THINCATSINVESTORCONFERENCE

11th October 2018

AGENDA

2

⚫ Housekeeping

⚫ Welcome & Business Overview

⚫ Business Development

⚫ Importance of Institutional Investors

⚫ Credit Process

⚫ Security, Monitoring & Recoveries

⚫ IT

⚫ New Products

⚫ FCA

MEET THE PRESENTERS (PART OF THE TEAM)

3

John MouldChief Executive Officer

Ravi AnandManaging Director

Damon WalfordChief Development

Officer

Jill SandfordChief Risk Officer

Matt JonesFinance Director

Greg BeamishHead of Credit

WELCOME & BUSINESS OVERVIEWJOHN MOULD CHIEF EXECUTIVE OFFICER

THINCATS HAS BEEN BUILT THOUGHTFULLY OVER TIME

5 WE ARE CHANGING ORGANISATION

PRE-ESF 2011-2015 POST-ESF 2016-PRESENT FUTURE

Business Model Pure P2P Professionalisation Direct lending

Origination OutsourcedBig data plus.11 person team focused on professional intermediaries

Repeat business

Credit OutsourcedProprietary data + strong underwriting team

Further build out of team including sector specialisms

Funders Retail Crowd Retail Crowd +£600m institutional Retail & Institutional

OperationsIn house servicing based on proprietary tech

Fully built out Automation

Regulation Interim Full P2P +AIFM

No. of People 8 70 c.140

LIMITED CONSISTENT COMPETITION

6

BANK CAPITAL AND PROCESS RESULTS IN A FOCUS ON ASSET BACKED LENDING

THINCATS OCCUPIES UNIQUE POSITION IN A LARGE MARKET

Direct Lending Funds

ThinCats: A challenger to the established and

challenger banks

• No consistent competition from banks or

other alternative lenders for loans from

£0.5m - £10m

Key issues facing established banks as

competitors

• Faced with regulatory and cost constraints

• Insufficient resources to deliver complex

lends to SMEs

• Banks are too slow

• Challenger banks also affected

Alternative providers

• Struggle with capital to be consistently

relevant on larger loans

BANK CAPITAL AND PROCESS RESULTS IN A FOCUS ON ASSET BACKED LENDING

OTHER NON BANK FUNDERS FOCUS ON SMALLER OR LARGER LOANS

“ThinCats is a real wake up call to the High

Street lenders. Their streamlined process makes the traditional banks look very outdated and not fit for purpose.”Mark Lilley, Founder and CEO of Abokado

LARGE MARKET OF UNDERSERVED UK SMEs

7 TARGET SMEs HAVE £30BN+ OF ANNUAL BORROWING DEMAND

THINCATS MARKET SEGMENT ACCOUNTS FOR MORE THAN 25% OF THE UK ECONOMY

1. Business Statistics, House of Commons December 20172. BOE/Experian3. PH analytics for BIS, with extrapolation of SME cohort

UK SME MARKET SEGMENTATION

Category

Micro SMEs Large Total

Employees 1 No. <9 9-249 250+

% 33% 27% 40%

Share of Aggregate Turnover 1 22% 28% 49% £3.7bn

No. of Companies 2 5.5m 300,000 6,000 5.9m

- of which borrowers 127,000 85,000 2,500 215,000

Gross Assets <£0.5m £0.5-£20m £20m+

Annual borrowing

Reported 2 £27bn £25bn £200bn £250bn

Funding Gap 3 unknown £5-10bn £15bn £20-25bn

Total Borrowing Demand £30-35bn

ThinCats targets a market of 200,000 SMEs driven by:

• A manageable and identifiable number which can be targeted

• Existing borrowers who need more capital• Considerable funding gap

ThinCats is targeting £900m of origination within 5 years or less than 3% of current annual demand

“ThinCats fills an important gap in the market for ambitious SMEs

that are looking for a competitive source of funding to drive acquisitions and growth.”Tommy Cook, CEO of Calnex Solutions

BUSINESS DEVELOPMENT DAMON WALFORD CHIEF DEVELOPMENT OFFICER

ORIGINATION: TIMELINE

9

1st Originator - Midlands

2nd Originator – Central London

Recruitment

2016

3rd Originator - SW

2017 2018

Total reliance on existing sponsors

4th Originator - NW

5th Originator – NE

6th Originator – Greater London

7th Originator - Scotland

8th Originator – South Coast

9th Originator – East Midlands

10th Originator – Wales & Bristol

11th Originator – South Midlands

Damon made responsible for

Origination

Basic Collateral Produced

Credit Appetite finalised

New website launched/Collateral

produced

New branding Launched/Launch

event

10th Originator Manchester Starts

Limited Market Launch of Lower Cost

Debt (LCD)

9th Originator - South Midlands leaves

4th Originator – NW leaves

Waterfall debt arrives

Market messages created

11th South Midlands replacement joins and 12th

Home Counties

Total reliance on new origination

Drop of existing sponsors

Build up of new origination

H1 H2 H1 H2 H1 H2

Fullmarketing

of LCD

A REGIONALLY FOCUSSED BUSINESS DEVELOPMENT TEAM HAS BEEN RECURITED

(Including some of the old sponsors)

EVOLUTION OF ORIGINATION MODEL NOW BEARING FRUIT

10 A TOTAL CHANGE OF LOAN ORIGINATION SOURCES

REGIONALLY FOCUSED AND RIGOROUS BDM RECRUITMENT

11 TOP PERFORMING BDMs KEY UK REGIONS

Scotland12,6503,050

E. Midlands14,3003,750

N.W19,4005,300

Wales4,9001,200

W. Midlands17,3504,650

SW15,9503,900

SE23,2005,500

London47,85011,600

East15,9503,800

BDM months in role 13

BDM months in role 2

BDM months in role 0

N.E20,2005,750

BDM months in role 11

BDM months in role 5

BDM months in role 22

BDM months in role 16BDM months in role 12BDM months in role 21

BDM months in role 11

BDM months in role 5

BDM months in role 28

BDM months in role 0

Modelled SME opportunity

Relevant SMEs 192,000

Primary Targets 48,500

BDMs are recruited into key targeted regions. Coverage is now country wide although coverage of c 40% of SMEs by region only just started

REGIONALLY FOCUSSED BDM RECRUITMENT RIGOROUS BDM RECRUITMENT PROCESS

BDM recruitment is disciplined focus on top performers with diverse skillsets, high cognitive ability and from varied backgroundsEach BDM is independently assessed and we are raisng the bar on client service

Aggregate BDM independent assessments

Source: Mercuri Urval

IMPORTANCE OF INSTITUTIONAL INVESTORSRAVI ANAND MANAGING DIRECTOR

THINCATS & INSTITUTIONAL FUNDERS

13

• Borrowers and introducing professionals require certainty to consider using ThinCats as a funder

• We need to show significant capital to ensure we can satisfy market requirements

• Some borrowers concerned about exposure to pure retail investors

• Certain borrowers require lower rates reflecting their credit risk

• We engaged with the whole institutional market and have now raised c£500m

• All funders undertook extensive due diligence on the business and engaged third parties to review our systems and controls

Key areas of focus were :

− Credit policy and process- detailed review of a number of loans

− PRISM risk tool and its predictive power around potential loss

− Cash processing and controls

− Legal documentation (including independent opinions on legal enforcement)

− Monitoring and Recoveries processes

► THE INSTITUTIONS ARE NECESSARY

WHERE DO INSTITUTIONS INVEST

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Institutions provide a number of benefits for the retail investors

• Provide certainty that loans will be filled

• Ensure a wider pool of opportunities are available to the market through providing borrowers and intermediaries certainty and comfort

• Test our system and controls on a regular basis

• Ensure the platform can scale and maintain high standards through reinvestment into systems and marketing

But here are some disadvantages:

- Lowest risk loans are not available to the crowd but rates are typically sub 5%

- Institutions take a minimum 51% investment in any loan.

INSTITUTIONS SYNDICATED BY RISK

Lender rates of 7-14%Generally offered to institutions and

crowd

Lender rates of 4-7%Whole loans to institutions only

Risk based loan pricing

★★★★★

★★★★

★★★

★★ Not funded

★

Strong Weak

Credit

Security

THE INSTITUTIONS WANT TO INVEST IN ALL TYPES OF LOANS

THINCATS & INSTITUTIONAL FUNDERS

15

£500m + LEADING GLOBAL INSTITUTIONS SYNDICATED BY RISK AND LOAN SIZE

UK Asset Manager£200m UK specialist manager

Are committing an initial £10m to fund property loans alongside the crowd

£700bn manager of pension and insurance funds.

Have committed up to £300m to fund SME whole loans only, no crowd participation

A £6bn credit fund investing into a number of platforms and have committed £410m to ThinCats.

A £500m specialist credit manager who have committed £30m to ThinCats and are also an equity owner Waterfall and ESO share SME loans pro rata to their commitment- with Waterfall leading,retail lenders participate alongside Waterfall and ESO in the same auction

DIVERSE INSTITUTIONAL FUNDING

THE CREDIT PROCESSGREG BEAMISH HEAD OF CREDIT

EVOLUTION OF RISK APPETITE

MIGRATION TOWARDS HIGHER QUALITY CREDIT DUE TO ENHANCED CREDIT PROCESS17

CREDIT PROCESS HAS DEMONSTRABLY LOWERED RISK

Credit Grade

Security Grade

New credit policy post acquisition

38%

18% 16%27% 34%

3%

10%

10%22%

16%13%

4% 5%

41%

5%31%

26%25% 15%

26%40%

45%22% 14%17% 15% 27%

51% 22%

9%25% 26%19% 16% 12% 16%

33%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018

1 padlock 2 padlocks 3 padlocks 4 padlocks 5 padlocks

5% 4% 5% 11% 10% 10%10%16%

28% 26%22%

45%

28%

65%58% 33%

42%33%

44%

28%

46%

17%13% 39%

21% 34%18% 13% 26%

8%19%

7% 5% 2% 5% 5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018

A B C D E1-5 Stars from 2017

• Introduction of new credit process has pushed lending towards higher graded credit - 75% B grade or above

• Greater focus on:

• Downside protection – 3rd party asset valuations and exit route assessment; and

• Serviceability – Look forward CF analysis and liquidity pinch points

Of loans ~ 3* or better

FIVE LINES OF CREDIT DEFENCE

ROBUST CREDIT PROCESS FILTERS 100s OF LOANS WITH ~11% CONVERSION RATE18

PRESENCE AND MIDLANDS BASED TRANSACTION SUPPORT

11 BDMs

Initial filter of opportunities

3 Regional Heads of Credit

Review financials and management

4 Senior Credit & 3 Junior Credit Analysts

2 In-house lawyers

Detailed DD and preparation of IC papers

3 IC Members

Group MD, Head of Credit, Head of Portfolio Management

Final sign off

Monitoring & Recoveries - Headed by Head of Risk

Chasing defaults and reporting

In-house recovery

Qualified Deal

1

2

3

4

5

200 Professional Intermediaries (first screening of opportunities)

EXPERIENCED CREDIT TEAM

OVER 200 YEARS OF LENDING EXPERIENCE ACROSS THE TEAM19

CREDIT TEAM HAS SIGNIFICANT DEPTH OF EXPERIENCE FROM A VARIETY OF BACKGROUNDS

• Establishment of an experienced team with Regional Heads Of Credit enabling opportunities to be considered across the UK

• Scale of team allows for vast majority of borrowers to be met by credit prior to drawdown

• Mid Cap and Large SME experience enables team to analyse larger deals more efficient given tend to provide better information and more robust advisers

RAVI ANANDMANAGING DIRECTOR, IC MEMBER AND CHAIR

GREG BEAMISHHEAD OF CREDIT, IC

MEMBER

ZOE SHAWPORTFOLIO MGT, IC

MEMBER

SIMON BROOKRHOC - SOUTH

DAVID JAMIESONRHOC - MIDLANDS

ROB THOMPSONRHOC - NORTH

LAUREN BURNSSENIOR ANALYST

MAHESH CHORDIA SENIOR ANALYST

SIMON LUKESENIOR ANALYST

HELENA MERCERSENIOR ANALYST

29 years’ experience in financial services

12 years’ Credit Investing, Special Situations and Private Equity

36 years’ Credit Investing , Mid - Market Lending, Securitisation & Portfolio Management

35 Years’ Credit & Risk 22 years’ Lending, Credit And Investing

35 years’ Credit and Risk

8 years’ Credit Analysis And Debt Structuring

11 years’ credit investing

7 years’ SME / Mid-market Lending

30+ years’ experience in financial services

Head of Corporate Finance at Dexion Capital

Head of Corporate Finance and co-head of Alternatives at New Star

ECM Director at HSBC

Managing Director at ESO Capital.

Sun Capital Senior Associate.

Barings Asset Management and KPMG

Head of fixed Income at Hermes

Founder New Bond Street

Senior roles at BGB UK and WestLB UK

Finance Director at Syscap

VP at Manufacturers Hanover, Daiwa Securities and Grindlays Bank

Williams & Glyn, RBS Group and KPMG

Senior roles at Barclays, AIB and Santander

Senior Associate at Westpac Institutional Bank

Private Debt (UK) at AIMCo, senior roles at SMBC and DZ BANK

Commercial Manager at ANZ Bank, New Zealand

International Banks and ratings agency

TYPES OF DEAL

ACCESS TO ATTRACTIVE RISK-ADJUSTED RETURNS VIA ABILITY TO ANALYSE BOTH CF AND ASSET BACKED DEALS20

TEAM EXPERIENCE ENABLES ABILITY TO UNDERWRITE BOTH ASSET BACKED AND CASH FLOW LENDS

Deal Type Asset backed deal Cash flow backed deal

Key metric and typical limit LTV 75% on distressed asset value Leverage 3.5x last twelve months EBITDA

Downside Protection Underlying assets Property, P&M, Stock, Debtors

Implied (or cash) equity cushion

Key considerations Asset values, liquidity of assets, debt serviceability

Recurrability of cash flows, customer diversification, debt serviceability

Stars and Padlocks Typically more locks Typically more stars

CASH FLOW DEALS KEY CONSIDERATIONS

RECURRING CASH FLOWS AND IMPLIED EQUITY CUSHIONS UNDERPIN CASH FLOW DEALS21

RECURRING CASH FLOWS CAN PROVIDE ROBUST PROTECTION

KEY CRITERIA:

• Underlying market dynamicso Favourable trends (e.g. digitisation, healthy eating/low-carb etc.)

• Recurring Cash flowso Contracted or repeatable revenues

• Customer diversification o Limited dependence on any one customer

• Gross leverage level vs. EV multipleo Derives implied equity cushion

CASH FLOW DEALS EXAMPLE

ATTRACTIVE EN-VOGUE OFFERING WITH DIVERSIFIED SITE PORTFOLIO22

£3M, 4YR LOAN, £1.25M I/O FOR 12 MONTHS THEN AMORTIZING, £1.25 M BULLET (+ £0.5M*)

7.0% COUPON

Borrower A fast casual dining business providing healthy and food that has grown from one store in 2004 toa current portfolio of 24 stores located across Central London. Initially launched by a husband and wifeteam who developed a strong, recognisable and ethical brand. Now supported by an experienced teamincluding an FD, Ops Director, Marketing Manager.

Loan purpose Initial loan of £2.5M provided to refinance the RBS facility (£2M) and provide a working capital cushion (£500k). *Additional £500k loan committed to within the first 12 months for new store openings subject to covenant compliance. (New stores tend to be cash generative in the month of opening, as food and packaging debtors are paid a month later).

Security First ranking debenture over the company and all assets, Shareholder loans (£3.19M at end-March 2018) tobe non-cash pay and fully subordinated to the ThinCats facility.

Deal Rationale Acceptable initial leverage of 2.4x & high level of cash generation to service debt, as well as the valuation forthe business, thought to be 6 - 7x recurring EBITDA, which would thus be expected to cover the ThinCatsloan by > 2.0x. Abokado has survived market cycles and also expanded, capitalising on healthy eatingtrends, which show no apparent sign of diminishing.

Credit and Security Grading 3 star & 3 lock (driven by leverage level and customer concentration)

SECURITY,MONITORING & RECOVERIESJILL SANDFORD CHIEF RISK OFFICER

THE TEAMS

24 EXPERIENCED TEAMS

Monitoring SecuritiesLegalRecoveriesTransaction

Support

TRANSACTION SUPPORT

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IP writing

⚫ Supporting the BD and credit teams in drafting the IP.

⚫ Consistent format.

⚫ Clear and not misleading.

Securities

⚫ Initial security review.

⚫ Advise Credit on alternative structures.

⚫ Registration of security OR confirm registration if completed by external solicitors.

⚫ Review requests to release security.

Legal

⚫ Instruct external solicitors, acting on behalf of Lenders.

⚫ Liaise with solicitors regarding any proposed modifications to the loan documents.

⚫ Execution of all loan and security documents in preparation for drawdown.

SUPPORTING THE DEAL TO DRAWDOWN

MONITORING

Monitoring

⚫ Engage with the borrower at drawdown and establish relationship.

⚫ Review of borrowers MI.

⚫ Covenant testing as specified in the loan agreement.

⚫ Site visits to discuss specific issues with borrowers.

⚫ Receive initial notification of DD failure and ascertain from the borrower the reasons why.

⚫ Liaise with Credit and Recoveries as appropriate.

⚫ Issue breach and default notices

What are they looking for ?

• Is the MI in line with projections?

• Are annual accounts in line with MI?

• Trends both positive and negative

• Additional borrowings:

• other lenders

• extension of creditor days

• Review of bank statements

• Changes in credit status

• Changes in ownership and management

• Late filings at Companies HouseMONITORING THE BORROWERS PERFORMANCE THROUGHOUT THE LIFECYCLE OF THE LOAN26

WORKING WITH THE BORROWER

NEGOTIATED REVISED COVENANTS AND AN INCREASED INTEREST RATE OF 1.75% FOR LENDERS TO BE IN PLACE UNTIL CERTAIN MILESTONES ACHIEVED27

CASE STUDY

• Borrower acknowledged that they were going to breach covenant test and requested that they be waived / reset

• Severe cashflow pressure:

• Creditors being managed

• HMRC arrears and threat of WUP

• External equity raise in progress

• Meetings held with the management team and advisors (Credit, Monitoring and Recoveries)

• Commissioned and Independent Business Review (paid for by the borrower)

• Revised projections and management accounts requested

• Decision made to support the borrower subject to the successful equity raise:

• Professional advisors to join the board as NEDs

• The investment into the business will enable the business to grow and therefore enhance the value of the business

• Additional assets will be purchased, which will be caught by our security, thereby strengthening the security position

RECOVERIES

28

⚫

aways

⚫ Commercial strategies to maximise returns for lenders:

⚫ Accelerated sale of the business

⚫ Protection of intellectual property and contracts

⚫ Enhanced asset realisations via work out scenarios

⚫ Work with the borrower where possible:

⚫ Engagement at an early stage

⚫ Always have plan B running in the background

⚫ Patience can maximise returns.

⚫ Hostile appointments are sometimes necessary:

⚫ Ostrich syndrome

⚫ Preservation of assets

Enforcement:

⚫ Appointment of Administrators or Receivers - of our choosing.

⚫ Demand and appointment can be made on the same day if considered appropriate.

⚫ Recovery under corporate and personal guarantees.

⚫ Instruct independent solicitors and agents to act on behalf of lenders.

Pre funded recoveries to date

c £0.5m

COMMERCIAL STRATEGIES MAXIMISE RETURNS

FIGHTING HARD ON YOUR BEHALF

29

CASE STUDY 1

⚫ Roll up loans - not defaulted or matured

⚫ Director issued notice of a meeting of creditors to put the company into liquidation

⚫ Claimed that there were no assets other than debtors that we believed to be fictitious

⚫ The director was paying a fixed cash contribution to the proposed liquidator effectively a company burial fee

⚫ We objected to the proposed liquidator and appointed our own who specialised in fraud investigations

⚫ Provided an indemnity of £100k to the Court to enable the liquidator to apply for freezing orders across 40+ properties owned by the director and his family

⚫ Achieved 100% capital recovery plus a proportion of interest and fees

CASE STUDY 2

⚫ Protracted refinance proposals but we were always running Plan B

⚫ Served demand on the guarantor at the same that we made hostile appointments across the corporate entities

⚫ The next day we made an emergency application to the High Court London for the appointment of an interim receiver (same day hearing), on the grounds that we had concerns regarding asset dissipation. Including key information on personal computers

⚫ Application made without notice to the debtor

⚫ We provided an undertaking of £50k to the Court for costs

⚫ After 2 days in Court the judge did not make the order but did say that were perfectly within our rights to have made the application

PLATFORM & TECHNOLOGY UPDATEJOHN MOULD - CEO

PROGRESS IN 2018

31

Borrowers

⚫ Released new internal application which starts to enable the full automation of on-boarding borrowers

Scalability

⚫ Continued development to ensure the platform is scalable to support the business growth (e.g. automated payment processing)

Stability

⚫ Continuous bug fixes resolving issues impacting the operational staff and lenders

NEW PRODUCTSMATT JONES FINANCE DIRECTOR

DIVERSIFIED LOAN PORTFOLIO

DIVERSIFIED LOAN PORTFOLIO OFFERS LENDERS THE OPPORTUNITY TO DIVERSIFY THEIR LENDING PORTFOLIO33

Diversified Loan Portfolio Realisation

All capital and interest repayments received from Borrowers less fees will be returned to Lenders

⚫ No Secondary Market trading of either the Underlying Loans or the Diversified Loan Portfolio

⚫ Prior to the end of the Target Term, all remaining performing Underlying Loans will be offered for sale via the Secondary Market

⚫ Opportunity to lend to a selection of loans previously listed on the ThinCats Platform

⚫ Lenders can achieve greater diversification in a portfolio

⚫ ThinCats will charge a 1.0% administration fee

⚫ Target Term will typically be two years

INNOVATIVE FINANCE ISA (IFISA)

IFISAs CAN BE OPENED ON THE THINCATS PLATFORM FOR TAX EFFICIENT LENDING34

IFISA - 2018

Lenders can open a Thincats IFISA 2018 Account

⚫ Add £20,000 before 6th April 2019 and pay no income tax or capital gains tax

⚫ Self-select loans are eligible for an IFISA Investment

⚫ DLPs are eligible for an IFISA Investment

⚫ IFISA 2019

– Give the ability to perform transfers in

FCAJOHN MOULD

THE FCA

36

• The FCA Journey

• ThinCats FCA Journey

• The Future

• Lenders

• ThinCats

• Other P2P