Waterstone Market Neutral

Master Fund Ltd.

Fund Investment Objectives

The investment objective of the Fund is to return to investors over 12% annually, while preserving capital and avoiding correlation to broad market indexes. The Fund invests in multiple strategies with a specialization in convertible securities. The fund manager evaluates the markets for credit, equities, volatility and convertibles to choose investments with the best risk-adjusted source of return. The primary driver to the investment strategy is relative valuation, incorporating fundamental analysis, quantitative models, scenario analysis and past experience. To best implement an investment opinion with regard to a particular company, we compare the relative value of all the different components of its capital structure and its competitors' capital structures. The strategies invested in currently include: Convertible Arbitrage, Credit Long / Short, Opportunistic Equity, Event-Driven, Volatility Arbitrage, Capital Structure Arbitrage, and proactive negotiations with companies. The Fund actively changes its portfolio as its analysis of potential risks and rewards differ from current market consensus. We add value to performance through hands-on trading, fundamental research and market judgment, and the Portfolio Manager's experience includes profitable years in the difficult markets of 1994, 1998 and 2002.