an introduction to strategos capital...

AN INTRODUCTION TO STRATEGOS CAPITAL MANAGEMENT

• Philadelphia based asset manager specializing in structured credit

• Established in 2004 and independently owned since 2011

• Seasoned team of 12 led by CEO & CIO Alex Cigolle who has over 18 years of industry experience

• Deep Value Strategy launched in April 2008

• $403mm AUM as of July 2016

• 14.02% Annualized Composite return since incep on (As of July 2016)*

FIRM OVERVIEWStrategos Capital Management is an SEC registered investment advisor with expertise

in structured credit, focusing on fi xed income and real estate related securities. Th e team

believes that its extensive history in structuring and managing portfolios of complex

credit instruments, paired with its nimble size, provides a competitive edge against larger

market participants. Of the experienced team of 12, the senior investment professionals

have worked together for over 9 years. Alex Cigolle and certain senior personnel maintain

signifi cant personal investments in the Strategos Deep Value Fund.

CURRENT PRODUCT OFFERINGSSTRATEGOS DEEP VALUE FUND

Employs the Deep Value Strategy, targeting investments primarily in Non-Agency

U.S. RMBS, CMBS, CDOs, ABS, Mortgage REITS/Closed End Funds, CLOs and

TruPS CDOs.

• Irish ICAV master fund with US, Irish and Cayman feeder funds

• Open end fund; monthly subscriptions ($1mm min.)

• Quarterly liquidity w/ 60 days written notice

• 1.5% management fee and 20% incentive fee subject to high watermark

STRATEGOS ECS FUND^

Targeting special opportunities concentrated in Legacy Non-Agency RMBS and related products. Generally focused on mid to lower portions of capital structure.

• Closed end fund; Expected closing Q4-16

• 3 year maturity with two 1 year extensions at option of the manager

• Draw on capital commitments over 6-12 months

• 1.5% management fee and 20% carried interest after 10% IRR hurdle, full catch-up

INDUSTRY RECOGNITION**

2015 - BarclayHedge Top 10 - Fixed Income: Mortgage Backed Strategies

2013 - Barron’s - Top 100 Hedge Funds

2012 - BarclayHedge Top 10 - Fixed Income: Mortgage Backed Strategies

^Any reference to the Strategos ECS Fund and any of the associated terms reflect the manager’s expectations for the launch of a new private fund yet to be consummated. Actual terms may vary.

PORTFOLIO MANAGERS

Alex Cigolle, CFA - CEO & CIO. Founded Strategos in Sep. 2004. 18 years of industry experience. BS in Economics, Massachuse s Ins tute of Technology.

David Gregory - Deputy CIO. Joined in Jun. 2006. 10 years of industry experience. BS in Business Management, Bucknell University.

GENERAL INQUIRYJohn Fogarty - VP, Strategic Investor Rela [email protected] Tel: (215) 701-9695

Grisha Maziya - VP, Investor Rela [email protected] Tel: (215) 701-9610

Strategos Capital Management, LLC2929 Arch Street, 17th Floor Philadelphia, PA 19104, USA

www.strategoscm.com • [email protected]

* See monthly performance, disclaimers and explana on of composite beginning on next page ** Any industry recogni on set forth herein was determined based upon criteria established by third-party rankings or awards providers including, without limita on, net returns. Neither Strategos Capital Management, LLC nor any of its affi liates has independently verifi ed or audited the completeness or accuracy of such rankings or awards. Past performance is not indica ve of future results.

STRATEGOS DEEP VALUE STRATEGY COMPOSITE PERFORMANCE UPDATE JULY 2016

All data as of July 31, 2016 unless otherwise noted. Latest monthly performance preliminary and subject to change un l fi nalized by administrator.www.strategoscm.com • [email protected]

MARKET COMMENTARYRisk assets generally posted posi ve returns in July. We believe that "Brexit" related concerns were trivialized by benign US economic data and predominantly strong earnings reports released during the month. As vola lity dissipated (the VIX declined from 15.63 to 11.87 in July), the S&P 500 touched a historic high while the US 10 Year Treasury yield touched a historic low (which we believe defi es conven onal wisdom). Structured credit also broadly generated posi ve returns in July as mezzanine bonds generally outperformed bonds higher up in the capital structure. Similar to HY corporate credit, CMBS and SFR (Single Family Rental) BBB- bonds returned roughly 2%. Despite signifi cant weakness in oil prices (WTI Crude prices dropped from 49.01 to 41.6 in July), mezzanine CLO bonds were generally the best performing area within structured credit with returns commonly in the 5-15% range. ABS CDOs and TRUP CDOs were typically up for the month, but only slightly as the more esoteric areas of the market appeared to underperform the more "on the run" sectors. In RMBS, mezzanine Agency CRT (Credit Risk Transfer) bonds were rou nely up 3-4% while legacy RMBS bonds were mostly higher by 1-2%. In legacy RMBS, senior fi xed-rate bonds were generally the worst performers as the interest rate rally appeared to unravel late in the month. We believe that seasoned, mezzanine, non-Agency RMBS was be er bid with market par cipants slightly more willing to take on spread dura on in the context of the broader risk asset rally. Subprime bonds that we regard as having suffi cient credit support to weather realis c loss scenarios typically outperformed deeper mezzanine bonds. Overall, the sub-$50 dollar RMBS market has remained choppy which we a ribute to (among other things) weak hedge fund infl ows throughout the year. Fundamentally, we believe that certain key US housing metrics (including Housing Starts, Building Permits, Exis ng and New Home Sales) refl ected a healthy housing market in July. In addi on, non-performing loan (NPL) balances generally decreased across RMBS. We believe that if these dynamics persist, they will support our thesis in the coming years. Source: BAML and Strategos Analysis.

DEEP VALUE STRATEGY HIGHLIGHTS: • Inception Date: April 2008

• AUM: $403mm

• Target seasoned non-Agency RMBS with strong underlying loans and structure

• Bottom-up process driven by rigorous loan and deal level analysis

• Inefficiencies exist in complex and fragmented, yet active secondary market

• Take advantage of discounts for odd lots and smaller matching trades

STRATEGOS DEEP VALUE STRATEGY COMPOSITE RETURN NET ¹ TABLE

JAN FEB MAR Q1 APR MAY JUN Q2 JUL AUG SEP Q3 OCT NOV DEC Q4 YTD

2016 -0.58% -1.02 0.06% -1.54% 0.17% 0.09% 0.45% 0.70% 1.16% 0.31%

2015 1.10% 0.52% 0.71% 2.34% 0.71% 0.57% 0.34% 1.63% 0.38% 0.36% 0.33% 1.07% 0.36% 0.16% -0.49% 0.03% 5.16%

2014 0.96% 0.67% 1.02% 2.67% 0.76% 1.32% 0.74% 2.84% 0.64% 0.42% 0.68% 1.75% 0.47% 0.79% 0.56% 1.83% 9.40%

2013 3.17% 1.05% 1.23% 5.53% 2.54% 1.27% -2.06% 1.70% 0.86% 0.99% 0.26% 2.12% 1.30% 0.93% 0.58% 2.83% 12.71%

2012 1.30% 1.59% 2.77% 5.77% 1.21% 0.95% 1.17% 3.36% 2.51% 2.40% 6.53% 11.82% 1.89% 1.79% 1.78% 5.57% 29.05%

2011 3.27% 0.95% 0.24% 4.50% 0.52% 0.25% -0.83% -0.07% 0.29% -1.28% -1.52% -2.49% -0.38% 0.55% 0.32% 0.49% 2.32%

2010 2.89% 1.26% 1.52% 5.78% 2.72% -0.81% 2.62% 4.55% 4.40% 5.48% 3.38% 13.84% 2.56% 0.94% 1.34% 4.91% 32.08%

2009 1.71% -0.38% -1.19% 0.13% 3.71% 9.80% 2.63% 16.86% 6.51% 2.80% 3.75% 13.60% 3.91% 0.70% 2.34% 7.09% 42.35%

2008 NA NA NA NA NA 1.40% 0.52% 1.93% 0.55% 2.05% 2.61% 5.29% -2.24% -12.43% -0.49% -14.81% -8.57%

PERFORMANCE STATISTICS NET 1

Strategos Deep Value Strategy

Composite1

Barclays US Corp

HY Index2

Barclays US MBS Index2

S&P 5002

Since Incep on (Annualized) 14.02% 8.12% 4.25% 7.94%

Standard Devia on (Annualized) 7.81% 11.50% 2.53% 16.16%

Sharpe Ra o 1.68 0.70 1.49 0.53

Sor no Ra o 1.21 0.72 2.51 0.68

Correlations - 0.534 -0.279 0.346

Posi ve Months 85.86% 70.71% 73.74% 64.65%

Worst Month -12.43% -15.91% -1.53% -16.79%

Months to Recovery 7 7 10 14

¹ Any reference to the Strategos Deep Value Strategy Composite (the "Composite") represents time and asset weighted returns of all funds (net of fees and expenses) and separate accounts (net of Strategos' fees) managed (currently or in the past) by Strategos Capital Management, LLC ("Strategos") that pursue or have pursued the Deep Value Strategy. Total returns include changes in market value and, un l the par cular fund or separate account enters the wind down phase, reinvestment of income and other distribu ons, if any, from por olio posi ons. Past performance is not indicative of future results. ² Please see the “Benchmark Disclaimer” located on the last page of these materials. For purposes of this comparison, incep on date for benchmarks is April 30, 2008. Barclays US Corp HY Index and Barclays US MBS Index sourced from Barclays Capital. Note: USD 1MO Libor used as risk free rate in calcula on of Sharpe and Sor no Ra os. 1

WHO WE ARE: Strategos Capital Management, LLC ("Strategos") is an independent, SEC registered investment advisor with expertise in U.S. residential mortgage backed securities (RMBS) and other structured securities. We seek investments with strong long term fundamental value through detailed loan and deal level analysis of seasoned secondary offerings. Strategos manages approximately $403 million (as of July 31, 2016) in private funds and separate accounts.

STRATEGOS DEEP VALUE STRATEGY COMPOSITE RETURN NET ¹ VS. INDICES2

406080

100120140160180200220240260280300

Apr-16Oct-15Apr-15Oct-14Apr-14Oct-13Apr-13Oct-12Apr-12Oct-11Apr-11Oct-10Apr-10Oct-09Apr-09Oct-08Apr-08

Deep Value Strategy CompositeBarclays US MBS IndexBarclays US Corp HY IndexS&P 500



STRATEGOS DEEP VALUE STRATEGY COMPOSITE ACCOUNT SUMMARY NET ¹,²

Fund 17 Fund 1-A/MAP 38 Fund 29 SMAs³ SDVF

(Class A Cayman Feeder)⁴ Composite⁵Barclays

US Corp HY Index2

Barclays US MBS Index2

S&P 5002,6

2008 -8.57% n/a n/a n/a n/a -8.57% -27.00% 5.66% -33.66%

2009 39.61% 52.68% -0.92% n/a n/a 42.35% 58.21% 5.89% 26.46%

2010 34.12% 29.27% 21.09% 20.73% n/a 32.08% 15.12% 5.37% 15.06%

2011 n/a 2.12% 1.47% 4.79% -0.08% 2.32% 4.98% 6.23% 2.11%

2012 n/a 6.78%10 33.60%11 30.88% 20.22% 29.05% 15.81% 2.59% 16.00%

2013 n/a n/a n/a 13.68% 12.39% 12.71% 7.44% -1.41% 32.39%

2014 n/a n/a n/a 9.43% 8.47% 9.40% 2.45% 6.08% 13.69%

2015 n/a n/a n/a 5.46% 2.93% 5.16% -4.47% 1.51% 1.38%

2016 YTD n/a n/a n/a 0.32% 0.84% 0.31% 12.01% 3.32% 7.66%

3 Month n/a n/a n/a 1.49% 3.67% 1.71% 4.29% 1.15% 5.82%

1 Year n/a n/a n/a 1.27% 0.05% 1.03% 4.98% 3.90% 5.61%

3 Year (Annualized) n/a n/a n/a 6.43% 5.36% 6.31% 4.46% 3.86% 11.16%

5 Year (Annualized) n/a n/a n/a 10.94% 8.74% 10.40% 6.16% 2.86% 13.38%

Since Incep on (Annualized) 24.92% 27.39% 17.60% 12.56% 8.74% 14.02% 8.12% 4.25% 7.94%

Standard Devia on (Annualized) 13.53% 8.99% 8.31% 4.86% 3.39% 7.81% 11.50% 2.53% 16.16%

¹ Net of: for funds, fees and expenses; and for separately managed accounts ("SMAs"), Strategos' fees. Total returns include changes in market value and, un l the par cular fund or SMA enters the wind down phase, reinvestment of income and other distribu ons, if any, from por olio posi ons. Past performance is not indicative of future results. Note: USD 1MO Libor used as risk free rate in calcula on of Sharpe and Sor no Ra os.

² Please see the "Benchmark Disclaimer" located on the last page of these materials. Barclays US Corp HY Index and Barclays US MBS Index sourced from Barclays Capital. For purposes of this comparison, incep on date for benchmarks is April 30, 2008. ³ SMAs show combined net returns for eight seperately managed accounts, as further described in the "Explana on of Composite", of which fi ve have been wound down. ⁴ Represents net returns of the Class A Shares of the Strategos Deep Value Fund Ltd. (the "Cayman Feeder Fund").⁵ See Explana on of Composite located on the last page of these materials for important informa on about construc on of the Composite.6 Returns of the S&P 500 reflect month-over-month changes in index valuation as well as dividend reinvestment.7 Realized cash-on-cash return to Fund 1 investors. 8 Realized cash-on-cash return to Fund 1-A/MAP 3 investors. 9 Realized cash-on-cash return to Fund 2 Investors.10 The 2012 return for Fund 1-A/MAP 3 represents only the 1st quarter of 2012 since such fund was fully liquidated by March 31, 2012.11 The return for Fund 2 in September 2012 and the return for SMA-1 (as defined in the Explanation of Composite) in January 2013 were substantially higher than the other components of the Composite for the same time period primarily because in the final stages of each account's scheduled liquidation, the sale prices for certain of the account's remaining assets (particularly higher beta

assets which were relatively heavily represented late in the liquidation process) secured through a competitive bidding process, were substantially higher than the previous marks. The 2012 return for Fund 2 represents only 11 months of the year since all investments were divested by November 2012.

2



3

EXPLANATION OF COMPOSITE

The Composite represents the me and asset weighted returns of: (i) the Strategos Deep Value Mortgage Master Fund, Ltd. (“Fund 1”) launched May 2008, (ii) the Strategos Deep Value Mortgage (Off shore) Fund 1-A, L.P. (“Fund 1-A”) launched February 2009, (iii) the Strategos Deep Value Mortgage Master Fund II, Ltd. (“Fund 2”) launched December 2009, (iv) a private fund that was, un l March 2012, on an Ireland based managed account pla orm (which was the result of a transfer in kind of all assets from Fund 1-A)("MAP 3"), (v) eight separately managed accounts launched from January 2010 through May 2015 (sequen ally by me, "SMA-1", "SMA-2", "SMA-3", "SMA-4", "SMA-5","SMA-6", "SMA-7" and "SMA-8" and collec vely, the "SMAs"), and (vi) the Strategos Deep Value Master Fund, ICAV (“SDVF”) launched August 2011a. Strategos Capital Management, LLC (“Strategos”) structured Fund 1, Fund 1-A, and Fund 2, in a closed-end drawdown style which it believed was appropriate for the highly dislocated market at the me they were launched. Given improvements in liquidity and price transparency in the relevant sectors, Strategos launched SDVF as a tradi onal evergreen hedge fund. These por olios have generally been managed under substan ally similar investment guidelines and restric ons, return objec ve, risk profi le, target universe and purchase and sale discipline (the “Deep Value Strategy”) and all trades are subject to the Strategos alloca on policy.

Leverage was contractually prohibited in Fund 1, Fund 2 and Fund 1-A. Hedging was contractually prohibited in Fund 1 and Fund 2. However, leverage (subject to a 2X limit) and hedging are contractually permi ed in SDVF. SDVF fi rst employed leverage in April 2012 and con nues to employ leverage as of the date hereof. No leverage has ever been employed for any other private fund or SMA, except for SMA-4 and for SMA-5.

The individual “cash-on-cash” returns for Fund 1, Fund 2, and Fund 1A/MAP 3 are reported herein net of fees and expenses which generally includes a 1.5% annual management fee and an incen ve fee/alloca on of 20% of all net realized and unrealized profi ts over (i) for Fund 1 and Fund 1A/MAP 3, a 10% hurdle rate, and (ii) for Fund 2, an 8% hurdle rate. Certain investors in these private funds paid lesser or no management fees and/or incen ve fees/alloca ons. These returns are factored into the Composite on a me and asset weighted basis. The individual returns of the Class A Shares of the Strategos Deep Value Fund, Ltd. (the “Cayman Feeder Fund”) which invests all of its assets in SDVF are reported herein net of fees and expenses which includes an annual 1.5% management fee (but prior to January 1, 2015, a 2% annual management fee) and an incen ve alloca on of 20% of all net realized and unrealized profi ts subject to a high water mark. However, the SDVF returns factored into the Composite are the me and asset weighted returns of all share classes including the Class A Shares and other share classes that paid or pay lesser or no management fees and/or incen ve alloca ons. No investor in these private funds has necessarily achieved the fund returns factored into the Composite (or the aggregate Composite returns).

The combined returns for the SMAs are reported net of annual management fees ranging from 0.75% to 1.50% and incen ve fees of up to 20% of all net realized and unrealized profi ts subject to a high water mark and, for certain SMAs, subject to a specifi c hurdle rate. These returns are factored into the Composite on a me and asset weighted basis. No separately managed account client has necessarily achieved the combined returns for the SMAs factored into the Composite (or the aggregate Composite returns).

SDVF, SMA-6, SMA-7 and SMA-8 are currently being invested and/or reinvested on a discre onary basis under the Deep Value Strategy. All other private funds and SMAs have been wound down and are no longer ac ve cons tuents of the Composite.

Strategos was a wholly owned subsidiary of Ins tu onal Financial Markets Inc. (“IFMI”)(f.k.a. Cohen & Co.) un l March 28, 2011 when it became an independent company. The same por olio manager has ul mately been responsible for the management of the funds and SMAs represented in the Composite con nuously since incep on. aPlease refer to the relevant off ering documents for SDVF (which are available upon request) for addi onal details regarding the "Restructuring” as defi ned therein.

DISCLAIMER

This report was prepared by Strategos Capital Management, LLC (“Strategos”) for informa onal purposes only. This informa on is proprietary to Strategos and, accordingly, this informa on is to be treated as strictly confi den al and not disclosed directly or indirectly to any party other than the recipient and its advisers. You may not reproduce or distribute the informa on contained herein in whole or in part nor share such informa on with any third par es without the prior wri en consent of Strategos.

Under no circumstances is this informa on to be used or considered as an off er to sell, or a solicita on of any off er to buy, any security. Any such off er or solicita on may be made only by the delivery to a prospec ve investor of a defi ni ve confi den al off ering memorandum and/or prospectus. The informa on contained herein is in summary form for convenience of presenta on. It is not complete.

The informa on contained herein was prepared by Strategos from a number of sources, including, but not limited to, third party reports and publicly available informa on which Strategos believes, but does not guarantee, to be accurate. None of Strategos or its affi liates has independently verifi ed or audited such informa on and Strategos is not making any representa on or warranty regarding the informa on set forth herein, nor do they assume any responsibility for the accuracy or completeness of the informa on or the reasonableness of the assump ons on which any por on thereof is based. Strategos expressly disclaims liability for errors or omissions in such informa on and no warranty of any kind, expressed or implied, including but not limited to, warran es of merchantability, noninfringement, or fi tness for any par cular purpose, is given in conjunc on with such informa on and materials. This report contains opinions and subjec ve assessments by Strategos personnel. Such opinions and assessments are not forecasts or guarantees, and should not be relied upon in making any investment decisions.

In addi on, the informa on contained herein is current as of the date listed on the cover page of these materials (unless otherwise noted) and is subject to change. Accordingly, the recipient should not assume that such informa on is accurate as of the date of delivery or any future date. Strategos does not intend to update the informa on contained in the materials a ached hereto.

Certain informa on contained herein cons tutes "forward-looking statements" which can be iden fi ed by the use of forward-looking terminology such as "may," "will," "should," "expect," "an cipate," "target," "project," "es mate," "intend," "con nue" or "believe," or the nega ves thereof or other varia ons thereon or comparable terminology. Due to various risks and uncertain es, actual events or results or the actual performance of any individual security or client account may diff er materially from those refl ected or contemplated in such forward-looking statements.

Past performance is not indica ve of future results. Nothing contained herein shall cons tute any representa on or warranty as to future performance. This informa on is provided to you on the understanding that you, as a sophis cated investor, will understand and accept its inherent limita ons and will not rely on the informa on in making any investment decision.

No representa on is made that any Strategos-managed investment vehicle, presented strategy, or any investment will or is likely to achieve its objec ves, that any investor will or is likely to achieve results comparable to the actual or derived performance shown, will make any profi t at all or will be able to avoid incurring substan al losses.

Important disclosures are included throughout this report and should be carefully reviewed. This report is subject to and qualifi ed in its en rety by all of the informa on that will be set forth in a confi den al off ering memorandum and/or prospectus, including, without limita on, all cau onary statements. This report does not cons tute a part of any confi den al off ering memorandum and/or prospectus and does not create any obliga on on Strategos to consider any off er. Strategos reserves the right, without prior no ce and without giving reasons, to vary or terminate the sale process, to reject any or all proposals and/or to nego ate with any prospec ve purchaser on any terms with respect to any transac on.

Strategos makes no representa on that the performance informa on contained in this report is representa ve of how any Strategos-managed investment vehicle will perform. Analyses contained herein may be based on assump ons that if altered can change the analyses or opinions expressed. This report is not intended to provide and should not be relied upon for tax, legal, accoun ng or investment advice. No advisory or fi duciary rela onship is created by the receipt of this report.

Benchmark Disclaimer: The S&P 500 Index is designed as a broad indicator of the performance of the US equi es market. The index consists of 500 stocks selected on the basis of a variety of criteria, including market capitaliza on, liquidity and industry group representa on. Note, as of the January 2015 report, all historical S&P 500 returns are reported as total return. Prior to January 2015, all historical S&P 500 returns reported were only month-over-month changes in index value, excluding dividend reinvestment. The Barclays U.S. Mortgage-Backed Securi es (MBS) Index covers agency mortgage-backed pass-through securi es (both fi xed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The Barclays U.S. Corporate High-Yield Index measures the market of $US denominated, non-investment grade, fi xed-rate, taxable corporate bonds. Securi es are classifi ed as high yield if the middle ra ng of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. These benchmarks are not being used to show the rela ve under performance or out performance of the Composite components results. Rather, the performance of the Indexes is presented to show compara ve rates of return of widely followed asset classes during the same me period as the Composite components. The comparison of the Composite components performance to the performance of certain market indicators or indexes may not be meaningful since the correla on of returns, amount of diversifi ca on and risks associated with the Composite components may be signifi cantly diff erent than those of any other market indicator or Index.

Disclosure For Swiss Recipients: As required by the Swiss Collec ve Investment Schemes Act (or "CISA"), the following are hereby disclosed: Swiss Representa ve: ARM Swiss Representa ves SA, Route de Cité-Ouest 2, 1196 Gland, Switzerland; Swiss Paying Agent: Banque Cantonale de Genève (BCGE), 17, quai de l’Ile, 1204 Geneva, Switzerland; Loca on where the relevant documenta on can be obtained: The Memorandum, the Memorandum of Associa on and Ar cles of Associa on of the Cayman Feeder Fund, each as amended and/or restated from me to me, the Cayman Feeder Fund’s annual audited fi nancial report and the monthly performance reports published by Strategos related to the Cayman Feeder Fund can be obtained free of charge from the representa ve in Switzerland; Place of performance and jurisdic on: The place of performance and jurisdic on is the registered offi ce of the representa ve in Switzerland with regards to the shares of the Cayman Feeder Fund distributed in and from Switzerland.

an introduction to strategos capital...

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