Healy Circle Capital

April 21, 2010

Re: Healy Circle Partners, LP

Dear Investor,

The initial signs of an economic recovery, ongoing government stimulus, a benign interest rate environment
supported by the Federal Reserve and an underinvested public, continued to push the market higher with
the S&P 500 rising 5.4% in the first quarter. After a rocky January, caused by some profit taking after last
year’s gains, the market marched higher despite low trading volumes. Since the March 6, 2009 bottom of
666, the market has risen 75.6% and 49.8% over the past twelve months.

Despite an environment that continues to challenge our commitment to managing a hedged portfolio, we are
pleased to announce that Healy Circle Partners, LP rose 4.8%, representing our best quarter since the
second quarter of 2008. Mirroring the market, we struggled in January (down 6.0%) as the market traded
lower but rebounded strongly in both February (up 5.7%) and March (up 5.4%). For perspective, our longs
once again significantly outpaced the market, rising almost 13% however, our shorts cost the portfolio
almost 8%. Although we and others have anticipated a “stock picker’s” market in which there are
opportunities on both the long and short side, suiting our investment strategy best, the last 21 months has
been mainly directional. Moreover, it has been the most challenged companies, both fundamentally and
financially, that have risen the most. Our challenge remains performing within a market environment that is
not conducive to our investment strategy while being positioned to capitalize when the environment better
suits it.

We are hopeful that the past four months (including our 5.2% gain in December) represent a continuation of
the strong investment results that we achieved during the first 7 ½ years of our Fund. Despite the
challenging results over the past eighteen months, we are proud of our long term track record (compounded
return of 3.5% compared with the market’s gain of 1.1%) achieved with modest net market exposure while
being tax efficient.

ITD
Jan Feb Mar 1Q 2010 (6/1/01)
Healy Circle Partners, LP* (6.0%) 5.7% 5.4% 4.8% 36.0%
S&P 500** (3.6%) 3.1% 6.0% 5.4% 10.2%
Dow Jones** (3.3%) 3.0% 5.3% 4.8% 22.9%
Note: Performance numbers are based on Limited Partner returns; monthly results may not add to a full quarter’s results.
* Net of all fees and expenses. Returns may differ depending on a Partner’s IPO eligibility.
** Performance is based on Index return with reinvestment of dividends.

444 Madison Avenue, 34th floor New York, NY 10022 tel 212 446 2440 fax 212 446 2448
As highlighted in the Appendix, our gross exposure of 220% was modestly greater than at year-end which is
a function of finding more interesting opportunities on the long side of the portfolio, which we discuss below.
However, our net exposure ended the quarter at 44%, which was comparable with year-end levels, and
again highlights our commitment to maintaining a hedged portfolio. Each of our five largest positions
contributed in the quarter. Walter Energy (WLT), our second largest position, was the second biggest
contributor due to metallurgical coal prices rising substantially as China began importing coal from the U.S.
Ford Motor Co (F), a beneficiary of an operating turnaround, the government’s “cash for clunkers” program,
and increased share from both their domestic competitors (who received government bailouts) and its
foreign competitors, most notably Toyota (TM), is now one of our largest positions replacing WR Grace
(GRA). We have begun reducing our position in GRA as it has approached our price objective.

Market Outlook

I recognize that I’m a “glass half empty” individual and it’s easy to remain focused on the many challenges
that face our economy over the next several years: the growing budget deficits on a national (not to mention
those at the state and local) level; the implications for the US Dollar; and the importance of foreign
governments to fund this deficit are front and center. Importantly, the political discord in Washington is as
great as I can ever remember and while we would argue that gridlock is traditionally perceived as good for
the market, there appears to be many issues that need to be addressed, including government spending
and financial regulatory reform. Besides our domestic concerns, the crisis in Greece underscores the
economic challenges that are facing a number of developed countries in Europe (referred to as the “PIIGS”
and include Portugal, Italy, Ireland, Greece and Spain) and represent a serious challenge to the European
Union.

Despite these ongoing and longer term concerns, we are encouraged that employment trends are improving
(yet have a long way to go), the economic stimulus is beginning to have some impact, corporate end
demand has picked up (albeit being helped by inventory restocking), and consumer confidence and
spending are also improving. We continue to believe that the Fed will err on the side of caution leaving
short term rates low to ensure an economic recovery but which may lead to inflation somewhere down the
road. And while long term rates have begun to move higher, they remain at historically low levels, and a
steepening yield curve is a positive for the health of many financial institutions.

There are clear signs that the improving economy is helping corporate earnings as incremental top line
growth is being leveraged by the significant cost cutting actions that were undertaken over the past eighteen
months. Moreover, it is estimated that there is $1 trillion of cash on corporate balance sheets, which
represents 11% of corporate assets, and is at the highest level since 1955. This cash plus the estimated
$625 billion of uncommitted private equity funds, coupled with the improving availability of credit from the
banks has begun to translate into a return of merger and acquisition activity by both strategic and private
equity investors in a broad spectrum of industries including energy, technology, materials and utilities. We
expect this trend to continue, which we discuss in greater detail below.

As investors face the challenge of unattractive short term interest rates and what to do with their cash, we
face the challenge of trying to determine how much of the good news has been priced into the overall
market, but more importantly, into individual stocks. One concern is that the market has been rising on low
volume, which has traditionally been a cautionary sign. As well, the VIX Index, which is a measure of
volatility (and is associated with “fear”), is at low levels last seen in mid 2007, well before the financial
meltdown, suggesting a level of complacency that is concerning.

Investments

One of the topics that we discussed in our last letter was several investments that we had made in
“distressed” companies. Our focus has been on good companies that either had a capital structure that was
overleveraged or was caught by a significant change in industry conditions. By way of an update, we
bought Pilgrim’s Pride (PPC), the nation’s largest chicken producer, which had filed for bankruptcy after
previous management had undertaken several acquisitions that leveraged up its balance sheet. Following
an operational restructuring undertaken by a new management team and the sale of a 64% stake to the
Brazilian company JBS, Pilgrim’s Pride exited from bankruptcy in December, 2009, which was one of the
catalysts we were looking for when we originally invested. As well, the poultry market has shown signs of
improvement as several of the largest participants (PPC being one of them) have shown restraint in chicken
production. However, when the next anticipated catalyst, the IPO of JBS USA (which includes its stake in
PPC) was delayed to the end of this year or into next year, we decided to exit our position with a 54% gain
over the six months we owned it.

The second stock we discussed last quarter was General Growth Properties (GGP), one of the largest mall
REITs (real estate investment trust) in the country, which entered bankruptcy in April 2009. As
management is approaching its bankruptcy hearing to reorganize and exit bankruptcy later this month,
several suitors/investors have emerged underscoring the attractiveness of GGP’s assets. They include both
strategic buyers/investors including Simon Properties, another of the nation’s largest mall REITs as well as
several of GGP’s largest debt and equity holders. The potential outcomes range from an outright sale to a
significant equity infusion that enables GGP to exit bankruptcy is a going concern. Despite a 96%
appreciation in our position, we’ve opted to hold on to 60% of our original position as we are encouraged by
the significant interest shown by multiple parties that are more knowledgeable than us about GGP’s assets
and operations.

In the quarter, we took a position in Wabash National (WNC), one of the largest manufacturers of truck
trailers in the United States. The combination of massive reduction in the demand for light, medium and
heavy duty trucks (and therefore truck trailers) over the past several years as the economy slowed and
declining trucking company profitability, WNC’s shares collapsed 99% from 2004 to 2009. For perspective,
revenues fell from $1.3 billion in 2006 to $337 million in 2009 and despite its standing as one of the largest
and well known participants in the industry, its market capitalization fell to less than $25 million. And while
we aren’t expecting a robust recovery, we have seen some incremental improvement in the demand for
trucks and WNC has received several large orders. Needless to say, after significant cost cutting over the
past several years in order to survive, there is significant earnings leverage should revenues pick up, even
modestly.

Another, and less evident, opportunity to participate in the distressed investing arena is through Lennar
(LEN), the homebuilder, which we think is a unique backdoor way of buying distressed real estate from the
FDIC (Federal Deposit Insurance Corporation). We view this opportunity as similar to investing in the
divestitures from the RTC (Resolution Trust Corporation) which was created following the Savings and Loan
crisis in 1989. At this juncture, I am sure you are scratching your head. Yes, LEN remains one of the
nation’s largest homebuilders and new housing starts have fallen more than 60% from a peak in winter 2006
to current levels. The good news is that the federal government is attempting to stimulate new home sales
(as well as help existing homeowners remain in their current homes). At some point, new family formation
will outstrip supply, which has been curtailed. LEN management is widely credited with addressing its
operating issues sooner than most of its peers, which we view as a major positive. After selling and writing
down a lot of its unfinished and raw land, LEN management has begun to selectively purchase land lots in
certain markets, suggesting improvement in several local markets. But what attracted us to LEN was a deal
they struck in mid-February with the FDIC, in which their Rialto subsidiary purchased a $3 billion portfolio of
largely residential loans from the FDIC (which retained a 60% stake) which financed the purchase at 0% for
7 years. We find several parts to this transaction interesting, including: 1) LEN has done this before through
a subsidiary called LNR, that was extremely successful and subsequently sold to a private equity firm, and
the LNR team has been reassembled; 2) the government is a stakeholder and financier at very attractive
terms; and 3) when asked why they kept this opportunity in the public company rather than as a private
vehicle, management admitted that because of the financial meltdown they were unable to raise the capital
for a private partnership. In fact, at least two other pools of loans have been sold by the FDIC to large well-
known private equity firms. While we are cautious of the near-term housing issues (we are monitoring
housing trends quite carefully), we think LEN is a unique investment vehicle to participate in the distressed
real estate market.
As we noted above, both corporate cash levels ($1 trillion) and uncommitted private equity funds ($625
billion) are at heighten levels. The banks have begun to selectively lend, which would leverage this potential
“buying pool”. The M&A market has begun to show signs of life as corporate managements appear to be
regaining confidence in their own business and private equity firms have capital to spend and are able to
monetize some portion of their existing investments as the IPO market has also reopened.

We have no idea who the next acquisition candidate is, although in 2007 we had ten companies in our
portfolio acquired. One of the reasons is that our portfolio has many mid-sized companies (between $1 and
$10 billion market capitalizations) which are the perfect size for many potential buyers. Earlier we noted the
situation with GGP. In our last letter we also wrote about RadioShack (RSH) as an interesting investment
as a relatively new management team, led by CEO Julian Day, is changing the focus of the retailer. As we
noted, Mr. Day, who previously turned around and subsequently sold Kmart to Sears, is heavily incentivized
by a stock laden contract. Although the fundamentals at RSH are improving, there have been market
rumors that RSH will either be sold to a strategic buyer (such as Best Buy) or a private equity firm. We have
no particular insight regarding its M&A activity but RSH is an improving (and ubiquitous) retail concept and
has a management incentivized to enhance shareholder value. We suspect that a price north of $30 per
share, or about 30% above the current price and more than double Mr. Day’s cost basis, gets the deal done.

As the economy was improving and consumer spending began to accelerate, we bought United Airlines
(UAUA). Despite all of the pitfalls associated with investing in airlines over the past decades, we thought
the combination of increased demand, decreased supply, an emphasis on profitability through measures
such as charging for luggage as well as an initial round of consolidation (USAir buying America West and
Delta buying Northwest) were all positives. Over the past year, airlines have been good investments, with
UAUA rising 54% since our purchase. Subsequent to the end of the quarter, it was first reported that UAUA
was in merger talks with USAir and then Continental (both of which UAUA has had merger discussions with
in the past). Because the stock has risen smartly on the news and there are consolidation challenges with
each (such as labor and equipment issues and alliance partnerships), we’ve sold our position as we believe
a large portion of the upside has been achieved and the risks outweigh the rewards.

Besides takeout candidates, we think there are several “beneficial buyers” in our portfolio. One is Tyco
International (TYC), which spun off their healthcare (Covidian) and electronics (Tyco Electronics)
businesses in June of 2007. In January, 2010 management announced the purchase of Broadview
Security, (the renamed Brink’s Home Security), which in turn had been spun off from Brink’s Company in
October 2008. We think this deal, which is expected to close reasonably soon and which combines the two
largest participants (Tyco’s home security brand is ADT) in the home security market, is extremely attractive
fundamentally as well as being accretive to full year 2010 estimates of $2.70 per share. And while the stock
is up 105% since our purchase in March 2009, it is still reasonably inexpensive trading at less than 15x this
year and 13x next year earnings.

Another example of “beneficial buyer” is Republic Services (RSG), the nation’s second largest solid waste
management company. Following the December 2008 acquisition of Allied Waste, the Republic Services’
management team of CEO Jim O’Connor and CFO Tod Holmes, whom I have known and respected for the
past two decades, has focused on the integration of these two organizations. Synergies have run ahead of
initial expectations, and despite negative solid waste volumes in the face of the slowing economy, we have
been impressed by the industry pricing discipline. We suspect a better volume environment coupled with
this industry-wide pricing discipline along with the cost cutting and integration efforts will translate into better
than expected earnings growth and free cash flow. We are confident that management is focused on
returning that cash to its shareholders, including Bill Gates’ investment fund which owns 15% of the shares
(and has been a holder since the 1990’s) and Warren Buffett with a 2% stake (a recent buyer and the first
time in my 25 year memory that he has owned a waste services stock), through dividend increases (the
current yield is 2.5%) and stock repurchases.

As we continue to lament, the short side of the portfolio continues to be a challenge as most companies are
witnessing strong/improving earnings. Profits on the short side of the portfolio have been few and far
between. Short squeezes have been plentiful, particularly as the most financially and fundamentally
challenged companies have sidestepped disaster as they restructure their operations and are able to
refinance their balance sheets. While committed to maintaining a hedged portfolio, we have: 1) tightened
our risk management relative to our shorts, covering a position when it goes 15% against us; and 2) taken
profits when an event occurs that leads to a downdraft in one of our shorts.

Among the themes on the short side, they continue to include companies that have exposure to state and
municipal government spending given the shortfalls that are occurring. As we have noted previously, we
are short (although we have taken some profits) a California road builder whose largest client is the
California Department of Transportation and we are short a school book publisher under the thesis that
elementary and high schools will have to cut back on their spending.

Several other short themes in the portfolio:

• Managed care companies, who were and are the subject of much of the health care debate and
health care bill that Congress has recently passed. Despite recently initiating significant price
increases, we suspect that their pricing leverage in the future will be limited, the level of public and
regulatory scrutiny increased and that demographics with the initial “baby boomers” eligible for
some form of government programs will work against HMO profitability; and
• Financial services companies, that 1) are dependent on equity trading volumes, which as we noted
above remain slack; and 2) asset management companies that are dependent on money market
fees which remain under pressure due to the extraordinary low levels of short term interest rates.
Moreover, we suspect that financial regulatory reform, which is more likely to be passed following
the disclosure of some alleged wrongdoing at Goldman Sachs (civil charges were filed by the SEC
as we were writing this report) will represent an operating headwind.

Business Update

We have decided to consolidate and move the remainder of our prime brokerage assets that were at BNP
Paribas to UBS Securities LLC. BNP Paribas, through its acquisition of Bank of America’s prime brokerage
business, has been our prime broker since we launched our Fund in June 2001. UBS is one of our largest
research brokers and we look forward to building our prime brokerage relationship.

We remain appreciative of the support that we have received from our investors during this challenging
period. While we made some progress, we have plenty of “wood to chop”. As I noted in the last letter, I
added to the funds and now represent more than 25% of the total funds under management. In the quarter,
we added two new investors, both of whom I have known for decades and both of whom are in the
investment business. We continue to seek new investors who share our collective goals.

Conclusion

We appreciate your continuing support, particularly during these challenging times. We are optimistic that
our performance will improve. Please feel free to call me with any questions or comments at the office (212-
446-2440) or at home (212-593-3301).

Marc Sulam
General Partner
Disclaimer:
Unless noted, performance numbers are based on a limited partner returns who are eligible to participate in IPO allocations. Performance attribution
is the gross return at the fund level. The information provided in this letter should not be considered a recommendation to purchase or sell any
particular security. The securities discussed do not represent the fund’s entire portfolio and in the aggregate may represent only a small percentage
of the fund’s portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be
profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of
the securities discussed herein.
 Healy Circle Partners, LP
March 31, 2010
Growth of Initial $1000 Portfolio Exposure
$2,500
Long Market Value $ 61,714,312 132%
Short Market Value $ 41,006,899 88%
$2,000 Total Exposure $ 102,721,211 220%

$1,500 Net Exposure $ 20,707,414 44%

$1,000 Largest Long Positions

Ticker Company %
$500 CCK Crown Holdings 6.9%
Walter Energy
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
WLT 5.7%
L Loews 4.9%
APC Anadarko Petroleum 3.9%
Healy Circle Partners, LP S&P 500 TR F Ford Motor Co 3.9%

Monthly Performance (%) Net of Fees

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2010 (6.0%) 5.7% 5.4% 4.8%
2009 (0.1%) 5.5% (2.5%) (11.1%) 1.7% (1.1%) 0.4% 1.8% (0.2%) (5.0%) (2.8%) 5.2% (9.1%)
2008 (6.2%) 4.5% (1.9%) 2.9% 7.4% 4.6% (3.4%) (4.3%) (17.2%) (2.0%) (10.0%) (4.2%) (28.1%)
2007 2.4% 0.5% 3.1% 2.0% 3.5% (1.7%) 1.3% (0.1%) 4.3% 5.8% (3.2%) 3.5% 23.1%
2006 6.3% 0.5% 3.6% 2.1% (2.5%) (1.3%) (2.8%) 1.5% (3.7%) 1.0% 4.3% (0.7%) 8.2%
2005 (0.0%) 4.0% 0.1% (2.3%) 1.1% 1.1% 3.8% 0.5% 3.2% (3.2%) 0.8% 1.6% 11.2%
2004 (4.2%) 2.9% (0.7%) (3.2%) (1.4%) 2.9% 0.6% 0.3% 5.2% 0.9% 4.1% 2.4% 9.8%
2003 0.2% 1.6% (0.1%) (1.6%) 0.1% 0.7% 0.8% 1.2% (1.8%) 2.6% 1.2% (0.4%) 4.4%
2002 3.2% 1.1% 0.5% 2.2% 2.3% (0.2%) 1.1% (0.1%) 2.1% (0.9%) (3.2%) 0.7% 8.8%
2001 (0.0%) 2.7% 2.4% 1.6% 2.1% (1.5%) (0.0%) 7.4%
Market Cap Exposure
# Longs Long % # Shorts Short % Total Net %
Greater than $10B 14 44.6% 14 -43.0% 28 1.5%
$1 to 10B 20 65.4% 11 -38.9% 31 26.6%
$500M to 1B 8 15.7% 0 0.0% 8 15.7%
Less than $500M 4 6.3% 1 -5.9% 5 0.5%

46 132.1% 26 -87.7% 72 44.3%

Sector Exposure
Sector: # Longs Long % # Shorts Short % Total Net %
Autos & Transportation 1 3.3% 0 0.0% 1 3.3%
Consumer Discretionary & Service 8 22.3% 5 -13.2% 13 9.1%
Consumer Staples 5 11.4% 2 -6.0% 7 5.4%
Financial Services 10 27.0% 5 -11.9% 15 15.1%
Health Care 2 6.0% 0 0.0% 2 6.0%
Market Indices 0 0.0% 7 -39.7% 7 -39.7%
Materials & Processing 11 38.4% 2 -3.9% 13 34.4%
Multi-Sector Companies and Other 2 4.7% 0 0.0% 2 4.7%
Integrated Oils and Other Energy 4 11.1% 2 -5.0% 6 6.2%
Producer Durables 1 3.4% 0 0.0% 1 3.4%
Technology 2 4.4% 3 -8.0% 5 -3.6%
Utilities 0 0.0% 0 0.0% 0 0.0%

46 132.1% 26 -87.7% 72 44.3%

Important Information
The performance information above may not be indicative of future results. The Fund's returns are calculated net of all management and incentive fees. Performance numbers are based on Limited Partner
returns; monthly results may not add to a full quarter's results. Returns may differ depending on a Partner's New Issue eligibility. The summary is provided merely as a convenience and should not substitute for
a careful review of the Fund's offering materials. Before considering any investment, eligible investors in applicable jurisdictions should carefully review the Fund's offering materials, including a complete
description of the Fund and strategies, policies and risks.