Emerald Direct Lending Advisers www.teamemerald.

com

EMERALD DIRECT LENDING FUND I, L.P.

Investing in Consumer Term Notes

Presentation to National Association of Corporate Treasurers

April 4, 2014

Proprietary and Confidential Information contained herein should be used for one‐on‐one presentations
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 NOTIFICATION AND RISK DISCLOSURE

Emerald Direct Lending Partners, LLC (“EDLP”) and Emerald Direct Lending Advisers, LLC (“EDLA”) serve as the General Partner and
Adviser of the Emerald Direct Lending Fund I, L.P. (the “Fund”). The materials and information contained and described herein are
proprietary to EDLP, EDLA, and the Fund and may not be reproduced or distributed in any fashion without such parties’ written consent.
This presentation, furnished on a confidential basis to the recipient, is neither an offer to sell nor a solicitation of any offer to buy any
securities, investment product or investment advisory services, including interests in the Fund. This presentation is not an
advertisement and is not intended for public use or distribution and is intended exclusively for the use of the person to whom it has
been delivered by Emerald Direct Lending Advisers.
The Fund invests in consumer loans and notes originated through various online lending exchanges. Any grades or credit scoring
attached to loans are assigned by the lending exchanges. An investment in the Fund is suitable only for sophisticated investors of
adequate financial means who have no need for liquidity in this investment. There can be no assurances or guarantees that (i) the
Fund’s investment objectives will be realized, (ii) the Fund’s investment strategy will prove successful, or (iii) investors will not incur a
loss of principal by investing in the Fund. Prospective investors should carefully consider, with their respective financial, tax and legal
advisors, the risk factors described in the offering memorandum. Investments may lose value over time and no return is guaranteed.
This presentation is subject to a more complete description and does not contain all of the information necessary to make an investment
decision, including, but not limited to, the risks, fees and investment strategies of the Fund. Any offering is made only pursuant to the
relevant offering memorandum, together with the current financial statements of the Fund, if available, and a relevant subscription
application, all of which must be read in their entirety. No offer to purchase interests will be made or accepted prior to receipt by an
Offeree of these documents and the completion of all appropriate documentation.
This presentation does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or
participate in any particular trading or investment strategy and no representation or warranty is given with respect to any future offer or
sale. This information is not investment or tax advice or an investment recommendation.
The information including projections contained herein is generally believed to be reliable but no representation or warranty is given
with respect to its accuracy or completeness. These materials have been prepared solely for informational purposes and are subject to
change without notice.

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 EMERALD ASSET MANAGEMENT – “DRIVEN BY RESEARCH”

Assets Under Management

$2.8 Billion*
Company
East Coast Offices: Leola, Pittsburgh & King of Prussia, PA
West Coast Office: Oceanside, CA
Founded: 1991
Employees: 43
Fundamental, bottom up, active manager

Strategies / Products
Small, Mid & All Cap Growth
Large Cap Core
Banking & Finance Sector
Global ETFs
Fixed Income
Alternative High Yield Income
Partial Client List
City Of Philadelphia
Client List Disclosure Illinois Teachers’
It is not known whether the clients approve or disapprove of Emerald services provided through
its subsidiaries. Emerald did not use performance-based data to determine which clients are
Commonwealth of Pa
included on this list. Clients were selected based upon their general name recognition and as a Contra Costa County (CA)
representative sampling of the types of accounts managed. Performance-based data was not
used to determine which clients are included on this list. Clients were selected based on a
Independence Blue Cross
sampling of the types of accounts managed. Carpenter Technology
Indiana Hospital
Shippensburg University * As of 12/31/2013
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 EMERALD DIRECT LENDING FUND I, L.P. FEATURES

A diversified portfolio of prime and super-prime consumer term notes

+ Monthly contractual cash flow from principal and interest

+ Targeting a 8% ‐ 11% net return1
+ Uncorrelated to the public markets
+ Short duration1
+ Traditional asset – Fully amortizing term notes

1: The fund invests in fully amortizing 36 and 60 month notes. The note pool “self‐liquidates” from contractual cash flows from principal and
interest plus pre‐payments less defaults and delinquencies. The Fund have historically performed at a rate that principal investment would be
returned in less than 20 months. Actual cash flows experienced will vary based on actual interest rates, repayment rates, defaults and
delinquencies and there is no guarantee that an investment will perform as expected including potential loss of principal.
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 WHY CONSUMER CREDIT?
A $2.7 Trillion Institutional Grade Asset Class

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 WHY CONSUMER CREDIT?

Unsecured consumer credit yields have proven durable over a variety of interest rate
cycles and markets
1981 2012
16%
14% Over the past 30 years,
cash yields on most
12% investments have
10% declined while interest
rates on consumer loans
8% and credit cards have
6% remained high

4%
2%
0%
T-bills 10 yr T- 10 yr 30 yr T- 30 yr Consumer
Notes Munis Bonds Munis Credit
Sources: Federal Reserve, Bloomberg, ValuBond

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 CONSUMER CREDIT CONSISTENT - 90 QUARTERS OF POSITIVE RETURNS

18.00

16.00

14.00

12.00
Percent

10.00

8.00

6.00

4.00

2.00

0.00

Delinquency Rate Gross Yield Net Yield

Source: Federal Reserve

Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 CONSUMER DIRECT LENDING
A New Path For Smart Money

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 PEER-TO-PEER LENDING

TRADITIONAL LENDING P2P LENDING

BORROWERS

BANK
Loan issuance

INTERMEDIARY BANK P2P LENDING PLATFORM

SERVICES Borrower Aggregation Borrower Aggregation
Credit Underwriting Credit Underwriting
Loan Issuance Servicing & Collections
Servicing & Collections

FUNDING
Depositors Depositors Depositors

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
 LENDING TO PRIME & SUPER-PRIME BORROWERS

Dominant Loan Purpose is Credit Card Pay-Offs

Loan Purpose Borrower Credit Profile

Credit Card
Pay-Off Average
Personal Credit Score
Business 684
Home
Target Loans
Other Prime Super-Prime
500 - 509
510 - 519
520 - 529
530 - 539
540 - 549
550 - 559
560 - 569
570 - 579
560 - 569
570 - 579
580 - 589
590 - 599
600 - 609
610 - 619
620 - 629
630 - 639
640 - 649
650 - 659
660 - 669
670 - 679
680 - 689
690 - 699
700 - 709
710 - 719
720 - 729
730 - 739
740 - 749
750 - 759
760 - 769
770 - 779
780 - 789
780 - 789
790 - 799
<500

800+
WEAK MODERATE STRONG EXCELLENT

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 DIRECT LOAN ORIGINATION PROCESS

LOAN UNDERWRITING ORIGINATION & SERVICING

LOAN ORIGINATION
BORROWER The Fund does independent credit
INQUIRY analysis and portfolio optimization
DATA The Fund makes buy/pass decision
COLLECTION Loans and Notes in separate SPV
+ Referred to CREDIT
Website by: SCORING
+ Affiliates + Borrower
Partners DATA
completes
+ Advertising detailed online + Lending
VERIFICATION
questionnaire LOAN COLLECTIONS
+ Borrower Platforms utilize
answers 6 basic + Data collected proprietary credit SERVICING & DEFAULTS
from IRS + Borrower provides
questions to pre‐ scoring models
database requested physical
qualify (90% fail) based on FICO
+ Data collected data including W‐2; + Serviced by + Lending Platforms
and heuristic
from ADP and/or tax returns; pay originating Lending actively call to collect
credit variables
Paychex stubs Platform in the 1st 30 days
+ Data collected + Loan is Rated &
+ Lending Platforms + ACH Collections + 31 – 120 days past
from FICO Priced (APR)
perform manual due collected by 3rd
providers and automated + Payment
party collection firms
+ Lending Platform random data confirmation and
does manual verifications reporting to + 120 day charge‐off
credit verification investors policy
as necessary
+ Cash paid to + Ongoing collection
investor accounts after default
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 OVER $200 MILLION IN INTERNET UNDERWRITTEN LOANS PER MONTH

Disciplined Credit Analysis

We evaluate over 15,000 ⁺ Minimum FICO Score (Prime & Super‐Prime)

loans per month ⁺ Minimum monthly gross income

⁺ Size of requested loan amount
⁺ Delinquencies and charge‐offs
We look for: ⁺ Utilization of aggregate credit limit
• Ability to pay ⁺ Size of revolving credit line
⁺ Job consistency
• Willingness to pay
⁺ Type of employment / occupation
• Likelihood to pay ⁺ Employer
⁺ Length of credit history
⁺ Education

EDLA portfolio management team

works to identify and select mispriced credit risk

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 DIRECT CONSUMER LOANS:
SHORT DURATION, ATTRACTIVE YIELD, LOW CORRELATION

Emerald Direct Lending Advisers has identified

a potentially attractive opportunity in the consumer credit sector

+ Traditional Asset: 3 year and 5 year fully amortizing consumer loans

+ Relatively Short Duration: 2 year – 3 year investment horizon
+ Attractive Yield: Unlevered target net returns of 8‐11% on a diversified loan pool
+ Optional Monthly Income: Contractual cash flow from principal and interest payments
+ Low Volatility: Portfolio construction focuses on principal preservation
+ Non-Correlated: no exposure to public market pricing

The fund invests in fully amortizing 36 and 60 month notes. The note pool “self‐liquidates” from contractual cash flows from principal and interest
plus pre‐payments less defaults and delinquencies. The Fund have historically performed at a rate that principal investment would be returned in
less than 20 months. Actual cash flows experienced will vary based on actual interest rates, repayment rates, defaults and delinquencies and
there is no guarantee that an investment will perform as expected including potential loss of principal.
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 CONSISTENT MONTHLY INCOME FROM CONTRACTUAL CASH FLOWS

Emerald Direct Lending Fund I Monthly Income*

Year Entity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD TTM
2014 EDLF-I 0.70% 0.85% 1.56% 9.92%
2013 EDLF-I 0.95% 0.86% 0.80% 0.90% 0.89% 0.69% 0.86% 0.95% 0.84% 0.91% 0.74% 0.35% 10.19% 10.19%
2012 EDLF-I 0.00% 1.01% 0.97% 1.03% 0.79% 0.97% 4.87% n/a

* Unaudited monthly income net of fees and expenses

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 COMPARATIVE PORTFOLIO PERFORMANCE

Comparative Performance of EDLFI Portfolio vs. all Portfolios On Lending Club Platform

Emerald Direct Lending Fund I

Source: Lending Club Website

2 2

Chart is independently produced by Lending Club and represents their projections of portfolio net performance. It is for
informational and broad comparative purposes only. It does not represent actual Fund performance.
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 CONTACT INFORMATION www.teamemerald.com

Emerald Direct Lending Advisers, LLC

EAST COAST WEST COAST
3175 Oregon Pike 301 Mission Avenue, Suite 209
Leola, PA 17540 Oceanside, CA 92054

Joseph E. Besecker Joseph G. Witthohn, CFA Howard Freedland, CFA

CEO Portfolio Manager Principal
[email protected] [email protected] [email protected]
(717) 396‐1116 – Office (717) 396‐1116 – Office (760) 444‐5014 – Office
(717) 951‐8002 – Mobile (856)‐625‐7915– Mobile (949) 813‐5563 – Mobile

Scott L. Rehr Andrew Smith Richard E. Keller

CAO Portfolio Manager Principal
[email protected] [email protected] [email protected]
(717) 556‐8828 – Office (717) 396‐1116 – Office (760) 444‐5012 – Office
(484) 269‐0623 – Mobile (484)‐269‐6404 – Mobile (858) 922‐3641 – Mobile

Daniel W. Moyer IV Simon Leach

EVP, Marketing VP Operations & Compliance
[email protected] [email protected]
(717) 396‐1116 – Office (760) 444‐5011 – Office
(717) 368‐4340 – Mobile (760) 710‐7679 – Mobile

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 EMERALD DIRECT LENDING FUND I, L.P.
Near term cash alternative
Monthly cash income
Uncorrelated to public equity and debt markets

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 EMERALD DIRECT LENDING ADVISERS CORE TEAM

• Joseph Witthohn, CFA • Joe Besecker, CEO

• Howard Freedland, CFA • Scott Rehr, CAO
• Andy Smith • Rich Juliano, CFO
• Simon Leach, VP Ops /
• Richard Keller Portfolio Financial, Compliance
Management
Operational, • Chima Narasimhan
& & Risk
Strategy Management

Sales
Third Party
• Opus Fund Services &
• BDO USA, LLP
Support
Marketing
• Pepper Hamilton LLP • Daniel Moyer, IV
• Millennium Trust • Richard Keller
• JP Morgan, Chase

Proprietary and Confidential

This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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 SUMMARY

Fund Objectives*:
+ Generate contractual monthly cash flow
+ Competitive yield
+ Short duration
+ Uncorrelated to equity and fixed income
markets
+ Low volatility
+ Principal preservation
+ Active portfolio management
Emerald Direct Lending Fund I Monthly Performance*
Year Entity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD TTM
2014 EDLF-I 0.70% 0.85% 1.56% 9.92%
2013 EDLF-I 0.95% 0.86% 0.80% 0.90% 0.89% 0.69% 0.86% 0.95% 0.84% 0.91% 0.74% 0.35% 10.19% 10.19%
2012 EDLF-I 0.00% 1.01% 0.97% 1.03% 0.79% 0.97% 4.87% n/a
* Unaudited monthly income net of fees and expenses. There can be no assurances or guarantees that the Fund’s investment objectives will
be realized or that the Fund’s investment strategy will prove successful. Investments may lose value over time and no return is guaranteed.
Proprietary and Confidential
This presentation, furnished on a confidential basis to the recipient, does not constitute an offer of any securities or investment advisory services. It is intended exclusively for the use of the person to
whom it has been delivered by Emerald Direct Lending Advisers, and it is not to be reproduced or redistributed to any other person without the prior consent of Emerald Direct Lending Advisers.
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