SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
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EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
225 HIGH RIDGE ROAD
STAMFORD, CT 06905
[ ], 2007
Dear Member:
On behalf of the Board of Managers (the "Board") of Excelsior
Absolute Return Fund of Funds, LLC (the "Fund"), it is my pleasure to invite you
to attend a Special Meeting (the "Meeting") of Members of the Fund ("Members").
The Meeting will be held at 10:00 a.m. (Eastern Standard time) on March 15,
2007, at the offices of United States Trust Company, National Association, 225
High Ridge Road, Stamford, Connecticut 06905. The formal notice of the Meeting
and related materials are enclosed.
As you may know, The Charles Schwab Corporation ("Schwab") has
entered into an agreement to sell its subsidiary, U.S. Trust Corporation ("U.S.
Trust"), to the Bank of America Corporation ("Bank of America"), along with all
of U.S. Trust's subsidiaries, including U.S. Trust Hedge Fund Management, Inc.,
the investment adviser (the "Adviser") of Excelsior Absolute Return Fund of
Funds Master Fund, LLC (the "Master Fund"), in which the Fund invests
substantially all of its assets (the "Sale").
The change in control of the Adviser resulting from the Sale
will cause the automatic termination of the Master Fund's current investment
advisory agreement with the Adviser (the "Current Agreement"), in accordance
with its terms. Thus, for the Adviser to continue to provide investment advisory
services to the Master Fund after the Sale, the Master Fund must enter into a
new investment advisory agreement with the Adviser. On January 12, 2007, the
Board of Managers of the Master Fund (the "Master Fund Board") approved a new
investment advisory agreement with the Adviser to become effective upon, and
subject to, the Sale (the "New Agreement"). The New Agreement, which is
identical in all material respects to the Current Agreement except for the term
and date of its effectiveness, also is subject to approval by members of the
Master Fund, including the Fund, before it can become effective.
In approving the New Agreement, the Board received
representations from the Adviser and Bank of America that no material adverse
impact on the daily operations of the Fund or the Master Fund or the nature or
quality of the investment advisory activities provided to the Fund or the Master
Fund by the Adviser is expected to arise as a result of being affiliated with
Bank of America. Although the ownership of the Adviser will change upon
completion of the Sale, the Board was advised that the Adviser and Bank of
America did not anticipate any changes to the investment personnel responsible
for managing the Master Fund's portfolio. The Master Fund's, and thus the
Fund's, investment objective and investment program will not be affected by the
Sale, and your interest in the Fund, your capital account and fees payable by
the Fund will not be affected by the transaction.
At the Meeting, Members will vote on a proposal to approve the
New Agreement. Members also will vote on a proposal to elect four nominees
proposed by the Board to serve as Managers of the Fund and to serve as members
of the Master Fund Board.
The enclosed Proxy Statement describes in detail the proposals
that will be considered at the Meeting and solicits your proxy to be voted on
those proposals. We urge you to review carefully the enclosed Proxy Statement.
The Board unanimously recommends that you vote "FOR" approval
of the New Agreement and that you also vote "FOR" each of the nominees for
Manager listed on the enclosed proxy card to serve as Managers of the Fund and
as members of the Master Fund Board.
You may vote at the Meeting if you were a Member of record of
the Fund as of the close of business on January 12, 2007. If you attend the
Meeting, you may vote in person. Whether or not you intend to attend the
Meeting, you can vote in one of three ways: (i) by signing and returning the
enclosed proxy card in the enclosed prepaid envelope; (ii) by using the Internet
if you want to vote electronically; or (iii) by using your touch-tone telephone.
(Please see the questions and answers below, as well as your proxy card, for
additional instructions on how to vote.) If you do vote electronically or by
telephone, you do not need to mail your proxy card. However, if you want to
later change your vote, you may do so by attending the Meeting, by submitting a
new proxy card, or submitting a new vote by touch-tone telephone or the
Internet.
To help you understand the matters upon which Members are
being asked to vote, we have attached the following questions and answers
regarding the proposals. They are designed to help answer questions you may have
and to help you cast your votes, and are being provided as a supplement to, not
as a substitute for, the Proxy Statement, which we urge you to review carefully.
Please feel free to call us at (203) 352-4400 if you have any
questions regarding voting procedures.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING, IT IS
IMPORTANT THAT YOUR VOTES BE REPRESENTED. TO ENSURE THAT HAPPENS, PLEASE MARK,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED BY
MAIL OR VOTE OVER THE INTERNET OR BY TOUCH-TONE TELEPHONE.
Thank you for your confidence and support.
Very truly yours,
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
/s/ David R. Bailin
-----------------------------------------
Name: David R. Bailin
Title: Manager
QUESTIONS AND ANSWERS
AT THE SPECIAL MEETING OF MEMBERS ("MEMBERS") OF EXCELSIOR
ABSOLUTE RETURN FUND OF FUNDS, LLC (THE "FUND") TO BE HELD ON MARCH 15, 2007,
MEMBERS WILL HAVE THE OPPORTUNITY TO VOTE ON TWO PROPOSALS RELATING TO THE FUND.
WE RECOMMEND THAT YOU CAREFULLY READ THE ENCLOSED PROXY STATEMENT, WHICH
DESCRIBES THE PROPOSALS IN DETAIL. THE FOLLOWING "QUESTIONS AND ANSWERS" ARE
PROVIDED AS A SUPPLEMENT TO THE PROXY STATEMENT AND TO ANSWER QUESTIONS YOU MAY
HAVE.
WHY IS THE FUND HOLDING A SPECIAL MEETING OF MEMBERS?
On November 20, 2006, the Charles Schwab Corporation
("Schwab") announced an agreement to sell its subsidiary, U.S. Trust Corporation
("U.S. Trust"), to the Bank of America Corporation ("Bank of America"), along
with all of U.S. Trust's subsidiaries, including U.S. Trust Hedge Fund
Management, Inc., the investment adviser (the "Adviser") of Excelsior Absolute
Return Fund of Funds Master Fund, LLC (the "Master Fund"), in which the Fund
invests substantially all of its assets (the "Sale").
The change in control of U.S. Trust resulting from the Sale
will result in the automatic termination of the Master Fund's current investment
advisory agreement with the Adviser (the "Current Agreement"), in accordance
with its terms. Thus, for the Adviser to continue provide investment advisory
services to the Master Fund after the Sale, the Master Fund must enter into a
new investment advisory agreement with the Adviser.
On January 12, 2007, the Board of Managers of the Master Fund
(the "Master Fund Board"), which is comprised of the same persons as the Fund's
Board of Managers (the "Board") approved a new investment advisory agreement
with the Adviser to become effective upon, and subject to, the Sale (the "New
Agreement"). The New Agreement is identical in all material respects to the
Current Agreement except for the term and date of its effectiveness. The New
Agreement is also subject to approval by members of the Master Fund, including
the Fund, before it can become effective.
The Fund will vote the Master Fund interest it holds in
accordance with the voting instructions it receives from the Fund's members
("Members"). Accordingly, the Board has called a Special Meeting of Members to
be held on March 15, 2007 (the "Meeting") to allow Members to vote on the New
Agreement. Members also will vote on a proposal to elect four nominees proposed
by the Board to serve as Managers of the Fund, and as members of the Master Fund
Board.
HOW WILL THE SALE AND THE NEW AGREEMENT AFFECT ME AS A MEMBER OF THE FUND?
The Sale will result in a change in ownership of U.S. Trust,
the parent of the Adviser. In approving the New Agreement, the Board received
representations from the Adviser and Bank of America that no material adverse
impact on the daily operations of the Fund or the Master Fund or the nature or
quality of the investment advisory activities provided to the Fund or the Master
Fund by the Adviser is expected to arise as a result of being affiliated with
Bank of America. Although the ownership of the Adviser will change upon
completion of the Sale, the Board was advised that the Adviser and Bank of
America did not anticipate any changes to the investment personnel
responsible for managing the Master Fund's portfolio. The Master Fund's, and
thus the Fund's, investment objective and investment program will not be
affected by the Sale, and your interest in the Fund, your capital account and
fees payable by the Fund will not be affected by the transaction.
WHY ARE MEMBERS VOTING TO ELECT MANAGERS OF THE FUND AND MEMBERS OF THE MASTER
FUND BOARD?
The Board, which is comprised of four Managers, is responsible
for supervising the business and affairs of the Fund. The four nominees proposed
by the Board currently are Managers of the Fund. One person now serving as a
Manager was elected to that position by action of the Board to fill a vacancy
created by the resignation of another Manager. Under the requirements of the
Investment Company Act of 1940, as amended (the "1940 Act"), if one of the
previously-elected Managers were to resign (or become unable to serve), it would
be necessary to call a special meeting of Members to elect a person to fill the
vacancy. Thus, the election of the nominee Managers at the Meeting may help
avoid the need to call a special meeting of Members in the future, and the
related costs of such a meeting.
The same persons who serve on the Board also serve on the
Master Fund Board, and are standing for election as members of the Master Fund
Board. The Fund will vote the Master Fund interest it holds in accordance with
Members' votes on the election for Managers of the Fund.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
THE BOARD HAS CAREFULLY CONSIDERED BOTH OF THE PROPOSALS THAT
WILL BE VOTED ON AT THE MEETING AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE NEW AGREEMENT AND "FOR" EACH OF THE NOMINEES FOR MANAGER LISTED
ON THE ENCLOSED PROXY CARD TO SERVE AS MANAGERS OF THE FUND AND AS MEMBERS OF
THE MASTER FUND BOARD.
HOW CAN I VOTE?
Whether or not you attend the Meeting, you may vote by using
one of the following options:
o BY MAIL: Mark, sign and date the enclosed proxy card
and return it in the enclosed envelope.
o BY TELEPHONE: Call toll-free at 1-888-221-0697 to vote
by phone. Have your control number (located on the
signature side of your proxy card) available for
reference. Follow the recorded instructions. Do not
mail the paper proxy card.
o BY INTERNET: Log on to www.proxyweb.com. Have the
enclosed proxy card available for reference. Follow the
on-screen instructions. Do not mail the paper proxy
card.
If you attend the Meeting, you may vote in person.
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
225 HIGH RIDGE ROAD
STAMFORD, CT 06905
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON MARCH 15, 2007
To Members:
A Special Meeting of Members ("Members") of Excelsior Absolute
Return Fund of Funds, LLC (the "Fund") will be held on March 15, 2007, at 10:00
a.m. (Eastern Standard time) at the offices of United States Trust Company,
National Association, 225 High Ridge Road, Stamford, Connecticut 06905 (the
"Meeting").
The Meeting is called for the following purposes:
1. to approve a new Investment Advisory Agreement between Excelsior Absolute
Return Fund of Funds Master Fund, LLC (the "Master Fund") and U.S.
Trust Hedge Fund Management, Inc. (the "Adviser") to become effective
upon completion of the sale of U.S. Trust Corporation ("U.S. Trust") to
the Bank of America Corporation (the "New Agreement");
2. to elect four persons to serve as members of the Board of Managers of the
Fund (the "Board") and as members of the Board of Managers of the Master
Fund (the "Master Fund Board"); and
3. to transact such other business as may properly come before the Meeting.
These proposals are discussed in greater detail in the
accompanying Proxy Statement.
You may vote at the Meeting if you were a Member of record of the
Fund as of the close of business on January 12, 2007. If you attend the Meeting,
you may vote in person. Members who do not expect to attend the Meeting are
urged to vote in one of three ways: (i) by signing and returning the enclosed
proxy card in the enclosed prepaid envelope; (ii) by using the Internet if you
want to vote electronically; or (iii) by using your touch-tone telephone. Signed
but unmarked proxy cards will be counted in determining whether a quorum is
present at the Meeting and will be voted "FOR" approval of the New Agreement and
"FOR" each of the persons nominated to serve as members of the Board and the
Master Fund Board.
The Fund will furnish, without charge, copies of its most recent
annual report and subsequent semi-annual report to Members upon request. Please
call (203) 352-4400 or write to Excelsior Absolute Return Fund of Funds, LLC,
225 High Ridge Road, Stamford, Connecticut 06905, Attn: Peggy Lynn, to request
copies of these reports. You may also view or obtain these documents from the
SEC (i) in person: at the SEC's Public Reference Room in Washington, D.C., (ii)
by phone: 1-800-SEC-0330, (iii) by mail: Public Reference Section, Securities
and
Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549,(duplicating fee
required), (iv) by e-mail: publicinfo@sec.gov, or (v) by Internet: www.sec.gov.
If you have any questions, please call the Fund at (203) 352-4400.
By Order of the
Board of Managers
EACH MEMBER'S VOTE IS IMPORTANT. THE MEETING MAY BE ADJOURNED WITHOUT CONDUCTING
ANY BUSINESS IF A QUORUM IS NOT PRESENT. IN THAT EVENT, THE FUND WILL CONTINUE
TO SOLICIT PROXIES IN AN ATTEMPT TO OBTAIN A QUORUM.
YOUR VOTE COULD BE CRITICAL TO ENABLE THE FUND TO HOLD THE MEETING AS SCHEDULED,
SO PLEASE VOTE IN ONE OF THREE WAYS: (I) BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE; (II) BY USING THE INTERNET IF YOU
WANT TO VOTE ELECTRONICALLY; OR (III) BY USING YOUR TOUCH-TONE TELEPHONE. PLEASE
SEE YOUR PROXY CARD, FOR ADDITIONAL INSTRUCTIONS ON HOW TO VOTE.
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
225 HIGH RIDGE ROAD
STAMFORD, CT 06905
SPECIAL MEETING OF MEMBERS
TO BE HELD ON MARCH 15, 2007
------------------------------
PROXY STATEMENT
------------------------------
This Proxy Statement is being furnished to members ("Members") of
Excelsior Absolute Return Fund of Funds, LLC (the "Fund") by the Board of
Managers of the Fund (the "Board"). The Board is requesting your proxy for use
at a Special Meeting of Members (the "Meeting") to be held at the offices of
United States Trust Company, National Association ("USTC, NA"), 225 High Ridge
Road, Stamford, Connecticut 06905 on March 15, 2007, at 10:00 a.m. (Eastern
Standard time). Your proxy may also be voted at any adjournment of the Meeting.
In addition to soliciting proxies by mail, officers of U.S. Trust
Hedge Fund Management, Inc., the investment adviser (the "Adviser") of Excelsior
Absolute Return Fund of Funds Master Fund, LLC (the "Master Fund"), in which the
Fund invests substantially all of its assets, and personnel of UST Advisers,
Inc. and USTC, NA, may solicit proxies by telephone or in person, without
special compensation. The Adviser has retained ADP, a third party solicitor, to
solicit proxies from Members. ADP may solicit proxies in person, by Internet or
by telephone. The Adviser expects to pay approximately $3,774 to ADP in
connection with the solicitation. The fee and expenses of the proxy solicitor,
as well as all other costs associated with the solicitation of proxies and of
the Meeting, are being paid by the Adviser.
At the Meeting, Members will vote on a proposal to approve a new
Investment Advisory Agreement between the Adviser and the Master Fund (the "New
Agreement"), to become effective upon the sale of U.S. Trust Corporation ("U.S.
Trust"), the parent company of the Adviser, to the Bank of America Corporation
("Bank of America") (PROPOSAL 1). Members also will be voting to elect four
persons to serve as members of the Board and as members of the Board of Managers
of the Master Fund (the "Master Fund Board") (PROPOSAL 2 and collectively, the
"Proposals"). Each of the nominees for election currently serves as a member of
the Board (a "Manager") and as a member of the Master Fund Board.
All properly-executed proxies received before the Meeting will be
voted at the Meeting and any adjournment thereof in accordance with the
instructions marked thereon or otherwise as provided therein. Unless
instructions to the contrary are marked, such executed proxies will be voted
"FOR" each of the Proposals. Members who execute proxies retain the right to
revoke them in person at the Meeting or by written notice received by the Fund
at any time before they are voted. Proxies voted by telephone or over the
Internet may be revoked at any time before they are voted, in the same manner
that proxies voted by mail may be revoked. In addition, any Member who attends
the Meeting in person may vote by ballot at the meeting, thereby canceling any
proxy previously given. See "Voting Information - Revocation of Proxies and
Abstentions."
i
If a quorum is not present at the Meeting or if sufficient votes
have not been obtained to approve the Proposals, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. See "Voting Information - Adjournments."
The close of business on January 12, 2007 has been fixed as the
record date (the "Record Date") for the determination of Members entitled to
notice of and to vote at the Meeting and any adjournment.
Each Member is entitled to cast a number of votes equivalent
to such Member's investment percentage(1) as of the Record Date. As of the close
of business on the Record Date, the total value of the capital accounts of all
Members was [$___________].
This Proxy Statement is first being mailed to Members on or about
February 8, 2007.
Copies of the Fund's most recent annual report and subsequent
semi-annual report to Members are available upon request, without charge, by
calling (203) 352-4400 or writing to Excelsior Absolute Return Fund of Funds,
LLC, 225 High Ridge Road, Stamford, Connecticut 06905, Attn: Peggy Lynn. You may
also view or obtain these documents from the SEC (i) in person: at the SEC's
Public Reference Room in Washington, D.C., (ii) by phone: 1-800-SEC-0330, (iii)
by mail: Public Reference Section, Securities and Exchange Commission, 100 F
Street, N.E., Washington, D.C. 20549,(duplicating fee required), (iv) by e-mail:
publicinfo@sec.gov, or (v) by Internet: www.sec.gov.
As of the Record Date, there were no Members owning of record or
known by the Fund to own beneficially 5% or more of the outstanding limited
liability company interests in the Fund ("Interests"). None of the Managers
holds any outstanding Interests. As of the Record Date, the Adviser and its
affiliates (together, the "Adviser Affiliates") beneficially owned less than 1%
of the outstanding Interests.
- --------------------------
(1) An investment percentage is established for each Member on the Fund's books
as of the first day of each fiscal period. The investment percentage of each
Member was most recently established on December 31, 2006, and was determined by
dividing the balance of each Member's capital account as of such date, which was
the commencement of the most recent fiscal period, by the sum of the balances of
capital accounts of all Members as of that date. The sum of the investment
percentages of all Members for each fiscal period equals 100%. This means that,
if a Member's investment percentage is 1.1%, such Member will have the right to
vote the equivalent of 1.1 votes out of a total of 100 votes entitled to be
voted by all Members.
ii
TABLE OF CONTENTS
PAGE
I. Proposals for Member Approval............................................1
Proposal 1 -Approval of the New Investment Advisory Agreement............1
Proposal 2 - Election of Managers.......................................10
II. Voting Information .....................................................19
III. Other Matters and Additional Information................................20
iii
I. PROPOSALS FOR MEMBER APPROVAL
-----------------------------
PROPOSAL 1
APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT
INTRODUCTION.
On November 20, 2006, the Charles Schwab Corporation ("Schwab")
announced an agreement to sell U.S. Trust, a wholly-owned subsidiary of Schwab,
to Bank of America. The transaction (the "Sale") is subject to Federal Reserve
Board and other regulatory approvals, as well as, in the case of Bank of
America's obligation to complete the Sale, the approval of a new investment
advisory agreement for the Master Fund with the Adviser. If approved, the Sale
will result in Bank of America owning U.S. Trust and all of its subsidiaries,
including the Adviser.
As required by the Investment Company Act of 1940, as amended (the
"1940 Act"), the change in control of the Adviser resulting from the Sale will
cause the automatic termination of the Master Fund's current investment advisory
agreement with the Adviser (the "Current Agreement"), in accordance with its
terms. Thus, the Master Fund must enter into a new investment advisory agreement
with the Adviser for the Adviser to continue to serve as investment adviser of
the Master Fund after the Sale.
At a meeting on January 12, 2007, the Master Fund Board and all of
the members of the Master Fund Board who are not "interested persons," as
defined by the 1940 Act, of the Master Fund (the "Independent Managers of the
Master Fund") who were present at such meeting, approved a new investment
advisory agreement with the Adviser to become effective upon the Sale (the "New
Agreement"). To become effective, the New Agreement must also be approved by
members of the Master Fund, including the Fund.
The New Agreement is identical in all material respects to the
Current Agreement except for the term and date of its effectiveness. A copy of
the New Agreement is contained in Exhibit 1 to this Proxy Statement.
1940 ACT REQUIREMENTS.
As required by the 1940 Act, the Current Agreement provides for
its automatic termination in the event of its assignment (to the extent required
by the 1940 Act and the rules thereunder). An "assignment," as defined by the
1940 Act, is deemed to include any change of control of the Adviser. Section
15(a) of the 1940 Act prohibits any person from serving as an investment adviser
of a registered investment company, such as the Master Fund, except pursuant to
a written contract that has been approved by the vote of a majority of the
outstanding voting securities of the investment company.
The Sale will result in a change in control of the Adviser because
Bank of America will become the owner of U.S. Trust, the parent of the Adviser.
Therefore, the Sale will result in a termination of the Current Agreement, and
the approval of the New Agreement by members of the Master Fund is required for
the Adviser to continue to provide investment advice to the Master Fund after
the Sale. If the New Agreement is approved
1
by members of the Master Fund but the Sale is not consummated, the Adviser will
serve as investment adviser under the New Agreement, which would become
effective upon the later of approval by members of the Master Fund or
termination of the stock purchase agreement between Schwab and Bank of America.
In the event the New Agreement is not approved and the Sale is consummated, the
Master Fund Board will promptly consider what appropriate action to take that is
in the best interests of the Master Fund and its members. Such action may
include, but is not limited to, seeking a new investment adviser, other than the
Adviser, subject to any required approval by the members of the Master Fund or
liquidating the Master Fund. If the New Agreement is not approved and the Sale
is not consummated, the Adviser will continue to serve as investment adviser to
the Master Fund under the current investment advisory agreement.
In connection with the vote on the New Agreement by members of the
Master Fund, the Fund will vote its interest in the Master Fund proportionately
for and against approval in accordance with the votes of Members at the Meeting
for and against the proposal to approve the New Agreement.
If the New Agreement is approved by members of the Master Fund, the
New Agreement will become effective upon consummation of the Sale and will have
an initial term expiring not more than two years from the date of execution of
the New Agreement. The New Agreement may continue in effect from year to year
after its initial term, provided that such continuance is approved annually by:
(i) the Master Fund Board; or (ii) the vote of a majority (as defined by the
1940 Act) of the outstanding voting securities of the Master Fund; and, that, in
either event, such continuance also is approved by a majority of the Independent
Managers of the Master Fund, by vote cast in person at a meeting called for the
purpose of voting on such approval.
In anticipation of the Sale and to help assure continuity in
investment advisory services provided to the Master Fund should the Sale be
consummated, the Master Fund Board held an in-person meeting on January 12, 2007
to consider the potential implications of the Sale to the Master Fund and to
consider the New Agreement pursuant to which the Adviser would continue to
provide investment advisory and other services to the Master Fund after the
Sale. After careful consideration of these matters, and evaluation of the
factors described below under "Board Consideration," the Master Fund Board, and
all of the Independent Managers of the Master Fund who were present at such
meeting, approved the New Agreement and directed that the New Agreement be
submitted to the members of the Master Fund, including the Fund, for approval.
THE TERMS OF THE NEW AGREEMENT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THE
TERMS OF THE CURRENT AGREEMENT EXCEPT FOR THE TERM AND DATE OF ITS
EFFECTIVENESS.
In connection with the Sale, Schwab and Bank of America intend to
use reasonable best efforts to ensure that they comply with the "safe harbor"
provisions afforded by Section 15(f) of the 1940 Act. Section 15(f) provides, in
substance, that when a sale of a controlling interest in an investment adviser
of an investment company occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection therewith as long as two
conditions are satisfied. First, an "unfair
2
burden" must not be imposed on the investment company as a result of the
transaction relating to the sale of such interest, or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair burden"
is defined to include any arrangement during the two-year period after the
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person," as defined by the 1940 Act, of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or the holders of its securities (other
than fees for bona fide investment advisory or other services) or, with certain
exceptions, from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company.
The Board is not aware of any circumstances relating to the Sale that might
result in an unfair burden being imposed on the Fund or the Master Fund.
The second condition of Section 15(f) is that, during the
three-year period following consummation of a transaction, at least 75% of the
investment company's board must not be "interested persons," as defined by the
1940 Act, of the investment adviser or predecessor adviser of the investment
company. With respect to this second condition, three of the four Managers and
members of the Master Fund Board are not "interested persons" of the Adviser or
Bank of America. Thus, the Board and the Master Fund Board currently satisfy the
75% requirement. Bank of America has agreed with Schwab to use reasonable best
efforts, to the extent within its control or that of its affiliates, to comply
with Section 15(f) of the 1940 Act. Specifically, Bank of America has agreed
with Schwab to use reasonable best efforts to assure that (1) no more than 25%
of the Board and the Master Fund Board are "interested persons" of Bank of
America or the Adviser for a period of not less than three years after the
closing of the Sale and (2) for a period of not less than two years after the
closing of the Sale not to impose an "unfair burden" (within the meaning of
Section 15(f) of the 1940 Act) on the Master Fund or the Fund as a result of the
transactions contemplated by the Sale.
THE ADVISER.
The Adviser is a wholly-owned subsidiary of U.S. Trust and is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. Through its subsidiaries, U.S. Trust provides investment management,
fiduciary, financial planning and private banking services to affluent
individuals, families and institutions nationwide. Headquartered in New York
City, U.S. Trust and its subsidiaries have thirty-nine offices throughout the
United States.
U.S. Trust (114 W. 47th Street, New York, NY 10036) is a
subsidiary of Schwab (101 Montgomery Street, San Francisco, CA 94104) and is a
financial holding company registered under Federal law and incorporated in New
York. Charles R. Schwab is the founder, Chairman and a Director and significant
shareholder of Schwab. As a result of his positions and share ownership, Mr.
Schwab may be deemed to be a controlling person of Schwab and its subsidiaries.
Schwab, through its principal brokerage subsidiary, Charles Schwab & Co., Inc.,
is one of the nation's largest financial services firms, serving investors
through the Internet, investor centers, regional customer telephone service
centers and automated telephonic channels.
The following chart sets forth the name, address and principal
occupation of the principal executive officers and directors of the Adviser and
of each employee of the Adviser who is also an officer or Manager of the Fund:
NAME ADDRESS PRINCIPAL OCCUPATION
- -----------------------------------------------------------------------------------------------------
Robert F. Aufenanger 225 High Ridge Road Chief Financial Officer and
Stamford, CT 06905 Treasurer
- -----------------------------------------------------------------------------------------------------
3
Spencer Boggess 225 High Ridge Road President and Chief Executive
Stamford, CT 06905 Officer
- -----------------------------------------------------------------------------------------------------
David R. Bailin 225 High Ridge Road Chairman and Director
Stamford, CT 06905
- -----------------------------------------------------------------------------------------------------
Leo A. Gardella 225 High Ridge Road Senior Vice President and Director
Stamford, CT 06905
- -----------------------------------------------------------------------------------------------------
Nicola Knight 114 W. 47th Street Chief Legal Officer
New York, New York 10036
- -----------------------------------------------------------------------------------------------------
Mohan Badgujar 225 High Ridge Road Vice President
Stamford, CT 06905
- -----------------------------------------------------------------------------------------------------
As of October 31, 2006, the Adviser had approximately $548
million in aggregate assets under management.
INFORMATION CONCERNING BANK OF AMERICA.
Bank of America is a financial services holding company organized
as a Delaware corporation. Bank of America provides a diverse range of financial
services and products. Bank of America, headquartered in Charlotte, North
Carolina, operates in 29 states and the District of Columbia and has offices
located in 150 foreign countries. Bank of America provides a diversified range
of banking and certain nonbanking financial services and products both
domestically and internationally through five business segments, one of which is
Global Wealth & Investment Management ("GWIM)". The GWIM division provides
investment, fiduciary and comprehensive banking and credit expertise to
individual and institutional clients located across the United States and
throughout the world. As of December 31, 2006 GWIM's assets under management
were approximately $542.9 billion.
INFORMATION ABOUT THE SALE.
The Sale is expected to be consummated in the third quarter of
2007, but could occur later depending upon regulatory approvals and satisfaction
of other conditions and is subject to continued negotiation by Bank of America
and Schwab. The closing of the Sale is subject to: (i) the approval of new
investment advisory agreements by the boards and shareholders of each of the
mutual funds advised by USTC, NA and UST Advisers, Inc.; (ii) certain regulatory
approvals; and (iii) other customary closing conditions. The Sale will result in
Bank of America controlling U.S. Trust and each of its subsidiaries, including
the Adviser.
DESCRIPTION OF THE NEW AGREEMENT AND CURRENT AGREEMENT.
The Adviser has served as investment adviser of the Master Fund
since its inception pursuant to the Current Agreement, which is dated June 26,
2003. The Current Agreement was approved by the Master Fund Board at a meeting
held on June 26, 2003 and approved by the organizational member of the Master
Fund (who was then the sole securityholder of the Master Fund) on June 26, 2003.
After its initial term, the Current Agreement has been continued in effect
annually by action of the Master Fund Board. Such continuance was last approved
at a meeting held on June 21, 2006.
The terms of the Current Agreement and the New Agreement are
described generally below.
4
ADVISORY SERVICES. Under the Current Agreement, the Adviser is
responsible for managing the investment activities of the Master Fund, subject
to the supervision of the Master Fund Board, in a manner consistent with the
Master Fund's investment objective, policies and restrictions, and for
determining the investments to be purchased and sold by the Master Fund. The
Current Agreement also requires the Adviser to provide various other services,
including, among others: to supervise the entities retained to provide
accounting, custody and other services to the Master Fund; to respond to
inquiries of members of the Master Fund regarding their investment and capital
account balances; to assist in the preparation and mailing of subscription
materials to prospective investors and of reports and other information to
members of the Master Fund; to assist in the preparation of regulatory filings;
to monitor compliance with regulatory filings; to review the accounting records
of the Master Fund and to assist in the preparation of and review financial
reports of the Master Fund; to review and arrange for the payment of Master Fund
expenses; to coordinate and organize meetings of the Master Fund Board and
meetings of members of the Master Fund, and to prepare materials and reports for
use at meetings of the Master Fund Board; to assist the Master Fund in
conducting repurchase offers; and to review subscription documents and to assist
in the processing of subscriptions for interests in the Master Fund. The New
Agreement requires that the Adviser provide the same services. Under both the
Current Agreement and the New Agreement, the Adviser is authorized to enter into
investment sub-advisory agreements with any registered investment adviser (a
"Sub-Adviser") subject to approvals of the Master Fund Board and the members of
the Master Fund and may delegate to the Sub-Adviser any or all of the investment
advisory services to be provided by the Adviser. Additionally, under both the
Current Agreement and the New Agreement, the Adviser is responsible for bearing
all costs and expenses associated with its provision of services (including, but
not limited to: expenses relating to the selection and monitoring of
investments; fees of consultants or a Sub-Adviser retained by the Adviser; and
expenses relating to qualifying potential investors and reviewing subscription
documents), and is required, at its own expense, to maintain such staff and to
employ or retain such personnel and consult with such other persons as may be
necessary to render the services required to be provided by the Adviser.
ADVISORY FEE. In consideration of services provided by the Adviser
under the Current Agreement, the Master Fund pays the Adviser a quarterly
advisory fee computed at the annual rate of 1.00% of the Master Fund's average
monthly net assets determined as of start of business on the first business day
of each month in the quarter, after adjustment for any subscriptions effective
on such date. The advisory fee is payable in arrears. The same fee is payable to
the Adviser under the New Agreement. For the fiscal year ended March 31, 2006,
the Adviser received $2,844,351 in advisory fees from the Master Fund.
LIABILITY AND INDEMNIFICATION. The Current Agreement requires that
Adviser use its best efforts in the supervision and management of the investment
activities of the Master Fund and in providing services, but provides that, in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations, the Adviser (and its directors, officers and
employees and its affiliates, successors or other legal representatives) shall
not be liable to the Master Fund for any error of judgment, for any mistake of
law, for any act or omission by the Adviser or any of its affiliates or for any
loss suffered by the Master Fund. In addition, the Current Agreement requires
that the Master Fund indemnify the Adviser and its directors, officers or
employees and their respective affiliates, executors, heirs, assigns, successors
or other legal representatives against any and all costs, losses, claims,
damages or liabilities, joint or several, including, without limitation,
reasonable attorneys' fees and disbursements, resulting in any way from the
performance or non-performance of any their duties with respect to the Master
Fund, except those resulting from their willful malfeasance, bad
5
faith or gross negligence or their reckless disregard of such duties, and in the
case of criminal proceedings, unless they had reasonable cause to believe their
actions unlawful. The provisions of the New Agreement relating to the liability
of the Adviser and the Master Fund's obligation to indemnify the Adviser are the
same as those of the Current Agreement.
EFFECTIVE DATE AND TERM. The Current Agreement had an initial term
expiring June 26, 2005, and provides for its continuance from year to year
thereafter; provided that such continuance is approved at least annually by the
vote of a majority of the outstanding voting securities of the Master Fund, as
defined by the 1940 Act and the rules thereunder, or by the Master Fund Board;
and provided that such continuance is also approved by a majority of the
managers of the Master Fund who are not parties to the agreement or "interested
persons" (as defined by the 1940 Act and the rules thereunder) of any such
party, by vote cast in person at a meeting called for the purpose of voting on
such approval. The provisions of the New Agreement relating to the term of
effectiveness of the New Agreement are the same as those of the Current
Agreement, except that the New Agreement will become effective upon the Sale and
will have an initial term expiring not more than two years from the date of
execution of the New Agreement.
TERMINATION. The Master Fund has the right, at any time and
without payment of any penalty, to terminate the Current Agreement upon sixty
days' prior written notice to the Adviser, either by majority vote of the Master
Fund Board or by the vote of a majority of the outstanding voting securities of
the Master Fund (as defined by the 1940 Act and the rules thereunder). The
Adviser has a similar right to terminate the Current Agreement upon sixty days'
prior written notice to the Master Fund. In addition, the Current Agreement
provides for its automatic termination in the event of its assignment (to the
extent required by the 1940 Act and the rules thereunder). The New Agreement has
the same termination provisions.
BOARD CONSIDERATION.
At a meeting held on January 12, 2007, the New Agreement was
approved by the Master Fund Board and by all of the Independent Managers of the
Master Fund who were present at such meeting. In making its determination to
approve the New Agreement and to recommend its approval by members of the Master
Fund, the Master Fund Board considered all information it deemed reasonably
necessary to evaluate the terms of the New Agreement and the ability of the
Adviser to continue after the Sale to provide services to the Master Fund of the
same scope and quality as are now provided. The Independent Managers of the
Master Fund reviewed materials furnished by the Adviser, including information
regarding the Adviser, its affiliates and personnel, operations and financial
condition, and information regarding Bank of America. At the meeting, the Master
Fund Board also met with representatives of the Adviser and with representatives
of Bank of America and discussed various matters relating to: the operations of
the Master Fund and the Adviser; the commitment of Bank of America to support
the Adviser's business and operations; and Bank America's plans with respect to
the management and offering of alternative investment products, including the
Master Fund. Representatives of Bank of America assured the Master Fund Board
that Bank of America does not anticipate that there will be any reduction or
significant adverse change in the scope, nature or quality of the investment
advisory or other services provided to the Master Fund by the Adviser under the
New Agreement. These representatives noted that a plan would be put into place
designed to provide for the continuity of the investment advisory services under
the New Agreement. They stated that no departures of personnel of the Adviser
material to the Fund's operations are anticipated and that Bank of America's
intention is to utilize the strengths and personnel of both organizations to
develop a cohesive team. The Master Fund Board was also advised that the
6
Adviser will continue to provide investment advice with no material changes in
operating conditions and, in particular, that the Sale will not adversely affect
the ability of the Adviser to fulfill its obligations to the Master Fund. The
representatives of Bank of America also noted that the Sale is being viewed by
Bank of America as an opportunity to enhance Bank of America's offerings of
alternative investment funds. Additionally, the Master Fund Board was assured
that Schwab and Bank of America intend to comply with the "safe harbor"
provisions afforded by Section 15(f) of the 1940 Act.
Based on its review, and after careful consideration of the
factors discussed below, the Master Fund Board (including each of the
Independent Managers of the Master Fund present at the meeting) determined that
continuity and efficiency of advisory services after the Sale can best be
assured by approving the New Agreement. In connection with the Master Fund
Board's review, the Independent Managers of the Master Fund met in an executive
session, during which they were advised by and had the opportunity to discuss
with independent legal counsel various matters relating to the Sale and the New
Agreement. The Master Fund Board believes that the New Agreement will enable the
Master Fund to obtain high quality investment advisory services at a cost that
is reasonable and appropriate and that approval of the New Agreement is in the
best interests of the Master Fund and its members. No single factor was
considered in isolation, nor was any single factor considered to be
determinative to the decision to approve the New Agreement.
In connection with its deliberations, the Independent Managers of
the Master Fund, with the assistance of independent legal counsel, requested,
received and reviewed information regarding the New Agreement and relevant
materials furnished by the Adviser, U.S. Trust and Bank of America. These
materials included information regarding Bank of America and its management,
history, qualifications, personnel, operations and financial condition and other
pertinent information. In addition, the representations made by representatives
of Bank of America were considered.
In considering the New Agreement, the Master Fund Board considered
the nature, extent and quality of operations and services to date provided by
the Adviser to the Master Fund, which are expected to continue to be provided
after the Sale. It also considered the fact that the Current Agreement and the
New Agreement, including the terms relating to the services to be performed by
the Adviser, and the fees payable by the Master Fund, are identical except for
the term and date of its effectiveness. With respect to the fees payable under
the New Agreement, the Master Fund Board compared the fees and overall expense
levels of the Master Fund to those of competitive funds and other funds with
similar investment objectives (including other funds advised by the Adviser and
its affiliates). In evaluating the advisory fee, the Master Fund Board also took
into account the complexity and quality of the investment management services
required by the Master Fund. The Master Fund Board also considered the
investment performance of the Master Fund, including comparisons of the Master
Fund's performance to that of other similar funds, and the costs of services
provided and the profits realized by the Adviser from its relationship with the
Master Fund. The Master Fund Board considered the extent to which economies of
scale in costs of providing services would be realized as the Master Fund grows
and whether the fees payable to the Adviser pursuant to the New Agreement
properly reflects these economies of scale for the benefit of investors. The
benefits to the Adviser of its relationship with the Master Fund were also
considered. The Master Fund Board
7
viewed as significant the fact that the key personnel of the Adviser who provide
investment advisory services to the Master Fund will continue to provide
services to the Master Fund after the Sale, and the commitment of Bank of
America to maintain the continuity of management functions and the services
provided to the Master Fund. In addition to the foregoing, the Master Fund Board
considered the expected financial condition and resources of the Adviser
following the Sale in light of the business reputation and financial condition
of Bank of America, and considered whether there are any aspects of the Sale
likely to affect adversely the ability of the Adviser to retain and attract
qualified personnel following the Sale and to otherwise provide services to the
Master Fund.
Possible alternatives to approval of the New Agreement were also
considered by the Master Fund Board. During its review and deliberations, the
Master Fund Board evaluated the potential benefits, detriments and costs to the
Master Fund and Members of the Sale. The Master Fund Board determined that
Members will likely benefit from the expected retention and the continued
availability of the management expertise of the key personnel of the Adviser who
now provide investment advice to the Master Fund. In addition, the Master Fund
Board deemed it beneficial to the Master Fund to be affiliated with Bank of
America for several reasons, including the expanded distribution capabilities
that can be offered by Bank of America and the extensive investment, compliance
and operations infrastructure that will be available as a result of the Sale.
After consideration, the Master Fund Board noted its overall
satisfaction with the nature, quality and extent of services provided by the
Adviser and concluded that the Master Fund was receiving, and would continue to
receive under the New Agreement, all services required from the Adviser and that
these services were of high quality. The Master Fund Board also concluded that
the Master Fund's performance compared favorably with the performance of similar
registered funds, and determined that the fees and expense ratios of the Master
Fund are within the range of the fees and expense ratios of similar funds. It
also concluded that the profitability to the Adviser from its relationship with
the Master Fund was not disproportionately large so that it bore no reasonable
relationship to the services rendered and determined that, given the overall
performance of the Master Fund and superior service levels, the current
profitability was not excessive.
One of the managers of the Master Fund has an interest in the
approval of the New Agreement as a result of his financial interest in and
position with the Adviser or its affiliates, as described above under the
heading "The Adviser."
REQUIRED VOTE.
Approval of the New Agreement by members of the Master Fund
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Master Fund, which, for this purpose, means the affirmative
vote of the lesser of (1) Master Fund members representing more than 50% in
interest of the outstanding interests in the Master Fund or (2) Master Fund
members representing 67% or more in interest of the outstanding interests in the
Master Fund present at a meeting called for the purpose of approving the New
Agreement, if Master Fund members holding more than 50% in interest of the
outstanding interests in the Master Fund are represented at such meeting in
person or by proxy.
8
In connection with the vote of members of the Master Fund on the New Agreement,
the Fund will vote its interest in the Master Fund proportionately for and
against approval in accordance with the votes of Members at the Meeting for and
against the proposal to approve the New Agreement. The only other holder of
Master Fund interests is an offshore fund, which has determined to vote its
interest in the Master Fund for and against approval of the New Agreement in the
same proportion as the vote of the Fund. Thus, if Members representing 50% or
more in interest of the outstanding Interests vote to approve the New Agreement
(or if Members representing 67% or more in interest of the outstanding Interests
vote to approve the New Agreement and Members holding more than 50% in interest
of the outstanding Interests are represented at the Meeting), the New Agreement
will be approved by members of the Master Fund. If the New Agreement is not
approved by members of the Master Fund, the Master Fund Board will take such
further action as it deems to be in the best interests of the Fund and Members.
ADDITIONAL INFORMATION.
The Adviser provides management services to the Fund pursuant to a
management agreement between the Fund and the Adviser. Like the Current
Agreement, this agreement also will terminate upon the Sale. At its meeting on
January 12, 2007, the Board and all of the members of the Board who are not
"interested persons," as defined by the 1940 Act, of the Fund (the "Independent
Managers") who were present at such meeting approved a new management agreement
between the Fund and the Adviser, which is the same as the currently effective
management agreement except for the term and date of its effectiveness. This new
agreement is not subject to approval by Members and will become effective upon
the consummation of the Sale if the New Agreement is approved by members of the
Master Fund. Pursuant to the management agreement, for the fiscal year ended
March 31, 2006, the Adviser received $1,228,797 in advisory fees from the Fund.
AIG Global Investment Corp. ("AIGGIC"), an Indirect Wholly-owned
Subsidiary of American International Group, Inc. ("AIG"), Serves as the
Investment Manager of the Master Fund, pursuant to a Sub-Advisory Agreement
Entered Into Between the Adviser and Aiggic Dated September 2, 2003. Under This
Agreement, AIGGIC Provides day-to-day investment management services to the
master fund, subject to the general supervision of the Adviser. Because the sale
will not result in a change of control of AIGGIC, the Sub-Advisory Agreement
will not terminate upon the sale. At its meeting on January 12, 2007, the Master
Fund Board and all of the Independent Managers of the Master Fund Who were
present at such meeting approved the continuance of the Sub-advisory Agreement
for an additional year.
UST Securities Corp. ("UST Securities") serves as the Fund's
placement agent and, in such capacity, offers Interests to investors in a
private placement. Like the Current Agreement, and consistent with the
requirements of the 1940 Act, the Fund's agreement with UST Securities also will
terminate upon the Sale. At its meeting on January 12, 2007, the Board and all
of the Independent Managers who were present at such meeting approved a new
placement agent agreement between the Fund and UST Securities, which is the same
as the currently effective placement agent agreement except for the term and
date of its effectiveness. This new agreement is not subject to approval by
Members and will become effective upon the consummation of the Sale if the New
Agreement is approved by members of the Master Fund. UST Securities is not
compensated by the Fund or the Adviser for its services as placement agent.
J.D. Clark & Co., located at 2425 Lincoln Avenue, Ogden, Utah
84401, provides various administrative services to the Fund pursuant to an
administrative, accounting and investor services agreement.
THE BOARD, INCLUDING ALL OF THE INDEPENDENT MANAGERS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE NEW AGREEMENT
- --------------------------------------------------------------------------------
9
PROPOSAL 2
ELECTION OF MANAGERS
At the Meeting, Members will vote on a proposal to elect four
persons nominated by the Board to serve as Managers, all of whom currently serve
as Managers. The nominees are: David R. Bailin, Virginia G. Breen, Jonathan B.
Bulkeley and Thomas F. McDevitt. Ms. Breen and Messrs. Bulkeley and McDevitt,
who are Independent Managers, have served as Managers since the Fund's
inception and were elected to their positions by the organizational members of
the Fund. The other nominee, Mr. Bailin, has served as a Manager since September
26, 2006 and was appointed by the Board to fill a vacancy created by the
resignation of another Manager.
Each of the nominees also serves as a manager of the Master Fund.
Except for Mr. Bailin, each of such persons has served in such capacity since
the inception of the Master Fund and was elected by the organizational member of
the Master Fund. Mr. Bailin has served as a manager of the Master Fund since
September 26, 2006 and was appointed by the Master Fund Board to fill a vacancy
created by a resignation.
The Board has determined to have each of the present Managers
stand for election by Members at the Meeting to help assure continued compliance
with 1940 Act provisions regarding the election of Managers. These provisions
require that a majority of the Managers be elected by Members and allow the
appointment of a new Manager by the Board to fill a vacancy on the Board only
if, after such appointment, at least two-thirds of the Managers have been
elected by Members. Because Mr. Bailin has not been elected by Members, if one
of the other Managers now serving were to resign (or become unable to serve as a
Manager), it would be necessary to call a special meeting of Members if the
Board determined to elect a person to fill the vacancy (since under those
circumstances only two of four Managers would have been elected by Members,
which is less than the required two-thirds specified by the 1940 Act). The
election of Managers at the Meeting will thus help avoid the need to call a
special meeting of Members in the future and the related costs of such a
meeting.
The Master Fund Board has similarly determined that each of the
persons now serving as members of the Master Fund Board should stand for
election by members of the Master Fund.
The persons named as proxies on the accompanying proxy card
intend, in the absence of contrary instructions, to vote all proxies they are
entitled to vote in favor of the election of the four nominees named above. The
nominees each have consented to stand for election and to serve if elected. If
elected, a nominee will serve for a term of indefinite duration until his or her
successor is elected and qualified, or his or her earlier death, resignation or
removal, or until declared bankrupt or incompetent by a court of appropriate
jurisdiction. If any nominee should be unable to serve, an event that is not now
anticipated, the persons named as proxies will vote for such replacement nominee
as may be designated by the Board.
Information regarding the nominees for election as Managers,
including brief biographical information, is set forth below.
10
INDEPENDENT MANAGER NOMINEES
- -----------------------------------------------------------------------------------------------------------------------
(2)
POSITION(S)
HELD (3) (4) (5)
WITH THE TERM OF OFFICE/ PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS
(1) FUND AND THE LENGTH OF TIME DURING PAST 5 YEARS AND OTHER IN FUND COMPLEX*
NAME, ADDRESS AND AGE MASTER FUND SERVED DIRECTORSHIPS HELD OVERSEEN
- --------------------- ------------ -------------- ----------------------------- --------------------
Virginia G. Breen Manager Term-Indefinite/ Partner, Sienna Ventures (1/05- 4
c/o Excelsior Absolute Length - since present); Partner, Blue Rock
Return Fund of Funds, LLC June 2003 (8/95 to present); also a
225 High Ridge Road manager of Excelsior Buyout
Stamford, CT 06905 Investors LLC and Excelsior
LaSalle Property Fund Inc.
Age 42
Jonathan B. Bulkeley Manager Term-Indefinite/ CEO of Scanbuy, a wireless 4
c/o Excelsior Absolute Length - since software company (3/06 to
Return Fund of Funds, LLC June 2003 present); Managing Partner of
225 High Ridge Road Achilles Partners (10/01 to
Stamford, CT 06905 3/06); Non-Executive Chairman
of QXL, PLC (2/98 to 2/05);
Age 46 also a manager of Excelsior
Buyout Investors, LLC and
Excelsior LaSalle Property
Fund, Inc.
Thomas F. McDevitt Manager Term-Indefinite/ Managing Partner of Edgewood 4
c/o Excelsior Absolute Length - since Capital Partners and President
Return Fund of Funds, LLC June 2003 of Edgewood Capital Advisors
225 High Ridge Road (5/02 to present); Managing
Stamford, CT 06905 Director, Societe Generale
(6/98 to 3/02); also a manager
Age 50 of Excelsior Buyout Investors
LLC and Excelsior LaSalle
Property Inc.
INTERESTED MANAGER NOMINEE
- -----------------------------------------------------------------------------------------------------------------------
(2) (3)
POSITION(S) TERM OF (4) (5)
HELD OFFICE/ PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS
(1) WITH THE LENGTH OF DURING PAST 5 YEARS AND OTHER IN FUND COMPLEX*
NAME, ADDRESS AND AGE FUND TIME SERVED DIRECTORSHIPS HELD OVERSEEN
- --------------------- ------------ ------------ ----------------------------- --------------------
David R. Bailin** Manager Term- Managing Director of U.S. Trust's 3
c/o United States Trust Indefinite/ Alternative Investment Division
Company, N.A. Length - since (since 9/06); co-founder of Martello
225 High Ridge Road September 2006 Investment Management, a hedge fund-
Stamford, CT 06905 of-funds specializing in trading
strategies (2/02 to 9/06); Chief
Age 47 Operating Officer and Partner of
Violy, Byorum and Partners, LLC,
an investment banking firm focusing
on Latin America (1/00 to 1/02).
* The "Fund Complex" consists of the Fund, the Master Fund, Excelsior Buyout
Investors, LLC and Excelsior LaSalle Property Fund, Inc.
** An "interested person," as defined by the 1940 Act, of the Fund and the
Master Fund because of his affiliation with the Adviser and its affiliates.
11
In addition to Mr. Bailin, set forth below is the name and certain
biographical information for each of the Fund's other executive officers, as
reported by them to the Fund.
OFFICERS OF THE FUND
- -----------------------------------------------------------------------------------------------------------------------------------
(2) (3)
POSITION(S) TERM OF (4) (5)
HELD OFFICE/ PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS
(1) WITH THE LENGTH OF DURING PAST 5 YEARS AND OTHER IN FUND COMPLEX
NAME, ADDRESS AND AGE FUND TIME SERVED DIRECTORSHIPS HELD OVERSEEN
- --------------------- ------------ ------------ ----------------------------- --------------------
Robert F. Aufenanger Chief Term - President and Director, UST N/A
United States Trust Company, Financial Indefinite Advisers, Inc. (12/05 to present);
National Association Officer Length - Senior Vice President, Alternative
114 W. 47th Street and Since July Investments Division, USTCNA (4/06
New York, NY 10036 Treasurer 2003 to present); Senior Vice President,
Chief Financial Officer and
Treasurer, Alternative Investments
Age: 52 Division, USTCNA (4/03 to 3/06);
Chief Financial Officer, Treasurer
and Director, U.S. Trust Hedge Fund
Management, Inc. (7/03 to present);
Consultant to private equity funds
(1/02 to 3/03); Chief Financial
Officer, Icon Holding Corp. (12/99
to 12/01).
Hiam Arfa Chief Since Mr. Arfa is a Senior Vice N/A
United States Trust Company, Compliance October 2006 President of United Stated Trust
National Association Officer Company, National Association and
114 W. 47th Street Chief Compliance Officer of the
New York, NY 10036 Excelsior Investment Funds.
Prior to that, Mr. Arfa served as
Age: 47 associate director of compliance
for Bear Stearns Asset
Management. From August 1998 to
November 2004, Mr. Arfa served as
vice president of regulatory
compliance for JP Morgan Asset
Management.
BOARD MEETINGS AND COMMITTEES.
The only standing committee of the Board is the Audit Committee.
The members of the Audit Committee are: Virginia G. Breen, Jonathan B. Bulkeley
and Thomas F. McDevitt, constituting all of the Independent Managers. Ms. Breen
has been designated as the chair of the Audit Committee. The Board has adopted a
written charter for the Audit Committee, a copy of which is attached to this
Proxy Statement as Exhibit 2.
The function of the Audit Committee, pursuant to its adopted
written charter, most recently revised and approved by the Board on June 26,
2003, is to: (a) assist the Board in its oversight of the Fund's accounting and
financial reporting policies and practices, its internal controls and, as
appropriate, the internal controls of certain service providers; (b) assist the
Board in its oversight of the quality and objectivity of the Fund's financial
statements and the independent audit thereof; and (c) select, oversee and set
the compensation of the Fund's independent auditor and to act as liaison between
the auditor and the full Board.
During the most recent fiscal year of the Fund, which ended on
March 31, 2006, the Board held four regular meetings and one special meeting and
the Audit Committee held five
12
meetings. Each Manager attended at least 75% of the total number of meetings of
the Board and, if a member of the Audit Committee, of the Audit Committee, held
during the fiscal year (or during the Manager's period of service if not a
Manager for the full fiscal year).
AUDIT COMMITTEE REPORT
In discharging its duties, during the 2006 fiscal year the Audit
Committee has met with and held discussions with Fund management and with the
Fund's then-serving independent registered public accounting firm, Deloitte &
Touche LLP ("D&T"). D&T has represented that the Fund's financial statements
were prepared in accordance with generally accepted accounting principles. The
Audit Committee also discussed with D&T the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communications with Audit
Committees). D&T provided to the Audit Committee the written disclosure required
by Independent Standards Board Standard No. 1 (Independent Discussions with
Audit Committees), and the Audit Committee discussed with representatives of D&T
their firm's independence with respect to the Fund.
Members are reminded, however, that the members of the Audit
Committee are not professionally engaged in the practice of auditing or
accounting. Members of the Audit Committee rely without independent verification
on the information provided to them and on the representations made by
management and D&T. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the audit of the Fund's financial statements has been carried out in accordance
with generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Fund's auditors are, in fact, "independent."
Based on the Audit Committee's review and discussions of the
audited financial statements of the Fund for the fiscal year ended March 31,
2006 with Fund management and D&T, the Audit Committee approved the inclusion of
the audited financial statements of the Fund for the fiscal year ended March
31, 2006 in the Fund's Annual Report.
The Master Fund Board has an Audit Committee comprised of the
Independent Managers of the Master Fund, with substantially the same
responsibilities, and substantially the same Audit Committee charter.
During the most recent fiscal year of the Master Fund, which
ended on March 31, 2006, the Master Fund Board held four regular meetings and
one special meeting and the Audit Committee of the Master Fund held five
meetings. Each member of the Master Fund Board attended at least 75% of the
total number of meetings of the Master Fund Board and, if a member of its Audit
Committee, of the Audit Committee of the Master Fund Board, held during the
fiscal
13
year (or during the Master Fund Board member's period of service if not a member
of the Master Fund Board for the full fiscal year).
In discharging its duties, during the 2006 fiscal year the Master
Fund Board's Audit Committee has met with and held discussions with Master Fund
management and with D&T. D&T has represented that the Master Fund's financial
statements were prepared in accordance with generally accepted accounting
principles. The Master Fund Board's Audit Committee also has discussed with D&T
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees). D&T provided to the Master Fund Board's
Audit Committee the written disclosure required by Independent Standards Board
Standard No. 1 (Independent Discussions with Audit Committees), and the Master
Fund Board's Audit Committee discussed with representatives of D&T their firm's
independence with respect to the Master Fund.
Based on the Master Fund Board's Audit Committee's review and
discussions of the audited financial statements of the Master Fund for the
fiscal year ended March 31, 2006 with Master Fund management and D&T, the Master
Fund Board's Audit Committee approved the inclusion of the audited financial
statements of the Master Fund for the fiscal year ended March 31, 2006 in the
Master Fund's Annual Report.
The Board does not have a standing nominating committee or a
nominating committee charter, because the Board does not generally consider
nominations for Independent Managers, except in special circumstances, such as
the nomination of a candidate by a Member (as described below), or in the event
of a vacancy or other inability to serve by an existing Independent Manager. In
such circumstances, all of the Independent Managers will serve as the nominating
committee and will identify potential nominees through their network of contacts
and may also engage, if they deem appropriate, a professional search firm. The
Independent Managers will meet to discuss and consider such candidates'
qualifications and then choose a candidate by majority vote. The Independent
Managers will consider, among other factors: whether or not the person is an
"interested person," as defined in the 1940 Act, of the Fund, and whether the
person is otherwise qualified under applicable laws and regulations to serve as
a Manager; whether or not the person has any relationships that might impair his
or her independence, such as any business, financial or family relationships
with Fund management, the Adviser, service providers or their affiliates; the
contribution which the person can make to the Board, with consideration being
given to the person's business and professional experience, education and such
other factors as the Independent Managers may consider relevant; and the
character and integrity of the person.
As noted above, the nominating committee (when assembled) may
consider nominees recommended by Members. Members who wish to recommend a
nominee should send such recommendations to the Fund's Secretary that include
all information relating to such person that is required to be disclosed in
solicitations of proxies for the election of Managers. A recommendation must be
accompanied by a written consent of the individual to stand for election if
nominated by the Board and to serve if elected by Members.
The Master Fund Board does not have a standing nominating
committee or a nominating committee charter for the same reasons set forth above
with respect to the Board, and will consider the same factors in connection with
nominations for Independent Managers of the Master Fund as the Board does with
respect to nominations for Independent Managers. In the event that such a
committee is required, the Independent Managers of the Master Fund will meet and
make analogous considerations with respect to Master Fund Board nominees, and
members of the Master Fund who wish to recommend a nominee should send
14
such recommendations to the Master Fund's Secretary containing all requisite
information and an analogous written consent of the individual nominee.
MANAGER COMPENSATION.
The following table sets forth certain information regarding the
compensation received by the Independent Managers for the fiscal year ended
March 31, 2006 from the Fund and from all investment companies for which the
Adviser or an affiliated person of the Adviser serves as investment adviser (the
"Fund Complex"). No compensation is paid by the Fund to Managers who are
"interested persons," as defined by the 1940 Act, of the Fund.
BOARD COMPENSATION TABLE
(3) (5)
(2) PENSION OR (4) TOTAL COMPENSATION
(1) AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM FUND AND FUND
NAME OF PERSON COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON COMPLEX PAID TO
POSITION FUND FUND EXPENSES RETIREMENT MANAGERS*
- --------------------- ----------------- ------------------- ---------------- -------------------
Virginia G. Breen, $20,000 0 0 $57,250 (4)
Manager
Jonathan B. Bulkeley, $15,500 0 0 $52,500 (4)
Manager
Thomas F. McDevitt $17,500 0 0 $54,750 (4)
Manager
* The total compensation paid to such persons by the Fund and Fund Complex for
the calendar year ended December 31, 2006. The parenthetical number represents
the number of investment companies (including the Fund) from which such person
receives compensation.
Currently, the Independent Managers are each paid an annual
retainer of $7,000 ($8,000 for the Chairperson of the Board and $7,500 for the
Chairperson of the Audit Committee) and per-meeting fees of: $2,000 for
in-person attendance at quarterly meetings of the Board ($2,500 for the
Chairperson of the Board); $1,000 for telephone participation at a quarterly
Board meeting or for participation at a telephonic special meeting of the Board;
and $750 for each Audit Committee meeting (whether held in-person or by
telephone). The Independent Managers are also reimbursed for travel-related
expenses. The Board does not have a compensation committee.
No compensation is paid by the Master Fund to members of the
Master Fund Board.
15
NOMINEE EQUITY OWNERSHIP.
The following table sets forth, as of December 31, 2006, with
respect to each nominee, certain information regarding the beneficial ownership
of equity securities of the Fund and the Master Fund, and of all registered
investment companies overseen by the nominee within the same family of
investment companies as the Fund and the Master Fund.
(3)
(2) AGGREGATE DOLLAR RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES OF ALL FUNDS OVERSEEN OR
(1) EQUITY SECURITIES TO BE OVERSEEN BY NOMINEE IN FAMILY OF
NAME OF NOMINEE OF THE FUND AND OF THE MASTER FUND INVESTMENT COMPANIES
--------------- ---------------------------------- --------------------
Virginia G. Breen None None
Jonathan B. Bulkeley None None
Thomas F. McDevitt None None
David R. Bailin None None
As of December 31, 2006, none of the Independent Managers, nor the
immediate family members of the Independent Managers, beneficially owned or
owned of record securities of the Adviser or of any persons directly or
indirectly controlling, controlled by or under common control with the Adviser
or AIGGIC.
16
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 Act (the
"1934 Act") and Section 30(h) of the 1940 Act, taken together, require the
Managers, beneficial owners of more than 10% of the equity securities of the
Fund, the Adviser and officers of the Fund ("Reporting Persons") to file with
the Securities and Exchange Commission ("SEC") reports of their ownership and
changes in their ownership of the Fund's securities. The Fund believes that each
of the Reporting Persons who was a Reporting Person during the fiscal year ended
March 31, 2006 has complied with applicable filing requirements, except that
reports filed by James L. Bailey and Lee A. Gardella were not timely filed.
Similarly, the Fund believes that each of the members of the Master Fund Board,
beneficial owners of more than 10% of the equity securities of the Master Fund,
the Adviser and officers of the Master Fund ("Master Fund Reporting Persons")
who was a Master Fund Reporting Person during the fiscal year ended March 31,
2006 has complied with applicable filing requirements, except that reports filed
by James L. Bailey and Lee A. Gardella were not timely filed.
INDEPENDENT PUBLIC ACCOUNTANTS.
The engagement of D&T as the independent registered public
accounting firm ("Independent Auditors") of the Fund and the Master Fund for the
fiscal year ending March 31, 2007, was approved by the Audit Committees of the
Fund and Master Fund, and the selection of D&T was approved by the Board and
Master Fund Board, including the separate vote of all of the Independent
Managers and Independent Managers of the Master Fund, respectively, at meetings
of the Audit Committees and the Board and Master Fund Board held on June 21,
2006. D&T, with offices at Two World Financial Center, New York, New York,
10281, has served in such capacity since October 28, 2004.
The Fund and the Master Fund were advised by D&T in a letter
received December 11, 2006 that, effective upon the closing date of the Sale,
D&T will no longer be able to serve as the Independent Auditors of the Fund or
the Master Fund or provide any attest services to the Fund or the Master Fund.
In view of this, the Fund and the Master Fund requested, and received, a
presentation from PricewaterhouseCoopers ("PwC") on January 12, 2007. The Board
and the Master Fund Board and their Audit Committees requested that the officers
of the Fund and Master Fund continue to work and negotiate with PwC, pending the
outcome of the Sale.
D&T's reports on the financial statements of the Fund and Master
Fund for either of the past two years did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. There were no disagreements between the
Fund or Master Fund and D&T on any matter of accounting principle or practice,
financial statement disclosure, or auditing scope or procedure.
The Fund or Master Fund did not consult with PwC during its
fiscal years ended March 31, 2006, 2005 and 2004 on the application of
accounting principles to a specified transaction, the type of opinion that might
be rendered on the Fund's or Master Fund's financial statements, any accounting,
auditing or financial reporting issue, or any item that was either the subject
of disagreement or a reportable event as defined in Item 304 of Regulation S-K.
Since the Fund and Master Fund comply with the provisions of Rule
32a-4 of the 1940 Act, they are not required to submit the selection of
independent auditors to shareholders for ratification. Representatives of D&T
are not expected to be present at the Meeting, but have been given an
opportunity to make a statement if they so desire and will be available should
any matter arise requiring their presence.
AUDIT FEES.
For the fiscal years ended March 31, 2005 and March 31, 2006, the
aggregate fees billed by D&T for professional services rendered for the annual
audit of the Fund's financial statements were $29,000 and $45,118, respectively.
17
For the fiscal years ended March 31, 2005 and March 31, 2006,
respectively, the aggregate fees billed by D&T for professional services
rendered for the annual audit of the Master Fund's financial statements were
$45,000 and $78,245, respectively.
AUDIT-RELATED FEES.
For the fiscal years ended March 31, 2005 and March 31, 2006,
there were no fees billed by D&T for assurance and related services reasonably
related to the performance of the annual audit of the Fund's or the Master
Fund's financial statements.
During their regularly-scheduled periodic meetings, the Audit
Committees of the Fund and the Master Fund pre-approve all audit, audit-related,
tax and other services to be provided by the Independent Auditors to the Fund
and the Master Fund, respectively. Each Audit Committee has delegated
pre-approval authority to its chairperson for any subsequent new engagements
that arise between regularly scheduled meeting dates, provided that any such
pre-approved fees are presented to the Audit Committee at its next regularly
scheduled meeting.
TAX FEES.
For the fiscal years ended March 31, 2005 and March 31, 2006,
there were no fees billed by D&T for tax return preparation and other
tax-related services with respect to the Fund or the Master Fund.
ALL OTHER FEES.
For the fiscal years ended March 31, 2005 and March 31, 2006,
there were no fees billed by D&T for services provided to the Fund or the Master
Fund other than those described above.
AGGREGATE NON-AUDIT FEES.
For the fiscal years ended March 31, 2005 and March 31, 2006, the
non-audit fees billed by D&T for services rendered to: the Fund, the Master
Fund, the Adviser and any control person of the Adviser that provides ongoing
services to the Fund and the Master Fund were $618,675 and $754,000,
respectively.
All such services provided to the Adviser and any such control
person were pre-approved by each of the Audit Committees of the Fund and the
Master Fund.
18
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" EACH OF THE NOMINEES
- --------------------------------------------------------------------------------
II. VOTING INFORMATION.
------------------
REVOCATION OF PROXIES AND ABSTENTIONS.
A Member giving a proxy may revoke it at any time before it is
exercised by: (i) submitting to the Fund a written notice of revocation; (ii)
submitting to the Fund a subsequently executed proxy; (iii) attending the
Meeting and voting in person; or (iv) notifying the Fund of revocation via
Internet or by touch-tone telephone.
If a proxy (i) is properly executed and returned marked with an
abstention (with respect to Proposal 1) or is accompanied by instructions to
withhold authority to vote (with respect to Proposal 2), or (ii) represents a
nominee "non-vote" (that is, a proxy from a broker or nominee indicating that
such person has not received instructions from the beneficial owner or other
person entitled to vote on a particular matter with respect to which the broker
or nominee does not have discretionary power to vote) (collectively,
"abstentions"), the Interest represented thereby will be considered to be
present at the Meeting for purposes of determining the existence of a quorum for
the transaction of business. If a proxy is properly executed and returned and is
marked with an abstention, the proxy will not be voted on any matter as to which
the abstention applies. Abstentions will have the effect of a vote "AGAINST"
approval of Proposal 1, but will have no effect on the outcome of voting on
Proposal 2.
QUORUM REQUIREMENTS.
A quorum of Members is necessary to hold the valid Meeting. If
Members holding Interests representing a majority of the total number of votes
eligible to be cast by all Members as of the Record Date are present in person
or by proxy at the Meeting, a quorum will exist.
ADJOURNMENTS.
If a quorum is not present at the Meeting, or if a quorum is
present but sufficient votes to approve the Proposals are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. In determining whether to propose an
adjournment in such event, the following factors may be considered: the nature
of the Proposals, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to Members with respect to the reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority of
Members present in person or by proxy at the Meeting. If a quorum is present and
an adjournment is proposed, the persons named as proxies will vote those proxies
which they are entitled to vote "FOR" the Proposals in favor of such
adjournment, and will vote those proxies required to be voted "AGAINST" the
Proposals against such adjournment. At any adjourned Meeting at which a quorum
is present, any business may be transacted which
19
might have been transacted at the Meeting originally called. An abstention will
be treated as a vote for adjournment.
III. OTHER MATTERS AND ADDITIONAL INFORMATION
----------------------------------------
OTHER BUSINESS AT THE MEETING.
The Board does not intend to bring any matters before the Meeting
other than as stated in this Proxy Statement and is not aware that any other
matters will be presented for action at the Meeting. If any other matters
properly come before the Meeting, it is the intention of the persons named as
proxies to vote on such matters in accordance with their best judgment, unless
specific restrictions have been given.
FUTURE MEMBER PROPOSALS.
Pursuant to rules adopted by the SEC under the 1934 Act, Members
may request inclusion in the Fund's proxy statement for a meeting of Members
certain proposals for action which they intend to introduce at such meeting. Any
Member proposals must be presented a reasonable time before the proxy materials
for the next meeting are sent to Members. The submission of a proposal does not
guarantee its inclusion in the proxy statement and is subject to limitations
under the 1934 Act. Because the Fund does not hold regular meetings of Members,
no anticipated date for the next meeting can be provided. Any Member wishing to
present a proposal for inclusion in the proxy materials for the next meeting of
Members should submit such proposal to the Fund at c/o the Adviser, 225 High
Ridge Road, Stamford, Connecticut 06905.
COMMUNICATION WITH THE BOARD.
Members wishing to submit written communications to the Board
should send their communications to the Secretary of the Fund at its principal
office. Any such communications received will be reviewed by the Board at its
next regularly scheduled meeting.
APPRAISAL RIGHTS.
Members do not have any appraisal rights in connection with the
Proposals.
RESULTS OF VOTING.
Members will be informed of the results of voting at the Meeting
in the Fund's next annual report, which will be sent to Members on or before May
30, 2007.
EXPENSES.
All of the expenses of the Meeting, including the costs of
solicitation and the expenses of preparing, printing and mailing this Proxy
Statement and its enclosures, and the fee and expenses of the proxy solicitor,
are being paid by the Adviser.
MEMBERS ARE REQUESTED TO MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE
20
IF MAILED IN THE UNITED STATES. ADDITIONAL PROCEDURES YOU MAY USE TO VOTE
ARE DESCRIBED ON THE ENCLOSED PROXY CARD.
By Order of the Board of Managers
/s/ David R. Bailin
-----------------------------------------
Name: David R. Bailin
Title: Manager
Dated: [_______________]
21
EXHIBIT 1
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made and executed the __ day
of ___________, 2007, by and between Excelsior Absolute Return Fund of Funds
Master Fund, LLC, a Delaware limited liability company (the "Fund"), and U.S.
Trust Hedge Fund Management, Inc., a North Carolina corporation (the "Investment
Adviser").
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end, non-diversified management investment
company, and the Investment Adviser is an investment adviser registered as such
under with the Commission under the Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Investment Adviser to act
as its investment adviser pursuant to this Agreement; and
WHEREAS, the Investment Adviser desires to be retained to act as
investment adviser to the Fund pursuant to this Agreement;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed, by and between the parties, as follows:
1. The Fund hereby retains the Investment Adviser to:
(a) act as its investment adviser and, subject to the
supervision and control of the Board of Managers of the Fund (the "Board"),
manage the investment activities of the Fund as hereinafter set forth. Without
limiting the generality of the foregoing, the Investment Adviser shall: obtain
and evaluate such information and advice relating to the economy, securities
markets, and securities as it deems necessary or useful to discharge its duties
hereunder; continuously manage the assets of the Fund in a manner consistent
with the investment objective, policies and restrictions of the Fund, as set
forth in the Confidential Memorandum of the Fund and as may be adopted from time
to time by the Board, and applicable laws and regulations; determine the
securities to be purchased, sold or otherwise disposed of by the Fund and the
timing of such purchases, sales and dispositions; invest discrete portions of
the Fund's assets (which may constitute, in the aggregate, all of the Fund's
assets) in unregistered investment funds or other investment vehicles and
registered investment companies ("Portfolio Funds"), which are managed by
investment managers ("Portfolio Managers"), including Portfolio Managers for
which separate investment vehicles have been created in which the Portfolio
Managers serve as general partners or managing members and the Fund is the sole
investor ("Portfolio Accounts") and Portfolio Managers who are retained to
manage the Fund's assets directly through separate managed accounts (Portfolio
Managers of Portfolio Accounts and of managed accounts are collectively referred
to as "Sub-Managers"), and take such further action, including the placing of
purchase and sale orders and the voting of securities on behalf of the Fund, as
the Investment Adviser shall deem necessary or appropriate. The Investment
Adviser shall furnish to or place at the disposal of the Fund such of the
information, evaluations, analyses
Exhibit 1 - 1
and opinions formulated or obtained by the Investment Adviser in the discharge
of its duties as the Fund may, from time to time, reasonably request; and
(b) provide, and the Investment Adviser hereby agrees to
provide, certain management, administrative and other services to the Fund.
Notwithstanding the appointment of the Investment Adviser to provide such
services hereunder, the Board shall remain responsible for supervising and
controlling the management, business and affairs of the Fund. The management,
administrative and other services to be provided by the Investment Adviser shall
include:
(i) providing office space, telephone and utilities;
(ii) providing administrative and secretarial, clerical
and other personnel as necessary to provide the
services required to be provided under this
Agreement;
(iii) supervising the entities which are retained by the
Fund to provide administration, custody and other
services to the Fund;
(iv) handling investor inquiries regarding the Fund and
providing investors with information concerning
their investments in the Fund and capital account
balances;
(v) monitoring relations and communications between
investors and the Fund;
(vi) assisting in the drafting and updating of
disclosure documents relating to the Fund and
assisting in the preparation of offering materials;
(vii) maintaining and updating investor information, such
as change of address and employment;
(viii) assisting in the preparation and mailing of
investor subscription documents and confirming the
receipt of such documents and funds;
(ix) assisting in the preparation of regulatory filings
with the Securities and Exchange Commission and
state securities regulators and other Federal and
state regulatory authorities;
(x) preparing reports to and other informational
materials for members and assisting in the
preparation of proxy statements and other member
communications;
(xi) monitoring compliance with regulatory requirements
and with the Fund's investment objective, policies
and restrictions as established by the Board;
Exhibit 1 - 2
(xii) reviewing accounting records and financial reports
of the Fund, assisting with the preparation of the
financial reports of the Fund and acting as liaison
with the Fund's accounting agent and independent
auditors;
(xiii) assisting in the preparation and filing of tax
returns;
(xiv) coordinating and organizing meetings of the Board
and meetings of the members of the Fund, in each
case when called by such persons;
(xv) preparing materials and reports for use in
connection with meetings of the Board;
(xvi) maintaining and preserving those books and records
of the Fund not maintained by any Sub-advisers (as
defined in Paragraph 2 below) of the Fund or the
Fund's administrator, accounting agent or custodian
(which books and records shall be the property of
the Fund and maintained and preserved as required
by the 1940 Act and the rules thereunder and shall
be surrendered to the Fund promptly upon request);
(xvii) reviewing and arranging for payment of the expenses
of the Fund;
(xviii) assisting the Fund in conducting offers to members
of the Fund to repurchase member interests;
(xix) reviewing and approving all regulatory filings of
the Fund required under applicable law;
(xx) reviewing investor qualifications and subscription
documentation and otherwise assisting in
administrative matters relating to the processing
of subscriptions for interests in the Fund;
(xxi) providing the services of persons employed by the
Investment Adviser or its affiliates who may be
appointed as officers of the Fund by the Board; and
(xxii) assisting the Fund in routine regulatory
examinations, and working closely with any counsel
retained to represent the members of the Board who
are not "interested persons," as defined by the
1940 Act and the rules thereunder (the "Independent
Managers") of the Fund in response to any
litigation, investigations or regulatory matters.
2. Provided that the Fund shall not be required to pay any
compensation for services other than as provided by the terms of this Agreement,
the Investment Adviser is authorized: (i) to obtain investment information,
research or assistance from any other person, firm or corporation to supplement,
update or otherwise improve its investment management
Exhibit 1 - 3
services; and (ii) to enter into investment sub-advisory agreements with any
registered investment adviser (a "Sub-Adviser"), subject to such approvals of
the Board and members of the Fund ("Members") as may be required to comply with
applicable provisions of the 1940 Act, delegating any or all of the investment
advisory services required to be provided by the Investment Adviser under
Paragraph 1(a) hereof, subject to the supervision of the Investment Adviser.
3. Without limiting the generality of paragraph 1 hereof, the
Investment Adviser (and, if applicable, the Sub-Adviser) shall be authorized to
open, maintain and close accounts in the name and on behalf of the Fund with
brokers and dealers as it determines are appropriate; to select and place orders
with brokers, dealers or other financial intermediaries for the execution,
clearance or settlement of any transactions on behalf of the Fund on such terms
as the Investment Adviser (or the Sub-Adviser) considers appropriate and that
are consistent with the policies of the Fund; and, subject to any policies
adopted by the Board and to the provisions of applicable law, to agree to such
commissions, fees and other charges on behalf of the Fund as it shall deem
reasonable in the circumstances taking into account all such factors as it deems
relevant (including the quality of research and other services made available to
it even if such services are not for the exclusive benefit of the Fund and the
cost of such services does not represent the lowest cost available) and shall be
under no obligation to combine or arrange orders so as to obtain reduced charges
unless otherwise required under the federal securities laws; to pursue and
implement the investment policies and strategies of the Fund using a
multi-manager strategy whereby some or all of the Fund's assets may be committed
from time to time by the Investment Adviser (or the Sub-Adviser) to the
discretionary management of one or more Sub-Managers, the selection of which
shall be subject to the approval of the Board of Managers in accordance with
requirements of the 1940 Act and the approval of a majority (as defined in the
1940 Act) of the Fund's outstanding voting securities, unless the Fund receives
an exemption from the provisions of the 1940 Act requiring such approval by
security holders; and to identify appropriate Sub-Managers, assess the most
appropriate investment vehicles (general or limited partnerships, separate
managed accounts or other investment vehicles (pooled or otherwise), and
determine the assets to be committed to each Sub-Manager. The Investment Adviser
(or the Sub-Adviser) may, subject to such procedures as may be adopted by the
Board, use affiliates of the Investment Adviser as brokers to effect the Fund's
securities transactions and the Fund may pay such commissions to such brokers in
such amounts as are permissible under applicable law.
4. ADVISORY FEE; EXPENSES
(a) In consideration for the provision by the Investment
Adviser of its services hereunder and the Investment Adviser's bearing of
certain expenses, the Fund will pay the Investment Adviser a quarterly fee of
0.25% (1.00% on an annualized basis) of the Fund's "net assets" (the "Advisory
Fee"). "Net assets" shall equal the total value of all assets of the Fund, less
an amount equal to all accrued debts, liabilities and obligations of the Fund
calculated before giving effect to any repurchases of interests.
(b) The Advisory Fee will be computed based on the average
monthly net assets of the Fund as of the start of business on the first business
day of each month in the quarter, after adjustment for any subscriptions
effective on such date, and will be due and payable in arrears within five
business days after the end of such calendar quarter.
Exhibit 1 - 4
(c) The Investment Adviser is responsible for all costs and
expenses associated with the provision of its services hereunder including, but
not limited to: expenses relating to the selection and monitoring of Portfolio
Managers; fees of consultants or a Sub-Adviser retained by the Investment
Adviser; and expenses relating to qualifying potential investors and reviewing
subscription documents. The Investment Adviser shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as may be necessary to render the services required to be provided
by the Investment Adviser or furnished to the Fund under this Agreement. Without
limiting the generality of the foregoing, the staff and personnel of the
Investment Adviser shall be deemed to include persons employed or otherwise
retained by the Investment Adviser or made available to the Investment Adviser.
5. The Fund will, from time to time, furnish or otherwise make
available to the Investment Adviser such financial reports, proxy statements,
policies and procedures and other information relating to the business and
affairs of the Fund as the Investment Adviser may reasonably require in order to
discharge its duties and obligations hereunder.
6. Except as provided herein or in another agreement between the
Fund and the Investment Adviser, the Fund shall bear all of its own expenses,
including: all investment related expenses (including, but not limited to, fees
paid directly or indirectly to Portfolio Managers, all costs and expenses
directly related to portfolio transactions and positions for the Fund's account
such as direct and indirect expenses associated with the Fund's investments,
including its investments in Portfolio Funds, transfer taxes and premiums, taxes
withheld on foreign dividends and, if applicable in the event the Fund utilizes
a Portfolio Account, brokerage commissions, interest and commitment fees on
loans and debit balances, borrowing charges on securities sold short, dividends
on securities sold but not yet purchased and margin fees); all costs and
expenses associated with the establishment of Portfolio Accounts; any
non-investment related interest expense; fees and disbursements of any attorneys
and accountants engaged by the Fund; audit and tax preparation fees and expenses
of the Fund; administrative expenses and fees; custody and escrow fees and
expenses; the costs of an errors and omissions/directors and officers liability
insurance policy and a fidelity bond; the fee payable to the Investment Adviser;
fees and travel-related expenses of members of the Board (the "Managers") who
are not employees of the Investment Adviser or any affiliated person of the
Investment Adviser; all costs and charges for equipment or services used in
communicating information regarding the Fund's transactions among the Investment
Adviser and any custodian or other agent engaged by the Fund; any extraordinary
expenses; and such other expenses as may be approved from time to time by the
Board.
7. The compensation provided to the Investment Adviser pursuant to
paragraph 4(a) hereof shall be the entire compensation for the services provided
to the Fund and the expenses assumed by the Investment Adviser under this
Agreement.
8. The Investment Adviser will use its best efforts in the
supervision and management of the investment activities of the Fund and in
providing services hereunder, but in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations hereunder, the
Investment Adviser, its directors, officers or employees and its affiliates,
successors or other legal representatives (collectively, the "Affiliates") shall
not be
Exhibit 1 - 5
liable to the Fund for any error of judgment, for any mistake of law, for any
act or omission by the Investment Adviser or any of the Affiliates or by any
Sub-Adviser or Sub-Manager or for any loss suffered by the Fund.
9. (a) The Fund shall indemnify the Investment Adviser and its
directors, officers or employees and their respective affiliates, executors,
heirs, assigns, successors or other legal representatives (each an "Indemnified
Person") against any and all costs, losses, claims, damages or liabilities,
joint or several, including, without limitation, reasonable attorneys' fees and
disbursements, resulting in any way from the performance or non-performance of
any Indemnified Person's duties with respect to the Fund, except those resulting
from the willful malfeasance, bad faith or gross negligence of an Indemnified
Person or the Indemnified Person's reckless disregard of such duties, and in the
case of criminal proceedings, unless such Indemnified Person had reasonable
cause to believe its actions unlawful (collectively, "disabling conduct").
Indemnification shall be made following: (i) a final decision on the merits by a
court or other body before which the proceeding was brought that the Indemnified
Person was not liable by reason of disabling conduct or (ii) a reasonable
determination, based upon a review of the facts and reached by (A) the vote of a
majority of the Managers who are not parties to the proceeding or (B) legal
counsel selected by a vote of a majority of the Board in a written advice, that
the Indemnified Person is entitled to indemnification hereunder. The Fund shall
advance to an Indemnified Person (to the extent that it has available assets and
need not borrow to do so) reasonable attorneys' fees and other costs and
expenses incurred in connection with defense of any action or proceeding arising
out of such performance or non-performance. The Investment Adviser agrees, and
each other Indemnified Person will agree as a condition to any such advance,
that in the event the Indemnified Person receives any such advance, the
Indemnified Person shall reimburse the Fund for such fees, costs and expenses to
the extent that it shall be determined that the Indemnified Person was not
entitled to indemnification under this paragraph 9.
(b) Notwithstanding any of the foregoing to the contrary, the
provisions of this paragraph 9 shall not be construed so as to relieve the
Indemnified Person of, or provide indemnification with respect to, any liability
(including liability under Federal Securities laws, which, under certain
circumstances, impose liability even on persons who act in good faith) to the
extent (but only to the extent) that such liability may not be waived, limited
or modified under applicable law or that such indemnification would be in
violation of applicable law, but shall be construed so as to effectuate the
provisions of this paragraph 9 to the fullest extent permitted by law.
10. Nothing contained in this Agreement shall prevent the
Investment Adviser or any affiliated person of the Investment Adviser from
acting as investment adviser or manager for any other person, firm or
corporation and, except as required by applicable law (including Rule 17j-1
under the 1940 Act), shall not in any way bind or restrict the Investment
Adviser or any such affiliated person from buying, selling or trading any
securities or commodities for their own accounts or for the account of others
for whom they may be acting. Nothing in this Agreement shall limit or restrict
the right of any member, officer or employee of the Investment Adviser to engage
in any other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
Exhibit 1 - 6
11. This Agreement will take effect on the date first set forth
above. Unless earlier terminated pursuant to this paragraph, this Agreement
shall remain in effect for a period of two (2) years from such date and shall
continue in effect from year to year thereafter, so long as such continuance
shall be approved at least annually by the vote of a "majority of the
outstanding voting securities of the Fund," as defined by the 1940 Act and the
rules thereunder, or by the Board; and provided that in either event such
continuance is also approved by a majority of the Independent Managers, by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Fund may at any time, without payment of any penalty, terminate this
Agreement upon sixty days' prior written notice to the Investment Adviser,
either by majority vote of the Board or by the vote of a "majority of the
outstanding voting securities of the Fund," as defined by the 1940 Act and the
rules thereunder. The Investment Adviser may at any time, without payment of
penalty, terminate this Agreement upon sixty days' prior written notice to the
Fund. This Agreement shall automatically terminate in the event of its
"assignment," as defined by the 1940 Act and the rules thereunder.
12. Any notice under this Agreement shall be given in writing and
shall be deemed to have been duly given when delivered by hand or facsimile or
five days after mailed by certified mail, post-paid, by return receipt requested
to the other party at the principal office of such party.
13. This Agreement may be amended only by the written agreement of
the parties. Any amendment shall be required to be approved by the Board and by
a majority of the Independent Managers in accordance with the provisions of
Section 15(c) of the 1940 Act and the rules thereunder. If required by the 1940
Act, any amendment shall also be required to be approved by the vote of a
"majority of the outstanding voting securities of the Fund," as defined by the
1940 Act and the rules thereunder.
14. This Agreement shall be construed in accordance with the laws
of the State of New York and the applicable provisions of the 1940 Act. To the
extent the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
15. The Fund represents that this Agreement has been duly approved
by the Board, including the vote of a majority of the Independent Managers, and
by the vote of a "majority of the outstanding voting securities of the Fund," as
defined by the 1940 Act and the rules thereunder.
16. The parties to this Agreement agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Managers,
members of the Fund or any officers, employees or agents, whether past, present
or future, of the Fund, individually, but are binding only upon the assets and
property of the Fund.
17. This Agreement embodies the entire understanding of the
parties.
{THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK}
Exhibit 1 - 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
EXCELSIOR ABSOLUTE RETURN FUND OF
FUNDS MASTER FUND, LLC
By:
---------------------------------
Name:
Title:
U.S. TRUST HEDGE FUND MANAGEMENT,
INC.
By:
---------------------------------
Name:
Title:
Exhibit 1 - 8
EXHIBIT 2
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
AUDIT COMMITTEE CHARTER
1. The Audit Committee of the Board of Managers of Excelsior Absolute Return
Fund of Funds, LLC, (the "Fund") shall be composed entirely of independent
managers, each of whom shall have no relationship to the Fund or its
investment adviser (the "Adviser"), administrator or custodian that may
interfere with the exercise of his or her independence from management and
the Fund. Membership of the Audit Committee shall be determined by the full
Board from time to time at its sole discretion.
2. The Audit Committee shall meet at least once a year and is empowered to
hold special meetings as circumstances require.
3. The purposes of the Audit Committee are to:
(a) assist the Board in its oversight of the Fund's accounting and
financial reporting policies and practices, their internal controls
and, as appropriate, the internal controls of certain service
providers;
(b) assist the Board in its oversight of the quality and objectivity of
the Fund's financial statements and the independent audit thereof;
(c) select, oversee and set the compensation of the Fund's independent
auditor (the "Auditor") and to act as liaison between the Auditor and
the full Board of Managers.
The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and
internal controls, and the Auditor's responsibility to plan and carry
out the audit in accordance with auditing standards generally accepted
in the United States. The Auditor is ultimately responsible to the
Board of Managers and the Audit Committee, as representatives of the
members of the Fund.
4. The Auditor shall report directly to the Audit Committee.
5. To carry out its purposes, the Audit Committee shall have the following
duties and powers:
(a) SELECTION OF AUDITOR.
(i) The Audit Committee shall pre-approve the selection of the
Auditor and shall recommend the selection, retention or
termination of the Auditor to the full Board and, in connection
therewith, shall evaluate the independence of the Auditor,
including whether the Auditor provides any consulting, auditing
or non-audit services to the Adviser or its affiliates.
The Audit Committee shall review the Auditor's specific
representations as to its independence.
(ii) The Audit Committee shall review and approve the fees charged by
the Auditor for audit and non-audit services in accordance with
the pre-approval requirements set forth in (d) below. The Fund
shall provide for appropriate funding, as determined by the Audit
Committee, to compensate the Auditor for any authorized service
provided to the Fund.
(b) MEETINGS WITH AUDITORS.
The Audit Committee shall meet with the Auditor, including private
meetings, as necessary (i) to review the arrangements for and scope of
the annual audit and any special audits; (ii) to provide the Auditor
the opportunity to report to the Audit Committee, on a timely basis,
all critical accounting policies and practices to be used; (iii) to
discuss any matters of concern relating to the Fund's financial
statements, including (a) any adjustments to such statements
recommended by the Auditor, or other results of said audit(s), and (b)
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, the ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
Auditor; (iv) to provide the Auditor the opportunity to report to the
Audit Committee, on a timely basis, any material written communication
between the Auditor and management such as any management letter or
schedule of unadjusted differences; (v) to provide the Auditor the
opportunity to report all non-audit services provided to any entity in
the "investment company complex"(2) that were not pre-approved by the
Audit Committee; (vi) in accordance with Statement of Auditing
Standards No. 61, as amended, to consider the auditors' comments with
respect to the Fund's financial policies, procedures and internal
accounting controls and responses thereto by the Fund's officers;
(vii) to review the form of written opinion the Auditor proposes to
render to the Board and members of the Fund; and (viii) to provide the
Auditor the opportunity to report on any other matter that the Auditor
deems necessary or appropriate to discuss with the Audit Committee.
(c) CHANGE IN ACCOUNTING PRINCIPLES.
The Audit Committee shall consider the effect upon the Fund of any
changes in accounting principles or practices proposed by the Auditor
or the Fund's officers.
(d) PRE-APPROVAL REQUIREMENTS.
(i) PRE-APPROVAL REQUIREMENTS. Before the Auditor is engaged by the
Fund to render audit or non-audit services, EITHER:
a. The Audit Committee shall pre-approve all auditing
services and permissible non-audit services (E.G., tax
services) provided to the
- -------------------
(2) "Investment Company Complex" means the Fund, the Adviser and any entity
controlled by, controlling or under common control with the Adviser if such
entity is an investment adviser or is engaged in the business of providing
administrative, custodian, underwriting or transfer agent services to the Fund
or Adviser.
Exhibit 2 - 2
Fund. The Audit Committee may delegate to one or more of its
members the authority to grant pre-approvals. The decisions
of any member to whom authority is delegated under this
section shall be presented to the full Audit Committee at
each of its scheduled meetings; or
b. The engagement to render the auditing service or
permissible non-audit service is entered into pursuant to
pre-approval policies and procedures established by the
Audit Committee. Any such policies and procedures must (1)
be detailed as to the particular service and (2) not
involve any delegation of the Audit Committee's
responsibilities to the Adviser. The Audit Committee must
be informed of each service entered into pursuant to the
policies and procedures. A copy of any such policies and
procedures shall be attached as an exhibit to the Audit
Committee Charter.
(ii) DE MINIMIS EXCEPTIONS TO PRE-APPROVAL REQUIREMENTS.
Pre-Approval for a service provided to the Fund other than
audit, review or attest services is not required if: (1) the
aggregate amount of all such non-audit services provided to the
Fund constitutes not more than 5 percent of the total amount of
revenues paid by the Fund to the Auditor during the fiscal year
in which the non-audit services are provided; (2) such services
were not recognized by the Fund at the time of the engagement
to be non-audit services; and (3) such services are promptly
brought to the attention of the Audit Committee and are
approved by the Audit Committee or by one or more members of
the Audit Committee to whom authority to grant such approvals
has been delegated by the Audit Committee prior to the
completion of the audit.
(iii) PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO THE ADVISER AND
CERTAIN CONTROL PERSONS. The Audit Committee shall pre-approve
any non-audit services proposed to be provided by the Auditor
to (a) the Adviser and (b) any entity controlling, controlled
by, or under common control with the Adviser that provides
ongoing services to the Fund, if the Auditor's engagement with
the Adviser or any such control persons relates directly to the
operations and financial reporting of the Fund.
APPLICATION OF DE MINIMIS EXCEPTION: The De Minimis exception
set forth above under Section 5(d)(ii) applies to pre-approvals
under this Section (iii) as well, except that the "total amount
of revenues" calculation is based on the total amount of
revenues paid to the Auditor by the Fund and any other entity
that has its services approved under this Section (I.E., the
Adviser or any control person).
(iv) The pre-approval requirements set forth above are optional to
the extent that any engagement is entered into with the Auditor
prior to May 6, 2003 (the effective date of the Securities and
Exchange Commission ("SEC")
Exhibit 2 - 3
regulations establishing such requirements). (3) Engagements
entered into prior to May 6, 2003, are subject to any
limitations set forth in the transition and grandfathering
provisions in the SEC rules.
(e) PROHIBITED ACTIVITIES OF THE AUDITOR. An auditor who is performing the
audit for the Fund may not perform contemporaneously (during the audit
and professional engagement period) the following non-audit services
for the Fund:
(1) bookkeeping or other services related to the accounting
records or financial statements of the Fund;
(2) financial information systems design and implementation;
(3) appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;
(4) actuarial services;
(5) internal audit outsourcing services;
(6) management functions or human resources;
(7) broker or dealer, investment adviser, or investment banking
services;
(8) legal services and expert services unrelated to the audit;
and
(9) any other service that the Public Company Accounting
Oversight Board determines, by regulation, is impermissible.
The Auditor will be responsible for informing the Audit Committee of
whether it believes that a particular non-audit service is permissible
or prohibited pursuant to applicable regulations and standards.
(f) Investigate improprieties or suspected improprieties in Fund
operations.
(g) Report its activities to the full Board on a regular basis and to make
such recommendations with respect to the above and other matters as
the Audit Committee may deem necessary or appropriate.
6. The Audit Committee shall have the opportunity to meet with the Treasurer
of the Fund and with personnel of the Adviser.
7. The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of the Fund.
- -------------------
(3) The final rules adopted by the Securities and Exchange Commission relating
to pre-approval requirements are set forth in Strengthening the Commission's
Requirements Regarding Auditor Independence, Release No. IC 25915 (Jan. 28,
2003).
Exhibit 2 - 4
8. The Audit Committee shall review this Charter on an annual basis and
recommend any changes to the full Board of Managers.
Dated:
-------------------
Exhibit 2 - 5
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
PROXY SOLICITED ON BEHALF OF THE
BOARD OF MANAGERS FOR THE
SPECIAL MEETING OF MEMBERS TO BE HELD ON MARCH 15, 2007
The undersigned hereby appoints Ralph A. Pastore and Robert F.
Aufenanger, jointly and severally, as proxies ("Proxies"), with full power to
appoint one or more substitutes, and hereby authorizes them to represent and to
vote, as designated below, the interest in Excelsior Absolute Return Fund of
Funds, LLC (the "Fund") held of record by the undersigned on January 12, 2007 at
the Special Meeting (the "Meeting") of Members of the Fund to be held at the
offices of United States Trust Company, National Association, 225 High Ridge
Road, Stamford, Connecticut 06905 on March 15, 2007 at 10:00 a.m. (Eastern
Standard time) and at any and all adjournments thereof, with all the powers the
undersigned would possess if personally present at such Meeting, and hereby
revokes any proxies that may previously have been given by the undersigned with
respect to the interest in the Fund covered hereby. I acknowledge receipt of the
Notice of Special Meeting of Members and the Proxy Statement dated [------],
2007.
The Board of Managers recommends a vote "FOR" Proposal 1 and "FOR
ALL" of the nominees.
INSTRUCTIONS: Check ONE of the boxes for each Proposal.
- ------------ ---
- ----------------------------- -------------------------------- --------------------------- -------------------------------
1. APPROVAL OF NEW AGAINST ABSTAIN
INVESTMENT ADVISORY FOR
AGREEMENT [ ] [ ] [ ]
- ----------------------------- --------------------------------------------------------------------------------------------
2. ELECTION OF o Mark "FOR" if you wish to vote for all nominees.
MANAGERS o Mark "WITHHOLD AUTHORITY" if you wish to withhold authority for all nominees.
o Mark "FOR ALL EXCEPT" below and write on the lines below the number(s) of the
individual nominee(s) for whom you wish to withhold authority.
WITHHOLD
FOR ALL AUTHORITY FOR ALL EXCEPT*
[ ] [ ] [ ]
NOMINEES: 01 - David R. Bailin 02 - Virginia G. Breen
03 - Jonathan B. Bulkeley 04 - Thomas F. McDevitt
* To withhold authority to vote for any individual, mark the box "FOR ALL EXCEPT" and
write the Nominee's number on the line below.
---------------------------------------------
3. IN THEIR DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
- ----------------------------- --------------------------------------------------------------------------------------------
PLEASE MARK, SIGN AND DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
If this proxy is properly executed and received by the Fund prior to the
Meeting, the interests in the Fund represented hereby will be voted in the
manner directed on this proxy card. If not otherwise specified, this proxy will
be voted "FOR" Proposal 1 and "FOR ALL" nominees for election as managers.
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS ON THIS PROXY CARD. INDIVIDUALS,
JOINT TENANTS AND IRA INVESTORS, PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS
PROXY CARD. WITH RESPECT TO ENTITY INVESTORS, EACH PERSON REQUIRED TO SIGN UNDER
THE INVESTOR'S GOVERNING DOCUMENTS MUST SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD GIVE THEIR FULL TITLE. IF MORE THAN ONE AUTHORIZED
SIGNATORY IS REQUIRED, EACH SIGNATORY SHOULD SIGN. IF INTERESTS IN THE FUND ARE
HELD JOINTLY, EACH HOLDER SHOULD SIGN.
- -------------------------------------------------------------------------------
- ------------------------------------ ---------------------------------------
Signatory (Please sign) Additional Signatory (Please sign,
Name: Name: if applicable)
Title: Date: Title: Date:
- -------------------------------------------------------------------------------
Control Number:
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
TO VOTE BY INTERNET TO VOTE BY TELEPHONE TO VOTE BY MAIL
------------------- -------------------- ---------------
o Read the Proxy Statement and have o Read the Proxy Statement o Read the Proxy Statement
this card at hand and have this card at hand o Check the appropriate
o Log on to www.proxyweb.com o Call toll-free at boxes on this proxy card
o Follow the on-screen instructions 1-888-221-0697 o Sign, date and return
o Do NOT mail this proxy card o Follow the recorded this proxy card
instructions o Mail your completed
o Do NOT mail this proxy card proxy card in the enclosed
envelope
PLEASE DO NOT VOTE USING MORE THAN ONE METHOD
DO NOT MAIL YOUR PROXY CARD IF YOU VOTE BY INTERNET OR TELEPHONE
ONLY PROPERLY-EXECUTED PROXIES RECEIVED BEFORE THE MEETING WILL BE VOTED AT THE
MEETING OR ANY ADJOURNMENT THEREOF.