Waterstone Quarry Master

Fund Ltd.

Fund Investment Objectives

The Waterstone Distressed Opportunities Master Fund's investment objective is to produce attractive, risk-adjusted returns through investment in stressed and distressed company situations while maintaining a liquid overall portfolio. Fundamental research is the primary driver of the investment strategy, which also incorporates broader market movements and trading technicals. The fund's investment process considers: Fundamental research, drawing on sector-specific expertise; In-depth analysis of a company's entire capital structure; Macro views of the credit cycle and the potential for systemic dislocations; Market technicals; and Liquidity. Waterstone pursues a bottom-up approach to investing. We analyze a company's entire capital structure to identify discrepancies between its view of value and the market price, and looks to exploit those discrepancies. The fund seeks to mitigate volatility by maintaining a reasonably liquid portfolio, selecting securities most appropriate given its view of the current investing environment and incorporating other risk-management tools into its portfolio construction process. Portfolio Characteristics The fund may take positions in bank debt, corporate bonds, equities, claims, derivatives and other securities. The portfolio may also include long and short positions in other types of securities. The initial geographic focus will be the U.S. and Canadian markets.