Value Creation Through Constructive Activism Investor Presentation August 2017 1
Certain Notices and Disclaimers This presentation (“Presentation”) contains certain forward-looking statements relating to the investment objectives, strategy, and approach of 180 Degree Capital Corp. (“180”). Forward looking statements generally can be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “belief,” “estimate,” “project,” “plan,” “likely,” “will,” “should” or similar words or phrases. Forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. 180 may not be successful in executing and implementing their investment strategies and reaching their investment objectives. Prospective investors are urged not to place undue reliance on these forward-looking statements. Prospective investors should carefully review and consider the risks and uncertainties. Any performance data set forth herein represents past performance. Past performance does not guarantee future results. This Presentation is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Any such offering will be made only by means of a registration statement, private placement memorandum, subscription agreement, or other documents as permitted by law. This Presentation does not purport to be complete and is for discussion purposes only. If and when an investment opportunity is offered to you, you must carefully read all of the distributed materials, including any included Risk Factors (the “Disclosure Package”). All information provided in this Presentation is qualified in its entirety by the disclosure set forth in any Disclosure Package. This presentation on is intended solely for the party to whom it has been distributed. Any reproduction, distribution or dissemination of this Presentation or the information included herein is expressly prohibited. 2
Firm Overview Current Entity/Business Prior Entity/Business Changes Effective in March 2017 • • New Structure: Registered Closed-End Fund Reduced operating costs and regulatory burden § • Established 1981; IPO in 1983 Resources focused on value creation/investments § Structure: Business Development Company • • New Investment Focus: § Public Microcap Companies • Investment Focus: Venture Capital Deep Value § Constructive Activism § • New Leadership: § Kevin Rendino joined as CEO 3
180’s Philosophy and Core Beliefs We are Graham and Dodd Investors • The price we pay relative to the business we buy is the most important driver of investment returns. • Markets overreact to near-term internal or environmental challenges creating attractive valuations. • Out-of-favor companies and industries create opportunities to identify investments that offer asymmetric return-to-risk potential. • Companies with strong franchises, managements, and balance sheets are the best positioned to turnaround, gain market share, and improve profitability in an industry recovery. A portfolio of strong business franchises, purchased at the right price, outperforms over a market cycle. 4
Firm Overview Differentiated Investment Strategy • Rigorous, Analytical Investment Process • Experienced Management Team • Constructive Activism • Managed Funds and Special Purpose Vehicles • Active Risk Management • 5
Differentiated Investment Strategy • We focus on investments in <$250 million market capitalization (microcap) public companies where we: • Believe many companies are deeply undervalued • Understand the markets that these companies target • Can purchase meaningful ownership and exact some measure of influence • Believe we can add value through active, hands-on constructive activism • Invest at valuations that provide significant margin of safety • Identify catalysts/changes that we believe can unlock value • Believe we can generate attractive risk-adjusted returns in 1-3 years 6
Differentiated Investment Strategy • Opportunity for value creation in US micro-capitalization publicly traded stocks exists because management and boards often: • Prioritize growth over cash flows • Overvalue market perception of story versus certainty • Favor status quo rather than change • Lack intimate knowledge of desires of ”buy side” investors and the workings of the public markets in general • Mischaracterize “short-term viability” as detractor of “long-term growth” • Manage for quarterly results • Entrench themselves to protect their jobs and positions • Few investors are willing/able to spend the time and energy identifying, conducting diligence and actively engaging with such companies. 7
Differentiated Investment Strategy Minimal Analyst Coverage High relative returns • • 25 22.5% 20 16.5% 15 12.0% 10 7.0% 5 2.2% 0 <=$300M $300M-$3B $3B-$6B $6B-$12B >$12B Source: Furey Research Partners, March 2016 via Grant Wasylik, Uncommon Wisdom Daily. Source: Ibbotson Classic Yearbook, 2015 via Grant Wasylik, Uncommon Wisdom Daily. Low correlations to other asset classes High frequency of takeovers • • 70% 60.2% 60% 50% 40% 30.4% 30% 20% 10% 4.7% 2.4% 2.3% 0% 8 <=$300M $300M-$3B $3B-$6B $6B-$12B >$12B Source: FactSet via Grant Wasylik, Uncommon Wisdom Daily. Source: Furey Research Partners, March 2016 via Grant Wasylik, Uncommon Wisdom Daily.
Differentiated Investment Strategy Traditional, Long-Only 180 Degree Capital Corp Micro-Capitalization Funds (Constructive Activism) 1 (Passive Investing) Active engagement with management of investee Wait passively for identified catalysts to realize value companies to impact timing of catalysts Not often willing to run proxy campaigns Ability to run proxy campaigns, if required Generally not able to hold board seats Able to hold board seats at portfolio companies on portfolio companies Concentrated portfolios available, but Able to offer co-investment opportunities on a single- not often single-position focused funds company basis through special purpose vehicles (1) Subject to applicable laws and regulations. 9
Experienced Management Team • Joined as Board Member in 2016 and Chief Executive Officer and Portfolio Manager in March 2017. • 25+ year career in deep value investing at BlackRock / Merrill Lynch • Value team leader managing $13B in assets over 11 funds. • Member of BlackRock’s leadership committee. • Frequent contributor to financial focused television and media outlets. • Since 2012, served as Chief Executive Officer of RGJ Capital, LLC, a firm focused on deep value investing in micro- capitalization publicly traded companies. Kevin M. Rendino • Joined 180’s predecessor company in 2004; now serves as President and Portfolio Manager. • 13+ year career managing the investments and operations of a publicly traded investment company • Sourced, executed and managed investments across multiple asset classes including private and public equities and debt. Actively led and participated in multiple capital formation efforts at 180 and its portfolio companies. • Responsibility for day-to-day operations, finance, legal and compliance functions of the firm. • • Current and past member of the board of multiple privately held and publicly traded portfolio companies. Daniel B. Wolfe 10
Rigorous, Analytical Investment Process Fundamental Plan Screening Research Development Execution Exit >250k Companies 300-600 Companies 30-40 Companies 10-15 Companies • Initially <$250mm market • Secondary financial cap companies • Sell liquid securities: screens/financial health • Assemble components • at increased valuation • US-Based and Exchanged for strategy to improve • Low inside ownership • Establish initial position following successful Traded financial performance of • Quality of management execution of plan; the target company such • Attempt to work with ~2800 Companies as: management/board to • Evaluate franchise within • if risk thresholds are affect change industry tripped; • Identify needed changes in business • Increase position and/or • if investment thesis with support purchase additional types ceases to hold; 100-125 Companies • Fundamental value and of securities (e.g., debt) • Identify • If alternative financial screens director/management investment • 1/2 market price to • SPVs candidates opportunity presents book • Deep industry and • Go active (File 13D, public better return profile. • 2/3 market price to • Identify path to obtain financial modeling letters, proxy, etc…) earnings and maintain control • 2/3 market price to • Catalyst identification • Actively monitor risks • Collect cash flows from • Company visits cash flows/EBITDA and validation income-producing • Customer calls • Above average investments. • Management, board, dividend yield investor conversations 11
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