prosper.com: a new path for smart money

A NEW

PATH FOR

SMART MONEY.

Overview and Update

PROPRIETARY & CONFIDENTIAL . PROSPER FUNDING LLC . © 2013

2

First US peer-to-peer lending platform;

launched in 2006

Pioneered the development of this asset class

Prosper Marketplace, Inc. is backed by top

investors including Sequoia Capital, Accel

Partners and Benchmark Capital

Prosper Marketplace, Inc. management team

brings experience from Wells Fargo, Merlin

Securities, Bear Stearns, Barclaycard US, Bivio

Networks and CNET Networks

Prosper Marketplace, Inc. has 85 employees

with a broad range of experience and

complimentary skill sets

Figures shown above are dollar weighted.

What is peer-to-peer lending?

PROPRIETARY & CONFIDENTIAL . PROSPER FUNDING LLC . © 2013 3

High credit costs

Lack of available credit

Hidden fees

High cost base

(branches, ATM, etc.)

Competitive rates

Access to credit

Transparent terms

Low cost base

Traditional Bank Financing

Peer-to-Peer Lending

CURRENT MARKET SIZE*

$2.8 TRILLION

ADDRESSABLE

MARKET**

$850 BILLION Peer-to-peer lending Currently ~$3.3 billion out of $850 billion

The Investment Opportunity: Disrupting consumer credit


Consumer credit has been a large, consistently profitable asset class

Equivalent to sixth-largest GDP in world

* Consists of consumer credit card debt and installment loans

and does not include loans secured by real estate.

** Consists of revolving consumer debt outstanding

Source: Federal Reserve

Well-established market. Consumer credit data starts in Q4 1945

Current market size excludes home related debt

Small loan size. Credit card average balance is $7,300

Primary demographic user of consumer credit is 30-44 years old

Solving the central problems


Investors face a difficult environment

Likelihood of suppressed future economic growth

Portends low returns and high volatility for most

asset classes

Fixed income offers little yield and a lot of

duration risk

Cash has a negative return

Borrowers face a difficult environment

Uncooperative lending institutions

Limited access to capital

Desire to improve balance sheet and pay down debt

is restricted by these two factors

Unsecured consumer interest rates remain high


Durable interest rate levels throughout economic cycles

Small loan size and lack of collateral cause above market interest rates

Source: Federal Reserve, Prosper

The history of consumer credit


Positive lending spread in 26 of 26 years

throughout volatile economic and interest

rate cycles

Banks keep majority of consumer credit

loans on balance sheets due to steady

profitability

Little previous access for investors. Only

low yield ABS and private transactions

surrounding distressed assets

Avg. credit card interest rate - credit card charge-off rate =

est. lending spread on consumer credit (1985 to 2013)

* Federal Reserve data

How peer-to-peer lending works


Loan Request

Principal & Interest Principal & Interest

Loan Criteria

Value Exchange between Borrowers and Lenders

Loan Funding Loan Originates

Attracting creditworthy borrowers


AVERAGE CREDIT SCORE

701

AVERAGE INCOME

$85,761

As reported by borrowers

The Prosper marketplace

Highly creditworthy borrowers

Source: Prosper, dollar weighted originations, 12 months ending

September 30, 2013

• Lower fixed rates

• Fully amortizing loans

• No hidden or tricky fees

BORROWER CREDIT PROFILE LOAN PURPOSE

BORROWERS GET

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Borrower requests a loan


Lenders choose loans to fund


Transparent reporting


Account Summary

Risk management process

Risk process is rigorous, efficient and thorough

Targeting and credit policy determine who is approved and at what expected loss rate

Underwriting process verifies borrower information

Tracking and analysis of performance establishes feedback loop to improve quality of models

Continuously looking for arbitrage pockets and eliminating them

Inbound Inquiry Data Collection Credit Scoring

Servicing Verification

Direct-to-site

Affiliates/partners

Direct mail

Borrower data

Bureau pull

Proprietary scorecard

Additional adjustments

Rating assigned

Verify identity

Verify address

Fraud screen

Verify bank account

Verify employment

on majority of loans

Lender statements

Payment processing

Customer relations

Collections

1-15 dpd: Internal

16+ dpd: External

120 day charge-off policy

Post c/o: External

Originate Loans

Identify

Segment

Variances and

Drivers

Measure

Performance

vs.

Expectations

Adjust Policy,

Product, Pricing


Expected Return by Prosper Rating


Expected Returns by Prosper Rating for seasoned loans (“Seasoned Returns”)3

Source: Prosper, as of September 30, 2013

Consistent lender returns


Source: Prosper, September 30, 2013

4

Hypothetical portfolio example*


* This hypothetical example is not intended to be indicative of any specific investment. The hypothetical example is included for illustrative purposes only and is not

intended to represent the past or future performance of any specific investment.

Allocation

Lender

Yield5

Estimated

Loss2

Estimated

Return2

3 year - 65%

AA 5% 6.72% 1.59% 5.00%

A 5% 10.48% 3.26% 6.83%

B 15% 14.47% 5.23% 8.47%

C 15% 18.49% 7.58% 9.65%

D 10% 22.82% 10.50% 10.45%

E 10% 26.70% 13.14% 11.19%

HR 5% 30.33% 15.74% 11.85%

5 Year - 35%

AA 5% 7.32% 1.79% 5.37%

A 5% 10.81% 3.32% 7.09%

B 10% 15.15% 5.11% 9.25%

C 5% 19.74% 7.38% 11.03%

D 5% 24.27% 10.36% 11.93%

E 5% 28.46% 13.50% 12.42%

TOTALS 18.32% 7.64% 9.38% Source: Prosper, September 30, 2013

Lower overall portfolio risk, greater current income


Prosper’s monthly returns show low correlation to other asset classes*

Low standard deviation of returns helps reduce overall portfolio volatility

High current income increases overall portfolio income

Source: Prosper Source: Bloomberg, Prosper / August 2009 through latest data

points available as of September 30, 2013

* Any comparison of Prosper Notes with other fixed-income products as potential investments should include consideration of numerous additional factors beyond

duration and yield, including but not limited to government-backing, balance sheet strength, credit insurance and overcollateralization.

Balancing volatility and returns


Higher rated loans greatly enhance overall portfolio stability

The right mix across rating grades will vary depending on an investor’s risk-tolerance

* Prosper return expectations calculated using 100 loan portfolios by credit grade overlaying simulation of economic downturns to projected estimated returns.

** Risk free asset assumed to have a constant 1.20% return (5 year Treasury yield as of May 30, 2013).

Working closely with regulators


Investing Activities Regulated by the SEC

Notes are issued pursuant to a registered public offering governed by a Form S-1; Notes have been

registered since July 2009

Prosper Marketplace, Inc. and Prosper Funding LLC are public filing companies (file 10-Ks, 10-Qs, etc.).

Prosper Marketplace, Inc. has 5 years of audited financials and Prosper Funding LLC, which was formed in

2012, has 1 year of audited financials

State-by-state Blue Sky registration also required: Notes are registered in 30 states, plus DC

Borrower Activities are Subject to Consumer Lending Laws

Prosper is subject to Federal and state consumer lending laws and other laws applicable to financial

institutions (privacy, anti-money laundering, etc.)

Partnership with WebBank exempts Prosper Loans from state-by-state interest rate and fee caps

Prosper has a Deep Regulatory Expertise

Developed through years of careful analysis and extensive interaction with Federal and State Regulators

Prosper Marketplace, Inc. has an experienced in-house legal team with expertise in securities and

consumer finance, and has developed a sophisticated compliance management system

Advised over a number of years by premier outside counsel with strong regulatory relationships (DC offices

of Covington & Burling and Skadden Arps)

Prosper Marketplace, Inc. Contact Information


Ron Suber

Head of Global

Institutional Sales

T: (415) 593-5478 [email protected]

John Higgins

Director,

Institutional Relations

M: (203) 809-4420 [email protected]

Eric Thaller

Head of Institutional

Relationships

T: (415) 593-5588 [email protected]

Institutional Relations

mailto:[email protected]



Disclosures IMPORTANT DISCLOSURES Borrower Payment Dependent Notes (the “Notes”) are offered pursuant to the Prospectus, which accompanies this presentation and which is also available at www.prosper.com/prospectus.

Persons considering investing in Notes should review the Prospectus in its entirety.

This presentation includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from

those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the

current plans and expectations of our management and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will

result or be achieved or accomplished. You should carefully read the factors described in the “Risk Factors” section of the Prospectus for a description of certain risks that could, among other

things, cause our actual results to differ from these forward-looking statements.

All forward-looking statements speak only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements above and in the Prospectus. We

undertake no obligation to update or revise forward-looking statements that may be made in this presentation to reflect events or circumstances that arise after the date made or to reflect the

occurrence of unanticipated events.

Neither Prosper Funding LLC nor Prosper Marketplace, Inc. are registered as an investment adviser with any federal or state regulatory agency. The information contained in

this presentation is for informational purposes, and should not be construed as individually tailored investment advice or as a recommendation with respect to any security or

investment approach. This presentation has been prepared without regard to the circumstances and objectives of its participants and should not be relied upon as authoritative

or taken in substitution for the exercise of judgment by any individual. Each individual should consider the appropriateness of any investment decision having regard to his or

her own circumstances, the full range of information available and appropriate professional advice. Prosper Funding LLC and Prosper Marketplace, Inc. recommend that each

individual seek independent investment and financial advice concerning any services or investments discussed in this presentation.

1 Borrower credit scores are Experian FICO08, except that borrower credit scores for all listings begun prior to September 6, 2013 are Experian Scorex Plus. 2 Estimated return is the difference between the estimated effective yield and the estimated loss rate. Estimated effective yield is equal to the current yield (borrower interest rate minus the

1% servicing fee) (i) minus estimated uncollected interest on charge-offs, (ii) plus estimated collected late fees. The estimated loss rate is the estimated principal loss on chargedoff loans. All

estimates are based on the historical performance of Prosper loans for borrowers with similar characteristics. The calculations of estimated return, estimated effective yield, and estimated

loss rate require significant assumptions about the repayment of loans, and lenders should make their own judgments with respect to the accuracy of these assumptions. Actual performance

may differ from estimated performance. 3 Seasoned Return calculations represent historical performance data for the Borrower Payment Dependent Notes ("Notes") issued and sold by Prosper Funding and Prosper Marketplace,

Inc. since July 15, 2009. To be included in the calculations, Notes must be associated with a borrower loan originated more than 10 months ago; this calculation uses loans originated

through November 30, 2012. Our research shows that Note returns historically have shown increased stability after they've reached ten months of age. For that reason, we provide

"Seasoned Returns", defined as the Return for Notes aged 10 months or more.

To calculate the Return, all payments received on borrower loans, net of principal repayment, credit losses, and servicing costs for such loans, are aggregated and then divided by the

average daily amount of aggregate outstanding principal. To annualize this cumulative return, it is divided by the dollar-weighted average age of the loans in days and then multiplied by 365.

All calculations were made as of September 30, 2013. Seasoned Return is not necessarily indicative of the future performance on any Notes. 4 To calculate the lender return by month of origin, all payments received on borrower loans originated during that month (i) minus principal payments (ii) minus servicing fees (iii) minus

charge-off’s are aggregated and then divided by the average outstanding principal balance. To annualize this return, it is divided by the dollar-weighted average age of the loans in months

and then multiplied by 12. Seasoned vintages are categorized as those vintages that are at least 10 months old. 5 Lender yield equals borrower interest rate minus Prosper servicing fee.


http://www.prosper.com/prospectus/

http://www.prosper.com/prospectus

prosper.com: a new path for smart money

Economy & Finance