Project Acropolis: Building a Strategic Plan for the Treasury Function Klaas Springer – Director Corporate Treasury EuroFinance Budapest, 15-17 October 2014

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• General introduction Royal FrieslandCampina

• Strategy process: Acropolis

• Deliverables: key projects and roadmap

Contents

General introduction Royal FrieslandCampina

4

19,000 ambitious member farmers are the owners of FrieslandCampina

5

Coöperative Council

Members

Member Council

Supervisory Board

Districts

General Meeting of Shareholders

Board

Executive board

Zuivelcoöperatie

FrieslandCampina U.A.

Royal

FrieslandCampina N.V.

holding all shares in

The Company is owned by the Cooperative

13,887 member dairy farms

6

7

employees 21.186

11.4 billion euro revenue

28 Facilities in

countries 100 Export to over

countries

Millions of consumers

member dairy farmers own the Company

19,244

Every day

FrieslandCampina at a glance 2013

Figures 2013

North and South America

United States Brazil

Africa and Middle East

Nigeria Ghana United Arab Emirates Saudi Arabia

Asia en Oceania

Indonesia Malaysia Singapore Thailand Vietnam Philippines China Hong Kong India Japan New Zealand

Figures2013 * in millions of euros

Europa

Netherlands Germany Belgium Greece Hungary Romania Russia France Spain Italy Austria United Kingdom

10

1,165 revenue *

1,026 employees

19 locations

26

2,938 revenue *

6,846 employees

30 locations

61

6,965 revenue *

13,147 employees

68 locations

3

350 revenue *

167 employees

7 locations

Worldwide

8

%

%

%

%

3.6

3.8

3.8

4.4

4.4

5

5.3

5.3

5.6

5.6

5.7

6.5

6.6

9.4

11.2

11.2

11.5

14.6

15.2

21.3

20. Morinaga Milk Industry - Japan

19. Schreiber Foods - USA

18. Müller - Germany

17. Kraft Foods - USA

16. Bongrain - France

15. Sodiaal - France

14. Mengniu - China

13. DMK - Germany

12. Meiji - Japan

11. Unilever - Netherlands/UK

10. Yili - China

9. Dean Foods - USA

8. Saputo - Canada

7. Arla Foods - Denmark/Sweden

6. Dairy Farmers of America - USA

5. FrieslandCampina - Netherlands

4. Fonterra - New Zealand

3. Lactalis - France

2. Danone - France

1. Nestlé - Switzerland

Our position in the dairy sector

9 Figures 2013 in billion of euros

Company Dairy Revenue

5. FrieslandCampina - Netherlands

Source: Rabobank, July 2014

Strategy process: Acropolis

Key figures Corporate Treasury

● Net Debt € 1,4 bln

● Interest € 29 mio

● Property damage sum insured € 11,5 bln

● Over 20 banks

● 20 institutional investors

● 718 bank accounts (-81)

● FX annual turnover € 2,7 bln

● Around 3400 FX deals annually averaging € 0,8 mln per deal

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● Budget 2014 € 2,1 mio, 8,3 fte

● Liability coverage limit € 600 mio per occurrence

● Front office: 4 fte

● Mid office: 2 fte

● Insurance: 2 fte

Treasury

Resources

Insurance ● Around 10 insurance comp.

Project Acropolis Q3 2013 – Q2 2014

Steering Group: CFO, Dir. Finance & Reporting,

Dir. Internal Audit

Unanticipated Challenges Are The Normal…….

Fast changing regulatory environment

Extreme currency moves

Impacts of sovereign debt crisis

Potential break-up of Euro Zone Low interest rates

Big financing needs

…With A Fast Changing Regulatory Environment

SEPA EMIR

BASEL III

Solvency II

MIFID FTT

RFC

SWOT analysis

Weaknesses Strengths

Threats Opportunities

• Financing of FrieslandCampina • Bank Relationships • Investor Relationships • Interest Rate Risk management • Liquidity Risk management • Skilled staff

• Internal Controls • Limited resources for operational activities • Control over local activities • No Corporate Treasury presence in Asia • Distance to the Business • No clearly communicated strategy

• Budget cuts • Highly independent Operating Companies • Low quality cash forecasts • Laws and Regulations, increase administrative

activities • Highly dependent on multiple IT systems

• Internal Control Framework • Summit implementation • 3S project: Financial Shared Service Center • New Mid-Officer • Internal Credit rating • 3rd party IT solutions

Treasury Audit Main Issues

Weaknesses in internal controls regarding:

• Bank Account Management: e.g. visibility of contracts, source documentation, job roles, authorizations

• Payment Organization: E-banking

• Currency Management: e.g. transactions executed outside trading platform

How to interpret this?

• Call for centralization of treasury function, our peers are multinationals

• Central management is not enough, central control is required

• Confronts RFC with “As Is” situation which is a heritage from the past: e.g. in the corporate manual OpCo Finance Directors “Must Authorize” and are “Responsible” for:

- Proxies bank accounts;

- Local cash management and payments

• Adjusted approach will require full alignment within Finance Function

Deliverables: key projects and roadmap

The new Mission and Vision of the Corporate Treasury functions can be described as:

The Mission: The Corporate Treasury Team is there to optimize the capital structure and funding of the Group, manage its financial risks in an effective and efficient way, and is centrally responsible for the operational treasury function. The Vision: To be a Treasury Team that is pro-actively supporting the future growth of the Group and placed in the top quartile compared to peers in terms of treasury infrastructure and operations by the end of 2015

Centralization - Visibility - Control

Project Acropolis

Project Jungfrau Project Vaalserberg Project K2

Strategic planning for the Corporate Treasury function

Deliverables: vision, strategy, swot analysis, roadmap

Central Payment solution Replace all E-banking

applications by one centrally managed solution.

Benefits: a) Realize cost savings b) Improve internal control measures c) Increase insight on cash flows and d) Harmonize processes

Centralization of bank account opening/closing.

Benefits: a) Implement a cost efficient process b) Improve internal control measures (e.g. SIBC: Standard Internal Bank Confirmation) c) Being prepared for future inhouse banking solutions

Global roll out of the 360T trading platform for derivatives trading.

Benefits: a) Best market prices/quotes b) Improve internal control measures c) Fully integrated with the Treasury management system d) Improved visibility of FX cash flows.

21 Reporting package

Roadmap Corporate Treasury

FrieslandCampina System Landscape Project Jungfrau

Shared Service Center

Head Office Subsidiaries

Other systems

Shared Service Center

Head Office Subsidiaries

Other systems

Plugin Agent Agent Agent

Single point of contact

Host-to-host, EBICS or Swift

Central Payment Solution

Q & A