Private Placement Investors Association

1. Private Placement Investors Association PPIDX Private Placement Bond Index January 26, 2015 Turnberry

2. PPIDX Private Placement Bond Index Proposal Rationale for a Private Placement Bond Index • OTCFin and Sagamore Advisors have proposed an initiative to create a new index for private placement corporate bonds. • There is currently no comparative performance data specifically for private placements. • The goal is to create an index to serve as a performance benchmark for private placement investors. • The index will also provide a basis for attribution analysis.

3. PPIDX Private Placement Bond Index Proposal – Construction Private Placement Bond Index Construction • All pricing data collected is sent to a third party to ensure confidentiality and compliance with antitrust requirements. • Data can be pulled from existing systems. • Initial collection of data is to have at least five years of pricing so long-term performance is immediately available. • Returns will be available for quarterly, YTD, one year, three year and five year periods. • Final price of any security will be the market value weighted average price across all PPIDX participants. • Return data will be based on both book and par value. • There must be a minimum of four investors per cusip, otherwise the security will not be included in the index. Likewise no cusip will be included should one investor hold 50% or greater of the amount outstanding.

4. PPIDX Private Placement Bond Index Proposal – Potential Benefits and Concerns • Benefits • Performance measurement versus benchmark as well as total return peer group comparisons. • Attribution analysis, including sector, rating, geography and average life. • Concerns • Construction of index. • Viability of easily pulling data. • Quality of index. • Minimum of ten participants. • Cost • Initial cost estimate is $250,000 to fund development of a prototype. • $25,000 per participant for onboarding, loading of historical data and production. • Annual maintenance and reports are $25,000 per participant (includes quarterly load of data sets and production of reports).

5. PPIDX Private Placement Bond Index Proposal – Potential Next Steps • Determine if the PPIA, or a subset of members, has an interest in developing and using the PPIDX. • If there is sufficient interest, propose that a more formal working group moves forward with the project and report out at the PPIA’s summer meeting.

6. Appendix – Detailed Proposal from OTCFin and Sagamore