Disclaimer

The past performance results presented herein do not guarantee and are not indicative of future results. There can be no assurance that these or comparable returns will be achieved from investments made by the Courage Special Situations Master Fund, L.P. (“Master Fund”), either individually or in the aggregate. All returns shown have been calculated on a consistent basis and assume a theoretical continuous investment in Class A interests of the Master Fund’s domestic feeder fund through March 31, 2010, which are charged a 1% annual management fee and 20% annual incentive allocation, and Class B interests of the Master Fund’s domestic feeder from and after April 1, 2010, which are charged a 1.25% annual management fee and 20% annual incentive allocation. All returns reflect the reinvestment of dividends and interest and the deduction of all fees, expenses and incentive allocation. Beginning March 2008, all returns presented reflect returns for a ‘‘new issue eligible’’ investor. Allocation of new issues to new issue eligible investors may result in returns to such investors that are higher than the returns to “new issue ineligible” investors. Investors should be aware that, when the Funds have been able to achieve positive returns, it has done so partially due to various hedging strategies, such as the “short” selling of securities and the selling and buying of options of underlying securities and commodities and futures contracts. The performance data listed above for the domestic feeder fund was developed internally by the fund itself and such performance numbers are unaudited. It is possible that performance goals of the fund may not be achieved and that an investor could lose all or a significant portion of its investment. Portfolio position data reflects holdings of the Master Fund.

Disclaimer

The past performance results presented herein do not guarantee and are not indicative of future results. There can be no assurance that these or comparable returns will be achieved from investments made by the Courage Credit Opportunities Fund II, L.P. (the “Credit Fund II”), either individually or in the aggregate. All returns shown have been calculated on a consistent basis and assume a theoretical continuous investment in Credit Fund II. All returns reflect the reinvestment of dividends and interest and the deduction of all fees, expenses and incentive allocation. The performance data listed above was developed internally by the fund itself and such performance numbers are unaudited. It is possible that performance goals of the fund may not be achieved and that an investor could lose all or a significant portion of its investment.

Disclaimer

The past performance results presented herein do not guarantee and are not indicative of future results. There can be no assurance that these or comparable returns will be achieved from investments made by the Courage Long Short Opportunity Fund, L.P. (the “Long Short”), either individually or in the aggregate. All returns shown have been calculated on a consistent basis and assume a theoretical continuous investment in Long Short. All returns reflect the reinvestment of dividends and interest and the deduction of all fees, expenses and incentive allocation. The performance data listed above was developed internally by the fund itself and such performance numbers are unaudited. It is possible that performance goals of the fund may not be achieved and that an investor could lose all or a significant portion of its investment.

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Special Situations

Overview

The Special Situations strategy has an 18-year track record and seeks to generate equity-like returns through a portfolio of debt and equity investments and a low net exposure.

Courage has an extensive track record of opportunistic, contrarian, and deep value investing in credit and equities.  The team's expertise "up and down" the capital structure affords us the ability to structure investments creatively to establish a favorable, asymmetric risk to return profile.

Strategy

The Special Situations strategy draws upon the team's access to a differentiated and robust network of industry, operational, financial, and restructuring professionals to source unique opportunities where we can gain an edge through extensive fundamental research and deep due diligence.

Courage employs an opportunistic, value-driven investment approach focusing on event-driven or special situations that capitalize on complex, misunderstood, or off-the-run opportunities.  Sourcing is derived from:

  • Distress and bankruptcy
  • Litigations and investigations
  • Complex situations
  • Capital structure dislocations
  • Out of favor industries, companies, and asset classes
  • Activism
  • Private company and industry relationships
  • Transformative catalysts generating value opportunities
  • Courage's extensive library of models, deals, and work-outs

Approach

Opportunistic and
value-biased

We believe the best opportunities often result from irrational markets and emotion surrounding events where the pricing of securities becomes inefficient and deviates from underlying value.  The Special Situations strategy focuses on opportunities and catalysts where we can unlock value.

The strategy targets securities of mostly small- and mid-cap U.S. companies and maintains flexibility with regard to investing across a company's capital structure. The Special Situations strategy will invest both long and short and is opportunistic, value-biased, and often contrarian.  We strive to build a differentiated portfolio with a low correlation to the broader markets and other managers.

Process

The strategy employs an iterative process and collaborative approach designed to source, evaluate, and implement investments with a consistent discipline throughout various market environments.

Idea Generation

  • Courage draws upon its access to a unique network for idea sourcing and timely insight into situations as they develop.
  • Identify the catalysts which provide the framework for both entry and exit points.
  • Prioritize ideas:
    • Meets criteria
    • Informational edge
    • Favorable risk/reward
    • Divergent View

Intensive Research Modeling

  • Analyze industry and competitive landscape.
  • Prepare detailed financial model and assess valuation framework.
  • Collaborate and compose questions for due diligence.
  • Complete management calls/visits; conduct field research and channel checks; consult with industry contacts.
  • Ascertain range of possible EVs; emphasize downside risk.

Position Structuring

  • Examine securities across the entire capital stack; seek best risk/reward tradeoff.
  • Size positions based on the level of conviction and the magnitude of tail risk.
  • Require a significant return premium for illiquid positions.

Exposure Profile

  • Create a concentrated portfolio of long and short idiosyncratic investments.
  • Continually review catalysts/milestones to track the accuracy of our initial thesis.
  • Ensure an appropriate liquidity profile of the broader portfolio and limit exposure to highly illiquid positions.

Risk Management

    • A parallel process at both the position and portfolio level

    • Balance a bottom-up centric strategy with a top down assessment of overall risk.
  • The process is intended to concentrate the portfolio on idiosyncratic risk and mitigate unintended beta exposures.