Iron Harbor Capital Management

June 2012 Open Market Call

The views expressed herein are for information purposes only and ARE NOT intended as trading or investment recommendations. Iron Harbor Capital Management IS NOT a Commodities Trading Advisor and IS NOT offering these views as investment advice or as a solicitation for investment. Comments and questions are welcome at info@iharborcap.com

Gravelle Pierre, CFA, Founder & Portfolio Manager gpierre@iharborcap.com 646.290.5451

Contents

2012 Recap and Outlook Our Investment Strategy 1H2012 Investment Themes Europe and Germany China US Top Themes APPENDIX Investment Strategy Process Team Biographies 3 5 6 8 10 15 16

Iron Harbor Capital Management

Investment Strategy Basics

Fund Overview
Harbor Reserve Fund is a discretionary global investment fund. We develop and execute investment themes based on rigorous fundamental research of regional economies and broad-based economic trends. Our strategy is based on a highly liquid core portfolio which is calibrated to capture key global and regional investment themes.
Investment team executes trading and investing strategies over a broad set of asset classes to include equities, fixed income and interest rate derivatives, currencies, and commodities. We express themes primarily in directional trades, though will we occasionally target relative value opportunities to minimize risk. Our investment horizon is 6-18 months.

Specific nearer-term exposures (6-12 months) are managed via a portfolio overlay which targets specific opportunities in currency, commodities, and interest rate markets.
Fund employs very limited and targeted use of leverage

Market Exposures

Current Geographic Market Exposure

10%

Current Asset Class Exposure

5% 15%

40% 30%

N. America/LATAM
Europe Asia ME/Africa/Russia

Equity Indices/ETFs Fixed Income/Rates

15% 65%

Currency Commodities

20%
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Iron Harbor Capital Management

Snapshot of Recent Portfolio

Strategies
5% 15%
Equity Indices/ETFs Fixed Income/Rates

Top Positions: Long NASDAQ Long S&P 500 Long emerging market debt (locally denominated) Long Italian debt / Short German debt Short 10yr US/Long 30yr US, short Canada 30yr Short Australian Dollar Short Euro Short Japanese Yen Long Mexican Peso Short Copper Short Crude Oil Volatility Long Lumber Long Natural Gas

15% 65%

Currency

Commodities

Iron Harbor Capital Management

1H2012 Investment Themes

Germany and Europe: Continental Divide

Germany is important trading partner for rest of Europeand is performing well But Germanys export-led model is reaching its limits Germany is obstructing necessary Euro depreciation China cannot will growth upward to 8% China has outperformed.but it is not a miracle Productivity + demographics Phase of Business Cycle Middle of Early Upswing Jobs & housing recovery still intact but stay vigilant Weather related pull forward into Q1? Wait for it.Paradigm Shift! Bank stress to come into finer focus After 15 years of wrong callstime to short JGBs? Black swans on the loose? A more sensible approach

China Inflection Point: The Writing is on the Wall US Economy: Steady As She Goes

Top Global Themes: Whats on the Horizon

Iron Harbor Capital Management

1H2012 Recap Eurozone & Germany

Germany and Europe: Continental Divide
Germany is important trading partner for rest of Europeand is performing well
But Germanys export-led model is reaching its limits Germany is obstructing necessary Euro depreciation

German growth trend significantly weaker

6% 4% 2% 40% 0% 20% -2% 0% 80%

German export engine sputtering

60%

-4%
-6% -8% Mar-02 Eurozone GDP % YoY Germany GDP % YoY Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 -20% Top 6 German Export Destinations % YoY China Export Values % YoY Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

-40% Jan-06

Source: Eurostat

Source: Eurostat

Iron Harbor Capital Management

1H2012 Recap Eurozone & Germany

German growth trend significantly weaker
6% 4% 2% 10 0% 0 -2% -4% -6% -8% Mar-02 Eurozone GDP % YoY Germany GDP % YoY Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 30 20

Industrial Production has collapsed

-10
-20 -30 Jan-06 Jan-08 Jan-10 GER IP % YoY GER Cap Goods % YoY Jan-12

Source: Eurostat

Source: Eurostat

PMI points to further weakness

65 60 55 50 45 40 35 30 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 GER Svcs PMI GER Mftr PMI 6 Mar-02 13 12 11 10 9 8 7

Do not be fooled by unemployment

GER Unemployment % YoY

Mar-04

Mar-06

Mar-08

Mar-10

Mar-12

Source: Markit

Source: Eurostat Iron Harbor Capital Management

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1H2012 Recap China

China Inflection Point: The Writing is on the Wall

Government cannot will growth at 8% China has outperformed.but it is not a miracle Focus on productivity + demographics as baseline: 4% recent, falling to 2%

China growth trending weaker

14

We expect a much weaker trend than the market

12

10

6 China GDP 4 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12

Source: National Bureau of Statistics

Source: Iron Harbor (http://www.scribd.com/doc/91873968)

Iron Harbor Capital Management

1H2012 Recap China

Exports hitting the skids
100 80 60 40 20 0 -20 5 -40 -60 Jan-06 Jan-08 % Chng YOY Imports % Chng YOY Exports Jan-10 Jan-12 0 Jan-06 Jan-08 Jan-10 Jan-12 Industrial Production 10 20 25

Industrial Production trending lower

15

Source: China Economic Information Network

Source: China Economic Information Network

Retail and auto sales lower

160 Passenger Car Sales cum. % YoY (LHS) Retail Sales cum. % YoY (RHS) 25 50 40 30 20

Other measures of activity also weak.

Electricity Consumption cum. % YoY Steel Output cum. % YoY

120 20 80

40 15 0

10
0 -10

-40 Jan-06 Jan-08 Jan-10 Jan-12

10

-20 Jan-06 Jan-08 Jan-10 Jan-12

Source: China Automotive Information Net, National Bureau of Statistics

Source: Antaike Information Development, China Economic Information Network Iron Harbor Capital Management

1H2012 Recap US
US Economy: Steady As She Goes
Phase of Business Cycle Middle of Early Upswing Jobs & Housing Recovery Still Intact But Stay Vigilant Weather Related Pull into Q1?

Early Upswing

Slowdown Late Upswing

Increasing confidence Increasing household spending Inventory builds Falling unemployment rates Short term rates increase

Late Upswing
Early Upswing

Recession
Initial Recovery

Confidence is high Unemployment is low Inflation pick-up, wages accelerate Rapid economic growth Restrictive monetary policy

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1H2012 Recap US
US Economy: Steady As She Goes
Phase of Business Cycle Middle of Early Upswing Jobs & Housing Recovery Still Intact But Stay Vigilant Weather Related Pull into Q1?

Government sector less of a drag on overall payrolls

4% NFP Total Government % YoY SA 10%

Construction weakening again

NFP Construction % YoY SA Professional/Bus. Svcs % YoY SA 5%

Total Payrolls % YoY

2%

0% 0% -5% -2% -10% -4%

-15%

-6% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

-20% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

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1H2012 Recap US
US Economy: Steady As She Goes
Phase of Business Cycle Middle of Early Upswing Jobs & Housing Recovery Still Intact But Stay Vigilant Weather Related Pull into Q1?

Prices to rent looking better

26 5%

Household formation trending higher

Total Households % YoY

24
4% 22 20 3%

Avg % YoY since 1990 Avg % YoY 1965-1985

18
16 14 2%

1%

12
10 1988 1991 1994 1997

Asking Sales Price to Asking Rent Average since 1988

0% 2000 2003 2006 2009 2012 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: Census Bureau

Source: Census Bureau

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1H2012 Recap US
Starts appear to have bottomed
3000 2500 2000 1500 1000 500 0 Total Starts Single Family Starts 3000 2500 2000 1500 1000 500 0

at the same time permits have found support.

Total Permits Single Family Permits

Jan-72

Jan-82

Jan-92

Jan-02

Jan-12

Jan-72

Jan-82

Jan-92

Jan-02

Jan-12

Source: Census Bureau

Source: Census Bureau

Delinquent loans moving lower

12 Foreclosures as % of Total 10 8 6 4 2 0 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 0 1962 1972 1 Serious Delinquent Loans as % Total 3

Vacancy rates recovering

US Homeowner Vacancy Rates %

1981 1991 2001 2011

Source: Mortgage Bankers Association

Source: Census Bureau Iron Harbor Capital Management

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1H2012 Recap US

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1H2012 Recap Top Themes

Top Global Themes: Whats on the Horizon

Wait for it.Paradigm Shift! Bank stress to come into finer focus After 15 years of wrong callstime to short JGBs? Black swans on the loose? A more sensible approach

Iron Harbor Capital Management

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Appendix A Iron Harbor Investment Approach

Operational Risk Investment Strategy/Process

17 18

Risk Management
Team Biographies

22
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How We Mitigate Operational Risk

Big Funds Have BIG Operational Risk

Galleon (2009), Madoff (2008), Amaranth (2006), Bayou Management (2005), Aman Capital (2005), Marin Capital (2005), Bailey Coates Cromwell (2005), Tiger Management (2000), Manhattan Fund (1999), LTCM (1998) and Everest Capital (1998) Misappropriation Misrepresentation Trading beyond investment mandate Administrator: SS&C; Auditor: Asher & Company Monthly Capital & Fund Holdings Report from Administrator Monthly NAV from the Administrator Dual signature requirement: Iron Harbor and SS&C We are a CFTC registered Commodity Pool Operator We regularly communicate our investment views (monthly research, podcasts, quarterly research) Segregation of assets Privileged redemption conditions Eliminates operational risk factors Lessens manager diligence burden
Iron Harbor Capital Management
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Sources of Operational Risk How We Reduce Your Operational Risk

We Can Accommodate Managed Accounts

Summary of Investment Strategy

Risk Management
Our approach to risk management is based on whole-firm enterprise risk management which incorporates both market and operational risk management.
Net portfolio risk is hedged using derivatives (options) and stop-loss limits. The Fund combines scenario-based stress testing with value-at-risk approach. Targeted monthly drawdown is 3%. Total portfolio overnight VaR is targeted to 4.5% of AUM. Third party service providers add multiple layers of organizational risk control

Liquidity

Our goal is to maintain a liquid portfolio. International markets are, by definition, large and very liquid securities markets. We expect to be able to reduce our position size in a rapid manner to adjust to changes in our investment thesis or to respond to redemption requests or market conditions.
Focus on highly liquid instruments: futures, options on futures, and ETFs. Goal is to be able to liquidate 80% of portfolio within 2 business days during which markets are open and the remaining 20% within an additional 1-2 business days. Single investment opportunities typically represent no more than 4% of VaR.

Operational Risk Controls

Operational Risk Controls: In recent years, large funds and institutions have repeatedly demonstrated poor operational risk controls. We have procedures to mitigate investor risk:
Administrator: SS&C; Auditor: Asher & Company Monthly Capital and Fund Holdings Report from Administrator Weekly unaudited NAV from the Fund Dual signature requirement: Iron Harbor and SS&C We can accommodate managed accounts
Iron Harbor Capital Management
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Summary of Investment Strategy

Trend following and high leverage are key to many fund models How we outperform equity and bond markets with lower risk

Major portion of returns dependent on leverage over full investor relationship Notable underperformance at market turning points or range-bound periods Near-guarantee of large drawdown or fund closure at some point in investor relationship High correlation with other funds

Understand the cycle/key issues in regional economies; set beta to calibrate Hedge aggressively based on underpriced risk exposures Seek value in targeting currency exposures Opportunistically trade volatility Aggressively manage portfolio exposure at valuation extremes via options Capture risk-managed tactical alpha when available

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Investment Process

The Core Four

Why is the market priced the way it is?

Is the basis for the current price reasonable? What is the potential catalyst for re-pricing? When will it happen?

Iron Harbor Capital Management

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Investment Process (contd)

Harbor Reserve employs a fundamental approach to identify misalignments between pricing and fundamentals

Research
Assess Fundamentals Determine central bank outlook from speeches, forecasts, and meetings

Idea Generation
The Core Four Why is the market priced the way it is? Is the basis for the current price reasonable? What is the catalyst for a re-pricing? When will it happen?

Investment Selection
Execute Structure exchange-listed futures and options trades with rigid risk parameters Opportunistic/ frequently contrarian

Portfolio Management
Manage Prudently Minimal leverage Define entry/exit, rolling stoploss orders Trading risk controls: Measure, Manage & Monitor Monthly drawdown limited

Analyze economic activity indicators: GDP, industrial production, PMI, payrolls, etc.
Review relevant markets: commodities, equities Tap market contacts

Low-frequency trading
Low volatility

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Risk Management
Trading Risk Controls
Manage + Monitor Judicious use of derivatives to control risk Vigorous stop-loss limits applied on a rolling basis to every position Limits on maximum monthly drawdown Constant awareness of major market drivers and portfolio exposure profile Manager is major investor Measure VaR is measured at 99.7% confidence interval with a one-day holding period using 100 days of data 100-day max-loss measures hypothetical performance per position on most adverse price move of past 100 days Scenario analysis based on serial correlations

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Team Biographies
Gravelle Pierre, CFA, Portfolio Manager
Gravelle Pierre, CFA, is the Founder of Iron Harbor Capital Management, LLC and Portfolio Manager of Harbor Reserve Fund, LP. Harbor Reserve is a fundamentally driven global macro fund which specializes in currency and interest rate investments. Gravelle has 14 years experience trading currencies and interest rates, most recently at Goldman, Sachs and Company. Gravelle worked for several years as a spot currency trader before assuming the role of Co-Manager of the G-10 Currency Forwards book. As CoManager, he oversaw the day-to-day management of the Currency Forwards business and participated directly in strategic planning for the Global Currency Group at Goldman. Prior to joining Goldman, Gravelle served in the United States Army, attaining the rank of Captain of the 108th Army Airborne Corps. Gravelle holds a B.S. from the United States Military Academy at West Point, an M.S.A. from Central Michigan University and an M.B.A. from the Sloan School of Management at Massachusetts Institute of Technology.

Jacqueline Hayot, Chief Operating Officer

Jacqueline Hayot is the Chief Operating Officer for Iron Harbor Capital Management. Most recently, Jacqueline was Global Head of Marketing for Morgan Stanley's Prime Brokerage group. Prior to that role, Jacqueline headed the strategic marketing group for BNP Paribas' Equity Derivatives team in New York. Jacqueline began her post-MBA career in debt and equity origination at Morgan Stanley. She earned her A.B. from Dartmouth College, an M.A. from Johns Hopkins University's School of Advanced International Studies (SAIS) and an M.B.A. from the Wharton School of the University of Pennsylvania. Jacqueline holds a Series 63 and is a Level I candidate for the Chartered Alternative Investment Analyst (CAIA) program.

Christopher Nicholson, CFA, Senior Portfolio Strategist

Chris Nicholson, CFA, is the Senior Portfolio Strategist at Iron Harbor Capital Management. Before completing his M.B.A. in Europe and China, Chris was a Corporate Development Director at a medical device company. Earlier in his career, Chris was a Business Development and Investments executive at a technology-focused holding company. Chris conducted research in international economics and insurance risk at Harvard Business School while completing graduate Economics coursework. Prior to that, Mr. Nicholson was a strategy consultant at Fletcher Spaght , a spinoff of the Boston Consulting Group. Mr. Nicholson holds an A.B. in Applied Mathematics and Economics from Harvard University, and an M.B.A. from Central European University.

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Team Biographies (contd)

Michael Huczko, Chief Financial Officer
Michael Huczko is the Chief Financial Officer of Iron Harbor Capital Management. Prior to joining Iron Harbor, Michael was the COO/CFO of Taum Sauk Capital Management, LP, a long/short fund. He is the founder of Pinewood Capital Management, Inc. an outsourced COO/CFO/CCO and hedge fund operations consulting firm. Prior to founding Pinewood, Michael was the COO of Duquesne Capital Management, LLC with founding portfolio manager, Stanley Druckenmiller. He grew Duquesne from under $50 million in 1987 to $3 billion at the time of his departure in 1996. Michael holds a B.S. from the University of Pittsburgh, attended Concord Law School and earned a certificate in Entrepreneurial Management from Carnegie Mellon University. He holds a Series 3 and is currently registered with the US Commodity Futures Trading Commission.

Aditi Thapar, PhD, Economist

Aditi Thapar serves as the Economist for Iron Harbor Capital Management . Aditi is the Clinical Assistant Professor of Economics at New York University where she teaches at both the New York and Abu Dhabi campuses. Her research focus is Macroeconomics, International Economics and Applied Econometrics. With specific interests in money and banking, Aditi has made significant contributions to the study of monetary policy. Her most recent research paper, Using Private Forecasts to Estimate the Effects of Monetary Policy, was published in the Journal of Monetary Economics, 2008. She is currently working on research for two forthcoming research papers: Are the Effects of Monetary Policy Asymmetric? and Using Private Forecasts to Control for Regime Shifts: the Case of UK Monetary Policy. Aditi earned her B.A. from the University of Delhi (India); an M.A. from the Delhi School of Economics (India); and her Ph.D. from Boston University.

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Contact Information

Iron Harbor Capital Management, LLC 155 Water Street, 5th Floor Brooklyn, New York 11201 T 646.290.5451
Gravelle Pierre, Founder & Portfolio Manager gpierre@iharborcap.com Jacqueline Hayot, Chief Operating Officer jhayot@iharborcap.com

Michael Huczko, Chief Financial Officer mhuczko@iharborcap.com

Christopher Nicholson, Senior Portfolio Strategist cnicholson@iharborcap.com Aditi Thapar, Economist

economics@iharborcap.com

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Disclaimer

This presentation does not constitute an offer to sell or a solicitation of an offer to buy. Any offer or solicitation can be made only through a private placement memorandum subject to regulations and guidelines of the SEC and CFTC.
The views expressed herein are for information purposes only and ARE NOT intended as trading or investment recommendations. Iron Harbor Capital Management IS NOT a Commodities Trading Advisor and IS NOT offering these views as investment advice or as a solicitation for investment. Although this presentation has been prepared from public and private sources and data we believe to be reliable, we make no representations as to its accuracy or completeness.

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