Synthesis Bond Presentation Synthesis Bond Presentation * * * * - PowerPoint PPT Presentation

Synthesis Bond Presentation Synthesis Bond Presentation * * * * * *

Bond Issuance 6.50% p.a. indicative rate in USD (Swap equivalent level in EUR and GBP: indicatively 5% p.a. in EUR and 5.50% p.a. in GBP) For a 2yr Issue from a USD500mio Note Issuance Programme Listed in Luxembourg

Transaction Highlights Transaction Highlights A strategic way for bond investors to obtain a high yield return from a diversi�ed trade �nance portfolio A strategic way for bond investors to obtain a high yield return from a diversi�ed trade �nance portfolio All underlying transactions are synthetic investment grade due to the use of A- or better rated credit insurance and letters of credit and have a maximum tenor of 124 days All underlying transactions are synthetic investment grade due to the use of A- or better rated credit insurance and letters of credit and have a maximum tenor of 124 days Strong origination team with extensive experience across markets Strong origination team with extensive experience across markets Bankruptcy-remote SPV structure ring-fences the excess spread to provide additional protection for investors Bankruptcy-remote SPV structure ring-fences the excess spread to provide additional protection for investors

How our Business operates Our business model is similar to �nancing that has been carried on for centuries. We provide funding for companies who have strong business models but need outside help to �nance their larger transactions 1. We �nance transactions, not companies. We are not a lender in a traditional manner and we do not provide loans to companies. All funding that we provide is repaid upon completion of the transaction and our exposure ends at that point. 2. We step directly into the transaction. Most of the transactions that we �nance are the simple sales of goods to end buyers. In this case, we are bridging the time gap between dispatch of the goods by the supplier, and receipt by the buyer. W e pay the seller directly, we take ownership of the goods until receipt, and collect sales proceeds directly from the buyer. 3. We always require secured method of payment. Where letter of credit or credit insurance is not feasible or customary we would require that �nal buyer pays through Cash Against Documents arrangement plus payment guarantee/performance bond.

Synthesis Trade Finance II SA Bond Issuance The notes will be : Listed on the Luxembourg Stock Exchange Available for trading on the Euro-MTF market Deliverable in Euroclear, Clearstream and CREST Stock Exchange listed Stock Exchange listed The proceeds of the notes will be used to �nance short-dated, secured, trade �nance transactions to a Locked Locked diverse pool of clients. Every transaction will have either a Letter of Credit or Credit Insurance backing it, as well as appropriate legal charges over the �nanced goods. The underlying transactions will have no market risk because they are �nancing existing back-to-back contracts. The goods themselves will primarily be commodities. The transactions will be originated by Synthesis Structured Commodity Trade Finance Limited and purchased by Synthesis Trade Finance IISA. This document gives an overview of the planned issuance programme.

What is Structured Trade Finance? Structured trade �nance is where a �nance company funds a transaction on behalf of a third party. In our case we achieve this by directly purchasing the goods from their supplier and then selling the goods directly to their purchaser, instantly removing a substantial portionof the creditrisk. The advantage for investors is that trade �nance portfolios : Self-Liquidating Self-Liquidating Are self-liquidating Trade �nance transactions are typically 30-60 days so there is a clear exit path for the funder. It also allows funders to quickly reduce exposure to borrowers, sectors and geographies Strong Returns Strong Returns Have strong returns Typically trade �nance transactions have very strong returns due to the short tenor. By e�ciently keeping money deployed, this can be converted to strong annualised returns Enhanced Security Enhanced Security Have strong security The funder generally has direct ownership or a charge over the assets being �nanced as well as access to a Low Default Rates Low Default Rates Letter of Credit or Credit Insurance Have low default rates Historically, structured trade �nance transactions have very low default rates and very strong recovery rates, thanks tothe strong asset security

Structured Trade Finance in numbers $6 trillion 80% 0.02% WTO Member Exports per Of the SME share requires Is the historical default >50% year trade �nance rate SME share ofthat trade According to the International Chamber of Despite global economic uncertainty, global trade However, as deliveries take longer, SMEs turn to trade SMEs continue to globalise, moving their goods in Commerce Report in 2011, default rates in trade continues to grow year-on-year as globalisation �nance to bridge the cash�ow gap between greater size, across greater distances �nance stood at around 0.02% - better than continues production and payment investment gradebonds* * http://iccreport2015 Product Total Exposure($mio) Total DefaultedExposure ($mio) Exposure-weighted Default Rate Transaction Default Rate Export L/C 988,434 235 0.02% 0.01% ImportL/C 1,656,528 1,210 0.07% 0.08% Performance Guarantees 1,023,561 1,154 0.11% 0.17% Loans forImport/Export 3,154,407 5,323 0.17% 0.22%

Why is there an opportunity for investors in Structured Trade Finance? With the phased implementation of Basel III and tighter lending criteria from banks, many SMEs have lost access to the funding that they previously had. Banks are reducing exposure due to High regulatory costs of capital Out-dated technology and KYC infrastructure A reluctance to lend on a transactional basis The Global Financial Crisis created a gap With banks less willing to lend to SMEs an opportunity has been created for smaller, more nimble �nancial organisations to enter the market. Using a combination of experience and understanding of global trade �ows, a new breed of trade �nance houses is emerging who can lend based upon assets, increasing security whilst maintaining strong returns.

How do we choose our clients? Here at Synthesis, a large part of our success within the group comes from working exclusively with borrowers who have a strong track record in their industry. We look for a minimum of three years of successful trading by the management team and a strong business model with good margins across their product range.

Deal selection In Structured Trade Finance the key to a successful portfolio is not just to choose the right counterparties, but also to select the deals with the right characteristics. Each commodity has its own idiosyncrasies, but in all transactions we seek veri�cation of the value of the goods and will, where possible, take a charge over the goods. In the event of non-payment, we would liquidate the assets, hence our preference for non- perishable, generic commodities. Underlying asset Loan-to-value The underlying asset must be something that we can take control Typically we look at a “real” valuation of the asset in terms of of, check the quality of and re-sell if necessary. It is always non- what price it can be sold at in a variety of jurisdictions perishable Monitoring Credit Enhancement Are we able to identify, monitor and exercise control over the The transactions that we �nance are always backed by a Letter of asset at any point during the transaction? Credit or Credit insurance from an investment grade counterparty, or by alternative arrangements ensuring prompt and secure payment by the customer (performance bonds, payment guarantees)