Note 3. Investments

As of December 31, 2017, the Company’s investments consisted of the following:

					Percentage
	Amortized Cost		Fair Value		of Total Investments
Senior secured term loans	$	78,573,493	$	78,573,493		23.4	%
Senior secured term loan participations		119,165,378		119,165,378		35.6	%
Senior secured trade finance participations		111,089,698		111,030,621		33.1	%
Short term investments		26,500,000		26,500,000		7.9	%
Total investments	$	335,328,569	$	335,269,492		100.0	%

Participations

The majority of the Company’s investments are in the form of Participation Interests (“Participations”). Participations are interests, which may be divided or undivided, in financing facilities. Participations may be interests in one specific loan or trade finance transaction, several loans or trade finance transactions under a facility, or may be interests in an entire facility. The Company’s rights under Participations include, without limitations, all corresponding rights in payments, collaterals, guaranties, and any other security interests obtained in the underlying financing facilities.

Interest Receivable

Depending on the specific terms of the Company’s investments, interest earned by the Company is payable either monthly, quarterly, or, in the case of most trade finance investments, at maturity. As such, some of the Company’s investments have up to a year or more of accrued interest receivable as of December 31, 2017. In addition, certain of the Company’s investment in term loans accrue deferred interest, which is not payable until the maturity of the loans. Deferred interest included in the interest receivable balance as of December 31, 2017 and 2016 amounted to $1,960,157 and $1,403,416, respectively. The Company’s interest receivable balances at December 31, 2017 and 2016 are recorded at the amounts that the Company expects to collect.

Trade Finance

Trade finance encompasses a variety of lending structures that support the export, import or sale of goods between producers and buyers in various countries and across various jurisdictions. The strategy is most prevalent in the financing of commodities. The Company’s trade finance position typically fall into two broad categories: pre-export financing and receivable/inventory financing. Pre-export financing represent advances to borrower based on proven orders from buyers. For trade finance, the structure and terms vary according to the nature of the transaction being financed. The structure can take the form of a revolver (up to one year) with draw requests with maturity up to one year based on collateral and performance requirements. The structure can also be specific to the individual transaction being financed, which typically have shorter durations of 60 – 180 days. In terms of underwriting, particular consideration is given to the following:

•

nature of the goods or transaction being financed,

•

the terms associated with the sale and repayment of the goods,

•

the execution risk associated with producing, storing and shipment of the goods,

•

the financial and performance profile of both the borrower and end buyer(s),

•

the underlying advance rate and subsequent LTV associated with lending against the goods that serve to secure the facility or transaction,

•

collateral and financial controls (collection accounts and inventory possession),

•

third party inspections and insurance, and

•

the region, country or jurisdiction in which the financing is being completed.

Collateral varies by transaction, but is typically raw or finished goods inventory, and/or receivables. In the case of pre-export finance, the transaction is secured by purchase orders from buyers or offtake contracts, which are agreements between a buyer and seller to purchase/sell a future product.

Terms depend on the nature of the facility or transaction being financed. As such, they depend on the credit profile of the underlying financing, as well as the speed and detail associated with the request for financing. Interest can be paid as often as monthly or quarterly on revolving facilities (one year in duration) or at maturity when dealing with specific transactions with shorter duration, which is the case for the majority of the Company’s trade finance positions. At times, settlement can be delayed due to documentation, shipment, transportation or port clearing issues, delays associated with the end buyer or off-taker assuming possession, possible changes to contract or offtake terms, and the aggregation of settlement of multiple individual transactions. Conversely, at times payments are made ahead of schedule as transactions either clear faster than expected, borrowers decide to prepay or pay down ahead of schedule, counterparties clear multiple individual transactions in one settlement, or less expensive financing is secured by the borrower.

On occasion, the Company may receive notice that a borrower or counterparty intends to pay ahead of schedule or in one lump sum (settling multiple draw requests all at once). Depending on timing and the ability to redeploy these funds, combined with projected inflows of fund capital, these outsize payments can negatively impact the Company’s performance. In these situations, the credit profile of the borrower, and the transaction in general, is reviewed with the sub-advisor and a request may be made to either stagger payments, where at all possible, or request that payment only be made at the end of that specific financial quarter. These requests or accommodations, which happen very rarely, will only be made where the Company has strong comfort in and around the credit profile of the transaction or borrower.

Short Term Investments

Short term investments are defined by the Company as investments that generally meet the standard underwriting guidelines for trade finance and term loan transactions and that also have the following characteristics: (1) maturity of less than one year, (2) loans to borrowers to whom, at the time of funding, the Company does not expect to re-lend. Impact data is not tracked for short term investments. Due to Short Term Investments’ unique characteristics, the Company has determined to present these investments separately.

Watch List Investments

Prodesa

As of December 31, 2017, the Company’s investment in Corporacion Prodesa S.R.L. (“Prodesa”) is comprised of two senior secured term loan participations with an aggregate principal balance of $3,210,000 and $1,750,000 due under a senior secured purchase order revolving credit facility. The total accrued interest balance as of December 31, 2017 amounts to $640,278 including $466,103 of deferred interest payable at maturity. The Company has been working with Prodesa to re-align its operations since 2015, starting with a senior secured purchase order revolving credit facility. The purchase order facility is secured by specific purchase orders from customers of Prodesa, as well as pledges of additional unencumbered assets and all shares of Prodesa. A number of draws and repayments have occurred under this facility. For example, during the year ended December 31, 2016, the Company funded seven additional draws under the purchase order facility for an aggregate of $1,750,000.

On January 31, 2017, the Company entered into a series of loan amendments with Prodesa. First, the $2,000,000 term loan facility with an original maturity date of July 15, 2016 was amended to increase the commitment to $3,540,000 to finance the acquisition of additional machinery and equipment and refinance existing property. As part of the amendment, the loan facility also extended the maturity date to July 28, 2021, and amended the interest rate on the $3,540,000 loan to 12.00% per annum, reflecting the increased and improved collateral supporting the loan facility. Separately, the Company simultaneously entered into amendments for the $750,000 inventory loan facility and the $1,750,000 purchase order facility to extend those facilities to mature concurrently with the amended term loan facility above, as each facility is cross-defaulted and cross-collateralized. The $750,000 inventory loan, with an original maturity date February 15, 2015 and previously extended to December 22, 2016, now matures on July 28, 2021. The $1,750,000 purchase order facility, with an original maximum term of December 31, 2020, now matures on July 28, 2021.

The Company has estimated the fair value of the Prodesa loans as of December 31, 2017 at $4,960,000 based on the income valuation approach as further described in Note 4.

Usivale

In May 2015, one of the Company’s borrowers, Usivale Industria E Commercio (“Usivale”), with an aggregate principal balance of $3,000,000, notified the Company that it would be unable to make its monthly interest payment for May 2015 and requested the deferment of interest payments until October 2015. Usivale is a sugar producer located in Brazil that has been in business since 1958. Usivale’s business is highly cyclical and it generates the majority of its revenues during the first and fourth quarters of any calendar year. In accordance with the terms of the loans, the Company originally increased the annual interest rate charged Usivale from 12.43% to 17.43%. On August 27, 2015, Usivale filed for judicial recuperation or recovery (the “Filing”) with the local court in Brazil. The Filing was led by the ongoing pricing pressure within the sugar market, leading up to the material drop in the month of August, when prices reached a seven year low. The Filing provided for a 180 day “standstill” period relative to any claim for payment by Usivale’s creditors. During this period, Usivale was permitted to operate as usual, but was required to develop and present a recovery plan to its creditors to allow it to emerge from judicial recovery. Usivale submitted an initial plan to the judicial court for review at the end of November 2015, which was published by the court on January 19, 2016. Creditors had 30 days to review and either approve or reject the plan. As the only secured creditor within the greater credit group, the Company’s acceptance of any plan was required. The Company placed Usivale on non-accrual status effective August 27, 2015, the date of the judicial recovery filing.

On February 17, 2016, the Company filed a rejection of the plan presented by Usivale. In accordance with the judicial recovery process, a general assembly of Usivale’s creditors was held on June 14, 2016 and an agreed upon restructure plan was submitted to the court and subsequently approved by the court on October 7, 2016. Under the restructure plan, interest on the principal started accruing effective July 1, 2016 at an annual rate of 12.43% and Usivale is required to make annual principal payments starting in the fourth quarter of 2016. On November 10, 2016, the Company received payments of principal and interest of $316,777 and $144,390, respectively. The Company recorded the $144,390 payment as interest income and stated accruing interest on the unpaid principal effective November 10, 2016. As of December 31, 2017, the principal balance of the Usivale loans amounted to $2,851,296 and the Company has estimated the fair value of the Usivale loans at $2,851,296, which is based on a discounted cash flow analysis (income approach). As of December 31, 2017, accrued interest amounted to $410,532, of which $393,795 was received in March 2018.

Fruit and Nut Distributor

The Company has a trade finance participation with a fruit and nut distributor (“the Distributor”) located in South Africa, with a total balance outstanding of $785,806 as of December 31, 2017. The Distributor trade finance has a stated maturity date of May 22, 2015, which the Company agreed to extend. The Distributor had made partial payments of principal during 2015 and 2016 (the original loan from the Company to the Distributor was for $1,250,000), with the most recent payment being made on October 2016. Through the latter part of 2015, the depreciation in the South African Rand had proven to be problematic for the Distributor given that it has to purchase its inventory in U.S. Dollars and then sells in South African Rand. This situation has led the Distributor to experience some cash flow difficulties and operating losses. As of December 31, 2016, the Company, together with its sub-advisor, had agreed to extend further the principal maturity date to facilitate the strategic sale of the Distributor, which closed in June 2016. As a result of the sale, one of the Company’s sub-advisor now owns 40% of the Distributor. Accordingly, the Company placed this participation on non-accrual status effective February 1, 2016 and interest not recorded relative to the original terms of this participation amounted to approximately $139,600 and $127,400, respectively, for the years ended December 31, 2017 and 2016. Based on the information available to the Company and according to its valuation policies, the Company has estimated the fair value of its investment in the Distributor to be $726,729 as of December 31, 2017.

Farm Supplies Distributor

The Company had several trade finance participations in a facility to a farm supplies distributor, Neria Investment Ltd. (“Neria”), located in Zambia with an aggregate principal balance of $5,078,526 and net accrued interest of $550,370 as of June 30, 2017. The Company placed this participation on non-accrual status effective July 1, 2016. In addition, during the year ended December 31, 2016, the Company reversed $550,370 of interest income that had been previously accrued. On December 1, 2016, the Company’s sub-advisor declared an event of default and filed a claim against the credit insurance policy. The insurer had 180 days from time of filing (June 1, 2017) to conclude its initial review, acceptance of the claim and waiting period. Following expiration of the waiting period, a formal demand letter was sent to the Zambian government. During the quarter ended September 30, 2017, the Company received a payment from Neria of $6,981,578, which was comprised of the entire principal balance of $5,078,526 and interest of $1,903,052. Accordingly the Company recorded additional interest income of $1,352,682 during the year ended December 31, 2017.

Sesame Seed Exporter

The Company has a trade finance participation with a Sesame Seed Exporter (“the Exporter”) located in Guatemala, with a principal balance outstanding of $881,800 as of December 31, 2017. The participation had a maturity date of March 31, 2016 and is secured by inventory. During 2016, the Exporter lost a major customer, which resulted in a slowdown in business, affecting its ability to repay the amount due under the participation. Although the Exporter was able to secure new customers during 2017 to replace the lost order(s), the Exporter had a shipment rejected and returned, and as a result, the Exporter had difficulties making payments. As the Exporter’s financial position further deteriorated, the Company’s sub-advisor determined that a restructuring of the Exporter’s business was required and, as such, the sub-advisor started taking control over the Exporter’s operations. The Company’s existing loan to the Exporter is also going to be restructured with the following term: 3 year senior secured term loan, secured by share pledge, 12% deferred interest compounded quarterly and payable at maturity, monthly principal amortization based upon available cash flow, expected to begin in June 2018.

The Exporter has made three principal payments totaling $92,435 during October and November 2016, an interest payment of $90,402 in February 2017, an interest payment of $8,388 in July 2017 and interest payments of approximately $81,500 during October, November, and December 2017. The Company has determined that the restructured term loan should be valued using the income approach, in accordance with its valuation policy, and has determined that the fair value of this investment should be $881,800 as of December 31, 2017. The Company has, however, placed this position on non-accrual status as of July 1, 2017.

Mac Z Group SARL

The Company has a $9,000,000 trade finance position with Mac Z Group SARL (“Mac Z”), a scrap metal recycler in Morocco. As of December 31, 2017, the outstanding principal balance on this position was $7,349,626 and accrued interest amounted to $483,775. The primary collateral securing this position is 1,970 tons of copper scrap. In late October, the sub-advisor’s designated Collateral Manager for Mac Z notified the sub-advisor of an investigation into a 1,820 ton, approximately $13.3 million, shortage of copper scrap inventory physically held in the warehouse. The copper scrap is pledged to the Company and serves as the primary collateral for this position. In addition to conducting its investigation, the sub-advisor has issued an Event of Default and is taking steps to enforce the Corporate Guarantee, Personal Guarantee and relevant pledges, which include two insurance policies. The sub-advisor has placed a blocking notice on all of the borrower’s bank accounts and has requested a freeze order from the Moroccan local courts on the physical assets of the company. Mac Z has an estimated $12 million in Zinc Ore inventory, which may serve as secondary collateral for this position. The Company is working with the sub-advisor and is investigating the issue. Based on the results of the initial investigation, the Company believes there is sufficient collateral available to cover both the outstanding principal balance and the accrued interest. The Company placed this position on non-accrual effective October 1, 2017 and believes no adjustment to fair value is necessary as of December 31, 2017

Vicentin – Nacadie S.A.

The Company has a trade finance position with Vicentin – Nacadie S.A (“Vicentin”), an Argentinian company focused on trading of the “soy bean complex” (soybeans, soybean meals, and oils) originating from Argentina, Paraguay and Uruguay. As of December 31, 2017, the outstanding principal balance on this position was $12,000,000 and accrued interest of $539,042. The Company’s sub-advisor, IIG called a technical default on the borrower due to the breach of informational covenants by Vicentin and due to non-payment of interest by Vicentin. The technical default called by IIG resulted in a filing in the Commercial Court in Buenos Aires, Argentina on July 4, 2017. The Commercial Court has jurisdiction over commercial claims/disputes of this type. After IIG filed its claims in the Commercial Court, the court ruled that they were valid claims and enjoined Vicentin’s cash accounts to allow for recovery by IIG. Once sufficient cash had been secured, the court allowed Vicentin to replace the enjoined cash accounts with a payment guarantee from Zurich International with a 100% LTV, including accrued interest.

As a short-term trade finance facility, Vicentin has historically been valued at cost. The remaining principal balance of $12,000,000 has been outstanding since March 2017. As IIG is seeking full repayment through its court action to secure assets from Vicentin, the Company believes, that as of December 31, 2017, the most appropriate valuation method is the liquidation approach. With the bond secured by IIG through the Commercial Court, whose value is for all principal and interest outstanding, there is sufficient collateral available to pay off the principal and accrued interest balances in full and the Company has determined the fair value of this investment should remain at $12,000,000.

Frigorifico Regional Industrias Alimentarias S.A. Sucursal Uruguay

The Company has a trade finance position with Frigorifico Regional Industrias Alimentarias S.A. Sucursal Uruguay (“FRIAR”), an Argentinian company that produces, processes and exports bovine meat for human consumption. As of December 31, 2017, the outstanding principal balance on this position was $9,000,000 and accrued interest of $264,500. The Company’s sub-advisor, IIG called a technical event of default due to non-payment by FRIAR. IIG filed the promissory notes for FRIAR in the Commercial Court in Buenos Aires, Argentina. The Commercial Court has jurisdiction over commercial claims/disputes of this type. During January 2018 the court granted IIG’s motion to freeze FRIAR’s accounts. IIG is also in the process of securing additional collateral to cover the full balance outstanding, including accrued interest and penalties. It is expected that once enough cash and assets are secured, FRIAR will secure a payment guarantee bond. IIG has confirmed that FRIAR continues to operate and is a going concern.

As a short-term trade finance facility, FRIAR has historically been valued at cost. The remaining principal balance of $9,000,000 has been outstanding since July 2016. As IIG is seeking full repayment through its court action to secure assets from FRIAR, we believe the most appropriate valuation method is the liquidation approach. The Company has determined the fair value of this investment should remain at $9,000,000. However, the Company is placing the position on non-accrual status effective January 1, 2018.

Sancor Cooperativas Unidas

The Company has a trade finance position with Sancor Cooperativas Unidas (“Sancor”), an Argentinian company that distributes dairy products. As of December 31, 2017, the outstanding principal balance on this position was $6,000,000. Interest has been paid in full through December 31, 2017. Sancor, however, did not make the required interest payments for the first and second quarters of 2017 on a timely basis. As a result, the sub-advisor exercised pledged warrants to cover interest payments for 2017. The sub-advisor has worked with Sancor to restructure the existing loan and has extended the maturity to September 30, 2018, with an annual renewal option. It is anticipated a further extension will be agreed to as part of the restructuring. As part of the restructure, a co-borrower (Sancor Brazil) was added, additional collateral (face value of $56.6 million) was secured and key customers pay into the sub-advisor’s designated collection account. An unrelated loan from another lender of approximately $26 million was fully repaid by Sancor in the first quarter of 2017 and the release of the associated mortgage and reassignment of the collateral is in the final stages of being released and assigned to the Company.

Functional Products Trading S.A.

The Company has a trade finance position with Functional Products Trading S.A. (“Functional”), a Chilean company that exports chia seeds to United States and European off-takers. As of December 31, 2017, the outstanding principal balance on this position was $1,326,688. In 2017, Functional experienced operational losses due to volatile prices for raw chia seeds and its byproducts, with sales declining from 2016 by 57%. As a result, the company is developing a full restructuring plan (selling office building and entering lease back agreement) with its current lenders, including the Company, to provide more cash flow flexibility, become current on all interest payments and improve its capital structure, in order to support the company’s growth initiatives. During February 2018, we received $25,000 in interest payments, which covered accrued interest up to the end of November 2017 and $10,000 in March 2018, which brought Functional current on interest payments through December 2017. The Company is currently working with Functional on restructuring the facility, which it believes will be completed in the near term.

As of December 31, 2016, the Company’s investments consisted of the following:

					Percentage
	Amortized Cost		Fair Value		of Total Investments
Senior secured term loans	$	28,673,487	$	28,673,487		14.1	%
Senior secured term loan participations		58,450,761		58,450,761		28.7	%
Senior secured trade finance participations		116,730,642		116,671,565		57.2	%
Total investments	$	203,854,890	$	203,795,813		100.0	%

The industry composition of the Company’s portfolio, at fair market value as of December 31, 2017 and 2016, was as follows:

	As of December 31, 2017					As of December 31, 2016
	Fair		Percentage			Fair		Percentage
Industry	Value		of Total			Value		of Total
Agricultural Products	$	15,351,296		4.6	%	$	22,851,296		11.2	%
Bulk Fuel Stations and Terminals		16,545,994		4.9	%		15,437,474		7.6	%
Chemicals and Allied Products		15,000,000		4.5	%		—		—
Coal and Other Minerals and Ores		31,254,315		9.4	%		6,574,351		3.2	%
Commercial Fishing		351,559		0.1	%		1,058,273		0.5	%
Communications Equipment		—		0.0	%		6,111,941		3.0	%
Consumer Products		10,960,000		3.3	%		9,900,000		4.9	%
Drugs, Proprietaries, and Sundries		1,080,000		0.3	%		—		—
Electric Services		18,527,237		5.5	%		19,500,000		9.6	%
Farm Products		7,960,987		2.4	%		3,142,480		1.5	%
Fats and Oils		12,000,000		3.6	%		6,000,000		2.9	%
Fertilizer & Agricultural Chemicals		—		0.0	%		5,078,526		2.5	%
Financial services		10,000,000		3.0	%		—		—
Freight Transportation Arrangement		12,464,320		3.7	%		—		—
Fresh or Frozen Packaged Fish		3,338,520		1.0	%		5,037,134		2.5	%
Food Products		1,072,944		0.3	%		740,690		0.4	%
Groceries and Related Products		3,500,000		1.0	%		11,195,862		5.5	%
Hotels and Motels		15,807,931		4.7	%		17,000,000		8.3	%
Land Subdividers and Developers		15,411,497		4.6	%		—		—
Logging		6,840,000		2.0	%		—		—
Lumber and Other Construction Materials		—		0.0	%		11,483		0.0	%
Meat, Poultry & Fish		9,000,000		2.7	%		9,675,717		4.7	%
Metals & Mining		4,566,481		1.4	%		2,234,145		1.1	%
Miscellaneous Plastics Products		—		0.0	%		161,018		0.1	%
Packaged Foods & Meats		—		0.0	%		500,000		0.2	%
Personal Credit Institutions		3,157,735		0.9	%		—		—
Petroleum and Petroleum Products		32,000,000		9.5	%		—		—
Primary Nonferrous Metals		—		0.0	%		3,000,000		1.5	%
Primary Metal Industries		—		0.0	%		6,000,000		2.9	%
Programming and Data Processing		15,714,764		4.7	%		10,236,013		5.0	%
Refuse Systems		11,315,000		3.4	%		—		—
Rental of Railroad Cars		—		0.0	%		4,411,650		2.2	%
Secondary Nonferrous Metals		17,349,626		5.2	%		7,649,945		3.8	%
Short-Term Business Credit		4,740,000		1.4	%		—		—
Soap, Detergents, and Cleaning		1,355,600		0.4	%		2,000,000		1.0	%
Street Construction		10,861,658		3.2	%		14,927,195		7.3	%
Telephone and Telegraph Apparatus		14,388,525		4.3	%		—		—
Water Transportation		13,353,503		4.0	%		13,360,620		6.6	%
Total	$	335,269,492		100.0	%	$	203,795,813		100.0	%

The table below shows the portfolio composition by geographic classification at fair value as of December 31, 2017 and 2016:

	As of December 31, 2017					As of December 31, 2016
	Fair		Percentage			Fair		Percentage
Country	Value		of Total			Value		of Total
Argentina	$	39,500,000		11.8	%	$	31,000,000		15.2	%
Botswana		4,740,000		1.4	%		—		—
Brazil		18,566,060		5.5	%		13,087,309		6.4	%
Cabo Verde		15,807,931		4.7	%		17,000,000		8.3	%
Cayman Islands		10,000,000		3.0	%		—		—
Chile		1,326,687		0.4	%		2,234,915		1.1	%
China		10,000,000		3.0	%		—		—
Colombia		3,157,735		0.9	%		—		—
Ecuador		3,690,079		1.1	%		6,095,407		3.0	%
Ghana		34,027,237		10.2	%		19,500,000		9.6	%
Guatemala		881,800		0.3	%		907,565		0.4	%
Hong Kong		41,346,389		12.3	%		—		—
Indonesia		14,193,994		4.2	%		17,927,195		8.8	%
Kenya		12,464,320		3.7	%		161,018		0.1	%
Malaysia		15,000,000		4.5	%		—		—
Mauritius		3,500,000		1.0	%		11,195,862		5.5	%
Mexico		11,315,000		3.4	%		—		—
Morocco		7,349,626		2.2	%		7,649,945		3.8	%
Namibia		15,411,497		4.6	%		500,000		0.2	%
New Zealand		6,840,000		2.0	%		—		—
Nigeria		19,106,003		5.7	%		13,360,620		6.6	%
Peru		21,505,994		6.4	%		19,337,474		9.5	%
Singapore		—		—			10,000,000		4.9	%
South Africa		1,960,874		0.6	%		14,174,143		7.0	%
United Arab Emirates		1,080,000		0.3	%		—		—
United Kingdom		20,796,451		6.2	%		6,585,834		3.2	%
Zambia		1,355,600		0.4	%		13,078,526		6.4	%
Uganda		—		0.0	%		—		—
Uruguay		346,215		0.1	%		—		—
Total	$	335,269,492		100.0	%	$	203,795,813		100.0	%