Private equity has become the panacea of choice for institutional investors to offset low public equity and fixed income returns, because of recent relative outperformance, illiquidity and long timeframes. It’s become another way for institutional investors to kick the can down the road. As a result, pension funds and endowments are relying more heavily on private equity allocations than ever before to make up for lost ground in other asset classes.

1. PROPRIETARY & CONFIDENTIAL
The information contained in this presentation is proprietary and confidential and is provided to prospective investors solely for the purpose of evaluating an
investment in the Lateral U.S. Credit Opportunities Fund, L.P. (the “Fund”) This information is not to be shared, distributed or otherwise used, for any other
purpose or by any other individual, organization, company or business entity, without the prior written consent of Lateral Investment Management, LLC (“Lateral”).
LATERAL MARKET PERSPECTIVE, 19 April 2016
Private Equity: a Panacea or ‘Hail Mary’ for Institutional Investors

2. 2PRIVATE & CONFIDENTIAL
DISCLAIMER
The information contained in this presentation is proprietary and confidential and is provided to prospective investors solely for
the purpose of evaluating an investment in the Lateral U.S. Credit Opportunities Fund, L.P. (the “Fund”). This information is not
to be shared, distributed or otherwise used, for any other purpose or by any other individual, organization, company or business
entity, without the prior written consent of Lateral Investment Management, LLC (“Lateral”).
This presentation is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities.
Securities of the Fund are offered to selected investors only by means of a complete offering memorandum, which contains
significant additional information about the terms and risks of an investment in the Fund and shall supersede the information
contained herein in its entirety. Securities of the Fund are not registered with any regulatory authority, are offered pursuant to
exemptions from such registration and are subject to significant restrictions.
The information in this presentation was prepared by Lateral. The information is believed by Lateral to be reliable and has been
obtained from public sources believed to be reliable. Lateral makes no representation or warranty, express or implied, as to the
fairness, accuracy, completeness or correctness of such information, nor does Lateral or any of its affiliates accept any liability
arising from its use. Opinions, estimates and projections in this presentation constitute the current judgment of Lateral and are
subject to change without notice. Lateral has no obligation to update, modify or amend this presentation or to otherwise notify a
recipient of this presentation in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth
herein, changes or subsequently becomes inaccurate. No person has been authorized to give any information or make any
representations not contained herein.
Investment in the Fund involves significant risks of loss of capital. There is no assurance that the Fund will achieve its
investment objective and an investor could lose all or a substantial portion of his/her/its investment in the Fund. An investor
should carefully review the Fund’s offering memorandum and consult with the appropriate financial, tax or legal adviser before
investing in the Fund. The risks disclosed in this presentation do not include all of the risks and other significant considerations
of an investment in the Fund.
The information provided herein shall not form the primary basis of any investment decision. Each investor should
independently confirm such information and obtain any other information deemed relevant to an investment decision. A decision
to invest in the Fund should be made after reviewing the Fund’s offering memorandum, conducting such investigations as the
investor deems necessary and consulting the investor’s own advisers. Investors should not treat this presentation as advice in
relation to legal, taxation or investment matters. Additional information may be available from Lateral upon request. This
presentation is provided for informational purposes only

3. 3PRIVATE & CONFIDENTIAL
OVERVIEW: LATERAL INVESTMENT MANAGEMENT, LLC
Lateral is an innovative commercial finance company that provides growth funding and help for
leading asset-based, owner-operated companies in the United States
Our focus is on short-term collateralized senior loans plus equity upside for growing, independent
middle market firms
 Company size criteria: $10MM-100MM in revenues, $2MM-10MM EBITDA
 Facing a discontinuous short-term growth event, need for $5MM-25MM in capital
 Existing hard assets, recurring revenue or long-term contracts
 No major private equity sponsor; owner-operated or family owned; opportunity to take 10-40%
equity stakes
We believe that private credit risk in the U.S. is priced at a significant premium over comparable
public debt, a long-term opportunity because of dislocations in the banking system
 Higher recovery rate in private debt because of more control, transparency and pricing
 Demand for capital significantly higher than supply accessible from banks and private equity
firms
 Large underserved market for debt addresses 350K businesses with $16MM average revenue

4. 4PRIVATE & CONFIDENTIAL
LEADERSHIP TEAM
Integrates credit and private equity expertise in the lower middle market to bring innovative funding solutions for growing companies
Background:
 General Partner, Highland Capital Partners, a Boston-based venture capital and
private equity firm with $3B in assets under management.
 Company operations and turnaround management as CEO, executive or co-
founder at 5 companies.
Education:
 MBA, Harvard Business School
 M.Phil., Cambridge University
 AB, Harvard College
Richard de Silva, Managing Partner
Background:
 CFO and Managing Director of Operations and Compliance at White Oak
 CFO/COO of Merriman Holdings, a publicly traded middle-market investment bank
 CFO of Pacific Growth Equities, COO of the bank’s asset management group
 Deloitte & Touche LLP
Education:
 BS, Accountancy, University of
Southern California
 CPA, State of California
Jack Thrift, Chief Financial Officer/Managing Director of Risk and Compliance
Background:
 Co-Founder, Managing Partner and Co-Portfolio Manager, White Oak Global
Advisors, a private debt fund with $1B in assets.
 Director, KKR Financial; handled more than $2B in new direct corporate loans
 Senior Portfolio Analyst for Franklin Templeton Funds’ multi-billion dollar distressed
debt portfolio
Ken Masters, Chief Investment Officer & Managing Partner
Education:
 MBA, Harvard Business School
 BS, Cornell University

5. 5PRIVATE & CONFIDENTIAL
-1
-0.5
0
0.5
1
1.5
2
Japan 2Y OTR YIELD
Sweden 2Y OTR YIELD
USA 2Y OTR YIELD
France 2Y OTR YIELD
Germany 2Y OTR YIELD
Inflation CPI
NEGATIVE RATES AROUND THE WORLD,
NEGATIVE REAL YIELDS FOR U.S. TREASURY BONDS
YieldtoMaturity(%)
Inflation
Source: Citi Velocity

6. 6PRIVATE & CONFIDENTIAL
0
100
200
300
400
500
600
700
800
900
1000
OAS to Treasury, HYM
OAS to Treasury, USBIG
HY SPREADS WIDENED AND THEN TIGHTENED BACK,
FALSE PERCEPTION OF REDUCED DEFAULT RISK
Source: Citi Velocity
Jan
Feb
Apr
SpreadinYieldoverTreasuries(Basispoints)

7. 7PRIVATE & CONFIDENTIAL
PRIVATE MARKETS ARE AN INCREASINGLY IMPORTANT SOURCE
OF YIELD AND RETURN FOR INVESTORS
Private
Public
Equity Debt
Non-sponsor-backed
private credit plus
equity upside
Correlated sponsor-
backed private debt
financing
High PE entry
valuations
Tighter access to debt
financing
Volatile market comps
Lowered return outlook

8. 8PRIVATE & CONFIDENTIAL
GOOD PE RETURNS RECENTLY, BUT LONG TERM TREND IS DOWN
US PE premium to S&P
25 year: 3.5%
5 year: 1.4%

9. 9PRIVATE & CONFIDENTIAL
5X INCREASE IN PE INDUSTRY TO $4T IS UNPRECEDENTEDTotalAssetsUnderManagement
Source: Prequin

10. 10PRIVATE & CONFIDENTIAL
ONLY $500B IN PRIVATE DEBT, MOSTLY PE-RELATED
<$115B IN NON-PE RELATED DIRECT LENDING
Source: Prequin

11. 11PRIVATE & CONFIDENTIAL
EXCESSIVE SIZE OF PE INDUSTRY HAS LED TO HARMFUL
OVER-“SPONSORIZATION” OF U.S. CORPORATIONS
 Historically, Private Equity has played a positive role in improving the productivity of the U.S.
economy, by fostering growth and increasing the scale of companies
• Public/private arbitrage on multiples increasingly a function of excess leverage capacity, not
corporate efficiency, operating scale or rationalization
 For the macro economy, shift in emphasis to financial engineering versus innovation and long-
term growth
• Excess financing costs versus investment in product and people
• Agency cost of professional managers versus owner-operators
• Build to scale and exit versus durable, long-term companies
 For investors, illiquidity masks the volatility and cyclicality of the asset class
• High variability in vintages based on market cycle
• Long J curves and long term returns trending down
• 40% of exits involve trading to other PE firms, in which institutions may already be an investor
 For business owners, perverse incentives to sell early
• Value creation going to sophisticated financial players, not business builders
• Complexity: earn-out targets, separate debt and equity stakeholders
• Undermines the foundations required to build long-term franchises and generational family-
owned businesses

12. 12PRIVATE & CONFIDENTIAL
THE CYCLE HAS TURNED IN PRIVATE EQUITY- 2014 LIKELY HIGH
2000 High
2007 High
2014 High ?

13. 13PRIVATE & CONFIDENTIAL
U.S. PE BACKED EXIT ACTIVITY HAS DROPPED BY 50%Exitvalue($B)
Numberofexits
Source: Pitchbook

14. 14PRIVATE & CONFIDENTIAL
U.S. PE-BACKED EXITS HAVE FALLEN OFF A CLIFF, ZERO 2016 IPOSExitvalue($B)
Source: Prequin

15. 15PRIVATE & CONFIDENTIAL
ACTIVITY HAS SLOWED DOWN BUT, PLENTY OF DEALS CLOSINGDealvalue($B)
Numberofdealsclosed
Source: Pitchbook

16. 16PRIVATE & CONFIDENTIAL
ENTRY MULTIPLES ARE STILL HIGHValuationmultiples
Source: Pitchbook

17. 17PRIVATE & CONFIDENTIAL
DEBT LEVELS ARE COMING DOWNDebtpercentageoftotalvalue
Source: Pitchbook

18. 18PRIVATE & CONFIDENTIAL
POTENTIAL FUTURE RETURNS IN PE UNLIKELY TO MATCH
RECENT PERFORMANCE
Source: Bain 2016 Private Equity Report
Theoreticalmultipleoninvested
capitalonleveragedbuyoutdeal

19. 19PRIVATE & CONFIDENTIAL
TIME TO SELL, NOT BUY PRIVATE EQUITY
700 funds in fundraising market – 2016 vintages
are unlikely to perform as well as recent ones
LPs should ponder TPG founder David Bonderman’s
comments earlier this year:
• “We’re selling everything that isn’t bolted to the
ground” at an investor conference at the Beverly
Hilton in February
• … but TPG announced reaching $10BB for a
new fund later that month

20. 20PRIVATE & CONFIDENTIAL
LATERAL VS LENDER TO PE-BACKED COMPANIES
Origination In-house and proprietary Outsourced
Underwriting Direct fundamental analysis Proxy – depends on PE firm’s
work
Pricing According to risk Auction – lowest cost debt
provider wins
Structure and
documentation
Covenant tight, collateral-
focused and customized
Auction – covenant light,
weakest terms wins
Portfolio
management
Direct Through PE firm
Recovery Collateral-based and multi-
faceted approach
Limited, typically an all-or-
nothing scenario – must
negotiate with PE firm
Lateral Non-
Sponsored Financing
Typical Lender to PE-
Backed Companies

21. 21PRIVATE & CONFIDENTIAL
Transitional growth capital: Funding a well-defined, discontinuous growth event for borrower to scale the size of operations
LATERAL’S APPROACH: SHORT-TERM COLLATERALIZED FINANCING
AS CATALYST FOR EVENT-DRIVEN GROWTH AND THEN EXIT
21PRIVATE & CONFIDENTIAL
PRE-INVESTMENT
Proven but sub-scale
business model, strong
collateral but insufficient cash
flow to accelerate growth or to
qualify for traditional bank
financing.
POST-INVESTMENT
Company’s owners have
scaled their business,
increased value of their
holdings without significant
dilution.
18 to 36
months
EVENT-DRIVEN GROWTH:
$5-25MM funding with discrete
milestones. Lateral helps with
strategic growth initiatives,
capital expenditures optimization,
customer intros, team building.
Loan covenants are keyed to
milestones
Revenue
Time
A
B
LATERAL’S EXIT
Company has scaled
successfully with demonstrated
operating leverage and cash flow
increases
Lateral prepares company for
refinancing or new equity funding
Lateral facilitates process and
provides transaction support
LATERAL’S ENTRY
Identify potential for inflection
point in growth – 50-100%
revenue increase
Existing and future plans to
purchase additional capex
Well defined milestones for
company to move from A to B

22. 22PRIVATE & CONFIDENTIAL
HOW LATERAL PRICES RISK: IDIOSYNCRATIC, MARKET-NEUTRAL
APPROACH
BASE CASE target unlevered gross return components
Gross unlevered annual return (%)
26.8%
Current pipeline
target IRR
DOWNSIDE unlevered gross return components
Gross unlevered annual return (%)
24.8%

23. 23PRIVATE & CONFIDENTIAL
HOW LATERAL RE-PRICES RISK AND MAXIMIZES RECOVERY
OUTCOMES IN A DEFAULT SCENARIO
Options for Recovery Pricing Risk
Waive breach and/or extend term Charge fee, increase rate
Mandate operating changes: reduced cost
structure, capex limits
Charge fee, increase rate
Sell specific assets Reduce exposure
Require junior capital Reduce exposure
Foreclose on capital stock and operate Run off and operate to sell
Force M&A Sell company
Foreclose and sell assets
Sell assets at orderly liquidation
value
Options for Recovery Pricing Risk

24. 24
LOAN ILLUSTRATION (1 OF 3):
LATERAL’S CREDIT VS. PRIVATE EQUITY FUNDING
Choice: Lateral or PE funding?
• Alpha is a fast growing manufacturer
that wants to invest $10 MM in new
plant to expand its capacity. Lack of
scale drags down valuation.
• Owned by 2 strong-willed
entrepreneurs, concerned about
dilution and control issues.
Fit with Lateral criteria
• Compelling business inflection
point: Potential to double revenues
and increase margins from 10% to
20% with new plant.
• Incompatible with bank
requirements: Cashflows will lag for
12 months years before the business
shows long-run profitability.
• Strong collateral value: The
equipment has a long life and multiple
potential buyers.
• Exit plan: Plan to become >$10MM
EBITDA positive in 2 years to set up
PE and bank refinancing.
PE funding Bank loan Lateral loan
• Low pre-money results in
60% dilution
• Loss of control, board
• Help to grow
• Long-term equity partner
that requires an exit
• Fails coverage test
due to low
EBITDA
• Not a possible
funding source
• 2.0-year tenor, focus
on short-term growth
• 16% annual cost of
capital
• Help to grow
• No long-term control
Funding options

25. 25
LOAN ILLUSTRATION (2 OF 3):
LOAN TERMS AND CREDIT STATISTICS
Term sheet
Seniority: Senior to all other liens
and payments
Additional collateral: Pledge of capital stock
Size of loan: $10,000,000
Tenor: 2.0 years
Interest: 14.0% + 2.0% PIK
Underwriting fees: 4.0%
Pre-payment fees: NC Yr 1, 2.0% Yr 2
Servicing fees: $25,000 per year
Equity
Warrants for stock
equivalent to most senior
series
Put feature
Sell equity at 8x multiple of
EBITDA 12 months after
debt matures
Positive covenants Negative covenants
Financial
Performance:
Within 90% of
projections, tested
quarterly
Max Loan to
Value:
Asset valuation plus
cash equal to max
50% LTV
Quarterly
Reporting:
Due 30 days after each
quarter-end
Annual
Audits:
Due 90 days after
year-end
Asset
Valuations:
Conducted annually
Cash
Balance:
Equal to 12-month
debt service excluding
amortization
Change of
Control Put:
Remaining principal
and accrued interest
plus 2%
Prepayment
Fee:
102% of principal and
accrued Interest
Key Person
Put:
Any one of the two
founders
Liens: Excluded
Additional
Debt:
None without LGI
consent
Use of
Proceeds:
Purchase of
equipment and
general corporate
purposes

26. 26PRIVATE & CONFIDENTIAL
0
50
100
150
200
250
Scenario: PE now Scenario: LGI now, PE later
Valueofsharesatexit($MM)
More value upon exit
for the founders
Founder
equity
value
Founder
equity
value
Significant value created or business owners
by working with LateraI
Exit for Lateral
• 2 years for debt, 3
years for equity
• 20% IRR on debt
• 2x return for equity
• Overall 40% gross IRR
and 2.5x MOIC
LOAN ILLUSTRATION (3 OF 3):
RETURNS AND BENEFITS FOR THE BORROWER

27. CONTACT US:
Margret (“Mags”) Hardardottir
email: mags@lateralim.com
Richard de Silva
email: rd@lateralim.com
Ken Masters
email: ken@lateralim.com
Lateral Investment Management, LLC
1825 South Grant Street, Suite 210,
San Mateo, CA 94402
www.lateralim.com
Phone: 650-396-2200

28. 28PRIVATE & CONFIDENTIAL
PRIVATE EQUITY RETURNS BY VINTAGE YEAR

29. 29PRIVATE & CONFIDENTIAL
BET ON THE U.S. ECONOMY: FOCUS ON SMALLER COMPANIES
Company size of $10-100MM in revenues: 350K firms, 25% of jobs, $6 TT in revenues
Source: US Census 2012 County Business Patterns and 2012 Economic Census
351,148
firms
30 MM
24.6% jobs
$5.8 TT
in gross
receipts
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Number of Firms Employment Estimated Revenues
>$100MM $10MM-100MM < $ 10 MM
Categorized by firm size (annual revenues)
PercentoftotalintheUSeconomy
6 MM firms 121 MM employees $ 30 TT in gross revenues