William Blair - Spec Fin 2014

Equity Research Financial Services and Technology | Financial Technology | Specialty Finance | Business Development Companies
Financial Technology and Specialty Finance

Sector Update and 2014 Outlook
We believe the global economy is stable and steady with some modest acceleration in several markets. The global economy will likely be slightly stronger in 2014 than it was in 2013, in our view. The secular growth opportunity in global electronic payments has not declined in the least, in our view. We still believe that about 85% of global retail payment transactions use cash and checks, in line with three years ago, despite double-digit secular growth. Faster-growing emerging-market economies (i.e., Latin America, Asia, Africa, and Eastern Europe), which are predominantly cash-based, put upward pressure on the electronic payments opportunity. International growth of electronic payments will continue to materially exceed growth in the United States. Companies poised to bene it from the international growth of payments should show strong inancial results despite the uncertain economic environment. Asia, Latin America, the Middle East, and Africa all have substantial long-term electronic payment growth opportunities, in our view. Technological innovation is a key driver to growth of inancial services. Innovation in the payments space continues to accelerate. Mobile payments; tablet computers, such as iPads; prepaid cards; mobile wallets; the Internet; and online lending are all examples of game-changers in the inancial services sector. Consumer-directed healthcare secular trend appears to be gaining momentum. We believe the growth of consumer-directed healthcare is the single best way to control the growth of healthcare costs. We believe the Affordable Care Act has accelerated the trend. Private healthcare exchanges appear poised for substantial growth. Regulatory pressures continue to build for the inancial technology sector. We believe most companies will navigate the environment, but costs continue to rise. Financial technology continues to outperform the market; valuation continues to expand. After 30% growth in 2012, the William Blair Financial Technology Index rose 44% in calendar 2013, versus the S&P 500 growth of 13% in 2012 and 30% in 2013. The William Blair Financial Technology index trades at about 12 times on an EV-to-EBITDA basis, 29% above year-ago-levels. Companies with high barriers to entry, long-term secular growth, international exposure, and visible operating leverage should remain core holdings.
January 14, 2014 Industry Report Financial Technology Alliance Data Systems Corporation (ADS) Outperform, Core Growth American Express Company (AXP) Outperform, Established Growth Capital One Financial Corporation (COF) Market Perform, Core Growth Cardtronics, Inc. (CATM) Outperform, Core Growth Discover Financial Services (DFS) Outperform, Core Growth EVERTEC, Inc. (EVTC) Outperform, Core Growth Financial Engines, Inc. (FNGN) Outperform, Aggressive Growth Green Dot Corporation (GDOT) Market Perform, Aggressive Growth MasterCard Incorporated (MA) Outperform, Established Growth MoneyGram International, Inc. (MGI) Outperform, Aggressive Growth Performant Financial Corp. (PFMT) Outperform, Aggressive Growth QIWI plc. (QIWI) Outperform, Aggressive Growth Visa Inc. (V) Outperform, Established Growth WageWorks, Inc. (WAGE) Outperform, Core Growth The Western Union Company (WU) Market Perform, Established Growth WEX Inc. (WEX) Outperform, Core Growth Specialty Finance CAI International, Inc. (CAP) Outperform, Core Growth DFC Global Corp. (DLLR) Market Perform, Aggressive Growth Encore Capital Group (ECPG) Outperform, Core Growth Independence Realty Trust, Inc. (IRT) Outperform, Core Growth Marlin Business Services Corp. (MRLN) Outperform, Core Growth Portfolio Recovery Associates, Inc. (PRAA) Outperform, Established Growth Business Development Companies Garrison Capital Inc. (GARS) Outperform, Core Growth Harvest Capital Credit Corp. (HCAP) Outperform, Core Growth Monroe Capital Corp. (MRCC) Outperform, Core Growth (14-009)
Robert P. Napoli +1 312 364 8496 bnapoli@williamblair.com
Brian D. Hogan +1 312 364 5256 bhogan@williamblair.com
Cristopher D. Kennedy, CFA +1 312 364 8596 ckennedy@williamblair.com
Please refer to important disclosures on pages 104 and 105. Analyst certication is on page 104. William Blair & Company, L.L.C. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the rm may have a conict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision.
William Blair & Company, L.L.C.
Contents
Summary ............................................................................................................................ 3 2014 Top Picks................................................................................................................... 6 Runners-up ........................................................................................................................ 9 Attractive Long-Term Investments .................................................................................. 10 Yield Stocks ...................................................................................................................... 11 Consumer Trends ............................................................................................................ 13 Commercial Trends ......................................................................................................... 36 Mortgage/Housing Trends .............................................................................................. 58 Payments and Remittance Trends .................................................................................. 74 Stock-Price Performance and Valuation ......................................................................... 92
Robert P. Napoli +1 312 364 8496
Summary
In 2013, the William Blair Financial Technology Index rose 43.7%, while the William Blair Specialty Finance Index rose 46.9% (versus 29.6% for the S&P 500). This performance is on the heels of the William Blair Financial Technology Index rising 30.3% in 2012 and the William Blair Specialty Finance Index rising 30.6% in 2012 (versus 13.4% for the S&P 500).
Exhibit 1 William Blair Financial Technology Index Versus S&P 500 400 350 300 250 200 150 100 50 0 Oct-09 Oct-10 Oct-11 Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Apr-10 Apr-11 Apr-12 Jan-09 Jan-10 Jan-11 Jan-12 Fin Tech S&P 500 Oct-12 Jan-13 Oct-13
Oct-13
Price (Indexed to 100)
Apr-13
Jul-13
Sources: FactSet and William Blair & Company, L.L.C.
Exhibit 2 William Blair Specialty Finance Index Versus S&P 500 350
300 250 200 150 100 50 0 Oct-09 Oct-10 Oct-11 Oct-12 Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Apr-10 Apr-11 Apr-12 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Apr-13 Jul-13 Jan-14 Specialty Finance S&P 500
We believe that despite strong stock price performance, valuations remain reasonable; however, we expect modest multiple expansion from current levels. On an EV-to-EBITDA basis, valuation for the William Blair Financial Technology Index expanded 29% in 2013, to 12.0 times; interestingly, valuations have expanded by 7 points (or 147%) from their bottom in November 2008. We believe the relatively strong business models and secular tailwinds suggest the group could trade at a 12to 14-times multiple over time.
Jan-14

Exhibit 3 William Blair Financial Technology Index EV-to-NTM-EBITDA
18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x
A Few Interesting Charts The 178 exhibits in this report highlight the various macro trends that we monitor and historical valuations. Below we focus on a few of the more interesting exhibits that might represent an in lection point. The U.S. population continues to rely heavily on the government payments (exhibits 21 and 22, on pages 21 and 22). As of third quarter 2013 (the most recently available data), about 17% of personal income comes from government social bene it programs (e.g., Medicaid, Medicare, unemployment insurance, Social Security, and veterans bene its); this compares with 13.99% exiting 2006 and the long-term average of 10.4% (since 1947). Further, social bene it payouts have exceeded employer and employee contributions by about 1.5 times since 2009 (versus the long-term average of 1.08 times). In the September quarter, for instance, the government paid $2.4 billion in social programs but collected only $1.6 billion from employers and employees for the programs. The U.S. jobs market continues to gradually improve. For most of 2013, weekly initial unemployment claims have been below 350,000, on a four-week rolling average basis, a level that we view as healthy. Weekly jobless claimswhich we view as a more important indicator than the monthly employment reportare down about 50% from their March 2009 highs. Initial jobless claims, on a four-week average basis, have ranged from 305,000 to 369,000 in 2013 (exhibit 23, on page 23). Consumer deleveraging appears to be bottoming; consumers have plenty of dry powder that will drive spending if conidence returns (exhibits 13, on page 17, and 37, on page 30). Revolving credit outstanding was at $823.4 billion, which remains 18% ($182 billion) below the recent December 2008 peak. Further, consumers inancial obligation ratio (household debt payments to disposable income) was 15.36% in the September 2013 quarter; this compares with the most recent peak of 18.10% in December 2007 and the average of 16.6% since 1980. Credit quality continues to be near record low levels (exhibit 72, on page 49). According to the Federal Reserve, 0.97% of all business loans were delinquent in the September 2013 quarter, which compares with the recent peak of 4.36% in the September 2009 quarter and the historical average of 2.98% since 1985. Similarly, charge-offs totaled 0.23% in the September 2013 quarter, which compares with the recent peak of 2.52% exiting 2009 and the historical

average of 0.90% since 1985. We believe recent trends will prove unsustainable over the long term but could linger longer than most expect, due to the improving economy, the tighter lending environment, and the overall deleverage in the market. The U.S. housing market is the key to a much-more-robust economy and shows steady signs of improvement; however, higher interest rates appear to have pressured affordability (exhibits 94, on page 60, and 115, on page 71). Residential investment as a percentage of U.S. GDP represented 3.2% in the September 2013 quarter and compares with the recent bottom of 2.4% in 2010, the recent peak of 6.7% in 2005, and the historical average of 4.6% since 1929. Housing affordability, as de ined by the National Association of Realtors, is 23% below its recent peak, reached in January 2013, but remains 12% above its long-term average. According to the National Association of Realtors, the index measures whether a typical family could qualify for a mortgage loan on a typical home and is based on the combination of median home price, median family income, and average mortgage interest rates. Consumer-directed healthcare continues to gain share as employers ind solutions to contain healthcare costs (exhibits 148 and 149, on pages 90 and 91). Healthcare represents 17.7% of the United States gross domestic product (GDP), which compares with 9% in 1980 and the global average of 9.3%, according to the Organisation for Economic Co-operation and Development. Only about 20% of employees in the United States are covered by high-deductible health (versus 4% in 2006), according to the Kaiser Family Foundation. In addition to tax bene its, employers have incentives to increase their participation in these programs, because consumer-directed bene its reduce total cost of coverage by about 18% per employee (versus PPO and HMO plans), according to Mercer. We believe 2014 could represent an in lection point for the healthcare exchange market.
Key risks include government budget de icits broadly, global currency risks, in lation, interest rate volatility, geopolitical events, and disruptive terrorist events.
2014 Top Picks

Our top picks for 2014 include Outperform-rated Visa, MasterCard, and Discover Financial Services. We believe our top picks have high risk-adjusted returns (i.e., below-average risk of experiencing a sharp decline and above-average long-term opportunity to materially outperform the market). We outline our rationale for each of the companies below. Visa Inc. Rationale Visa is well positioned to continue capitalizing on the electronic payments secular growth trend. Roughly 85% of payment transactions globally are cash and check (versus roughly 45% in the United States). For perspective, electronic payment transactions accounted for about 15% of the U.S. market in 1990, according to The Nilson Report. Secular growth of electronic payments is expected to be 10% to 12%, on average, globally over the next several years, which compares with personal consumption expenditure growth of about 7%. The drivers behind the secular shift from paper to plastic include convenience, security, and enhanced services and rewards for the consumer, as well as lower cash-handling expenses for the retailer. Management estimates that it has roughly 22% share of personal consumption expenditure (PCE) in its developed markets (excluding Europe) up from 19% in 2009, and only 9% share of PCE in its emerging markets, up from 6% in 2009. Visas global network represents substantial barriers to entry, and disintermediation appears unlikely, in our view. There are substantial barriers to entry as incumbents have massive scale and global reach, as well as leading security and data management skills, information intelligence, brand recognition, and trust. We believe the cost of building a global payments network would even prevent the largest technology, inancial, or wireless companies from seriously considering such an endeavor. Visa enjoys high incremental margins, which contribute to its attractive margin pro ile (61.5% in iscal 2013, ending September) and strong free cash low, positioning the company to invest in growth initiatives (e.g., prepaid, mobile, e-commerce, international, and person to person). Amid the backdrop of strong secular tailwinds, we believe iscal 2014 guidance could prove conservative. Fiscal 2014 guidance calls for low-double-digit constant-currency revenue growth and mid- to high-teens adjusted EPS growth. Guidance is based on a tepid economic recovery. We expect long-term sustainable EPS growth of at least 15% due to the secular tailwinds, modest margin expansion, and capital redeployment. Visa has a strong balance sheet and generates strong cash low. The company had about $7 billion of cash and investments and no debt on its balance sheet as of September 30, 2013. Visa should generate nearly $5 billion of free cash low in iscal 2014 and is authorized to repurchase more than $5.2 billion of stock.
Valuation On a calendar-year basis, Visa trades at about 24 times our 2014 EPS estimate and 21 times our 2015 EPS estimate, yet we anticipate 19% EPS growth in 2014 and 16% growth in 2015. The stock trades at under a 1.2 PEG ratio, which is attractive relative to the broader market.

Similarly, on an EV-to-EBITDA basis, Visa trades at about 14 times for calendar 2014 and 12 times for 2015, yet we anticipate 12%-13% EBITDA growth.
Key Risks Global economic growth remains an important driver of revenue growth for Visa. During the prior recession, Visa revenue growth rose 9% year-over-year in calendar 2009 (versus 18% in calendar 2008). Legal and regulatory risks remain.
MasterCard Incorporated Rationale Similar to Visa, MasterCard is well positioned to continue capitalizing on the electronic payments secular growth trend (see thesis above). Also similar to Visa, MasterCards global network represents substantial barriers to entry, and disintermediation appears unlikely, in our view. We believe there are substantial barriers to entry as incumbents have massive scale and global reach, leading security and data management skills, information intelligence, brand recognition, and trust. We believe the cost of building a global payments network would even prevent the largest technology, inancial, or wireless companies from seriously considering such an endeavor. For perspective, MasterCard-branded cards accounted for about $3 trillion of total purchase volume over the last 12 months. High incremental margins should drive MasterCards operating margin expansion over time. The network effect allows for incremental margins in the 90% range, in our opinion. However, we believe the company will heavily invest in prepaid, mobile, e-commerce, international, person to person, and other initiatives, allowing for a more gradual increase in operating margins from the current level of just about 56%. Amid the backdrop of strong secular tailwinds, guidance could prove conservative. On a constantcurrency basis and excluding future acquisitions, guidance for 2013-2015 calls for net revenue to increase at an 11%-14% compound annual rate, operating margins to remain above 50%, and EPS growth of at least a 20% compound annual rate. We believe capital allocation and share buybacks will play a larger role in EPS growth in the coming years as operating margins remain elevated. MasterCard has a solid balance sheet and produces strong cash low. It exited the September 2013 quarter with $3.4 billion of cash and equivalents and $2.6 billion of investment securities, and it should generate more than $3 billion of free cash low in 2014.
Valuation MasterCard trades at about 27 times our 2014 EPS estimate and 23 times our 2015 EPS estimate, yet we anticipate 18%-20% EPS growth in the coming years. MasterCard trades at under a 1.2 PEG ratio, which is attractive relative to the broader market. Similarly, on an EV-to-EBITDA basis, the stock trades at about 16 times 2014 and 13 times 2015; yet we anticipate over 15%-16% EBITDA growth in coming years.

Key Risks Global economic growth remains an important driver of revenue growth for MasterCard. During the prior recession, its revenue increased 2% year-over-year in 2009 (versus 23% growth in 2008). Legal and regulatory risks remain.
Discover Financial Services Rationale Discover continues to expand and enhance its direct banking strategy, which along with its network, uniquely positions it among its peers, in our opinion. We believe the company is well positioned to continue to bene it from the secular growth of electronic payments, both consumer and commercial. Discover is taking market share in credit card lending and ills a signi icant void left by the banks with its personal loan offering as well as student lending. Discovers credit card lending portfolio (80% of total loans) was up 4.0% in the third quarter, comfortably above the industry growth rate of 0.2%. We forecast Discover to continue taking market share, and we forecast 4% growth in both 2014 and 2015. Discover is one of only a few lenders underwriting private student loans today. We believe Discover is well positioned to increase its market share in student lending (13% of total loans). The personal consumer lending business (6% of total loans) is growing rapidly, as Discover is taking advantage of the market dislocation and signi icant market opportunity, which we estimate at roughly $400 billion. Credit quality trends remain strong, exhibiting improving trends despite seasonal headwinds, relatively strong loan portfolio growth, and credit metrics already at record-low levels. While further material improvement is unlikely, we expect credit losses to remain below average for an extended period. We expect Discovers loss provisioning over the next year to be primarily attributed to loan growth. At this point, we believe our loss rate forecast of 2.1% in 2014 could be conservative. Network partnerships provide material long-term upside potential. Discovers closed-loop network gives it unique long-term value, in our opinion. We believe the barriers to building a closed-loop payments network are substantial. Discover has built its unique franchise over decades. We believe its network is underused, but management appears active in seeking ways to increase the volume on its network, forming partnerships with a host of marquee companies looking to build or enhance their payments businesses. While we believe the partnerships have signi icant potential, it will likely take several years to be meaningful, if successful. International network expansion represents a long-term opportunity for Discover, though likely not material in the near term. Discover is using the Diners Club brand and building out the interoperability of its network to establish an international presence. The network interoperability allows a Discover-branded card to be accepted anywhere Diners Club is accepted. Discover is signi icantly overcapitalized, generates strong cash lows, and is aggressively returning capital to shareholders. Return on equity is a little more than 20%, versus loan growth of about 5%; this compares with managements long-term average target of 15%. Discovers tier-1 common ratio stood at 14.7%, up from 13.9% a year earlier and despite a 5% reduction in the share count. We forecast Discover to return 80% of capital generated in 2014 and 2015 via dividends and share repurchases.

Valuation Discover shares trade at about 12 times our 2014 EPS estimate, compared with about 15 times for a broad group of regional banks. Discover generates higher return on equity, has a higher long-term earnings growth rate, and has substantial excess capital. Discover is more credit sensitive and regional banks bene it more from rising interest rates, but over the long term, we believe Discovers valuation gap with that group will narrow materially. In addition, the stock trades in line with Capital One despite generating higher return on equity and a more visible growth outlook. We also believe Discovers valuation gap to American Express, which trades at about 16 times our 2014 EPS estimate, is also too wide.
Key Risks The banking industry, which includes credit card lending, is under increased regulatory scrutiny. Economic cyclicality could drive greater-than-expected volatility in earnings. A weak economy would lead to consumer spending and could also lead to higher-than-expected credit costs. Compression of interchange fees, driven by regulatory intervention and/or competition, could adversely affect operating results.
Runners-up
Below we highlight other stocks in our universe that were on our runners-up list: American Express Company (Outperform) American Express is valued at a market multiple and has good business momentum; we believe it is likely to trade at a premium to the market. Wells Fargo and U.S. Bank will issue the American Express cards; we believe these new relationships highlight the power of the brand. CAI International, Inc. (Outperform) CAI was a disappointing stock in 2013, up only 3% in 2013. Relative valuation has plummeted versus its peers, despite in-line fundamental performance. We believe this is due to smaller market cap and the lack of a capital return plan. CAIs shares are valued at about 7 times our 2014 EPS estimate versus the peer average of 11.3 times. Its price-to-book value of about 1.3 times compares with the peer average of about 2.4 times. If global growth accelerates slightly in 2014, we believe estimates could start to move up and that the stock price could have 50% upside. DFC Global Corp. (Market Perform) DFC is the worst performer in our universe in 2013, down 47% year-to-date. The underperformance is due to severe regulatory changes in the U.K. market. DFCs Canadian and U.S. segments are driving solid performance and justify the current valuation. We believe U.K. regulation will drive out many competitors and that it is a likely survivor and should drive reasonable returns in that market. If this happens, we believe there is upside potential of 50% to 100%. EVERTEC, Inc. (Outperform) Evertec is a Latin American payments and inancial technology company. The stock has been essentially lat at around $20 since its initial public offering. Shares are valued at about 15 times our 2014 EPS estimate while its peers trade at 15-20 times. Cash lows are strong with 50% EBITDA margins and a 10% tax rate. Currently, 85% of business is generated in Puerto Rico, but the big growth opportunity is outside Puerto Rico.
Robert P. Napoli +1 312 364 8496 9

MoneyGram International, Inc. (Outperform) The stock remains inexpensive at about 6 times our 2014 EBITDA estimate, despite 50% stock price appreciation in 2013. MoneyGram has reported 12 consecutive quarters of double-digit transaction growth; in the most recent quarter, it had 14% transaction growth and 13% revenue growth, all organic. We expect double-digit transaction growth for the next few years. Performant Financial Corporation (Outperform) Performant was another 2013 underperformer, with the stock up only 5%. Management has executed well, but it has been faced with continued uncertainty and indecision by the Centers for Medicare and Medicaid Services (CMS) with regard to its Medicare RAC business, which is about 25% of revenue. Shares are valued at about 8 times our 2014 EBITDA estimate. We believe there is 50% upside potential if a favorable resolution on the Medicare RAC is attained.
Attractive Long-Term Investments

Below we list other stocks in our coverage universe that we believe are compelling long-term investments. Most of these stocks were up signi icantly more than the William Blair proprietary inancial technology and the specialty inance indices as well as the market as a whole. Alliance Data Systems Corporation (Outperform) We believe ADS brings a unique proposition to the market by marrying digital marketing skills with credit and loyalty products; as a result, ADS is in the sweet spot of the trend toward enabling commerce through technology. We believe managements long-term targets and our estimates are conservative. Management targets revenues to grow organically at the rate of three to four times gross domestic product, which should drive about 10% EBITDA growth and 15% EPS growth. Shares trade at about 21 times our 2014 economic EPS estimate and 19 times our 2015 estimate. Debt Collectors: Portfolio Recovery Associates, Inc. (Outperform) and Encore Capital Group, Inc. (Outperform) Both stocks are up roughly 50% in 2013, following similar moves in 2012. Valuations are still reasonable, in our opinion, but regulatory headwinds and debt supply questions add some near-term noise. Industry consolidation in the United States has accelerated, and both Portfolio Recovery and Encore are clear winners over the long term, in our opinion. In addition, we believe global opportunitiesespecially in the United Kingdom and Europe broadlyadd to long-term growth potential. Financial Engines, Inc. (Outperform) Financial Engines has expanded its total addressable market substantially with the addition of IRA and Income+ products over the past couple years. In our opinion, the third quarter 2013 was the companys best quarter ever, as it added a record $85 billion of assets under contract (AUC), bringing the total AUC to $752 billion, up 34% year-over-year, and EBITDA rose 50%. The shares are valued at about 11 times our 2014 revenue estimate and 3.2% of AUM. QIWI plc (Outperform) QIWI is a Moscow-based payments company that is up about 200% since its May 3, 2013, initial public offering. The company has strong momentum and has exceeded expectations by a wide margin each quarter since the IPO. Valuation is at about 28 times 2015 EPS and about 21 times EBITDA. WageWorks, Inc. (Outperform) WageWorks is one of the best plays in the trend toward consumer-directed healthcare bene its, in our opinion. We also believe it is a great play on the growth of private exchanges, based on its exclusive relationship with Towers Watsons active exchange. Bene its from the exchange
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relationship, potential acquisitions, and the likely bene its from positive adjustments to the useit-or-lose-it rule are not included in our estimates and are likely to affect 2015 and later years much more than 2014. WEX Inc. (Outperform) WEX was one of our top picks for 2013. The company reported strong reacceleration in its online travel payments business in the September quarter and steady results in its core fuel card business. Perhaps most importantly, it announced an acquisition of the Exxon private-label card program in Europe (marketed under the Esso brand) that doubles the total addressable market for the fuel card business. However, the deal will not close until late 2014 and will be dilutive to 2014 and irst half 2015 earnings. We hope this will lead to other deals with major oil companies in Europe and Asia. Shares are valued at about 18 times our 2014 and 16 times our 2015 EPS estimates. Green Dot Corporation (Market Perform) Despite an onslaught of new competition, Green Dots core business appears to be more resilient than our (and managements) initial expectations. Shares remain relatively inexpensive at about 6 times 2014 EV-to-adjusted-EBITDA and 17 times EPS; the company had $245 million of net unencumbered cash and investments (or $5.39 per share) on the balance sheet exiting September. Green Dots ive-year contract with Wal-Mart (65% of Green Dots revenues) expires in May 2015. Cardtronics, Inc. (Outperform) We believe Cardtronics has a unique franchise and that the company has several levers that will drive long-term growth, including both secular and macro (e.g., increased circulation of cash, growth in ATM transactions, growth of prepaid, and shrinkage of bank branches) and internal initiatives (e.g., addition of new revenue streams, geographic growth, and cost initiatives). We are encouraged by the Cardpoint acquisition, which will provide scale in the United Kingdom and serve as a platform for Germany. We note that Cardtronics contract with 7-Eleven (27% of 2012 revenues) expires in July 2017. The Western Union Company (Market Perform) We remain attracted to the $550 billion global remittance market, which should grow 8%-9% in the coming years, and we have been encouraged by accelerating transaction growth at Western Union. Yet the company has been plagued by operational challenges, and 2014 is expected to be another year of transition as regulatory costs are expected to increase $60 million to $110 million. While this will be painful over the short term, we believe the tightening regulatory environment could improve the competitive and pricing environment for the largest companies. Western Union maintains a solid global brand and generates strong free cash low.
Yield Stocks
For investors in search of yield, we believe the three business development companies (BDCs) on our coverage list are attractive alternatives to high-yield bonds and that they are attractive relative to the broader BDC sector as a whole. We view Monroe Capital as the most compelling of the three BDCs that we cover, given its current valuation and market position. The lending to lower-middlemarket companies (roughly $10 million to $100 million in revenue and $2 million to $20 million in EBITDA) offers signi icant opportunities, considering the relatively high amount of loan maturities over the next several years and the level of competition, in our view. In addition, we ind apartment real estate investment trust (REIT) Independence Realty Trust attractive, given its focus on secondary markets, its relationship with RAIT Financial Trust, and its compelling valuation.
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Monroe Capital Corporation (Outperform) Monroe is an externally managed BDC that provides customized inancing solutions primarily to lower-middle-market companies in the United States. Monroe Capitals inancing solutions consist primarily of senior, unitranche, and junior secured debt. We believe its current valuation, substantial market opportunity, management teams proven track record, and differentiated sourcing and origination platform make the shares an attractive investment. Monroes book value as of September 30 was $14.01. We believe shares should trade at a slight premium to book value, especially once Monroe gets its SBIC license, which we view as likely sometime in the irst half of 2014. Monroes annualized dividend of $1.36 equates to a yield of about 11%, versus its primary peer group of about 9.0%. Garrison Capital Inc. (Outperform) Garrison is an externally managed BDC that provides customized inancing solutions primarily to lower-middle-market companies in the United States. Garrisons inancing solutions consist primarily of irst- and second-lien senior secured, unitranche, and subordinated debt. First-lien senior secured loans accounted for 91% of Garrisons $412 million portfolio as of September 30. We are con ident in the stability of Garrisons dividend and believe that an eventual increase is likely once Garrison gets the SBIC license. The dividend yield of 9.8% compares favorably with high-yield bond funds, which return about 6.5%, and with its primary peer group average of about 9.0%. Garrisons book value as of September 30 was $15.11. We believe shares should trade at a slight premium to book value. We appreciate managements long-term focus and discipline. Harvest Capital Credit Corporation (Outperform) Harvest is an externally managed BDC that provides customized inancing solutions, primarily to the lower-middle market in the United States. Harvests inancing solutions consist primarily of secured subordinated (junior) debt, senior secured debt, unitranche, and, to a lesser extent, minority equity investments. Secured junior loans accounted for 55% of Harvests $49 million portfolio as of September 30, while senior secured debt accounted for 39%. By focusing on the lower-middle market and secured junior debt, Harvest generates asset yields in the mid- to upper teens, which should allow the company to generate a return on equity (ROE) of more than 11% once the portfolio is fully ramped up. Harvests current annualized dividend of $1.35 per share equates to an 8.9% yield, generally in line with the peer group. Harvests book value as of September 30, was $14.79. We believe shares should trade at a slight premium to book value. Independence Reality Trust, Inc. (Outperform) IRT is an externally managed multifamily apartment REIT that aims to generate attractive riskadjusted returns with an emphasis on distributions and capital appreciation. The company is focused on owning, operating, and acquiring apartment properties with stable occupancy rates and resident bases that are located in relatively developed submarkets. We believe Independence should bene it from the current economic, market, and demographic environment trends. IRT has a strong pipeline with over $100 million worth of properties at various stages of due diligence and underwriting, which, if closed in its entirety, would nearly double IRTs portfolio. IRTs shares trade at a 7.5% dividend yield relative to its peer group range of 3% to 5%. IRTs dividend is considered return of capital for tax purposes versus the more common treatment as ordinary income.
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Consumer Trends
Consumer credit improvement is near an end but will likely remain better than average for an extended period. According to the Federal Reserve, credit card charge-offs improved 43 basis points quarter-over-quarter in third quarter 2012, to 3.19%the lowest level since irst quarter 2006, which was positively affected by the October 2005 bankruptcy law change. Delinquencies, which precede charge-offs, increased 6 basis points from the second-quarter record-low level of 2.47%. Since 1987, consumer credit cycles averaged about three years, with the shortest cycle 1.75 years and the longest cycle 4.5 years. Positive credit cycles have ranged from 2.25 to 4.0 years. Although further improvement in the credit metrics is likely near an end, we believe credit quality could remain better than average for an extended period because of tighter lending standards, consumer deleveraging, and the improvement in initial jobless claims.
Exhibit 4 Consumer Loan Charge-off Rates, NSA As of end of 3Q13
Oct. '05 Bankruptcy Law Change Credit Cards Total
11.0 10.0 9.0 8.0 7.0 6.0
(%)
5.0 4.0 3.0 2.0 1.0 0.0

3.5 yrs 3.0 yrs 2.25 yrs 3.25 yrs 2.5 yrs 1.75 yrs 4.0 yrs 4.5 yrs 3.0+ yrs
Sources: Federal Reserve and William Blair & Company, L.L.C.
7.0 6.0 5.0 4.0
(%)
3.0 2.0
1.0 0.0 1Q85 1Q86 1Q87 1Q88 1Q89 1Q90 1Q91 1Q92 1Q23 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
1Q85 1Q86 1Q87 1Q88 1Q89 1Q90 1Q91 1Q92 1Q23 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
Exhibit 5 Consumer Loan Delinquency Rates, NSA

As of end of 3Q13
Credit Cards
Total
13

Bond spreads are at their lowest levels since late 2007. As global economic growth sputtered, corporate bond spreads sharply widened in the second half of 2008 and peaked in December 2008. As the global economic outlook improved, spreads narrowed from their highs to slightly better than their long-term averages. Because of increased global economic uncertainty stemming primarily from the European sovereign debt woes, bond spreads widened again in late 2011, but not nearly to the same extent as in 2008. Spreads have generally narrowed since then. As of mid-December 2013, the AAA bond spread was about 25 basis points below its long-term average and the highyield bond spread was 180 basis points below its long-term average, likely because investors are searching for yield in the current low-rate environment.
Exhibit 6 Option-Adjusted Spread Trends of the Merrill Lynch AAA, BBB, and High-Yield Corporate Bond Indices Daily From 1/3/1997 Through 12/19/2013
2500
2000
AAA
BBB
High-Yield
Basis Points
1500
1000
500
0 Jul-00 Jul-07 Jun-10 Jan-11 Dec-06 Nov-09 Sep-08 Aug-11 Dec-99 Sep-01 Nov-02 Aug-04 Aug-97 May-99 May-06 May-13 Dec-13 Jun-03 Jan-04 Jan-97 Oct-98 Oct-05 Mar-05 Mar-98 Feb-01 Feb-08 Mar-12 Apr-02 Apr-09 Oct-12
Sources: Bloomberg and William Blair & Company, L.L.C.
Exhibit 7 Option Adjusted Spread Trends of the Merrill Lynch AAA, BBB, and High Yield Corporate Bond Indices Weekly Since 1997 Through 12/19/2013
2,500
2,000
AAA
BBB
High Yield
Basis Points
1,500
1,000
500
0 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Sources: Bloomberg and William Blair & Company, L.L.C.
14

LIBOR rates are generally in line with their historical relationships with the federal funds target rate. LIBOR rates increased slightly in the second half of 2011 but have generally and modestly trended downward since. The LIBOR rates and respective spreads to Treasuries remain well below their October 2008 highs. Historically, one-month LIBOR (0.16% as of December 20) has closely tracked the federal funds target rate, which is 0.00%-0.25%. At December 20, the TED spread (three-month LIBOR less three-month Treasury) has been below its long-term historical median since September 2012.
Exhibit 8 Daily Interest Rates/Yields, July 1, 2008, to Present
8.0
LIBOR Overnight
7.0
LIBOR 1 Month LIBOR 1 Year U.S. Treasury 3 Month
LIBOR 3 Month
6.0
2-Year Swap
5.0 4.0
%
3.0 2.0 1.0 0.0 -1.0 7/1/08 8/19/08 10/7/08 11/25/08 1/13/09 3/3/09 4/21/09 6/11/09 7/30/09 9/17/09 11/5/09 12/24/09 2/11/10 4/1/10 5/20/10 7/8/10 8/26/10 10/14/10 12/2/10 1/20/11 3/10/11 4/28/11 6/16/11 8/4/11 9/12/11 10/27/11 12/15/11 2/2/12 3/22/12 5/10/12 6/28/12 8/16/12 10/4/12 11/22/12 1/10/13 2/28/13 4/16/13 6/6/13 7/25/13 9/12/13 10/31/13 12/19/13 Sources: Bloomberg and William Blair & Company, L.L.C.
Exhibit 9 Federal Funds Rate and LIBOR 1-Month Rate

6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1/1/02 4/12/02 7/24/02 11/4/02 2/13/03 5/27/03 9/5/03 12/17/03 3/29/04 7/8/04 10/19/04 1/28/05 5/11/05 8/22/05 12/1/05 3/14/06 6/23/06 10/4/06 1/15/07 4/26/07 8/7/07 11/16/07 2/27/08 6/9/08 9/18/08 12/30/08 4/10/09 7/24/09 11/4/09 2/15/10 5/27/10 9/7/10 12/17/10 3/30/11 7/11/11 10/6/11 1/17/12 4/27/12 8/8/12 11/19/12 2/28/13 6/11/13 9/20/13 Sources: Bloomberg and William Blair & Company, L.L.C.
LIBOR 1 Month Fed Funds Rate
15

Exhibit 10 TED Spread, 2000 to Present
Ted Spread basis
400
500
Average
Median
Basis Points
300
200
100
-100 Jan-00 Apr-00 Aug-00 Dec-00 Apr-01 Aug-01 Dec-01 Apr-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Oct-13 Sources: Bloomberg and William Blair & Company, L.L.C.
Corporate proits as a percentage of U.S. GDP remain steady near recent relative highs and comparable to pre-downturn levels. Corporate pretax pro its were 13.5% of GDP in third quarter 2013, generally lat with the prior six quarters. The historical average contribution is 9.6%. Corporate pro its as a percentage of GDP troughed at 6.2% in fourth quarter 2008 and rebounded about as quickly as they fell.
Exhibit 11 Pretax Corporate Profits as % of GDP
Pretax Corporate Profits
16% 14% 12% 10% 8% 6% 4% 2% 0% 1947-I 1949-I 1951-I 1953-I 1955-I 1957-I 1959-I 1961-I 1963-I 1965-I 1967-I 1969-I 1971-I 1973-I 1975-I 1977-I 1979-I 1981-I 1983-I 1985-I 1987-I 1989-I 1991-I 1993-I 1995-I 1997-I 1999-I 2001-I 2003-I 2005-I 2007-I 2009-I 2011-I 2013-I Sources: U.S. Bureau of Economic Analysis and William Blair & Company, L.L.C.
18%
Average
16

Consumer credit, excluding mortgages, has exhibited 35 consecutive months of year-over-year growth as of October 2013, and is at a record high of $3.1 trillion. The growth comes despite relatively tight lending standards and consumer deleveraging, which in addition to high charge-off rates, led to the 22-month decline in total consumer credit that ended in December 2010. Total nonmortgage consumer credit grew 6.3% year-over-year and 5% sequentially on an annualized basis, to $3.1 trillion in October 2013. Revolving credit grew 4% sequentially (annualized) and 1.1% yearover-year. It is down 18% from its December 2008 peak of $1.01 trillion, to $0.82 trillion. We expect revolving credit to exhibit modest growth (1%-3%) in 2014. Nonrevolving debt (primarily auto and student loans) grew 8.4% year-over-year and 5.3% sequentially (annualized), to $2.23 trillion in October. Mortgage debt outstanding totaled $9.37 trillion as of the end of third quarter 2013, down 0.8% year-over-year. Mortgage debt accounts for about 75% of total consumer credit outstanding.
Exhibit 12 Consumer Credit Outstanding excluding Mortgages (NSA) Since January 1979
3,500,000 3,000,000 20% 2,500,000 30%
Millions
2,000,000 1,500,000 1,000,000 500,000 0 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
10%
0%
Total Consumer Credit Year-Over-Year Change
-10%
-20%
Exhibit 13 Revolving Credit Outstanding (NSA) Since January 1979

1,100,000 1,000,000 900,000 800,000 700,000 20% 30%
Millions
10%
600,000 500,000 400,000 300,000 200,000 100,000 0 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 -20% -10% 0%
Revolving
17

Exhibit 14 Nonrevolving Credit Outstanding (NSA) Since January 1979
2,500,000 20% 15% 10%
2,000,000
Millions
1,500,000 5% 1,000,000 0% 500,000 Nonrevolving 0 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 4Q11 3Q12 -5% -10%
Exhibit 15 Total Outstanding U.S. Consumer Debt (S.A.)

$14,000
Mortgages
$12,000
Nonrevolving Debt
$10,000
Revolving Debt
$ Billions
$8,000 $6,000 $4,000 $2,000 $0 2Q01 1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 2Q13 1990 1993 1996 1999
18

U.S. consumer bankruptcy ilings have been down year-over-year for 35 consecutive months. We view this as an indicator of improving consumer health. Filings were down year-over-year in October 2010 for the irst time since 2006, an easy comparison year because of the October 2005 bankruptcy law change. November 2013 consumer bankruptcies of 70,966 were down 14% yearover-year. The improvement comes despite the relatively high unemployment rate and is being driven by a rapidly deleveraging consumer and improvement in jobless claims, in our view. Before the bankruptcy law change in October 2005, monthly ilings generally ranged from about 125,000 to 150,000.
Exhibit 16 Monthly U.S. Nonbusiness Bankruptcies Since October 2005
160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Sources: Bloomberg, National Bankruptcy Research Center, and William Blair & Company, L.L.C. 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% Dec-06 Jun-07 Sep-07 Dec-07 Jun-08 Sep-08 Dec-08 Jun-09 Sep-09 Dec-09 Jun-10 Sep-10 Dec-10 Mar-07 Jun-11 Sep-11 Dec-11 Mar-08 Jun-12 Mar-09 Sep-12 Dec-12 Jun-13 Sep-13 Mar-10 Mar-11 Mar-12 Mar-13 Bankruptcy Law Change of October 2005 Filings totaled 645,575 for the month
Exhibit 17 U.S. Nonbusiness Bankruptcies Year-Over-Year Change Since Dec. 2006
Sources: Bloomberg, National Bankruptcy Research Center, and William Blair & Company, L.L.C.
19

Exhibit 18 Monthly U.S. Nonbusiness Bankruptcies Since April 1999
Bankruptcy law change of October 2005 filings totaled 645,575 for the month
200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000

Oct-99
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Sources: Bloomberg, National Bankruptcy Research Center, and William Blair & Company, L.L.C.
Exhibit 19 U.S. Nonbusiness Bankruptcies Year-Over-Year Change Since April 2000

400% 350% 300% 250% 200% 150% 100% 50% 0% -50% -100% Apr-00 Sep-00 Feb-01 Jul-01 Dec-01 May-02 Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Sources: Bloomberg, National Bankruptcy Research Center, and William Blair & Company, L.L.C.
20
Oct-13
Apr-99
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13

U.S. public debt has spiked as the private sector deleverages. The national debt of the United States stood at $17.2 trillion as of December 26, 2013, up from $16.4 trillion at the end of 2012 and $9.0 trillion at the end of 2007. Public debt totaled 103% of average quarterly GDP as of December 26, 2013, which is encouragingly down from 105% at the end of 2012 but well above the 2007 level of 64% as well as its recent relative high of 67% in 1995 and 1996. The all-time high of 121% of GDP occurred in 1946.
Exhibit 20 Public Debt 18,000
Public Debt Public Debt % GDP
140% 120% 100%
16,000 Total Public Debt ($ Billions) 14,000 12,000 10,000 8,000 6,000
2013 Public Debt as of December 26
80% 60% 40%
4,000 2,000 0
1929 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
20% 0%
Sources: U.S. Treasury and William Blair & Company, L.L.C.
The increase in the public debt outstanding has been partly driven by greater use of the federal governments safety nets and social welfare programs during the economic downturn, as well as from rising healthcare costs (i.e., Medicare and Medicaid bene its). Government sources in personal income stood at 17.0% of the total in third quarter 2013, up from 14.2% at the end of 2007.
Exhibit 21 Personal Income Received From Government Payments
20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1Q1947 1Q1952 1Q1957 1Q1962 1Q1967 1Q1972 1Q1977 1Q1982 1Q1987 1Q1992 1Q1997 1Q2002 1Q2007 1Q2012 Medicare Medicaid Other Unemployment Insurance Veterans' Benefits Social Security
Sources: Bureau of Economic Analysis and William Blair & Company, L.L.C.
Public Debt % of GDP
21

The governments social insurance deicit has ballooned. The government ran a relatively balanced social insurance budget until 2000. Driven by a retiring baby boomer population, rising healthcare costs, and high unemployment, the social insurance de icit has ballooned to record levels. The recent but relatively modest improvement is likely due to an improving employment environment. Higher taxes and lower healthcare reimbursement rates are likely future consequences.
Exhibit 22 Government Social Insurance Contributions Less Payouts ($ in billions)
$200 $0 -$200 -$400 -$600 -$800 -$1,000
Employer and employee social insurance contributions less governtment transfer receipts (Social Security, Medicaid, Medicare, unemployment insurance, veterans' benefits, and other)
22
1Q1947 1Q1949 1Q1951 1Q1953 1Q1955 1Q1957 1Q1959 1Q1961 1Q1963 1Q1965 1Q1967 1Q1969 1Q1971 1Q1973 1Q1975 1Q1977 1Q1979 1Q1981 1Q1983 1Q1985 1Q1987 1Q1989 1Q1991 1Q1993 1Q1995 1Q1997 1Q1999 1Q2001 1Q2003 1Q2005 1Q2007 1Q2009 1Q2011 1Q2013

On a rolling-four-week average basis, weekly initial jobless claims have been below 350,000a level that we view as healthyfor most of 2013. Weekly jobless claims, which we view as a more-important indicator than the monthly employment report, are down about 50% from their March 2009 highs. Initial jobless claims, on a four-week average basis, have ranged from 305,000 to 369,000 in 2013. The most recent four-week average of 357,000 is slightly above the 300,000-350,000 range we consider healthy. We are encouraged by the generally improving directional trend. However, we believe a negative signal would be sent if the number of claims were to increase materially from current levels. Our analysis shows that consumer credit trends, particularly credit card credit trends, have a higher correlation with initial jobless claims than the overall unemployment rate.
Exhibit 23 Initial Unemployment Claims (SA) Four-Week Average Since 1967 Through 1/2/2014 release
700 600
800
Thousands
500 400 300 200 100 Jan-67 Jan-69 Jan-71 Jan-73 Jan-75 Jan-77 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Sources: U.S. Department of Labor and William Blair & Company, L.L.C.
120% 100% 80% 60% 40% 20% 0% -20% -40% -60% Jan-68 Jan-70
Exhibit 24 Initial Unemployment Claims (SA) Year-Over-Year Percentage Change in Four-Week Average
Through 1/2/2014 release
Jan-72
Jan-74
Jan-76
Jan-78
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
23

Continuing jobless claims have declined sharply from the peak but remain slightly above healthy levels, in our view. Based on historical unemployment claim patterns and current initial jobless claim levels, we expect continuing claims to continue to modestly improve in 2014. We view healthy levels at about 2.5 million. The four-week average as of December 21 was 2.9 million.
Exhibit 25 Continuing Unemployment Claims (SA) Four-Week Average Since 1967 7,000 6,000 5,000 Thousands 4,000 3,000 2,000 1,000 0 Jan-67 Jan-69 Jan-71 Jan-73 Jan-75 Jan-77 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-08 Jan-11 Jan-10 Jan-13 Jan-12 Through 1/2/2014 release
140% 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% Jan-68 Jan-70
Exhibit 26 Continuing Unemployment Claims (SA) Year-Over-Year Percentage Change in Four-Week Average
Through 1/2/2014 release
Jan-72
Jan-74
Jan-76
Jan-78
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
24
Jan-06

Monthly unemployment rate is on the decline but remains well above healthy levels. The unemployment rate improved 30 basis points in November, to 7.0%, as the increase in the number of people employed more than offset the increase in the size of the workforce. The November unemployment rate is the lowest it has been since November 2008. The Federal Reserves unemployment rate forecast, as of December 18, is 7.0%-7.1% for fourth quarter 2013, 6.3%-6.6% for fourth quarter 2014, 5.8%-6.1% for fourth quarter 2015, and 5.3%-5.8% for 2016, which compare with its September forecast of 7.1%-7.3% for 2013, 6.4%-6.8% for 2014, 5.9%-6.2% for 2015, and 5.4%-5.9% for 2016.
Exhibit 27 Historical Unemployment Rate (%)
11% 10% 9% 8% 7% 6% 5% 4% 3% Jan-75 Jan-77 Jan-79 Jan-81 Jan-83
Jan-85
Jan-87
Jan-89
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Sources: Bureau of Labor Statistics amd William Blair & Company, L.L.C.
The number of job openings continues to improve. According to the U.S. Department of Labor, there were 3.9 million job openings as of October 2013 (according to the latest available data), up 7.7% year-over-year and comfortably above the July 2009 low of 2.2 million.
Exhibit 28 Job Openings
6,000 5,000 Thousands 4,000 3,000 2,000 1,000 0
50% 40% 30% 20% 10% 0% -10% -20%
Job Openings Year-Over-Year Change Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13
-30% -40% -50%
Sources: Bureau of Labor Statistics and William Blair & Company, L.L.C.
Jan-13
25

The U.S. civilian workforce has been relatively lat over the past year and is modestly above prerecession levels. The number of people employed declined sharply from September 2008 to January 2010 when it resumed modest growth.
Exhibit 29 Civilian Labor Force and Employed, 2001 to Present Civilian Labor Force 155,000 150,000 145,000 140,000 135,000
Jan-01 Jun-01 Nov-01 Apr-02 Sep-02 Feb-03 Jul-03 Dec-03 May-04 Oct-04 Mar-05 Aug-05 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13
160,000
130,000
The percentage of the population in the labor force has trended sharply down since early 2009, which we partly attribute to the baby boomers starting to reach retirement coupled with the economic recession. The decline in the workforce is helping drive improvement in the unemployment rate.
Exhibit 30 Employment Ratio, 1976 to Present 97.0% 96.0% % of Labor Force Employed 95.0% 94.0% 93.0% 92.0% 91.0% 90.0% 89.0% Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 % of Labor Force Employed % of Population in Labor Force 62.0% 63.0% 66.0% 65.0% 64.0% 68.0% 67.0% % of Population in Labor Force
26

Part-time employment for economic reasons is trending lower but remains high based on historical levels. We believe the relatively high level of part-time employment is indicative of peoples willingness and need to work but their inability to ind full-time employment given the current economic environment as well as businesses higher costs for full-time labor relative to part-time labor (e.g., healthcare costs).
Exhibit 31 Part-Time Employment for Economic Reasons, 2001 to Present 10,000 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
The median number of weeks a person is unemployed has started to exhibit modest improvement but remains quite high, which we attribute to the lack of job openings and the extension of unemployment insurance bene its to a record-high 99 weeks, although the maximum varies by state. On December 28, Congress failed to garner enough votes to keep the unemployment insurance bene it extension and will revert back to the 26-week maximum.
Exhibit 32 Weeks Unemployed Average Median
45 40 35 30 25 20 15 10 5 0
Part-Time for Economic Reasons
Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
27

Increase in temporary help employment has been relatively steady since mid-2011. We view temporary help employment as a leading indicator of overall employment, and ultimately, economic growth. Encouragingly, temporary help employment has increased month-over-month in 48 of the past 53 months. The correlation between temporary help employment and nonfarm payrolls on a three-month-lag basis is nearly 0.8.
Exhibit 33 Employment in Temporary Help Services (SA) Month-Over-Month Percentage Change
4% 3% 2% 1% % Change 0% -1% -2% -3% -4% -5% -6%
80 60 40 20 0 -20 -40 -60 -80 -100 -120 -140
Thousands
28
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Exhibit 34 Employment in Temporary Help Services (SA) Month-Over-Month Change

The personal savings rate of 4.8% in October is just below the 5.0% monthly average of the past years and compares with the long-term average (since January 1959) of 8.4%. We believe a sustained personal savings rate in the 6%-8% range is best for the long-term health of the U.S. consumer and economy.
Exhibit 35 Savings as a Percentage of Disposable Income Monthly (January 1959 to October 2013)
18 16 14 12 10 8 6 4 2 0
Average Since 1959 = 8.4% Average Since 1990 = 5.5%
Sources: Bureau of Economic Analysis, Bloomberg, and William Blair & Company, L.L.C.
30 25 20 15 10 5 0
1929 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
-5
Jan-59 Jan-61 Jan-63 Jan-65 Jan-67 Jan-69 Jan-71 Jan-73 Jan-75 Jan-77 Jan-79 Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Exhibit 36 Savings as a Percentage of Disposable Income Annually (1929-2012)
Average since 1929: 7.4% Average of past 20 years: 4.0%
29

Consumer leverage is at its lowest level since the early 1980s and appears to be leveling off. The consumer debt services burden and inancial obligation ratios have declined sharply from their record highs prior to the recession, driven by record-low interest rates, defaults, and higher savings rates. The consumer debt service burden ratio has fallen from its record high of 13.2% in fourth quarter 2007 to 9.9% in third quarter 2013, the lowest on record dating back to 1980. The inancial obligations ratio has fallen from its record high of 18.1% in fourth quarter 2007 to 15.4% in third quarter 2013. We expect the ratios to stabilize around current levels, which we view as healthy.
Exhibit 37 Consumer Debt Services and Financial Obligations Ratios
Debt Service Ratio Financial Obligations Ratio
19 18 17 16 15 14 13 12 11 10 9
(%)
Retail sales growth has been relatively stable since mid-2012 and is slightly below the longterm average. Retail sales grew 4.7% year-over-year and 8.2% month-over-month annualized in November 2013. The long-term average year-over-year growth rate is 6.46%. The December 2008 decline of 11.5% was the sharpest fall since the U.S. Department of Commerce began tracking the data in 1968.
Exhibit 38 Retail Sales (SA) and Year-Over-Year Change $500 $450 $400 $350 (Billions) $300 $250 $200 $150 $100 $50 -10% 0% -5% 10% 5% Retail Sales Year-Over-Year Change 15% 20%
-15% $0 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13
Sources: U.S .Dept. of Commerce and William Blair & Company, L.L.C.
30

E-commerce market share continues to grow. U.S. third quarter 2013 e-commerce sales grew 17.5% year-over-year, according to the U.S. Census Bureau. This compares with 4.7% in overall U.S. retail sales. As a percentage of overall U.S. retail sales, e-commerce market share was 5.9%, up from 5.2% a year prior.
Exhibit 39 U.S. E-Commerce Growth and Percentage of Total Retail Sales ($ in millions)
$250,000
E-commerce Sales (L-Axis) % of Total Retail Sales (R-Axis) E-commerce Year-Over-Year Growth $140,158 (R-Axis)
$134,567 $111,935
50% $224,280 $192,911 $165,770 $193,378 45% 40% 35% 30% 25% 20% 15% 10% 5%
$200,000
$150,000
$142,604
$100,000
$90,528 $72,100 $56,775 $44,354 $34,093 $50,000 $27,388 $0 9m Ended 9/30/13 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0%
Sources: U.S. Census and William Blair & Company, L.L.C.
31

The November reading of the Discover U.S. Spending Survey Index improved from October on better spending intentions despite a continued relatively dismal economic sentiment. The economic outlook of consumers had plummeted with the temporary government shutdown and has yet to recover. Spending intentions have increased the past couple of months but have been relatively stable over the past year.
Exhibit 40 Discover U.S. Consumer Spending Monitor
105 100
Index Values (5/07 = 100)
95 90 85 80 75 70 65
Index Spending Economy
60 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Sources: Discover Financial Services and William Blair & Company, L.L.C.
U.S. bank revolving credit (home equity) outstanding has been declining since June 2009. Home equity loans could continue to cause headaches for lenders for a couple more years.
Exhibit 41 U.S. Banks' Revolving Credit (Home Equity)
Home Equity Revolving Credit Year-Over-Year Change
$700 $600 $500 Billions $400 $300 $200 $100 $0
50% 40% 30% 20% 10% 0% -10% -20%
Sources: Federal Reserve and William Blair & Company, L.L.C..
32
Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

The Manheim Used Vehicle Value Index shows used vehicle values have moderated from their 2011 record highs but continue to be relatively strong. The November 2013 Manheim Used Vehicle Value Index declined 0.2% but was up 0.1% from the prior month. We believe the relative strength of the index over the past several years has been indicative of the supply/demand imbalance of used vehicles, which is the result of several factors, such as consumers trading down and consumers holding onto their cars longer. The index is an excellent approximation of the trends in used-car values and recovery rates on repossessed vehicles, as it represents actual prices of used cars sold at auctions across the United States. Higher used-car values drive better recovery rates in an auto inance business.
Index Value (Jan '95 = 100)
Exhibit 42 Manheim Used Vehicle Value Index 25%

Index Year-Over-Year Change
130 125 120 115 Index 110 105 100 95 90

Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Sources: Manheim Consulting and William Blair & Company, L.L.C.
20% 15% 10% 5% 0% -5% -10% -15%
33

Essentially all credit card issuers master trusts that we track had generally stable credit trends and early signs of accelerating loan growth in November. Delinquency rates (30-plus days) appear to be stabilizing at record lows. The industry charge-off rate is near a record low, but material further improvement is unlikely. Based on the delinquency rate trend, we believe the charge-off rate is likely to remain near the current level into mid-2014 and likely to remain below the long-term average for an extended period. Payment rates have leveled off slightly below recordhigh levels. The increase in payment rates to record highs has been driven by the deleveraging consumer and a modestly improving economic environment. The net interest margin signi icantly increased off its low in late 2008, primarily because of the sharp decline in the base rate and issuers re-pricing; however, increased competition caused yields to come down, bringing the net interest margin down somewhat from its record high, although it remains comfortably above prerecession levels. Most issuers are increasingly using deposit funding to fund their card portfolios; thus, we are not surprised by the decline in the trust receivables outstanding for the group. Due to the decline in securitization activity, some trust metrics, such as receivable growth, are not re lective of the broader industry. Revolving credit as reported by the Federal Reserve was up 1.1% year-over-year in October 2013, the latest igure available.
Exhibit 43 U.S. Credit Card Three-Month Average Excess Spread (%) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0
Jan-01 Jun-01 Nov-01 Apr-02 Sep-02 Feb-03 Jul-03 Dec-03 May-04 Oct-04 Mar-05 Aug-05 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13
Sources: Company reports, Bloomberg, and William Blair & Company, L.L.C.
Exhibit 44 U.S. Credit Card Net Charge-off Rate (%) 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
34

Exhibit 45 U.S. Credit Card Three-Month Average Payment Rate (%) 26.0 24.0 22.0 20.0 18.0 16.0 14.0 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
22.0 20.0 18.0 16.0 14.0 12.0 10.0
Exhibit 46 U.S. Credit Card Three-Month Average Net Interest Margin (%)
6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Exhibit 47 U.S. Credit Card Total 30-Day-Plus Delinquencies (%)
35
Commercial Trends
Growth of U.S. exports and imports of goods is showing signs of accelerating growth after waning the past several years on dificult comps and global growth concerns in key markets, such as Europe. The weakness in the U.S. dollar in early 2008 drove signi icant growth in U.S. exports of goods; however, this trend rapidly reversed course in the second half of 2008 as the global economy slumped. As the global economy outlook improved and the U.S. dollar weakened, U.S. exports spiked at the beginning of 2009. With gradually more dif icult comparisons and heightened global growth uncertainty, the growth rate of exports and imports has faded. An acceleration in the global economy is key to an acceleration in U.S. export and import growth.
Exhibit 48 Year-Over-Year Percentage Change of U.S. Exports and Imports of Goods 40% Exports 30% 20% 10% 0% -10% -20% -30% -40% 1990-I 1990-IV 1991-III 1992-II 1993-I 1993-IV 1994-III 1995-II 1996-I 1996-IV 1997-III 1998-II 1999-I 1999-IV 2000-III 2001-II 2002-I 2002-IV 2003-III 2004-II 2005-I 2005-IV 2006-III 2007-II 2008-I 2008-IV 2009-III 2010-II 2011-I 2011-IV 2012-III 2013-II
Sources: U.S. Department of Commerce, Bureau of Economic Analysis, and William Blair & Company, L.L.C.
Imports
36

The U.S. dollar has depreciated versus most other major currencies over the past several months. The U.S. dollar signi icantly appreciated off its mid-2008 lows as it became the primary currency of choice during the global economic slowdown. As the early indications of stabilization appeared in the global economy in March 2009, the U.S. dollar began to depreciate. The U.S. dollar sharply appreciated versus the euro and British pound over sovereign debt concerns in irst half 2010 but began to depreciate once the concerns subsided. With renewed European sovereign debt concerns and its potential contagion effects on global economic growth starting in mid-2011, the U.S. dollar has once again become a primary currency of choice and appreciated against most other major currencies through 2012. Since mid-2012, the exchange rate movements against the U.S. dollar have been a mixed bag.
Exhibit 49 Foreign Exchange Rates (Foreign Currency Unit Versus U.S. Dollar) 2.10 1.95 1.80 1.65 1.50 1.35 1.20 1.05 0.90 0.75 0.60 0.45 0.30
As of December 20, 2013
GBP
EURO
Yuan (RMB) x 10 CAD
YEN x 100
AUD BRZ Real
Peso x 10
Weekly trafic for most carload types of major U.S. railroads has exhibited slow and steady improvement since its May 2009 trough. We believe U.S. railroad traf ic has historically been a decent indicator of the strength of the U.S. economy, given the wide variety and large volume of products transported via rail. Railroad traf ic for carloads of most products, as reported by the Association of American Railroads, is up low-single digits year-over-year through mid-December. Rail traf ic has returned to pre-downturn levels for most carload types, and some carload types, such as chemicals, petroleum, and containers, are at record levels. On a cumulative year-to-date basis through December 14, total rail traf ic was up 1.7%, as measured by total carloads and intermodal units originated. Total carloads were down 0.6%, while intermodal units were up 4.6%. Coal, which accounts for 21% of total carloads and intermodal units combined, is the primary driver of the year-over-year decline in carloads originated as it is down 4.4% yearover-year. Excluding coal, rail traf ic is up 3.5% year-over-year. Coal has been weak in 2013 because of the abnormally warm winter weather early in the year, which reduced demand; the relative cost of natural gas, which is a substitute for coal; a decline in export demand; and the current federal government administration policies.
Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
37
Exhibit 50 Year-Over-Year Growth of GDP Versus Total Rail Carloads and Intermodel Units 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
12,403,723 26,492,730
GDP
Carloads
Sources: Association of American Railroads, Bloomberg, and William Blair & Company, L.L.C.
Carloads Originated Coal Chemicals/Petroleum Products Motor Vehicles & Equipment Total Carloads Originated Intermodal Units Originated Total Carloads & Intermodal Originated
Exhibit 51 Rail Traffic of Major U.S. Railroads Q/Q Chg 3Q12 2Q13 3Q13 1,558,810 1,417,208 1,511,817 6.7% 523,635 570,870 552,646 -3.2% 189,247 220,907 198,362 -10.2% 3,716,542 3,647,026 3,724,268 2.1% 3,150,778 6,867,320 3,185,405 6,832,431 3,277,326 7,001,594 2.9% 2.5%
Y/Y 2012 YTD 2013 YTD % chg Chg Cumulative Thru 12/13/13 -3.0% 5,821,428 5,562,557 -4.4% 5.5% 1,995,195 2,165,264 8.5% 4.8% 782,144 821,656 5.1% 0.2% 14,178,362 14,089,007 -0.6% 4.0% 2.0% 11,860,632 26,038,994 4.6% 1.7%
Sources: Association of American Railroads, Bloomberg, and William Blair & Company, L.L.C.
38
Exhibit 52 Rail Traffic of Major U.S. Railroads Total Intermodal Units

Thousands
280
Thousands
Total Carloads Originated

360 340 320 300 280 260 240 220 200 180 1 4
2007 2008
260 240 220 200 180 160 140

2007 2008 2009 2010 2011 2012 2013
Total Intermodal Units
Through Week Ending 12/13/13
Total Carloads

2009 2010 2011 2012 2013
120
10
13
16
19
22
25 28 31 Week
34
37
40
43
46
49
52
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
Sources: AAR, Bloomberg, and William Blair & Company, L.L.C.
Week Sources: AAR, Bloomberg, and William Blair & Company, L.L.C.
50 Thousands 45 40 35 30 25
2007 2008
Chemical/Petroleum Carloads
650 Thousands 600 550 500 450 400 350

2007 2008
Total Carloads + Intermodal
Total Carloads
Total Carloads

2009 2010 2011 2012 2013
2009
2010
2011
2012
2013
20 1 4 7 10 13 16 19 22 25 28 Week 31 34 37 40 43 46 49 52
300 1 4 7 10 13 16 19 22 25 28 31 34 Week Sources: AAR, Bloomberg, and William Blair & Company, L.L.C. 37 40 43 46 49 52
Sources: AAR, Bloomberg, and William Blair & Company, L.L.C.
Coal
160 Thousands Thousands 150 140 130 120 110 100 90
2007 2008
Total Carloads + Intermodal ex Coal

500 450 400 350 300 Through Week Ending 12/13/13 250
2007 2008 2009 2010 2011 2012 2013
Robert P. Napoli +1 312 364 8496 39
Total Carloads

2009 2010 2011 2012 2013
80 37 40 43 46 49 52
Total Carloads
200 34 37 40 43 46 49 52
1 4 7 10 13 16 19 22 25 28 31 34 Week Sources: AAR, Bloomberg, and William Blair & Company, L.L.C.
1 4 7 10 13 16 19 22 25 28 31 Week Sources: AAR, Bloomberg, and William Blair & Company, L.L.C.

Capacity utilization is approaching its long-term average after nearly six years of being below average. The manufacturing industrial capacity utilization index stood at 78.97% in November 2013, up 75 basis points from the prior month and 111 basis points from a year earlier. It stood 70 basis points below the long-term average of 79.67%. From the beginning of 2008, the index dropped more than 12 percentage points in 18 months, bottoming at 66.81% in June 2009. The decline and the subsequent sharp rebound are evident in the rail traf ic volume trends. A capacity utilization rate above the long-term average has historically coincided with a strong U.S. economy.
Exhibit 53 Industrial Capacity Utilization
87 85 83 81 79
(%)
77 75 73 71 69 67 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
1Q10
Through November 2013
Sources: The Federal Reserve and William Blair & Company, L.L.C.
The railcar manufacturing backlog is quite high, while orders and deliveries are relatively normal compared with historical averages. We would typically view the increase in the backlog as an indication of economic strength, as it indicates overall demand; however, the idle rate of the industry railcar leet remains well above normal levels. Thus, we believe the increase has been car-type speci ic and/or was driven by leet replacement. Some carload types (i.e., tank cars for petroleum use) are seeing record shipments, while others remain below pre-downturn levels.
Exhibit 54 Railcar Manufacturing Statistics
Through 3Q13 80,000 Note: Deliveries includes cancelations 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1Q88 1Q90 1Q92 1Q94 1Q96 1Q98 1Q00 1Q02 1Q04 1Q06 1Q08 1Q12 Deliveries Orders Backlogs
90,000
Sources: Railway Supply Institute, company reports, and William Blair & Company, L.L.C.
40
Jan-12

The railcar idle rate of the industry leet remains well above normal levels. As of December, 1, 282,394 (18.3%) of the roughly 1.5 million industry railcar leet were idle, according to the American Association of Railroads (AAR). The AAR has historically viewed a normal idle run-rate as 2%-3%. It would take about 57 months to reach the normal idle rate if about 4,160 (current average rate) cars were to be either removed from the leet or returned to service every month. We attribute most of the recent increase in the idle rate to the slump in demand for coal (21% of total carloads and intermodal traf ic), which is carried in open-hopper cars.
Exhibit 55 Railcars in Storage in North America
35% Cars in Storage 30% % of Total Fleet 25% 20% 300,000 15% 200,000 10% 5% 0% Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Sources: AAR and William Blair & Company, L.L.C. 100,000 Healthy Level 500,000 600,000
400,000
Exhibit 56 Number of Railcars In/(Out) of Storage in North America 15,000 10,000 5,000 0 -5,000 -10,000 -15,000 -20,000 -25,000 -30,000 -35,000 May-09 May-10 May-11 May-12 May-13 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Nov-09 Nov-10 Nov-11 Nov-12 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Nov-13 Jan-10 Jan-11 Jan-12 Jan-13
Sources: AAR and William Blair & Company, L.L.C.
41

The price of scrap steel (currently $361 per metric ton) has been relatively steady for the past year at about $350. The price of scrap steel plummeted in September 2008, dropping roughly 80% from record-high levels. The price quickly rebounded, driven by strong foreign demand. The change in the price of scrap steel has historically coincided well with the economic outlook and demand.
Exhibit 57 Price of U.S. Scrap Steel With Year-Over-Year Change
600 200%
Scrap Steel
500
Year-Over-Year Change
150%
$ Per Metric Tonne
400
100%
300
50%
200
0%
100
-50%
-100%
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Great Lakes cargo volume is up 0.5% year-over-year on a cumulative year-to-date basis through November and is still 14% below pre-downturn levels. Shipments of raw materials used in steel production and other capacities plummeted in late 2008 and in 2009 because of the lack of demand. Volumes grew sharply in 2010. Volume in 2013 is closely tracking the volumes reported in 2010, 2011, and 2012.
Exhibit 58 U.S.-Flag Great Lakes Carrier Total Volume
2005 2006 2007 2008 2009 2010 2011 2012 2013
14 12 Net Tons (Millions) 10 8 6 4 2 Jan Feb Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Sources: Lake Carriers' Association and William Blair & Company, L.L.C.
42
Jan-13

Global containership idle rate has begun to increase over the past several months as a result of seasonality, soft demand, and relatively strong deliveries of new containerships. As of early December 2013, the idle rate stood at 3.9%, down from the 5.0% experienced a year earlier. The all-time high was 11.7% in early December 2009. A lower idle rate generally coincides with a stronger global economy but overbuilding of containerships has made analysis much more dif icult.
Exhibit 59 Idle Rate of the Global Containership Fleet, November 2008-Present 12%
Prior all-time high was about 5% in 1986 Previous-cycle high was 3.2% in March 2002
10% 8% 6% 4% 2% 0% Nov-08
Jun-09
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Dec-12
Jul-13
Sources: AXS-Alphaliner, Clarkson's Research, and William Blair & Company, L.L.C.
Containership leet capacity forecast to grow faster than container trade growth. According to AXS-Alphaliner, the global containership leet capacity is expected to grow 6% in 2013, while container trade is forecast to grow about 4%.
Exhibit 60 Containership Fleet Projections (as of December 1, 2013, assuming no deletions since that date other than those planned) 31-Dec-2011 31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015 Ships TEU Ships TEU Ships TEU Ships TEU Ships TEU 1,425,640 162 2,066,495 197 2,557,523 255 3,341,104 315 2,555,320 326 2,825,749 377 3,285,605 427 3,741,036 484 2,840,841 475 2,915,449 489 3,010,253 514 3,161,585 523 3,167,294 739 3,339,269 761 3,444,024 786 3,563,390 796 1,101,941 296 1,012,646 265 914,150 286 991,291 298 1,811,511 677 1,723,561 667 1,696,725 684 1,738,174 709 1,011,825 576 979,325 568 968,200 593 1,011,904 604 822,994 702 823,031 681 796,983 694 810,974 706 599,199 785 583,145 765 570,721 772 576,325 773 78,636 226 72,659 218 69,512 218 69,512 218 15,415,201 4,964 16,341,329 4,988 17,313,696 5,229 19,005,295 5,426 6.0% 6.0% 9.8% 15,415,201 4,964 16,341,329 4,981 17,285,957 5,077 18,552,556 5,192 7.9% 6.0% 5.8% 7.3%
Fleet as of: Containership Size
31-Dec-2016 Ships TEU
10,000-18,000 118 7,500-9,999 TEU 290 5,100-7,499 TEU 463 4,000-5,099 TEU 701 3,000-3,999 TEU 323 2,000-2,999 TEU 712 1,500-1,999 TEU 596 1,000-1,499 TEU 699 500-999 TEU 809 100-499 TEU 246 Total 4,957 year-over-year growth Total after Exp. 4,957 Scrap/Slip year-over-year growth
4,257,857 322 4,348,857 4,253,410 502 4,416,300 3,218,895 523 3,218,895 3,611,590 797 3,616,547 1,036,791 299 1,039,891 1,796,155 717 1,815,535 1,031,272 610 1,041,752 824,532 706 824,532 576,931 773 576,931 69,512 218 69,512 20,676,945 5,467 20,968,752 8.8% 1.4% 20,059,206 5,133 20,101,013 8.1% 0.2%
Sources: AXS-Alphaliner and William Blair & Company, L.L.C.
43

China manufacturing index has encouragingly exhibited an expansion reading (i.e., above 50) for the past 15 months, though barely, despite slowing growth GDP. Chinas GDP growth accelerated slightly in the most recent quarter. The index stood at 51.0 in December. An index reading of 50 is the boundary level for expansion versus contraction.
Exhibit 61 China Manufacturing PMI 65 Through December 2013 60 55 50 45 40 35 Note: An index value above 50 indicates expansion whereas an index value below 50 indicates contraction Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13
Sources: CFLP & Li & Fung Research Center
Global containerized trade growth has accelerated the past several months. Through November on a year-to-date basis, containerized trade at 8 of the worlds top 25 busiest container ports is up 1.5%, up from 0.2% in June. Excluding Hong Kong data (Hong Kong port traf ic was adversely affected by a lengthy port strike early in 2013), year-to-date port traf ic through November was up 2.7% versus 1.9% through June. Container trade growth has been about 9%, on average, over the past 30 years and 8% over the past 10 years. Industry trade associations forecast container traf ic to be up about 4%-6% in 2013 and 2014.
Exhibit 62 Monthly Container Handlings at 8 of World's Top 25 Busiest Container Ports
13 12 TEUs in Millions 11 10 9 8 7
2006 6 Jan Feb
2007 Mar Apr
2008 May
2009 Jun Jul
2010 Aug
2011 Sep Oct
2012 Nov
2013 Dec
44

Exhibit 63 Year-Over-Year Change of Cumulative Year-to-Date Container Handlings at 8 of World's Top 25 Busiest Container Ports 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25%
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25%
Exhibit 64 Year-Over-Year Change of Monthly Container Handlings at 8 of World's Top 25 Busiest Container Ports
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Oct-07
Oct-11
Oct-12
Jul-13
Oct-13
Oct-08
Oct-09
Oct-10
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
45

Asia accounts for 55% of global container trade volume. China container trade volume makes up the largest portion of total global container trade at 29%, followed closely by the rest of Asia at 26%. North America makes up just 8%, according to Clarkson Research, an industry trade group.
Exhibit 65 Total Expected Trade Volume by Region for 2013
Mediterranean 6% China 29% Northern Europe 11%
North America 8%
Other 20%
Sources: Clarkson Research and William Blair & Company, L.L.C.
Asia excluding China 26%
Throughput growth at Chinese ports has moderated but remains comfortably above the rest of the world. Container throughput at Chinese ports is up 7.4% year-over-year on a cumulative year-to-date basis through November, down from 8.1% growth in June. China throughput has more than doubled over the past seven yearsevidence of globalization, in our opinion.
Exhibit 66 China Port Handlings in TEUs
18 16 14
TEUs in Millions
12 10 8 6 4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005
2006
2007
2008
2009
46
Exhibit 67 Year-Over-Year Change in Cumulative Year-to-Date Container Traffic at Chinese Ports 40%
30%
20%
10%
0%
-10%
-20% Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
Exhibit 68 Year-Over-Year Change In Monthly Container Traffic at Chinese Ports 40%
30%
20%
10%
0%
-10%
-20% Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13
47

Container trade forecasts are about 1.7 times global GDP growth estimates, slightly less than the 2-times historical relationship but generally in line with the past several years. As of October 2013, the International Monetary Fund projected global GDP to grow 2.9 % in 2013, 3.6% in 2013, and 4.1% in 2015; it forecasts global trade to grow 2.9% in 2013, 4.9% in 2014, and 6.1% in 2015. Clarkson Research forecasts container trade to grow 4.7% in 2013, 6.2% in 2014, and 7.2% in 2015.
Exhibit 69 Annual Growth Comparison: World Trade Volume Versus Container Liftings Versus World Real GDP 16% 12% 8% 4% 0% -4% -8% -12% -16% Container Liftings World Real GDP Total Trade Volume
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13E'14E'15E
Sources: International Monetary Fund, Clarkson Research, Drewry, and William Blair & Company, L.L.C.
Exhibit 70 Global Total Port Handling 800 700 600

TEUs in Millions
20% Liftings Year-Over-Year Growth 15% 10% 5% Year-Over-Year Growth
500 400 0% 300 200 100 0 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14E -5% -10% -15%
Sources: Clarkson Research, Drewry, and William Blair & Company, L.L.C.
Commercial and industrial loans outstanding increased 0.2% sequentially and 7.8% yearover-year, to $1.59 trillion in November. Commercial and industrial loans outstanding peaked at $1.60 trillion in October 2008 before declining 25% over 21 months to a $1.20 trillion trough in July 2010. We believe the essentially nonexistent credit markets that characterized late 2008 forced banks to hold more commercial loans on their balance sheet versus securitizing them, thus distorting the growth statistics of the last cycle. Historically, the commercial and industrial loan volume has been a useful indicator of economic growth, in our opinion. Growth of commercial and industrial loans
48

has moderated over the past year but is in line with the long-term historical average. According to the Federal Reserve Bank Opinion Survey data, banks have loosened credit standards in 15 of the past 16 quarters and demand has increased in 11 of the past 16 quarters.
Exhibit 71 Commercial and Industrial Loan Volume, NSA C&I Loans Year-Over-Year Change
$1,800,400 $1,600,400 $1,400,400 $1,200,400 Billions $1,000,400
25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
$800,400 -5.0% $600,400 $400,400 $200,400 $400 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 -10.0% -15.0% -20.0% -25.0%
Commercial and industrial loan credit quality is approaching historical lows. As of third quarter 2013, the commercial and industrial loan delinquency rate was 0.98% and the charge-off rate was 0.26%, which compare with the 27-year averages of 2.98% and 0.90%. Given the record-low delinquency rate and near record-low charge-off rate trends, we do not expect any further material improvement; however, it is likely that credit quality would remain better than average for an extended period.
Exhibit 72 NSA Commercial Banks Commercial and Industrial Delinquencies and Charge-Offs Delinquencies 6 5 (%) 4 3 2 1 0 Q1 1985 Q1 1986 Q1 1987 Q1 1988 Q1 1989 Q1 1990 Q1 1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013
Charge-Offs
49

Commercial real estate lending returned to growth in fourth quarter 2012 after 13 quarters of shrinkage, and the growth has accelerated the past two quarters. Commercial real estate loans outstanding totaled $1.37 trillion at the end of the third quarter, up 3.8% year-over-year but comfortably below the $1.62 trillion peak in fourth quarter 2008. Commercial real estate credit quality has been improving from its irst quarter 2010 peak and is comfortably below the long-term average. We expect credit trends to modestly improve.
Exhibit 73 Commercial Real Estate Loans, NSA
$1,800 CRE Loans $1,600 $1,400 $1,200 Billions $1,000 5% $800 $600 $400 $200 $0 1Q85 1Q86 1Q87 1Q88 1Q89 1Q90 1Q91 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 Sources: Federal Reserve and William Blair & Company, L.L.C. 0% -5% -10% -15% Year-Over-Year Change 20% 15% 10% 25%
14 12 10 8 (%) 6 4 2 0 -2 Q1 1991 Q1 1992 Q1 1993
Exhibit 74 NSA Commercial Banks Commercial Real Estate Delinquencies and Charge-Offs Charge-Offs Delinquencies
Q1 1994
Q1 1995
Q1 1996
Q1 1997
Q1 1998
Q1 1999
Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
50
Q1 2013

The NCREIF Property Index, which measures total investment returns in the U.S. commercial real estate industry, turned positive in irst quarter 2010 after six consecutive quarterly declines. The index has been positive for 15 consecutive quarters; the past 14 have been above the long-term average of 2.2%. The third-quarter index reading was 2.48%.
Exhibit 75 NCREIF Property Index Historical Returns
8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% -6.00% -8.00% -10.00%
Average: 2.0%
Sources: National Council of Real Estate Investment Fiduciaries and William Blair & Company, L.L.C.
According to the most recent Federal Reserve Bank Opinion Survey, banks have slightly loosened credit standards and demand has increased for commercial and industrial loans. Given the turmoil in the credit markets and the slowdown in the U.S. economy, banks dramatically tightened lending standards from 2007 through 2009; however, in 15 of the 16 quarters since, more of the banks surveyed by the Federal Reserve have slightly loosened credit standards than tightened them. Demand continues to be volatile. The most recent survey, which was completed in early October, indicated a net 1% of the banks surveyed said demand picked up in the quarter, which compares with 15% in the prior quarter. In our opinion, lending standards were a little lax in 2006 and most of 2007, and tighter credit standards were necessary. We believe economic growth is dependent on access to capital; thus, we are encouraged by the slight loosening of standards and improved demand.
Correlation: (0.69) R squared: 0.48 100% 80% 60% 40% 20% 0% -20% -40% -60% -80% 49Q5 4Q91 4Q92 4Q93 4Q94 4Q96 4Q97 4Q98 4Q99 4Q00 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11
Exhibit 76 Bank Opinion Survey: 4Q91-4Q13 Tightening Credit Standards Demand for C&I Loans
51

The NFIB Small Business Optimism Index has seen moderate, albeit volatile, improvement since the beginning of 2009 but remains below pre-downturn levels. We believe small businesses provide good insight into the economic environment, due to their breadth and sheer number.
Exhibit 77 NFIB Small Business Optimism Index 110 105 100
Average: 95.6
95 90 85 80
Jul-04
Jan-02
Jun-02
Jan-07
Nov-02
Sep-03
Dec-04
Jun-07
Jul-09
Jan-12
Nov-07
Aug-06
Sep-08
Dec-09
Jun-12
Oct-05
Aug-11
Nov-12
May-05
May-10
Sources: NFIB and William Blair & Company, L.L.C.
Over $1 trillion of capital that has been raised by private equity over the last eight years has yet to be put to work, including $400 billion for buyouts. We believe specialty lenders should bene it from this overhang, as many times private equity relies on other lenders to ill out the capital structure of their investments.
Exhibit 78 Global Private Equity Fundraising ($ in billions)
$212
$250 $200 $150 $100 $50 $0 1Q08 1 2Q08 2 3Q08 3 4Q08 4 1Q09 1 2Q09 2
$173
$172 $128 $114 $94 $79 $59 $86 $77 $84 $66 $68 $95 $77 $62 $92 $94 $82 $83 $83 $87 $141
3Q09 3
4Q09 4
1Q10 1
2Q10 2
3Q10 3
4Q10 4
1Q11 1
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
Sources: Preqin and William Blair & Company, L.L.C.
52
3Q13
Sep-13
Mar-06
Feb-04
Oct-10
Mar-11
Feb-09
Apr-03
Apr-08
Apr-13

Exhibit 79 Private-Equity Dry Powder ($ in billions)
$1,067 $1,001 $1,061 $988 $1,006 $943 $1,074
$1,200 $1,000
$798
$800 $600 $400 $200 $0 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
$1,200 $1,000 $800 $600 $400 $200 $0 2006 2007
Exhibit 80 Private-Equity Dry Powder by Fund Type ($ in billions) Buyout Distressed Private Equity Growth Mezzanine Real Estate Venture Capital Other 2008 2009 2010 2011 2012 2013
According to data from Standard & Poors, there will be more than $170 billion of middle-market debt maturities over the next six years, most of which will need to be re inanced. Because of tight lending standards, increased bank regulations on risk asset holdings, and bank failures, we believe specialty lenders should experience increased investment opportunities.
Exhibit 81 Maturities of Middle-Market Loans (dollars in billions) $50 $50 $40 $30 $23 $20 $11 $10 $0
2012 2013 2014 2015 2016 2017 2018 2019
Sources: S&P Levered Commentary Data and William Blair & Company, L.L.C.
$60
$45
$28
$13 $1
$3
53

LBO purchase multiples are down from their prerecession highs. Middle-market purchase multiples have been increasing over the past several years but still compare favorably to the average LBO multiple of the entire market.
Exhibit 82 LBO Purchase Multiples 9.8x 9.5x 8.2x 8.0x 6.3x 6.1x 6.5x 6.0x 4.0x 2.0x 0.0x 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 8.0x 2Q13 7.1x 7.4x 8.6x 7.9x 8.5x
12.0x 10.0x
9.1x 8.9x
8.5x
Sources: Standard & Poor's and William Blair & Company, L.L.C.
Exhibit 83 Middle-Market Average EV-to-EBITDA Transaction Multiples 9.0x 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
Note: Transactions between $10M-$250M and <15x; excludes technology, media, and telecom Sources: Quarton Partners and William Blair & Company, L.L.C.
7.8x
8.2x 7.6x 7.2x 5.8x 7.2x 7.5x 7.7x 7.2x
54

Business investment spending was 12.2% of GDP during third quarter 2013, just above the longterm average of 11.9%. Much of the growth since the downturn can be attributed to investment in equipment. Business investment as a percentage of GDP troughed at 10.9% in irst quarter 2010, the lowest contribution since 1963.
Exhibit 84 Business Investment as a Percentage of GDP
Nonresidential 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1947-I 1949-III 1952-I 1954-III 1957-I 1959-III 1962-I 1964-III 1967-I 1969-III 1972-I 1974-III 1977-I 1979-III 1982-I 1984-III 1987-I 1989-III 1992-I 1994-III 1997-I 1999-III 2002-I 2004-III 2007-I 2009-III 2012-I
18.0%
Structures Intellectual property products
Equipment
Equipment leasing and inance data trends have exhibited generally stable trends over the past several months. Although volatile by month, new business volume growth has decelerated, primarily due to economic and political uncertainty as well as tough comps, in our opinion. Although up signi icantly from its recession low, new business volume is generally in line with pre-downturn levels. Approval rates have declined slightly over the past several months, likely due to higher demand, as credit quality remains near best-ever levels. Delinquencies have increased slightly off the record low while charge-offs remain at record lows.
Exhibit 85 Equipment Leasing and Finance Industry New Business Volume
$14
100% 80%
New Business Volume (Billions)
$12 $10 $8
60% 40% 20%
$6 0% $4 $2 -20% -40%
New Business Volume

$0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 May-05 May-06 May-07 May-08 May-09 May-10
-60% Jan-11 Jan-12 Sep-10 Sep-11 Sep-12 Jan-13 May-11 May-12 May-13 Sep-13
Sources: ELFA and William Blair & Company, L.L.C.
55

Exhibit 86 Equipment Leasing and Finance Industry Credit Approvals as a Percentage of All Decisions
Credit Approvals as a % of All Decisions 90% 85% Year-Over-Year Change 15% 10% 5% 0% -5% -10% -15% -20% Jan-05 Jan-06 Sep-05 Jan-07 Sep-06 Jan-08 Sep-07 Jan-09 Sep-08 Jan-10 Sep-09 Jan-11 May-05 Sep-10 Jan-12 May-06 May-07 Sep-11 May-08 Sep-12 Jan-13 May-09 May-10 May-11 May-12 May-13 Sep-13
95%
20%
Approved Ratio
80% 75% 70% 65% 60% 55%
Exhibit 87 Equipment Leasing and Finance Industry Charge-offs as Percentage of Net Receivables
3.50% Charge offs as a % of Net Receivables 3.00% 2.50% Year-Over-Year Change 150% 200%
Charge-offs
100% 2.00% 50% 1.50% 0% 1.00% 0.50% 0.00% Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 -50% -100%
6% 5% 4% 3% 2% 1% 0%
Exhibit 88 Equipment Leasing and Finance Industry Delinquencies as Percentage of Receivables

Total > 30 days 31-60 days 61-90 days Over 90 days
Jan-05
Jan-06
Sep-05
Jan-07
Sep-06
Jan-08
Sep-07
Jan-09
Sep-08
Jan-10
Sep-09
Jan-11
May-05
Sep-10
Jan-12
May-06
May-07
Sep-11
May-08
Sep-12
Jan-13
May-09
May-10
May-11
May-12
56
May-13
Sep-13

The national average price per gallon of gasoline was down 7.9% from the prior quarter and 5.6% year-over-year, to $3.29, in the fourth quarter. As of December 30, the price of a gallon of gasoline was $3.33. Lower gas prices increase consumers discretionary spending abilities, which should help bolster the economy.
Exhibit 89 Weekly U.S. Retail Gasoline Prices
$4.50 $4.00 $3.50
80% 60% 40%
$3.00
$ Per Gallon
$2.50 $2.00 $1.50
20% 0% -20%
$1.00 $0.50 Gasoline Price $0.00 1/3/05 5/3/05 9/3/05 1/3/06 5/3/06 9/3/06 1/3/07 5/3/07 9/3/07 1/3/08 5/3/08 9/3/08 1/3/09 5/3/09 9/3/09 1/3/10 5/3/10 9/3/10 1/3/11 5/3/11 9/3/11 1/3/12 5/3/12 9/3/12 1/3/13 5/3/13 9/3/13 1/3/14 Year-Over-Year Change -60% -40%
Sources: Energy Information Administration, the U.S. Department of Energy, and William Blair & Company, L.L.C.
57
Mortgage/Housing Trends
Mortgage originations are forecast to continue to decline in 2014 and 2015 as a result of the waning reinance boom that coincided with record-low mortgage rates. Mortgage rates are now more than 100 basis points above the all-time low set at the end of 2012. On the heels of about 16% growth in 2012 and 2013, we expect purchase originations to grow about 13% in 2014 and 11% in 2015, driven by still relatively low mortgage rates, a better economic environment and outlook, and stable to rising home prices. We forecast the decline in re inance activity to more than offset the growth in purchase originations. Following a roughly 24% decrease in re inance originations in 2013, we forecast a 55% decline in 2014 and a 35% decline in 2015. We forecast mortgage debt outstanding to exhibit slight growth in 2014 due to rising home prices.
Exhibit 90 Annual Originations With Purchase and Refinance Breakout
$4,500 Refinance $4,000 $3,500 3,812 Purchase
(Billions)
$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 1,048 2,030 2,483
3,027 2,773 2,726 2,306 1,971 1,509 1,593 1,477 2,095 1,826 1,301 1,210
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E2014E2015E Sources: Bloomberg, Mortgage Bankers Association, Fannie Mae, Freddie Mac, and William Blair & Company, L.L.C.
Exhibit 91 Mortgage Debt Outstanding 14,000
12,000
10,000 $ (Billions)
8,000
6,000
4,000
2,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
Sources: Fannie Mae and William Blair & Company, L.L.C.
58

Exhibit 92 Mortgage Originations/Debt Outstanding Ratio
60% 50% 40% 30% 20% 10% 0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E2014E
Sources: Bloomberg, Mortgage Bankers Association, Fannie Mae, and William Blair & Company, L.L.C.
Credit trends at the government-sponsored entities continue to slowly moderate from their highs of early 2010 but are still about 200 basis points above pre-downturn levels.
Exhibit 93 Fannie Mae and Freddie Mac Total Single-Family Delinquencies 90-Plus-Days Delinquent
6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Fannie Mae Freddie Mac
Note: FRE excludes mortgage loans underlying structured transactions Sources: Fannie Mae and Freddie Mac Monthly Data and William Blair & Company, L.L.C.
Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
59

The National Association of Realtors home affordability index has declined sharply from the record highs in early 2012, partly due to investor (rather than individual homeowner) demand but also due to the relatively low-mortgage-rate environment, depressed home values, and an improved economic environment. The index remains above pre-housing-bubble levels.
Exhibit 94 Housing Affordability Index
220 210 200 190 180 170 160 150 140 130 120 110 100 90 Aug-01 Aug-02 Aug-03 Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Sources: National Association of Realtors and William Blair & Company, L.L.C.
Total home sales have bounced off the bottom but are still below pre-downturn levels. Total home sales were lat year-over-year at 5.36 million in November on a seasonally adjusted basis.
Exhibit 95 Total (New- and Existing-) Home Sales (SA) and Year-Over-Year Growth
60% 50% 40% 30% Year-Over-Year Growth 20% 10% 0% -10% -20% -30% -40% -50% Mar-68 Mar-70 Mar-72 Mar-74 Mar-76 Mar-78 Mar-80 Mar-82 Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Year-Over-Year Total Home Sales 9,000 8,500 8,000 7,500 7,000 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Number of Homes in Thousands 6,500
Sources: National Association of Realtors, U.S. Census Bureau, U.S. Department of Housing & Urban Development, and William Blair & Company, L.L.C.
60
Aug-13
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13

Total home sales are running slightly below trend. Exhibit 96 shows actual total home sales versus expected total home sales (based on the historical average of home sales per number of households). Dating to 1968, the seasonally adjusted home sales per number of households percentage has averaged 4.73%. We then used this 4.73% historical average to construct a trend line of expected sales for each month since 1968.
Exhibit 96 Total (New and Existing) Home Sales Versus Trend Line of Home Sales 9,000 Total Homes Sales 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000
Mar-68 Jun-69 Sep-70 Dec-71 Mar-73 Jun-74 Sep-75 Dec-76 Mar-78 Jun-79 Sep-80 Dec-81 Mar-83 Jun-84 Sep-85 Dec-86 Mar-88 Jun-89 Sep-90 Dec-91 Mar-93 Jun-94 Sep-95 Dec-96 Mar-98 Jun-99 Sep-00 Dec-01 Mar-03 Jun-04 Sep-05 Dec-06 Mar-08 Jun-09 Sep-10 Dec-11 Mar-13
Trend Line Based on Historical Average of Home Sales Per Household
Number of Home Sales
61

Existing-home sales were down 1.2% year-over-year, to a seasonally adjusted 4.90 million in November. On a month-over-month basis, existing-home sales were down 4.3% in November.
Exhibit 97 Existing-Home Sales (SA) and Year-Over-Year Growth
60% 50% 40% 30% Year-Over-Year Growth 20% 10% 0% 8,000
Year-Over-Year Number of Existing Homes Sold
7,500 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000
-10% -20% -30% -40% -50% Mar-68 Mar-70 Mar-72 Mar-74 Mar-76 Mar-78 Mar-80 Mar-82 Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12
Existing-home inventory, seasonally adjusted, totaled 2.09 million units, or a 5.1-month supply, in November, which is slightly below the pre-housing-bubble levels.
Exhibit 98 Inventory of Unsold Existing Homes
4,500,000 4,000,000 3,500,000 3,000,000
Units
2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Sources: National Association of Realtors and Bloomberg, seasonally adjusted
62
Number of Homes in Thousands
7,000
13.0 12.0 11.0 10.0 9.0 8.0
Exhibit 99 Existing-Home Months' Supply
Months
7.0 6.0 5.0 4.0 3.0 2.0 1.0 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-13 Mar-13
Sources: National Association of Realtors and Bloomberg, seasonally adjusted
The median existing-home price grew 9% year-over-year but was down 1% from the prior month in November, to $196,200.
Exhibit 100 Median Monthly Existing-Home Price
20% 15% 10% 5% 0% -5% -10% -15%
$240,000 $230,000 $220,000 $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000
Year-Over-Year Growth
Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06
Median Price
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
$140,000 $130,000
-20%
Sources: National Association of Realtors and William Blair & Company, L.L.C.
63

New-home sales totaled a seasonally adjusted 464,000 in November, down 2% from the prior month but up 17% year-over-year.
Exhibit 101 New-Home Sales (SA) and Year-Over-Year Growth
100% 80% Year-Over-Year Number of New Homes Sold 1,500 1,400 1,200 1,100 40% 20% 0% -20% -40% -60% Mar-68 Mar-70 Mar-72 Mar-74 Mar-76 Mar-78 Mar-80 Mar-82 Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 1,000 900 800 700 600 500 400 300 200
60%
New-home inventory stood at 167,000 in November, representing a 4.3-month supply.

Exhibit 102 Inventory of Unsold New Homes
650,000 600,000 550,000 500,000 450,000 400,000 350,000
Units
300,000 250,000 200,000 150,000 100,000 50,000 0 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Sources: U.S. Census Bureau, U.S. Department of Housing & Urban Development, and William Blair & Company, L.L.C.
64
Number of Homes in Thousands
1,300
Exhibit 103 New-Home Months' Supply

14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-13 Mar-13
Sources: U.S. Census Bureau, U.S. Department of Housing & Urban Development, and William Blair & Company, L.L.C.
The median new-home price was up 17% year-over-year in November, to $270,900.

Exhibit 104 Median Monthly New-Home Price
20% 15% 10% 5% 0% -5% -10% -15% $290,000 $280,000 $270,000 $260,000 $250,000 $240,000 $230,000 $220,000 $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 Sep-10 Sep-11 Sep-12 Mar-10 Mar-11 Mar-12 Mar-13
Months
-20% Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09
Sources: U.S. Department of Commerce, National Association of Home Builders, and William Blair & Company, L.L.C.
65

Single-family housing permits were at a 641,000 annual rate in November, up 3% from the previous month and up 12% year-over-year.
Exhibit 105 Single-Family Housing Permits Seasonally Adjusted Annualized Rate
1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200
Single-Family Housing Permits
Sources: U.S. Census Bureau, U.S. Department of Housing and Urban Development, and William Blair & Company, L.L.C.
Single-family housing starts were at a 727,000 rate in November, up 21% over the previous month and 26% year-over-year.
Exhibit 106 Single-Family Housing Starts Seasonally Adjusted Annualized Rate
2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 Feb-60 Aug-61 Feb-63 Aug-64 Feb-66 Aug-67 Feb-69 Aug-70 Feb-72 Aug-73 Feb-75 Aug-76 Feb-78 Aug-79 Feb-81 Aug-82 Feb-84 Aug-85 Feb-87 Aug-88 Feb-90 Aug-91 Feb-93 Aug-94 Feb-96 Aug-97 Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06 Feb-08 Aug-09 Feb-11 Aug-12 Sources: U.S. Census Bureau, U.S. Department of Housing and Urban Development, and William Blair & Company, L.L.C.
66
Single-Family Housing Starts
Feb-60 Aug-61 Feb-63 Aug-64 Feb-66 Aug-67 Feb-69 Aug-70 Feb-72 Aug-73 Feb-75 Aug-76 Feb-78 Aug-79 Feb-81 Aug-82 Feb-84 Aug-85 Feb-87 Aug-88 Feb-90 Aug-91 Feb-93 Aug-94 Feb-96 Aug-97 Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06 Feb-08 Aug-09 Feb-11

Total housing permits (single and multifamily) were at a seasonally adjusted annual rate of 1,017 million in November, down 2% over the prior month but up 9% year-over-year.
Exhibit 107 Total Housing Permits Seasonally Adjusted Annualized Rate
2,400 2,200
Total Housing Permits
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 Feb-60 Aug-61 Feb-63 Aug-64 Feb-66 Aug-67 Feb-69 Aug-70 Feb-72 Aug-73 Feb-75 Aug-76 Feb-78 Aug-79 Feb-81 Aug-82 Feb-84 Aug-85 Feb-87 Aug-88 Feb-90 Aug-91 Feb-93 Aug-94 Feb-96 Aug-97 Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06 Feb-08 Aug-09 Feb-11 Aug-12
Total housing starts were at a seasonally adjusted annual rate of 1,091 million in November, up 23% from the prior month and 30% year-over-year.
Exhibit 108 Total Housing Starts Seasonally Adjusted Annualized Rate
2,500 2,300 2,100
Total Housing Starts
1,900 1,700 1,500 1,300 1,100 900 700 500 300 Feb-60 Aug-61 Feb-63 Aug-64 Feb-66 Aug-67 Feb-69 Aug-70 Feb-72 Aug-73 Feb-75 Aug-76 Feb-78 Aug-79 Feb-81 Aug-82 Feb-84 Aug-85 Feb-87 Aug-88 Feb-90 Aug-91 Feb-93 Aug-94 Feb-96 Aug-97 Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06 Feb-08 Aug-09 Feb-11
67

Homebuilder conidence is on the rebound but remains slightly below pre-downturn levels. The NAHB/Wells Fargo Housing Market Index, which is a survey of homebuilder con idence, improved 11 points (23%) from December 2012, to 58, in December 2013; however, it remains well below pre-downturn levels.
Exhibit 109 NAHB Housing Market Index Versus Year-Over-Year Growth
200% 150%
90 80 70
100% 50%
60 50 40
0% -50% -100% Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
30 20
Year-Over-Year Change Housing Market Index
10 0
Sources: Builders' Economic Council Monthly Surveys, NAHB Economics Department, and William Blair & Company, L.L.C.
Residential investment as a percentage of GDP has increased off the bottom but remains below post-WWII cyclical troughs. Residential investment was 3.15% of GDP in third quarter 2013, well below the historical average (since 1929) of 4.55%.
Exhibit 110 Residential Investment as Percentage of GDP
8% 7% 6% 5% 4% 3% 2% 1% 0% 1929 1935 1941 1947-I 1948-III 1950-I 1951-III 1953-I 1954-III 1956-I 1957-III 1959-I 1960-III 1962-I 1963-III 1965-I 1966-III 1968-I 1969-III 1971-I 1972-III 1974-I 1975-III 1977-I 1978-III 1980-I 1981-III 1983-I 1984-III 1986-I 1987-III 1989-I 1990-III 1992-I 1993-III 1995-I 1996-III 1998-I 1999-III 2001-I 2002-III 2004-I 2005-III 2007-I 2008-III 2010-I 2011-III 2013-I Sources: U.S. Department of Commerce, Bureau of Economic Analysis, and William Blair & Company, L.L.C.
68
Percentage of GDP

Homeowner vacancy rates are down from the peak but remain above the long-term average. The homeowner vacancy rate was 1.9% in third quarter 2013, down from an all-time high of 2.9% in 2008; it compares with the long-term average of 1.6%.
Exhibit 111 Homeowner Vacancy Rates
3.5% 3.0%
Homeowner Vacancy Rate
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1Q65 1Q67 1Q69 1Q71 1Q73 1Q75 1Q77 1Q79 1Q81 1Q83 1Q85 1Q87 1Q89 1Q91 1Q93 1Q95 1Q97 1Q99 1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 4Q10 1Q13 4Q12
Sources: U.S. Census Bureau and William Blair & Company, L.L.C.
Rental vacancy rates have quickly declined from the third quarter 2009 peak and are 90 basis points above the long-term average of 7.4%.
Exhibit 112 Rental Vacancy Rates
12%
10%
Rental Vacancy Rate
8%
6%
4%
2%
0% 4Q66 4Q68 4Q70 4Q72 4Q74 4Q76 4Q78 4Q80 4Q82 4Q84 4Q86 4Q88 4Q90 4Q92 4Q94 4Q96 4Q98 4Q00 4Q02 4Q04 4Q06 4Q08
69

The homeownership rate, which stood at 65.3% at the end of third quarter 2013, is up slightly from its recent low of 65.0%, and compares with levels experienced in the mid-1990s.
Exhibit 113 Homeownership Rates for the United States
70% 69% 68% 67% 66% 65% 64% 63% 62% Dec-70 Dec-72 Dec-74 Dec-76
Dec-78
Dec-80
Dec-82
Dec-84
Dec-86
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
The average national monthly mortgage payment has returned to being more than the national average rent price. The monthly mortgage payment was less than rent prices for seven consecutive quarters until interest rates jumped in mid-2013. We assume a conventional 30-year mortgage with 20% down to compare mortgage payments and rental rates as provided by the U.S. Census Bureau. For the total monthly mortgage payment, we assume 200 basis points for insurance and taxes. We do not account for the interest expense tax deductibility in our calculations.
Exhibit 114 Owning Versus Renting: Monthly Payment Comparison
$1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
Monthly Mortgage Payment National Rent Price Total Monthly (Mortgage, Insurance, Taxes) Payment
Sources: Natioanal Association of Homebuilders, Freddie Mac, National Association of Realtors, U.S. Census Bureau, and William Blair & Company, L.L.C.
Mortgage reinancing applications have dropped signiicantly since mid-2013, as the 10-year Treasury and mortgage rates jumped more than 100 basis points in response to the Federal Reserve suggesting it was going to start reducing its bond-buying program. Home purchase applications have been relatively lat since October 2011 but have also trended slightly lower since mid-2013.
70
1Q88 4Q88 3Q89 2Q90 1Q91 4Q91 3Q92 2Q93 1Q94 4Q94 3Q95 2Q96 1Q97 4Q97 3Q98 2Q99 1Q00 4Q00 3Q01 2Q02 1Q03 4Q03 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 3Q13
Dec-12

Exhibit 115 Weekly Mortgage Application Index
Application Index 4-Week Moving Average
1,100 1,000 900 800
Market Index
700 600 500 400 300 200 100 0 11/11/11 5/8/09 8/7/09 2/5/10 5/7/10 8/6/10 2/4/11 5/6/11 2/8/13 11/9/12 8/9/13 11/8/13 11/8/13 8/12/11 2/10/12 5/11/12 8/10/12 5/10/13 11/6/09 11/5/10
Sources: Mortgage Bankers Association of America and William Blair & Company, L.L.C.
6,500 6,000 5,500 5,000
Exhibit 116 Weekly Refinance Application Index and 10-Year Treasury

Weekly Refinance Application Index 10-Year Treasury Yield
5.5% 5.0% 4.5% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%
10-Year Rate
Refinance Index
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 10/23/09 10/22/10 10/28/11 10/26/12 10/25/13 2/8/13 4/24/09 7/24/09 1/22/10 4/23/10 7/23/10 1/21/11 4/22/11 7/29/11 1/27/12 4/27/12 7/27/12 1/25/13 4/26/13 7/26/13
4.0%
Sources: Mortgage Bankers Association of America and William Blair & Company, L.L.C.
350 300 250
Exhibit 117 Weekly Purchase Application Index

Weekly Application Purchase Index 4-Week Moving Average
Purchase Index
200 150 100 50 0 11/11/11 5/8/09 8/7/09 2/5/10 5/7/10 8/6/10 2/4/11 5/6/11 11/6/09 8/12/11 2/10/12 5/11/12 8/10/12 11/9/12 5/10/13 11/5/10 8/9/13
Sources: Federal Reserve Data and Mortgage Bankers Association of America and William Blair & Company, L.L.C.
71

Mortgage delinquency rates continue to improve after peaking in irst quarter 2010, according to the Mortgage Bankers Association delinquency survey. Foreclosures remain more than four times greater than the long-term average.
Exhibit 118 Percentage of Loans in Foreclosure Process Versus Unemployment Rate 5.0% 4.5% 4.0% Foreclosure Rate 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5%
4Q90 4Q91 4Q92 4Q93 4Q94 4Q95 4Q96 4Q97 4Q98 4Q99 4Q00 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12
12.0% % of Loans in Foreclosure Unemployment Rate 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Unemployment Rate
0.0%
Sources: Mortgage Bankers Association, Bloomberg, and William Blair & Company, L.L.C.
Exhibit 119 Percentage of Loans Delinquent Versus Unemployment Rate

11.0% 10.0% 9.0% % of Loans Delinquent Unemployment Rate 10.0% 12.0%
Delinquency Rate
8.0% 7.0% 6.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 4Q90 4Q91 4Q92 4Q93 4Q94 4Q95 4Q96 4Q97 4Q98 4Q99 4Q00 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 0.0% 2.0% 4.0% 8.0%
Sources: Mortgage Bankers Association, Bloomberg, and William Blair & Company, L.L.C.
72
Unemployment Rate

The average 30-year ixed conforming mortgage rate spiked in mid-2013 in response to the Federal Reserve commentary on tapering its bond buying program. The 30-year- ixed conforming mortgage hit a record low of 3.3% in November 2012, which compares with 4.48% on December 27, 2013.
Exhibit 120 30-Year Fixed Mortgage Rate Long-Term Trend
8.5% 8.0% 7.5% 7.0% 6.5%
Spread
6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 4/7/01 8/7/01 12/7/01 4/7/02 8/7/02 12/7/02 4/7/03 8/7/03 12/7/03 4/7/04 8/7/04 12/7/04 4/7/05 8/7/05 12/7/05 4/7/06 8/7/06 12/7/06 4/7/07 8/7/07 12/7/07 4/7/08 8/7/08 12/7/08 4/7/09 8/7/09 12/7/09 4/7/10 8/7/10 12/7/10 4/7/11 8/7/11 12/7/11 4/7/12 8/7/12 12/7/12 4/7/13 8/7/13 12/7/13
Sources: Freddie Mac and William Blair & Company, L.L.C.
Exhibit 121 30-Year Fixed Mortgage Rate Spread Over 10-Year Treasury Yield
3.5%
3.0%
Spread
2.5%
2.0%
1.5%
1.0% 4/7/00 8/7/00 12/7/00 4/7/01 8/7/01 12/7/01 4/7/02 8/7/02 12/7/02 4/7/03 8/7/03 12/7/03 4/7/04 8/7/04 12/7/04 4/7/05 8/7/05 12/7/05 4/7/06 8/7/06 12/7/06 4/7/07 8/7/07 12/7/07 4/7/08 8/7/08 12/7/08 4/7/09 8/7/09 12/7/09 4/7/10 8/7/10 12/7/10 4/7/11 8/7/11 12/7/11 4/7/12 8/7/12 12/7/12 4/7/13 8/7/13 12/7/13 Sources: Freddie Mac and William Blair & Company, L.L.C.
73
Payments and Remittance Trends

We continue to believe that the payments industry remains an attractive long-term secular growth story. Roughly 85% of global payment transactions are cash and check; however, electronic payments represent roughly 60% of the U.S. market (up from roughly 15% in 1990), according to the Nilson Report. We believe the level of electronic payment adoption internationally is about 20 years behind the United States. As such, secular growth of electronic payments is expected to be 9% to 11%, on average, globally over the next several years, driven by 5% of PCE growth and secular electronic payment growth of 4%-6%. The drivers behind the secular shift from paper to plastic include convenience, security, enhanced services, and rewards for the consumer and lower cash-handling expenses for the retailer. In addition, secular tailwinds continue to be supported by increased adoption of electronic forms of payment by governments (e.g., bene it programs and tax refunds) and by growth of e-commerce. Exhibit 122 provides a global view of the aforementioned secular trends in terms of PCE. Cards are expected to account for 43% of global PCE in 2016 (versus an estimated 33% in 2011), which equates to a 10% compounded annual growth rate, according to MasterCard. Exhibit 123 provides a snapshot of the competitive landscape of global payment networks. Collectively, Visa Inc. (excluding volume from Visa Europe) and MasterCard touch roughly 24% of the $42 trillion of global PCE. Interestingly, China UnionPay overtook American Express as the third-largest issuer of credit in 2012 as it grew its credit business 57% in 2011 and 52% in 2012.
Exhibit 122 Personal Consumption Expenditures (PCE), Select Years ($ in trillions)
$27T $30T Cards $6.9 EFT $3.9 $37T $42T $50T $53T
100% 90% 80% Share of Global PCE 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2010 2011 2015E 2016E
Sources: MasterCard and William Blair & Company, L.L.C. Paper $17.6 Paper $19.2 Paper $20.7 Paper $21.8 Paper $22.0 Paper $21.7 EFT $3.2 Cards $6.2 Cards $11.1 Cards $13.9 Cards, $20.0 Cards $22.8
EFT $5.2
EFT $6.3
EFT $8.0
EFT $8.5
74

Exhibit 123 Sizing Up the Global Payments Networks (General-Purpose Cards) Total Total Total Total Number of YearYearVolume Volume Cards in Over- Transactions Transactions Over$ Billions $ Billions in Billions in Billions Millions, Year Year 2011 2012 2011 2012 2011 Change Change Credit Visa Brand* MasterCard China UnionPay American Express JCB Diners Club Credit Card Total Debit and Prepaid Visa China UnionPay MasterCard Total Debit and Prepaid Total Credit, Debit, and Prepaid $2,926 $1,894 $673 $814 $162 $29 $6,499 $3,209 $2,120 $1,022 $888 $186 $28 $7,454 9.7% 11.9% 51.8% 9.1% 14.4% -2.5% 14.7% 32.2 20.9 3.4 5.5 1.4 0.2 63.6 35.2 23.1 4.9 5.9 1.6 0.2 71.0 9.5% 10.6% 42.7% 8.5% 12.8% -3.9% 11.6% 870 686 285 97 76 6 2,020
Number of YearCards in OverMillions, Year 2012 Change 884 721 331 102 79 6 2,123 1.6% 5.2% 16.1% 5.1% 4.3% -2.9% 5.1%
$5,193 $2,125 $1,267 $8,584 $15,083
$5,577 $2,756 $1,527 $9,859 $17,313
7.4% 29.7% 20.5% 14.9% 14.8%
74.5 5.3 19.4 99.2 162.7
77.0 6.8 23.2 107.0 178.0
3.4% 29.6% 19.3% 7.9% 9.3%
1,469 2,665 360 4,494 6,514
1,608 3,203 436 5,247 7,370
9.4% 20.2% 21.1% 16.7% 13.1%
*Includes Visa Europe, which accounted for about 27% of the brand's total volume Sources: The Nilson Report and William Blair & Company, L.L.C.
75

Exhibits 124 and 125 depict the shift toward electronic forms of payment in the United States, which are directionally representative of the long-term global opportunity, in our opinion; we believe the United States is about 20 years ahead of the rest of the world. For perspective, in 2011 electronic payments represented roughly 69% of U.S. consumer payment dollar volume in the United States (up from 53% in 2006) and represented 60% of transactions (up from 47% in 2006), according to the Nilson Report.
Exhibit 124 U.S. Paper Versus Card Payments Transaction Market Share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2009
Paper Electronic Card
Source: The Nilson Report, Carpinteria, CA
35% 30% 25% 20% 15% 10% 5% 0% 1990
Exhibit 125 U.S. Card Transaction Market Share (Card Transactions: Percentage of Total Consumer Payments Transactions)
Credit Card Debit Card Prepaid Card
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2010
2011
2011
Source: The Nilson Report, Carpinteria, CA
Exhibit 126 outlines expected purchase transaction growth by geographic region through 2016, according to the Nilson Report. We note that Asia-Paci ic, Latin America, and Middle East/Africa are forecast to be the three fastest-growing regions and are expected to grow at a compounded annual rate of 14%-15% through 2016. Still, the United States remains the largest country, representing about 47% of global transactions in 2011; it is expected to represent 43% of transactions in 2016.
76

Exhibit 127 provides a snapshot of market share by purchase volume by region for 2010-2011, according to the Nilson Report. With the exception of Europe (due to Visa Europe) and China (due to domestic provider China UnionPay), Visa has a dominant share of every major geographic region.
Exhibit 126 Purchase Transactions, 2011-2016E (in billions) 120 101.7 100
2011
2016E
80 60 40 21.1 20 0 Latin America

CAGR 15%
70.7 51.0 33.7 24.6 7.4 9.8 United States

8% 6%
50.6
10.7
2.4 4.7 Europe

15%
Canada
9%
Asia-Pacific
14%
Middle East Africa
Sources: The Nilson Report and William Blair & Company, L.L.C.
Exhibit 127 General-Purpose Cards Market Share by Region ($ in billions) U.S. Purchase Volume Asia-Pacific Purchase Volume 2010 Share 2011 Share Y/Y Chg 2010 Share 2011 Share Y/Y Chg Visa $1,863.5 57.2% $2,040.0 56.7% 9.5% China UnionPay $1,617.6 51.3% $2,358.4 56.9% 45.8% MasterCard $812.1 24.9% $901.0 25.1% 10.9% Visa $900.4 28.6% $1,026.5 24.8% 14.0% American Express $476.3 14.6% $540.1 15.0% 13.4% MasterCard $411.5 13.1% $506.2 12.2% 23.0% Discover $106.0 3.3% $114.2 3.2% 7.7% JCB $140.4 4.5% $158.5 3.8% 12.9% Total $3,257.9 100.0% $3,595.3 100.0% 10.4% American Express $74.0 2.3% $87.5 2.1% 18.3% Diners $9.0 0.3% $9.8 0.2% 9.0% Total $3,153.0 100.0% $4,147.0 100.0% 31.5% Canada Purchase Volume Middle East/Africa Purchase Volume 2010 Share 2011 Share Y/Y Chg 2010 Share 2011 Share Y/Y Chg Visa $199.5 40.2% $214.7 40.3% 7.6% Visa $90.0 59.8% $109.2 58.4% 21.4% Interac $171.9 34.6% $181.2 34.0% 5.4% MasterCard $51.4 34.2% $67.8 36.2% 31.8% MasterCard $98.8 19.9% $108.1 20.3% 9.4% American Express $7.6 5.1% $8.6 4.6% 12.6% American Express $26.4 5.3% $29.1 5.5% 10.1% Diners $1.5 1.0% $1.5 0.8% 4.9% Total $496.7 100.0% $533.1 100.0% 7.3% Total $150.5 100.0% $187.1 100.0% 24.4%
Europe Purchase Volume Latin America Purchase Volume 2010 Share 2011 Share Y/Y Chg 2010 Share 2011 Share Y/Y Chg Visa Brand* $1,488.0 67.9% $1,639.8 67.4% 10.2% Visa $277.5 61.9% $346.0 61.9% 24.7% MasterCard $602.3 27.5% $683.7 28.1% 13.5% MasterCard $128.9 28.8% $164.0 29.3% 27.2% American Express $92.2 4.2% $99.8 4.1% 8.2% American Express $36.7 8.2% $43.2 7.7% 17.7% Diners $9.9 0.5% $10.6 0.4% 6.6% Diners $5.2 1.2% $5.8 1.0% 12.3% Total $2,192.5 100.0% $2,433.8 100.0% 11.0% Total $448.3 100.0% $559.1 100.0% 24.7%
*Includes Visa Europe and Visa Inc. Sources: The Nilson Report and William Blair & Company, L.L.C.
77

Exhibit 128 depicts traditional point-of-sale global terminal growth, which has grown at a 12% compounded annual rate since 1999, according to the Nilson Report. Global growth has been driven by 22% compounded annual growth in Asia, 19% growth in Middle East/Africa, 17% growth in Latin America, 9% growth in Europe, 2% growth in the United States, and 1% growth in Canada. Due to limited infrastructure, in 2012, 41% of terminal shipments went to Asia, 22% went to Europe, and 18% went to Latin America. In addition to traditional POS terminals, we believe technology (e.g., mobile devices, mobile pointof-sale terminals, and e-commerce) accelerates the secular shift toward electronic payments. As outlined in exhibit 129, smartphones are expected to reach 1.7 billion units by 2017, representing a 31% CAGR since 2008, according to IDC. Visa estimates that the number of mobile payment acceptance points could approach 38 million by 2018 (versus 9 million in 2013).
Exhibit 128 Point-of-Sale Terminal Shipments 25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
1999 2005 2006 2007 2008 2009 2010 2011 2012

Sources: Nilson Report and William Blair & Company, L.L.C.
Exhibit 129 Global Smartphone Shipments (in millions) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
Sources: IDC and William Blair & Company, L.L.C.
78

E-commerce remains a key driver of the secular tailwinds toward electronic forms of payment, in our view. In the United States, e-commerce sales have increased at a 19% compounded annual rate since 2000 yet represent less than 6% of retail sales, according to the U.S. Census Bureau. This rate of growth compares with overall PCE growth of 4% and retail sales growth of 3%. More recently, MasterCard Advisors estimated that holiday retail sales (November 1 through December 24) rose 2.3% year-over-year, while online sales rose 13%. We believe e-commerce will continue to take share and will drive growth of electronic payments.
Exhibit 130 U.S. E-commerce Growth and Percentage of Total Retail Sales ($ in millions)
E-commerce Sales (L-Axis) $200,000 % of Total Retail Sales (R-Axis) E-commerce Year-Over-Year Growth (R-Axis) $150,000 $140,158 $142,604 $134,567 $111,935 $90,528 $72,100 $50,000 $34,093 $27,388 $56,775 $44,354 $192,911 $165,770 $224,280 $193,378
$250,000
50% 45% 40% 35% 30% 25% 20% 15% 10% 5%
$100,000
$0 9m Ended 9/30/13 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0%
Sources: U.S. Census and William Blair & Company, L.L.C.
79

Despite emerging technologies and electronic forms of communication, card issuers continue to use direct mail solicitations as a tool to expand their customer base. After posting 103% growth in 2010 and 44% growth in 2011, the number of card solicitations fell 42% year-over-year in 2012, to 2.35 billion. In the March 2013 quarter, solicitations fell an additional 4% year-over-year, to a 2.4 billion annualized rate. Interestingly, the number of solicitations remains 60% below the 2005 peak of 6.06 billion. For perspective, solicitations bottomed in 2009 at 1.39 billion offers, according to Bloomberg. Not surprisingly, response rates trended modestly upward as solicitations decreased (exhibit 131). While online offers might skew traditional solicitations, we continue to believe that a rebound in solicitations should drive volume and loan growth for the networks and issuers over time.
Exhibit 131 Direct Mail Solicitation Volume and Response Rate
700 1.8
Direct Mail Solicitation Volume

600
Response Rate
1.6 1.4
500 1.2 400 300 200 0.4 100 0 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 0.2 0 1 0.8 0.6
90 Percentage of Household Penetration 80 70 60 50
Exhibit 132 Household Penetration and Number of Offers Received
8 7 6 5 4
40 30 20 10 Household Penetration 0 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 Number of Offers Received 0 3 2 1
80
Number of Offers Received
Response Rate Percentage
Mailings in Thousands

Exhibits 133 through 136 depict the types of offers provided by card companies. The average APR spread (APR versus 3-month LIBOR) materially expanded beginning in 2008 and has averaged 12.4 points (versus 7.9 points from 2003 until 2007). The percentage of offers with rewards has tapered, averaging 76% since 2010 (when the Durbin Amendment was passed); this compares with the 84% average in 2009-2010.
Exhibit 133 Mean "Go-To" APR on Credit Cards Versus 3-Month LIBOR 16
Avg APR 3-Month LIBOR Spread
14 12 10 8 6 4 2
Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Nov-03 Jul-08 Nov-04 Jul-09 Nov-05 Jul-10 Mar-03 Nov-06 Jul-11 Mar-04 Nov-07 Mar-05 Nov-08 Nov-09 Mar-06 Mar-07 Nov-10 Mar-08 Nov-11 Jul-12 Jul-12 Nov-12 Nov-12 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-13
Exhibit 134 Share of Credit Offers With Rewards

100 90 80 70 60 50 40 30 20 10 0 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Nov-03 Jul-08 Nov-04 Jul-09 Nov-05 Jul-10 Mar-03 Nov-06 Nov-07 Mar-04 Mar-05 Nov-08 Nov-09 Mar-06 Mar-07 Nov-10 Mar-08 Jul-11 Nov-11 Mar-09 Mar-10 Mar-11 Mar-12
81
82
10 0 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 20 30 40 50 60 70 80 90 10 20 30 40 50 60 70 80 90 0 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13

Sources: Bloomberg and William Blair & Company, L.L.C. Sources: Bloomberg and William Blair & Company, L.L.C.
Exhibit 135 Share of Credit Offers With Intro Purchase APR
Exhibit 136 Share of Credit Offers With Balance Transfer APR

We believe exhibit 137 might partly explain Visas outperformance in the U.S. credit card business relative to MasterCard. Despite representing 44% of the credit card volume in the United States, Visa accounted for nearly 60% of total industry solicitations in the March 2013 quarter; this compares with MasterCard representing 24% of credit card volume but only 15% of total solicitations. In 2012, Visa averaged 53% of total offers versus 21% for MasterCard.
Exhibit 137 Market Share of Offers
Share of Offers for Visa Share of Offers for American Express Share of Offers for MasterCard Share of Offers for Discover
70 60 50 40 30 20 10 0 Jan-03
Jan-04
Sep-03
Jan-05
Sep-04
Jan-06
Sep-05
Jan-07
Sep-06
Jan-08
Sep-07
Jan-09
May-03
Sep-08
Jan-10
May-04
Sep-09
Jan-11
May-05
Sep-10
Jan-12
May-06
May-07
Sep-11
May-08
May-09
May-10
May-11
May-12
Sep-12
Jan-13
83

Card lines have remained relatively stable in recent years but remain 30% below the recent 2008 peak. Credit lines have remained stagnant at about $3.8 trillion since the end of 2010, according to Bloomberg. Not surprisingly, as credit lines were reduced, credit line utilization rates spiked in 2008. Utilization rates have been relatively consistent in recent years at about 18% (versus the long-term average of 16.7%); for perspective, utilization bottomed at 14.3% in 2007.
Exhibit 138 Credit Card Loans Versus Lines (dollars in trillions)
$6 $5 $4 $3
FDIC Industry Credit Card Loans $2 $1 $0
FDIC Industry Credit Card Lines
Jul-03
Jun-01
Jan-06
Nov-01
Sep-02
Dec-03
Jun-06
Jul-08
Jan-11
Nov-06
Aug-05
Sep-07
Dec-08
Jun-11
Oct-04
Aug-10
Nov-11
Sep-12 Sep-12
Feb-03
Mar-05
Oct-09
Mar-10
Feb-08
Apr-02
Apr-07
May-04
May-09
Exhibit 139 Credit Card Line Utilization Rate 20 19 18 17 16 15 14 13 12 11

Jul-03 Jun-01 Jan-06 Nov-01 Sep-02 Dec-03 Jun-06 Jul-08 Jan-11 Nov-06 Sep-07 Aug-05 Dec-08 Jun-11 Oct-04 Aug-10 Nov-11 Mar-05 Feb-03 Feb-08 Oct-09 Mar-10 Apr-02 May-04 May-09 Feb-13 Apr-07 Apr-12
10
84
Feb-13
Apr-12

More recent consumer spending trends remain solid, in our view. Exhibit 140 depicts the monthly transaction growth at First Data, which is one of the worlds largest payment processors and merchant acquirers. According to the First Data SpendTrend report, transaction growth on credit cards averaged 7.2% on a year-to-date basis through October 2013, versus 5.7% over the same period in 2012. We attribute the improving growth to the improving labor market, improving consumer balance sheets, and general market stability. Interesting transaction growth for debit cards has moderated, which we largely attribute to the anniversary of the Durbin Amendment (made effective April 2012). Signature debit transaction growth averaged 4.3% year-to-date through October 2013 (versus 6.0% for the comparable period in 2012), while PIN debit growth averaged 5.9% (versus 8.9%).
Figure 140 First Data SpendTrend Year-Over-Year Transaction Growth
20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jul-11 Jul-12 Jan-11 Jan-12 Nov-10 Nov-11 Nov-12 Jan-13 Jul-13 Sep-10 Sep-11 Sep-12 May-11 May-12 May-13 Sep-13 Mar-11 Mar-12 Mar-13 Credit Signature Debt PIN Debit Total Card
Sources: First Data and William Blair & Company, L.L.C.
85

Total worldwide international revenue passenger miles, a measure of air trafic, remain solid. We believe international air travel trends serve as a useful gauge for cross-border card spending trends. Global traf ic has increased roughly 5% calendar year to date through October 2013 and remains in line with the historical average, since 2003, according to the International Air Traf ic Association. On a year-to-date basis, the fastest-growing regions are Latin America (8.6% growth) and Africa (7.4% growth), while North America is the slowest-growing region at 2.5% year-over-year. The World Tourism Organization expects global tourism arrivals to grow about 5% in 2013. For perspective, in 2012 the number of international tourists rose 4% year-over-year, to 1,035 million (versus 5% in 2011), and total international tourist receipts rose 4%, to an estimated $1.075 trillion (versus 11% growth in 2011). Visa and MasterCard report cross-border revenues, which represent a small portion of transactions but about 25% of gross revenues, and are largely driven by international travel. In addition, American Express generates 10% of revenues from airline volume.
Exhibit 141 Global Air Travel Year-Over-Year Change 2005 to Present
25 15 5 -5 -15 Worldwide -25 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Oct-05 Oct-06 Oct-07 Oct-12 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Oct-13 Oct-08 Oct-09 Oct-10 Oct-11
Sources: International Air Traffic Association, Bloomberg, William Blair & Company, L.L.C.
Exhibit 142 Americas Air Travel Year-Over-Year Change 2005 to Present 25 15 % 5 -5 -15 North America -25
Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Jun-13 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
Latin America
Sources: International Air Traffic Association, Bloomberg, William Blair & Company, L.L.C.
86

Exhibit 143 International Air Travel: 2005 to Present 25 15 % 5 -5 -15 Europe -25
Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Jun-13 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
8% $1,030 $939 $850 $928 4.9% $1,075 6% 5.0% 4% 4.0% 2.1% 2% 0% -2% -3.4% 2005 2006 2007 2008 2009 2010 2011 2012 2013E -4%
Asia-Pacific
Africa
Sources: International Air Traffic Association, Bloomberg, and William Blair & Company, L.L.C.
Exhibit 144 Tourism Receipts Versus Tourism Arrivals Year-Over-Year Change

$1,200 7.2% 6.6% $1,000 $857 $800 $678 $600 $400 $200 $0 International Tourism Receipts Sources: UNWTO and William Blair & Company, L.L.C. $743 4.3% 7.2%
Y/Y Change International Tourism Arrivals
87

While macro uncertainties linger, we believe fundamental trends for the money transfer industry continue to improve moderately. The World Bank estimates that global remittances will reach $707 billion by 2016; this assumes 9% compounded annual growth and compares with 7% compounded annual growth since 2010. As outlined in exhibit 146 the countries with the largest amount of remittance in lows are India ($63 billion), China ($62 billion), Mexico ($24 billion), the Philippines ($23 billion), and France ($16 billion). Conversely as outlined in exhibit 147, the largest countries for out lows are the United States ($52 billion), Saudi Arabia ($27 billion), Switzerland ($22 billion), and Russia ($19 billion).
Exhibit 145 Outlook for Remittance Flows to Developing Countries ($ in billions) 2008 2009 2010 2011 2012 2013E $323 $303 $334 $374 $390 $414 84 79 95 107 108 116 40 32 32 37 38 42 63 55 56 59 60 61 36 34 41 43 48 50 72 75 82 97 107 114 29 28 29 30 30 32 $446 16.5% 18.8% 17.2% 2.2% 12.0% 32.6% 15.7% 16.1% $418 -6.3% -6.0% -20.1% -12.0% -6.5% 4.6% -1.8% -6.3% $454 10.2% 20.1% -0.9% 1.1% 19.4% 9.4% 4.1% 8.7% $506 11.9% 12.4% 17.6% 6.1% 6.3% 18.4% 4.5% 11.5% $519 4.3% 1.0% 1.6% 0.9% 10.8% 9.7% -0.4% 2.5% $549 6.3% 7.4% 10.8% 2.5% 3.6% 6.8% 6.2% 5.8%
Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub-Saharan Africa World Year-Over-Year Change Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub-Saharan Africa World
2014E $449 127 46 67 52 123 35 $594 8.6% 9.5% 10.3% 10.5% 4.9% 7.7% 8.6% 8.2%
2015E $491 139 51 75 55 133 38 $646 9.3% 10.2% 11.2% 11.1% 5.4% 8.5% 9.2% 8.8%
2016E $540 154 56 84 58 146 42 $707 9.9% 10.5% 11.6% 11.6% 5.6% 9.4% 9.5% 9.4%
Sources: World Bank and William Blair & Company, L.L.C.
88

Exhibit 146 Top 15 Countries for Migrant Remittance Inflows (2013E Data) ($ in billions)
$60 $60 $50 $40 $30 $20 $10 $0 $26 $22 $22 $21 $20 $15 $15 $15 $11 $11 $10 $9 $9
$80 $70
$71
$60 $51 $50 $40
Exhibit 147 Top 15 Countries for Migrant Remittance Outflows, 2012 Data ($ in millions)
$32 $30 $20 $10 $0
$29
$28 $16 $15
$12
$11
$11
$11
$11
$10
$10
$8
$6
89

We believe consumer-directed healthcare could serve as a solution to rising healthcare costs in the United States. As outlined in exhibit 148, as a percentage of gross domestic product (GDP), healthcare represents 17.7% (up from 9% in 1980) in the United States, which compares with the global average of 9.3%, according to the Organisation for Economic Co-operation and Development. The next highest is the Netherlands at 11.9%, followed by France at 11.6%; Estonia is the lowest at 5.9%. We believe high-deductible health plans (HDHP) with savings options represent a reasonable proxy of the emerging trend toward consumer-directed healthcare. In addition to tax bene its, employers have incentives to increase participation in these programs because consumer-directed healthcare reduces the total cost of coverage by about 18% per employee (versus PPO and HMO plans), according to Mercer. Studies suggest HDHPs might in luence consumer behavior and lifestyle choices, as the end-user is more connected with healthcare costs. These plans also help reduce the complexity that is generally associated with managed care plans and increase lexibility for employees, in our view. Despite these bene its, only about 20% of employees (versus roughly 5% in 2007) in the United States are covered by such plans, according to the Kaiser Family Foundation; see exhibit 149.
Exhibit 148 Total Expenditure on Healthcare as Percentage of GDP
Western and Central Europe
14.0 12.0 10.0
% of GDP
Scandinavia
12.0 10.0 8.0
% of GDP
8.0 6.0 4.0 2.0 0.0 Austria Luxembourg Spain Belgium Netherlands Switzerland Ireland Portugal United Kingdom
6.0 4.0 2.0 0.0 Denmark Finland Iceland Norway Sweden
North America
18.0 16.0 14.0 12.0
% of GDP
12.0 10.0 8.0

% of GDP
Asia-Pacific/Middle East
10.0 8.0 6.0 4.0 2.0 0.0 United States Canada
6.0 4.0 2.0 0.0
Israel
South Korea
New Zealand
Sources: OECD Health Data and William Blair & Company, L.L.C.
90
Exhibit 149 Percentage of Covered Employees Enrolled by Plan Type

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1996 1993 1988 14% 1% 16% 1% 17% 1% 19% 1% 20% 1% 20% 1% 21% 3% 20% 3% 21% 3% 25% 5% 24% 5% 27% 4% 24% 7% 29% 8% 28% 10% 27% 46% 73% 0% 10% 20% 30% 40% 50% 60% 70% 57% 56% 55% 58% 60% 58% 57% 60% 61% 55% 54% 52% 46% 42% 39% 31% 21% 9% 9% 10% 20% 19% 17% 13% 8% 8% 10% 8% 12% 5% 13% 4% 13% 0% 15% 15% 17% 18% 23% 21% 24% 14% 7% 26% 11% 16% 80% 90% 100%
28%
Conventional
HMO
PPO
POS
HDHP / SO
Sources: Kaiser Family Foundation, HRET, KMPG, HIAA, and William Blair & Company, L.L.C.
91
Stock-Price Performance and Valuation

Stock-price performance has been relatively strong for our coverage list and the inancial technology sector. Sixteen of the 25 stocks under our research coverage outperformed the S&P 500 in 2013 with average price up 53% (versus 28% for the market). WageWorks and QIWI (IPO in May 2013) were the best performers, up 241% and 227%, respectively, while DFC Global and Monroe Capital were the worst-performing names under our coverage, falling 42% and 19%, respectively. More broadly, the William Blair Financial Technology Index, which is composed of more than 50 stocks, rose 44% in 2013 (versus 30% growth in 2012). The William Blair Specialty Finance Index, which is composed of more than 60 stocks, rose 47% in 2013 (versus 31% in 2012).
Exhibit 150 Stock Price Performance 12/31/2013 Price 2010 2011 $ $ $ $ 76.61 11.45 50.26 52.84 11.0% -0.6% 21.1% -5.4% 34.8% -9.3% 67.7% -10.2%
Rating Consumer Finance Capital One Financial DFC Global Corp. Encore Capital Group Portfolio Recovery Associates Fintech - Payment Networks: Visa MasterCard Discover Financial Services American Express WEX Fintech - Payments: Green Dot Alliance Data Systems Cardtronics EVERTEC Qiwi Fintech - Other: Financial Engines WageWorks Performant Money Transfer Western Union Moneygram Commercial Finance Marlin Business Services CAI Independence Realty Trust BDCs Monroe Capital Garrison Capital Harvest Capital S&P500 COF DLLR ECPG PRAA MP MP OP OP
Stock Price Performance 2012 1Q:13 2Q:13 3Q:13
4Q13
2013 32.2% -38.2% 64.1% 48.3%
37.0% -5.1% 14.3% 9.4% 11.4% 2.5% -10.1% -17.0% -20.4% 4.2% 44.0% -1.7% 10.0% 38.2% 9.8% 58.3% 18.8% 21.0% 17.0% -11.8%
V MA DFS AXP WXS
OP OP OP OP OP
$ 222.68 $ 835.46 $ 55.95 $ 90.73 $ 99.03
-19.5% -12.5% 26.0% 5.9% 44.4%
44.3% 66.4% 29.5% 9.9% 18.0%
49.3% 31.8% 60.6% 21.9% 38.9%
12.0% 10.1% 16.3% 17.4% 4.2%
7.6% 6.2% 6.2% 10.8% -2.3%
4.6% 17.1% 6.1% 1.0% 14.4%
16.5% 24.2% 10.7% 20.1% 12.9%
46.9% 70.1% 45.1% 57.8% 31.4%
GDOT ADS CATM EVTC QIWI
MP OP OP OP OP
$ 25.15 $ 262.93 $ 43.45 $ 24.66 $ 55.97
10.0% 60.0%
-45.0% -60.9% 46.2% 39.4% 52.9% -12.3%
37.0% 11.8% 15.7%
19.4% 11.8% 0.5% 9.9% 36.5%
32.0% 16.8% 34.5% 1.1% 34.7%
-4.5% 24.3% 17.1% 11.0% 79.0%
106.1% 81.6% 83.0% 23.3% 229.2%
FNGN WAGE PFMT
OP OP OP
$ $ $
69.48 59.44 10.30
12.6%
24.2% 97.8% 12.2%
30.6% 40.6% 21.6%
25.9% 37.6% -5.6%
30.4% 46.4% -6.0%
16.9% 17.8% -5.5%
150.5% 233.9% 2.0%
WU MGI
MP OP
$ $
17.25 20.78
-1.5% -1.7% -25.5% -5.9% -18.1% -25.1%
10.5% 36.2%
13.8% 9.1% 25.1% -13.6%
-7.6% 6.1%
26.7% 56.4%
MRLN CAP IRT
OP OP OP
$ $ $
24.97 23.57 8.34
59.5% 0.4% 117.1% -21.1%
58.0% 42.0%
15.6% -1.8% 31.3% -18.2%
9.6% -1.3%
0.0% 1.3% 1.1%
24.5% 7.4% -1.9%
MRCC GARS HCAP SP50
OP OP OP
$ $ $ $
12.24 13.88 15.02 1,848 12.8% 0.0% 13.4%
1.4% 0.9%
-0.4% -13.3% 1.9% -4.2% 0.6% -0.5% 2.4% 4.7%
-5.8% -6.1% 0.0% 9.9%
-17.5% -7.5% 0.1% 29.6%
10.0%
IPO at $20.00; shares began trading on April 17, 2013 IPO at $17.00; shares began trading on May 3, 2013 IPO at $9.00; shares began trading on May 10, 2012 IPO at $9.00; shares began trading on August 10, 2012 Sources: FactSet and William Blair & Company, L.L.C.
IPO at $15.00; shares began trading on October 25, 2012 IPO at $15.00; shares began trading on March 27, 2013 IPO at $15.00; shares began trading on May 6, 2013 IPO at $8.50; shares began trading on August 13, 2013
92
Exhibit 151 William Blair Financial Technology Index Versus S&P 500 400
350 300 250 200 150 100 50 0 Oct-09 Oct-10 Oct-11 Oct-12 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Oct-13
Oct-13
Fin Tech S&P 500 Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Jul-13 Jan-14
Jan-14
Exhibit 152 William Blair Specialty Finance Index Versus S&P 500 350
300 250 200 150 100 50 0 Oct-09 Oct-10 Oct-11 Oct-12 Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Apr-10 Apr-11 Apr-12 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Apr-13 Jul-13 Specialty Finance S&P 500
93

The combination of strong earnings growth and multiple expansion drove stock price performance in 2013. For example, the EV-to-EBITDA multiple for the inancial technology index expanded 29% in 2013 and is up seven points, to 12 times, since valuations bottomed in November 2008. We believe the relatively strong business models and secular tailwinds suggest the group could trade at a 12- to 14-times multiple over time. Exhibit 154 highlights valuation multiples for our companies under coverage.
Exhibit 153 William Blair Financial Technology Index EV-to-NTM-EBITDA
18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x
For the remainder of this report, we examine the current and historical valuation metrics for companies under coverage. Valuations have expanded but appear fairly attractive compared with the historical averages.
94
Price Rating 12/31/2013 Fintech - Payment Networks: Visa MasterCard American Express Alliance Data Systems Discover Financial Services Capital One Financial Fintech - Payments: WEX Green Dot Cardtronics EVERTEC QIWI Fintech - Other: Financial Engines WageWorks Performant Financial Corp. Money Transfer Western Union Moneygram Consumer Finance DFC Global Corp. Encore Capital Group Portfolio Recovery Associates Commercial Finance Marlin Business Services CAI International V MA AXP ADS DFS COF OP OP OP OP OP MP $222.68 $835.46 $90.73 $262.93 $55.95 $76.61
($MM) Mkt Cap $144,965 $101,926 $98,079 $15,381 $27,080 $45,284
Price/ Tang BV 38.04x 19.78x 6.24x -8.52x 2.67x 1.75x
Div Yield 0.7% 0.1% 1.0% 0.0% 1.3% 1.6%
Exhibit 154 Financial Technology, Specialty Finance Valuation Table P/E William Blair EPS Estimates 2012 $6.65 $22.04 $4.41 $10.08 $4.50 $6.16 2013E $7.82 $26.21 $4.90 $11.35 $4.88 $7.04 2014E $9.30 $31.31 $5.40 $12.46 $4.80 $6.60 2015E $10.77 $37.00 $5.97 $13.50 $5.06 $7.10 2012 33.5x 37.9x 20.6x 26.1x 12.4x 12.4x 2013E 28.5x 31.9x 18.5x 23.2x 11.5x 10.9x 2014E 23.9x 26.7x 16.8x 21.1x 11.7x 11.6x 2015E 20.7x 22.6x 15.2x 19.5x 11.1x 10.8x
EV/EBITDA 2012 2013E 2014E 21.1x 17.2x 23.7x 19.5x 21.6x 19.1x 14.5x 16.1x 18.1x 2015E 12.4x 13.4x 17.5x 2012 23% 18% 8% 32% 9% -9%
Earnings Growth 2013E 18% 19% 11% 13% 8% 14% 2014E 19% 19% 10% 10% -2% -6% 2015E 16% 18% 11% 8% 5% 8%
WEX GDOT CATM EVTC QIWI
OP MP OP OP OP
$99.03 $25.15 $43.45 $24.66 $56.00
$3,870 $1,117 $1,942 $2,039 $2,912
-25.55x 3.51x -8.10x -3.21x 154.56x
0.0% 0.0% 0.0% 1.6% 2.1%
$4.06 $1.42 $1.61 $0.75
$4.54 $1.24 $1.91 $1.46 $1.08
$5.07 $1.45 $2.23 $1.67 $1.36
$5.69 $1.68 $2.54 $1.89 $1.71
24.4x 17.7x 27.0x 74.7x
21.8x 20.3x 22.7x 16.9x 51.9x
19.5x 17.3x 19.5x 14.8x 41.2x
17.4x 15.0x 17.1x 13.0x 32.7x
14.1x 12.8x 7.1x 6.9x 12.0x 10.9x 15.0x 50.1x 35.4x
11.2x 5.8x 9.4x 13.2x 27.0x
10.0x 4.6x 8.4x 11.5x 21.2x
12% -9% 18%
12% -13% 19% 44%
12% 17% 17% 14% 26%
12% 16% 14% 13% 26%
FNGN WAGE PFMT
OP OP OP
$69.48 $59.44 $10.30
$3,662 $2,083 $511
11.84x 138.88x -10.22x
0.3% 0.0% 0.0%
$0.50 $0.58 $0.64
$0.77 $0.73 $0.81
$0.96 $0.87 $0.72
$1.16 $1.02 $1.00
139.0x 102.5x 16.1x
90.2x 81.4x 12.7x
72.4x 68.3x 14.3x
59.9x 58.3x 10.3x
59.3x 42.4x 45.0x 38.7x 8.8x 6.7x
34.5x 33.1x 7.1x
28.4x 28.7x 5.2x
32% 61% 16%
54% 26% 27%
25% 19% -11%
21% 17% 39%
WU MGI
MP OP
$17.25 $20.78
$9,591 $1,496
-3.08x -2.54x
2.9% 0.0%
$1.69 $1.05
$1.42 $1.29
$1.44 $1.47
$1.67 $1.67
10.2x 19.8x
12.1x 16.1x
12.0x 14.1x
10.3x 12.4x
7.9x 7.4x
8.4x 6.9x
7.7x 6.2x
6.6x 5.5x
8% 28%
-16% 23%
1% 14%
16% 14%
DLLR ECPG PRAA
MP OP OP
$11.45 $50.26 $52.84
$466 $1,366 $2,677
-1.04x 23.35x 3.78x
0.0% 0.0% 0.0%
$2.18 $3.22 $2.46
$1.03 $3.65 $3.41
$1.25 $4.40 $3.81
$5.10 $4.20
5.3x 15.6x 21.5x
11.1x 13.8x 15.5x
9.2x 11.4x 13.9x
9.9x 12.6x
5.0x 2.0x 12.2x 14.6x 12.9x 9.5x
5.4x 9.6x 8.1x
8.7x 7.3x
12% 36% 26%
-53% 13% 39%
21% 21% 12%
26% 16% 10%
MRLN CAP
OP OP
$25.20 $23.57
$316 $533
1.97x 1.34x
1.7% 0.0%
$0.91 $3.18
$1.36 $2.81
$1.73 $3.09
$2.21 $3.47
27.7x 7.4x
18.5x 8.4x
14.6x 7.6x
11.4x 6.8x
9.4x
9.0x
8.7x
8.4x
90% 25%
49% -12%
27% 10%
28% 12%
Robert P. Napoli +1 312 364 8496 95
BDCs/REITs Monroe Capital Garrison Capital Harvest Capital Independence Realty Trust
MRCC GARS HCAP IRT
OP OP OP OP
$12.20 $13.88 $15.02 $8.34
$122 $233 $92 $85
0.87x 0.92x 1.02x 1.12x
11.1% 10.1% 9.3% 7.7%
$0.15 $1.54 $0.71
$1.17 $1.29 $1.16 $0.74
$1.41 $1.41 $1.52 $0.98
$1.42 $1.50 $1.66 $1.01
10.4x 10.8x 12.9x 11.3x
8.7x 9.8x 9.9x 8.5x
8.6x 9.3x 9.0x 8.3x
19.0x 32.5x
14.8x
14.4x
698% 63% -25% 4%
21% 9% 31% 32%
1% 6% 9% 3%

Exhibit 155 Historical Valuation: CAI (CAP) 25.0x 20.0x 15.0x
Avg 1.2x
2.5x 2.0x 1.5x 1.0x 0.5x P/E (L-Axis) Price to Book (R-Axis) 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
10.0x 5.0x 0.0x
Avg 7.6x
Exhibit 156 Historical Valuation: Portfolio Recovery (PRAA) 25.0x

Average 2.1x
3.5x 3.0x 2.5x
20.0x 15.0x
Average 12.4x
2.0x 1.5x 1.0x
10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
P/E (L-Axis)
Price to Book (R-Axis)
0.5x 0.0x
Exhibit 157 Historical Valuation: Encore Capital Group (ECPG) 25.0x P/E (L-Axis) 20.0x
Average 1.5x
3.0x Price to Book (R-Axis) 2.5x 2.0x
15.0x 1.5x 10.0x

Average 9.0x
1.0x 0.5x 0.0x
5.0x 0.0x 12/26/07 3/13/08 5/29/08 8/13/08 10/28/08 1/14/09 4/01/09 6/17/09 9/01/09 11/16/09 2/03/10 4/21/10 7/07/10 9/21/10 12/06/10 2/22/11 5/09/11 7/25/11 10/07/11 12/22/11 3/12/12 5/25/12 8/10/12 10/25/12 1/15/13 4/03/13 6/18/13 9/03/13 11/15/13
96
Exhibit 158 Historical Valuation: DFC Global (DLLR) 14.0x 12.0x 10.0x 8.0x 3.0x 6.0x 4.0x P/E (L-Axis) 2.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
Sources: FactSet and William Blair & Company, L.L.C. Average 8.2x Average 4.5x
6.0x 5.0x 4.0x
2.0x 1.0x 0.0x
EV to EBITDA (R-Axis)
Exhibit 159 Historical Valuation: MoneyGram (MGI) 40.0x 35.0x 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x P/E (L-Axis) 12/26/07 3/07/08 5/16/08 7/28/08 10/06/08 12/15/08 2/26/09 5/07/09 7/17/09 9/25/09 12/04/09 2/17/10 4/28/10 7/08/10 9/16/10 11/24/10 2/04/11 4/15/11 6/27/11 9/06/11 11/14/11 1/26/12 4/05/12 6/15/12 8/24/12 11/06/12 1/17/13 4/01/13 6/10/13 8/19/13 10/28/13
Sources: FactSet and William Blair & Company, L.L.C. Average 13.8x
Exhibit 160 Historical Valuation: Western Union (WU) 25.0x 20.0x

Avgerage 8.2x
14.0x 12.0x 10.0x 8.0x 6.0x

Avgerage12.1x
15.0x 10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
P/E (L-Axis) EV to EBITDA (R-Axis)
4.0x 2.0x 0.0x
97
6.849871
18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x
Exhibit 161 Historical Valuation: Performant Financial (PFMT) 9.0x

Average 13.5x
8.0x 7.0x 6.0x
Average 6.8x
5.0x 4.0x 3.0x
2.0x 1.0x 0.0x
80.0x
Average 40.8x
70.0x 60.0x 50.0x 40.0x 30.0x 20.0x 10.0x 0.0x 5/07/10 5/26/10 6/15/10 7/02/10 7/22/10 8/10/10 8/27/10 9/16/10 10/05/10 10/22/10 11/10/10 11/30/10 12/17/10 1/06/11 1/26/11 2/14/11 3/04/11 3/23/11 4/11/11 4/29/11 5/18/11 6/07/11 6/24/11 7/14/11 8/02/11 8/19/11 9/08/11 9/27/11 10/14/11 11/02/11
80.0x 70.0x 60.0x 50.0x 40.0x 30.0x 20.0x 10.0x 0.0x

Average 49x
98
5/07/10 6/22/10 8/05/10 9/20/10 11/02/10 12/16/10 2/01/11 3/17/11 5/02/11 6/15/11 7/29/11 9/13/11 10/26/11 12/09/11 1/26/12 3/12/12 4/25/12 6/08/12 7/24/12 9/06/12 10/19/12 12/06/12 1/23/13 3/08/13 4/23/13 6/06/13 7/22/13 9/04/13 10/17/13 12/02/13
9/17/12 10/02/12 10/17/12 11/05/12 11/20/12 12/06/12 12/21/12 1/09/13 1/25/13 2/11/13 2/27/13 3/14/13 4/01/13 4/16/13 5/01/13 5/16/13 6/03/13 6/18/13 7/03/13 7/19/13 8/05/13 8/20/13 9/05/13 9/20/13 10/07/13 10/22/13 11/06/13 11/21/13 12/09/13 12/24/13 Exhibit 162 Historical Valuation: WageWorks (WAGE)
P/E (L-Axis)
Exhibit 163 Historical Valuation: Financial Engines (FNGN) 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x

Exhibit 164 Historical Valuation: QIWI (QIWI) 40.0x 35.0x 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x
Average 6.8x Average 24.7x
10.0x 8.0x 6.0x 4.0x 2.0x 0.0x -2.0x
6/11/13 6/18/13 6/25/13 7/02/13 7/10/13 7/17/13 7/24/13 7/31/13 8/07/13 8/14/13 8/21/13 8/28/13 9/05/13 9/12/13 9/19/13 9/26/13 10/03/13 10/10/13 10/17/13 10/24/13 10/31/13 11/07/13 11/14/13 11/21/13 11/29/13 12/06/13 12/13/13 12/20/13 Exhibit 165 Historical Valuation: Evertec (EVTC) 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 5/20/13 5/28/13 6/04/13 6/11/13 6/18/13 6/25/13 7/02/13 7/10/13 7/17/13 7/24/13 7/31/13 8/07/13 8/14/13 8/21/13 8/28/13 9/05/13 9/12/13 9/19/13 9/26/13 10/03/13 10/10/13 10/17/13 10/24/13 10/31/13 11/07/13 11/14/13 11/21/13 11/29/13 12/06/13 12/13/13 12/20/13
Sources: FactSet and William Blair & Company, L.L.C. Average 12.2x Average 13.7x
14.0x 13.5x 13.0x 12.5x 12.0x 11.5x 11.0x 10.5x 10.0x
Exhibit 166 Historical Valuation: Cardtronics (CATM) 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
9.0x 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x

2.0x 1.0x 0.0x
99

Exhibit 167 Historical Valuation: Green Dot (GDOT) 45.0x 40.0x 35.0x 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x 9/20/10 10/28/10 12/08/10 1/19/11 3/01/11 4/08/11 5/19/11 6/29/11 8/09/11 9/19/11 10/27/11 12/07/11 1/19/12 2/29/12 4/10/12 5/18/12 6/28/12 8/08/12 9/18/12 10/26/12 12/10/12 1/22/13 3/04/13 4/12/13 5/22/13 7/02/13 8/12/13 9/20/13 10/30/13 12/10/13
25.0x
20.0x 15.0x
Average 18.6x
10.0x 5.0x 0.0x
Exhibit 168 Historical Valuation: WEX (WEX) 25.0x

Average 7.7x
12.0x 10.0x 8.0x
20.0x 15.0x
Average 13.6x
6.0x 4.0x
10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
2.0x 0.0x
Exhibit 169 Historical Valuation: Capital One Financial (COF) 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x
P/E (L-Axis) Price to Book (R-Axis)
1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x
100
12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
Exhibit 170 Historical Valuation: Discover Financial Services (DFS) 25.0x 20.0x 15.0x
Average11.2x Average 1.4x
2.5x 2.0x 1.5x 1.0x 0.5x
10.0x 5.0x
P/E (L-Axis)
0.0x
Price to Book (R-Axis)
0.0x
35.0x 30.0x 25.0x 20.0x
12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
Exhibit 171 Historical Valuation: American Express (AXP)
6.0x 5.0x
Average 3.0x
4.0x
Avgerage13.9x
3.0x 2.0x
15.0x 10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
P/E (L-Axis) Price to Book (R-Axis)
1.0x 0.0x
Exhibit 172 Historical Valuation: Visa (V) 45.0x 40.0x 35.0x 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x
25.0x 20.0x 15.0x 10.0x 5.0x 0.0x
12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
101

Exhibit 173 Historical Valuation: Alliance Data Systems (ADS) 25.0x 20.0x 15.0x
12.0x 10.0x 8.0x 6.0x 4.0x
10.0x 5.0x 0.0x 12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
2.0x 0.0x
Exhibit 174 Historical Valuation: MasterCard (MA) 35.0x

Average 10.2x
18.0x 16.0x 14.0x 12.0x

Avgerage 18.4x
30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x

10.0x 8.0x 6.0x 4.0x 2.0x 0.0x
12% 11%
Dividend Yield
12/26/07 3/11/08 5/22/08 8/05/08 10/16/08 12/30/08 3/16/09 5/28/09 8/10/09 10/21/09 1/05/10 3/19/10 6/02/10 8/13/10 10/26/10 1/07/11 3/23/11 6/06/11 8/17/11 10/28/11 1/12/12 3/27/12 6/08/12 8/21/12 11/05/12 1/18/13 4/04/13 6/17/13 8/28/13 11/08/13
Exhibit 175 Historical Valuation: Monroe Capital (MRCC)
1.1 1.0
Price/Book
10% 9% 8% 7% 6% 1/25/13 2/25/13 3/25/13 4/25/13 5/25/13 6/25/13 7/25/13 8/25/13 10/25/12 11/25/12 12/25/12 9/25/13 10/25/13 11/25/13 12/25/13
Dividend Yield P/B
0.9 0.8 0.7 0.6 0.5
Sources: Company reports, FactSet, and William Blair & Company, L.L.C.
102

Exhibit 176 Historical Valuation: Garrison Capital (GARS)
10.5% 10.0%
Dividend Yield
1.1 1.0
Price to Book Price to Book
0.9 9.5% 0.8 9.0% 0.7 8.5% 8.0% 10/9/13 11/6/13 10/23/13 11/20/13 12/4/13 3/27/13 4/10/13 4/24/13 5/22/13 6/19/13 7/17/13 7/31/13 8/14/13 8/28/13 9/11/13 9/25/13 12/18/13 5/8/13 6/5/13 7/3/13 1/1/14
Dividend Yield P/B
0.6 0.5
9.6% 9.4% 9.2%

Dividend Yield
Exhibit 177 Historical Valuation: Harvest Capital (HCAP)
1.1 1.0 0.9 0.8 0.7
9.0% 8.8% 8.6% 8.4% 8.2% 8.0% 10/4/13 10/18/13 11/1/13 5/17/13 5/31/13 6/14/13 6/28/13 7/12/13 7/26/13 8/23/13 9/20/13 11/15/13 11/29/13 12/13/13 12/27/13 12/31/13 5/3/13 8/9/13 9/6/13 Dividend Yield P/B
0.6 0.5
8.2% 8.0%
Dividend Yield
Exhibit 178 Historical Valuation: Independence Realty Trust (IRT)
7.8% 7.6% 7.4% 7.2% 7.0% 6.8% 10/1/13 10/8/13 11/5/13 10/15/13 10/22/13 10/29/13 11/12/13 11/19/13 11/26/13 12/3/13 8/13/13 8/20/13 8/27/13 9/10/13 9/17/13 9/24/13 12/10/13 12/17/13 12/24/13 9/3/13 1/7/14
103

IMPORTANT DISCLOSURES Additional information is available upon request. This report is available in electronic form to registered users via R*Docs at www.rdocs.com or www.williamblair.com. Please contact us at +1 800 621 0687 or consult williamblair.com/Research-and-Insights/EquityResearch/Coverage.aspx for all disclosures. Robert Napoli attests that 1) all of the views expressed in this research report accurately re lect his personal views about any and all of the securities and companies covered by this report, and 2) no part of his compensation was, is, or will be related, directly or indirectly, to the speci ic recommendations or views expressed by him in this report. We seek to update our research as appropriate, but various regulations may prohibit us from doing so. Other than certain periodical industry reports, the majority of reports are published at irregular intervals as deemed appropriate by the analyst. DJIA: S&P 500: NASDAQ: 16,437.05 1,842.37 4,174.66
The prices of the common stock of other public companies mentioned in this report follow: Exxon Mobil Corporation Mercer International Inc. RAIT Financial Trust Towers Watson & Co. (Outperform) Wal-Mart Stores, Inc. (Market Perform) Wells Fargo & Company $100.52 $9.80 $8.87 $128.08 $78.04 $45.94 Percent 16% 3% 0%
Current Ratings Distribution (as of 12/31/13) Coverage Universe Percent Inv. Banking Relationships* Outperform (Buy) 63% Outperform (Buy) Market Perform (Hold) 33% Market Perform (Hold) Underperform (Sell) 1% Underperform (Sell)
* Percentage of companies in each rating category that are investment banking clients, de ined as companies for which William Blair has received compensation for investment banking services within the past 12 months. The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations; contributions to all of the irms departments, including asset management, corporate inance, institutional sales, and retail brokerage; irm pro itability; and competitive factors. OTHER IMPORTANT DISCLOSURES Stock ratings, price targets, and valuation methodologies: William Blair & Company, L.L.C. uses a threepoint system to rate stocks. Individual ratings and price targets (where used) re lect the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry outlook, con idence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) stock expected to outperform the broader market over the next 12 months; Market Perform (M) stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) stock expected to
104 Robert P. Napoli +1 312 364 8496

underperform the broader market over the next 12 months; not rated (NR) the stock is not currently rated. The valuation methodologies used to determine price targets (where used) include (but are not limited to) price-to-earnings multiple (P/E), relative P/E (compared with the relevant market), P/Eto-growth-rate (PEG) ratio, market capitalization/revenue multiple, enterprise value/EBITDA ratio, discounted cash low, and others. Company Pro ile: The William Blair research philosophy is focused on quality growth companies. Growth companies by their nature tend to be more volatile than the overall stock market. Company pro ile is a fundamental assessment, over a longer-term horizon, of the business risk of the company relative to the broader William Blair universe. Factors assessed include: 1) durability and strength of franchise (management strength and track record, market leadership, distinctive capabilities); 2) inancial pro ile (earnings growth rate/consistency, cash low generation, return on investment, balance sheet, accounting); 3) other factors such as sector or industry conditions, economic environment, con idence in long-term growth prospects, etc. Established Growth (E) Fundamental risk is lower relative to the broader William Blair universe; Core Growth (C) Fundamental risk is approximately in line with the broader William Blair universe; Aggressive Growth (A) Fundamental risk is higher relative to the broader William Blair universe. The ratings, price targets (where used), valuation methodologies, and company pro ile assessments re lect the opinion of the individual analyst and are subject to change at any time. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategiesto our clients and our trading desksthat are contrary to opinions expressed in this research. Certain outstanding reports may contain discussions or investment opinions relating to securities, inancial instruments and/or issuers that are no longer current. Always refer to the most recent report on a company or issuer before making an investment decision. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily electronically, and in some instances in printed form. Electronic research is simultaneously available to all clients. This research is for our clients only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company, L.L.C. THIS IS NOT IN ANY SENSE A SOLICITATION OR OFFER OF THE PURCHASE OR SALE OF SECURITIES. THE FACTUAL STATEMENTS HEREIN HAVE BEEN TAKEN FROM SOURCES WE BELIEVE TO BE RELIABLE, BUT SUCH STATEMENTS ARE MADE WITHOUT ANY REPRESENTATION AS TO ACCURACY OR COMPLETENESS OR OTHERWISE. OPINIONS EXPRESSED ARE OUR OWN UNLESS OTHERWISE STATED. PRICES SHOWN ARE APPROXIMATE. THIS MATERIAL HAS BEEN APPROVED FOR DISTRIBUTION IN THE UNITED KINGDOM BY WILLIAM BLAIR INTERNATIONAL, LIMITED, REGULATED BY THE FINANCIAL CONDUCT AUTHORITY (FCA), AND IS DIRECTED ONLY AT, AND IS ONLY MADE AVAILABLE TO, PERSONS FALLING WITHIN COB 3.5 AND 3.6 OF THE FCA HANDBOOK (BEING ELIGIBLE COUNTERPARTIES AND PROFESSIONAL CLIENTS). THIS DOCUMENT IS NOT TO BE DISTRIBUTED OR PASSED ON TO ANY RETAIL CLIENTS. NO PERSONS OTHER THAN PERSONS TO WHOM THIS DOCUMENT IS DIRECTED SHOULD RELY ON IT OR ITS CONTENTS OR USE IT AS THE BASIS TO MAKE AN INVESTMENT DECISION. William Blair and R*Docs are registered trademarks of William Blair & Company, L.L.C. Copyright 2014, William Blair & Company, L.L.C. All rights reserved.
105
Equity Research Directory

John F. OToole, PartnerManager and Director of Research+1 312 364 8612 Kyle Harris, CFA, PartnerOperations Manager+1 312 364 8230 CONSUMER Sharon Zackfia, CFA, Partner+1 312 364 5386 Group HeadConsumer Apparel and Accessories, Leisure, Restaurants Jon Andersen, CFA, Partner+1 312 364 8697 Consumer Products Daniel Hofkin+1 312 364 8965 Hardlines, Specialty Retail Mark Miller, CFA, Partner+1 312 364 8498 E-commerce, Broad Assortment and Hardlines, Health and Beauty Amy Noblin+1 415 248 2874 Apparel and Accessories FINANCIAL SERVICES AND TECHNOLOGY Adam Klauber, CFA+1 312 364 8232 Co-Group HeadFinancial Services and Technology Insurance Brokers, Property & Casualty Insurance HEALTHCARE Ben Andrew, Partner+1 312 364 8828 Group HeadHealthcare Medical Devices
Ryan Daniels, CFA, Partner+1 312 364 8418 Healthcare Information Technology, Healthcare Services Margaret Kaczor+1 312 364 8608 Medical Devices John Kreger, Partner+1 312 364 8597 Distribution, Outsourcing, Pharmacy Benefit Management Tim Lugo+1 415 248 2870 Therapeutics Amanda Murphy, CFA+1 312 364 8951 Diagnostic Services, Life Sciences, Pharmacy Benefit Management Matthew OBrien+1 312 364 8582 Medical Devices John Sonnier, Partner+1 312 364 8224 Biotechnology Brian Weinstein, CFA+1 312 364 8170 Diagnostic Products Y. Katherine Xu, Ph.D.+1 212 237 2758 Biotechnology TECHNOLOGY, MEDIA, AND COMMUNICATIONS Jason Ader, CFA, Partner+1 617 235 7519 Co-Group HeadTechnology, Media, and Communications Hardware and Software Infrastructure
Robert Napoli, Partner+1 312 364 8496 Co-Group HeadFinancial Services and Technology Business Development Companies, Financial Technology, Specialty Finance Christopher Shutler, CFA+1 312 364 8197 Asset Management, Financial Technology GLOBAL INDUSTRIAL INFRASTRUCTURE Nick Heymann+1 212 237 2740 Co-Group HeadGlobal Industrial Infrastructure Multi-industry Larry De Maria, CFA+1 212 237 2753 Co-Group HeadGlobal Industrial Infrastructure Capital Goods Nate Brochmann, CFA+1 312 364 5385 Commercial Services, Logistics/Transportation
Bhavan Suri, Partner+1 312 364 5341 Co-Group HeadTechnology, Media, and Communications IT and Business Process Services, Software, Software as a Service Rahul Bhangare+1 312 364 5066 IT and Business Process Services
Brian Drab, CFA+1 312 364 8280 Filtration and Water Management, Industrial Technology Chase Jacobson+1 212 237 2748 Engineered Equipment, Engineering and Construction Ryan Merkel, CFA+1 312 364 8603 Commercial Services, Industrial Distribution GLOBAL SERVICES Brandon Dobell, Partner+1 312 364 8773 Group HeadGlobal Services Energy Services, Information Services, Marketing Services, Real Estate Services and Technology Timo Connor, CFA+1 312 364 8441 Education Services and Technology Timothy McHugh, CFA, Partner+1 312 364 8229 Consulting, HR Technology, Information Services, Staffing
Jim Breen, CFA+1 617 235 7513 Internet Infrastructure and Communication Services Anil Doradla+1 312 364 8016 Semiconductors and Wireless Justin Furby, CFA+1 312 364 8201 Software as a Service Jonathan Ho+1 312 364 8276 Cybersecurity, Security Technology Dmitry Netis+1 212 237 2714 Communications Equipment Ralph Schackart III, CFA, Partner+1 312 364 8753 Digital Media, Internet EDITORIAL Steve Goldsmith, Head Editor+1 312 364 8540 Maria Erdmann+1 312 364 8925 Beth Pekol Porto+1 312 364 8924 Kelsey Swanekamp+1 312 364 8174 Lisa Zurcher+44 20 7868 4549

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Equity Research Financial Services and Technology | Financial Technology | Specialty Finance | Business Development Companies

Financial Technology and Specialty Finance

Robert P. Napoli +1 312 364 8496 bnapoli@williamblair.com

Brian D. Hogan +1 312 364 5256 bhogan@williamblair.com

Cristopher D. Kennedy, CFA +1 312 364 8596 ckennedy@williamblair.com

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Sources: FactSet and William Blair & Company, L.L.C.

Sources: FactSet and William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Sources: FactSet and William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

2014 Top Picks

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

William Blair & Company, L.L.C.

Attractive Long-Term Investments

William Blair & Company, L.L.C.

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

11.0 10.0 9.0 8.0 7.0 6.0

5.0 4.0 3.0 2.0 1.0 0.0

Sources: Federal Reserve and William Blair & Company, L.L.C.

7.0 6.0 5.0 4.0

Sources: Federal Reserve and William Blair & Company, L.L.C.

Exhibit 5 Consumer Loan Delinquency Rates, NSA

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Sources: Bloomberg and William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

LIBOR 1 Month LIBOR 1 Year U.S. Treasury 3 Month

Exhibit 9 Federal Funds Rate and LIBOR 1-Month Rate

LIBOR 1 Month Fed Funds Rate

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Total Consumer Credit Year-Over-Year Change

Sources: Federal Reserve and William Blair & Company, L.L.C.

Exhibit 13 Revolving Credit Outstanding (NSA) Since January 1979

Sources: Federal Reserve and William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Sources: Federal Reserve and William Blair & Company, L.L.C.

Exhibit 15 Total Outstanding U.S. Consumer Debt (S.A.)

Sources: Federal Reserve and William Blair & Company, L.L.C.

Robert P. Napoli +1 312 364 8496

William Blair & Company, L.L.C.

Exhibit 17 U.S. Nonbusiness Bankruptcies Year-Over-Year Change Since Dec. 2006

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William Blair & Company, L.L.C.

200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000

Exhibit 19 U.S. Nonbusiness Bankruptcies Year-Over-Year Change Since April 2000