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Bowery Investor Letter

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									October 17, 2012

                                                                                                                     Annualized             Sharpe
 Summary of Results                                                                 3Q12            YTD ‘12
                                                                                                                      Return (*)            Ratio (*)
 Bowery Opportunity Fund, L.P.                                                      3.77%           12.36%               22.64%                1.73
 DJ-CS Event Driven Distressed Hedge Fund Index                                     3.65%             8.29%              10.07%                1.68
 DJ-CS Event Driven Hedge Fund Index                                                3.63%             7.19%                8.34%               1.07
 DJ-CS Hedge Fund Index                                                             3.34%             5.61%                8.79%               1.58

* Figures are since inception of the Bowery Opportunity Fund, L.P. (April 1, 2009)

Note: The data above represents the performance for a limited partner, net of annual management fees and pro forma incentive fees assuming no additional
subscriptions or redemptions by such limited partner since inception. Please see the important disclosures at the end of this letter for further information
regarding the calculation of performance returns.

3Q12 Overview

Financial markets during the quarter were dominated by developments in the European sovereign
debt crisis. The aggressive response by the ECB was not fully anticipated and caught many investors
that were too short by surprise. We disagreed with the conventional wisdom that European credit was
uninvestable and that credit strategy managers had to short European sovereign bonds. During the
quarter we continued to selectively make investments in European banks, such as RBS and Santander.
Our philosophy is that compelling investments only make sense at the right price. We chose not to
initiate short positions in peripheral sovereign bonds at yields exceeding 7%.

The firm stayed cautious during the third quarter with its portfolio positioning and was setup
defensively going into the highly anticipated Federal Reserve meeting. We rapidly increased long
exposure after the Fed’s announcement, but took risk positions back down when the market struggled
to hold onto its gains. Overall, while we see very strong positives beginning to emerge for the U.S. in
housing and energy, we believe the markets are still susceptible to very volatile periods as a number
of key domestic and global issues remain unresolved. At this moment, we are as focused on our
hedging and risk management as much as we are on identifying the correct long and short
investments for our portfolio.

Returns for the quarter were dominated by the strong performance of our long credit positions offset
by market hedges to protect capital. We continued to build positions in core trade claims positions,
such as MF Global. Our investments in European financials performed well as banks have been buying
back their own securities to build common equity and/or retire securities that might not be compliant
with upcoming capital regulations (Basel III). Central bank induced demand for yield is being met with

an enormous supply of lower quality high yield credit. At the end of the quarter, we began actively
looking at some of these new deals as short positions for the portfolio.

Depfa Bank

DEPFA Bank plc (“DEPFA”) is a financial services company wholly owned by Hypo Real Estate Holdings
AG (“Hypo”). DEPFA’s banking operations are domiciled in Ireland with its remaining operations
headquartered in Germany. In January 2010, Hypo was recapitalized by Germany’s Financial Market
Stabilization Authority (“FMSA”). Under stewardship of the FMSA, DEPFA has been ring-fenced as a
completely separate business from Hypo. DEPFA immediately ceased all ongoing lending activities and
is being treated as a run-off. As part of the recapitalization, €132 billion of troubled assets from
DEPFA’s balance sheet were transferred to the FMSA with no residual liability to DEPFA. This
transaction had the effect of radically transforming DEPFA to a good bank with a performing book of
high quality securities. The European Commission mandated that DEPFA pay €1.6 billion to the FMSA
as compensation for the transfer of these troubled assets. This obligation was met in three payments
with the final installment being fully paid in March 2012. The FMSA has consistently stated publicly
that it intends to reprivatize DEPFA in the medium-term.

DEPFA’s current balance sheet consists of €88 billion of assets consisting primarily of loans to public
sector entities, local government authorities and sovereigns in Western Europe and the U.S. These
assets have an estimated duration of less than seven years and are largely rated investment grade
with only 0.1% of total assets in workout or restructuring. The company has €5.9 billion of risk-
weighted assets, €2 billion of tier 1 capital (ratio of 33.7%) and €1 billion in tangible common equity.
We own the DEPFA 5.029% Perpetual Notes that are considered hybrid, tier 1 capital and trade at 32%
of par. The FMSA has suspended the payment of coupons on our notes as well as all other tier 1
capital of DEPFA until it is reprivatized. Our rationale for holding the 5.029% Notes is that DEPFA will
eventually engage in liability management and repurchase its hybrid securities to generate additional
value for its equity holders.

In March 2012, a consortium of hedge funds approached DEPFA to acquire all of the outstanding
equity of DEPFA. While the FMSA has not allowed the consortium to pursue the acquisition, the
existence of prospective acquirers coupled with the FMSA’s stated goal of privatization supports the
likelihood that eventually the 5.029% Notes may be tendered at attractive, above-market rates.
Additionally, the recent liability management exercise announced by IKB Deutsche Industriebank (also
a recipient of aid from Germany) for its hybrid securities suggests a similar scenario at DEPFA could
occur in the near future. Lastly, the continuing developments regarding ECB support for sovereign
debt and the European banking system limits the likelihood of material downside in DEPFA’s core

American Airlines

AMR Corporation (“AMR”) is the third largest U.S. based air carrier behind United Continental and
Delta Airlines. AMR is a holding company and its most important subsidiary is American Airlines, Inc.
(“American”), a provider of mainline airline services which generated $21.3 billion of revenue in 2011.
Another smaller, but also important subsidiary is AMR Eagle Holding Corporation (“Eagle”), a provider

of regional airline services that generated $2.7 billion of revenue in 2011. Eagle was in the process of
being spun-off to shareholders prior to AMR and its subsidiaries filing for Chapter 11 bankruptcy in
November 2011. Since entering bankruptcy, AMR has worked on reducing its cost structure by
renegotiating unfavorable labor contracts and rejecting unfavorable aircraft leases to improve
efficiency. In addition to working on its standalone restructuring plan, AMR is also considering
potential consolidation scenarios. US Airways has expressed interest in a merger with AMR and
American's three largest unions have offered conditional support for a merger with US Airways.
Additionally, AMR indicated its intention to send nondisclosure agreements to potential deal partners
including US Airways, JetBlue, Alaska Air, Virgin America, and Frontier Airlines.

In 2Q12, AMR generated revenues of $6.5 billion and EBITDAR of $639 million versus revenues of $6.1
billion and EBITDAR of $346 million 2Q11. Revenue in the second quarter of 2012 was driven by a 9.1%
increase in consolidated passenger revenue per available seat mile. Consolidated passenger yield,
representing average fares paid, increased 7.1% and mainline passenger yield increased 6.8%. AMR’s
2Q12 mainline load factor, or the percentage of total seats filled, was 85.1%, a record for the
company. Since filing for bankruptcy, AMR has been able to build over $1 billion of additional cash,
leaving $5.7 billion of cash, short-term investments, and restricted cash on the balance sheet as of July
31, 2012.

The largest component of our investment in AMR is in the 10.5% senior secured notes where we are
part of an ad hoc group. On September 21, 2012, attorneys for the ad hoc group asked Judge Sean
Lane to bolster safeguards for the bonds under bankruptcy rules designed to protect secured creditors
from declines in the value of collateral. The 10.5% holders argued that the collateral value cushion is
declining due to: (1) a lack of heavy maintenance checks and engine restoration visits, (2) the
identification of approximately 500 items of deferred maintenance the debtors have elected not to
complete, (3) the default in the payment of interest on the notes when due on April 15, 2012 eroding
the collateral coverage, (4) the debtors’ decision to park three of the aircraft, and (5) merger
discussions which may cause the debtors to reject older aircraft.

The debtors and the Official Unsecured Creditors’ Committee both argued on the record before Judge
Sean Lane that the collateral value of the aircraft far exceeds the amount of debt owed. These
statements, together with our own analysis, support the view that we are substantially oversecured.
At the end of the hearing, the Court concluded that it needed to hold an evidentiary hearing in order
to arrive at an informed decision. It is expected that the evidentiary hearing will be scheduled for this

Dex One

Dex One Corporation (“Dex One”), a yellow-pages directories business pursuing a digital
transformation, generated revenues of $335 million in 2Q12 versus $377 million in 2Q11 (down 11%).
The company is currently employing new tactics, such as digital focused sales teams to support growth
and address the rapidly changing needs of its customers. Digital has increased to 25% of total bookings
in the second quarter with new offerings, such as display, search engine optimization and premium
search engine marketing sold through the firm’s proprietary DexNet platform. In the second quarter of
2012, bundled sales of print and digital increased to 58% of total bookings. Bundles remain on track to
account for more than half of all bookings by year end as print only sales continue to decline. In the

second quarter, Dex One earned adjusted EBITDA of $141 million, representing a 10% decline. From
an operating perspective, the company continues to focus on cost cutting as evidenced by $27 million
in cost reductions. In April 2012, Dex One repurchased $98 million principal amount of senior
subordinated notes. Additionally, in March 2012, the company repurchased $142 million principal
amount of its outstanding bank debt. Adjusted EBITDA net of $46 million in cash interest, $7 million in
capital expenditures and $9 million in working capital, resulted in Dex One generating $79 million of
free cash flow in 2Q12.

On August 21, 2012, Dex One and SuperMedia (formerly Verizon yellow pages) announced that their
respective boards had approved a definitive merger agreement. Dex One shareholders will own 60%
of the surviving enterprise, named Dex Media, while SuperMedia will own the remaining 40%.
According to public filings, both management teams expect estimated annual run-rate cost synergies
of $150-175 million in addition to significant tax sharing benefits. Currently, both companies are in
discussions with lenders to modify loan documents, including extending maturities, modifying certain
covenants, and changing amortization requirements. Although the merger is conditioned on 100%
lender approval, which will be difficult to obtain, many participants believe that the proposed merger
and maturity extension allows both companies to improve cash flow and reduce leverage relative to
their standalone prospects. Dex One may seek to file a pre-packaged Chapter 11 bankruptcy in order
to drag along minority hold outs and extend the maturity of 100% of the bank debt.

The Fund’s investment in the bank debt of Dex One’s subsidiary, RH Donnelley (“RHD”), is one of our
core investments in old media. While the industry is out of favor, we believe RHD bank debt is a
compelling investment. At 62% of face value, RHD is currently valued at roughly 2x trailing EBITDA. The
bank debt is structured with a large coupon, mandatory amortization, and required free cash flow
sweeps that result in contractual distributions of greater than 65% of EBITDA directly to bank debt
holders. In addition, while Dex One is in secular decline, the market has overlooked that the rate of
decline is moderating and offset by the Company rapidly growing new media digital revenues. Over
the last several years, we have seen Dex One grow digital revenue by over 60%. Lastly, RH Donnelley
has extremely valuable tax assets which will be monetized in a merger with SuperMedia.

Very Sincerely,

Vladimir Jelisavcic

Important Disclosures:
This communication is confidential and intended solely for the recipient and his or her clients. No part of this communication may be reproduced or distributed
without the express written permission of Bowery Investment Management, LLC (“Bowery”). Bowery is not responsible for the accuracy or completeness of
information in this communication that was obtained from or compiled by persons or entities not affiliated with Bowery. Bowery uses fundamental value analysis
in the management of Bowery Opportunity Fund, L.P. (the “Fund”). The Fund may hold short positions to seek to enhance return and for hedging purposes. Using
its expertise in the corporate reorganization process, Bowery will select investments for the Fund in companies that are or have been in bankruptcy or
administration, are highly leveraged, or are otherwise experiencing financial or operational stress. Bowery may invest in, among other things, bank loans,
leveraged loans, high-yield debt, mezzanine and other loans, options, warrants, trade claims, and credit-default swaps and payables. The Fund may borrow now
or in the future. The material in this communication is presented with the understanding that the recipient or his or her clients are qualified purchasers and
otherwise eligible to invest in the Fund. This communication does not constitute an offer to sell or the solicitation of an offer to purchase any security or
investment product. Such an offer or solicitation may be made only by means of delivery of a private offering memorandum and subscription documents. The
private offering memorandum contains specific information on important matters, such as fees, incentive compensation, risk factors, and conflicts of interest.

Key Risks: An investor or prospective investor should be able to bear the risks involved in an investment in the Fund, as he or she could lose all or a substantial
portion of the amount invested. Hedge fund investments are speculative and involve a high degree of risk. Hedge funds and other alternative investment
programs are not suitable for everyone. Hedge fund interests are generally illiquid, and there are restrictions on transferring interests in the Fund. There is usually
no secondary market in which to sell hedge fund interests, and none is likely to develop. The Fund is not subject to the regulatory requirements applicable to
mutual funds, including the registration and disclosure requirements of the Securities and Exchange Commission. The instruments held by the Fund may involve
complex tax structures, and there may be delays in distributing important tax information. Fund transactions may take place on markets outside the United States
and consequently involve a greater degree of risk. Bowery is not obligated to provide periodic pricing or valuation information to investors or prospective
investors with respect to individual Fund positions.

Positions Discussed: The positions discussed in this communication do not represent all investments held by the Fund. Current or future Fund investments may
not exhibit the characteristics of the investments discussed in this communication. There is no assurance that any position held by the Fund will be profitable.
Bowery has complete investment discretion with respect to the Fund. Consequently, the identification of a position in this communication does not constitute a
recommendation to purchase or sell any particular investment. The Fund may or may not still own an investment discussed in this communication.

Performance Information: Bowery provides performance information to investors and prospective investors with the understanding that they are knowledgeable
about Bowery, its investment philosophy and strategy, and hedge fund investing generally. If summary performance is presented, an investor or prospective
investor should carefully review the complete performance information provided elsewhere in this communication or available upon request. There is no
assurance that the investment objective of the Fund will be achieved. The past performance of the Fund is not an indication of how the Fund will perform in the
future. Among other things, there may be differences in geographic exposure, economic conditions, regulatory climate, investment style, expenses, use of options
and leverage, portfolio size, portfolio makeup, and other conditions. The Fund may use leverage and engage in other speculative investment practices that
increase the risk of investment loss. Performance may be volatile. Performance information for the Fund reflects the reinvestment of dividends and realized gain
and is unaudited. The performance information is based on a hypothetical investment made at Fund inception, is net of fees, expenses, and incentive
compensation, and assumes that no additional subscriptions or withdrawals have been made. Admiral Administration Ltd., the third-party administrator for the
Fund, provides each investor with his or her actual Fund performance through individualized monthly statements. The performance experience of an investor may
vary from the Fund-level performance shown in this communication due to factors such as the timing of a subscription or withdrawal or the effect of a high water
mark, which would affect the calculation of incentive compensation. Longacre Fund Management, LLC managed various private investment funds from 1999 to
2012. At Longacre, Vladimir Jelisavcic solely managed the Fund, which was then known as Longacre Opportunity Fund, L.P., from its inception in 2009. In May
2012, Mr. Jelisavcic began to manage the Fund at Bowery. Historical performance information for the Fund is presented since its inception.

Comparative Information: Some of the information in this communication relates to the corresponding returns of the S&P 500 Index, the Dow Jones Credit Suisse
Event Driven Distressed Hedge Fund Index (the “DJ-CS Distressed HF Index”), the Dow Jones Credit Suisse Event Driven Hedge Fund Index (the “DJ-CS Event Driven
HF Index”), and the Dow Jones Credit Suisse Core Hedge Fund Index (the “DJ-CS HF Index”). This information is included to show general trends during the periods
indicated and is not intended to imply that the Fund is similar to the indexes in composition or risk. There is no assurance that the performance of the Fund will
meet or exceed the comparative returns shown. The S&P 500 Index is widely regarded as a reasonable proxy for the performance of large-capitalization equity
securities in the United States. Standard & Poor’s Financial Services LLC, which is not affiliated with Bowery, compiles the S&P 500 Index. The DJ-CS Distressed HF
Index is a sub-strategy of the DJ-CS HF Index that measures the aggregate performance of event-driven funds that focus on distressed situations. These funds
typically invest across the capital structure of companies subject to financial or operational stress or bankruptcy proceedings. The portfolio assets held by these
funds often trade at discounts to intrinsic values due to difficulties in assessing their proper value, lack of research coverage, or the inability of traditional
investors to continue to hold them. This strategy generally has a long bias, but investment managers may take outright long, hedged, or outright short positions.
Distressed managers typically attempt to profit on the potential for an issuer to improve its operations or the success of the bankruptcy process as an exit
strategy. The DJ-CS Event Driven HF Index is another sub-strategy of the DJ-CS HF Index that measures the aggregate performance of event-driven funds. Event-
driven funds typically invest in various asset classes and seek to profit from potential mispricing of securities related to specific corporate or market events, such
as mergers, bankruptcies, financial or operational stress, restructurings, asset sales, recapitalizations, spin-offs, litigation, and regulatory and legislative changes.
Event-driven funds often invest in equity securities, fixed-income instruments (such as investment-grade and high-yield bonds, bank debt, convertible debt, and
distressed debt), as well as options and other derivatives. Many event-driven managers use a combination of strategies and seek to adjust exposures based on
differing opportunities perceived to exist with respect to different industries and sectors. The DJ-CS HF Index is a broad-based index formerly known as the Credit
Suisse/Tremont Hedge Fund Database. Credit Suisse Hedge Index LLC, which is not affiliated with Bowery, constructs these indexes using data from approximately
8,000 relatively large and more established hedge funds. The indexes are calculated and rebalanced on a monthly basis and reflect performance net of
component incentive compensation and expenses.

Forward-Looking Statements: This communication may contain, or may be deemed to contain, forward-looking statements, meaning statements other than
historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may
or may not occur in the future. The results of investments described in this communication may vary materially from the results expressed in or implied by any
forward-looking statements.

© 2012 Bowery Investment Management, LLC. All rights reserved. For more information about Bowery or the Fund, please contact Joshua Spindel at


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