[ Gentle music plays ] Now interesting subject is pricing. So how are these deals priced in the market? It's very simple, so the pricing is based on outstandings. So maybe for some of you outstandings not very familiar, it's basically if we take this example where we have a trade volume. So let's say we have $300 million okay which is sold on a yearly on an annual basis okay from the supplier to the buyer. It's the annual volume, let's say the average payment terms where the buyer pays the supplier is 60 days okay average payment terms. So how the outstandings are calculated? You take the annual volume, divide it by how many times 60 days turns in one year. So we take 360 days divided by 60 days, so this is basically six times you turn that over a year. That means the outstandings are 50 million [Voice: So 360 days in a year?] Yeah it's a good question so if you speak with a bank it's 360 because of bank holidays it doesn't make a big difference it depends. So again you take the annual volume divided by 360 divided by the average payment terms and what does that mean? So basically the outstanding it's kind of it's kind of the maximum credit risk a bank has, correct? Because if the volume on average if the volume is 300 million and you have 60 days payment terms that means that at any point in time there's 50 million outstanding, there's 50 million credit risk you have with the buyer. How you generate the revenue? It's very simple, you take the supply chain finance fee which I will just explain in the next slide multiplied by the outstanding. This or this is kind of the discount. So how it works? Let's say invoice amount okay is $100,000 terms are 90 days. So let's say this is the volume or the invoice amount, I mean just basically the amount which is traded okay. It can be a one-off or per year but the terms right now is 60 days sorry 90 days, correct? The supplier chooses to get paid on day 10. So the financing period is 80 days. Now the outstandings in this example similar as before, so the outstandings is 100 million no 100,000 sorry multiplied by 80 basically this is wrong 360 that wrong sorry it's 360 divided by 80 then multiplied by the fee which we discussed before, correct? Now the fee has kind of I would say is three elements. What is the fee? So the SCF fee, in most cases you always have a base rate then you have a funding spread and you have a servicing fee servicing fee [Voice: Divide them by 360?] No you you add them all up. So the base rate this can be depending on what kind of currency can be LIBOR for US dollar or Euribor for euro dominated currencies or funding. So this is the LIBOR rate is basically a rate I think it's yeah it's set up every day, it's a club of banks based in London global banks where they define how much does it cost to lend between each financial institutions and you may be heard there was a big scandal a few years ago where they kind of had in internal discussion and fix the LIBOR rates, but basically it's the rate between banks which they are willing to lend each other and it's right now it's still very very low. It's going up, but right now and you have you have LIBOR rates for different periods, for three months, six months I think 12 months. So in this case for the period of 80 days you can use an interpolation if you don't have the exact amount now you use it one months and three months or something that. It's this case is 0.24% or 25 basis points and then the funding spread. In this case the funding spread is basically the fee for taking over the credit risk of the buyer. So it depends, here the servicing fee is 30 basis points, so that means it's quite a well rated corporate buyer. So 0.3% 30 basis point and then the servicing fee sorry I put it wrong that's 1.35% which is and the servicing fee it's 0.3%, so you add them all up and then if you add that all up together you come up with 1.89%. So you plug this figure here, correct? So 1.89% and this is the cost which the supplier has to pay $420 [Voice: That's where the spread it?] Yeah, so we see in this example and this is this is a realistic example by the way. So and this is for a company let's say with a double-B triple-B minus rating, I mean for this so if you are a supplier, you have an invoice $100,000 okay you you want to get paid almost three months in advance. You only pay $420 you receive 99.5 it means it's peanuts because at this rate 1.89 this is per annum. So you see you have to divide that by almost between four and five times. So it's about if you looked at for this specific period it's about I don't know about 0.6% this is your actual rate you have to pay which is nothing. It's why when I mentioned earlier today when you look at your credit cards, I don't I'm not using credit cards so actively but I know if the credit card is I think it's about 3% no [Voice: Three?] yeah [Voice: For credit card?] Yeah the charge is 3% if you don't pay within one month. So basically you receive your your your bill from your credit card company said okay you spend $1,000. You don't pay it within 30 days they charge you [Voice: I think in the US it's like 12 to 20%] Oh wait they charge you next month if they charge you 3% because you didn't pay within 30 days but 30 days is like one month, there are twelve months. So on an annual basis multiplied by 12 you got 36% that's the actual fee. It's why you always have to look at for this specific period. So all these fees which we discuss it's always on an annual basis. So you remember before when when we discussed about Nestle which was 0.25% this was just this was the funding spread plus the servicing fee 25 basis points. On an annual basis, so if you look at that for like let's say a period of 80 days, you're kind of dividing it by let's say five or four that's so it's 0.6% it's nothing it's almost free money. It's very difficult for a company to get this type of financing rate from banks. Now sometimes additional fees are charged okay like one of the fees like as I mentioned here sometimes fees are applied for structuring or if you have a corporate buyer which wants to include suppliers in a specific jurisdiction let's say like Vietnam or Indonesia or where the bank has a little experience or which have to get some legal advice then or they need some help with the legal documentation. Then it can be that they apply some legal fees to that like between I don't know 20 to $100,000. They're also and you raised a good point, so based on some of these programs the price is getting so low that the benefit for banks even if the price is too low let's say they lose money. They still make money because of the long term relationship this builds with Nestle. That means they will not only provide that to Nestle they will provide all other kind of products and services around their banking relationship, correct? Problem is if you are a platform provider service provider you only make money with supply chain finance, you're not selling all the stuff. That's why today you see a lot of service provider will say like hey I mean the fees are so low I still have the same cost to set up this program and manage these all the suppliers. So sometimes you see they are charging like fixed fees as I mentioned before where they say like," Okay, now I want to have 200k per year," because first one I want to make sure that you're using it because you don't know if Nestle will promote that to all the suppliers or not, they don't have to it's free for them in this program. So you want to kind of incentivize that they will achieve this volume through this program and this for this these fees are consuming, so as the volume is growing and as supplies are using that and and you achieve a fee for that, until it reach that you have no more cost for the buyer, but until then you know that you always have 200k for sure as a revenue.