Rand Capital Corporation · NASDAQ:RAND
Rand Capital — Proxy Contest (April 2019)
22 slides from Rand Capital's proxy contest presentation, Apr 29, 2019
Slide 1: Transforming Rand Capital: Driving Value Creation
Transforming Rand Capital: Driving Value Creation April 29, 2019 Investor Presentation 2 Nasdaq: RAND
Slide 2: Important Info
Important Info Definitions Definitions of commonlyused acronyms noted with and asteriskin this presentation are defined in the supplemental slides Cautionary StatementRegarding Forward-Looking Statements ‘This presentation contains forward-looking statements’ within the meaning of Section 27A of the
Slide 3: Executive Summary
Executive Summary RAND’S PROPOSED TRANSACTIONS SUPPORT SHAREHOLDERS’ REQUESTS OVER SEVERAL YEARS TO BECOME A DIVIDEND PAYING BUSINESS DEVELOPMENT COMPANY (BDC*) RATIONALE SUMMARY OF TRANSACTION + The BDC universe of 50 publicly-traded companies has + East Asset Management will invest been stagnant f
Slide 4: Timeline of events leading to the shareholder vote
(The following timeline of events leading to the shareholder vote is described in greater detail in the definitive proxy statement.) 2015 through early 2016 Established Strategic Committee of the Board, including the independent Chairman and Vice Chairman, and considered a variety of strategic alter
Slide 5: Strategic alternatives considered
Independent Public Company Wind-DownILiquidate Pursue Change-of-Control Transaction/Merger Status Quo Liquidate or Run-Off Go Private Strategic Party Transaction Insufficient capital to elect RIC Run-off proceeds ina wind- Option to reduce public —_ Best viable option presented was status, preferred
Slide 6: Erland E. Kailbourne
Erland E. Kailbourne Adirector since 1999 and Chairman since 2018. Chairman of Albany International Corporation from May 2009 to February 2019, and continues to serve as a director of Albany International Corporation. Mr. Kailbourne was a director of Financial Institutions, Inc. and its subsidiary,
Slide 7: Participants
Participants i Rand Capital Corporation (“Rand” or “the Company”) Rand Capital (Nasdaq: RAND) is a Business Development Company (BDC) with a wholly-owned subsidiary licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). Rand currently focuses its equi
Slide 8: East Asset Management strategic investment of $25 million in Rand
+ EastAsset Management, LLC (“EAM’” or “East”) to strategically invest $25 million in Rand Strategic * Consideration will include a combination of cash and yielding assets Investment + EAM receives approximately 8.3 million shares of Rand common stock Purchase price of $3.00 per share, represents a
Slide 9: Why support the proposals made by the Board?
The Transfo WHY SUPPORT THE PROPOSALS MADE BY THE BOARD? $25 million strategic investment by East Asset Management enables: Improved market valuation: $3.00 purchase price represents a 33% premium to the closing price of $2.26 per share on January 24, 2019, the day prior to the announcement of the t
Slide 10: RAND price vs offer price and VWAPs
$2.10 RAND Price — Offer Price —30 Day WAP —60 Day wap —90 Day WAP —120 Day WAP — 180 Day WAP 365 Day WAP 10 Source: SNL Financial, Capital I, Factset, Market Data as of 1/24/19 \VWAPs taken starting from day priorto announcement (1/24/19) 40 Offer premiums calculated based on RAND stock closing pri
Slide 11: Price to NAV comparison
0.88 0.83x 0stx ‘One Year Average 0.49x 047x 0.48 0.43x 128 iene 130/18 2n3ne 278 3n3ne 3278 anions 4n4ne 588 5/228 6SNe eign 78NB TATAB 7B1NB eane eens iA 92518 10/8 10/23/18 1168 1120/18 121418 12188 1g 15g " Source: SNL Financial, Capital I, Factset, Market Data as of 1/24/19 \VWAPs taken startin
Slide 12: BDC peer comparison
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Slide 13: Externalization of Management
Externalization of Management - Expected to reduce annual expenses as a percentage of portfolio assets (see slide 11) - Leverages talent and enhances investment decision processes * Currentmanagement team to be employed byRCM - Broadens potential pipeline of investment opportunities + Accessto a net
Slide 14: Expected Lower Cost Structure
Expected Lower Cost St Annual operating expenses (S's in millions) Current? Compensation Expenses? $1.0 nla nla nla General and administrative expenses? $0.9 $0.7 $ (0.2) (22.6)% Base management fee? nla $0.5 nla nla Incentive fees® n/a - n/a n/a Total $1.9 $1.2 $ (0.7) (36.3)% 4. Currentresuits are
Slide 15: Positioned for Growth
Positioned fo Gre Focused on Shareholder Returns Externalization expectedto lower expense ratio and capitalizes on existing management and additional investment talent/knowledge = Expected to improve investor returns and provide continuity of leadership with enhanced capabilities Achieving and maint
Slide 16: Tax Benefits and Special Dividend
Tax Benefits and Special Dividend Future Dividends Valuation Eliminate corporate-level U.S. federal income taxes + Rand intends to elect RIC tax treatment. A RICis a “pass-through entity” that avoids corporate- level U.S. federal income tax + Requires distribution of accumulated earnings and profits
Slide 17: User-Friendly Phone Book Suggests Liquidating the Portfolio
User-Friendly Phone Book (“USFB”) Suggests Liquidating the Portfolio - Destruction of shareholder value + Likely realizable value of assets in a liquidation expected to be less than $3.00 per share + Eliminates future return potential + Eliminates special dividend at $1.50 per share for shareholders
Slide 18: The Future
The Future: Investment of $25 million from East purchase of Rand stock * Cash infusion of ~$13.4 million; $4.4 million’ to be used for expected Special Dividend * Contributed income producing portfolio assets of ~$11.6 million; yielding ~12%? Planned Special Dividend of $1.50 per share to Rand share
Slide 19: Transforming Rand Capital: Driving Value Creation
Transforming Rand Capital: Driving Value Creation April 2019 Investor Presentation ©2019 R Nasdaq: RAND
Slide 20: History
History « Allen “Pete” Grum named President; Rand becomes Dan Penberthy a Business Rand Capital named CFO and EVP Development Corp. founded Company (BDC); by George Rand Margaret Brechtel named VP of and Don Ross Finance First SBA* lever pulled for growth Reloaded capital — critical juncture to grow
Slide 21: Portfolio
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Slide 22: Definitions of BDC and NAV
BDC: A Business Development Company, or BDC, is a form of closed-end investment company in the United States that invests in small and mid-sized businesses. This form of company was created by Congress in 1980 as amendments to the Investment Company Act of 1940. Publicly filing firms may elect regul