BusinessBlueprint EM MFA TRM Funds

BusinessBlueprint_EM_MFA_TRM Funds

ABC Corporate Fund Management

Table of Contents51Organization Structure

51.1Organizational Structure for Transaction Management

51.1.1Definition and Meaning

51.1.2Definitions at ABC Retiral Benefits Funds

91.1.3Relationship / Dependencies on other organizational entities

102Master Data

102.1Transaction Management

102.1.1Business Requirements (as-is)/Expectations

102.1.2Process Explanation (to-be)

132.1.2.1Business Partner Roles

142.1.2.2Securities Account

162.1.2.3Product Types

182.1.2.4Class ID

192.1.2.5G/L Accounts

232.1.3Special Organization Consideration

242.1.4Description of Improvement

253Business Processes

253.1Transaction Management

253.1.1Securities/Money Market - Investments

253.1.2Process Explanation (To-Be)

273.1.3Description of Improvement

284Annexure

284.1Authorization

304.2Reports

314.3Data Migration

324.4Organizational structure Bank Accounts

334.5Transaction Management

534.6Glossary

Executive Summary

Company Profile

SAP Implementation

Objectives, Scope and Approach

Objectives

Along with the process re-engineering and mapping the project team has to manage Organization Change Management. The purpose of Organization Change Management is to ensure that ABC achieves the expected results from its investment in SAP technology in a short span of time. As part of this service, XXX will work closely with ABC to introduce the change process, stress the importance of organizational alignment, and introduce the necessary tools and techniques needed to address issues in the Organization.

Scope

The scope for the current implementation of SAP Corporate Finance Management (CFM) software at ABC Retiral Benefits Funds is as below:

1. A comprehensive treasury planning process for better control over securities (bonds/stock/mutual funds) and money market (special deposits)2. To support management of financial transactions and positions from the trading stage through back office to the transfer to financial accounting

3. Flexible reporting to analyze financial transactions and positions

In the light of the above, the following key areas will be covered as part of the current SAP implementation at ABC .

a. Cash and liquidity management

b. Transaction management in the area of money market, securitiesc. Analytics and information system for the above two areas

The locations that would be covered as part of the current implementation are:

1. For Transaction Management: Head office, BombayApproach

XXX follows an implementation methodology called as Accelerated SAP (ASAP), which will be used as the base approach for the implementation at SAP. ASAP is a solution from SAP to streamline customer implementations and deliver faster business results.

ASAP incorporates a Step-by-Step Approach and avoids non-value added tasks. It utilizes the Business Engine of SAP R/3 and is based on R/3s best business practices. ASAP provides a baseline for Business Process Requirements, Configuration /Testing, and End-user Procedures/Training.

In the current phase of the project, Business Process Requirements, as detailed in the following pages, have been discussed and agreed in the form of Blue Print Document.

1 Organization Structure

The following organizational definitions have been done at ABC Retiral Benefits Funds.1.1 Organizational Structure for Transaction Management

1.1.1 Definition and Meaning

For the purpose of the implementation of the SAP CFM module, the following considerations have been made while arriving at organizational structures at the treasury department of ABC Retiral Benefits Funds.

1. Division of responsibilities and activities at ABC Retiral Benefits Funds for the purpose of day-to-day operations at the treasury department (general divisions)

2. Organizational entities that have to be mapped in the SAP system.

In the context of the above (organizational entities to be mapped to the SAP system), the following are the key entities for transaction management.

1. Company Code: The smallest organizational unit for which a complete self-contained set of accounts can be drawn up for purposes of external reporting. Balance Sheet and Income-Expenditure statement are prepared at company code level.

2. Portfolio: An organizational unit that enables financial transactions and positions to be brought together and aggregated position analyses to be undertaken. Portfolios are also used to control and evaluate risk items in risk management.

3. Valuation Areas: Used for position management (example: Operative valuation area and parallel valuation area).1.1.2 Definitions at ABC Retiral Benefits Funds

1. Based on responsibilities and activities

The following organizational definitions have been done at ABC Retiral Benefits Funds for transaction management, both in the securities area and the money market area.The structures of activities are divided into the following:

1. Front office/trading

2. Back Office

3. Accounting

This division of operations helps ensure

1. Clear segregation of roles and responsibility in the treasury function and

2. A system of tracking the transaction flows to the respective individual who carries out the same.

The key activities that fall under transaction management are given as below:

i. Front office / trading:

a. Entering into deals

b. Exercise/expiration of deals

c. Rollovers

d. Reversals

ii. Back office:

a. Checking/verifying the deal details

b. Settlement

c. Confirmation Letters

d. Netting

e. Processing reversals

f. Reports and MIS

iii. Accounting:

a. Postings into the books of accounts

b. Processing payments and receipts from transactions

c. Posting accrual and deferrals on transactions

d. Carrying out balance sheet and Income-Expenditure valuations

2. Organizational entities that have to be mapped in the SAP system

i. Company Code

There are four Trustees Managed Retiral Benefits Funds which should have a complete self-contained set of accounts, Balance Sheet and Income-Expenditure statement (with schedules). The important drivers behind the decision to create company codes for ABC Retiral Benefits Funds were:

a. Its amenability to reporting requirements

b. Its help in tracking each transaction to each of the four funds

c. Its capability to handle the distinct set of bank accounts/demat accounts that each of the four funds maintain

The proposed structure of company codes at ABC Retiral Benefits Funds is given below:

Name of the CompanyCompany Code

Provident Fund5000

Gratuity Fund6000

Superannuation Fund7000

TEPS Fund8000

ii. Portfolios

The key considerations while evaluating a set of portfolios for ABC Retiral Benefits Funds were:

a. Its amenability to reporting requirements

b. Its help in evaluating returns and carrying out further analysis

c. Its help in tracking each transaction

d. Its scalability for newer areas of operations

The proposed structure of portfolios at ABC Retiral Benefits Funds is given below:

a. A portfolio will be defined for every investment category. The portfolios will be as below:

i. Central Government Securitiesii. Central Government Guaranteed Bonds & State Development Loansiii. PSU Bondsiv. Private Sector Bonds (Includes Pvt. Sector Mutual Funds)v. Equity portfoliob. Newer portfolios can be added if, for example, the company enters into newer areas of operations (examples: derivatives)

iii. Valuation Area:

There will be one operative valuation area as per Indian Accounting Rules. This valuation area will be used for reporting all its treasury activities. Newer valuation area can be added if, the Funds want to make use of parallel valuation as per a different Accounting Standard.1.1.3 Relationship / Dependencies on other organizational entities

Relationship with entities in Financial Accounting

1. Portfolio: A portfolio is created in a company code. The portfolios for ABC Retiral Benefits Funds, as mentioned above will be linked to the relevant company codes for ABC Retiral Benefits Funds2. Valuation Areas are assigned to company codes in financial accounting

2 Master Data

2.1 Transaction Management

2.1.1 Business Requirements (as-is)/Expectations

The following outlines the master data in the area of transaction management that is maintained in the current system at ABC Retiral Benefits Funds.

For Securities transactions

1. Master list of Issuer/ Mutual fund houses2. Master list of Brokers/ Distribution houses

3. Master list of Depository Participants

4. Master list of Banks For Fixed deposit transactions

1. Master list of Banks

2.1.2 Process Explanation (to-be)

The creation of master data for transaction management would involve creation of master data for each of the following:

1. Business Partners

2. Securities Accounts (Demat a/c or SGL a/c)3. Security Class data4. Bank master data

A detailed sheet containing all the information requirements for master record creation for transaction management will be made available during the realization phase of the project. Work StepsDescriptionPerformed BySAP Transaction / Function

1.Generic Activities for Business Partner creation

Create Business Partner rolesTreasury AccountantSAP Transaction

2.Master Data for Money market transactions

a. Business Partner Creation

Create business partners in the SAP role of CounterpartyTreasury AccountantSAP Transaction

Create Business Partner standing instructionsTreasury AccountantSAP Transaction

Maintain Credit rating for business partnerTreasury AccountantSAP Transaction

3. Master data for Securities transactions

a. Business Partner Creation

Create the issuer of the Security in the SAP role of Issuer Treasury AccountantSAP transaction

Create the broker/distribution house (with whom ABC Retiral Benefits Funds deal with for the purchase and sale of the securities/units) in the SAP role CounterpartyTreasury AccountantSAP transaction

Create standing instructions for counterparty business partner, if requiredTreasury AccountantSAP transaction

b.Creation of investment products (Bond/Stock/Mutual fund investment).

Each Bond/Stock/Mutual fund product will be created as a security class in the system. This will contain the details of the issuer, nominal value, coupon rate, issue price, and other relevant conditions (dividend, interest) associated with the product. SAP Functional Expert in treasury department.SAP transaction

c. Create securities account for position managementSAP Functional Expert in treasury department.SAP transaction

d.Define position indicators for position managementSAP Functional Expert in treasury department.SAP transaction

e. Maintaining daily security prices/NAVs of mutual fund schemesTreasury AccountantSAP transaction

The proposed structure of master data at ABC Retiral Benefits Funds is given below:

2.1.2.1 Business Partner RolesBusiness Partners Role represents different capacities in which a Business Partner may act.e.g. Borrower, Agent, Sponsor

For ABC funds, the following business partner roles are suggested:

a. Counterparty Role

Assigned to Business Partners with whom ABC Retiral Benefits Funds have financial transactions. It could be either investments/payment transactions or redemption/sale of securities/receipt transactions or both.e.g. Brokers, Mutual Fund Distribution House

b. Issuer Role

To be able to deal in securities of a company, the company will have to be defined as a business partner in role Issuer. Likewise, the mutual fund house which issues the mutual fund will be defined in role Issuer.E.g. HUDCO, LIC Housing Finance, ABC Mutual Fundc. Depository Bank

The securities are kept in securities account with a Depository Bank. This represents the Depository Participant in common terms.e.g. HDFC Bank, Standard Chartered BankIssuer*Depository BankCounterparty*

Government of IndiaHDFC Bank Ltd.Darashaw & Co. Pvt. Ltd.

LIC Housing FinanceStandard Chartered BankICICI Securities Ltd.

HDFCHDFC Bank Ltd.

SAILHouse BankBRICS Securities Ltd.

NABARDState Bank of IndiaDSP Merrill Lynch Ltd.

IDBIHDFC Bank Ltd.Standard Chartered Bank

ICICI BankStandard Chartered BankABC Mutual Fund

HUDCOState Bank of India

(For special deposits invst.)

ABC Mutual Fund

* The List is indicative.

2.1.2.2 Securities AccountSecurities Account is an account with a Depository Bank where the securities are kept. In common terms this can be the demat account or SGL account.The master data for a Securities Account cover the following parameters:

a. Name of the Depository Bank with whom the securities account is held

b. The securities account number

c. Cash clearing account number this is the current account number (if any) held with the depository bank

d. Name of the House Bank used for payment transactions with the depository banke. Account number of the savings/current account held with the house bank.For ABC Provident Fund SGL account the master data is as under:Master Data for securities account e.g.

Depository Bank Standard Chartered

Securities account number C 0054

Cash clearing account number 222-0-527033-2

House Bank State Bank of India

House Bank account number 01000-000021-10

The proposed structure of securities account at ABC Retiral Benefits Funds is given below:Fund TypeCompany CodeSecurity A/cDescription

PF50005001 Stan Chart SGL A/c C 0054

5002 HDFC Bank Demat A/c 16260326

GF60006001 Stan Chart SGL A/c C 0052

6002 HDFC Bank Demat A/c 16260334

SAF70007001 Stan Chart SGL A/c C 0051

7002 HDFC Bank Demat A/c 16260342

TEPS80008001 Stan Chart SGL A/c C 0053

8002 HDFC Bank Demat A/c 16341930

2.1.2.3 Product Types

The different types of investments made by ABC funds are as under:

1. Fixed interest Bonds

These are the traditional types of bonds which have fixed tenure and fixed rate of interest. They pay interest annually or semi-annually and on maturity they pay the face value plus final interest.

2. Zero Coupon Bonds

Zero coupon bonds are fixed tenure bonds. No interest is paid on these bonds. These are sold at deep discount on the face value. On maturity, the face value is paid back.

3. Stepping Interest Bonds

These bonds pay interest at rate which steps up every year. The rate of interest to be paid every year is fixed while issuing the bonds.

4. Bonds with Installment Redemption

These bonds are fixed coupon bonds. The face value of the bond is repaid in installments. The interest calculation is on the written down face value of the bond.

5. Bonds with Redemption Premium

These are fixed coupon, fixed tenure bonds. On maturity these pay premium on the face value.

6. Bonds with Put / Call Options

These are fixed coupon, fixed tenure bonds on which the issuer or the borrower may have one or more put/call/both put and call option(s).

7. Mutual Funds

Funds are also investing into Mutual Funds. As of now, they have invested only in ABC Mutual Fund Gilt Scheme with Growth option. This investment is classified under investment in private sector bonds.

8. Special Deposits

There are no fresh investments to Special Deposits. The existing investments are about 1000 Crore with SBI. On these investments interest is received at 8% p.a. After every three years, Government renews these deposits.

Apart from these ABC Retiral Benefits Funds envisage investments in Stocks as well. Currently there are no investments in stocks.The following product types were proposed for investments done by ABC Retiral Benefits Funds:

Sr. No.Investment TypeSAP Product Type

1 Fixed interest Bonds04I Fixed-interest bonds

2 Zero Coupon Bonds04J Zero bonds

3 Stepping Interest Bonds04I Fixed-interest bonds

4 Bonds with Installment Redemption04R Bond with installment repayment

5 Bonds with Redemption Premium04I Fixed-interest bonds

6 Bonds with Put / Call Options06A Warrant Bonds

7 Stocks01A Stocks

8 Mutual Funds02A Investment certificates

9 Special Deposits51A Fixed-term deposit

For stepping interest bonds and bonds with redemption premium the SAP product type 04I Fixed interest bonds will be used. Changes will be made only in the Condition Items of the class master data for these bonds.For all other investment types, the mapping is into standard SAP product type.

2.1.2.4 Class ID

The following name format was proposed for naming the Class Id of securities used by ABC funds:

Sr No.Investment CategorySAP Class ID

1 Central Government Securities GOI000001

to

GOI999999

2 Sate and Central Government Guaranteed Securities SCG000001

to

SCG999999

3 PSU Bonds PSU000001

to

PSU999999

4 Private Sector Bonds PVT000001

to

PVT999999

5 Equity EQT000001 To

EQT999999

The first three characters in the Class Id denote the investment category of that security.2.1.2.5 G/L AccountsABC Retiral Benefits Funds will use nine investment types. These include six investment types for six types of bonds, one each for stocks, mutual funds and special deposits.There will be a single investment account for each of the investment type. This account will be balance sheet type account. Totally there will be nine G/L accounts for investments.Additionally, more G/L accounts will be created for Short Term Deposits with banks. These investment accounts will be created as per need basis.Apart from these G/L accounts for investments, the following G/L accounts will also be configured for each investment type:

1. Income on investment (Interest/dividend)2. Accrued Interest3. Capital Gain/Loss4. Diminution (For Provision of Loss in price of security)The proposed structure of G/L accounts at ABC Retiral Benefits Funds is given below:Sr. No.DescriptionG/L account

PFGFSAFTEPS

1Investments in Fixed interest Bonds9050000906000090700009080000

2Investments in Zero Coupon Bonds9050001906000190700019080001

3Investments in Stepping Interest Bonds9050002906000290700029080002

4Investments in Bonds with Installment Redemption9050003906000390700039080003

5Investments in Bonds with Redemption Premium9050004906000490700049080004

6Investments in Bonds with Put / Call Options9050005906000590700059080005

7Investments in Stocks9050006906000690700069080006

8Investments in Mutual Funds9050007906000790700079080007

9Investments in Special Deposits9050008906000890700089080008

10Interest on Fixed interest Bonds9050100906010090701009080100

11Interest on Stepping Interest Bonds9050102906010290701029080102

12Interest on Bonds with Installment Redemption9050103906010390701039080103

13Interest on Bonds with Redemption Premium9050104906010490701049080104

14Interest on Bonds with Put / Call Options9050105906010590701059080105

15Dividend on Stocks9050106906010690701069080106

16Dividend on Mutual Funds9050107906010790701079080107

17Interest on Special Deposits9050108906010890701089080108

18Interest Accrued on Fixed interest Bonds9050200906020090702009080200

19Interest Accrued on Zero Coupon Bonds9050201906020190702019080201

20Interest Accrued on Stepping Interest Bonds9050202906020290702029080202

21Interest Accrued on Bonds with Installment Redemption9050203906020390702039080203

22Interest Accrued on Bonds with Redemption Premium9050204906020490702049080204

23Interest Accrued on Bonds with Put / Call Options9050205906020590702059080205

24Interest Accrued on Special Deposits9050208906020890702089080208

25Capital Gains9050300906030090703009080300

26Diminution9050301906030190703019080301

This structure will still take care of all the reporting requirements.2.1.3 Special Organization Consideration

The pattern of investments to be followed by non-Government Provident Funds, Superannuation Funds Gratuity Funds and ABC Employee Pension Fund is governed by the Investment Guidelines.

Over and above these guidelines, the Trustees of the funds have decided upon some conservative norms such as:

No exposure to equity (even though up to 5% is permitted) Credit Rating of PSU bonds to be bought should be no less than AAA (stipulated norm is Investment Grade Rating only)

Any other norms that the Trustees may deem fit from time to time within the purview of the Investment Guidelines as stipulated by the Ministry

In view of this, the simplified tabular representation of the Investment Guidelines followed by ABC Retiral Benefits Funds is as under:

Investment CategoryMinimum % to be Invested

Central Government Securities25%

Sate and Central Government Guaranteed Securities15%

PSU Bonds with AAA rating from at least two credit rating agencies25%

Total65%

Out of the balance 35% investments, the funds can invest up to 10% in Private Sector Bonds having AAA rating from at least two credit rating agencies. The remaining balance is put into any of the above three investment types.

ABC Retiral Benefits Funds will run a report periodically. This report will give them the percentage/amount of holding under each of the investment category for each fund. Based on this report, further investment/redemption decisions can be taken.2.1.4 Description of Improvement

1. As it currently exists, each new investment transaction required creation of a two new G/L accounts, one for the investment and other for the income on investment. With proposed solution, there will be a single investment account for each of the investment type. Thus the total number of G/L accounts is drastically reduced. 2. Standing instructions help map general agreements between the business partner and ABC Retiral Benefits Funds. This helps in regulating the role (broker, issuer etc.) in which the partner deals with ABC Retiral Benefits Funds, the partners bank details (which account any payments to the business partner needs to be made), the types of correspondence regularly used with the partner.

3. Master agreements will help in avoiding repetitive tasks for monitoring the execution of individual transactions. This will help in tracking limits per investment instrument per business partner.

3 Business Processes

3.1 Transaction Management

3.1.1 Securities/Money Market - Investments

This includes investments in instruments like

1. Fixed interest Bonds

2. Zero Coupon Bonds

3. Stepping Interest Bonds

4. Bonds with Installment Redemption

5. Bonds with Redemption Premium

6. Bonds with Put / Call Options

7. Stocks

8. Mutual Funds

9. Special Deposits10. Short Term Deposits with banks3.1.2 Process Explanation (To-Be)

The organizational structure for ABC Retiral Benefits Funds in the area of securities/money market would be the same as mentioned in section 1.1.2. The broad split of the functions with the area of coverage is given as below.

a. Front office/trading

b. Back Office

c. Accounting

The activities for each area with reference to securities/money market transactions are given as below:

1. Front office/trading: This function would be the point of contact with the business partners and carry out the day to day investment operations in managing investments. The function would be responsible for receiving quotes from the banks/business partners for investment related transactions (Example: Interest Rates on Bonds, Mutual Fund schemes) and entering into deals. Typical activities (as mapped in the SAP system) would involve:

i. Creation of investment deals (bonds, stocks, mutual funds, fixed-term deposit)

ii. Rollover of deals

iii. Reversals of contracts, if any

2. Back office: This function would be

i. The support function for all front office activities and

ii. The liaison with the accounting function

Typical activities of the back office would include

i. Verifying the deal details once they have been entered into by the front office

ii. Confirming or settling the deals entered into the system

iii. Preparing confirmation letters to the business partners

iv. In case transactions have been reversed by the front office, entering reversal details

3. Accounting: The accounting function would carry out the activities of valuation of investments, postings of accruals of income, preparing accounting related MIS reports with respect to transactions carried out by ABC Retiral Benefits Funds.

The detailed explanation for the to-be processes can be found in Annexure 4.6.3.1.3 Description of Improvement

1. As exists, all transactions are carried out of the system. Only accounting entries are passed after execution of the transactions. The proposed system will help in creating deals as is executed, on a real time basis.

2. As it currently exists, information relating to daily surpluses is obtained as a separate, offline activity. It has to be manually aggregated collecting data from different, offline sources. The proposed system would ensure availability of the information as required.

3. Any investment analysis (yields, returns, cash flows) is currently carried out manually. With the implementation of the transaction manager component, transaction data will be available readily for analysis.4. There is an automatic link to accounting GL balances are updated automatically from the transactions

5. Accruals and valuations were done manually, but now it will be done on the system.

4 Annexure

4.1 Authorization

The topic of authorizations in CFM can be covered under two broad categories.

1. Role based authorizations: These refer to the role an employee plays in an organization and how this role is mapped in the SAP system. Role based authorizations help allocate SAP users (employees) to areas of activity (example: transaction processing, report extraction).

2. Trader authorizations: More specific to CFM, these authorizations determine the areas of activity (Money Market, Securities) that a trader (as defined in the system) has access to. They are detailed as below:

1. Role based authorizations: SAP delivers certain standard roles for CFM. They contain certain predefined activities that the user assigned to this role can play. An overview of the roles as delivered in the standard CFM system is given as below. These activities for each role will be assigned to user(s), depending on their roles during the realization phase. Role in Treasury DepartmentSample authorizations

AdministratorAll technical authorizations for maintaining the CFM system.

TraderAuthorizations to carry out front office activity (entry/exit from deals etc)

Limit ManagerControl of limits of exposure to business partners. This role is essentially a controllers role.

Risk ControllerThe risk controller analyzes and calculates the company's risks and opportunities on the basis of market data, in order to develop risk-oriented strategies and assess the consequences of certain decisions.

Back Office ProcessorAccess to back office activity

Fund ManagerThe fund manager plans and manages the company's liquidity.

Staff AccountantAccess to accounting functions in CFM

Trade ControllerThe trade controller evaluates performance, proposes strategies and monitors the effects of these strategies.

Treasury ManagerThe treasury manager checks that all the

strategies defined for the money market, market risk, limit management and cash management areas have been observed.

2. Trader authorizations: This activity will be carried out during the realization phase of the project.

4.2 Reports

All standard SAP reports will be provided under this implementation. System generated reports in CFM (Money Market, Securities) will be provided as part of this implementation along-with customized reports as required.4.3 Data Migration

Sl. No.Description of Data to be Uploaded/ EnteredManual/ SAP program (if Program- Standard/ BDC/ LSMW)Data SourcePre-requisite data / processRemark

1Business Partner Master dataLSMWCurrent records in ABC Retiral Benefits FundsSequential, flat file needs to be supplied as per a specified format. If the number of Business partners are not high, manual entry of master records can be an option

2Security Class Master data-do--do--do--do-

3Open transactions Bond investments-do--do--do--do-

4Open transactions Mutual fund investments-do--do--do--do-

5Open transactions special deposits-do--do--do--do-

As of now, ABC Retiral Benefits Funds have no investments into Stocks. Hence there are no Open Transactions as far as Stocks are concerned.4.4 Organizational structure Bank Accounts

The existing bank account structure for ABC Retiral Benefits Funds is as under. Funds have current accounts with SBI CAG, HDFC Bank or Standard Chartered Bank. Funds have SGL a/c with Standard Chartered Bank and demat a/c with HDFC bank. Also, funds have Special Deposit a/c with SBI.Fund

TypeCurrent A/cCurrent A/cCurrent A/cSGL A/cDemat A/cSpl. Deposit A/c

SBI CAGHDFC FortStan ChartStan ChartHDFC BankSBI

PF01000-000021-10222-0-527033-2C 0054162603260 1092600007

GF01000-000021-11222-0-527015-4C 0052162603340 1093600192

SAF0 602300000321222-0-527014-6C 0051162603420 1095600012

TEPS01000-000021-12222-0-527029-4C 005316341930

Detailed to-be process list

4.5 Transaction Management

SlSlProcessStepActivityExplanation/CommentsSystemPerformed by

1Money Market / Securities Operations

1Identify partners with whom ABC Retiral Benefits Funds deals for FD's/MF/Bonds/Stocks

1Identify business partners based on policy

ABC Retiral Benefits Funds has a procedure for identifying business partners (Banks, other financial institutions) that it deals with. This is carried out as a business activity outside the systemManualTreasury manager - head office

2Create Business Partner in the system ((New business partners can be added or existing business partners can be blocked in the system)

Once business partner has been decided, a business partner master record has to be created in the system. SystemHead office - treasury accountant

3Set limits for business partner (based on policy)

Limits for transactions for each business partner to be set based on policy.

SystemHead office - treasury accountant

2Entry into deals with business partner

1Investment deals

1Receive information about fund availability for investment

Run daily cash position reportSystemHead office - treasury accountant

2Receive information from advisers about avenues for investment

This information is available as a fax, mailManualHead office - treasury accountant

3Decide on the investment instrument(s) for the day

Information about existing investments will be available through system reports. However, this activity will be done manuallyManualHead office - treasury manager

4Enter deal in the system

The deal is saved in the system - it is not confirmedSystemHead office - treasury accountant

5Prepare investment note

Generate an internal correspondence for the deal (dealing slip). This can be used as an investment note. An additional note can be attached along with this (ABC format).SystemHead office - treasury accountant

6Send investment note for approval to the relevant authority

Signatures are required on the correspondence slipManual

7Verification of deal entry and settlement

Back office activity - will be carried out once signatures are received on the dealing slip/correspondence/investment noteSystemHead office - treasury accountant

8Confirmation and correspondence for deals for business partners

Back office activity - will be done once deal is settledSystemHead office - treasury accountant

9Posting of cash flows for deals entered

Accounting activity - done once correspondence is generatedSystemHead office - treasury accountant

10Funds transfer to business partner

ManualManual

11Receive instrument from Business partner

ManualManual

12Update investment position

Gets automatically updated and will be available in reportsSystemNo action

13Swapping of investment instruments (Example, one mutual fund scheme to another)

An exit with notice from the deal is entered in the systemSystemHead office, treasury accountant

At the same time, a new deal is entered in the system for the same amount. Dealing slip is generated for the new deal. An additional note can be attached along with this (ABC format). SystemHead office, treasury accountant

Back office nets the amount due to the business partner and arrives at a zero payment (zero flows)SystemHead office, treasury accountant

3Exit - expiration of deals with business partner

1Investments

AFD

1Get information about investments maturing for the next day (t - 1)

This information is available from the investment reports in CFM. SystemHead office, treasury accountant

2Get the instruments and send them for discharge of instruments (2 signatures) (t - 1)

This has to be done as a manual activity since physical movement of papers has to take placeManualHead office - treasury accountant

3Close the deal in the system

The deal has to be closed in the system.SystemHead office - treasury accountant

4Generate confirmation correspondence for the deal

Back office activity - will be done once deal is closedSystemHead office - treasury accountant

5Post flows from deal closure

Accounting activity - done once correspondence is generatedSystemHead office - treasury accountant

6Instruct business partner to transfer funds

ManualManual

7Add the funds transferred in cash position

This happens automatically. Funds transferred will automatically be reflected in the cash positionSystemAutomatic, no intervention

8Update the investment position for FD

This happens automatically. Closed deals will automatically be updated in the systemSystemAutomatic, no intervention

BMF/Bonds/Stocks

1Receive information on daily cash liabilities

This information is available from CFM reports (Eg. Daily cash position)SystemHead office, treasury accountant

2Compare yields of all existing instruments and select the lowest yielding instrument for sale

This information is available from CFM reportsSystemHead office, treasury accountant

3Arrive at the units of the scheme for sale by using the previous day NAV (info for NAV is received from the fund house) or security prices

Manual activity since NAV's and security prices are available on the phone / net.ManualHead office, treasury accountant

4Get redemption slip signed by authorized signatories (Redemption slip contains the bank account to which funds should be transferred)

This has to be done as a manual activity since physical movement of papers has to take placeManualHead office - treasury accountant

5Expire the instrument in the system

The deal has to be closed in the system. If it is a mutual fund at notice, notice of expiry has to be entered in the systemSystemHead office - treasury accountant

6Inform fund house/broker over phone and fax redemption slip

Redemption slip needs to be physically delivered at the fund house.ManualHead office - treasury accountant

7Account for funds transferred to Bank Account

Posting of flows from dealSystemHead office - treasury accountant

8Book capital gains/losses on redemption

Happens automatically, on posting of flowsSystemHead office - treasury accountant

9Update the investment position

This happens automatically. Closed deals will automatically be updated in the systemSystemAutomatic, no intervention

4Periodic activities for deal maintenance and monitoring

1Post accruals and deferrals of income from deals

Run accrual/deferrals posting at the end of the monthSystemHead office - treasury accountant

2Verify incoming receipt or income from deal (interest flows)

Create a bank statement when the information relating to actual physical inflow is received from the bank SystemHead office - treasury accountant

3Post actual interest receipts

Interest receipts are posted during the posting of flows in the systemSystemHead office - treasury accountant

5Periodic activities for legal reporting

1Valuate the investments for balance sheet

Run periodic program for valuation of investments for balance sheet buildingSystemHead office - treasury accountant

6Reporting and MIS activities

1Transaction Journals (per product type - FD, MF, Bonds, Stocks)

System generated reports in CFMSystemHead office - treasury accountant

2Cash flow journals (per product type - FD, MF, Bonds, Stocks)

System generated reports in CFMSystemHead office - treasury accountant

3Prepare Money Market Position List and position trend

System generated reports in CFMSystemHead office - treasury accountant

4Money market revenue list (operative revenues)

System generated reports in CFMSystemHead office - treasury accountant

5Money market position list (accruals)

System generated reports in CFMSystemHead office - treasury accountant

6Utilization of limits per business partner

Volume utilization report can be run in the SAP system for each master agreement, which will display the total utilization of limits for the business partner.SystemHead office treasury accountant

7Business partner wise analysis of investments (Maturity, instrument)SystemHead office - treasury accountant

2Periodic activities at Funds

1Valuation of investments for Balance sheet

Covered in earlier points

2Monthly/Quarterly/Half yearly reporting to board (calendar year)

Can use standard CFM reports

3Communication with banks/business partners w.r.t discrepancies

Manual activity

4Entry of market dataMutual fund NAVs/ security pricesData entry to be made in the systemSystemHead office - treasury accountant

4.6 Glossary

1. Business Partner: A business partner is a person, group or an organization in which you have a business interest. Typical business partners include banks or central treasury departments.

2. Business Partner Roles: A marker used to assign functions to your business partner depending on the business relationship (for example, counterparty, issuer, borrower), and to control field selection for the partner data. A business partner may have more than one role. 3. Correspondence: A communication that can be printed automatically or manually. Correspondence includes:

i. External correspondence (confirmation letter)

ii. Internal correspondence (dealing slip) related to financial transactions.

4. House Bank: A business partner that represents a bank through which you can process your own internal transactions.

5. Key date valuation: Key date valuation is the valuation of transactions or positions for accounting purposes at the market value on a specific key date. Depending on which valuation principle is used, key date valuation includes creating or reversing provisions, posting write-ups and write-downs as well as posting unrealized gains and losses.

6. Master Agreement: This refers to the arrangements and conditions that are applied to individual transactions. Some of the criteria of a master agreement are:

i. Permitted company codes

ii. Term

iii. Permitted business partners

iv. Permitted transaction types and the minimum and maximum transaction terms

v. Permitted currencies, including minimum amounts, and the total transaction volume in the respective currency.

7. Position indicator: The position indicator determines how valuation is performed for a Security instrument (in the case of ABC Retiral Benefits Funds) at company code and securities account level.

8. Position Management: This refers to all those activities (valuation, amortization) that are performed for investments that are managed by positions.

9. Securities Account: A unit in SAP that is used for position management and valuation. A securities account is required for all financial transactions that require position management. Typically, a securities account in the SAP System relates to an actual securities account at a bank.

10. Standing instructions: Standing instructions are general agreements made with a business partner for processing transactions of the same type. They include transaction authorizations, payment details for incoming and outgoing payments and correspondence with a business partner. The standing instructions are proposed as default values when you enter transactions in the system.

11. Valuation Area: In the financial subledger you can set up different valuation areas in order to value your financial transactions according to different accounting regulations. Example: Valuation area 1 as per Indian rules, Valuation area 2 as per US GAAP.

ABC Limited

ABC RETIRAL BENEFITS FUNDS

(PF,GF,SAF,TEPS)

CFM IMPLEMENTATION

BUSINESS BLUEPRINT

SAP Corporate Finance Management

Version- 1.0

February 24, 2006

PAGE 54XXXXXXXXXXXX