Important Notice to Investors This presentation contains forward - - PowerPoint PPT Presentation

Medley Management Inc. (NYSE: MDLY)

Investor Presentation Quarter ended September 30, 2018

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Important Notice to Investors

This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation due to the impact of many factors beyond the control of Medley Management Inc., including those listed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and our

• ther filings with the Securities and Exchange Commission (“SEC”). Any such forward-looking statements are made pursuant to the safe harbor provisions available under

applicable securities laws and Medley Management Inc. assumes no obligation to update or revise any such forward-looking statements except as required by law. Certain information discussed in this presentation (including information relating to portfolio companies) was derived from third party sources and has not been independently verified and, accordingly, the Company makes no representation or warranty in respect of this information. The following slides contain summaries of certain financial and statistical information about Medley Management Inc. The information contained in this presentation is summary information that is intended to be considered in the context of our SEC filings and other public announcements that we may make, by press release or

• therwise, from time to time. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the

achievement of which cannot be assured. You should not view the past performance of Medley Management Inc., or information about the market, as indicative of Medley Management Inc.’s future results. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of Medley Management Inc. This presentation includes certain non-GAAP financial measures, including Core Net Income, Core EBITDA, Core Net Income Per Share, Pre-Tax Core Net Income per Share, Pre-Tax Core Net Income Margin, Core Net Income Margin and Pro-Forma Weighted Average Shares Outstanding. These measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the financial performance section of this presentation for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with U.S. GAAP.

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Table of Contents

1. Overview 4 2. Market Opportunity 9 3. Investment Process 12 4. Financial Performance 14 5. Appendix 18

OVERVIEW

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• Diversified credit manager offering yield solutions for institutional and retail investors
• $4.8B of assets under management (“AUM”) and $2.9B of fee-earning assets under management

(“FEAUM”)

• Success in developing innovative new products and accessing multiple distribution channels

Company Overview

Note: Metrics in billions of USD. Due to rounding figures may not sum.

• 1. As of September 30, 2018.

Total AUM Fee Earning AUM(1)

5 $1.3 $1.8 $2.3 $3.7 $4.8 $5.3 $5.2 $4.8 2011 2012 2013 2014 2015 2016 2017 3Q18 Permanent Capital Institutional Capital

63% 16% 1% 20%

Permanent 9+ Years 6-9 Years 3-6 Years

Structured Credit Corporate Credit Tactical Opportunities Direct Lending

• Flagship product delivering

capital solutions to private, middle market companies

• National direct origination

franchise

• Medley leads origination,

underwriting and credit management

• Primarily focused on syndicated

middle market corporate credit

• Typically larger borrowers than

direct lending

• Preferred and structured equity
• Leverages direct lending and

institutional deal sourcing capabilities

• Private equity risk-reward profile
• Investing in CLO equity issued by

top tier managers

• Secondary markets investing in CLO

equity and related securities

• Capability to sponsor and issue

Medley-branded CLOs

Broad Investment Capabilities

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• Diversified alternative asset manager offering yield solutions for institutional and retail partners
• $4.8 billion in AUM1

1. As of September 30, 2018.

• Broad distribution through public and private channels
• Permanent capital, long-dated funds and managed accounts not subject to traditional outflows

Diversified AUM Across Multiple Funds

Sierra Total Return Fund

MEDLEY

(NYSE: MDLY)

Public Vehicles Medley Capital Corporation

(NYSE: MCC)

Long-Dated Funds and Separately Managed Accounts Senior Loan Fund Medley Opportunity Funds Separately Managed Accounts Institutional Capital Medley Credit Opportunity Fund Sierra Income Corporation Senior Loan Fund Tactical Opportunities

7

87% 13% Floating Fixed

23.8 %

26% 11% 18% 32%

Industry Breakout

Portfolio Summary

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12%

Investment Type Breakout Medley Investments by Geography Floating vs. Fixed Rate

Note: Portfolio summary represents total committed amounts as of 9/30/2018 and represents assets in all investment vehicles including TRS and SLS assets. Fixed/Floating mix includes only interest bearing investments. In addition, non-U.S. investments comprise approximately 1% of Medley’s overall investment portfolio.

15% 12% 8% 7% 8% 6% 4% 3% 4% 3% 3% 4% 2% 3% 2% 2% 14% Services: Business Healthcare & Pharmaceuticals Construction & Building Banking, Finance, Insurance & Real Estate High Tech Industries Multi-Sector Holdings Aerospace & Defense Wholesale Services: Consumer Automotive Hotels, Gaming & Leisure Energy: Oil & gas Containers, Packaging and Glass Media: Advertising, Printing & Publishing Capital Equipment Chemicals, Plastics & Rubber Other

76% 8% 6% 10%

First Lien Second Lien Unsecured Equity

MARKET OPPORTUNITY

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AUM CAGR Since 2010(1)

$- $5 $10 $15 $20 $25 2008 2015 2020E

Alternative Investments

$5T $8T $23T 8% CAGR 24% CAGR

• Market leading growth in AUM driven by:
• Increasing demand for yield in low rate

environment

• Increasing demand by investors for senior

secured and floating rate exposure

• Growth in alternatives continues to outpace that
• f traditional asset managers
• Increased allocation from both retail and

institutional investors

• Retail investors significantly underweight

exposure to alternatives

Increasing Demand for Alternatives

Note: Metrics in trillions of USD. 1. Traditional managers include: BEN, BLK, IVZ, JNS, OMAM, and TROW. Alternative managers include APO, BX, CG, KKR, OAK, and OZM. Medley selected the traditional and alternative manager groups based on subjective factors. There may be other managers not mentioned. 2. Based on BCG, Global Asset Management 2016.

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Growth in Alternatives(2)

7% 14% 22% 0% 10% 20% 30% 40% Traditional Managers Alternative Managers MDLY

Large and Growing Market in Private Credit

Bank Consolidation(1)(2)

$16.8 $9.2 $6.7 $4.9 $3.6 $2.7 $2.5 $2.2 United States China US Middle Market Japan Germany France UK Brazil

• Traditional lenders to the middle market have

changed in recent years

• Consolidation of the banking system
• Regulatory headwinds for banks and CLO

managers

• The middle market remains a large opportunity
• 20 years ago banks represented over 70%
• Today banks represent <10%
• US middle market would rank as the 3rd largest

global economy

• Private credit has emerged as an important asset

class for all investors

• Retail
• Insurance companies
• Pension funds
• Endowments

1. Federal Deposit Insurance Corporation, represents number of commercial banking institutions insured by the FDIC as of 6/30/2018. 2. S&P LCD’s Leveraged Lending Review – Q2’18. 3. International Monetary Fund, World Economic Outlook Database, June 2014. Metrics in trillions of USD.

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Top GDPs(3)

0% 10% 20% 30% 40% 50% 60% 70% 80% 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000

U.S. FDIC Insured Commercial Banks¹ Bank Participation in Levered Loan Market (%)²

INVESTMENT PROCESS

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Underwriting

• Downside protection – focused on capital preservation
• Three step underwriting process
• Multiple touch points and evaluations
• Disciplined Investment Committee process

Origination

• Nationwide platform
• Targeted middle market sectors

Underwriting

• Multi-step approval process
• Documentation process
• 3rd party resources
• Approve 1-3% of opportunities
• Medley has invested in over

400 borrowers(1) Asset and Portfolio Management

• Best-in-class technology and

systems

• Frequent interaction with

borrowers

• Credit monitoring and reporting

Origination

1 2

Asset and Portfolio Management

3 1 2 3

Integrated Investing Processes

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1. Since inception through 9/30/2018.

FINANCIAL PERFORMANCE

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Consolidated Income Statements

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1. Core Net Income reflects net income attributable to the controlling and non-controlling interests in Medley LLC adjusted to exclude reimbursable expenses associated with the launch of funds, certain one-time severance costs and stock-based compensation associated with restricted stock units that were granted in connection with our initial public

• ffering (“IPO”), as well as other non-core items and, in 2018, unrealized losses related to our investment in shares of MCC. Please refer to the reconciliation of net income

attributed to controlling and non-controlling interests in Medley LLC to Core Net Income on the following page. 2. Core Net Income Per Share reflects an adjustment for federal, state and local corporate income taxes. Please refer to the calculation of Core Net Income Per Share on the following page. 3. Core Net Income Margin equals Core Net Income Per Share divided by total revenue per share. 4. The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of up to 24,639,302 Medley LLC units for 24,639,302 shares of Class A common stock at the beginning of each period presented, as well as the vesting of the weighted average number of restricted stock units.

(Dollars in thousands except share and per share amounts) Revenues Management fees $ 12,336 $ 14,838 $ 36,386 $ 41,934 Performance fees — (167) — (1,984) Other revenues and fees 2,769 2,016 8,136 7,004 Investment income (loss): Carried interest (326) (34) 271 139 Other investment income (382) (91) (849) (101) Total revenues 14,397 16,562 43,944 46,992 Expenses Compensation and benefits 6,320 6,382 21,991 17,881 Performance fee compensation (79) (14) (112) (845) General, administrative and other expenses 6,244 3,510 15,095 8,932 Total expenses 12,485 9,878 36,974 25,968 Other income (expense) Dividend income 962 1,428 3,351 2,896 Interest expense (2,717) (2,718) (8,113) (9,131) Other income (expenses), net 2,711 (192) (11,055) 1,399 Total other income (expense), net 956 (1,482) (15,817) (4,836) Income (loss) before income taxes 2,868 5,202 (8,847) 16,188 Provision for income taxes 450 652 835 1,493 Net income (loss) 2,418 4,550 (9,682) 14,695 3,866 1,917 (3,112) 4,709 $ (1,448) $ 2,633 $ (6,570) $ 9,986 Core Net Income (1) $ 1,889 $ 3,851 $ 5,163 $ 13,171 Core EBITDA $ 5,582 $ 7,592 $ 15,941 $ 23,737 Core Net Income per share (2) $ 0.06 $ 0.09 $ 0.16 $ 0.28 Core Net Income Margin (3) 12.5% 15.9% 11.0% 18.2% Pro Forma Weighted Average Shares Outstanding (4) For the Nine Months Ended September 30, (Unaudited) 2018 2017 31,539,125 30,922,950 Less: Net income (loss) attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries Net (loss) income attributable to Medley Management Inc. and non- controlling interests in Medley LLC 2018 32,174,946 For the Three Months Ended September 30, 2017 30,777,252 (Unaudited)

Consolidated Income Statements (Cont.)

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1. Amounts relate to additional interest expense associated with the acceleration of amortization of debt issuance costs and discount relating to prepayments made on our Term Loan Facility as a result of the refinancing of our indebtedness from the issuance of Senior Unsecured Debt. 2. For the three and nine months ended September 30, 2018, other items consist primarily of expenses related to our pending merger with SIC, and prior to the pending merger, the pursuit of other strategic initiatives. 3. Represents a per share adjustment for income taxes assuming that all of our pre-tax earnings were subject to federal, state and local corporate income taxes. We assumed an annualized effective corporate tax rate of 33.0% for 2018 and 43.0% for 2017.

$ (1,448) $ 2,633 $ (6,570) $ 9,986 Reimbursable fund startup expenses 240 596 1,304 847 IPO date award stock-based compensation 444 532 1,018 189 Other non-core items Unrealized losses on shares of MCC

• 3,543
• Severance expense

39 20 2,263 1,184 Acceleration of debt issuance costs (1)

• 1,148

Other (2) 2,959 218 4,819 218 Income tax expense on adjustments (345) (148) (1,214) (401) Core Net Income $ 1,889 $ 3,851 $ 5,163 $ 13,171 Interest expense 2,717 2,718 8,113 7,982 Income taxes 795 800 2,049 1,894 Depreciation and amortization 181 223 616 690 Core EBITDA $ 5,582 $ 7,592 $ 15,941 $ 23,737 The calculation of Core Net Income Per Share is as follows: Numerator $ 1,889 $ 3,851 $ 5,163 $ 13,171 Add: Income taxes 795 800 2,049 1,894 Pre-tax Core Net Income $ 2,684 $ 4,651 $ 7,212 $ 15,065 Denominator Class A common stock 5,591,123 5,342,939 5,539,804 5,578,003 Conversion of LLC Units to Class A common stock 24,215,302 23,653,333 24,008,815 23,592,381 Restricted stock units and restricted LLC units 2,368,521 1,780,980 1,990,506 1,752,566 Pro-Forma Weighted Average Shares Outstanding 32,174,946 30,777,252 31,539,125 30,922,950 Pre-tax Core Net Income Per Share $ 0.08 $ 0.15 $ 0.23 $ 0.49 Less corporate income taxes per share (3) (0.02) (0.06) (0.07) (0.21) Core Net Income Per Share $ 0.06 $ 0.09 $ 0.16 $ 0.28 For the Three Months Ended September 30, (Unaudited) 2017 2017 2018 For the Three Months Ended September 30, (Unaudited) 2018 Net (loss) income attributable to Medley Management Inc. and non- controlling interests in Medley LLC Core Net income (Dollars in thousands except per share amounts) The reconciliation of Net income (loss) attributable to Medley Management Inc. and non-controlling interests in Medley LLC to Core Net Income and Core EBITDA is as follows: 2018 2017 For the Nine Months Ended September 30, (Unaudited) 2018 2017 For the Nine Months Ended September 30, (Unaudited)

Consolidated Balance Sheets

17 (Dollars in thousands) (unaudited) Assets Cash and cash equivalents $ 21,515 $ 36,327 Investments, at fair value 46,285 56,632 Management fees receivable 10,884 14,714 Performance fees receivable

• 2,987

Other assets 15,421 17,262 Total assets $ 94,105 $ 127,922 Liabilities and Equity Senior unsecured debt, net $ 117,428 $ 116,892 Loans payable, net 9,726 9,233 Accounts payable, accrued expenses and other liabilities 37,068 25,130 Total liabilities 164,222 151,255 Redeemable Non-controlling interests 32,226 53,741 Equity Class A common stock 57 55 Class B common stock

• Additional paid in capital

6,260 2,820 Accumulated other comprehensive loss

• (1,301)

Accumulated deficit (17,591) (9,545) Total stockholders' deficit, Medley Management Inc. (11,274) (7,971) Non-controlling interests in consolidated subsidiaries (1,638) (1,702) Non-controlling interests in Medley LLC (89,431) (67,401) Total deficit (102,343) (77,074) Total liabilities, redeemable non-controlling interests and equity $ 94,105 $ 127,922 2018 2017 As of December 31, As of September 30,

APPENDIX

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Endnotes & Definitions

Definitions: “Assets Under Management” or “AUM” refers to the assets of our funds, which represents the sum of the NAV of such funds, the drawn and undrawn debt (at the fund level, including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). “Core Earnings Before Interest, Income Taxes, Depreciation and Amortization (Core EBITDA)” is calculated as Core Net Income before interest expense, income taxes, depreciation and amortization. “Core Net Income” is calculated by adjusting net income attributable to Medley Management Inc. and net income attributable to non-controlling interests in Medley LLC to exclude reimbursable expenses associated with the launch of funds, amortization of stock-based compensation expense associated with grants of restricted stock units at the time of our IPO, other non-core items and the income tax impact of these adjustments. “Core Net Income Margin” equals Core Net Income Per Share divided by total revenue per share. “Core Net Income Per Share” is Core Net Income adjusted for corporate income taxes assuming that all of our pre-tax earnings are subject to federal, state and local corporate income taxes, divided by Pro-Forma Weighted Average Shares Outstanding (as defined above). In determining corporate income taxes we used an annual effective corporate tax rate of 33% for 2018, and 43% for 2017. “Fee Earning Assets Under Management” refers to the assets under management on which we directly earn base management fees. “Pre-Tax Core Net Income” is calculated as Core Net Income excluding the impact of income taxes. “Pre-Tax Core Net Income Margin” equals Pre-Tax Core Net Income Per Share divided by total revenue per share. “Pre-Tax Core Net Income Per Share” is calculated as Pre-Tax Core Net Income divided by Pro-Forma Weighted Average Shares Outstanding. “Pro-Forma Weighted Average Shares Outstanding” assumes the conversion by the pre-IPO holders of up to 24,639,302 Medley LLC units for 24,639,302 shares of Class A common stock at the beginning of each period presented, as well as the vesting of the weighted average number of restricted stock units.

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Corporate Information

Board of Directors BROOK TAUBE Co-Chairman SETH TAUBE Co-Chairman JEFF TONKEL Director JAMES G. EATON Independent Director JEFFREY T. LEEDS Independent Director GUY ROUNSAVILLE, JR. Independent Director Corporate Officers BROOK TAUBE Co-Chief Executive Officer SETH TAUBE Co-Chief Executive Officer JEFF TONKEL President RICHARD T. ALLORTO, JR. Chief Financial Officer JOHN FREDERICKS General Counsel & Secretary Research Coverage COMPASS POINT Casey Alexander – (646) 452-7083 CREDIT SUISSE Craig Siegenthaler - (212) 325-3104 Corporate Headquarters 280 Park Avenue, 6th Floor East New York, NY 10017 (212) 759-0777 Investor Relations SAM ANDERSON Head of Capital Markets & Risk Management (212) 759-0777 Corporate Counsel LOWENSTEIN SANDLER LLP New York, NY Independent Registered Public Accounting Firm RSM US, LLP New York, NY Securities Listing NYSE: MDLY (Common Stock) MDLQ (Senior Notes Due 2024) MDLX (Senior Notes Due 2026) Transfer Agent AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (888) 777-0324 Media Contact TENEO (212) 498-9197