synthesis market based financing fund

MARKET-BASED FINANCING FUND

THE NEW EVOLUTION OF THE FIRST SPECIALISED PEER-TO-PEER LENDING FUND LAUNCHED AND

REGULATED IN THE EU

REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG

CONTENTS04 FUND SUMMARY

05 THE SYNTHESIS APPROACH

06 – 14 STRUCTURED COMMODITY TRADE FINANCE

15 – 16 SMALL BUSINESS LENDING

17 – 18 AIRCRAFT LEASING

19 – 23 U.S. PRIME CONSUMER LENDING

24 – 29 LENDING CLUB OVERVIEW

30 – 34 THE SYNTHESIS TEAM

35 TERMS & CONDITIONS

36 – 39 ANNEX

REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 02

SYNTHESIS’ main objective is to offer uncorrelated and stable returns with low volatility, converting investors’

capital into lending facilities grounded in the real economy and handing back interest earned to our investors.

“”Spyros Papadopoulos, Founder & CEO


FUND SUMMARY

1 Our flagship product, Synthesis Market-Based Financing Fund was launched as Synthesis-P2P in November 2012, and was the first fund of its type to be established in the EU. It has returned an average of 7.65% per annum (0.62% per month) net to investors since its launch, and after its initial deployment of capital, has produced positive returns for its investors every month since January 2013.

BACKGROUND

2 Changes in the regulatory environment in the wake of the subprime crisis have led to a structural shift away from financing by banks, opening up the possibility for funds and other non-bank institutions to access investments which were previously only accessible to banks.

RATIONALE

3 Synthesis aims to continue to exploit the opportunities created by regulatory pressures (Basel II & Ill) and by bank deleveraging. As our fund evolves, we are continually re-defining our asset classes, enabling us to maintain a strong average return that is not achievable by other, more restricted funds.

STRATEGY


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95.00100.00105.00110.00115.00120.00125.00

Cumulative Returns

P2PHFRI Fund Weighted Composite IndexiBoxx USD Overall Index

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2.0%

4.0%

6.0%

8.0%

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An

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aliz

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Annualized Volatility

Risk vs Return

P2PHFRI Fund Weighted Composite IndexiBoxx USD Overall Index

THE SYNTHESIS APPROACH

The Synthesis-P2P Fund delivered a highly successful track record over the last three years by maintaining a significant exposure to the peer-to-peer lending sector. Throughout 2015 and 2016

we have extensively examined a series of alternative asset classes that offer strong returns and re-aligned the portfolio based upon our findings.

Synthesis has decided to concentrate on short-term, secured, structured trade financing, aiming to allocate 50% of the fund’s portfolio to financing shipments of energy-related commodities, non-

precious metals and agriculture (non-perishable). 35% - 40% of the remaining portfolio will be allocated to other strong collateralized opportunities and the remaining 10% - 15% will remain as exposure to U.S. Prime Consumer Lending. We are also planning to launch a fund dedicated to

consumer lending for non-US investors, as well as a dedicated Fund in Structured Trade Finance.

We have chosen to focus on Structured Commodity Trade Finance due to the historic consistency of returns (attractive yields combined with low volatility), short tenors of 60-90 days, fast capital

deployment, and the lowest default rates relative to any other interest-based asset class.



MARKET-BASED FINANCING

STRUCTURED COMMODITY TRADE FINANCE

STRUCTURED COMMODITY TRADE FINANCE - GLOBAL OVERVIEW


$0.6tn Exports (6.4%)

SOUTH AMERICA


NORTH AMERICA


AFRICA

$2.2tn Exports (24.7%

ASIA-PACIFIC


CIS


EUROPEAN UNION


MIDDLE EAST

Source: WTO International Trade Statistics 2015 – Merchandize Trade By Region

STRUCTURED COMMODITY TRADE FINANCE - GLOBAL OVERVIEW


80-90%55%41%

of merchandize trade is from the developing world

of exports are made by SME’s

of trade relies on trade finance

$8.8tn

Is the value of WTO members’

commodity exports in 2014

The average trade is around 60 days, allowing

us to remain highly invested whilst giving liquidity to investors.

SELF-LIQUIDATINGCAPACITY

The market for global trade is in excess of $6

trillion per year.

Our transactions typically yield an

annualized return of 8-12%.

STRONG RETURNS

Figures show that default rates are sub 0.02% per year, with loss ratio of

0.01% - better than those of single A-Rated Bonds.

LOW DEFAULT RATES


STRUCTURED COMMODITY TRADE FINANCE - OVERVIEW

Structured Trade Finance (‘STF’) has been around for almost thirty yearsand unlike with traditional Trade Finance (where lending is dependent uponthe credit quality of the borrower’s balance sheet), in Structured TradeFinance a self-liquidating arrangement is created, focusing on theunderlying transaction itself.

STF has been given many definitions since then, but the bestdefinition is given by Dr Benedict O. Oramah as ’the art oftransferring risks from parties less able to bear them to thosemore equipped to manage them in a manner that ensures theautomatic reimbursement of the financing through theunderlying transaction assets’. With STF, lenders no longerlook to borrowers as direct sources of repayment, but ratherto the underlying assets arising from the financing, namely thegoods financed and the receivables arising therefrom.

Accordingly, structured finance makes it possible to isolate certain risks andconvert uncertainty to some certainty (‘predictable cash flow’), and makethe transaction being financed self-liquidating.



STRUCTURED COMMODITY TRADE FINANCE - OVERVIEW

Good Deal Flow

Proper Due Diligence

OUR SUCCESS IN STRUCTURED TRADE FINANCE IS BUILT UPON:

It is important to note that we do not take any view on theprice of a commodity.

SoundDocumentation


STRUCTURED COMMODITY TRADE FINANCE – TRANSACTION TYPES

Receivables financing differs from inventoryfinancing in that the goods have already beensold but payment has not been made. In thiscase, the security for the lender is based uponthe value of the unmade payments.Receivables financing is often done by“factoring”, where the lender purchases theinvoices and becomes the legal owner of thedebt, or “invoice discounting” where the lenderbecomes the borrower remains responsible forcollection and enforcement of the debt.

Risk Mitigation: Credit insurance / Letter ofCredit, insured goods, documentary review.

RECEIVABLESFINANCING

Transit financing is a loan extended either tothe buyer or seller of goods in a situationwhere all aspects of a buy and sell transactionare agreed apart from the payment date.Typically this could be because the buyerwants paying upon shipment but the seller willonly pay upon receipt of goods.

Risk Mitigation: Credit insurance / Letter ofCredit, insured goods, documentary review.

TRANSITFINANCING

Inventory financing is a very broad term, it is justused to clarify that the goods are not in transit,but waiting in a warehouse in either exporting orimporting country for onwards export/distribution. When goods are in inventory, youdon’t have shipping documents but instead havewarehouse warrants/warehouse receipts thatevidence that the goods are held to your order.Goods can be pre-sold or unsold. If unsold, yourisk having a borrower that is unable (for somereason) not to sell the goods, thus risking yourmain source of repayment. If unsold, the goodsshould also be hedged, with the proceeds of thehedge assigned to the borrower. We try to avoidthis type of financing. If pre-sold, theperformance risk is on the o take of our borrower.Goods may not need to be hedged if thepurchase and sales price are back to back orfixed. We like this kind of financing.

INVENTORYFINANCE


STRUCTURED COMMODITY TRADE FINANCE – LOAN STRUCTURE

Typically processor, producer or merchant of commodities. Screened and vetted by SSCTF.

BORROWER

Funding borrower by paying directly to its supplier, repayment as part of the sales proceeds from final off taker. Incentives for all participants are aligned.

SELF-LIQUIDATING

Loans for single transactions, thus short-term in nature. Typically 45-90 days, and always uncommitted.

SHORT-TERM

Collateral-to-Loan ratio always above 110% and increasing throughout the transaction. Collateral always insured against loss or theft.

COLLATERAL PROTECTION

Loans secured against the commodity financed and its receivables. Legal recourse and operational control.

SECURED

No commodity price exposure. Credit risk exposure transformed into performance risk exposure.

EXPOSURE

Loans are short-term, 30-120 days, self-liquidating and fully secured made to select participants in the commodity value chain. All loans have the following attributes:

LETTER OF CREDIT/INSURANCEIn most cases, we require either a letter of credit or credit insurancein order to provide us with the highest possible protection. Typicallythis would come from a A+ or better rated institution.

LEGAL CHARGE OVER GOODSEach commodity has their own idiosyncrasies, but in all transactionswe seek verification of the value of the goods and will wherepossible take a charge over the goods. In the event of non-paymentwe would liquidate the assets, hence our preference for non-perishable and homogeneous commodities.

COMPANY GUARANTEEWhilst this is transactional finance, it remains a corporate debt

PERSONAL GUARANTEE OR COLLATERALIn some cases we will extract personal guarantees from theborrower and in extreme cases we will take other collateral. Whilstthis would be a last resort for us, it is further security as well aspersonal incentive for the borrower.


STRUCTURED COMMODITY TRADE FINANCE – SECURITY

SMALL BUSINESS LENDINGSHORT-TO-MEDIUM TERM RECEIVABLES FINANCE AND OTHER ASSET-BACKED OPPORTUNITIES



Since 2008, small businesses have found it increasingly hard to obtain financing from traditional lenders. AtSynthesis, we focus on the underlying assets, rather than the company’s balance sheet, allowing us to makelending decisions based upon the security that we receive.

Lending to Small Businesses against:

ACCOUNTSRECEIVABLE

PROPERTY &EQUIPMENT

PERSONAL &COMPANY GUARANTEES

MARKETPLACE LENDINGAIRCRAFT LEASING



MARKETPLACE LENDING – AIRCRAFT LEASING

Before the financial crisis, an aircraft lessor would typicallyhave 80% of the aircraft financed by the many banks involvedin the sector. Now, with banks under pressure to preservecapital, these loan to values (‘LTV’) have been reduced to 60-70%. This opens up the possibility for third party investors –such as investment funds - to fill a lucrative funding gap.

As an investment, turbo-charged, fuel efficient propellers have the following advantages:

• Proven value curves.

• Low volatility.

• Regulation and protection under international law.

• Systematic insurance coverage.

• Aircraft are maintained to strict schedules and are movable

from low demand to high demand areas very quickly.

MARKETPLACE LENDINGU.S. PRIME CONSUMER LENDING



EXECUTIVE SUMMARY

PROGRAM FOCUS

• Focused on investments in U.S. prime consumer credit via investment on the Lending Club marketplace loan platform.

• Generate superior risk-adjusted returns by investing in consumer debt originated by Lending Club uncorrelated with stock and bond markets.

• Active loan selection methodology using proprietary selection/risk model.

• Use moderate leverage to enhance returns, optimizing financing through fixed-rate rated securitizations.

MANAGER

Our partner company is the largest manager entirely focused on Lending Club assets, with over $600M under management across its fund vehicles and managed accounts, as well as the first institutionally-focused fund investing with leverage on the Lending Club platform with 3-5 years of history and 12+% lifetime returns.

COMPETITIVE ADVANTAGES

• Utilizes buying technology developed by largest and most experienced team, applying an insurance underwriting approach to predict the performance of risk pools.

• Investment Approach developed during four year working partnership with Lending Club.

• Liquidity - up to 80% of pro rata taxable income available for quarterly distribution.

• Position / Reputation in the market consistently provides “first pass” .

ICON LIST 03

Investing in Lending Club’s prime consumer programPrime consumers utilizing loans from Lending Club to transform high rate bankcard debt to lower rate installment loans (Better

than typical US consumer).

Focus on this segment eliminates bottom third of credit populationExpected losses accelerate quickly within this range.


PRIME CONSUMER PORTFOLIO OVERVIEW

LOAN USAGEPercentage of debt consolidation or credit card refinancing.

AVERAGE FICO SCORE688

DEBT-TO-INCOME RATIO16%

AVERAGE BORROWER INCOME(vs. $51,900 U.S. median household income – 2013)

$84,700

CREDIT INQUIRIESIn the last six months. 88% have <= 1 inquiry.

0.6

86%

DELINQUENCIESIn the last two years. 93% have <= 1 delinquency.

0.4


PRIME CONSUMER PORTFOLIO OVERVIEW

36 MONTHS

50%

60 MONTHS

50%

LOAN TERM

C – 40%

A/B – 26%

D – 19%

E – 12%

F/G 3%

LOAN GRADEATTRIBUTE VALUE

FICO 690

Average Income $85,645

Debt to Income 15.4%

Revolving Balance $17,367

Open Credit Lines 11

Revolving Utilization 56%

Recent Credit Inquiries 0.6

Years on File 16.2 years

FICO RANGE DELINQUENCY RATE SHARE OF POPULATION

300-499 87% 5%

500-549 71% 8%

550-599 51% 9%

600-649 31% 10%

650-699 15% 13%

700-749 5% 17%

750-799 2% 18%

800+ 1% 20%

THE SYNTHESIS TEAMAN INSIGHT


SYNTHESIS MULTI-ASSET ARCHITECTURE SICAV-SIF, SCA, is managed by its GeneralPartner, SYNTHESIS (LUXEMBOURG) S.A.

The four members of the Board of Directors of SYNTHESIS (LUXEMBOURG) S.A are supported intheir functions by:

• an ADVISORY COMMITTEE at the level of the SIF providing general and specific advice onmatters of strategic decision-making, including a focus on identifying potential conflicts ofinterest within the structure.

• an INVESTMENT COMMITTEE for Synthesis P2P Sub-Fund, comprised of individuals withspecific expertise and experience in the core strategies of the Sub-Fund.


Spyros Papadopoulos Chairman & CEOSpyros has over 17 years of experience in alternative investments. He began his career in Private Banking, first with Citigroup in London and Geneva,where he was the key contributor to the development of both the Spanish and Greek Wealth Management Desks, and then with Societe Generale inAthens, where he was instrumental to the expansion of the Greek Private Banking division. Spyros resigned from Private Banking in 2006 to set up anasset management company for Deloitte, before returning to London as Director of the hedge fund Absolute Return Partners. He left to found Synthesisin June 2009. His clients came through unscathed, and indeed pro ted, from the crises of 2000-02 and 2007-present. Spyros holds the InvestmentManagement Certificate of the CFA-Society of the UK.

Marc Lefe bvre Chief Compliance OfficerMarc started his career as an auditor of investment funds at PricewaterhouseCoopers. He then moved on to Nordea Bank to assist with Compliance, Anti-Money Laundering and Legislation issues and set up controls and processes to ensure efficient monitoring. Later, as Board Member and ConductingOfficer with Glitnir Bank, he was instrumental in setting up the investment fund arm of the bank. Marc subsequently set up his own advisory firm, LEVeLAdvisory, providing services to the asset management and banking sector. Marc holds a Masters Degree in Finance and a Masters Degree in Control fromHEC. He is a Certi ed Director of the Luxembourg Institute of Administrators (ILA), and a certified “Senior Fund Specialist” and “Compliance Officer” of theInstitut de Formation Bancaire in Luxembourg.

Manuel Bertrand Chief Financial OfficerManuel is a CSSF Authorized Director in the investment fund sector, acting as executive or non-executive Director. Manuel previously headed theFinance & Administration Management activities of several industrial companies, both at subsidiary and mother company level, where his primary focuswas to ensure the existence and the communication of accurate and reliable financial data. Manuel gained his first experience atPricewaterhouseCoopers, Liege, where he was in charge of the audit of a number of major industrial companies. Manuel holds a Degree in CommercialEngineering from HEC in Belgium.

Aristides Protopapadakis Managing Partner – Risk ManagementAristides has a banking background, with a wealth of experience in derivatives, credit, risk analytics, and financial software systems. Prior to setting upSystemic Risk Management Solutions, he acquired extensive experience in the above areas while holding senior positions at Citibank, ABN Amro, andBank of America in Treasury and Risk Management units. Aristides holds an MBA in Commercial Engineering from the Solvay Business School (UniversiteLibre de Bruxelles).


THE SYNTHESIS TEAM – BOARD OF DIRECTORS

David Phipps Member of the Investment CommitteeHaving worked in the financial industry for almost 30 years, David has built up significant and broad experience in Commodity Risk Management,Commodity Trading and Financing of Commodities. David has held senior positions at investment banks, including Head of Commodities at ABN AMROBank NV, Co-Global Head of Commodities at ETD UBS AG, CEO of a London Stock Exchange listed trading company and Head of Portfolio Managementat a Fund of Funds. David has extensive knowledge of market and credit risk management including risk mitigation products in physical, on exchangeand OTC products.

Frances Walsh Member of the Investment CommitteeHighly experienced and motivated structured trade financier with comprehensive knowledge of and extensive practical experience in providing financewithin the international trade sector. Frances’ expertise encompasses traditional trade finance, factoring and forfaiting in the export markets. Thisexperience is complemented by a strong legal background and 25 years’ exposure to the international banking and finance markets.

Andy Sweeney Member of the Advisory CommitteeAndy has over 16 years of experience in debt capital markets, all gained working in major global investment banks. He began his career at Citigroup witha focus on raising short term finance for companies via the commercial paper market. Subsequently he worked in the bond syndication teams at RBCCapital Markets and Mizuho International, advising banks, governments and corporates on issuing bonds across a range of currencies for periods ofanything from one year to fifty years, and in sizes ranging into the billions of pounds sterling. He enjoys innovation and has been responsible for severalinnovative bond transactions, including creating a retail bond for a major UK bank and designing structures to effectively manage interest rate risk forborrowers. One of his roles in banking was to work to create liquid secondary markets for securities and he looks forward to bringing that experience tothe peer-to-peer and market-based lending market. Andy understands that investment is about creating a fair transaction for both borrowers andinvestors. Andy graduated from Cambridge University with an MA (Hons) in Law.


THE SYNTHESIS TEAM – MEMBERS OF THE INVESTMENT COMMITTEE


MARKET-BASED FINANCE FUND – TERMS & CONDITIONS

Risk-Adjusted Targeted Return 5 - 7% over LIBOR (unleveraged)

Management Fee 1.5% p.a.

Performance Fee 10%, providing annual returns exceed 7.5% (not cumulatively)

Minimum Investment €125,000 (or $ equivalent)

High Water Mark Yes

Status Open-Ended

Subscription Monthly

Redemption Monthly with 45 days notice (Orders received by 17:00 CET on the 15th calendar day of each month are processed on the NAV of the last calendar day of the following month)

Legal Form SICAV-SIF

Jurisdiction Luxembourg

Supervisor Commission de Surveillance du Secteur Financier (CSSF)

Custodian CBP Quilvest Bank

Administrator Lux Global Trust Services S.A.

Auditor PwC

Legal Counsel Allen & Overy

ANNEX

SUPPLEMENTARY INFORMATION



THE EVOLUTION OF THE “P2P” LENDING INDUSTRY

2005The concept of peer-to-peer

(consumer) lending is pioneered in the

UK by Zopa.

Founding of Lending Club and Prosper in the US.

Lending Club originates its first loan in June 2007.

2006

2010MarketInvoice is

incorporated in the UK for the purpose of

short-term receivables financing of UK SMEs.

Launch of OnDeckCapital in the US, providing small

business loans to SMEs.

2011

2012Incorporation of

LendInvest in the UK, and Realty

Mogul in the US, for short-term bridging property finance.

Lending Club reaches over $1

billion in total consumer loan

originations.

2012

2012Launch of

Synthesis Peer-to-Peer Lending Fund

2013Google acquires a stake in Lending

Club.

OnDeck Capital reaches over $500

million in total small business loan

originations.

2013

2014Venture Capital firm Foundation

Capital publishes a paper* coining the term “marketplace

lending”.

2014 Lending Club IPO officially hit the $1 billion mark with

underwriters exercising their full option to purchase8.7 million shares.

2014

2014Reflecting the

evolution of the P2P/marketplace

“industry”, Synthesis Peer-to-Peer Lending

Fund incorporatesshort-term structured

commodity trade finance transactions.


THE EVOLUTION OF THE “P2P” LENDING INDUSTRY

This document is not intended for any citizen of the United States or any other person or entity subject to U.S. Securities law.

Without any limitation, this presentation does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. Theinformation herein does not constitute the provision of investment advice or a recommendation; its sole purpose is to generate interest for a productproposal. Changes to this presentation may be made without notice. Opinions expressed may differ from views set out in other documents. Although theinformation contained herein has been taken from sources, which the authors believe to be accurate, no warranty or representation is made as to thecorrectness, completeness and accuracy of the information or the assessments made on its basis. The authors do not accept liability for any damagearising from the reliance on this presentation. This presentation may not be distributed by the recipient to any other person without the express writtenconsent of the authors. Each recipient of this presentation is expected to be sophisticated and capable of independently evaluating the merits and risksof an investment in the product. If an investor decides to invest in the fund, the investor does so in reliance on his own judgement. Investing in theproduct reflects a particular market view the recipient of this presentation has taken independently from the authors. When making an investmentdecision the recipient of this presentation should rely solely on his own market and financial research and not the information contained here in. Theproduct described herein may not suit all investors and before entering into any transaction each investor should take steps to ensure that he fullyunderstands the product and has made an independent assessment of the suitability of the product, including its possible risks, in light of the investor’sown objectives and financial situation. In particular, investing in the product may result in the return of less than the investor’s original investment andeven the total loss thereof. Any investor should seek advice from its professional advisors in making such assessment.


DISCLAIMER

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synthesis market based financing fund

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