Trade Finance

A net return of 8% per year. To be paid out 2% per quarter.

The concept of trade finance basically entails financing trade transactions. These trade transactions take place between a manufacturer and a retail organization, which initiates the transactions. These two, howver, do not engage in direct business with each other; services from a third party, who has all the necessary contacts, are used (vendor). The vendor searches for funding to enable the trade and he contacts a Trade Finance Specialist (TFS), who, after investigating all parties involved, checks the insurability of the trade with an insurance company (AIG). No insurance means no trade. The TFS has access to funding to finance this trade by means of an investment fund. The TFS asks his bank (HSBC in New York) to write a letter of credit (LC) containing the end products' specifications and payment conditions. An LCis a commitment from a bank that money is transferred on the condition that the finished product has been produced according to the right specifications. After receipt of the LC, the manufacturer now knows that he is going to be paid and the production is started. In this way, the risk is being controlled for both manufacturer and retailer. When the finished goods are ready, they are checked, shipped and stored in a warehouse. The TFS informs the retailer that the product has been delivered and can be collected. Finally, the TFS sends the retailer an invoice . After receipt of payment, the TFS pays out interest to the investment fund first, then its own costs. What is left is paid to the vendor. The Trade Finance Fund product, as offered by De veste Asset management, invests directly into the investment fund and receives interest on a monthly basis. Investing in Trade Finance is possible from EUR100,000.

Within the trade finance concept, risks are managed by taking the following measures;

• Before a trade is financed. both the transport - as well as the credit risk are insured with a renowned insiurance company. No insurance, no trade.
• When the finaished product is ready, the TFS hires an external quality controller to check whether the end products' specifications as stated in the Letter of Credit.
• If there are extra costs (for instance, repackaging costs), these costs are taken out of the margin for the vendor. The interest payment to the fund remains intact this way.
• A buffer is built into the fund (a so-called 'first loss reserve' that is gradually built up at the cost of the vendor's margin) so if the end product is not accepted by the retailer. the first loss reserve will back this up.
• Since the investments are made in US Dollars, the currency risk will be hedged.