The U.S. middle market is comprised of nearly 200,000 businesses and accounts for more than 47 million jobs.1 If ranked as a country, the U.S. middle market would represent the world’s third-largest economy.1 Despite its size and importance to the economy, many investors have had limited access to investing in middle market companies.

The impact of banking regulations

While middle market companies play an indispensable role in our economy, sweeping regulatory changes since the financial crisis have led many banks to reduce their lending activity to middle market companies. In addition, the number of banking institutions in the United States declined from more than 10,000 in 1994 to 5,300 in 2015.2 As traditional banking institutions have declined in recent years, there is a growing opportunity for non-bank lenders to help fill the void.2

NUMBER OF U.S. BANKS VS. MARKET SHARE OF SENIOR SECURED LOANS 20% 15% 10% 1994 2015 Source: FDIC and S&P Leveraged Commentary and Data. 0 2,000 4,000 6,000 8,000 10,000 12,000 0% 5% 25% 30% 35% U.S. bank market share of senior secured loans Number of U.S. banks

Source of income

Middle market loans have historically provided higher levels of current income than traditional fixed income investments. Because they are smaller and generally have fewer places to turn for their capital needs, middle market companies often pay a higher rate of interest than larger corporate borrowers that may be able to access the public capital markets. Investors can tap into this “middle market premium” by investing with a manager that has a proven track record of identifying, analyzing and underwriting middle market loans.

As of August 1, 2016. Middle market loans and large corporate loans are represented by the S&P/LSTA Leveraged Loan Index (based on companies with annual EBITDA of $50 million or less), which covers more than 1,100 U.S. dollar-denominated loans to below investment grade companies. Investment grade bonds are represented by the Bank of America Merrill Lynch U.S. Corporate Master Index, which tracks the performance of U.S. dollar-denominated investment grade corporate debt publicly issued in the U.S. domestic market. Treasuries are represented by 10-year U.S. Treasury note. There are varying levels of risk associated with each type of investment. Past performance is not indicative of future results.It is important to note that investments with higher yields may be accompanied by a higher degree of risk. This risk, whether actual or perceived, may be based on considerations such as time horizon, liquidity and investment rating, among other factors. 8% 7% 6% 5% 4% 3% 2% 1% 0% Middle market loans 6.37% Large corporate loans 5.35% Investment grade bonds 2.79% Treasuries 1.52% YIELD COMPARISON

Low correlation

Adding investments that behave differently from one another, or have low correlation, may help diversify a portfolio. Middle market loans historically have had a low correlation to many traditional investments, such as stocks and investment-grade bonds, and have been negatively correlated to U.S. Treasuries.

While middle market loans are more highly correlated to high yield bonds, they are typically the first obligations of a company to be repaid, before junior debt or equity investors. Unlike most high yield bonds, loans are typically secured by a borrower’s assets, including cash, inventory, equipment and property, which may help protect an investor’s principal if a company comes under financial stress.

High yield bonds Treasuries Domestic stocks Investment grade bonds 0.61 -0.29 0.45 0.32 Correlation data from January 1997 through February 2016. Middle market loans are represented by the S&P/LSTA U.S. Leveraged Loan Index (based on companies with annual EBITDA of $50 million or less). High yield bonds are represented by the Bank of America Merrill Lynch High Yield Master II Index. Treasuries are represented by the Bank of America Merrill Lynch 10-year Treasury Index. Domestic stocks are represented by the S&P 500 Index. Investment grade bonds are represented by the Bank of America Merrill Lynch U.S. Corporate Master Index. CORRELATION OF MIDDLE MARKET LOANS TO TRADITIONAL INVESTMENTS

Investor considerations

Investing in middle market loans is different than investing in traditional investments, such as stocks and bonds. Middle market loans are often illiquid and issued by below-investment-grade companies. When building a portfolio that includes middle market loans, investors and their financial advisors should first consider the individual’s financial objectives. Investment constraints such as risk tolerance, liquidity needs and investment time horizon should be taken into consideration. Past performance is no guarantee of future results.

Learn more:

1 National Center for the Middle Market, 4Q 2016 Middle Market Indicator. The Middle Market Indicator is a quarterly business performance update and economic outlook survey conducted among 1,000 C-suite executives of middle market companies. For purposes of the 4Q 2016 Middle Market Indicator, the National Center for the Middle Market defined the middle market as U.S. companies having annual revenues from $10 million to $1 billion.

2 FDIC, “Statistics at a Glance,” latest industry trends as of December 31, 2015.