Gates Capital Management -

ECF Value Fund II, L.P.

Fund Investment Objectives

The Fund makes investments based on cash flow generation, focusing on event-driven equities and high yield debt. Event-driven securities include equities and bonds created through spin-offs and financial restructurings. High yield investments tend to be larger issues that are more senior in the capital structure with low equity risk. The portfolio typically holds 30-40 positions, including equity long/short (40-60%net), and high yield bonds (30-50%). Liquidity requirements, limits on leverage and portfolio concentration, and use of options to protect positions are key risk management tools employed. The manager's competitive advantage is a discliplined approach to understanding the cash flow prospects for companies undergoing disruptive events.