Distressed Securities are comprised of debt, equity and creditor claims of a company that is undergoing a corporate restructuring or in which the market is embedding a heightened going-concern risk. In such securities, the market will often assign a higher level of uncertainty to the company's securities to compensate investors for this additional risk. When a company restructures, its securities tend to improve in value as the uncertainty /risk that the company will remain a going concern is lowered.

Orphan Securities

"Orphan Securities" are defined as bond, equity and hybrid financial instruments that are created when newly reorganized companies emerge from a corporate restructuring. These securities are given to creditors and/or shareholders in exchange for their holdings of creditor claims and/or pre-restructuring securities. These securities will often trade at a discount to comparable securities until they attract a broader following from the broader investment management community.

Credit Deterioration

"Credit Deterioration" is defined as the weakening of a company's financial condition, measured by its credit risk, as a result of a catalyst event such as a violation of a key covenant in its banking facilities, the inability to refinance its existing bank or bond facilities, insufficient capital to complete its business plan, impending credit agency downgrades, or reduction in corporate distributions or dividends. The Fund's investment activities in the area of Credit Deterioration will predominately take the form of a short sale of corporate debt and/or equity securities that the Manager believes are overpriced relative to its risk profile combined with a catalyst event that may cause the market to revalue these securities.

Capital Structure Arbitrage

"Capital Structure Arbitrage" is defined as the strategy of offsetting long and short positions in different securities within a company's capital structure. Opportunities arise when different segments of the capital markets assign a materially different risk/return outlook to a company's securities and there is potential profit from the reversal of the valuation discrepancy between these securities.

Reorganization

A "Reorganization" is defined as a situation when a company undergoes a liquidation, merger, wind-up or divestiture of some or all of its operations and assets. Existing investors will typically receive either new securities, corporate assets and/or a cash payout in the event that the Reorganization is completed.The Fund will purchase or short sell debt and/or equity securities of companies that are undergoing a formal Reorganization. Investments will be pursued in securities that are trading at a material variation to what the Manager believes to be the securities' realizable value

Recapitalization

A "Recapitalization" is defined as the additional financing a company requires to make its capital structure more stable to avoid, operate in, or emerge from a restructuring. Sometimes called "Rescue Financing", the use of this capital is to generally pay off secured lenders, refinance debtor-in-possession debt facilities, finance new capital expenditures and/or to re-establish working capital or financial liquidity.