Paddy Dear - Principal Philip Bland - Chief Financial Officer David Wishnow - Principal, Member of Investment Committee and member of Risk Committee Mike Rosenberg - Principal, Member of Investment Committee and member of Risk Committee

Good afternoon, ladies and gentlemen, and welcome to the Tetragon Investor Conference Call. This presentation will be followed by a question-and-answer session from the web and if you are a web participant, you may send in your question by clicking the ask a question tab under [the left hand] side of your screen and following the on-screen instructions. (Operator instructions) And just to remind you, this conference call is being recorded the 9th of May, 2013 at 3 PM. I will now like to hand over to the Chairperson, Mr. Paddy Dear. Please begin your meeting and I will be standing by.

Thanks very much very indeed. And as one of the principles and founders of the investment manager of Tetragon Financial Group, I would like to welcome you to our Investor Call, which will focus on the Q1 results in 2013. I do not expect our interim call will be more concise than the annual review a few weeks ago. We have a presentation for you to follow on the website and more detail is available as always in the quarterly report that we released last week. The format we have for today is as follows. I will provide a very brief overview of the company and its objectives, Philip Bland, our CFO will cover the company's financials; David Wishnow, will cover the performance of the investment portfolio; Mike Rosenberg, will discuss certain aspects of the current CLO market and I will then review the asset management business and review potential and new investments that we are looking at over the next 12 months. We will, as previously be taking questions electronically by our web-based system at the end of the presentation and any questions that we've received since our last update we have tried to answer within the presentation. I would like to remind everyone that as always, the following contains forward-looking comments including statements regarding intentions, beliefs, current expectations concerning performance and the financial condition on the products and markets in which Tetragon invests and our performance may change materially as a result of various possible events or factors. So moving to the first slide, which is similar to one of the slides that I referred to during our 2012 annual report. The point I was making is that TFG is more than a traditional investment holding company. It is a mixture of financial assets and asset management operating businesses and this model is designed to try and give investors a higher blended return on equity. We identify assets and by that I mean asset classes and opportunities that we believe may have achieved a sustainable high return on equity. We then see to optimize the structure within what we hold such investments and we like to have TFG own some or all of the asset management companies that are making those investments. This way not only does the company get returns on the invested capital, but hopefully adds to those from management and performance fees received from managing third-party client money. We also believe we have skills that can help in growing the asset management businesses, both in making better investments and also in how to grow the asset management business itself. Obviously fee income, both management fees and performance fees is highly correlated to performance, but if performance is good and client money are paying fees, then TFG investors will get a higher return on equity than that achieved on the investment capital alone and also is it safe here is repeatable and sustainable return on equity of 10% to 15% net to shareholders. It's worth nothing in the parenthesis at the bottom that these returns will likely be correlated to LIBOR. For exempt we would expect our return target in the current environment to be towards the bottom end of that range given the low level of current LIBOR. The second slide I have here is just for you to refer back to the goals that we had for 2013 and take a very quick look at our performance against those. The first was obviously the return on equity target and as we will get to in the financials of the first quarter annualized return is about 17%. The second target is to have more of TFG’s assets managed on the asset management platform. The specific data is at 27.5% of TFG’s assets that are currently managed on the platform and that's a tiny amount from 27.4% at yearend. However, if one is to exclude the cash and the loans, the number is 24% versus 20% and therefore a material move in the first quarter. The further is asset management, sorry, asset under management from the clients in the underlying businesses. AUM is $8.1 billion applied asset and that's up from $7.7 billion at year end, so a continued positive growth and the fourth point is to over the longer term add further asset management businesses to the TFG platform. I don’t have anything to report in the first quarter, but we are continuing to review several potential opportunities. I now will pass over to Phil Bland, who is going to discuss the first quarter financial results in some detail.

Thanks so much indeed Paddy. So against a backdrop to TFG’s business and its 2013 goals, I am going to focus on how the firm performed in Q1 2013, while looking initially at TFG’s key metrics and then reviewing the Statement of Operations in some detail. So our first metric is earnings and we differ in two different ways both ROE and earnings per share, so let’s start by looking at the annualized return on equity. As Paddy mentioned, in Q1, we generated 4.3% ROE, which is a little over 17% annualized, reflecting another quarter of our performance against our over-the-cycle targets 10% to 15% per annum. TFG generated net economic income of $69.3 million in the quarter, an increase of almost 30% versus the same period in 2012, although it was down quarter-on-quarter as Q4 2012 included a significant rerating of the CLO portfolio reflected through the adjustment of certain default assumptions and discount rates. Our second view of earnings is earnings per share. TFG generated adjusted EPS of $0.70 during the quarter compared with the $0.46 generated in equivalent quarter in 2012. In Q1 this year, certain of the discount rates used in modelling the fair value of the CLO portfolio was recalibrated largely in response to sustained reductions in observed risk premium data. The effect of the recalibration was to add approximately $0.42 of earnings per share after fees. The discount rates used on pre-crises U.S. CLOs knows as CLO 1.0 has 15% are now around the levels of average [generals] when the portfolio was originally constructed. The gap between discount rates used for these strong U.S. deals and euro denominated deals is currently somewhat elevated at 10 percentage points reflecting our current view of the relative risk profile. Our second metric is NAV per share and here we are using pro forma fully diluted NAV per share, which is explained in detail on page 15 of our Q1 report. TFG's total net asset value increased year-on-year by 10.4% to $1.67 billion and is equated to pro forma fully diluted NAV per share of $15.02 so continuing that upward trend on the graph. The NAV per share improvement in Q1 was again primarily driven by the strong underlying performance of the investment portfolio, in particular the U.S. CLO's as previously discussed, but it was also positively impacted by the company's share repurchase program applied during the quarter. Our third key metric is distributions i.e. the way that we return value to shareholders and particularly in the form of dividends. TFG declared a Q1 dividend per share of $0.135, unchanged from Q4 2012. On a rolling 12-month basis, the dividend of $0.50 was against a 22% increase over corresponding periods at the end of Q1 2012. As is drawn out by the graph in front of you, TFG continues to pursue a progressive dividend policy with a target payout ratio of between 30% to 50% of normalized earnings recognizing the long term sustainable target ROE of 10% to 15% per annum. The Q1 2013 dividend per share of $0.135 brings our cumulative dividend per share since TFG's IPO to almost $2.40. I would like to turn now to the Statement of Operations of TFG. Investment income was up over 17% compared to Q1 2012, almost down on Q4 2012, which is what the CLO's will rewrite significantly as [TFG] mentioned. For 2012 to 2013 first quarter comparison highlight several important changes in the business year-on-year primarily driven by the Polygon acquisition in Q4 2012. Firstly the significant increase in fee income was primarily covered management fees and in certain quarters realized performance fees. Second big change is the increase in other income and this reflects certain costs which were recovered by TFG asset management, mainly from affiliated businesses using its platform and the third element is the sharp increase in the expenses associated with running TFG's asset management platform. Now $5.8 million of Q1 operating and administrative expenses, which totalled $22.2 related to share-based employee compensation and is basically a reflection of the consideration paid on the Polygon acquisition which is being described for US GAAP purposes over a five-year period. We have [backed that] expense and added in estimated year-to-date net performance fees on the Polygon hedge fund businesses to arrive at our net economic income of $69.3 million, which we feel better represents the underlying performance of TFG’s asset management activities compared to the U.S. GAAP. On slide 11, with the Statement of Operations here into TFG's two key business segments, investment portfolio and TFG asset management, both of which will be discussed in more detail later. Interest income includes interest on the loan portfolio, but continues to reflect primarily the recognition of the IRRs on the CLO portfolio. It's worth remembering that the total return on the CLO portfolio is split between interest income line and the unrealized appreciation on investments, which also now include unrealized gains on TFG's broadening range of investment activities including real estate and hedge funds. Unrealized gains of $32.7 million again contributed significantly to TFG's performance albeit down compared to Q4 2012 at the pace of rewriting of CLOs slowed down. Interest income was a little lower from both Q1 2012 and last quarter reflecting both reduction in IRRs and the lower level of loans held directly i.e. outside CLOs by TFG. Fee income, which is a category which covers mainly management and when appropriate realized performance fees, held up well during the quarter for both Polygon and LTM. Q4 2012's fee income had been boosted by both a recognition of year-end performance fees so those will come later in the year in 2013 and some management fees linked to distribution from a Polygon private equity fund the improvement of which is currently expected to also occur later in 2013. In this next slide, we focus [AUM] Asset Management business and take a look at the EBITDA equivalent for TFG asset management focusing primarily on net economic income view. This metric which was $5.3 million in Q1 adjusts U.S. GAAP income to include pretax unrealized performance fees on Polygon funds. In this economic income view, we also have net costs recovered, which as I mentioned are reported under other income in our US GAAP segment of operation, we [net] those have changed the cost incurred to provide a net view of operating employee and admin expense we think gives a better view. Q1 was a solid start to TFG asset management and Paddy will provide additional color on this business segment later in the presentation. So having reflected on what was generally a pleasing set of Q1 operating results measured against TFG's three key metrics, I can hand you back now -- over now to David Wishnow, who is going to discuss TFG's investment portfolio in more detail.

Thanks Phil. Let me now take you through the investment portfolio. The majority of the investment portfolio continues to be corporate loans owned directly and indirectly through CLO equity. This totalled $1.27 billion at quarter end. During the quarter, we invested in two new issued CLOs; one of which was an LCM managed transaction with the other being a third party managed CLO. Both of these investments were majority equity stakes. With the additional investments made during the quarter, the CLO equity portfolio now consists of 82 transactions, while the number of external managers remains unchanged to 27. The composition of our overall CLO portfolio at quarter end was as follows. Approximately 71.5% U.S. pre-crises CLOs, 18% U.S. post-crises CLOs for a combined total of U.S. dollar CLOs rounding to approximately 90% and the remaining 10.5% being European CLOs. On a look-through basis, this represents exposure to leverage loans through our CLO investments of approximately $18.1 billion across approximately 1500 corporate [loans]. While the 53 pre-crises U.S. CLOs performed very well during the quarter generating a total cash flow of approximately |$110 million versus $112.3 million in Q4 2012 we did begin to see the effects of loan spread tightening as a weighted average spread within these deals declined quarter-on-quarter. While cash flows remain strong, it's important to recognize that the majority of U.S. pre-crises CLOs will begin to amortize in 2013 and 2014 and as such their cash flow generation capacity will naturally begin to diminish. All of our pre-crises U.S. CLOs were passing their junior most OC test at yearend and at quarter end. TFG's 10 U.S. pre-crises CLOs performed well during the quarter producing cash flows of $8.9 million versus $8.3 million in the prior quarter. No post-crises U.S. CLOs experienced asset defaults and all O/C tests remain in compliance. TFG's U.S. post-crises CLOs are also subject to the challenging reinvestment conditions caused by loan spread compression and declining LIBOR floor levels albeit in the context of a benign default environment. These deals have higher funding costs and longer remaining reinvestment periods, which could be more negatively impacted by loan spread tightening. Mike will discuss this loan spread compression issue in more detail in his market update section. The performance of TFG's 10 European CLO equity investments have slightly improved from year end thought we expect these returns to remain volatile. European deals generated approximately €5 million versus €5.4 million in the prior quarter. 70% of our European CLOs are passing their junior most O/C tests up from 65% at year end. Our U.S. direct loan portfolio performed well during Q1 experiencing no defaults or credit downgrades in line with the broader market, the portfolio witnessed notable spread tightening and an increase in refinancing activity and repayments which has changed the risk reward dynamics. We have produced our exposure accordingly. As of the end of Q1, TFG held $89.2 million of investments in Polygon managed equity funds, up from $46.4 million as of yearend. These fund strategies are primarily focused European event driven equity, global equities and mining equities related investments. Equity fund investments commenced on December 1st, 2012, and through the end of Q1 2013 these funds have earned 4.9% with a blended weighted average IRR totalling approximately 23.9% to TFG. As of the end of Q1, TFG held $10.5 million of investments in Polygon managed convertibles funds, up from $10.1 million at year end. Convertible fund investments commenced on December 1st, 2012 and through the end of Q1 2013, these funds have earned 4.5% with a weighted average IRR totalling approximately 14.3% to TFG. As of the end of Q1, TFG held $29.2 million in GreenOak managed real estate funds and vehicles, including $6.3 million of new capital investments funded during Q1. These investments include numerous commercial and residential properties across Japan, U.S. and Europe. During Q1, TFG received distributions of over $4.5 million bringing life-to-date receipts from real estate investments to approximately $7 million. Two asset sales made up the majority of the distribution. Realized equity multiples on these sales exceeded our expectations at 1.6 times and 1.9 times before these expenses and taxes. Let me now turn the call over to Mike Rosenberg, who will provide a CLO market update.

Great, thank Dave. So in our market update section today, I would like to highlight spread compression, which has strictly become the most significantly issue facing the CLO market. Generally speaking, the lack of M&A and [buyer] activity has led to a dearth of new deals in the loan market. This combined with a robust new issue slow pipeline has contributed to a supply-demand imbalance that has driven up loan prices and compressed loan spreads. Loan issuers have taken advantage of these market conditions and have aggressively looked to tap the loan market to refinance older vintage loans at tighter spread levels and this is both in terms of nominal credit spread and LIBOR floors. As evidence of this prepayment rates have risen significantly with the Q1 prepayment rate coming in at 17.5% versus 38% for all of 2012. As a result of the refinancing activity in the loan market, TFG's weighted average spread across its U.S. CLO portfolio declined to 384 basis points over LIBOR at the end of Q1 versus 397 basis points as of yearend 2012. This impacts our CLO portfolio in several different ways. First our pre-crises U.S. CLOs, the majority of these deals exit the reinvestment periods during 2013 and 2014. Due to various investment restrictions in the CLO documents, loan spread compression may lead to call transactions earlier than what would otherwise be anticipated. Now for our post-crises U.S. CLOs, the negative impact of spread compression and the associated reduction in cash flows is potentially greater due to these deals typically having higher liability costs, a higher concentration of 2011 and 2012 [bridge] loans and longer remaining reinvestment periods. Now on the positive note, spread compression all of being equal, does increase the value of TFG's call option for pre-crises CLOs and makes our ability to refinance existing liabilities for post-crises CLOs that much more valuable. With that, I am going to turn it back over to Paddy.

Thanks very much Mike. I would like to now move on to discuss the asset management business and the asset management business we have now at TFG is an active fully operating business with approximately 125 employees, offices in London, New York and Tokyo, multiple funds, brands and business lines. The three main brands as shown here on the slide LCM, Polygon and GreenOak real estate and I've stated previously, we believe there are four key performance metrics for the asset management business. The most important of these is performance of the underlying funds. Not only is it the performance applicable to TFG’s own capital where it's invested and managed on its platform, but also it is a measure of how TFG's asset managers are delivering to their clients and that's the leading indicator for the other key metrics. In this respect, all funds managed by TFG's asset management brands open to clients and invested in by TFG had a positive Q1 in 2013 and the specific data is available in the quarterly report. The second key metric we believe is fee income and as Phil stated earlier and looking from his slide, the fee income including unrealized performance fees on the Polygon fund is $12.5 million for the first quarter. The third is turning back then into ahead of our profitability measure, which we have called the EBITDA equivalent. Again that's been explained in the financials and as shown in both the annual and the quarterly reports and this totalled $5.3 million in Q1 of 2013. And lastly the fourth metric assets under management as I mentioned previously $8.1 billion as of the end of the first quarter, up from $7.7 billion at the end of last year and again there is much more detail on that in the quarterly report. I would like to move now to a new section and that is looking at expected investments that we plan to make over the next 12 months and we've added this to give investors some insight as to how we may allocate funds to the various investments and that we think a 12-month timeframe is suitable. Obviously the actual investments may vary depending on market circumstances, but we still believe this is useful to indicate management's current thinking. So the categories here, the existing CLO businesses we think somewhere in the range of $80 million to $140 million and this would be as we have done previously through majority positions in CLO equity both with CLM -- sorry LCM as the manager and through third party managed deals, but I would obviously point out and in Mike's comments about the spread tightening, the effect that it's had on the arbitrage and obviously as we made these investments, it's highly dependent on market opportunities at the time. In real estate over the next 12 months, we see somewhere between $25 million and $75 million being deployed. We are currently being drawn down on our investments in Japan fund, on the U.S. fund and there will be other opportunities both within Europe and also single managed entity opportunities globally. In the current hedge fund vehicles, we think that is somewhere in the region of $20 million to $70 million. Again sort of market opportunities will determine the ultimate determination there and the most difficult but in many ways what is the largest amount could be is in new business investments. Now we have put out a spread here of $50 million to $200 million. Obviously that remains under review. It depends on those that come to pass. It's the most difficult to predict and it's dependent on the outcome of multiple current discussions. But I thought -- as I said earlier that it's worth putting this out as a new slide and we have to keep people updated on this. Lastly before I move to Q&A, I just want to mention that we are working on having an Investor Day later in the year. As we get more details on that, we will get them out to investors and now hope to attract as much interest as possible.

So with that I would like to move on to the Q&A session. We have a few questions that have come in over the last few minutes and I will start off here which is, can you please discuss the methodology you used to arrive at the $99 million valuation of the Polygon assets and the measures you took to avoid risks from the conflict of interest in the deal? This question refers to a deal that TFG did seven months ago and actually these questions and many others were answered in detail at that time. So what I would like to do is refer the answer to the question and others back to the conference call and the Q&A we did at that time that had much detailed information on this plus also I would refer people to the financial that we did at year end, that again had a lot of detail on those two are strong for that question. The second question I have here is on European CLOs and it's, can you give me your thoughts on the European new issued CLO market and I think probably it's best to hand over to Mike for that one.

Yes sure, Paddy thanks. Well we've definitely seen the re-emergence of the European CLO market post the financial crises. It's definitely growing. We've seen several deals have printed already and many more are in the pipeline. We see a lot of demand across the capital structure down from the equity all the way through the AAA. From our perspective however, we are going to be very cautious with the structure of European CLOs. In our view, the structural issues that play European CLOs prior to the financial crises and even back in the late 90s early 2000s when that market first started, those issues still persist and they are related to a few things. First is the size of the underlying European leverage financed market. It's a much smaller loan market than the U.S. and that leads to a few issues in Euro CLOs, which resulted in one less diversity, less granularity, higher concentrations within the portfolio. In addition, we've seen that to make the arbitrage work for European CLO, you typically see a higher percentage of non-first leaned senior secured loans and that includes second lean loans, European mezzanine bonds or high yield bonds or introducing currency risks into the deals as managers look for non-euro denominated loans to fill out the portfolio. So when you combine the larger position sizes and these riskier assts, we think leads to more tail risk in the portfolio. So very simple example, if you are a second lien loan in the U.S. field, that is a may be a 30 basis point position size. If that goes bad and you have low recovery rate, okay it hurts but it doesn’t really affect your return too much. If you have that same second lien loan in the European deal, but it's a 1.5% position size then it goes bad and you have the very low recovery rate. On a ten times leverage, that's going to really impact negatively your equity returns. So with respect to European CLO, we continue to watch it but we will continue to be cautious until we feel that the European structures have become more robust. With that, I will pass it back over to Paddy.

Thanks Mike. And there is one here which really sort of goes to the heart of what you are saying in the commentary about the current CLO market and spread tightening. The specific question is, is there an opportunity to call CLO deals to crystallize capital gains? Now may you’ve already said a bit about that, it's worth expanding on what we had said or was it too difficult to give more color?

Well I can expand just a little bit on that one. As I mentioned in May, the spread tightening may lead us to call deals earlier than what we otherwise would anticipate. With respect to crystallizing capital gains, I would just say that we analyze those deals and determine the optimal time to call it versus holding it to maturity and clearly whatever one has a better economic outcome is the path that we are going to choose.

Another one here on -- it says with U.S. [list alternative manager] evaluation becoming more attractive, have you reconsidered listing in the U.S.? I think for those of you that have sort of been following the company for a while, you will be aware that the last couple of calls we've talked about very this specific issue. It is something that we have and are actively investigating, but we are well aware that there are very material hurdles that need to be overcome before we could achieve it if we wanted to. The more significant of those is the classification of active versus passive income. So I think the easiest way to think about this is potentially it's a long term goal yes, but there is nothing but to likely to be achievable in the foreseeable future. And I have another question here that says, if you do not find opportunities to allocate the robust cash flow, the company will generate above your hurdle rate, would the company be opened to another tender? And I think the easiest way to answer this is whenever we make any investment, we are always looking at all the potential alternative and we are always looking at all the potential alternatives and obviously buyback tenders are alternative use of cash as are dividend, as are all investments. So return on equity, the correlation to existing assets, the concentration, the volatility of expectation, the long term variability of the returns and all the things that we take into account when making investment. And that completes the questions. So with that, thank you all for joining us and we will finish the call there. Thank you.