1 DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMME Felicity Smith PepsiCo International 19 May, 2009

2 The Company Taxes and Social Security PepsiCo is a World leader in convenient snacks, foods and beverages Home to hundreds of brands around the globe Brands available in approximately 200 countries 2008 net revenues of USD $431,251 million Approx 150,000 global employees

3 AMERICAS 119 expatriates from 22 nationalities working 14 countries Argentina - 3 Brazil - 10 Canada - 2 Chile - 2 Colombia - 5 Dominican Rep. - 2 Ecuador - 1 Guatemala - 7 Mexico - 10 Peru - 4 Puerto Rico - 7 United States - 54 Uruguay - 1 Venezuela 11 UK/EUROPE 153 expatriates from 26 nationalities working in 19 countries Belgium – 2 Bulgaria - 2 France - 3 Germany - 4 Greece - 1 Hungary - 3 Ireland - 12 Italy - 1 Netherlands – 6 Norway - 2 Poland - 5 Portugal - 1 Romania - 7 Russia – 20 Serbia - 2 Spain - 14 Switzerland – 49 Turkey - 1 UK - 18 AMEA - MEA 128 expatriates from 26 nationalities working in 8 countries Bahrain - 1 Jordan - 2 Lebanon - 1 Nigeria - 2 Pakistan - 2 Saudi Arabia - 39 South Africa - 1 United Arab Emirates - 80 AMEA - ASIA 118 expatriates from 19 nationalities working in 12 countries Australia - 3 China - 46 Hong Kong - 16 Indonesia - 3 Korea - 1 Malaysia - 2 New Zealand - 5 Philippines - 5 Singapore - 1 Thailand - 30 Taiwan - 1 Vietnam - 5 -Expatriates are sourced from 55 countries, with 10% from the US -Majority (52%) of expatriates are in 5 countries – United Arab Emirates, US, Switzerland, China and Saudi Arabia PepsiCo has 518 expatriates working in 53 countries The Expatriate Population

4 The Costs Net Allowances Taxes and Social Security Other Expat Benefits Vendors Total Spend = Nearly $150MM+ Annually ($120MM+ Expatriate Program Plus Annual Relocation Cost of $24MM) 35% 21% 40% 4% Estimated annual cost of current expat programme, excluding salary and bonus

5 Extended Business Trips Short Term Assignments Permanent Moves Localisations Virtual Assignments Commuter Assignments Long Term Assignments Secondment to Bottlers/Distributors/Joint Ventures Extended Business Trips Developmental Assignments Repatriations Pepsi’s International Moves

6 Why are companies changing their expat programme ? Unprecedented market conditions – 40% of companies looking to reduce costs Review market competitiveness Reduce allowances Avoid exceptions Localise long term expats Simplify / streamline procedures Alternatives to traditional expat package The Evolution – making moves affordable to the business and attractive to the expat FACILITATE MOBILITY Non-Executive / Developmental moves

7 PEPSICO EXPATRIATES ARE PAID UNDER 2 PRINCIPAL APPROACHES:- uHOME/HOST TAX EQUALISED uDESTINATION PAY – ‘HOST BASE PAY’ BOTH PACKAGE TYPES ADDRESS DIFFERENCES IN COST OF LIVING, HOUSING, TAX AND SOCIAL SECURITY BETWEEN THE HOME AND HOST LOCATIONS BUT THE APPROACH AND DELIVERY IS DIFFERENT Alternative Package Types ? THE PEPSICO APPROACH Home Host Destination Pay Paid under home country salary ranges; assignment allowances are delivered in the host country and home country deductibles taken in home country Participate in home country benefits & social security, where legally possible Maintain home country connection; equity with home country nationals in similar positions Paid under host country salary ranges; receive income differential where costs in host location are higher than at home to protect savings and investments Participate in home country benefits, where legally possible Equity with peers in host location in similar positions

8 uTraditional Home/Host is typically more expensive than Destination Pay ÔExample:- Company costs: UK expatriate to Poland ÔRecent analysis in Asia has shown company cost to be 35% lower on average with destination pay packages. ÔBoth package types address differences in cost of living, housing, tax and social security between the home & host locations but the approach and delivery is different. HOME/HOST (TEQ)DESTINATION PAYPOLISH LOCAL US$ 480,000US$ 388,000US$ 240,000 Why change your approach ?

9 Review your existing approach * Based on collective input from AirInc, ORC and PwC. Custom surveys completed with National Foreign Trade Council Expatriate Management group and RES European network (covering nearly 100 largest global companies) and also subscribed to ORC Select Benchmarking Survey group (70+ large, global multinational companies for benchmarking practices / competitiveness. Too Competitive Need to align to Market

10 Areas for Review HOUSING Full expat versus modest approach to host housing House Savings programme Deductibles – no ‘free housing’, reflective of home country costs COST OF LIVING Full expat standard versus conservative living pattern What elements are included – is anything being double counted (club, transport, medical) ? Calculated on full base salary ? VACATION LEAVE Class of Travel Frequency of Flights Location / Intention HYPO TAX Reflective of home country deductions ? State taxes, tax deductions, reconciliations EXCEPTION MANAGEMENT Centralised / regional process

11 The Time Is Right….. NEXT STEPS….. Align on your International Mobility Strategy Look for alternative approaches to facilitate cross border moves Review your exisiting policies to ensure that they are effective WHY ? Better management of the ongoing costs of your programme Realise some savings opportunities Ensure competiveness in marketplace SUPPORT THE ONGOING AND GROWING NEED FOR AN INTERNATIONALLY MOBILE WORKFORCE