Owl Creek letter

8/3/2019 Owl Creek letter

1/15

1

640 Fi f th Avenue, 20 t h Floor

New York, NY 10019

T 212 688-2550

F 212 753-2760

December9,2011

PerformanceSinceInception

Gross Net Gross Net Gross Net

20.94% Year20021

5.14% 4.12% 4.98% 3.98% 5.25% 4.20%

28.67% Year2003 60.88% 48.70% 61.00% 48.80% 60.69% 47.67%

10.87% Year2004 32.67% 26.14% 32.77% 26.22% 33.12% 26.50%

4.91% Year2005 3.95% 3.16% 4.07% 3.25% 4.11% 3.35%

15.78% Year2006 25.78% 20.63% 26.17% 20.94% 26.94% 21.35%

5.49% Year2007 39.75% 31.80% 39.93% 31.94% 40.81% 32.42%

36.99% Year2008 8.44% 7.53% 8.85% 7.93% 8.91% 10.32%

26.47% Year2009 20.34% 16.94% 21.91% 18.28% 22.25% 21.75%

15.08% Year2010 2.63% 2.18% 3.41% 2.80% 2.79% 2.35%

2.37% Jan11 3.41% 2.73% 3.57% 2.86% 3.67% 2.95%

3.43% Feb11 0.75% 0.60% 0.74% 0.60% 0.63% 0.51%

0.04% Mar11 2.47% 1.99% 2.33% 1.88% 2.43% 1.97%

2.96% Apr11 1.51% 1.21% 1.55% 1.25% 1.56% 1.26%

1.13% May11 1.47% 1.18% 1.56% 1.25% 1.53% 1.24%

1.67% Jun11 3.46% 2.79% 3.44% 2.78% 3.43% 2.81%

2.03% Jul

11

0.53%

0.42%

0.51%

0.41%

0.52%

0.52%

5.43% Aug11 9.30% 9.16% 9.24% 9.01% 9.17% 9.17%

7.03% Sep11 7.72% 7.72% 7.48% 7.48% 7.55% 7.55%

10.93% Oct11 6.61% 6.61% 6.04% 6.04% 6.06% 6.06%

0.22% MTDEst.thruNov11 2.9% 2.9% 2.8% 2.8% 2.8% 2.8%

1.06% YTDEst.thruNov11 13.0% 12.9% 12.6% 12.6% 12.7% 13.0%

33.93% ITDEst.thruNov11 303.6% 208.2% 313.9% 214.9% 318.4% 214.2%

3.02%

AnnualizedITDEst.

thruNov11 15.2% 12.1% 15.5% 12.4% 15.7% 12.3%

OwlCreekOverseas

Fund,Ltd1

S&P500

Index OwlCreekI,LP1

OwlCreekII,LP1


2/15

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NavistarIntern

DanaHoldingC

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CignaCorp

SeatPagine

ForestOil

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WellpointInc

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4/15

4

reportedtheirsecondquarterearnings,whichbeatconsensus,andalsoincreasedtheirfullyear

guidance.Danaalreadyunderwentabankruptcywhichcleaneduptheirbalancesheet.Thecompany

hasminimaldebtandasignificantcashbalance,makingthedeclineinthestockpriceallthemore

dramatic,sincewithoutleverageittranslatesintoahugereductioninTEV.Withvaluationsaround3.5x

ourestimated2012EBITDAandwithminimalcapitalexpenditureneeds,wethinkthestockrepresentsa

compellingopportunity.

Dana'snew

CEO,

Roger

Wood,

previously

ran

the

turbocharger

business

at

BorgWarner,

one

of

the

most

lucrativebusinesslinesintheauto/trucksector.Herealizestheimportanceofmovingupthevalue

chainandisaggressivelymovingDanaawayfromcommoditybusinesses.TheCompanyhasbeen

aggressivelyraisingpricesforitscoreproducts.Itsprimarybusinesses,axlesforlightandcommercial

vehicles,arebothduopolies.ForcommercialvehiclesitisestimatedDanaandMeritorcontrol95%of

themarketintheUnitedStates.Inaddition,Meritorhashadsignificantsupplyconstraints.Ratherthan

manageforshare,RogerWoodhastakenanaggressivestancetodowhatanycompanyinacapacity

constrainedduopolyshoulddo raiseprices.Whilethissoundslikeanobrainer,previousmanagement

teamswereoftenunabletoachievebetterthansingledigitmarginsinthisbusiness.Moreover,Dana

hashadanimpressivestretchofwinningnewcontracts.Withtheopportunityofincreasedprofitability

fromcost

cutting,

price

increases,

increased

volumes

with

the

truck

cycle,

and

new

product

offerings,

wethinktherearemultiplewaysforDanatowork.WeaddedtoDanaonitswaydownandeventhough

thestockisuparound14%sincetheendoflastquarter,westillbelieveithassubstantialupsidefrom

here.

WashingtonMutual,Inc.(HoldingCo)AsweadvisedyouinSeptember,thebankruptcyjudgeoverseeingtheWashingtonMutualcasedenied

confirmationforasecondtimeandgrantedtheequitycommitteestandingtocommencealawsuiton

behalfofWashingtonMutualagainstfourlargenoteholders(theSettlementNoteholders),including

OwlCreek,forequitabledisallowance.Thejudge,however,stayedthelawsuitpendingamandatory

mediationprocess

intended

to

help

all

parties

reach

asettled

outcome

of

the

various

legal

issues.

That

mediationprocessispresentlyongoing.Thedelayinconfirmationhascausedsecuritypricestodrop

becauseofthetimevalueofmoneyandbecausepostpetitioninterestcontinuestoaccrueonsenior

andsubordinatedbondstothedetrimentofthejuniorsubordinatedbonds.

CignaCorpCignadeclinedby18.5%inthe3rdquarterasthemanagedcaresectorsoldofffollowingthedebtceiling

debateandsubsequentratingagencydowngrade.WhenCongresspassedanextensionofthedebt

ceiling,itcreatedaJointSuperCommittee(JSC)tofurtherreducethedeficitby$1.2T.IftheJSCdidnot

reach

its

goal,

then

any

shortfall

would

be

funded

by

an

across

the

board

cut

to

discretionary

spending

includinga2%maximumcuttotheMedicareprograminaprocesscalledsequestration.Asaresult,

healthcarelostitsdefensivedistinctionandagainbecametargetedbythegovernment.Wethink

thegovernmenttookitsproverbialpoundoffleshfromtheHMOswiththepassageofthePatient

ProtectionandAffordableCareAct(PPACA)in2010,butacknowledgethemarketdislikesuncertainty

morethananythingelse.TheJSCcametotheconclusionthatitwouldreachnodealonNovember23rd,

andthatsequestrationwouldkickin.Duringthislastlegdownformanagedcare,whileCignahadvery

limitedexposuretoMedicare,thestocksoldoffjustasmuchastherestofthegroup.


5/15

5

At7.0x2012P/E,CignacontinuestobethecheapestoftheBig4insurers.Recently,Cignaannounced

ahighlyaccretivetransactionforHealthSpring,alargeMedicareAdvantageplayer.Wethinkthisisa

verygooddealforCigna.GiventheagingpopulationoftheUS,theseniormarketisgrowingfasterthan

thecommercialmarketandBabyBoomersareincreasinglyelectingMedicareAdvantageplansover

traditionalMedicare.HealthSpringhasauniquemodelinwhichthecompanyoftencontractswith

patientsattraditionalMedicarerates,butincentsphysicianstomanagecareanddrivecostsdown.

Cignapaid

areasonable

12.5x

P/E

for

this

business

and

we

think

transactions

like

this

highlight

the

disconnectbetweenpublicandprivatemarketvaluesforhealthinsuranceassets.Postdealclose,

HealthSpringwillrepresent25%ofCignasearningsandshouldbeaccretiveinthefirstyear.Proforma

onetimedealcosts,webelieveCignacanearn$6.00in2012.Applyinga12xP/Emultiplealongwitha

deductionof$2.50pershareforitsunderfundedpension,wethinkCignaisworth$69or60%upside

fromtodayslevels.

Historically,theHMOindustrytradedat1318xearningsduetotheirhighreturnsoncapitaland

earningsgrowth.Premiumsgrewwithmedicalcosts(68%annually)and8085%ofthepremium

revenuewaspaidoutinbenefits.Giventhehighlevelofunderwritingpredictability,largeemployers

retainedunderwriting

risk

and

paid

the

HMOs

for

access

to

their

provider

networks.

With

amodest

amountofSG&Aleverage,earningsgrewat10%annually.Beingabletounderwriteprofitablyalso

limitedinvestmentportfoliorisk.

Givenregulatoryscrutiny,multiplecontractionmakessense,butwedontthinkitistoodemandingfor

thegrouptoreratetoatleast12xearnings.Withlesshealthcarereformrisk,andexposuretohigher

growthsegmentsliketheInternationalbusinessandHealthSpring,Cignawouldtradeatapremiumto

thegroupifitcouldsolveforitsrunoffreinsurancesegment.Cignahastakenmeasurestoringfence

potentiallossesfromthissegment.Fromhere,thestockmarketwouldneedtodeclineby40%before

additionalcashflowcontributionswerenecessary.However,marketvolatilitydiminishesCignasability

tocompletely

exit

and

its

stock

exhibits

greater

sensitivity

to

rates

and

stock

market

fluctuations

than

its

peers.Withthepassageoftime,webelievethiscontingentliabilitywillshrinkandwethinkthe

companycanstillexitthissegmentin2012.

SeatPagineSeatisanItaliandirectory/onlinemarketingbusiness.Themarketpriceofourholdingsinthesenior

securedbonds(SSB)andseniorunsecuredbonds(8%notes)decreasedfrom91to64and36to

15respectivelyintheQ3of2011.Thisweaknesscanbeexplainedinpartbytheoverallweaknessin

Italianassets,aswesawtheItalianstockindexdeclineby26%andthewideningofItaly5yearCDS

levelsfrom

177

to

476

during

the

same

period.

However,

additional

pressure

in

the

name

came

from

theCompanyannouncinganaccountingchangewhichnowunderstatescashEBITDAandfroma10%

guidancereductionfor20122015.Thereductioninguidancewaslargelyduetoanobservedcontinuing

declineinprintsaleswhichwasexpectedtoeaseduring2011.Otherimportantmetricsincludingthe

progressofsellingonlinepackageswereaheadofschedule.

Itisimpossibletovalueacompanylikethis,whichhassomanymovingparts,withasimplecomps

analysis,whichiswhatwebelieveothersaredoing.Wevaluethecompanybasedonitsabilityto


6/15

6

generateextremelystrongcashflows.WithEBITDAmarginsinthe40sandcapitalexpenditure

requirementsthatarealmostimmaterial,webelievewehavebakedinaverylargemarginofsafetyon

thisposition.

Seathasinitiatednegotiationswiththeircreditorsaboutapotentialdebtforequityswapwhichwould

seeamajorityofthe8%notesconvertedintoequity.Asoneofthelargestbondholders,wehavebeen

involvedinthesenegotiations.Thedealhasnotyetbeencompleted,andgiventhesensitivity,weare

unableto

comment

further

at

this

time.

ForestOilCorpForestOil($14/shareattheendofthe3rdquarter),anexploration&productioncompany,wasoneof

ourworstperformingstocksduringthequarter,down46%in3Q.Fallingoilandnaturalgaspricesand

themarket'sgeneralriskaversionbeginninginAugustdroveFSTaswellasmanyofitsenergypeers

lower.Oilpricesfellfrom$97/barrelto$79/barrelduringthequarterlargelyonconcernsofslowing

economicgrowth,thoughhavesincerebounded.Oilpricesarenowbackat$98/barrelasactual

demandhasproventobeextremelyresilient.Neartermnaturalgaspriceshavealsofallenbutlonger

termpricesremaininlinewithourassumptions.Whileweaddedsomeenergymarkethedgestoprotect

ourdownside

during

3Q,

we

believe

that

FST

is

undervalued

even

at

oil

and

natural

gas

prices

below

the

currentlevelsandweaddedaggressivelytothispositionallthewaydownto$9.50pershare. We

believethestockisworth$30pershare.

BeforewebeganbuyingForest,shareshadalreadyfallen30%during2011,primarilyduetodeclining

performanceoftheirkeyasset,theGraniteWash.OnJuly7th,Forestprovidedanoperationalupdate

withfurtherdisappointingwellresultsintheGraniteWash,thecompanycutproductionguidancefor

theyearandraisedspending.FSTstockdeclined14%onthatday.Webegantobuildourpositionafter

thisnews,aswebelievedthatissuesbehindthereducedguidanceweretemporary,valuationwas

attractiveandsentimenthadturnedextremelynegative.Inaddition,thecompanyhadalreadyIPO'd

theirCanadian

subsidiary,

Lone

Pine

Resources.

We

believed

the

separation

of

LPR

would

simplify

FST's

portfolioandmakethecompanyeasiertobesoldifthestockdidnotreflectthecompany'sintrinsic

value.

However,throughAugustandSeptember,FSTcontinuedtotradelowerintheabsenceofspecific

companynewsflowandasthemarketcontinuedtoquestionthequalityofForestsassetbase.We

believeinvestorshadextrapolatedFST'sprolificinitialresultsintheGraniteWashoflastyearhadbegun

toentirelydiscountthisplay.

FSThadalsobuiltapotentiallyattractivepositionintheEagleFordshale,anarearepletewithindustry

activity.InAugust,aresearchreportnegativelyportrayedtheeconomicsofFST'sacreagecitingwhatwe

believeto

be

inaccurate

and

premature

data.

While

we

are

not

positive

exactly

how

much

of

FST's

acreagewillultimatelybecomeeconomic,webelieveasignificantportionwillprovevaluableaswell

resultsfromnearbycompetitorshavebeenpromisingandacreagedealshaverecentlygoneashighas

$10,000/acre.Nonetheless,atthecurrentvaluation,webelievethemarketisgivinglittlecredittoeither

FSTsGraniteWashorEagleFordplays.


7/15

7

Lastly,in3QFSTcompletedthespinoffofLonePineResources.Asmentioned,weviewthetransaction

positivelyasitsimplifiestheFSTportfoliobyremovinganattractivebutnoncorepositionandshould

allowFSTtorefocustheireffortsontheirkeydomesticplays.

DespitetheselloffinFSTandenergystocksingeneral,threerecentindustrydealshighlightthe

underlyingvalueintheNorthAmericanoilandnaturalgasresourcespace:Statoil'spurchaseofBrigham

Exploration,KinderMorgan'stakeoutofElPasoandSinopec'sacquisitionofDaylightEnergy.Eachof

thesedeals

implied

long

term

oil

and

natural

gas

prices

of

$90

$100/barrel

oil

and

$5.50/mcf

natural

gas,whichimplyfairvalueforFSTof$30/share.WebelieveFST'sassetswouldmakesenseinthehands

ofastrategicbuyer,andifmanagementisnotabletocloseFST'sdiscounttofairvalue,astrategicbuyer

wouldlikelystepin.

Sincetheendofthequarter,FSTshareshaverebounded13%andarenowaboveourcostbasis.FST

reportedsolidQ3earningsbutmoreimportantlyannouncedseveralverypositivewellresultsinthetwo

areasthathadbeeninquestion,boththeGraniteWashandEagleFord.ThewellsintheGraniteWash

reversedthetrendofdecliningperformanceYTD.IntheEagleFord,FSTreportedaverygoodwellinthe

shallowestportionofitsacreage,commonlyassumedtobetheleastproductiveportionofitsacreage,

andassuchFST'sEagleFordresultsshouldonlyimprovefromhere.Theseannouncementssignificantly

dispelledthemarket'sskepticismofFST'sassetsthoughwebelievethereismoretogo.

WecontinuetobelieveupsideisextremelyattractivehereasFST'snetassetvalueinourupsidecaseis

$30/shareandatleast$22/shareassumingamoreconservativepricedeckof$80/barreloiland

$5.00/mcfgasprices.RecenttransactionswouldvalueFSTatourupsidecaseof$30.Ourdownsidecase

ifrecentpositiveresultsintheGraniteWashandEagleFordprovetobefleeting,webelieveisnoless

than$1214/shareNAV,thoughourexperiencelastquartershowedthatstockscantradewellbelow

liquidationvalueforaperiodoftime.GiventhepositiveinflectioninFST'soperationsasillustratedby

thecompanyssolidQ3resultswebelievethistobeaverylowprobabilityscenario.

WellpointIncWellpointsstockdeclined17%inthe3rdquarterasourmanagedcarepositionswereimpactedbythe

outcomeofthedebtceiling. AsoutlinedintheCignasection,theJointSuperCommitteewasunableto

agreetodeficitreductionmeasures,andsequestrationtriggeredanacrosstheboard2%cutto

Medicarespendingbeginningin2013. WeestimateMedicarerepresents1015%ofWellpoints

earnings,butifacutweretriggereditwouldonlyimpactQ42012earningsandby2013,webelievethe

effectswouldlargelybepassedontoprovidersorrepricedthroughbenefitdesign.

Wellpointtradesat9.0x2012P/Eandwillreturn14%ofitsmarketcaptoinvestorsthisyearthrough

sharerepurchasesanddividends.Recently,thecompanyannouncedanincreasetoitssharerepurchase

authorizationto

$5B,

which

is

approximately

2years

of

cash

flow.

Barring

better

uses

of

capital,

managementisindicatingtheywillreturn21%ofthemarketcapoverthenext2years.

Historically,theHMOindustrytradedat1318xearningsduetotheirhighreturnsoncapitaland

earningsgrowth.Premiumsgrewwithmedicalcosts(68%annually)and8085%ofthepremium

revenuewaspaidoutinbenefits.Giventhehighlevelofunderwritingpredictability,largeemployers

retainedunderwritingriskandpaidtheHMOsforaccesstotheirprovidernetworks.Withamodest


8/15

8

amountofSG&Aleverage,earningsgrewat10%annually.Beingabletounderwriteprofitablyalso

limitedinvestmentportfoliorisk.

ThesegmentmostatriskofdisruptionfromhealthcarereformistheIndividualandSmallGroup

segment.OftheBig4insurers,Wellpointgetsthelargestpercentageofitsearningsfromthe

IndividualandSmallGroupspace.Whileweacknowledgethatmarginswilldeteriorateinthissegment,

theplayerswiththegreatestregionalmarketsharewillstillbeabletonegotiatethebestrateswith

doctorsand

hospitals,

provide

the

most

comprehensive

network,

thus

offering

insurance

more

cheaply

thansmallerplayers.Netnet,thebiggestplayersshouldgainmarketshareattheexpenseofless

efficientplayers.Wellpointshouldbealongrunwinnerfromthistrend.

Whenwemodelouttheearningsimpactfromhealthcarereform,webelievethenetimpactisa10%

proformadeclineinearningsversuswhatWellpointwouldhaveearnedwithouthealthcarereform.

Oncerebased,wethinkearningscanresumetheirhistoricalgrowthpattern,sincehealthcarereform

wasmuchmoreaboutexpansionofcoverageversusreductionofmedicalcosttrends.Inthemeantime,

wewillbereceiving$2.5Binannualsharebuybacksandwearecreatingthestockat6.5x2014P/E.Even

ifweneededtowait2yearsforthemarkettobecomfortableputtinga12xmultipleonWellpoints

earnings,thiswouldrepresentagrossreturnof180%anda35%IRRfromtodaysshareprice.

TevaPharmaceuticalTevastockdeclined23%inQ3(from$48.22to$37.22)despiteitsostensiblydefensivecharacteristics.

Typically,whenastockdeclinesthatmuchinashortperiodoftime,therehasbeenamajorchangeto

thecompanysearningspowerorlongtermoutlook.Wedontbelievethathasbeenthecase,asthe

neartermearningsoutlookisfineandTevasCopaxonesituation(describedinpreviousletters)hasalso

madefavorableprogress. Atcurrentlevels($40),thestockistradingatlessthan7x2012earnings,and

wethinkthestockisworth$60pershare,representingaround50%upside.

TevaQ211earningswereslightlyaboveexpectations.Thecompanyreported$1.10EPSversus

consensusexpectationsof$1.07.Intermsofforwardlookingestimates,fullyear2012earnings

expectationshaveonlyimprovedinthelastfewmonths.Seethechartbelow.Theredlinerepresents

consensusestimatesfor2012EPS(righthandaxis),whereasthewhitelineisthestockprice(lefthand

axis).ConsensusestimateshavegoneupsinceQ211andstandat$5.74.Meanwhilethestockcorrected

sharplyduringtheJulyAugustperiod.


9/15

9

Oneconcernthathasimpactedthehealthcaresectoristhespecterofadditionalcutstoreimbursement

rates.Specifically,giventhestructureofthedebtceilingresolution,whichwillresultinanautomatic2%

reductioninMedicarepaymentsacrosstheboardstartingin2013unlesstherearechangesbyanew

Congress. Fortunately,TevahasrelativelylittleexposuretoMedicareorMedicaid.Approximately15%

oftheirUSbusinessisfromMedicareandMedicaid(6%and9%respectively).ButUSisonly50%oftotal

sales,soevenifthecutendsupbeing4%,thatwouldonlyapplyto7.5%ofTevassalesandhasade

minimusimpactonearnings.

RegardingCopaxone,theMultipleSclerosisdrugthatrepresentsapproximately1/3ofTevasoperating

profits,thepatentcasecontinuestomoveinTevasfavor.OnAug29th,thecourtissuedafavorable

Markmandecisionwhichisthetechnicaltermforasetofpatentclaimconstructionrulings.Thisis

importantbecausetheexactdefinitionofkeytermsinapatentcanbeopentointerpretation,andthus

howthesetermsareunderstoodbythecourtcanbecriticalinaninfringementcase.Asthepatent

holder,Tevaclearlywantedthedefinitionstoleadtothebroadestsetofpatentclaims.Fortunately,the

courtadoptedallrelevantTevaclaimconstructioninterpretations.Therefore,inouropinion,this

decisionimprovedTevaschanceofwinningitspatentinfringementsuitagainstmakersofaproposed

Copaxonegeneric.Weexpectafinaldecisionbymidyear2012.

OnesetbackthathasoccurredwasthatTevaspotentialsuccessordrugtoCopaxone,Laquinomod,had

disappointingphaseIIIresults,whichweresharedwiththemarketonAug1st.Streetmodelshad

incorporatedrelativelylittleforLaquinomodsalesgiventhedurabilityoftheCopaxonefranchiseand

availableLaquinomodclinicaldata.Nonetheless,thestockdeclined6%onthatday,asthiscalloption

onalleviatingtheCopaxoneoverhanghasallbutdisappeared.

Atthecurrentprice($40),wethinkTevaoffersaveryattractiverisk/rewardgiventheclearsecular

growthdriversingenericdrugs.WeexpectTevatoearn$5.78inEPSin2012,suchthatthestockis

tradingat6.7xforwardyearearnings.WethinkTevacangrowEPSatahighsingledigitCAGRoverthe

nextseveralyearsevenifagenericCopaxoneislaunchedinthattimeframe.Therefore,wedarguethat

thestock

should

trade

at

10

11x

EPS

which

would

lead

to

atarget

of

$58

$63,

or

45

58%

upside

from

recentprices.

Wewouldalsonotethatmanagementhasgivenlongtermguidanceof$6.80$7.50ofEPSin2015.

Giventhecurrentvaluation,themarketisimplyingextremepessimismthatthosetargetsare

achievable,whereaswebelieve$7shouldbefeasible.Wethinkthestockshouldgetahighermultiple

aftertheCopaxonepatentsexpire,asthecompanywillbeabletogrowearningsfasterwiththatpatent

cliffheadwindbehindit.At12x$7earnings,thatwouldimplyafuturepriceof$84pershare.Wethink

thatisareasonablepricetargetforlate2014,whichequatestoa30%IRRovera3yearholdingperiod.

In

terms

of

downside,

we

must

acknowledge

that

perhaps

we

are

wrong

and

Teva

loses

that

patent

case

andtheFDAapprovesafullysubstitutablegenericCopaxoneinthenextyear.Thosearetwo

independentevents,bothofwhichwefindunlikely.LetsalsoassumethatTevadoesntkeepany

marketshareinCopaxonewhichisparticularlyconservativegiventhenatureofthedrug.Inthat

scenario,wethinkTevacanearn$3.75EPSin2012,andistradingat10.5xearnings,whichwedont

thinkisdemandinggiventhegrowthratefortherestofthebusiness.


10/15

10

HuiXianREITDuringAugustandSeptember,themarketsinAsiadeclinedseverely,ledbyadeclineintheHsharesof

28%.OurnamesinAsiasufferedaswell,withourtwobiggestlosersbeingPICC,down36%and

representingan84bpslossandHuiXianREIT,down36%andrepresentingan83bpslossforthe

quarter.Generally,wehavenotseenanychangeinthefundamentalperformanceofthecompanieswe

haveinvestedinandattributemostofthedeclinetomarketderisking.

HuiXianREITisasinglesitecommercialcomplexlocatedintheheartofBeijingwith44%ofitsvalueina

shoppingmall,27%inofficebuildings,19%intheGrandHyatthotel,and10%inserviceapartments.Hui

XianREITwasthefirstoffshoreRMBdenominated(CNH)REITlistedinHongKongandhastradeddown

considerablyfromitsIPOandfallenanadditional32.8%inAugustandSeptember.Throughoutthistime,

though,therehasbeennochangetothefundamentalsofthecompanyotherthanthemacroconcerns

ofaChinahardlanding.

Theoccupancyrateoftheshoppingmallhasbeenconsistentlyinthehigh90sevenduringthefinancial

crisis.Revenuegrowthisalsovisibleasexistingrentalcontractshave45%rentescalatorsbuiltinand

realizedrentsare2030%belowcurrentspotrents,whichshouldleadtosignificantrentalreversionin

thenext

35years.

The

offices

are

one

of

the

prime

choices

for

multinational

corporations

to

base

their

ChinaheadquartersinBeijing.Between20052008,BeijingsawahugephaseofnewsupplyforGradeA

officesandasaresultoccupancydroppedto6070%in2008andrentsweredepressed.Astheeconomy

grewandnewsupplywasdigested,occupancyincreasedfromitstroughlevelin2008andisnow90

91%.SpotrentshavealsoincreasedtoaboutRMB200/sqm/monthversuscurrentrealizedrentof140.

Toputthisinperspective,HongKongsGradeAofficerentsarearound1300/sqm/month.Theaverage

leasetermisabout3years,andweexpectaverageofficerentachievedwouldcontinuetoreverttothe

currentspotoverthenext34years.

GivenHuiXiansrentalreversionprofileandsupply/demanddynamicsforitscoreassets,wecansee

visibleearning

growth

of

13

15%

for

the

next

3years.

At

the

end

of

September,

the

stock

was

trading

at

a13%grosscaprate,10%netcaprate,andanunleveraged8%dividendyield.Thecompanyisinanet

cashpositionandintendstoleveruptobuyotherqualityrentalprojectsinChina.Giventhecurrent

tightfinancingforcommercialdevelopersinChina,HuiXianstandstobenefitthroughacquisitionswhich

canenhanceequityvalue.Sincetheendofthethirdquarter,thestockhasrebounded13%.PICCPropertyandCasualtyPICCisthelargestP&CinsurerinChinawith40%marketshare.Wehavebeeninvolvedinthisname

sinceearly2010,whichiswhentheindustryturnedfromnegativeunderwritingprofitabilitytopositive

underwriting,leadingtoacombinedratio(costsdividedbyrevenue)improvementfrom107%to93%as

ofJune

30th

2011.

Currently,

PICC,

Ping

An,

and

CPIC

(65%

of

the

market)

are

running

at

combined

ratiosinthelow90sversusthesmaller,marginalinsurersinthehigh90sto100.GivenPICChasa7%

expenseratioadvantageagainstPingAnandCPICand1015%versusthesmallerinsurersbecauseofits

scaledifference,wethinkPICCscombinedratiocanbesustainedatlowtomid90sstructurally.

Beyondthemarketsdecline,therewassomeconcernthatclaimcostsmightbehigherbecauseof

inflationandthatacommissionwarhadstarted.Aftertalkingtoeightdifferentinsurancecompaniesin

varyingregionsinChina,wefoundtheoppositetobetrueregardinghigherclaimcostsandthat


11/15

11

commissioncostshadincreased,butonlyfor15%oftheirbusinessandcausinganethittocombined

ratioof30bps.Whileinflationprobablycontributed100200bpsnegativelytothecombinedratio,this

ismorethanoffsetbyadecreaseinaccidentfrequency.TheChineseautomarketsawahugeboomover

20092011,wheremanyfirsttimedriversenteredthemarket.Asaresult,accidentfrequencyrateshave

declinedfrom55%in2009to30%currently.

Afterthestocksdecline,attheendofSeptemberPICCwastradingat67x11Eearningsand2x11EP/B

ratiowith

a40%

ROE.

While

the

street

is

saying

PICCs

profitability

peaked

in

2011

and

underwriting

profitabilitywilldeclinenextyear,wecansee23yearsofvisible3035%ROEandadoublingofbook

value.Sincetheendofthethirdquarter,thestockhasrebounded30%.

ConclusionWearedisappointedbyrecentperformance. Themarketshavebeenveryunfriendlytoinvestors,with

extremevolatilityduetosignificantmacroeconomicheadwindsthathaveextremelybinaryoutcomes.

WehavementionedthesovereigndebtissuesinEuropeandthepoliticalgridlockandhigh

unemploymenthereintheUSnumeroustimesoverthepasttwoyears. Westillassertthattherearent

anyeasyanswerstotheseproblems,eventhoughthemarketwouldliketothinksoasitcontinues

hopingwith

fingers

crossed

that

kicking

the

can

down

the

road

will

ultimately

be

awinning

proposition.

TheseEuropeanissueswouldbedifficultenoughtosolvewithsimilarlysituatedpeoplewithlikeminds,

soyoucanimaginehowmuchmoredifficulttheissuesbecomewhenyouhave17differentcountries

withcompletelydifferentfiscalproblemsandacentralbankwithlimitedpowers.Couplethatwiththe

largesteconomyintheworldstuckinneutralformanyreasons,includingpoliticalgridlockthathasno

signsofabatinguntilthenextelectionsthatarealmostayearaway,andyoucanseewhythereare

reasonstobecautious.

Withthatsaid,itsourjobtoremainopportunisticallymindedandfindsignificantlyundervaluedor

misunderstoodinvestmentsinthesevolatileenvironments.Wehopetheabovedescriptionsofourten

largestloss

making

positions

during

the

prior

quarter

helps

you

to

understand

that,

while

we

dont

like

toeverlosemoney,sometimesmarketforceswillcausegoodinvestmentstobeseverelymispricedfor

certainperiods.Webelieveweareinoneofthoseperiodsnow,and,whileweareconcernedaboutthe

headwindsmentionedabove,wefeelthatinalloftheseinvestmentswewillbewellrewardedover

time.

Wewouldliketothankyouagainforyourcontinuedsupport.Ifyouhaveanyquestionsaboutthefunds,

pleasedonthesitatetocontactKimSmith,ourDirectorofMarketingandInvestorRelations,oranyof

us,at(212)6882550.

Sincerely,

Jeff Altman Dan Krueger Jeff Lee Shai TamborJeffreyA.Altman DanielE.Krueger JeffreyF.Lee ShaiS.Tambor

andtherestoftheOwlCreekTeam.


12/15

12

EXHIBITS:FlagshipPortfolio$5.1billionAUMandthefivelargestnamesasofSeptember30,2011,were(alphabetically):

AifulCorp

AppleInc

CignaCorp

WashingtonMutual,Inc.(HoldingCo)

WellpointInc

ThenameslistedaboveconsistofaminorityofissuersinOwlCreeksportfolioanditshouldnotbeassumedthattheseholdingswereorwillbeprofitable.

OwlCreek2010&2011GrossPerformanceAttribution3

2010 2011

Equities4,5

1Q 2Q 3Q 4Q YTD 1Q 2Q 3Q

Est4Q

thru

11/30 YTD

Automobiles &Components 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.2% 3.0% 0.9% 2.3%

Banks&OtherFinancialI ns ti tutions 3.6% 2.1% 0.0% 0.7% 2.2% 0.3% 0.3% 0.9% 0.7% 1.6%

CapitalGoods 0.0% 0.2% 0.6% 1.2% 0.4% 1.0% 1.1% 2.0% 0.2% 2.3%

ElectricUtilitiesandPower 1.7% 0.1% 0.0% 0.5% 1.2% 0.1% 0.1% 0.2% 0.0% 0.2%

Energy 0.3% 0.9% 0.0% 1.1% 0.4% 2.2% 1.1% 1.7% 0.4% 0.2%

HMOs 0.7%2.0% 1.4% 0.2% 0.3% 2.8% 1.8%

2.9% 1.2% 2.9%

Insurance 2.2% 1.7% 0.0% 0.7% 1.1% 0.2% 0.2% 0.2% 0.0% 0.3%

PharmaandOtherHealthStocks 0.4% 1.5% 1.7% 1.7% 2.4% 0.8% 0.3% 1.1% 0.6% 0.1%

MarketPuts/Calls 0.5% 0.9% 0.7% 0.8% 1.1% 1.1% 0.1% 1.1% 0.2% 0.3%

NonAsiaIndices 2.0% 1.9% 2.4% 4.0% 6.3% 4.1% 0.5% 4.0% 2.5% 2.4%

OtherNonAsiaEquities 1.8% 0.8% 0.1% 0.1% 0.9% 0.3% 0.1% 1.4% 2.3% 1.1%

HongKong/ChinaEquities 0.3% 0.6% 0.6% 0.8% 1.2% 0.2% 0.4% 3.9% 1.4% 2.4%

JapanEquities 1.1% 1.8% 0.1% 0.0% 0.7% 1.1% 0.5% 0.5% 0.1% 1.2%

OtherAsiaEquities 0.1% 0.1% 0.0% 0.5% 0.4% 1.4% 0.3% 0.6% 0.1% 1.1%

TotalEquities 6.3% 8.9% 0.3% 2.6% 0.4% 2.0% 0.2% 12.7% 3.0% 8.2%

Credit6

Distressed&OtherCredit 1.5% 0.9% 0.7% 0.6% 1.9% 1.2% 0.9% 1.8% 0.3% 0.5%

Liquidations 2.5% 0.5% 0.2% 0.3% 2.0% 0.5% 0.3% 2.0% 0.2% 2.1%

CorporateCDS 0.0% 0.1% 0.2% 0.2% 0.2% 0.1% 0.1% 1.2% 0.1% 1.2%

SovereignCDS

and

Bonds 0.0% 0.5% 0.1% 0.5% 1.2%

0.4% 0.1% 0.6% 0.2% 0.4%

AsiaDistressed 0.4% 0.3% 0.1% 0.5% 0.3% 0.4% 0.5% 0.4% 0.2% 1.6%

EuropeDistressed 1.1% 0.1% 0.5% 0.3% 1.4% 0.6% 0.4% 1.7% 0.2% 0.5%

TreasuryBonds 0.2% 0.3% 0.1% 0.2% 0.3% 0.1% 0.3% 0.5% 0.3% 1.1%

TotalCredit 5.3% 0.7% 1.4% 0.2% 6.1% 1.1% 1.8% 3.8% 0.9% 0.1%

Miscellaneous

SidePockets 0.0% 0.2% 0.1% 0.3% 0.6% 0.1% 0.1% 0.1% 0.2% 0.2%

FX Hedges 0.6% 0.4% 0.6% 0.5% 0.9% 0.7% 1.0% 0.9% 0.1% 0.9%

FX Positional 0.1% 0.2% 2.8% 0.0% 2.4% 0.1% 0.8% 0.6% 0.0% 1.3%

OtherMisc 0.6% 0.1% 3.3% 0.5% 4.4% 0.6% 0.6% 0.9% 0.4% 2.4%

TotalMiscellaneous 0.0% 0.6% 1.0% 0.7% 2.3% 1.2% 2.4% 0.5% 0.6% 4.7%

GRANDTOTAL 11.5% 10.2% 0.6% 2.0% 2.8% 1.8% 0.4% 16.5% 3.0% 12.7%


13/15

13

GrossPerformancebySecurityType7

PortfoliobyIndustryType9,10,11

1stQtr 2ndQtr 3rdQtr YTD Since20028 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 2011 2011 Inception

GrossPerformancebySecurityType:CommonStock 1 .2 % 2 5.5 % 2 5.5 % 9 .5 % 3 9.9 % 4 7.8 % 39.7% 3 0.6% 5.2% 7.2% 0.0% 20.2% 1 4 .5 % 1 4 9. 5%ShortStock 1.9% 5.3% 5.0% 6.2% 13.1% 7 .1 % 3 7 .9 % 24.8% 6.9% 4.9% 1 .1 % 5.5 % 0.7% 33.5%ShortBonds 1.7% 10.8% 2.5% 1.1% 0.7% 0.2% 0.0% 0.2% 0.1% 0.2% 0 .2 % 0.3 % 0.1% 10.2%BankDebt 2 .1% 2.7 % 4 .3% 0.1% 0.8% 0.1% 0.2% 1.6% 1.3% 0.4% 0.2% 0.3% 0.4% 9.0%LongBonds 6.9% 49.7% 1 1.3% 1.4% 6.0% 0.4% 1.2% 26.7% 4.6% 0.6% 1.1% 2.6% 0 .9 % 1 55 .6 %LongCDS/CDX 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 2.3% 2.9% 0.0% 0.1% 0.0% 0.0% 0.1% 0.7%ShortCDS/CDX 0.0% 0.0% 0.0% 0.0% 2.0% 1.8% 5.9% 6 .4 % 0 .2 % 0.7% 0.0% 2.1% 1.3% 0.4%Expenses 1.6% 1.9% 1.6% 1.6% 1.5% 1.5% 1.7% 1.6% 1.7% 0.5% 0.4% 0.7% 1.6% 15.1%

TotalPortfolio 5 .2 % 6 0.7 % 3 3.1 % 4 .1 % 2 6.9 % 4 0 .8 % 8.9% 22.2% 2.8% 1.8% 0.4% 16.5% 1 5 .3 % 3 0 6. 0%NetEquity 0 .8 % 1 9.2 % 1 9.8 % 3 .3 % 2 2.5 % 3 9 .9 % 1 1.3 % 0 .2 % 1 .3 % 2 .1 % 1.0% 15.3% 1 4.4 % 9 1.5 %NetDebt 6.6% 37.9% 1 3.3% 2.4% 5.3% 2.2% 4.6% 24.4% 6.1% 0.2% 1.1% 0.5% 0.8% 1 55.1%Expenses 1.6% 1.9% 1.6% 1.6% 1.5% 1.5% 1.7% 1.6% 1.7% 0.5% 0.4% 0.7% 1.6% 15.1%

TotalPortfolio 5 .2 % 6 0.7 % 3 3.1 % 4 .1 % 2 6.9 % 4 0 .8 % 8.9% 22.2% 2.8% 1.8% 0.4% 16.5% 1 5 .3 % 3 0 6. 0%GrossLong 2 .6 % 9 1.3 % 4 4.9 % 1 0.8 % 4 9.0 % 4 8.6 % 40.8% 70.8% 11.2% 8.4% 1.2% 22.9% 1 5 .3 % 5 6 4. 9%GrossShort 3.7% 15.6% 7.4% 5.2% 14.3% 6 .0 % 4 4 .8 % 30.0% 6.9% 5.8% 1.3% 8.0% 0.4% 41.4%Expenses 1.6% 1.9% 1.6% 1.6% 1.5% 1.5% 1.7% 1.6% 1.7% 0.5% 0.4% 0.7% 1.6% 15.1%

TotalPortfolio 5 .2 % 6 0.7 % 3 3.1 % 4 .1 % 2 6.9 % 4 0 .8 % 8.9% 22.2% 2.8% 1.8% 0.4% 16.5% 1 5 .3 % 3 0 6. 0%

Long Short Net

Exposure Exposure Exposure

HealthCareEquipment&Services 13.1% 1.3% 11.8%

Liquidation 12.0% 0.4% 11.6%

DiversifiedFinancials 13.4% 1.9% 11.5%

Media 7.3% 0.9% 6.4%

Banks 8.6% 3.4% 5.2%

TechnologyHardware&Equipment 7.0% 1.9% 5.1%

GovernmentBonds 2.4% 2.0% 4.4%

RealEstate 4.6%

0.4% 4.2%

Automobiles &Components 5.4% 2.3% 3.1%

Transportation 3.7% 0.7% 3.0%

Household&PersonalProducts 3.2% 0.9% 2.3%

Other 2.2% 0.1% 2.1%

TelecommunicationServices 3.8% 1.7% 2.1%

Software&Services 4.5% 2.9% 1.6%

Pharma.,Biotech.&LifeSciences 4.0% 2.9% 1.1%

Food&StapleRetailing 0.8% 0.8% 0.0%

Utilities 1.5% 1.9% 0.4%

ConsumerDurables &Apparel 0.1% 0.6% 0.5%

Semiconductors&SemiconductorEquipment 0.0% 0.7% 0.7%

Insurance 1.8%2.6%

0.8%

Retailing 0.2% 1.0% 0.8%

Food,Beverage&Tobacco 0.7% 2.2% 1.5%

Materials 0.6% 3.0% 2.4%

ConsumerServices 2.3% 5.7% 3.4%

CapitalGoods 6.1% 9.6% 3.5%

Energy 4.0% 13.2% 9.2%

Total 113.3% 61.0% 52.3%

IndustryExposureasof9/30/11


14/15

GrossExpos

Portfolioby

%ofAverageCapbCommonStockShortStockShortBondsBankDebtLongBondsLongCDS/CDXShortCDS/CDXNetExposureNetEquityNetDebtNetExposureTotalLongTotalShortNetExposureGrossEquityGrossDebtGrossExposure

re12,13

AssetClass14

200215

2003

ySecType:22% 36%

10% 14%

6% 32%

5% 6%

51% 77%

0% 0%

0% 0%

62% 73%

12% 22%

50% 51%

62% 73%

78% 119%

16% 46%

62% 73%

32% 50%

62% 115%

94% 165%

2004 2005

60% 112%

38% 57%

25% 21%

10% 4%

50% 29%

0% 0%

0% 0%

57% 67%

22% 55%

35% 12%

57% 67%

1 20% 14 5%

63% 78%

57% 67%

98% 169%

85% 54%

1 83% 22 3%

2006 2007

154% 1 65%

73% 112%

12% 2%

3% 1%

19% 6%

0% 0%

0% 0%

91% 58%

81% 53%

10% 5%

91% 58%

176 % 1 72%

85% 114%

91% 58%

227 % 2 77%

34% 9%

261 % 2 86%

14

2008 2009

110% 63%

90% 42%

0% 2%

1% 3%

3% 33%

1% 2%

3% 2%

26% 55%

20% 21%

6% 34%

26% 55%

113% 97%

87% 42%

26% 55%

200 % 105%

8% 42%

208 % 147%

1stQtr

2010 2011

91% 135%

42% 52%

3% 2%

6% 4%

26% 27%

0% 0%

0% 0%

78% 112%

49% 83%

29% 29%

78% 112%

12 3% 166 %

45% 54%

78% 112%

13 3% 187 %

35% 33%

16 8% 220 %

2ndQtr 3rdQtr

2011 2011

119% 89%

27% 44%

8% 2%

4% 5%

30% 35%

0% 0%

0% 1%

119% 85%

93% 45%

26% 40%

119% 85%

154% 129 %

35% 44%

119% 85%

146% 134 %

42% 43%

189% 177 %

YTD Since

2011 Inceptio

115% 93%

41% 53%

4% 11%

5% 4%

31% 32%

0% 0%

0% 0%

105% 66%

74% 40%

32% 26%

105% 66%

150% 129%

45% 63%

105% 66%

156% 145%

39% 49%

195% 194%

n


15/15

15

Thisletterisintendedonlyforthepersontowhomithasbeendelivered.Thisletterisnotanofferorsolicitationwithrespecttothepurchaseorsaleofanysecurity.Any

investmentdecisioninconnectionwithOwlCreekI,L.P.,OwlCreekII,L.P.,OwlCreekOverseasFund,Ltd.,OwlCreekSociallyResponsibleInvestmentFund,Ltd.,Owl

CreekAsiaI,L.P.,OwlCreekAsiaII,L.P.,andOwlCreekAsiaFund,Ltd.shouldbemadebasedontheinformationcontainedintheConfidentialMemorandumforthe

applicableFundwhichwillbemadeavailableuponrequest.Thisletterisstrictlyconfidentialandmaynotbereproducedorredistributedinwholeorinpartnormayits

contentsbedisclosedtoanyotherpersonunderanycircumstances.Thisletterisnotintendedtoconstitutelegal,tax,oraccountingadviceorinvestment

recommendations.

1.PerformanceDisclosures:InceptionDatewasFebruary1,2002.

NetPerformance:Netofallfeesincludingmanagementfeeandincentiveallocation/fee.Foronshorefundsassumesthatunrealizedgains(ifapplicable)onspecial

investmentswouldfirstbeoffsetbyanylossrecoveryaccount(LRA)andfortheoffshorefundassumesthatunrealizedgains(ifapplicable)onspecialinvestments

wouldnotbeoffsetbyanyLRApriortoaccruingforincentive.

GrossPerformance:Netofmanagementfee,doesnotincludeincentiveallocationfee.

Performance

is

based

on

the

assumption

that

an

investor

was

invested

in

the

Funds

since

inception

with

no

subsequent

subscriptions

or

redemptions

and

was

eligibletoinvestinnewissues.Thisincludestheappreciation/depreciationofthefairvalueofanyspecialinvestmentandincome/lossfromnewissues.Investors

whoinvestwiththeFundsinthemiddleofaparticularyear(aftertheestablishmentofaspecialinvestment)orwhodonotparticipateinnewissueswillhave

differentmonthlyandyearlyperformancenumbersandthedifferencemaybesubstantial.Additionalperformanceinformationisavailableuponrequest.Past

performanceshouldnotbeviewedasindicativeoffutureresults.InformationforYTD2011issubjecttorevisionpendingcompletionofDecember31,2011audits.

AnnualandInceptiontoDateperformancenumbersarecalculatedbygeometricallylinkingmonthlyperformancefortherelevantperiod.

TheS&P500Index(the"S&P500")isawidelyrecognizedindexof500publiclytradedstocksthatincludesthereinvestmentofdividends.TheS&P500is

unmanagedandthereforedoesnothaveanytransactioncosts,advisoryfeesorsimilarexpensesthatareassociatedwithitsperformance.Onecannotinvestin

theS&P500.TheinvestmentprogramofthefundsmanagedbyOwlCreekisnotrestrictedtothesecuritiescomprisingtheS&P500.Theinvestmentsprogramof

thefundsincludetradingandinvestmentsindebtsecurities,aswellasothersecuritiesandinstrumentsoftroubledcompanies.Inaddition,thefundsportfolio

maycontainoptionsandotherderivativesecurities,shortsalesandleverage,maynotbeasdiversifiedastheindicesandmayexperiencedifferingdegreesof

volatility.Fortheforegoingandotherreasons,theperformanceofthefundsmanagedbyOwlCreekandtheS&P500maynotbecomparable.

2.InformationisfortheOwlCreekOverseasFund,Ltd.InceptionwasFebruary1,2002andthechartisbasedoffofquarterlydatapoints.

3.InformationisfortheOwlCreekOverseasFund,Ltd.Performancenumbersarecalculatedbygeometricallylinkingmonthlyperformanceforeachsecuritytypefor

therelevantperiod.PleaserefertothePerformanceDisclosuresabove.

4.Equitiesincludecommonsharesandsomepreferredsharesanddebtthatactsubstantiallylikeequityinvestments.

5.AllAsianpositionsaregroupedintoAsianspecificclassificationswhereasallnonAsianpositionsarebrokendownintotheirspecificindustryclassifications.

6.Creditincludesbonds,bankdebt,creditdefaultswapsandsomecommonsharesandsomepreferredsharesthatactsubstantiallylikecreditinvestments.

7.InformationisforOwlCreekOverseasFund,Ltd.Performancenumbersarecalculatedbygeometricallylinkingmonthlyperformanceforeachsecuritytypeforthe

relevantperiod.PleaserefertothePerformanceDisclosuresabove.

8.InceptionwasonFebruary1,2002.

9.InformationisfortheOwlCreekOverseasMasterFund,Ltd.

10.Exposureincludesthenotionalexposureoftotalreturnswapsandfuturescontracts.Forpurposesoftheindustrybreakdown,indiceshavebeenbrokenoutinto

thecorrespondingexposuresoftheunderlyingholdingsofeachindex.

11.StartingonApril30,2011,OwlCreekwillgenerallybreakdownindustrybasedonGICSindustrygroups;OwlCreekhasmadeadjustmentstotheseclassifications

when,initsownjudgment,ithasdeterminedthatGICSclassificationiseithernotreflectiveoftheunderlyingexposureorifGICSdoesnotprovideaclassification.

ThefollowingnonGICSbucketsareincludedintheindustryexposure:

#1Liquidation Equitiesandcreditsofacompanythatisanticipatedtobeinliquidationproceedingsinthenearfutureoriscurrentlyinliquidationproceedings.

#2GovernmentBonds includesSovereignCDSandTreasuries.

#3Other includesforwardforeigncurrencyexchangecontracts,escrowpositions,theinvestmentintheOwlCreekAsiaMasterFund,Ltd.aswellasanyGIC

industrygroupwherethelongandshortexposureislessthan0.5%ofNAV.


13.Chartisbasedonquarterlydata.Quarterlydataiscalculatedbytakingtheaverageexposureofthemonthendexposures:frominceptionthrough6/30/2010Owl

CreekOverseasFund,Ltd.monthendexposuresareused;from7/1/2010onwardsOwlCreekOverseasMasterFund,Ltd.monthendexposuresareused.Exposure

includesthenotionalexposureoftotalreturnswapsandfuturecontracts.

14.

Portfolio

exposures

are

calculated

by

taking

the

average

exposure

of

the

month

end

exposures:

from

inception

through

6/30/2010

Owl

Creek

Overseas

Fund,

Ltd.

monthendexposuresareused;from7/1/2010onwardsOwlCreekOverseasMasterFund,Ltd.monthendexposuresareused.Exposureincludesthenotional

exposureoftotalreturnswapsandfuturecontracts.


Documents

Owl Creek letter