Multi*COINS IN COINS WE TRUST

Multi*COINS IN COINS WE TRUST Case Reference: Expanding import-export business using trade financing in CHINA

Multi*COINS IN COINS WE TRUST A. EXPORT BUSINESS Case A1 – The Scenario A leather goods factory in China sells fashionable handbags to a large French retail franchise, and the French buyer requires the settlement method of “Open Account O/A 30 days after shipment.” Although the factory can self-finance the upfront production funding itself, accepting such trade term means that the factory will not be able to receive the payment nearly 100 days after the shipment, which will not only result in tie-up of funds but lead to collection and exchange risk as well. How should the problem be solved ?

Multi*COINS IN COINS WE TRUST Solving the problem for both the buying and the selling parties with the “discount and buyout of usance L/C” Case A1 - The Solution The Buyer The Supplier 1）Establish a usance L/C of 120-150 days 2）Document presentation after shipment 3）D/A and pickup 4）Full advancement of payment 5）Payment after 120-150 days FSP

Multi*COINS IN COINS WE TRUST Case A1 - The Benefits Benefits for the Supplier Advanced payment term Reduced exchange risk Tax rebate in time Lowered capital costs Enhanced competitiveness for more orders Benefits for the Buyer Prolonged payment term Reduced exchange risk Lowered capital costs Enhanced competitiveness with fund on hand

Multi*COINS IN COINS WE TRUST Case A2 – The Scenario A furniture factory have not entertained credit transactions for years and it would accept sight L/Cs or full payment before shipment. Amid fierce market competition, they realized that they have lost many orders due to disagreement on settlement with the customers. They also found out that settlement with sight L/C is not really risk-free as they have been refused payment by issuers many times on the ground of discrepancies after shipment and eventually had to settle for discounted payment. With credit transactions, however, there were also situations when customers canceled their orders or the L/Cs due to market changes., which caused big losses to the factory. An even greater problem was the funding pressure to raise adequate funds for production by receiving too many L/Cs. So how should the problem be solved ?

Multi*COINS IN COINS WE TRUST Case A2 - The Solution 1. Using multiple trade financing methods. 2. Establishing a flexible settlement scheme by integrating various financing methods and hedging measures. Settlement scheme Financing scheme 30% deposit + usance L/C 30% deposit + documentation collection Partial L/C + partial collection Document against Acceptance (D/A) Open Account (O/A) Packaging + cargo pledge loans Negotiation loans B/L pledge loans Discount and buyout of usance L/Cs Export credit insurance loans Factoring

Multi*COINS IN COINS WE TRUST Case A2 – The Results Results to the Factory Enhanced competitiveness for more orders Reduced collection risk Lowered capital costs Advanced production funding

Multi*COINS IN COINS WE TRUST Case A3 – The Scenario A motorcycle factory receives an order from a large US franchise for an annual export sales of USD30,000,000 that features steady exportation in monthly average and profitability. The customer, however, requires “O/A 90 days after shipment.” So how should the problem be solved ?

Multi*COINS IN COINS WE TRUST Case A3 - The Solution 3）80% advance payment US Customer The Factory 1）Document presentation after shipment 2）D/A and pickup 4）Payment after 90 days FSP 5）Payment of remaining balance

Multi*COINS IN COINS WE TRUST Case A4 – The Scenario A large garment procurement company purchases products from a number of local factories in China that are scattered geographically and diversified in strength. The procurement company requires “O/A 45 days after shipment.” Most of the factories can raise funds for purchasing materials, but considering the production cycle plus the 45 days after shipment, they will not be able to collect the payments until over 100 days later, so the production flow will be affected. So how should the problem be solved ?

Multi*COINS IN COINS WE TRUST Case A4 - The Solution The Buyer The Suppliers FSP 1）Goods delivery to warehouse 2）Partial payment for the goods 3）Shipment to destination 4）Payment after 45 days 5）Payment of remaining balance CFS/Warehouse

Multi*COINS IN COINS WE TRUST Case A4 - The Benefits Benefits for the Suppliers Advanced capital payback Reduced exchange risk Lowered capital costs Enhanced competitiveness for more orders Benefits for the Buyer Prolonged payment term Reduced exchange risk Lowered capital costs Less risk for suppliers due to advance payment

Multi*COINS IN COINS WE TRUST B. IMPORT BUSINESS Case B1 – The Scenario A large international food material trading company imports industrial dairy products and sells them to the domestic food factories in China. Based on common market practice in the trade, they demand settlement of “net 30-60 days with a grace period of 30 days” thus it will take the trading company over 180 days from product procurement to payment collection leading to capital tie-up as well as collection risk over time. So how should the problem be solved ?

Multi*COINS IN COINS WE TRUST Case B1 – The Solution 3）70% advance payment Food product factories Trading Company 1）Document presentation after shipment 4）Payment after 90 days FSP 2) Document presentation 5）Payment of remaining balance

Multi*COINS IN COINS WE TRUST Case B2 – The Scenario A building materials manufacturer in Europe sells products to China through the local regional distributors that require payment terms of “net 30-60 days with a grace period of 30 days.” As the distributors have different credit positions and weak in financial strength, the risk of open account is great. But if handled otherwise, the distributors will not be able to operate as plan with their own funding thus affecting sales. So how should the problem be solved ?

FSP’s specified financing institute Multi*COINS IN COINS WE TRUST Case B2 : The Solution For regional distributors FSP’s specified financing institute Providing financing credit Regional distributors The Overseas Manufacturer 1）Collection and document presentation after shipment FSP 2）Collection and document

Multi*COINS IN COINS WE TRUST Glossary Usance letter of credit or Deferred payment letter of credit That is paid a fixed number of days after shipment or presentation of prescribed documents. It is used where a buyer and a seller have close working relationship because, in effect, the seller (beneficiary of the L/C) is financing the purchase by allowing the buyer a grace period for payment. It differs from a sight draft or time draft in that no drafts are involved but the payment is guaranteed on the stated date. However, there being no draft, the beneficiary party's ability to discount or sell his or her right to payment is restricted. Standby Letter of Credit Primarily a substitute for a performance bond or payment guaranty, this L/C is used where banks are legally barred from issuing certain types of guaranties. It serves as a parallel (collateral) payment source in case the primary source fails to meet its obligations in part or in full.

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