Strategic Value of Global Markets Solutions Interest rate ...

Strategic Value of Global Markets Solutions Interest rate ...

FX Forwards vs. Cross-Currency Swaps: A Fair Comparison? 08 May 2018 Agenda Review of Basic Foreign Currency Hedging Tools Theoretical Constructs: Forwards and Swaps Hedge Accounting Considerations Example 2 First Things First: Definitions FX Forwards A forward is a contract that locks in the price at which a counterparty can buy or sell a currency on a future date. The exchange rate is todays rate, adjusted for the interest rate differential in the two currencies (the forward points). If the interest rate in the local currency is higher/ lower than that of the USD (or whatever the reference currency is), the local currency will trade at a discount / premium relative to spot. A forward can be used to hedge the foreign exchange exposure of a loan or an equity stake when the counterparty only wants to protect the principal repayment. Cross-currency swaps In a cross-currency swap, the parties exchange a stream of payments in one currency for a stream of cash flows in another. The typical cross-currency swap involves the exchange of both recurring interest and principal (usually at the end of the swap), and thus can fully cover the currency risk of a loan transaction. The exchange rate used for all cash flows is usually is the spot rate at inception. Conceptually, cross-currency swaps can be viewed as a series of forward contracts packaged in a single transaction. 3 Most Common Hedging Tools: FX Forwards and Options Hedging Products Use 2016 vs 2013 (BIS Triennial Study) 16% 14% 12% 10% The company uses foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the US dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to five years. Caterpillar Inc. 10-K 8%

6% 4% 2% 0% Forwards Options 2013 We manage global foreign exchange risk centrally on a portfolio basis to address those risks that are material to NIKE, Inc. We manage these exposures by taking advantage of natural offsets and currency correlations that exist within the portfolio and, where practical and material, by hedging a portion of the remaining exposures using derivative instruments such as forward contracts and options. Cross-currency Swaps Nike, Inc. 10-K 2016 2016 Cross-currency swaps gaining in popularity and use, yet starting from a low base 4 Basic building blocks of currency hedging programs: forwards and options Foreign Currency Risk Management: Forwards Description Indicative Rates: EURUSD Forwards The forward contract fixes the full value of the future FX revenue or obligation in USD up to the notional amount hedged The forward rate is based on (A) current spot rate level and (B) the interest rate differential between the two currencies One of the most common and widely used hedging tools, either with a single future value date, or with window dates Window forwards provide flexibility by allowing payments to be made between two pre-determined dates (the window) Pros and Cons of the Strategy Value Date Forward Points All-in Rate Spot - 1.2400 12-31-2018 250 1.2650

06-30-2019 460 1.2860 12-31-2019 675 1.3075 Pay-off Profile: Effective Rate Relative to Unhedged Rate Certainty over exchange rate for future cash flow conversion Zero cost upfront 1.40 1.35 EURUSD Rate No participation in favorable market movements Contract may become a liability, in event of an early termination Accounting Considerations Recognized and measured at fair value on the balance sheet Can be designated as an effective hedge of forecasted transactions with changes in value deferred to OCI Alternatively, changes in value flow through income statement as unrealized gains/losses until maturity; may act as offset to FX gain/loss from on-balance sheet payable/ receivable 1.30 1.25 1.20 1.15 1.10 1.05 1.00 1.10 5 Unhedged Rate Effective Rate Forward Foreign Currency Risk Management: Purchased Options Description Indicative Costs: EUR Puts / USD Calls For an upfront premium, option contracts provide protection in case of adverse market movements, while allowing the buyer to benefit should the market move in his/her favor Strategy is useful for situations of greater degree of uncertainty in timing and amounts of future cash flow Similar to buying insurance on a property: it protects against a specific undesired future event, while allowing buyer to enjoy upside if market moves in favor Pros and Cons of the Strategy Value Date

Strike Premium (% of Notional) 06-30-2018 1.24 0.5% 12-31-2018 1.24 1.8% 06-30-2019 1.24 2.6% 12-31-2019 1.24 3.4% Pay-off Profile: Effective Rate Relative to Unhedged Rate Certainty over exchange rate for future cash flow conversion Carries an upfront cost: the option premium 1.40 1.35 EURUSD Rate Flexibility: can be structured for desired level of protection (the strike rate) Longer tenor options increase in cost exponentially due to currency volatility factors Accounting Considerations 1.30 1.25 1.20 Recognized and measured at fair value on the balance sheet Can be designated as an effective hedge of forecasted transactions with changes in value deferred to OCI Once premium is paid, contract can only be an asset and cannot take a non-zero value (it cannot become a liability) 6 1.15 1.10 1.10 1.15 1.20 Rate 1.25 Unhedged

Effective Rate 1.30Put Option 1.35 1.40 Forwards vs. Options: Apples and Oranges? Often the choice between forwards and options is an imperfect one, and in many ways its apples to oranges because of the difference in risk profile: options serve particular purpose of allowing upside due to currency movement, whereas forwards lock in a known rate regardless of future rates. Forwards: Hedged cash flow certain/ highly probable Limited/No appetite to spend cash Presume credit available Available relatively inexpensively for longer tenors Options: Uncertainty in hedged cash flow Desire to capture positive market movement Skewed risk reversal No credit required once premium paid Prohibitively expensive for longer tenors Cross-currency swaps: Hedged cash flow certain/ highly probable Limited/No appetite to spend cash Presume significant credit available Available relatively inexpensively for longer tenors 7 Similar risk profile and risk management goals Foreign Currency Risk Management: Cross Currency Swaps Description Alternative Structures All-in-one transaction coverts a stream of cash flows in one currency in another currency Pay Leg Receive Leg Fixed Fixed Floating Fixed Fixed

Floating Floating Floating Payments structured as mirroring loan profiles, with payments based on interest rates and principal amounts in 2 currencies The exchange rate used for all conversions is the same: the spot rate at time of execution Structure very flexible and customizable to cash flow needs. Pros and Cons of the Strategy Cash Flow Profile: Regular Exchanges of Currency Certainty over exchange rate for future cash flow conversion No upfront cost Potential significant savings in interest costs High credit utilization Potentially high breakage cost t0 Accounting Considerations Recognized and measured at fair value on the balance sheet USD USD USD USD EUR EUR EUR EUR 8 Initial Exchange tn EUR USD Can be designated as an effective hedge of FX-denominated loan or net investment in foreign operation With favorable hedge accounting treatment, changes in MTM value deferred to OCI; otherwise changes in value to FX G/L USD t0n EUR Interest and Periodic

Exchanges Final Exchange Mechanics of a Cross-Currency Swap: Cash Flow Profile U S D Bank Pays/ ABC Receives USD USD USD USD Bank Receives/ ABC Pays EUR EUR EUR EUR Periodic Exchanges, based on EUR and USD Interest Rates E U R Key Point: Same rate (spot) to be used for all cash flows Can be omitted if USD debt proceeds have already been converted/ invested in EUR assets 9 Mechanics of a Cross-Currency Swap: Sources & Use of Funds Covering interest costs on USD debt CFG Pays/ ABC Receives USD USD USD USD CFG Receives/ ABC Pays

EUR EUR EUR EUR Lower coupon: funded by incoming EUR revenues Can be omitted if USD debt proceeds have already been converted/ invested in EUR assets 10 U S D Used to repay USD debt E U R Funded by accumulated EUR revenues or divestment of EUR operations Credit Risk Profile of a Cross-Currency Swap: Significant Example: EUR & GBP Xcy Swap: CEE as % of Notional Potential future exposure (PFE) and therefore CEE (credit-equivalent exposure) increase logarithmically (i.e. at a decreasing rate) as transaction tenor increases Other parameters driving CEE calculation: Currency pair - Currency volatility - Transaction size - Tenor 1y 2y 3y 5y 10y EUR GBP

17% 25% 31% 42% 64% 14% 20% 25% 33% 50% Cross-currency Swap: Potential Future Exposure Simple model: CEE calculated based on credit risk factors relevant for each currency pair at a 95% confidence level. 11 Accounting for Cross Currency Swaps Marked-to-market on balance sheet Through P&L, with no hedge accounting Through OCI, with cash flow or net investment hedge accounting Functional currency of entity plays a significant role Value of swap affected by changes in: Spot exchange rate, Interest rates in each of two currencies, and Cross currency basis Potential Hedge accounting designations: Hedged Item Converted To Accounting Designation FX Fixed-rate Floating-rate, functional ccy FX and IR Fair value hedge FX Floating-rate Floating-rate, functional ccy FX Fair value hedge FX Fixed-rate Fixed-rate, functional ccy FX Cash flow hedge FX Floating-rate Fixed-rate, functional ccy FX and IR Cash flow hedge Foreign investment Functional ccy equivalent Net investment hedge

12 Hedge Accounting: Net Investment in Europe Cross Currency Swaps qualify for hedge accounting under certain conditions The swap can be designated as a hedge of ABCs net investments in its European foreign operation Cross currency mark to market is recorded through CTA as part of OCI, offsetting changes in value of the EUR-denominated investment Conditions for Successfully Applying Hedge Accounting European subsidiary must have EUR functional currency Starting value of EUR investment value designated as hedged must be no less than Cross Currency Swap notional EUR leg ABC must document at inception all key requirements of ASC 815, such as description of hedging instrument, hedged item, method for testing the effectiveness of the hedging relationship Two methods permitted by ASC 815 (must be consistent among all net investment hedges) Method based on forward rates Method based on spot rates 13 Hedge Accounting: Subsequent Reporting of Accumulated OCI Account for effective portion of G/L on hedging instrument in same manner as the Cumulative Translation Adjustment (CTA), consistent with ASC 830 (formerly known as FAS 52) Translation adjustments are reported in CTA, a component of other comprehensive income CTA removed from equity and reported as part of the G/L on either sale or substantially complete liquidation of the foreign investment 14 OCI-CTA Example: ABC Inc. Multinational Corporation Company funded in part by USD debt capital structure Debt includes fixed rate notes with face value of USD 100 million and 7% coupon due 2021

EUR revenues coming from subsidiaries in Germany, France, Portugal, Italy and Spain from long term customer contracts Stable, predictable business generates net cash flows in EUR Historic approach is to hedge EURUSD risk with FX forwards, horizon up to 3 years No appetite to use cash to purchase currency options 15 Company considering other zero-cost alternatives, including Current Market Conditions EURUSD Forward Market Favorable for EUR Sellers and Long-term Investors in Europe Persistently Negative 3-yr Cross Currency Basis (bps) Rising USD Rates + Low/Negative Rates = EUR Forward Premium 1.45 4/ 21 6/ /20 18 15 8/ /20 17 15 /2 10 01 /1 5 12 4/.. /1 . 2/ 1/. 9/ .. 4/ 201 7/ 6 6/ 201 6/ 6 8/ 201 3 6 9/ /20 30 16 /2 11 01 6 1/ /29 26 /.. 3/ /20 . 27 17 5/ /20 24 17 7/ /20 21 17 9/ /20 19 17 /2 11 01

7 1/ /16 15 /.. 3/ /20 . 14 18 /2 01 8 0 1.40 -10 1.35 -20 1.30 -30 1.25 -40 1.20 -50 1.15 1.10 Apr-18 -60 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 Positive Forward Points Negative Cross-currency Basis Mainly as a result of interest rate differential between USA and Eurozone: US rates much higher than Eurozone (ex. 5y UST 2.84% vs. 5y Germany at -0.07%). Lingering and lasting effect of the 2008-2009 financial crisis and 2011 Eurozone crisis : Strong demand for USD spot (and EUR forward) leads to imbalance in the spot/forward market, amplifying effect of interest rate differential. 16 ABC Inc.: Hedging with FX Forwards EURUSD Spot Reference: 1.24 Tenor (Monthly Contracts) Hedge Notional

Forward Rate (Blended Average) USD Equivalent Year 1: 5/1/2018 4/30/2019 EUR 800,000/mo. 1.26 $1,008,000 /mo. Year 2: 5/1/2019 4/30/2020 EUR 600,000/ mo. 1.29 $774,000 /mo. Year 3: 5/1/2020 4/30/2021 EUR 400,000 /mo. 1.33 $532,000 /mo. EUR 21,600,000 1.2856 USD 27,768,000 Total EUR-USD hedge position Key Features Individual foreign currency cash flows are locked into USD at preset rates (the forward rate). Hedging entity benefits from upward sloping forward curve: future EUR more valuable than spot EUR Advantages No upfront cost Individual contracts, highly customizable for each tenor Disadvantages Opportunity cost: locking in a rate precludes any future benefit or cost from subsequent exchange rate movements 17 ABC Inc. Hedging with Cross-Currency Swap Fixed-Fixed Cross Currency Swap Transaction Key Terms: Effective Date: 4/24/2018 Maturity Date: 4/24/2021 USD Notional Amount: USD 25,000,000 Exchange Rate: 1.2400 EUR Notional Amount: EUR 20,161,000 Interest Rates: Fixed USD vs Fixed EUR Payment Periods: Quarterly; Act/ 360 Initial Exchange: None Periodic Exchanges:

- Bank Pays: 7.00% - Company Pays: 4.25% Final Exchange: - Bank Pays: USD 25,000,000 - Company Pays: EUR 20,161,000 The cross currency swap allows company to effectively reduce its interest costs from 7% to 4.25% on the hedged debt portion of USD 25,000,000. 18 Hedging with Cross-Currency Swap (cont.) Key Features Initial exchange: Periodic cash flows: Not needed due to the fact that companys capital has already been converted from USD and invested in Europe ABC pays EUR based on fixed interest rate Receives fixed/floating USD, to match USD interest leg on debt Final exchange: ABC sells EUR Buys USD same exchange rate used (initial spot) for all cash flows Periodic Cash flows: USD 7% EUR 4.25% USD 25mm Final Exchange EUR 20.16mm Advantages All-in one transaction with minimal ongoing administration required Highly customizable, aimed at optimizing currency risk profile of combined capital structure Potential favorable hedge accounting if designated as net investment hedge Disadvantages

Can be complex to restructure in the event of a recapitalization or change in risk profile Credit intensive: far date of (and value embedded in) final exchange carries credit risk for the bank Adverse mark-to-market value may affect P&L 19 USD Interest 7% Principal: USD 25mm USD Debtholders Cross-Currency Swap: Cash Flow Breakdown By Payment Leg EUR Cash Flows Start End Days Notional 4/24/18 7/24/18 91 7/24/18 10/24/18 10/24/18 Exchange USD Cash flows Payment Discount PV (EUR) Notional Exchange Payment 20,161,000 (216,590.74) 1.002701 (217,175.70) 25,000,000

442,361.11 0.995487 440,364.91 92 20,161,000 (218,970.86) 1.005029 (220,072.01) 25,000,000 447,222.22 0.990381 442,920.36 1/24/19 92 20,161,000 (218,970.86) 1.007815 (220,682.22) 25,000,000 447,222.22 0.98493 440,482.66 1/24/19 4/24/19 90 20,161,000 (214,210.63) 1.010104 (216,374.99) 25,000,000 437,500.00 0.979338 428,460.17 4/24/19 7/24/19 91 20,161,000 (216,590.74)

1.012170 (219,226.57) 25,000,000 442,361.11 0.973389 430,589.45 7/24/19 10/24/19 92 20,161,000 (218,970.86) 1.014094 (222,057.01) 25,000,000 447,222.22 0.967216 432,560.65 10/24/19 1/24/20 92 20,161,000 (218,970.86) 1.015812 (222,433.31) 25,000,000 447,222.22 0.960968 429,766.17 1/24/20 4/24/20 91 20,161,000 (216,590.74) 1.01727 (220,331.17) 25,000,000 442,361.11 0.954771 422,353.54

4/24/20 7/24/20 91 20,161,000 (216,590.74) 1.018455 (220,587.97) 25,000,000 442,361.11 0.948601 419,624.09 7/24/20 10/26/20 94 20,161,000 (223,731.10) 1.019399 (228,071.19) 25,000,000 456,944.44 0.942267 430,563.76 10/26/20 1/25/21 91 20,161,000 (216,590.74) 1.020051 (220,933.66) 25,000,000 442,361.11 414,129.07 1/25/21 4/26/21 91 20,161,000 (20,161,000) (20,377,590.74) 1.020459

(20,794,492.64) 25,000,000 25,000,000 25,442,361.11 Discount 0.936179 0.930137 23,664,870.66 (23,149,629.44) at spot 28,705,540.75 1.24 USD (28,705,540.75) 20 PV (USD) NET VALUE (0.0) Cross-Currency Swap Breakdown: Net USD USD Leg Payments Rec EUR Leg Payments Pay USD Value Net Payment (USD) Discount (USD) PV (USD) 1.2410 -268,789.11 173,572.00 0.99549 172,788.67 (218,970.86) 1.2509 -273,916.78 173,305.44 0.99038

171,638.42 447,222.22 (218,970.86) 1.2609 -276,108.11 171,114.11 0.98493 168,535.42 90 437,500.00 (214,210.63) 1.2710 -272,266.62 165,233.38 0.97934 161,819.33 7/24/19 91 442,361.11 (216,590.74) 1.2812 -277,494.13 164,866.98 0.97339 160,479.71 7/24/19 10/24/19 92 447,222.22 (218,970.86) 1.2914 -282,787.86 164,434.36

0.96722 159,043.54 10/24/19 1/24/20 92 447,222.22 (218,970.86) 1.3018 -285,050.17 162,172.05 0.96097 155,842.15 1/24/20 4/24/20 91 442,361.11 (216,590.74) 1.3122 -284,207.41 158,153.70 0.95477 151,000.57 4/24/20 7/24/20 91 442,361.11 (216,590.74) 1.3227 -286,481.07 155,880.04 0.9486 147,867.97 7/24/20

10/26/20 94 456,944.44 (223,731.10) 1.3333 -298,292.91 158,651.53 0.94227 149,492.10 10/26/20 1/25/21 91 442,361.11 (216,590.74) 1.3439 -291,083.10 151,278.01 0.93618 141,623.30 1/25/21 4/26/21 91 25,442,361.11 (20,377,590.74) 1.3547 -27,605,172.82 -2,162,811.71 0.93014 -2,011,711.20 Fwd FX Start End Days

4/24/18 7/24/18 91 442,361.11 (216,590.74) 7/24/18 10/24/18 92 447,222.22 10/24/18 1/24/19 92 1/24/19 4/24/19 4/24/19 Total The large off-market value notional exchange at maturity is recovered through the periodic interest payment differential 21 (0.00) Cross-currency Swaps: Pros and Cons Advantages Disadvantages Elegant approach, with all-in one financial instrument that does not require ongoing administrative work, adjustments and further layering Complex instruments, requiring a good understanding of interest rate and foreign currency markets and sufficient institutional knowledge for the end-user. Favorable accounting treatment enables a company to efficiently hedge large balance sheet items such as investments in foreign jurisdictions or debt denominated in foreign currency Final exchange may lead to an adverse cash event at maturity. This also leads to large swings in value (recorded as unrealized gains/losses) which may

affect materially a companys P&L, especially if special hedge accounting not adopted. Allows capturing favorable forward points advantage between two currencies through interest rate cost savings. Interest rate cost reduction Limited flexibility once executed. All-in one feature of the swap can also be its drawback: if something changes in the hedged exposure profile (e.g lower than anticipated foreign currency cash flows), the swap is may be costly to adjust when compared to layer forward contracts, for example. Companies that execute cross-currency swaps usually weigh the pros and cons and establish net benefits that outweigh complexity factors and other drawbacks from executing a swap 22 Strategy Comparison Criteria Delta (FX Sensitivity) Complexity Strip of Forwards Cross-currency Swap EUR 21.6 million EUR 20.2 million Minimum Elevated Yes May require additional documentation such as ISDA Low on front end; proportional for each contract/maturity High due to large notional exchange at maturity Relevant (different) forward rate for each value date All cash flows exchanged at spot rate Interest rates, spot rate Interest rates, spot rate, cross-currency basis Cash flow hedge accounting or MTM through FX G/L Cash flow /net investment hedge accounting or MTM through FX G/L

Ease of Execution Credit Charges Exchange Rates Used Valuation Drivers Accounting Treatment The steeper the forward curve, the more off-market the final exchange on the swap will be as a stand-alone forward Therefore the greater the interest rate differential will have to be to compensate for off-market value of the final exchange 23 Q&A. Thank you. Bryan Morales Global Markets Citizens Commercial Banking One Logan Square 130 North 18th Street, Suite 1310 Philadelphia, PA 19103 Desk: 888 821 3600 Direct: 617 994 7279 Mobile: 206 459 4885 [email protected] 24 Disclaimers: Citizens Bank, N.A., Citizens Bank of Pennsylvania This document has been prepared for discussion and informational purposes only by Citizens Bank, N.A. and/or Citizens Bank of Pennsylvania (Citizens).In the preparation of this document, Citizens has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources.Citizens makes no representation or warranty (express or implied) of any nature, nor does it accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information in this document.The information in this document is subject to change without notice and Citizens does not undertake a duty or responsibility to update these materials. The information contained herein should not be construed as investment, legal, tax, financial, accounting, trading or other advice. Under no circumstances should the information be considered recommendations to enter into transactions. You should consult with your own independent advisors before acting on any information herein. Citizens Bank, N.A. and Citizens Bank of Pennsylvania are wholly-owned bank subsidiaries of Citizens Financial Group, Inc. Products and services are offered by either Citizens Bank, N.A. or Citizens Bank of Pennsylvania. Citizens Bank is a registered trademark of Citizens Financial Group, Inc. Copyright 2014. All rights reserved. Citizens Bank is a brand name of Citizens Bank, N.A. and Citizens Bank of Pennsylvania. Deposit accounts held at Citizens Bank, N.A. and Citizens Bank of Pennsylvania are separately insured. Unauthorized reproduction or use of any such trademarks or brand names is prohibited.

Recently Viewed Presentations

  • World War II

    World War II

    Here children use German marks, worth less than a penny, as building blocks. World War II. The Road To War (1931~1941) ESSENTIAL QUESTIONS. ... Jiang Jieshi fiercly resisted. Japanese weaponry was far superior. Japan bombed cities. "Rape of Nanjing" -...
  • Environment and Marketing - University of Lapland

    Environment and Marketing - University of Lapland

    MAO:33/03 a message asking to contact a competing service provider was clearly marketing. The company claimed that they only tried to safeguard people using a service that might not be available after a certain date. MAO:204/04 even the use of...
  • Writing the Critical Lens Essay - Cardinal Hayes High School

    Writing the Critical Lens Essay - Cardinal Hayes High School

    Critical Lens Essay New York State English Regents Exam: Session II, Part B (Task 4) Your Critical Lens: "If the literature we are reading doesn't wake us, why then do we read it? A literary work must be an ice-axe...
  • Le cerveau comme le corps humain sont des

    Le cerveau comme le corps humain sont des

    OBJECTIFS 1 mois 2 mois 3 mois 6 mois 1 an 3 ans 5 ans 10 ans 20 ans AVOIR FAIRE ÊTRE PARAÎTRE OBJECTIFS La nécessité est la mère de l'invention S 'obliger à réussir, c 'est commander à son...
  • BYU Deposition Facility

    BYU Deposition Facility

    Calibri Arial 宋体 Symbol Times New Roman Wingdings Default Design Microsoft Equation 3.0 BYU Deposition Facility Slide 2 BYU - Previous Testing Goal 1: Increase gas temperatures to 1400 C Temperature Range BYU - Facility Modification BYU - New Coupon...
  • IP Inclusive / D&I Champions Some thoughts from

    IP Inclusive / D&I Champions Some thoughts from

    * Please note that information, guidance and ideas provided by IP Inclusive are not intended as legal advice. We encourage our supporters to seek independent professional advice on legal aspects of their equality, diversity and inclusion policies.
  • Smiles on Wings: New Beginnings - Dining for Women

    Smiles on Wings: New Beginnings - Dining for Women

    HOPE was founded in 1999 by Dr. IftikherMahmood, a native of Cox's Bazar, Bangladesh. The Foundation set up a hospital and 8 medical clinics in rural areas of Bangladesh to provide primary and specialized healthcare to the poor. HOPE partners...
  • Understanding ICD-10-CM and ICD-10-PCS

    Understanding ICD-10-CM and ICD-10-PCS

    Mary Jo Bowie MS, BS, AAS, RHIA, RHIT ICD-10-CM Coding Conventions CHAPTER 3 Coding Conventions Coding conventions are instructional notes, punctuation marks, abbreviations, and symbols that are used throughout ICD-10-CM and ICD-10-PCS to provide direction when selecting codes.