SAP-ICB

FINANCE MANUAL POLICY

Page 1 of 9 Last Modified: 14 November 2014

CHAPTER: 3.0 Accounting SECTION: Other Transactions POLICY: 3.900 Inter-company Transaction Guidelines

3.900.1 Policy Overview Each Business Unit bears all costs that relate to or benefit its business and charges between the Business Units are often required to obtain this result. All intercompany accounts in the Balance Sheet and Profit and Loss Statement must properly reflect all intercompany activity at each stated reporting period including the period actuals and Operating Plans. Intercompany balances must be settled between Business Units on a timely basis and in accordance with Mars, Incorporated policy and loan agreements. This policy should be read in conjunction with the following two Intercompany Finance Manual Policies:

Chapter 2.0 (Financial Control), Policy 2.210 (Inter-company Pricing Guidelines)

Chapter 2.0 (Financial Control), Policy 2.240 (Intercompany Cost Sharing Arrangements) 3.900.2 Scope Intercompany activity covered by this policy includes the following:

Purchases or sale of product from/to another Business Unit.

Services provided from/to another Business Unit, such as Global, Segment or Regional programs (e.g., Mars IS, Corporate Service Fee, Segment Service Fee, Research & Development, Risk Management, and other relevant programs).

Expenses incurred or income received on behalf of another Business Unit

Tax payments for countries with consolidated tax entities but separate reporting Business Units.

Business Unit specific agreements (e.g., sharing of Advertising and Consumer Promotion, Associates, Engineering, Commercial or other appropriate cross-charge agreements).

Interest income and expense on intercompany loans

Royalty income and expense charged between Business Units, where a royalty agreement exists.

See Chapter 3.0 (Accounting), Policy 3.901 (Intercompany Associate Assignments) for guidance on accounting for cross charging costs for Associates on assignment (i.e., secondment).

3.900.3 Guidelines 3.900.3.1 Intercompany Invoicing Intercompany invoices are legal documents that must be billed to each legal entity and by Business Unit. The invoice must provide sufficient quality of information for the receiving Business Unit to properly record the transaction correctly the first time. This is especially relevant where there are new cross-charges between Business Units. Invoices for services sent by a Business Unit must include support for the items included in the invoice. The supporting documents should appropriately identify the nature of the cost. The support must be sufficient for the receiving Business Unit to verify and evidence the claim. Examples of appropriate support may include supporting e-mails, third party invoices, etc. 3.900.3.1.1 Intercompany Billing Currency Goods & Services - Intercompany invoicing for goods, services and Cost Sharing Agreements are invoiced according to the Finance Manual, Chapter 3.0 (Accounting) Policy 3.830 (Accounting and Reporting for Currency Transactions). 3.900.3.2 Shipping Terms Title will pass to the receiving Business Unit immediately upon dispatch from the factory warehouse. The sale must be recorded as an intercompany sale by the supplying Business Unit and goods-in-transit recorded by the receiving Business Unit at the time of shipment. The documents produced for product sales must be a legal invoice. 3.900.3.3 Shared Cost Accounting



Global, segment, regional programs and expert centers exist where Business Units are contractually obligated to share the specific costs with other Business Units. Cross-charges are required to achieve the appropriate distribution of costs for operational, fiscal or legal purposes. Examples include group research & development projects, insurance, tax payments, event marketing programs, regional expert centers, and management costs for the multinational Business Units. One Business Unit may manage the budget, pooling and allocation of costs for each global, segment, or regional program or expert center. The shared costs are to be allocated based on the guidance in Chapter 2.0 (Financial Control), Policy 2.240 (Intercompany Cost Sharing Arrangements)

Mars, Incorporated Corporate Service Fee Corporate Service Fee is based on the Operating Plan third party GSV and billed each period. The Corporate Service Fee is an exception to the billing currency for services from Chapter 2.0 (Financial Control), Policy 2.240 (Intercompany Cost Sharing Arrangements) and is billed and payable in the Business Units local currency. An estimated year end true up will be made in Period 12. The allocable costs shall be based on Period 11 actuals with an estimate of Period 12 and Period 13 costs. The over or under collection for each Business Unit is credited or charged based on actual activity versus Operating Plan Corporate Service Fee amounts. The adjustment (difference between plan and estimate) is charged or credited to the Business Units in Period 12, and these adjustments are recorded below Operating Profit in Corporate Service Fee True-Up (FPPS 37271/FIS F17708_TII). In Period 4 of the following year, the Corporate Office reconciles the Corporate Service Fee collected with actual third party GSV and actual Mars, Incorporated Corporate Office expenses. The over or under collection for each Business Unit is credited or charged based on actual activity versus Operating Plan Corporate Service Fee amounts including the Period 12 estimate. The Corporate Service Fee adjustment is charged or credited to the Business Units in Period 4. These adjustments are booked below Operating Profit in Corporate Service Fee True Up (FPPS 37271/FIS F17708_TII).

Segment Service Fee for Global Business Unit (GBU) Segment Service Fees are costs incurred for maintaining a Segment Office for the benefit of the Business Units. These costs are charged to all Segment Business Units reporting to this Segment (GBU) Office. The Segment Service Fee percentage is determined based on the third party Net Sales of all participating Business Units using the 3 years average Net Sales translated at the current year Mars Plan & Consolidation Rates (MPCR rates). The Segment Office communicates the appropriate service fee percentage during the planning process, and this amount is used by the Business Units to record their planned Segment Service Fee expense based on third party Net Sales. The planned amounts are paid each period to the Segment Offices. The account to be used is under Other Operating Costs in the Service Fee/Segment Office account (FPPS 37309/FIS F17505_TIC). The periodic invoicing is in the Segment Offices currency using current year Plan Rates (MPCR) for purposes of calculations and allocations. An estimated total year true up will be made in Period 12. The true up is based on Period 11 actuals with an estimate of Period 12 and Period 13 costs. The Period 12 true up is recorded to Other Non-Operating Costs while the Period 12 and Period 13 costs are recorded to Other Operating Costs. The Segment Office reconciles the Segment Service Fee collected with actual Segment Office expenses and updates the allocation using actual year-to-date third party Net Sales. The over or under collection for each Business Unit is credited or charged based on actual activity. The true up adjustment is recorded in Other Non-Operating Income and Expense in the Segment Service Fee True Up Total account (FPPS 17709/38572). The true-up invoicing is prepared in the Segment Offices currency using actual currency rates for purposes of calculations and allocations.



In Period 4 of the following year, the Segment Office reconciles the Segment Service Fee collected with actual third party NSV and actual Segment Office expenses. The over or under collection for each Business Unit is credited or charged based on actual activity versus Operating Plan Segment Service Fee amounts including the Period 12 estimate. The Segment Service Fee adjustment is charged or credited to the Business Units in Period 4. These adjustments are recorded to Other Non-Operating Income and Expense within the Segment Service Fee True Up Total Account (FPPS 17709/38572). Segment Offices Locations*:

Petcare Corporate Office - Belgium - Currency EUR

Chocolate Corporate Office - USA - Currency USD

Food/Drinks/Multisales Corporate Office - Belgium Currency EUR Drinks Corporate Office UK - Currency GBP and Drinks Corporate Office USA - Currency

USD *Gum/Confections, Royal Canin and Mars Symbioscience Segments do not use the Segment/GBU Service Fee Cost Sharing method.

Segment Offices may incur shared project costs that benefit certain Business Units in the Segment but not all Business Units within the Segment. These costs are not included in the Segment Service Fee. Business Units are required to follow Chapter 2.0 (Financial Control), Policy 2.240 (Intercompany Cost Sharing Arrangements) for costs incurred outside of Segment Service Fees.

Regional & Expert Centers These centers exist to provide support to Business Units within the region. An example of these include the Regional Treasury & Benefits Centers. Regional and Expert Centers will recover all of their costs within the region.

Shared Cost Service Center (SC2) Exists to facilitate the administration of certain global shared programs. This includes the administration of Cost Sharing Agreements, allocation keys and processes, periodic billings of the global programs administered, reporting on the global program activity. All programs administered by SC2 are approved for inclusion in their activity by their steering committee.

Associate Provides Services on Behalf of Another Business Unit An Associate may be legally employed by one Business Unit but provide services to another Business Unit (e.g., Staff Officers). The Associates legal employer records the salaries, wages, and benefits in its local general ledger and cross charges these costs as Affiliate Professional Services Cross Charged Out, Affiliate Professional Services Cross Charged Out-Travel, Affiliate Professional Services Cross Charged Out-Other and Affiliate Professional Services Cross Charged Out-Non-Operating. The receiving Business Unit must record these costs as Affiliate Professional Services Cross Charged In, Affiliate Professional Services Cross Charged In-Travel, and Affiliate Professional Services Cross Charged In-Other. Business Units are required to follow Chapter 2.0 (Financial Control), Policy 2.240 (Intercompany Cost Sharing Arrangements) for these costs.

Direct Costs Incurred on behalf of another Business Unit A Business Unit may negotiate contracts on behalf of another Business Unit(s); however, the invoicing arrangements within these contracts must be direct to all participating Business Units from the vendor. This is done to minimize the amount of cross charges between Business Units for shared contracts. Exceptions to this policy require approval from the Business Units Regional S&F Staff Officers or the Corporate Financial Controller if a Business Unit does not have an assigned Staff Officer.



All transportation, lodging, meals, entertainment and similar expenses incurred by traveling Associates are paid by the visiting Associate For example, if the Business Unit changes airline bookings for a visiting Associate, the changed tickets are charged to the Associate's personal or company credit card. Cross-charges are not permitted for travel and entertainment costs (including taxis, meals, etc.) incurred for visiting Associates, regardless of amount. The only exceptions to this policy include costs incurred due to Associate relocations/transfers and Associates visiting a Business unit for the purpose of interviewing for a new position.

Facilities and equipment costs for Associates based at a site other than where their costs are absorbed (e.g. Corporate Staff located outside of MVA) The facility costs (only for services to operate the facility) and equipment costs (only to the extent the equipment is purchased directly for the benefit of the hosted Associate) incurred by a Business Unit on behalf of another Business Unit may only be cross-charged to the Associates home office if they meet either of the following criteria:

The Business Unit has twenty (20) or more Associates from other Business Units based at its site; or,

The Business Units total facility and equipment costs attributable to the Associates from other Business Units based at its site are greater than 10% of the total facility and equipment costs for the respective period.

The exception to this requirement is if both Business Units agree in advance to reimburse the costs prior to hosting the Associate which must be evidenced in writing. Business Units cannot cross-charge building depreciation. All cross charges for these costs must be labelled and included as service revenue. Under no circumstances should equipment costs be invoiced and labelled/identified as equipment depreciation expense or cross charged separately as a single line item within the intercompany invoice. The amount cross charged by the host Business Unit cannot exceed the equipment depreciation expense recognized by the host Business Unit for the respective period. The equipment must reside on the fixed asset subledger of the Business Unit originally purchasing the property from the third party vendor which typically is the host Business Unit. The host Business Unit does not reverse the equipment depreciation expense for the respective period on the host Business Units local ledger.

Minimum Invoice Amount To achieve administrative efficiency, and to avoid the transfer of costs immaterial to both the billing and receiving Business Units, no invoice less than $1,000 USD (or its local currency equivalent) may be cross-charged (except as noted in the paragraph below). Business Units are encouraged to reject invoices that are less than the $1,000 required minimum expenditure amount. Additionally, Business Units are required to invoice/cross charge within 2 periods after receipt of the invoice from the third party vendor. Receiving Business Units are encouraged to reject invoices with cross-charges that are over 2 periods old. The sending Business Unit is required to invoice a cost within 2 periods of incurring the cost otherwise the cross-charge is not considered timely which is inconsistent with the Efficiency Principle and may provide a hardship to the receiving Business Unit to plan for the costs appropriately. If the costs are not invoiced within 2 periods, the Business Unit is responsible for those costs and cannot cross charge for the costs. Exceptions to the $1,000 threshold must be agreed in advance in writing between the Business Unit S&F Head or their delegate of both Business Units. Exceptions to the 2 period limit must be approved in writing by the Business Units Regional S&F Staff Officer or the Corporate Financial Controller if a Business Unit does not have an assigned Staff Officer.



Multi-site Business Units may operate at a higher minimum limit provided this is agreed upon with their Regional S&F Staff Officer or the Corporate Financial Controller if a Business Unit does not have an assigned Staff Officer.

Exceptions to the minimum invoice amount and 2 period limit are the approved cost sharing arrangements. Even with quarterly billings of approved cost sharing arrangements, some of the Business Units are allocated less than the $1,000 USD threshold. As agreed with the Corporate Tax Department, the Business Units are billed as stated in the cost sharing agreement regardless of the amount of the cross-charge, since cost sharing agreements are closely reviewed by various local tax authorities. The cost sharing programs included in this exception are Mars IS, Corporate Service Fees, Segment Service Fees, Shared Costs Service Center, Global Programs, Regional Programs and Mars University courses. All cost sharing arrangements greater than $100K (USD) require a signed agreement as evidence of the arrangement. If the cost sharing arrangement is less than $100K (USD) the Business Units are required to have documentation supporting and evidencing that the arrangement was agreed upon in advance between the participating Business Units.

3.900.3.2 Interest Income and Expense and Dividends Intercompany interest income and expense is to be recorded by Business Units based on the terms of the intercompany loan. Intercompany dividends are recorded in the period when the payment occurs, except for MMI and New Uno Holdings, which are required to record dividends payable upon declaration. Dividend amounts in a currency other than the Business Units functional currency are to be booked using the spot exchange rate from the date of payment. 3.900.3.3 Intercompany Reconciliations Because many aspects of our business are managed and reported at consolidated levels in addition to the Business Unit level, it is necessary that valid consolidated reports are produced. To achieve this, all appropriate intercompany balances and accounts must eliminate in each consolidation. 3.900.3.3.1 Period-End Procedures The following procedures are carried out each period: Statement of Intercompany Balances - All Business Units (MOE)/Legal Entities must provide a statement of account dated and effective as of the last day of the period to all Business Units with which there is activity to verify. All intercompany Balance Sheet accounts must be included on the period end statement and Business Units are required to include all invoices on the Statement. The statement of account should include the following accounts:

Accounts Receivable Affiliate (FPPS 10239), Accounts Payable Affiliate (FPPS 10240),

Deposit with Cash Centre (FPPS 10532),

Borrowing From Cash Centre (FPPS 10533),

Notes Receivable Affiliate (FPPS 10241), Notes Payable Affiliate (FPPS 10242)

The Business Unit with the asset balance provides the confirmation statement. The statement includes an opening balance, charges, credits and adjustments, and an ending period balance. The statement must include all intercompany invoices. The Business Units must also ensure that intercompany income, expenses, interest, dividends, etc., are in balance and recorded in the same period. Each type of balance is detailed separately; i.e., accounts receivable, notes receivable, deposits with cash center, etc. These amounts are stated in the currency used for the invoice. Statements may include balances in more than one currency amount. Every transaction listed on the statement must be



supported with proper documentation which should have been provided with the invoice. If a billing Business Unit cannot prepare a proper invoice in time to include it with the statement, it must hold the charge and bill it in a subsequent period. Timing and Confirmation - The period end statements must be prepared by the Business Unit with the asset balance and delivered to the other Business Units no later than Noon local time of the Business Unit sending the statement on Monday of Week 1 by e-mail. Business Units which are required to send invoices by conventional mail for local statutory reasons must also send the invoice by e-mail to increase the efficiency and speed of processing to ensure that the receiving Business Unit can meet the required deadlines for posting intercompany activity. To achieve the Monday deadline, it is necessary for the sending (billing) Business Unit to cut off some intercompany activity earlier than the last day of the period. Services cross-charges will be cut off early so that the last invoice is sent by 5:00 p.m. local time on Wednesday of Week 4. Business Units are encouraged to invoice items in advance of the deadline (e.g., global programs billed a period in arrears must be processed in the first two weeks of the period). Product shipments must not be cut off early, and Factory Business Units should ensure that systems and processes are in place to provide sales invoices for dispatches on the last Saturday of the period. No early cut-off is allowed for intercompany interest, dividend and principal activity. Any service costs booked into a cost center after the cutoff date of Day 3 Week 4 may be recorded by the sending Business Unit incurring the cost to the Balance Sheet Account I/C to X-Charge Next Period (FPPS 39707/HFM 10411). This process ensures the service related costs do not impact the sending Business Unit. Specifically, Business Units should record unbilled intercompany activity for services to their balance sheet, but only for the specific period in which the Business Unit receives an invoice subsequent to the intercompany invoice billing deadline. The intercompany invoice billing deadline for Affiliate Products and Affiliate interest is Monday of Week 1. When received, the Business Unit with the payable has until close of business on Monday, Week 1 to verify the statement and, if necessary, agree any adjustments with the sending (billing) Business Unit. If agreement is not reached, the receiving Business Unit may record the statement amount to the Intercompany to Cross Charge Next Period Balance Sheet Account. Discussions over disputed amounts can continue after that time and if subsequent adjustments are agreed, they can be made to the account in the next period.

During the Period 13 close, the Business Units should not use an early cut-off procedure. Since Period 13 is the close of a given year, the Business Units must capture all applicable intercompany activity through Saturday of Week 4 (5) and communicate the period-end statements by Friday of Week 1.

Intercompany Accounts in FPPS/HFM - Accounts are established to handle the various types of intercompany accounts. These accounts require that the corresponding Business Unit's code (MOE for FPPS, Company Code for HFM) is included with the account code. Do not group intercompany balances from several Business Units under a single Business Unit account. This reconciliation is first due Monday Week 1 at 5:00 p.m. local time. After this point, the report is updated in real time so that any corrections with partner Business Units can be monitored up until the final submission of FPPS. Payables and receivables from the same Business Unit are not to be netted.

HFM Out of Balance Reconciliation Subsequent to each period close, the HFM support team communicates all A/R and A/P out of balances to all Business Units by HFM Company Code. The out of balances are identified by ICP tags. Business Units are expected to have no out of balances for both HFM & FPPS. If an HFM Company Code is out of balance due to timing at a more granular level than



FPPS, the Business Units are required to resolve the out of balances prior to the following period close. If there are disputes regarding the ICP tags, Business Units must follow the intercompany dispute resolution process. 3.900.3.3.2 Intercompany Dispute Resolution Process Invariably, there will be disputes between Business Units. Typical disputes include differences in amounts billed versus expectations, differences in amounts per invoice versus supporting documents, the timing of billings, sufficient supporting documents, and the identification of the appropriate Business Unit to be billed. Business Units should resolve all disputes prior to the period close. If a dispute is not resolved prior to the period close, it will be escalated to the appropriate S&F managers of both Business Units. The S&F managers must resolve the dispute by Monday of Week 2. If the S&F managers are unable to resolve the dispute by Monday of Week 2 they are required to escalate the dispute to the Business Unit S&F Heads. If the Business Unit S&F Heads are unable to resolve the dispute by Monday of Week 3, the Business Unit S&F Heads are to contact their Regional Staff Officer or the Regional Segment Chief Financial Officers if one or more Business Units do not have an assigned Staff Officer to resolve the dispute on behalf of both Business Units. The matrix below highlights the resolution process that must be followed by all Business Units.

Dispute Resolution - Escalation Matrix

Level Escalation Contact Resolution Deadlines

1 Intercompany Specialists Monday of Week 1

2 S&F manager Monday of Week 2

3 Business Unit S&F Head Monday of Week 3 4 Regional Staff Officer for both Units

or The Regional Segment Chief Financial Officers if one or more Business Units do not have an assigned Staff Officer

Upon Notification by S&F Head

If a dispute is initiated by the receiving Business Unit; it is the responsibility of the billing Business Unit to provide the requested support/documentation to resolve the dispute. In all circumstances, the billing Business Unit has the responsibility of resolving errors/omissions/etc. If an agreement is not reached before the period is closed, both Business Units involved with the transaction are required to record the intercompany receivable or payable as initially determined by the sending Business Unit. The corresponding side of the journal entry (debit or credit) may be recorded in the following manner based upon the nature of the entry and whether the entry is Inventory related or P&L impacting:

If the dispute is Inventory related, the Business Unit receiving the cross charge must record the invoice to their balance sheet. The billing Business Unit would not change their P&L classification.

If the dispute is P&L (Income Statement) related\, the Business Unit receiving the cross charge may record the invoice to the I/C to X-Charge Next Period account (FPPS 39707/HFM 10411). The receiving Business Unit will then reclassify the balance with a journal entry the following period after the dispute has been resolved in accordance with the dispute resolution process outlined below. The billing Business Unit will not change their P&L classification.

In both scenarios, the Business Units are required to record the intercompany receivable/payable. 3.900.3.3.3 Intercompany Balance Revaluations Intercompany transactions occurring between Business Units that do not have the same functional currency are subject to revaluation. In accordance with Chapter 3.0 (Accounting) Policy 3.830



(Accounting and Reporting for Currency Transactions), transactional gains or losses will result from the effect of exchange rate changes between the initial booking rate and the final settlement rate on purchase or sales denominated in other currencies. Gains or losses represent an increase or decrease in the local currency cash flows upon payment or receipt of foreign currency. As exposure transactions arise on intercompany transactions, they are entered into the Business Units accounting system at the current exchange rate. The resultant asset or liability is revalued each period at the period end rate and any gain or loss booked to the P&L (e.g. Sales to SPV, material purchases to PPV, etc.). When the currency denominated transaction is finally settled, the interim revaluations are backed out and the final local currency gain or loss is entered. The currency gain or loss created by revaluing the Intercompany Notes and Balances with Treasury Centers is to be recorded in the current period to the following account: Revaluation Effect of Affiliate Notes: FPPS 33739/FIS 17658_TII/HFM 90720 3.900.3.3.4 Settlement of Intercompany Balances Intercompany Receivables and Payables - Payment dates and processes as defined below for settlement of intercompany receivables and payables are in place to facilitate planning of cash flows, minimize transfer costs, and have no adverse tax consequences. These amounts are settled using the global intercompany netting process run by the European Treasury Center based in Veghel or the Wrigley Treasury Center for the Wrigley Business Units. All Business Units are required to participate in these global netting processes unless prohibited by local laws. These prohibitions usually occur in emerging countries with currency control regulations. The settlement of intercompany receivables and payables occurs every period as managed by the respective Treasury Centers. The following procedures facilitate the settlement process:

Mars Legacy Business Units initiate the netting process through the intercompany process which is managed by the European Treasury Center. The Wrigley netting process is facilitated through the use of Bank Mendes Gans (BMG), a third party system.

The Business Unit fully settles the agreed statement payable balance through the intercompany netting process. This may be in more than one currency as the payment should occur in the currency as agreed in the statement.

The Business Unit with the payable initiates the payment process and sends their payment intentions to the European Treasury Center according to the due dates as published by the European Treasury Center.

Settlement occurs on Wednesday of Week 3 with the European Treasury Center providing details of the amounts settled to all participating Business Units. Gains and losses from settlement of the balances are recorded along with the original transaction.

For the Wrigley settlement process, the Wrigley Business Unit with the receivable balance enters their receipt intentions directly in the BMG system before the due date for the applicable netting period (Day 5 of Week 2 by 12:00 p.m. CST). The following Monday (Day 1 of Week 3) final netting reports will be available for each Business Unit to review. In the case that the Business Unit is in a net payable position, a payment must be initiated to BMG per their instructions on the final netting report by Wednesday (Day 3 of Week 3). In the case the Business Unit is in a net receivable position, there is no action required other than to confirm receipt of funds from BMG on Day 3 of Week 3. It is the responsibility of the Business Unit to inform Wrigley Treasury Center if the units bank instructions change and require an update in the BMG system.

Exceptions - The Business Units within countries with currency restrictions should be the only entities that do not participate in the intercompany netting process. The European Treasury Center keeps track of all non-participating Business Units and work with the Business Units and Corporate Treasury to ensure the



settlement process for these Business Units is appropriate. Approval not to participate in the global netting process must be obtained from the Corporate Treasury Manager. The Business Units that cannot participate in the global netting process are still required to settle intercompany payables each period on the settlement day of Wednesday Week 3 each period. Intercompany Notes All intercompany notes are legal contracts between legal entities that must be executed in writing and signed by duly authorized officers of each legal entity as of the effective date of the note. Intercompany notes are settled based on the payment terms contained in the note. If they are interest bearing, the interest should be recorded each period and settled according to the note terms. If the notes do not contain repayment clauses or are open as to settlement (effectively they are permanent in nature), any repayments must be agreed to and coordinated with the Corporate Treasury Manager. The terms and settlement of intercompany notes should also be agreed with the Corporate Tax Department to ensure all appropriate tax and legal effects are considered.

POLICY: 3.900 Inter-company Transaction Guidelines

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