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Owl Creek Asset Management, L.P.
•
640 Fifth Avenue, 20
th
Floor
•
New York NY 10019
•
T 212 688-2550
•
F 212 753-2760
 January 30
th
, 2009
Performance Since Inception
 
S&P 500IndexOwl Creek I, LP* Owl Creek II, LP*Owl Creek OverseasFund, Ltd*
Gross Net Gross Net Gross Net
-20.94% Year 2002* 5.14% 4.12% 4.98% 3.98% 5.25% 4.20%28.67% Year 2003 60.88% 48.70% 61.00% 48.80% 60.69% 47.67%10.87% Year 2004 32.67% 26.14% 32.77% 26.22% 33.12% 26.50%4.91% Year 2005 3.95% 3.16% 4.07% 3.25% 4.11% 3.35%15.78% Year 2006 25.78% 20.63% 26.17% 20.94% 26.94% 21.35%5.49% Year 2007 39.75% 31.80% 39.93% 31.94% 40.81% 32.42%-6.00% Jan-08 3.24% 2.62% 3.24% 2.62% 2.55% 2.11%-3.25% Feb-08 2.78% 2.26% 2.77% 2.26% 2.66% 2.21%-0.43% Mar-08 -0.76% -0.62% -0.75% -0.61% -0.52% -0.43%4.87% Apr-08 -5.28% -4.31% -5.27% -4.30% -5.07% -4.22%1.30% May-08 5.79% 4.68% 5.88% 4.75% 6.90% 5.70%-8.43% Jun-08 3.45% 2.82% 3.50% 2.86% 4.27% 3.57%-0.84% Jul-08 -13.19% -10.89% -13.18% -10.85% -13.32% -13.38%1.45% Aug-08 -3.35% -3.35% -3.36% -3.36% -3.15% -3.17%-8.91% Sep-08 -0.37% -0.37% -0.75% -0.75% -1.83% -1.84%-16.79% Oct-08 6.04% 5.66% 6.35% 5.96% 6.05% 6.08%-7.17% Nov-08 -3.60% -3.26% -3.95% -3.59% -4.14% -4.16%1.06% Dec-08 -1.84% -1.84% -1.98% -1.98% -1.89% -1.65%
-36.99% Year 2008 -8.44% -7.53% -8.85% -7.93% -8.91% -10.32%-8.95%
Inception to Date
275.44% 196.17% 275.82% 196.25% 281.58% 189.89%-1.34%
AnnualizedInception to Date
21.07% 16.99% 21.08% 16.99% 21.35% 16.62%
* Inception Date was February 1, 2002
Past performance should not be viewed as indicative of future results. Performance herein is reflected for an investor who wasinvested in Owl Creek since inception and is eligible to invest in new issues. This includes the appreciation/depreciation of the fair value of any special investment. Investors who invest with Owl Creek funds in the middle of a particular year, including after theestablishment of a special investment, will have different monthly and yearly performance numbers.
640 Fifth Avenue, 20
th
FloorNew York, NY 10019T212 688-2550F212 753-2760
 
Owl Creek Asset Management, L.P.
•
640 Fifth Avenue, 20
th
Floor
•
New York NY 10019
•
T 212 688-2550
•
F 212 753-2760
 
Monthly Gross Exposure
0%50%100%150%200%250%300%31-May-0830-Jun-0831-Jul-0831-Aug-0830-Sep-0831-Oct-0830-Nov-0831-Dec-08
   G  r  o  s  s   E  x  p  o  s  u  r  e
Gross Long Gross Short
 
31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec
Gross Long
169% 132% 109%
88% 76% 56% 45% 57%
Gross Short 
117% 108% 65%
54% 57% 35% 24% 36%
Total Gross
286% 240% 174%
142% 133% 91% 69% 93%
After what felt like an eternity, 2008 is finally in the past. During this tumultuous periodin the world’s financial markets, we have seen unprecedented declines in the marketaverages globally and the daily questioning of the viability of the world’s financialsystem. We saw the demise of Lehman Brothers, last minute rescues of Bear Stearns,AIG and Merrill Lynch, and now government ownership of what today is a minorityinterest in all the major banks and what’s left of the investment banks. Europe is notfaring any better, and its financial system is even more precarious than ours, as its banksare significantly more levered on an assets to equity ratio than the over-levered US banksand investment banks. Asia, the recent growth engine, producer of the world’s exportsand consumer of the world’s commodities, is slowing dramatically. Japan’s rising Yenthreatens its export economy, and China’s recent unprecedented growth is showing clearsigns of being over-cooked.With that as a backdrop, two words dominate our investing mindset at Owl Creek:patience and conservatism. While we are excited about the potential dislocation thatmarket turmoil will continue to cause and the investment opportunities we expect willemerge from the carnage, we have not and will not jump in head first as we don’t foreseethe dramatic snap backs we have seen in recent history. During 2008, our conservativestance served us well as our flagship funds’ blended decline was 9% for the year vs. theS&P 500 being down 37% and the MSCI World Index being down over 40%. While wedon’t like losing money we feel very fortunate to have dodged a significant number of 
 
Owl Creek Asset Management, L.P.
•
640 Fifth Avenue, 20
th
Floor
•
New York NY 10019
•
T 212 688-2550
•
F 212 753-2760
 bullets, landmines, and other incendiary devices during this dramatic year. We have nowreturned 17% on an annualized basis to investors since our start in 2002 versus -1%annualized return for the S&P 500 over that same period. Our skeptical value-drivenapproach has allowed us to do the one thing we find most important here at Owl Creek,and that’s to preserve capital. With the partners and I at Owl Creek being the 2
nd
largestinvestor in the funds and me being the largest individual investor you can be assured thatpreservation of capital will always be our main focus.Almost everyone we speak to in the investment community has been saying the samething of late: “I have never seen anything like this before”. This is exactly why we havethe defensive portfolio mix and overall conservative tone that we have been expressingfor over a year now. The way we think about the investment landscape today and whywe believe so many people got it so wrong in 2008 is the fact that most managers didn’treally believe the above statement. Most investors kept thinking they had seen thisbefore and reacted the way the markets had taught them to act over the last 26 years.Media correspondents and long only money managers are on TV every day calling thebottom and saying we should be out there buying the dips. What we are experiencingtoday is very different. We have had 26 years of various types of bubbles pop, all of which we have corrected by adding additional leverage to the system, and now we arepaying the price for all of that. This will not be an easy unwind, and it will take years,not months, to recover from this downturn. Speaking recently with one of the smartestCEOs we know, he described the situation in even more dire terms: “It seems to me theworld economy has metastasized cancer, and even when the patient recovers it will bewithout many of its limbs for a long time to come.”
Distressed Debt and Credit
We are finally seeing an uptick in the default rate (see chart below), and distressedopportunities are now coming in our direction. As most of you know, we draw adistinction between stressed credits and distressed debt. We don’t dismiss theopportunity to make good risk-adjusted returns in stressed credits, and in fact we haveincreased our exposure from being net short credit for all of 2007 and most of 2008 tonow being net long 8% in stressed credits. However, we believe there is tremendousuncertainty as to how and when this shakeout will begin to stabilize, and we would needto have a larger margin of safety for us to want to aggressively own stressed credits.After the end of a 26 year-long credit and leverage boom, we think it is difficult to getcomfortable with the pro forma (or go-forward) business models, income statements, andbalance sheets of many of the current wave of stressed companies that will likely becomethe distressed companies of the future. We will continue to focus on the simple businessmodels and companies that we can get comfortable with, and we are happy to wait formuch of the rest to come our way. In distressed, the really fat pitches we have seen havebeen found in heavily litigated bankruptcy plays. We’ve already found a couple of greatopportunities, and we are net long 12% in distressed debt. This gets us to a 20% positionin all stressed and distressed credits
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