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Page 1: Institutional Presentation   Galloway Capital

CAPITAL

Page 2: Institutional Presentation   Galloway Capital

INVESTMENT CASE

Page 3: Institutional Presentation   Galloway Capital

Identify the best investment opportunities in the Emerging

and Frontier Markets, providing clients non-leveraged

equity-like returns with fixed income seniority within a

company’s capital structure

OPPORTUNITY

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Page 4: Institutional Presentation   Galloway Capital

Current Scenario

●High growth expectation for the Emerging Markets

●Tendency for the developed economies to maintain its low fixed income rates

●Constantly growing overseas interest in Emerging Markets assets

●Well-managed Emerging Market companies solidified their balance sheets and are gaining access to capital

MARKET PROFILE

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Page 5: Institutional Presentation   Galloway Capital

OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD

Emerging Markets and Advanced Economies GDP Growth

Source: Bloomberg / Jan 2012

0%

100%

200%

300%

400%

500%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

GDP Current USD Emerging Markets

GDP Current USD Developed Economies

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Page 6: Institutional Presentation   Galloway Capital

OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD

EM High Yield, US High Yield and US Equities accumulated return over the last 10 years

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Source: Bloomberg / May 2012

-50%

-25%

0%

25%

50%

75%

100%

125%

150%

dez-

01

dez-

02

dez-

03

dez-

04

dez-

05

dez-

06

dez-

07

dez-

08

dez-

09

dez-

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dez-

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Accumulated returns over the last 10 years

S&P 500 Index

CS EM Corp Bonds Index

iBoxx USD Liquid HY Index

16% 11% 8%

22%

88%

131%

0%

20%

40%

60%

80%

100%

120%

140%

SPX IBOXHY CEMBTOTR

Vol (Std. Dev.) Acum. Return

Page 7: Institutional Presentation   Galloway Capital

OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD

Ever since 2002, the major selloffs in Emerging Markets Debt (EMD) occurred after credit crises that emanated from the developed world, not the emerging world. The Lehman bankruptcy and global credit crisis created a huge buying opportunity in EMD in 2008/2009. If this pattern holds, the selloff induced by the European crisis could be creating another big buying opportunity.

Source: J.P. Morgan. As of December 31, 2011.

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Page 8: Institutional Presentation   Galloway Capital

OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD

Emerging Markets (EM) have accounted for a large and increasing share of global economic growth. Not only do EM generate most of the world’s economic growth, they contain most of the world’s population, hold most of its foreign exchange reserves and produce about half of its GDP. It is benefiting from powerful tailwinds that don’t figure to dissipate anytime soon. Also, the trend toward improving credit quality in EM is structural and secular in nature. The deleveraging process is extremely clear.

Sources: UBS and J.P. Morgan. All data annualized. Emerging market corporate debt is denominated in USD. As of December 31, 2011

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Page 9: Institutional Presentation   Galloway Capital

OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD

Emerging Markets High Yield carries less leverage, lower default rates and pays over 200bps more yield vis a vis US High Yield. Furthermore, if compared to B rated Bonds this number is significantly higher. All of this for the same expected recovery value on its unsecured debt should a company default.

Source: J.P. Morgan. As of December 31, 2011. Note: Emerging Markets Corporate Debt is denominated in USD.

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Page 10: Institutional Presentation   Galloway Capital

●Emerging Markets countries in general have higher expected growth rates with often lower leverage when compared to Developed Markets

●Selective Emerging Markets countries still show gaps between its current ratings and their macroeconomic reality providing opportunities to obtain higher returns when upgrades occur

INVESTING IN EMERGING MARKETS SOVEREIGN

OPPORTUNITY

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Page 11: Institutional Presentation   Galloway Capital

INVESTING IN EMERGING MARKET BONDS

OPPORTUNITY

● The Emerging Markets Debt market is dominated by Large Institutional Funds and Private Banks

● Large institutional funds also tend to focus on Emerging Markets High Grade credits due to issue size and liquidity

● Private Banks will mostly offer clients obvious Emerging Markets High Grade names which the bank supports and that the client feels comfortable with

Lack of reach from the larger players often forces the Emerging Markets High Yield asset class to provide investors higher yields, even beyond its implicit risks

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Page 12: Institutional Presentation   Galloway Capital

PRODUCTS

Page 13: Institutional Presentation   Galloway Capital

• Galloway Global Emerging Markets High Yield Fund

• Galloway Latin America High Yield Fund

• Galloway Brazil Biased Investment Grade Fund

• Fixed Income Long-only Funds

• Corporate and Sovereign Credit Bonds

• Galloway’s Multi-approach Due Diligence

• Well Diversified Portfolios

• Consistent Risk-Adjusted Returns

• No Leverage and no use of Derivatives

• Fully Invested

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INVESTMENT FUNDS GALLOWAY’S FIXED INCOME ALTERNATIVES

Page 14: Institutional Presentation   Galloway Capital

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INVESTMENT PROCESS GENERATION OF INVESTMENT IDEAS

● Experienced investment team focused on Emerging Markets: over 50 years of EM experience combined

● Proprietary Research: In depth analysis of opportunities through company visits, calls and meetings with companies’ top management

● Sell Side & Buy Side Research: Wide network of relationships with counterparties around the world (Investment Funds, Family Offices, Brokers, Banks, etc.) providing a deeper level of information and access to local expertise

Page 15: Institutional Presentation   Galloway Capital

INVESTMENT PROCESS

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● Committee’s based investment decisions:

• Monthly: Strategy and Risk Management Committees

• Weekly: Investment Committee

● Daily Meetings to discuss investment opportunities

● Dynamic process of monitoring the portfolio and opportunities through the constant reassessment of the positions

● Replacing good ideas with better ideas. We change a position when we find a bond with:

• The same risk and a higher yield

• The same yield and a lower risk

PORTFOLIO CONSTRUCTION

Page 16: Institutional Presentation   Galloway Capital

There is always a reason why a given company is paying an above average market return.

To assert why, and reach conviction to invest, we first have to understand:

It is paramount for companies and/or sovereign issues to be in countries or regions that have a

positive growth outlook or are in a turning point

Companies have to be aligned with local

governments

Thoughtful analysis to understand the sector’s importance to the

country (subsidies, government support, etc); and its relative value

to global peers

1. COUNTRY MACRO

ECONOMIC OUTLOOK

2. GEOPOLITICS 3. SECTOR

INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE

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Page 17: Institutional Presentation   Galloway Capital

In-depth analysis of the Company/Country’s and Bond structure. (leverage, debt profile,

cash flow, ownership structure, etc.; Bond seniority, guarantees,

covenants, etc.)

Company and/or country have to be checked through

our local network of contacts (sell and buy side)

Careful analysis of entry and exit points, new issuance outlook and relative value

4. CREDIT METRICS 5. LOCAL NETWORK 6.TECHNICAL ANALYSIS

INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE

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7. GOLDEN RULE: It is fundamental that the cost of a company/country not paying its obligations be “higher” than if it pays.

Page 18: Institutional Presentation   Galloway Capital

RISK MANAGEMENT

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Galloway Global EM

High Yield Fixed Income Fund

Galloway Latin America

High Yield Fixed Income Fund

Galloway Brazil Biased

Investment Grade Fixed Income Fund

Country Risk

● Limit of 20% for single countries

● Limit of 40% for Brazil, Russia, India or China

● Limit of 20% for single countries

● Latam Countries Only

● Minimum of 70% for Brazil

● Up to 30% on Other Countries

Corporate Risk

● Limit of 5% per individual corporate credit at cost

● Limit of 20% per individual Sovereign Bond at cost

● Limit of 10% per individual corporate credit at cost

● Limit of 20% per individual Sovereign Bond at cost

● Limit of 10% per individual corporate credit at cost

● Limit of 20% per individual Sovereign Bond at cost

Credit Risk ● High Yield

● Average Credit Rating: B

● High Yield

● Average Credit Rating: BB

● Investment Grade

● Average Credit Rating: BBB

Currency Risk

● Limit of 30% for any other currency than USD

● Non USD Bonds must settle via Euroclear / Cedel

● Limit of 30% for any other currency than USD

● Non USD Bonds must settle via Euroclear / Cedel

● Limit of 30% for any other currency than USD

● Non USD Bonds must settle via Euroclear / Cedel

Liquidity Risk ● Limit of 20% in less liquid bonds

(Issues size below USD 200 MM) ● Limit of 20% in less liquid bonds

(Issues size below USD 200 MM) ● Limit of 10% in less liquid bonds

(Issues size below USD 200 MM)

* All Bonds must be Euroclearable/ DTC/ Clearstream

Page 19: Institutional Presentation   Galloway Capital

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Galloway Global EM

High Yield Fixed Income Fund

Galloway Latin America

High Yield Fixed Income Fund

Galloway Brazil Biased

Investment Grade Fixed Income Fund

NAV Liquidity Monthly Monthly Monthly

Minimum Initial Investment USD 100,000 USD 100,000 USD 100,000

Additional Investment USD 25,000 USD 25,000 USD 25,000

Redemption Monthly with 15 days notice Monthly with 15 days notice Monthly with 15 days notice

Management Fee 1.5 % per year 1.0 % per year 0.5 % per year

Performance Fee 15% quarterly on a HWM basis 10% quarterly on a HWM basis 10% quarterly on a HWM basis

ISIN Code VGG3723N1024 VGG3723N1362 VGG3723N1446

Administrator SFT Fund Admin. Services SFT Fund Admin. Services SFT Fund Admin. Services

Custodian Pershing Pershing Pershing

Auditor Ernst & Young Ernst & Young Ernst & Young

MAIN CHARACTERISTICS

Page 20: Institutional Presentation   Galloway Capital

Easy access to Portfolio Management team and current portfolio ideas

Portfolio positions and trading history disclosure upon client’s request

TRANSPARENCY FULL DISCLOSURE

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Page 21: Institutional Presentation   Galloway Capital

THE MANAGER

Page 22: Institutional Presentation   Galloway Capital

THE MANAGER

Galloway Capital is a global Emerging Markets asset management company focused on active Fixed Income High Yield strategies. Galloway counts today with 19 professionals, managing over USD 400 Million across a broad range of EM Fixed Income strategies.

With a solid and extensive research approach and a performance-driven investment style, our team aims to identify the most interesting opportunities around the world to provide equity-like returns with fixed income risk

The investment committee members combine 50 years of careers dedicated to Credit including: Trading, Sales, Origination, Due Diligence and Execution.

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Page 23: Institutional Presentation   Galloway Capital

ASSET MANAGEMENT STRUCTURE

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INVESTMENT COMMITTEE

Nathan Shor Guillermo Bauder Ulisses de Oliveira

RESEARCH & PM

Nathan Shor Guillermo Bauder Ulisses de Oliveira

TRADING

João Paulo Vicente

RISK MANAGEMENT

João Ferrari

COMPLIANCE

Sergio Ravache

OPERATIONS

Rogerio Crus

SALES & PRODUCTS

André Simon

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7 1 1 3 3

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Page 24: Institutional Presentation   Galloway Capital

INVESTMENT COMMITTEE Nathan Shor Nathan Shor holds a BSBA from Boston University (Boston, USA) and a Masters degree in Finance from IESA (Instituto Estudios Superiores de Administracion, Caracas, Venezuela). He began his professional carrier at The Nash Fund in 1998, being responsible for its Emerging Markets Fixed Income area. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their Emerging Markets Fixed Income desk. Envisioning the future of the Emerging Markets Fixed Income market, Nathan decided to create Galloway Emerging Markets, providing Fixed Income investment solutions to institutional investors and high net worth individuals. The creation of Galloway Capital Management in 2006 came with the idea of an asset management company focused on their Emerging Markets Fixed Income expertise. Galloway Capital manages today a broad range of Emerging Markets Fixed Income funds.

Guillermo Bauder Guillermo studied business in the UNIMET (Universidad Metropolitana in Caracas-Venezuela). He began his career at Confimerca, the broker dealer of Grupo Confinanzas in 1993. Starting as a floor broker in the Caracas Stock Exchange, he was later transferred to the Local Fixed Income Area and finally ended at the International Fixed Income Area. In 1998 was a Foreign Associate in Peru for North American Institutional Brokers covering US Equity institutional clients. In 2000 joined FTC Securities as Foreign Associate for Latin America, in charge of developing Fixed Income and US Equity for institutional clients. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their Emerging Markets Fixed Income desk. Envisioning the future of the Emerging Markets Fixed Income market, Guillermo decided to create Galloway Emerging Markets, providing Fixed Income investment solutions to institutional investors and high net worth individuals. The creation of Galloway Capital Management in 2006 came with the idea of an asset management company focused on their Emerging Markets Fixed Income expertise. Galloway Capital manages today a broad range of Emerging Markets Fixed Income funds.

Ulisses de Oliveira Ulisses holds a Bachelor degree in Science of Finance and International Business from New York University, certified Series 7 and 66 registered, FSA Rules an Regulations, Securities and Derivatives registered. He began his career in 1996 at then commodity house E D & F Man. Later he joined Safra Bank of NY as Assistant Treasurer until 2000 when he joined Citigroup NY as a Relationship Officer, later he was Vice President of Investments responsible for research, originating and marketing investment ideas directly to clients on a wide range of asset classes: emerging markets and G-7 fixed income, equities, options, and structured products. At the beginning of 2009 Ulisses joined Galloway Capital as a partner and senior portfolio manager responsible for its Emerging Markets Fixed Income funds.

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Page 25: Institutional Presentation   Galloway Capital

This presentation has been prepared by Galloway Capital. This presentation is provided for informational purposes only and does not constitute or should not be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instrument or to participate in any particular trading strategy in any jurisdiction. The information herein is believed to be reliable as of the date in which this material was issued and has been obtained from public sources believed to be reliable. Galloway Capital does not make any representation or warranty, express or implied, as to the completeness, reliability or accuracy of such information, nor is this presentation intended to be a complete statement or summary of the securities, markets or developments referred to herein. Opinions, estimates, and projections expressed herein constitute the current judgment of the analyst responsible for the substance of this presentation as of the date in which it was issued and are therefore subject to change without notice. Prices and availability of financial instruments are indicative only and subject to change without notice. The financial instruments discussed in this presentation may not be suitable for all investors, and it does not take into account the investment objectives, financial situation or particular needs of any particular investor. Investors should obtain independent financial advice based on their own particular circumstances before making an investment decision on the basis of the information contained herein and it is strongly recommended that investors read carefully the disclosure document of the funds presented herein before making an investment decision. Foreign investments may involve greater risk than domestic investments. If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial instrument, and the reader of this presentation assumes any currency risk. Income from financial instruments may vary and its price or value, either directly or indirectly, may rise or fall. Past performance is not necessarily indicative of future results, and no representation or warranty, express or implied, is made herein regarding future performances. Galloway Capital does not accept any liability whatsoever for any direct or consequential loss arising from any use of this presentation or its content. This presentation may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of Galloway Capital. Additional information relative to the financial products discussed in this presentation

CONTACT & LEGAL INFORMATION

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+55 11 4082-2250

[email protected]

www.gallowaycapital.com