Bond Issuance 6.50% p.a. indicative rate in USD (Swap equivalent - - PowerPoint PPT Presentation

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

Bond Issuance

Transaction Highlights

• A strategic way for bond investors to obtain a high yield return from a diversified trade financeportfolio
• 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 124days

• Strong origination team with extensive experience across markets
• Bankruptcy-remote SPV structure ring-fences the excess spread to provide additional protection for

investors

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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

The proceeds of the notes will be used to finance short-dated, secured, trade finance transactions to a diverse pool of clients. Every transaction will have either a Letter of Credit or Credit Insurance backing it, as well as appropriate legal charges

• ver

the financed goods. The underlying transactions will have no market risk because they are financing 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.

Stock Exchange listed Secured 3

Low Default Rates

Have strong security

The funder generally has direct

• wnership
• r

a charge

• ver

the assets being financed as well as access to a Letter of Credit or Credit Insurance

Are self-liquidating

Trade finance 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

Have low def ault rates

Historically, structured trade finance transactions have very low default rates and very strong recovery rates, thanks to the strong asset security

Have strong returns

Typically trade finance transactions have very strong returns due to the short tenor. By efficiently keeping money deployed, this can be converted to strong annualised returns

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The advantage for investors is that trade finance portfolios : Enhanced Security Strong Returns Self-Liquidating

What is Structured Trade Finance? Structured trade finance is where a finance 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 portion of the credit risk.

$6trillion

Despite global economic uncertainty, international trade continues to grow SMEs continue to globalise, moving their goods in greater size, across greaterdistances However, as deliveries take longer, SMEs turn to trade finance to bridgethe cashflow gap between production andpayment According to the International Chamber of Commerce Report in2011, default rates in trade finance stood at around 0.02% - better than investment gradebonds* WTO Member Exports per year

>50%

SME share ofthat trade

80%

Of theSME share requires trade finance

0.02%

Is thehistorical defaultrate

Structured Trade Finance in numbers

* http://iccreport2015

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Product TotalExposure($mio) Total DefaultedExposure ($mio) Exposure-weighted DefaultRate TransactionDefaultRate 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?

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 g ap

W ith banks less willing to lend to SMEs an opportunity has been created for smaller, more nimble financial organisations to enter the market. Using a combination of experience and understanding of global trade flows, a new breed of trade finance houses is emerging who can lend based upon assets, increasing security whilst maintaining strong returns.

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. 6

Strong client base B. Strong management A. C. Strong business model

Synthesischooses who to lend to based on these criteria

MARKET KNOWLEDGE

How do we choose our client base?

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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.

Underlying asset

The underlying asset must be something that we can take control

• f, check the quality of and re-sell

if necessary. It is always non- perishable

Credit Enhancement

The transactions that we finance are always backed by a Letter of Credit or Credit Insurance from an investment grade counterparty

Loan-to-value

Typically we look at a “real” valuation of the asset in terms of what price it can be sold at in a variety of jurisdictions

Monitoring

Are we able to identify, monitor and exercise control over the asset at any point during the transaction?

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

• wn idiosyncrasies, but in all transactions we seek verification 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. 8

RiskMitigation

WorkedExample Purchase cost of the goods : USD100 Contribution by the Client : USD10 Contribution by Synthesis :USD90 Sales Revenue of the goods :USD105 Returned to Synthesis : USD92 Returned to Client :USD13 Marine Insurance during transit :Typically 1 10%of purchase price (USD1 10)with Synthesis as first loss payee Credit Insurance before payment : Typically 90% of sale price (USD94.5) with Synthesis as first loss payee (note our exposure is only USD90) 9

Key RiskFactors

Risk of non-payment

• Synthesis only lends to companies or management teams

with a significant track record in the relevant commodity

• Both the arranger of the deal and the debtor are required to

pass our KYCprocess

• Each transaction will have in place a Letter of Credit or Credit

Insurance to act as a safeguard Risk of rejection of goods

• Goods are checked for quality where necessary and certified

by an independent inspector before the transaction is funded Country Risk

• In conjunction with leading trade finance law firm Holman

Fenwick Willan, Synthesis Trade Finance SA continually monitors any potential risks, in particular those relating to currency restrictions, sanctions or embargoes Commodity Price Risk

• Synthesis Trade Finance SA does not engage in transactions

where the return is in any way linked to the price of the underlying goods. Each transaction will have a sales contract at a pre-agreed price so that the return is fixed

• In the event of non-payment by a borrower, Synthesis Trade

Finance SA would first look to enforce the terms of the

• contract. It would then seek to sell the commodity to another
• buyer. It is only after that that they would seek recovery

through the Letter of Credit or Credit Insurance. By concentrating on fungible, hard commodities, the risk of depreciation of the asset is minimised Risk of Documentary Failure

• Facility Documentation is arranged by Watson Farley &

Williams and all transactions are documented by experienced professionals

Oil and EnergyProducts

Eg petrol, aviation fuel

With buoyant consumption of oil products around the world and long delivery times, there is continual demand for funding

Agricultural produce

Eg grains and beans

Agricultural goods are often seasonal which makes it harder for small companies to raise finance. Using our strong market knowledge we can seek out mutualy beneficial relationships

Industrial commodities

Eg polymers, metals

Metals and polymers are businesses that

• ften have regular contracts that allow us to

remain well invested by continually moving money from one contract to the next

Semi-finished or finished goods

Eg generic pharmaceuticals

A proportion of our portfolio may be used to finance non- commodities as long as the margins are strong and the products are generic and liquid

What goods do we finance?

All of the goods that we finance are non-perishable and fungible, so that shipment delays do not accept the value of the asset and we could, in an extreme situation, find a replacement buyer. 10

Bankruptcy remote

The SPV structure means that each issueris independent of the others and dependent only upon its underlying investments

11 Excessspread

Each Issuer retainsits excess spread (the difference between where it borrows and where it invests), less management costs, to provide a buffer for investors

Luxembourg regulated

All bonds are approved by the CSSF and application will be made for them to be traded

• n the Euro-MTF market

Paripassu

All bonds issued with the same maturity date are pari passu and seniorsecured

Synthesis Trade Finance I SA

Bond Structure

Transaction documensts confirmedby SSCTF STF II SA purchases transaction and underlying security from SSCTF STF II SA secures repayment and re- invests the proceeds Transaction

• riginated by

SSCTF Transaction

• ffered to

STF ISA SSCTF monitors transaction performance for its duration

Securitisation Structure

As a securitisation vehicle, Synthesis Trade Finance II SA (STF II SA) has no ability to transact directly. This provides additional protection to investors because transactions are originated by a separate company with a separate decision making process (Synthesis Structured Commodity Trade Finance Ltd) and only purchased with the approval of the separate board of Synthesis Trade Finance SA.

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Disclaimer

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This communication is being furnished solely on a confidential basis to the recipient. This communication is directed at persons having professional experience in matters related to investments and any investment or investment activity to which this communication relates is available only to such persons or will be engaged in only with such persons (or other persons to whom such investment can lawfully be made available or with whom such investment activity can lawfully be engaged). If you do not have professional experience in matters relating to investments you should not rely on this communication. Neither this Communication nor any of the associated documents may be reproduced, re-transmitted or further distributed to any other person or published, in whole or in part, for any other purpose than that stated above. The information in this document, which is in draft form and incomplete, is subject to updating, completion, revision, further verification and/or amendment. In particular, the documents refer to certain events having occurred which have not yet occurred at the date these documents are made available, but which are expected to occur prior to the publication of an approved prospectus in final form. Recipients of this Communication (or any of the associated documents) who are considering purchasing or subscribing for Notes in any of the issuers are reminded that any such purchase or subscription must be made only on the basis of information contained in the approved prospectus its final form, which may be different from the information contained in this document. Notes may not at this time be offered by any of the issuers directly to the public. Neither this Communication nor any of the attached documents constitutes an offer of Notes. By accepting delivery of this Communication, you agree to keep it and its content (including the attached documents) confidential, and not copy, publish, distribute, pass on or disclose any of it except with the prior written consent of Synthesis. To the extent permitted by applicable law and regulation, Synthesis Trade Finance S.A. and its affiliated companies expressly disclaims and excludes any and all liability that may be based on this communication and the attached documents, any errors in it/them or omissions from it/them.