MASTER COLLATERAL CONTRACTS

Please be advised of the following procedures regarding the placement and activation of the said master collateral (contracts).

 

1. A fiduciary agreement must be drawn up between the Fiduciary Bank and the Contract holders.

2. Opening of accounts to receive contracts.

3. The contracts will be lodged into one of the accounts provided.

4. Upon placement of the contracts into the account(s) provided, the fiduciary bank must acknowledge receipt of the contracts along with an approximation of a window time of when the Fiduciary Bank anticipates transmitting the first of the Conditional Funding Instruments. (Bank purchase order)

5. Upon receipt of point 4, the Collateral Confirming Bank, will acknowledge receipt of the above and confirm acceptance of the approximation of the window time to transmit the Conditional Funding Instrument, and further guarantee to deliver the required collateral's upon receipt of the said Funding Instrument.

6. Upon receipt of point 5, by the Fiduciary Bank, instruction will be given to the Fiduciary Bank by the account holders to solicit the Funding Instruments to be confirmed by the Fiduciary Bank.

7. Upon receipt of point 6, the Fiduciary Bank must then confirm the availability of the Conditional Funding Instruments to the Collateral Confirming Bank. This being once the initial Funding Instrument is validated and authenticated by the Fiduciary Bank.

8. Once the said Funding Instrument is transmitted to the Collateral Confirming Bank, the Collateral Confirming Bank will transmit registration and cusip numbers to the Fiduciary Bank, this being for authentication.

9. In turn the Fiduciary Bank would then confirm the registration numbers and cusips to the original Buyers Bank.

10. Upon authentication by the Buyers Bank the said funds will be called for release by the Fiduciary Bank, in turn the said funds will be transmitted to the Collateral Confirming Bank.

 

Instructions will be given where hard copies of the collateral will be delivered to the Buyers Bank by bonded courier.

 

In turn, hold a master collateral contract between ourselves and several of the Grant Master Holders of the world.

 

The said instrument is discounted at various prices depending on the specifications of each of the issued instruments.

 

The reason for discounting the instruments is purely because of the volumes that are purchased.

 

The minimum amount that can be purchased at one time is US$100.000.000,00 with rollovers to US$500.000.000,00.

 

Hence the major buyers of these instruments are large Insurance companies, large corporations in the private sector, and in some cases Governments.

 

The instruments are discounted at the following prices:

 

1. Prime bank notes issued for a period of 10 years and one day, with interest coupons of 7,5% paid annually in arrears. (Herein after referred to as: PBN 7.5/10). Invoice price 73% OF FACE VALUE.

2. Prime bank notes issued for a period of 20 years and one day, with interest coupons of 7,5% paid annually in arrears. (Hereafter referred to as: PBN 7.5/20). Invoice price 63% OF FACE VALUE.

3. Prime bank notes issued for a period of 10 years and one day, with interest coupons of 14% paid annually in arrears. (Hereafter referred to as: PBN 14/10 ). Invoice price 85% OF FACE VALUE.

4. Standby Letters of Credit issued for a period of one year and one day, interest zero percent. (Hereafter referred to as: SBLC'S ). Invoice price 82,25% OF FACE VALUE.

 

Institutes, trusts, banks, and so forth purchase these Instruments for two main reasons:

 

1. Investment:

An Insurance company purchases, say US$500.000.000,00 of SBLC'S at a cost of say 85% of the face value. In order to receive the equivalent of US$500.000.000,00 in face value amount, the investor would only have to pay: 85% of US$500.000.000,00 = US$425.000.000,00 thus giving an annual yield of more than 17% for the year long investment.

 

2. Project funding:

Large companies have required funding for various different projects for many years.

 

Until recently project funding in the normal conventional way was relatively simple for large corporations.

 

Purchase Procedure

The reason: If a large corporation required a loan to commence the construction of a hotel.

 

Providing the lending source considered the hotel project to be viable, and the borrower had in the past a good track record with the funding institute, it was relatively easy to secure the required loan, not forgetting the project and possibly other assets had to be placed with the lending bank as collateral.

 

However, owing to the recent world recession, funding institutes, banks, trusts, have adopted the attitude that only clients who can provide a very attractive project along with some form of bank Guarantee, would then be eligible for a loan.

 

Therefore, many private individuals who then approach their banks for the Guarantee are rejected.

 

This leaves only two options:

 

1. Wait until lending conditions improve or change or:

2. Buy a bank guarantee, at a discounted rate and then in turn use the bank Guarantee to collateralise a loan.

 

For example:

 

A client purchases                                    : PBN 7.5/10

Face value amount                                    : US$100.000.000,00

Invoice price                                             : US$73.000.000,00

 

Once the Guarantee is purchased at a cost of US$73.000.000,00, the client would then receive a Guarantee of US$100.000.000,00 with interest coupons of 7,5% p/a for a term of 10 years.

 

The client then confirms the Guarantee to a Funding Institute, along with a Viable Project, and subject to approval of the Project, would then receive from the Funding Institute amount of money equivalent to the face value of the Guarantee.

 

For example:

 

Bank Guarantee                        : US$100.000.000,00

Amount of loan                          : US$100.000.000,00

Less bank fees of 2%                : US$98.000.000,00

Cost of purchased Guarantee 73% : US$73.000.000,00

 

Differential between cost of Guarantee and loan amount:  US$25.000.000,00

Overage                                                                        US$25.000.000,00

 

If the above operation is performed in the mannerism as described above, then it would take four times the net amount received 4XUS$25.000.000,00 to have sufficient funding for the proposed project.

 

All that is necessary is to repeat the process four times.

 

After the first operation was successfully completed, the client would reinvest in the same way as in the first place.

 

What happens if the client with the project does not have enough assets liquid to purchase the Guarantees required commencing with the operation as described.

 

A situation then arises of which through a fiduciary bank working with our group, would assist in the following way.

 

A project would be submitted for approval, this being from the interested borrower.

 

Subject to approval by ourselves of the project we would proceed as follows: We would instruct our Fiduciary Bank to confirm to a Funding Institute Bank that collaterals can be provided as per the requirements of the Lending Institute.

 

In turn, and upon receipt of this communication, the Lending Institute would then confirm to our Fiduciary bank the terms and conditions of the agreed loan and proceed on a bank to bank basis it the conclusion of the loan.

 

For example:

Fiduciary Bank confirms on behalf of the client that upon receipt of good, clean and clear funds, bank Guarantees issued by a bank from the top 100 banks of the world would be available to collateralise a loan.

 

In turn the funding bank would then deposit funds in to the Fiduciary Bank conditionally to the delivery of the agreed bank Guarantee.

 

In turn the fiduciary bank would then confirm the availability of funds to the collateral supplying bank and purchase the bank Guarantee with the funds deposited by the Lending bank.

 

The bank Guarantee is then confirmed to the Lending Bank for authentication.

 

Upon authentication of the Guarantees the funds are automatically released and are no longer conditional.

 

The procedure is worked on a back to back basis, for example: Whatever conditional-funding instrument is confirmed to the Fiduciary bank, the Fiduciary bank issues the identical Funding Instrument to the collateral issuing bank. So the Fiduciary bank performs all movements on a simultaneous basis. The cost of the bank Guarantee for this operation is: 73% of loan amount.

 

The loan amount would be: 100% of the face value of the bank Guarantee.

 

Less bank charges: 2%

 

Total loan: 98% of face value of the Guarantee provided.

 

Again we then take the differential between the cost of the actual bank Guarantee and the net loan amount.

 

Cost of Guarantee : 73%

Loan amount    : 98%

 

Differential        : 25%

 

Again this process is repeated four times to obtain the full loan amount.

 

Upon completion of the first cycle as explained above, the differential (25%) is held in trust on our behalf by our fiduciary bank.

 

This being until such time as the full cycle of operations is complete.

 

Upon completion, funds for the proposed project will be administered by our Fiduciary bank and on our behalf as mandators for the subsequent trusts and funding institutes funding for the project would then be administered on the bases of stage payment being made concurrent to the stage and development of the project.

 

The difference between this format of project funding and the first is that the first example was based on trading.

 

The prospective borrower actually buys the Bank Guarantee at a discounted rate, and then uses the full benefit of having a Bank Guarantee with a higher face value.

 

However, in the second example where the borrower does not have the financial resources to purchase the Guarantee with their own funds, then the 2nd example comes into effect.

 

Therefore, the Lending Institute secures their full loan amount from the completion of the first stage.

 

A separate loan agreement is the drawn between the borrower and ourselves as mandators for the Funding Institute to administer the funding for the proposed project at the same time agreement are finalised regarding agreeing terms and conditions of interest and capital repayment of the loan.

 

Further, a first charge would be taken on the project as a second security.

 

The same format applies to buy and sell operations with regards to the disbursements of any trading overage, the only two differences being:

 

1. No project is required.

2. The trading differential is smaller, therefore making large quantities of funding available to make the differentials to the amount of the first example. One final point with regards to the straightforward buy and sell operations.

 

There are several reasons why the Debenture Instruments we have available are in demand.

 

1. Very discounted rates for investment purposes, and excellent return and annual yield for a US Dollar investment.

2. Portfolio Enhancement

E.G. Boosts stocks and shares of the corporation as well as asset base, if integrated into the portfolio of the purchasing corporation.

3. Purchase or bank Debenture Instrument for re-sale in secondary market. (Please refer to Secondary Market explanation)

4. Collateralisation for eventual project funding.

 

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