Sony Global Treasury Sony Global Treasury Services PlcServices Plc

Cash Management OperationCash Management Operation

SGTS HistorySGTS History

Sony Global Treasury Services (Plc) was Sony Global Treasury Services (Plc) was incorporated in 2001. SGTS branches in London incorporated in 2001. SGTS branches in London (HQ), Tokyo, Singapore and New York branch.(HQ), Tokyo, Singapore and New York branch.

Prior to this each region had an independent Prior to this each region had an independent financial centre with little co-ordination and financial centre with little co-ordination and offsetting of cash positions.offsetting of cash positions.

Central aim was to consolidate Sony Group’s Central aim was to consolidate Sony Group’s cash position. This was achieved via setting up a cash position. This was achieved via setting up a cash management service to the Sony group cash management service to the Sony group companies throughout our regions (“C3 companies throughout our regions (“C3 operation”).operation”).

To record transactions between group To record transactions between group companies and SGTS, an internal web-based companies and SGTS, an internal web-based global system was set up (“e-cube”).global system was set up (“e-cube”).

Objectives & Expected Objectives & Expected Effects of GTS ServicesEffects of GTS Services

Objective Expected Effect

Subject of Each Effect

Global Cash Management

Introduction of Inter-company Cashless

Settlement

Operational Efficiency on Sony Group Treasury Functions and Upgraded Customer Service

Improvement of A/P & A/R Reconciliation Workload

Reduction of Interest Cost

Saving of Interest/ Commission to Banks

Reduction of Settlement Risk

All of the SONY group

GroupCompanies

Finance Dept.

of SONY

Accounting Dept.of SONY

Operational Efficiency in Payment / Settlement / FX

deal

Minimizing FX exposures

Facilitating Accounting Consolidation Work

Workload Reduction of AP/AR Reconciliation

SGTS Cash SGTS Cash ManagementManagement

Sony Group companies, hold collection accounts.Zero balanced each day

Funds received in SGTS Header A/C

Sony Group companies are provided with a RAS account (Running Account service) enabling “cashless settlement” with SGTS. RAS Account records:

-Zero balance sweeps credited to the RAS account.

-RAS customer enters payments in SAP system, and this interfaces to E-Cube. These payments (“proxy payments”) are made by SGTS. Each proxy payment debited from customer’s RAS account.

-inter-company cashless payments/receipts

-all FX transactions transacted on behalf of group companies are settled across the RAS account.

- SGTS will credit/debit interest to RAS account depending upon whether credit/debit balance.

SGTS provides this service for all major currencies

Overview of Automatic Sweeping Service and RAS

Customer A Customer B Customer C

Customer’s Sub Account (JPY)

Customer’s Sub Account (USD)

Customer’s Sub Account (EUR)

I//F via MT940 Msg

Customers’ Bank AccountCustomers’ Bank Account

…

GTS Head Account (JPY)

GTS Head Account (USD)

GTS Head Account (EUR)

…

GTS Bank AccountGTS Bank Account

Zero

-bal

anci

ng

Account Monitoring

Customer’sAccount

In GTS(=RAS)

Customer’sAccount

In GTS(=RAS)

•Payment to each Customer

As well as 3 currencies above, operate sweeps for AUD,GBP,HKD,MXN,NZD, SGD and THB.

Customer’sAccount

In GTS(=RAS)

Customer’sAccount

In GTS(=RAS)

Overview of Proxy Payment Service and RAS

Customer A Customer B Customer C

I/F

JPY Account

USD Account

EUR Account

I/F

GTS Bank AccountGTS Bank Account

…Account Monitoring

Proxy Payment Request

• Proxy payment to third parties

• Proxy payment to third parties

As well as main 3 currencies proxy payments for AUD,GBP,HKD,MXN,NZD, SGD and THB

Cash Management Cash Management

C3 RAS customer keys in daily forecast ZBA flow into Golfer Cashflow forecast summary

File exported from Golfer to internal drive, is then uploaded into Treasury system as Projected Cashflows

Cash Xplorer is run to determine current positions by currency. The projected cashflows are incorporated into current balances

Based on Cash positions in Cash Xplorer the Cash Management team will make their funding/investment decisions

MT940 statements received from Banks uploaded into Treasury system. A/c bank balances are reconciled using system’s Bank Rec function.

Proxy payments entered by C3 customers, approved by SGTS , and uploaded into Treasury system as actual cashflows.

FX / MM deals

Surplus cash invest in Money Market Funds. Deficit funded by ECP or USCP market

Treasurysystem

Internal Sony G.Co. AccountInternal Sony G.Co. Account

Entries for RAS Entries for RAS AccountAccount

Deciding on Partner Deciding on Partner Bank for Cash Bank for Cash ManagementManagement Likely to already have a relationship (credit Likely to already have a relationship (credit

facilities)- ongoing commitment to Sony.facilities)- ongoing commitment to Sony. Global presence, wide branch network to provide Global presence, wide branch network to provide

consistent cash management services.consistent cash management services. Dependency on one bank Vs additional work if Dependency on one bank Vs additional work if

cash management is tendered on a regional cash management is tendered on a regional basis.basis.

Cost-proxy payments vol. 23,000 payments/mth Cost-proxy payments vol. 23,000 payments/mth Reputation/customer service levels. Reputation/customer service levels. IT support to develop interfaces with RAS.IT support to develop interfaces with RAS. Advisory role-regulations/solutions relating to Advisory role-regulations/solutions relating to

cash management (Tax/banking regulations etc.)cash management (Tax/banking regulations etc.)

SGTS Experience of SGTS Experience of Partner BankPartner Bank Reputation of SGTS within Sony Group is on Reputation of SGTS within Sony Group is on

the line:the line:-Sony group companies want to view accurate -Sony group companies want to view accurate RAS accounts, relying on efficient banking RAS accounts, relying on efficient banking operation as well as reliable IT interface.operation as well as reliable IT interface.

Quality of service diluted if cash management Quality of service diluted if cash management provider uses a partner bank.provider uses a partner bank.

Fine to have a solutions/queries centre but Fine to have a solutions/queries centre but one main point of contact important.one main point of contact important.

Effort/cost of set-up means only poor client Effort/cost of set-up means only poor client service would lead to termination.service would lead to termination.

Ancillary Benefits for Ancillary Benefits for Partner BankPartner Bank Cash Management Bank is termed Cash Management Bank is termed

“relationship bank” internally“relationship bank” internally Regular contact with SGTS could lead Regular contact with SGTS could lead

to new opportunities.to new opportunities. Same day FX transactions will be dealt Same day FX transactions will be dealt

with the partner bank so that with the partner bank so that settlement can go across the accounts.settlement can go across the accounts.

SGTS is funding USA West coast SGTS is funding USA West coast payments based on a forecast. payments based on a forecast. Therefore, we leave a minimum cash Therefore, we leave a minimum cash balance with the partner bank.balance with the partner bank.

Investment/Funding Investment/Funding of Cash Positionof Cash Position

Lack of technology!!Lack of technology!!

Surplus cash Surplus cash investmentinvestment

++$$$++EUR++££

Money Market Funds

SGTS holds target balance of USD 500 mil.

Overnight investment with good liquidity/generally AAA credit rating

Current procedure for investment

Contact MMFs via telephone/Bank website for subscription/

Redemption to the fund

Settlement diary for maturing MMFs

Monitor yield/outstandings daily via email and excel

Input MMF investment

Back office settles MMF and makes payment

Treasurysystem

Treasurysystem

Treasurysystem

System constraints of System constraints of current procedure for current procedure for investmentinvestment Time consumingTime consuming

Redeeming/subscribing to all funds that have Redeeming/subscribing to all funds that have an outstanding balance/dayan outstanding balance/dayMonitoring fund performance/outstandings via Monitoring fund performance/outstandings via email and updating excel sheet (human work)email and updating excel sheet (human work)

Settlement riskSettlement riskReceiving/paying to a number of different Receiving/paying to a number of different fundsfunds

Reconciliation problemReconciliation problemInterest, including rebate, paid monthly. Interest, including rebate, paid monthly. Reconciliation issue as to interest received, Reconciliation issue as to interest received, and impact on both Accounting and other and impact on both Accounting and other issues such as SOXissues such as SOX

Money Market Fund Money Market Fund PortalsPortals SGTS is currently considering using an electronic SGTS is currently considering using an electronic

Money Market Fund’s portal. Advantages:Money Market Fund’s portal. Advantages: ReportingReporting

Centralises transaction data for immediate access.Centralises transaction data for immediate access.

Monthly statement provides information as to fund Monthly statement provides information as to fund balances and accrued interestbalances and accrued interest

Internal complianceInternal compliance

Enables internal guidelines to be met, for example Enables internal guidelines to be met, for example fund concentration/fund ownershipfund concentration/fund ownership

Reduced settlement risk-one paymentReduced settlement risk-one payment Straight through processingStraight through processing

Downside……………Loss of rebate????????Downside……………Loss of rebate????????

ECP/USCP IssuanceECP/USCP Issuance

SGTS uses SGTS uses ECP/USCP for short-ECP/USCP for short-term funding needs.term funding needs.

All contact/dealing All contact/dealing done via the done via the telephonetelephone

Time-consuming Time-consuming from issuance from issuance decision to finalising decision to finalising fundingfunding..

Decide on funding target to Libor.

Instruct CP dealersto work an order

CP dealers call toconfirm issuance.Update dealers onIssuance amount

Contact CP dealersWith funding needs.Receive update on market conditions

12

3

Consider electronic dealing such as Bloomberg

General ConclusionsGeneral Conclusions

Cash Management is a key focus for Cash Management is a key focus for Corporate Treasury department. Accounting Corporate Treasury department. Accounting regulations/internal compliance making FX regulations/internal compliance making FX hedging less of a priority.hedging less of a priority.

Cash management services viewed as a Cash management services viewed as a partnership with the bank to provide Sony partnership with the bank to provide Sony group companies a high level of service.group companies a high level of service.

Bank derives additional revenue streams Bank derives additional revenue streams from having cash management platform.from having cash management platform.

Opportunities exist for developing a dealing Opportunities exist for developing a dealing platform for widely-used money market platform for widely-used money market products.products.