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Realize a World of

Opportunity

Presentation to Kawartha Manufacturers Association September 23, 2008

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BEIJINGBEIJING

MUMBAIMUMBAI

MOSCOWMOSCOW

RIO DE JANEIRORIO DE JANEIRO

SHANGHAISHANGHAINEW DELHINEW DELHI

WARSAWWARSAW

SÃO PAULOSÃO PAULO

MEXICOMEXICO CITYCITY

MONTERREYMONTERREY

SANTIAGOSANTIAGO

ABU DHABIABU DHABI

EDC’s Global Footprint

CANADA:CANADA:St. John’s – MonctonSt. John’s – Moncton - Halifax - HalifaxQuebec City - MontrealQuebec City - MontrealWindsor - London – Mississauga - Windsor - London – Mississauga - TorontoTorontoCalgary – Edmonton – Vancouver - Calgary – Edmonton – Vancouver - WinnipegWinnipeg OTTAWAOTTAWA

SINGAPORESINGAPORE

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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

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The Integrative Trade Model

Canadian Foreign Affiliate

Imported Inputs

Outbound DirectInvestment

Foreign-sourcedInputs

Canadian Company

Foreign Customers

Export Sales

Foreign Suppliers

Imported Inputs

Affiliate Sales

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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

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Global Logistics

•Transporting goods – ocean, air, rail, truck, train

•Custom clearance

•Documentation

•Storage

•Delivery

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Market Entry and Market Distribution

•Product

•Place

•Price

•Promotion

•Distribution channels

•Plant and warehouse locations

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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)

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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

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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……

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Getting PAID!!!!

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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?

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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

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Kawartha Export Inc.

time

Delivery and Installation

ManufacturingPeriod

Pre-contractPeriod

Credit Period

WarrantyPeriod

FinalPayment

ShipmentContract Signing

9 months 60d

ILC toChinesesupplier

AdvancePayment

Cashflow

WIPLOC

Non-paymentRisk (15%)

Non-paymentRisk (85%)

F/X Risk

WarrantyBond

BuyerFinancing

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Kawartha Export Inc. … 2010

time

FinalPayment

Shipment

60d

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

•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 …

CanadianDirect

InvestmentAbroad

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EDC Solutions – Buyer Risks

Risk EDC Solution Who Pays?

Buyer becomes insolvent•Accounts Receivable Insurance•Contract Frustration Insurance •Single Buyer Insurance

•EXPORTProtect

ExporterBuyer defaults on payment

Buyer cancels contract •Accounts Receivable Insurance•Contract Frustration Insurance

Exporter

Buyer is a sovereign entity •Political Risk Insurance Exporter

Buyer makes a wrongful call on a contract bond

•Performance Security Insurance Exporter

Buyer needs vendor financing •Foreign Buyer Financing Buyer

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EDC Solutions – Exporter Risks

Risk EDC Solution Who Pays?

Exporter defaults on its operating loan

•Export Guarantee Program Financial InstitutionExporter defaults on its term loan

Exporter’s contract bond is called by the buyer •Performance Security Guarantee Financial Institution

Exporter defaults on its F/X facility •Foreign Exchange Guarantee Financial Institution

Exporter’s supplier bond is called

•Financial Security Guarantee Financial InstitutionForeign financial institution calls standby L/C (i.e., security for foreign financial institution)

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Our Services

EXPORTExpressCredit offers 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 Syndications pull 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.

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.

FinancingLoan Guarantees

Bonding

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.

Insurance

www.edc.ca

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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

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Ken GiffenAccount Manager

416-640-7611kgiffen@edc.ca

Involved in an export transaction or investment abroad?

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