Overview of the International Debt Sale Landscape November 2016 Powering Partnerships

Kessler Overview

Background to Kessler Debt Advisory Largest Debt Advisory Firm in Australia & New Zealand (Experience in US, Canada and UK) Services include debt sale, contingent outsourcing and other niche programs Managing programs on behalf of 24 major issuers in the automotive, utility, telco and banking industries Sales across banking & finance, telecommunications, automotive and utility sectors Kessler’s Debt Advisory unit has extensive experience in the management of non-performing assets in the Australian market, representing 24 clients made up of major blue chip companies.

Single Largest Debt Sale Relationship in Australia and New Zealand Kessler Expertise Established in 2010 Present 2011 2012 2013 2014 2015 Facilitated the first ever sale of Utility debt in Australia Facilitated the first ever sale of Auto debt in Australia Single largest source of debt sold in Australian market Successful expansion into New Zealand Successful expansion into Canada Debt sales are now standard practice for emerging industries such as Utility, Telco and Auto in Australia Single Largest Debt Sale Relationship in Australia and New Zealand > 3 Million Unique Customer Records Partnership with leading credit bureau Trusted Intermediary employed by sellers and buyers in the market 450+ Tranches Sold Long term focus on developing the debt sale and contingency market Kessler has successfully assisted new industries in adopting debt sales and transitioning them into sophisticated debt sale and collections programs

Australian Market Overview

Sellers Regulators Buyers Industry Participants Sellers Regulators Buyers Australian Securities and Investment Commission (ASIC) Australian Competition and Consumer Commission (ACCC) Industry Ombudsman Australian Advocacy Groups Specific Commonwealth Consumer, Energy, Credit, Trading and Bankruptcy Protection Laws 5/5 Major banking issuers sell debt 3/3 Major telco issuers sell debt Major utility issuers sell debt 7/9 Major auto Issuers sell debt 3 Publically listed debt buyers (ASX) 1 Major international debt buyer Major private debt buyer 20+ Smaller niche buyers

Market Trends – Past 12 Months Entry of an international debt buyer in the Australian market Substantial number of issuers transitioning to forward flow programs Increased competition amongst buyers (Continued growth of mid tier purchasers) Mixed performance of publically listed buyers The Australian debt sale market has seen significant growth over FY16 in terms of the number of issuers ( and the volumes sold) as well as overall pricing levels.

Sale Landscape by Issuers No Sale Regular Inventory Forward Flow Smaller financial institutions Government sector Majority of telco issuers Majority of utility issuers Majority of automotive issuers All major banking issuers Major telco issuer Automotive issuers Sale Frequency Banking and finance accounts for 75% of all debt sales conducted in Australia. In the coming years it is expected that emerging, telecommunication, automotive and utility sectors will capture additional debt sale market share. There will be involvement from broader industries in the debt sale market as different industries begin to embrace debt sale for example the sales of insurance debt and mortgage shortfalls.

Sale Landscape by Buyers The following table displays the annual spend of the largest five debt buyers in the Australian industry, with the volumes and spend of smaller buyers also displayed: ($M) Over a five year period, the five major debt buyers in Australia have a total spend of ~$1.7bn. Annual spend has grown by 59% across all buyers from FY13 to FY17. For FY17 it is forecasted that the spend of smaller buyers will increase to $27M (from $25M), however there will continue to be new entrants. Growth of buyers by spend is expected to slow down substantially, with a forecasted FY17 increase of just 5% from FY16. This represent the smallest % increase over the five year period. This is the result of record pricing and the maturity of sale programs.,

National Consumer Credit Act 2009 (NCCP) Regulatory Focus As a result of the increased regulatory environment of the Australian debt sale market, issuers and buyers are starting to transition business activities to be consumer orientated. Traditionally issuers selected buyers based on price, however there is a movement in the market of buyers being selected based on their customer handling and experience capabilities. Consumer Focus Reforms to consumer credit laws have resulted in a single national consumer credit regime governed by the NCCP. The NCCP applies licensing regime to those providing regulated credit or credit assistance and therefore require a Australian Credit License (ACL). The NCCP is enforced by ASIC . National Consumer Credit Act 2009 (NCCP) All state and territory jurisdictions have occupational licensing requirements applying to debt collection activities. These laws impose certain obligations on licensees, and set out grounds on which the relevant authority can refuse to grant or cancel a license. All debt purchasers are required to hold a Australian Credit License (ACL). National Licenses Business that breach the law may be subject to significant penalties. For example a buyers or credit issuer who have breached the harassment and coercion provisions may be subject to penalties of up to: $1,100,000 under the ACL or $1,700,000 under the ASIC Act (in the case of corporations – per breach). Applicable Fines

Key Industry Insights At the start of 2016 Kessler conducted an anonymous survey for issuers in the Australian Debt Sale Market. The purpose of the survey was to attain an understanding of the concerns that credit issuers have when partaking in debt sale, while also gaining insight into the trends and future state of the industry. The five key points were: 2. 60% of issuers who sell through a forward flow do so at write off. 1. 66% of respondents either currently sell, or plan to sell debt through a forward flow program. 3. The top 3 factors considered when selecting a buyer panel for sale are: Protection of brand and reputation; Provision of necessary licenses and insurance; and Compliance standards of the buyer. 4. 85% of issuers currently do not approve secondary sales due to the brand and reputational risk associated with such sales. 5. 70% of issuers use, or intend to use, an intermediary for debt sales in the next 12 months.

< $0.10 > $0.20 > $0.20 < $0.10 > $0.10 < $0.12 Current Pricing Levels Banking & Finance Automotive < $0.10 > $0.20 Ad- Hoc Inventory Sale Forward Flow Forward Flow > $0.20 Accounts typically sold post referral (1 or 2 cycles) Accounts typically sold through forward flow at write-off Banking and Finance debt is typically sold at write off Utility Telecommunications < $0.10 > $0.10 Ad- Hoc Inventory Sale Forward Flow < $0.12 > $0.12 Ad- Hoc Inventory Sale Forward Flow Accounts typically sold through inventory sale post referral (1 or two cycles) Accounts typically sold through forward flow post first referral Accounts typically sold through inventory sale post referral (2 cycles) Accounts typically sold through forward flow post referral (2 cycles) The Australian debt sale market has experienced pricing growth (particularly in the utility, telco and auto industries) in recent years as accounts are sold fresher and competition between buyers increases. The market is now approaching a state of maturity.

Summary of the Australian Debt Purchase Landscape & Outlook for 2016 Overall there has been a growth in the industry with record pricing achieved across all industries, increased volumes and increased participants Misalignment between issuers and buyers expectations for around pricing for 2017. There will be a widening of the market whereby broader industries will begin to participate in debt sale. Traditionally issuers selected buyers based on price, however there is a movement in the market towards buyers being selected on their customer handling and the concept of customer experience. Proprietary and Confidential Page 13

Focus: Customer experience and sustainable outcomes Broader International Market Approach Focus: Customer experience and sustainable outcomes Approach to sale: Diligent Account Selection External Data Enhancement View of Customer “Life Cycle” Buyer Panel Compliance Post Sale Reporting Requirements The international debt sale market has progressed substantially in recent years with market players adopting sophisticated debt sale strategies and moving towards industry global best practice.