ILC to Chinese supplier Cash flow Delivery and Installation ManufacturingPeriod Credit Period WarrantyPeriod Pre-contract Period Kawartha Export Inc. Warranty Bond Buyer Financing time WIP LOC F/X Risk

  15. Final Payment Shipment 60d Kawartha Export Inc. … 2010 • Opportunities - and Risks - Abroad • Follow-on foreign investment opportunities may arise related to export transactions • Integration into global supply chains • Establishment of off-shore production facilities • JV or other investment partnerships • But with opportunities come risks and the need for financial support Canadian Direct Investment Abroad time • Canadian Direct Investment Abroad • A wide range of products can contribute to an overall solution • The Export Guarantee Program can be used to guarantee the financial institution up to 100% on loans extended to acquire assets abroad • A Financial Security Guarantee to the financial institution can backstop domestic guarantees issued to help a sub located abroad obtain an LOC from a foreign financial institution • Political Risk Insurance can protect • The investor against in-country political risks like expropriation, transfer & conversion problems and war damage • The financial institution on project loans in developing countries • To name a few …

  16. EDC Solutions – Buyer Risks

  17. EDC Solutions – Exporter Risks

  18. Our Services Loan Guarantees Financing Insurance Account Receivable Insurance covers receivables up to 90 per cent of losses resulting from commercial or political risks. Single Buyer Insurance covers unlimited sales to one customer for six months on contracts worth up to USD$250,000. EXPORTProtect covers single export transactions for up to USD$250,000. Contract Frustration Insurance covers up to 90 per cent of losses for one export contract. Documentary Credit Insurance covers the financial institution for 90 per cent of losses resulting from commercial or political risks on documentary credits it confirms, negotiates, accepts or pays. Political Risk Insurance protects overseas assets, including equipment and manufacturing facilities. Performance Security Insurance covers up to 95 per cent of losses if the buyer demands payment of a bond issued by the exporter’s financial institution without valid reason. EXPORTExpressCreditoffers export credit loans to companies with little access to the cash they need. Security Compliance Loan is available for up to $150,000 to finance the costs related to becoming C-TPAT compliant Equity Investments – EDC engages in both direct and indirect equity investments. Note Purchases involving simple payment terms on export contracts with high-quality foreign buyers. Canadian Direct Investment Abroad – a wide range of financing structures is available to suit the needs of the investment and to address the ongoing working capital needs of foreign affiliates. Foreign Buyer Financing solutions provide one to ten-year coverage for up to 85% of the sale. Lines of Credit to foreign companies who repeatedly buy from Canadian companies and to foreign financial institutions or intermediaries that onlend money to foreign buyers. Corporate Loan Syndicationspull together multiple financial institutioning partners to fund a borrower’s large, medium-term capital requirements. Leasing - EDC does not act as a lessor but can provide funding to lessors. Project Finance - limited-recourse financing for large-scale infrastructure and industrial projects. Export Guarantee Program offers risk-sharing guarantees to Canadian financial institutions for loan related export contracts or general corporate purpose facilities. Financial Institution Guarantee Program provides cover to Canadian and international financial institutions financing the sale of Canadian exports to customers in developing markets. Bonding Performance Security Guarantee fully protects the financial institution in the event of a call on a contractual guarantee it issues on an exporter’s behalf. Surety Bond Insurance fully protects a surety company in the event of a call on a contractual guarantee it issues on an exporter’s behalf. Foreign Exchange Facility Guarantee -gives the financial institution a guarantee in lieu of collateral so the exporter can buy a foreign exchange contract to protect against currency fluctuations. Financial Security Guarantee -replaces the collateral usually needed to secure a variety of payment guarantees, including operating lines of credit with foreign financial institutions, letters of guarantee for suppliers, regulatory, utilities, etc. www.edc.ca

  19. Resources • Forum for International Trade and Training www.fitt.ca • Export Source www.exportsource.ca • Canadian Trade Commissioner Service www.infoexport.gc.ca • Dun and Bradstreet’s “Exporter’s Encyclopedia” • Product Map and Trade Map www.p-maps.org and www.trademap.org • Industry Canada strategis.ic.gc.ca

  20. Involved in an export transaction or investment abroad?Call us. We’d love to talk to you Ken Giffen Account Manager 416-640-7611 kgiffen@edc.ca

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