Foreign Exchange

Commercial Banking

Presented by:

Lee AduculesiVP FX SpecialistCitibank, N.A.Tel - 718-248-3850leon.aduculesi@citi.com

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What’s Been Happening in the Currency Market

EUR/USD gained 16% from Jan. 2011 to May 2011 and dropped 13% from May 2011 to present

GBP/USD gained 9% from Jan 2011 to May 2011 and dropped 8% to 1.56 range

USD/JPY is currently down 10% from April 2011 and has reached historic lows

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Cross-border Exchange Rate Volatility

Companies that trade or have operations overseas are likely to be exposed to foreign exchange risk

arising from volatility in currency markets

The most common cause of foreign exchange exposure arises from having to pay invoices for

imported goods priced in foreign currency or receiving foreign currency for exported finished

goods

FX exposure can also arise from:

Assets located overseas

Foreign currency borrowing or surplus cash balances of overseas subsidiaries

Competitors having a cost basis and/or selling product in foreign currency

For many companies, the impact that exchange rate fluctuations have on profitability will vary and in

many cases can be significant

As one of the world's leading providers of foreign exchange services, Citibank has a dedicated team of

foreign exchange specialists available to advise clients on developing an appropriate strategy for their

unique business needs

Assessing FX risk requires delineation of:

Firm Value

Translational RiskTranslation of foreign currency

denominated balance sheet and income statement items

Transactional RiskTransactions denominated in a foreign currency are

settled at a different exchange rate then they

were initially recorded at or subsequently revalued to

Economic RiskCompetitive advantages

and/or disadvantages resulting from exchange

rate fluctuations

Cash flow Imports and exports Royalties Loan repayments Dividends Mergers/acquisitions/divestitures

Business risk from changes in FX Rates

Impact on competitive environment

Underscores limitations on FX hedging – most important role but most difficult to manage

Accounting “Risk” Non–cash gains or losses Revaluation of profit and loss

statement and balance sheet

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Risks of Dealing in USD Overseas

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Buying in USD

– USD weakens • Supplier raises prices

– USD strengthens • Supplier keeps price firm as long

as possible

– Mark-up costs

• Supplier mark-up prices for taking on the currency risk.

Selling in USD

– USD weakens

• Client is happy – paying less

– USD strengthens

• Client complains about price

– Competitive Disadvantage

• Excluded from a market group that deals in local currency.

Is There Really “No Currency Risk” When Dealing in USD?

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• Multiple Access points

– FX Desk – FX specialists dedicated exclusively to the Commercial Banking segment

– CitiFX Pulse – Streaming live rates and fully automated booking of spot, forward and swap deals

– WorldLink® Multicurrency Transaction Services – Global multicurrency payment and receivables system

– CitiBusiness Online – Live rates and fully automated booking of spot transactions only

• Industry-leading FX services

– We provide market-making for more than $100 billon each day on all FX products

– Deal in 150 currencies

– 24-hour sales and trading services

– Innovative structured solutions

– Commentaries and research from our international economists

Innovative services that simplify execution, transaction confirmations, settlement andposition monitoring

As a leader in FX services, we can develop a foreign exchange strategy that helps you protect your company’s profits.

Market Leader in Foreign Exchange