UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-22035
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Investment Company Act file number
Excelsior Directional Hedge Fund of Funds (TE), LLC
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(Exact name of registrant as specified in charter)
225 High Ridge Road
Stamford, CT 06905
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(Address of principal executive offices) (Zip code)
Steven L. Suss
U.S. Trust Hedge Fund Management, Inc.
225 High Ridge Road
Stamford, CT 06905
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(Name and address of agent for Service)
Registrant's telephone number, including area code: (203) 352-4497
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Date of fiscal year end: 3/31/2008
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Date of reporting period: 9/30/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
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EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS (TE), LLC
Financial Statements
(Unaudited)
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
Excelsior Directional Hedge Fund of Funds (TE), LLC
Financial Statements
(Unaudited)
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
Contents
Statement of Assets, Liabilities and Members' Equity - Net Assets as of
September 30, 2007.......................................................1
Statement of Operations for the Period from July 1, 2007 (Commencement of
Operations) to September 30, 2007........................................2
Statements of Changes in Members' Equity - Net Assets for the Period from
July 1, 2007 (Commencement of Operations) to September 30, 2007..........3
Statement of Cash Flows for the Period from July 1, 2007 (Commencement of
Operations) to September 30, 2007........................................4
Financial Highlights for the Period from July 1, 2007 (Commencement of
Operations) to September 30, 2007........................................5
Notes to Financial Statements..................................................6
The Registrant files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (the "Commission") for the first and third
quarters of each fiscal year on Form N-Q. The Registrant's Forms N-Q are
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. Information on Form N-Q is available without charge,
upon request, by calling collect (203) 352-4497.
A description of the policies and procedures that the Registrant uses to
determine how to vote proxies relating to portfolio securities is available
without charge, upon request, by calling collect (203) 352-4497 and on the
Commission's website at http://www.sec.gov.
Information regarding how the Registrant voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge, upon request, by calling collect (203) 352-4497, and
on the Commission's website at http://www.sec.gov.
Excelsior Directional Hedge Fund of Funds (TE), LLC
Statement of Assets, Liabilities and Members' Equity - Net Assets (Unaudited)
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September 30, 2007
- --------------------------------------------------------------------------------
ASSETS
Investment in Excelsior Directional Hedge Fund of Funds, Ltd.
at fair value (cost $5,075,000) $5,010,030
Cash and cash equivalents 145,000
Investments in Excelsior Directional Hedge Fund of Funds, Ltd.
made in advance 3,455,000
Expenses in excess of expense limitation 67,769
Other assets 66
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Total Assets 8,677,865
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LIABILITIES
Members' interests received in advance 3,600,000
Management fee payable 6,344
Professional fees payable 12,667
Administration fees payable 3,000
Other payable 20,150
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Total Liabilities 3,642,161
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Net Assets $5,035,704
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MEMBERS' EQUITY - NET ASSETS
Represented by:
Capital $5,089,735
Net unrealized depreciation on investments (54,031)
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Members' Equity - Net Assets $5,035,704
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of
Excelsior Directional Hedge Fund of Funds, Ltd. and Excelsior Directional
Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Statement of Operations (Unaudited)
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Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS ALLOCATED FROM EXCELSIOR
DIRECTIONAL HEDGE FUND OF FUNDS, LTD:
Interest $ 1,164
Expenses (48,190)
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Net investment loss allocated from Excelsior Directional
Hedge Fund of Funds, Ltd. (47,026)
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Fund Income:
Interest 67
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Fund Expenses:
Management fee 6,344
Professional fees 12,667
Board of Managers' fees and expenses 4,000
Other 1,000
Administration fees 3,000
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Expenses before reimbursement by the Investment Adviser 27,011
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Expenses reimbursed by the Investment Adviser (67,769)
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Total Expenses (40,758)
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Net Investment Loss (6,201)
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REALIZED GAIN AND UNREALIZED LOSS ON INVESTMENTS ALLOCATED FROM
EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS, LTD.:
Net realized gain on investments 59,114
Net change in unrealized depreciation on investments (77,057)
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Net Realized and Unrealized Loss on Investments Allocated from
Excelsior Directional Hedge Fund of Funds, Ltd. (17,943)
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DECREASE IN MEMBERS' EQUITY - NET ASSETS DERIVED FROM OPERATIONS $ (24,144)
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of
Excelsior Directional Hedge Fund of Funds, Ltd. and Excelsior Directional
Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Statements of Changes in Members' Equity - Net Assets (Unaudited)
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Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
OPERATIONS
Net investment loss $ (6,201)
Net realized gain on investments 59,114
Net change in unrealized depreciation on investments (77,057)
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Decrease in Members' Equity - Net Assets Derived from Operations (24,144)
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CAPITAL TRANSACTIONS
Members' subscriptions 5,075,000
Members' interests repurchased -
Offering costs (15,152)
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Increase in Members' Equity - Net Assets Derived From Capital
Transactions 5,059,848
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Net Increase in Members' Equity - Net Assets 5,035,704
MEMBERS' EQUITY - NET ASSETS AT BEGINNING OF PERIOD -
- --------------------------------------------------------------------------------
MEMBERS' EQUITY - NET ASSETS AT END OF PERIOD $ 5,035,704
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of
Excelsior Directional Hedge Fund of Funds, Ltd. and Excelsior Directional
Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Statement of Cash Flows (Unaudited)
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Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net decrease in members' equity - net assets
derived from operations $ (24,144)
Adjustments to reconcile net increase in members' equity -
net assets derived from operations to net cash used in
operating activities:
Net change in unrealized depreciation on investment allocated
from Excelsior Directional Hedge Fund of Funds, Ltd. 77,057
Net realized gain on investment allocated from Excelsior
Directional Hedge Fund of Funds, Ltd. (59,114)
Net investment loss allocated from Excelsior Directional
Hedge Fund of Funds, Ltd. 47,026
Purchases of investment in Excelsior Directional Hedge
Fund of Funds, Ltd. (8,530,000)
Increase in other assets (65)
Increase in expenses in excess of expense limitation (67,769)
Increase in management fee payable 6,344
Increase in professional fees payable 12,667
Increase in administration fees payable 3,000
Increase in other payable 20,150
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Net Cash Used in Operating Activities (8,514,848)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from members' subscriptions 8,675,000
Payments for members' interests repurchased -
Offering costs paid (15,152)
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Net Cash Provided by Financing Activities 8,659,848
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Net increase in cash and cash equivalents 145,000
Cash and cash equivalents at beginning of period -
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 145,000
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of
Excelsior Directional Hedge Fund of Funds, Ltd. and Excelsior Directional
Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Financial Highlights (Unaudited)
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Period from July 1, 2007 (Commencement of Operations)to September 30, 2007*
- --------------------------------------------------------------------------------
The following represents the ratios to average members' equity - net assets,
total return and other supplemental information for the period indicated:
Net assets, end of period $ 5,035,704
Ratio of net investment loss to average Members' equity (0.42%)
- net assets (a)
Ratio of total expenses to average Members' equity (1.50%)
- net assets (b),(c)
Ratio of net expenses to average Members' equity (0.15%)
- net assets (b)
Total return (c) (0.77%)
* The ratios and total return are not annualized.
(a) The ratio reflects the income and expenses assuming inclusion of the
Fund's (as defined in Note 1) proportionate share of income and expenses
of the Company (as defined in Note 1).
(b) The ratio reflects the expenses assuming inclusion of the Fund's
proportionate share of the expenses of the Company.
(c) The ratio is before any expense limitation or reimbursement per the
Expense Limitation Agreement (as defined in Note 2b).
(d) Total return is net of expenses and assumes a purchase of an interest in
the Offshore Fund (as defined in Note 1) on the first day and the sale of
the interest on the last day of the period.
The accompanying notes and attached unaudited financial statements of
Excelsior Directional Hedge Fund of Funds, Ltd. and Excelsior Directional
Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited)
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September 30, 2007
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1. Organization
Excelsior Directional Hedge Fund of Funds (TE), LLC (the "Fund") was organized
as a limited liability company under the laws of Delaware on February 26, 2007,
and commenced operations on July 1, 2007. The Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end,
non-diversified, management investment company. The Fund's investment objective
is to seek capital appreciation. The Fund pursues its investment objective by
investing substantially all of its assets in Excelsior Directional Hedge Fund of
Funds, Ltd. (the "Offshore Fund"), a Cayman Island exempted company. The
Offshore Fund pursues its investment objective by investing substantially all of
its assets in Excelsior Directional Hedge Fund of Funds Master Fund, LLC (the
"Company"), a closed-end, non-diversified, management investment company. The
Company pursues its investment objective principally through a multi-manager,
multi-strategy program of investments in a diverse group of investment funds
that primarily invest or trade in a wide range of equity and debt securities.
The investment managers selected by the Company generally conduct their
investment programs through these investment funds (collectively, the
"Investment Funds") in which the Company invests as a limited partner or member
along with other investors.
The financial statements of the Offshore Fund and the Company, including the
Company's Schedule of Investments, are attached to this report and should be
read with the Fund's financial statements. The percentage of the Offshore Fund's
members' equity owned by the Fund at September 30, 2007 was 100.00%. The
percentage of the Company's members' equity owned by the Offshore Fund at
September 30, 2007 was 1.47%.
U.S. Trust Hedge Fund Management, Inc. serves as the investment adviser of the
Company and as a manager to the Fund (the "Adviser"). On July 1, 2007, the
Adviser became an indirect wholly-owned subsidiary of Bank of America
Corporation ("Bank of America"). As a result, the Adviser is now controlled by
Bank of America. Bank of America is a bank holding and a financial holding
company which has its principal executive offices at 101 North Tryon Street,
Charlotte, North Carolina 28255. Prior to July 1, 2007, the Adviser was a
wholly-owned subsidiary of U.S. Trust Corporation ("U.S. Trust"), a registered
financial holding company, which, in turn, was a wholly-owned subsidiary of The
Charles Schwab Corporation. On July 1, 2007, U.S. Trust and its subsidiaries,
including the Adviser, were acquired by Bank of America (the "Sale"). The
Adviser continued to serve as the investment adviser to the Company after the
Sale pursuant to a new investment advisory agreement with the Company (the "New
Advisory Agreement") that was approved by the Board of Managers of the Company
at a meeting held on January 11, 2007, and was approved by members of the
Company at a special meeting of members of the Company held on March 29, 2007.
The Adviser also continued to serve as manager of the Fund after the Sale
pursuant to a new management agreement with the Fund (the "New Management
Agreement") that was approved by the Fund's Board of Managers (the "Board").
Each of the New Advisory Agreement and the New Management Agreement is identical
in all material respects to the investment advisory agreement and management
agreement previously in effect except for the term and the date of
effectiveness. The Adviser provides various management and administrative
services to the Company, the Offshore Fund and the Fund.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited) continued
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September 30, 2007
- --------------------------------------------------------------------------------
1. Organization (continued)
The Fund's Board has overall responsibility to manage and supervise the
operations of the Fund, including the exclusive authority to oversee and to
establish policies regarding the management, conduct and operation of the Fund's
business. The Board has engaged the Adviser and to manage the day-to-day
operations of the Fund.
Subscriptions for interests in the Fund ("Interests") by eligible investors may
be accepted as of the first day of each calendar quarter, or at such times as
the Board may determine. The Fund may, from time to time, offer to repurchase
Interests from its members ("Members") pursuant to written tenders by the
Members. These repurchase offers will be made at such times and on such terms as
may be determined by the Board, in its sole discretion, subject to the liquidity
of the Company's assets and other factors considered by the Board.
The Adviser expects that, generally, it will recommend to the Board that the
Fund offer to repurchase interests from Members twice each year, at June 30th
and December 31st. Members can only transfer or assign Interests under certain
limited circumstances.
2. Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires that management make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
the Fund's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
a. Portfolio Valuation
The net asset value of the Fund is determined by, or at the direction of, the
Adviser as of the close of business at the end of each fiscal period (as defined
in the Fund's Limited Liability Company Agreement), in accordance with the
valuation principles set forth below, or as may be determined from time to time
pursuant to policies established by the Board.
The Fund records its investment in the Offshore Fund at fair value. The Fund's
investment in the Offshore Fund is represented by the Fund's proportionate
interest in the Offshore Fund's Shareholders' Capital - Net Assets at September
30, 2007. The Offshore Fund records its investment in the Company at fair value.
The Offshore Fund's investment in the Company is represented by the Offshore
Fund's proportionate interest in the Company's Members' Equity - Net Assets at
September 30, 2007. Valuation of investments held by the Company is discussed in
the notes to the Company's financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited) continued
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September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
a. Portfolio Valuation (continued)
The net unrealized depreciation on investments, which is included in Members'
Equity - Net Assets on the Statement of Assets, Liabilities and Members' Equity
- - Net Assets, reflects the Fund's allocated share of the Offshore Fund's net
unrealized loss on investments which is the Offshore Fund's allocated share of
the Company's net unrealized loss on investments.
Distributions received from the Offshore Fund, whether in the form of cash or
securities, are applied first as a reduction of the investment's cost, and any
excess is treated as realized gain from investments. Realized gains or losses on
investments in Investment Funds are measured by the difference between the
proceeds from the sale or liquidation and the cost basis of the investment using
the specific identification method without regard to unrealized appreciation or
depreciation reported in prior years.
b. Fund Expenses
The Fund bears its own expenses and, indirectly, bears a pro rata portion of the
Offshore Fund's and Company's expenses, including, but not limited to: fees paid
directly or indirectly to the investment managers of the Investment Funds, all
costs and expenses directly related to portfolio transactions and positions for
the Offshore Fund's and Company's accounts; legal fees; accounting and auditing
fees; custodial fees; fees paid to the Fund's, the Offshore Fund's and the
Company's administrator; costs of insurance; management fees and advisory fees;
travel and related expenses of the Fund's, the Offshore Fund's and the Company's
Boards; all costs with respect to communications regarding the Fund's, the
Offshore Fund's and the Company's transactions among the Adviser and any
custodian or other agent engaged by the Fund; and other types of expenses
approved by the Fund's, the Offshore Fund's and the Company's Boards.
The Adviser and the Fund have entered into an expense limitation and
reimbursement agreement (the "Expense Limitation Agreement"), under which the
Adviser has agreed to waive its fees, or to pay or absorb (subject to the
reimbursement described below) the ordinary operating expenses of the Fund to
the extent necessary to limit the ordinary operating expenses of the Fund,
including organizational and offering costs and the proportionate share of the
Offshore Fund's and the Company's expenses to 2.00% per annum of the Fund's
average monthly net assets (the "Expense Limitation"). In consideration of the
Adviser's agreement to limit the Fund's expenses, the Fund will carry forward
the amount of expenses waived, paid or absorbed by the Adviser in excess of the
Expense Limitation for a period not to exceed three years from the end of the
fiscal year in which they were incurred, and will reimburse the Adviser such
amounts. Reimbursement will be made as promptly as possible, but only to the
extent it does not cause the Fund's ordinary operating expenses to exceed the
Expense Limitation in effect at the time the fee was waived or the expense
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited) continued
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September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
b. Fund Expenses (continued)
was paid or absorbed. As of September 30, 2007, expenses in excess of the
Expense Limitation were $67,769. The Adviser has paid or absorbed (or will pay
or absorb) this amount. In addition, the Adviser may recoup this amount pursuant
to the Expense Limitation Agreement as described above.
c. Income Taxes
As a limited liability company, no provision for the payment of Federal, state
or local income taxes has been provided by the Fund. Each Member is individually
required to report on its own tax return its share of the Fund's taxable income
or loss. The Fund has a tax year end of December 31.
Net investment income or loss and net realized and unrealized gain or loss from
investments of the Fund for each fiscal period are allocated among, and credited
to or debited against, the capital accounts of all Members as of the last day of
each fiscal period in accordance with each Member's respective investment
percentage for the fiscal period, as defined in the Fund's Limited Liability
Company Agreement.
d. New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation 48, Accounting for Uncertainty in Income PersonNameTaxes, an
interpretation of FASB Statement 109 ("FIN 48"). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Fund is in the
process of evaluating the effects of the adoption of FIN 48 on the financial
statements.
FASB issued a Statement No. 157 in September 2006, Fair Value Measurements,
which is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. This
statement provides enhanced guidance for using fair value to measure assets and
liabilities. It clarifies fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. The standard applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value in any new circumstances. The Fund is
reviewing the statement and its impact on the financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited) continued
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September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
e. Other
Cash and cash equivalents consist of amounts maintained in a PFPC Trust Company
interest-bearing account. Interest income is recorded on the accrual basis.
The Fund records its proportionate share of the Offshore Fund's and the
Company's investment income, expenses and realized and unrealized gains and
losses.
3. Management Fee, Related Party Transactions and Other
As of September 30, 2007, the employees and affiliates of the Adviser have a
combined interest of approximately 84.23% of the Members' equity - net assets.
The Adviser provides certain investment advisory services to the Company and
incurs research, travel and other expenses related to the selection and
monitoring of investment managers. Further, the Adviser provides certain
management and administrative services to the Fund, including providing office
space and other support services, maintaining files and records, and preparing
and filing various regulatory materials. In consideration for such services, the
Fund pays the Adviser a quarterly management fee at an annual rate of 0.5% based
on the Fund's net assets on the first business day of each quarter after
adjustment for any subscriptions effective on that date. For the period from
July 1, 2007 (Commencement of Operations) to September 30, 2007, the management
fee was $6,344 all of which was payable as of September 30, 2007.
The Board is made up of three Managers who are independent of the Adviser (the
"Disinterested Managers"), and one Manager who is an "interested person," as
defined by Section 2(a)(19) of the 1940 Act, of the Fund. The Disinterested
Managers receive per-meeting fees of: $500 for attendance at quarterly meetings
of the Board; and $500 for telephone participation at a quarterly Board meeting
or for participation at a telephonic special meeting of the Board. All
Disinterested Managers may be reimbursed for expenses of attendance, if any, at
each regular or special meeting of the Board or of any committee thereof and for
their expenses, if any, in connection with any other service or activity they
perform or engage in as Managers. Any Manager who is an "interested person" does
not receive any retainer or other fee from the Fund. The Fund incurred $4,000 of
per meeting fees for the period from July 1, 2007 (Commencement of Operations)
to September 30, 2007, none of which is payable as of September 30, 2007.
<Page>
Excelsior Directional Hedge Fund of Funds (TE), LLC
Notes to Financial Statements (Unaudited) continued
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September 30, 2007
- --------------------------------------------------------------------------------
3. Management Fee, Related Party Transactions and Other (continued)
The Fund has retained J.D. Clark & Company (the "Administrator") to provide
accounting and certain administrative and investor services to the Fund. In
connection with such services provided, the Fund pays the Administrator a
quarterly fee equal to the greater of: (i) $3,000; or (ii) .00025 of the Fund's
net assets as of the first day of each calendar quarter on the first $150
million of net assets, plus .000125 of the Fund's net assets in excess of $150
million. For the period from July 1, 2007 (Commencement of Operations) to
September 30, 2007, the Fund incurred $3,000 in expenses related to such
administrative services, all of which was payable as of September 30, 2007.
4. Guarantees
In the normal course of business, the Fund enters into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is dependent on future claims that may be made against the Fund, and therefore,
cannot be established; however, based on experience, the risk of loss from any
such claims is considered remote.
5. Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Investment Funds in which the Company
invests trade various financial instruments and enter into various investment
activities with off-balance sheet risk. These may include, but are not limited
to, short selling activities, writing option contracts, contracts for
differences and equity swaps. However, as a result of the investments by the
Company as a limited partner or member, the Company's liability with respect to
its investments in the Investment Funds is limited to the net asset value of its
interest in each Investment Fund.
6. Subsequent Events
At September 30, 2007, the Fund had received subscriptions in advance for
Interests from Members in the amount of $3,600,000. These subscriptions became
Interests in the Fund effective October 1, 2007. The Fund also invested
$3,455,000 in the Offshore Fund as of October 1, 2007.
<page>
EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS, LTD.
Financial Statements
(Unaudited)
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
Excelsior Directional Hedge Fund of Funds, Ltd.
Financial Statements
(Unaudited)
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
Contents
Statement of Assets, Liabilities and Shareholders' Capital - Net
Assets as of September 30, 2007..........................................1
Statement of Operations for the Period from July 1, 2007
(Commencement of Operations) to September 30, 2007.......................2
Statements of Changes in Shareholders' Capital - Net Assets for the Period
from July 1, 2007 (Commencement of Operations) to September 30, 2007.....3
Statement of Cash Flows for the Period from July 1, 2007
(Commencement of Operations) to September 30, 2007.......................4
Financial Highlights for the Period from July 1, 2007
(Commencement of Operations) to September 30, 2007.......................5
Notes to Financial Statements..................................................6
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Statement of Assets, Liabilities and Shareholders' Capital - Net Assets
(Unaudited)
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September 30, 2007
- --------------------------------------------------------------------------------
ASSETS
Investment in Excelsior Directional Hedge Fund of Funds Master
Fund, LLC at fair value (cost $5,075,000) $ 5,043,196
Investments in Excelsior Directional Hedge Fund of Funds Master
Fund, LLC made in advance 3,455,000
Other assets 19,150
- --------------------------------------------------------------------------------
Total Assets $ 8,517,346
- --------------------------------------------------------------------------------
LIABILITIES
Shareholders' shares received in advance 3,455,000
Other payable 19,150
Professional fees payable 27,667
Administration fees payable 3,000
Accrued foreign withholding tax 2,499
- --------------------------------------------------------------------------------
Total Liabilities 3,507,316
- --------------------------------------------------------------------------------
Net Assets $ 5,010,030
- --------------------------------------------------------------------------------
SHAREHOLDERS' CAPITAL - NET ASSETS
Represented by:
Shareholders' capital $ 5,087,087
Accumulated net unrealized depreciation on investments (77,057)
- --------------------------------------------------------------------------------
Shareholders' Capital - Net Assets (equivalent to $987.198
per share based on 5,075.000 shares of capital stock
outstanding) $ 5,010,030
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of Excelsior
Directional Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS ALLOCATED FROM EXCELSIOR DIRECTIONAL
HEDGE FUND OF FUNDS MASTER FUND, LLC:
Interest $ 1,163
Expenses (17,523)
- --------------------------------------------------------------------------------
Net investment loss allocated from Excelsior Directional Hedge
Fund of Funds Master Fund, LLC (16,360)
- --------------------------------------------------------------------------------
Fund Expenses:
Professional fees 27,667
Administration fees 3,000
- --------------------------------------------------------------------------------
Total Expenses 30,667
- --------------------------------------------------------------------------------
Net Investment Loss (47,027)
- --------------------------------------------------------------------------------
REALIZED GAIN AND UNREALIZED LOSS ON INVESTMENTS ALLOCATED
FROM EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS MASTER FUND, LLC:
Net realized gain on investments 59,114
Net change in unrealized depreciation on investments, net of
foreign withholding taxes withheld at Excelsior Directional Hedge
Fund of Funds Master Fund, LLC of $2,499 (77,057)
- --------------------------------------------------------------------------------
Net Realized and Unrealized Loss on Investments Allocated from
Excelsior Directional Hedge Fund of Funds Master Fund, LLC (17,943)
- --------------------------------------------------------------------------------
DECREASE IN SHAREHODERS' CAPITAL- NET ASSETS
DERIVED FROM OPERATIONS $ (64,970)
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of Excelsior
Directional Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Statements of Changes in Shareholders' Capital - Net Assets (Unaudited)
- --------------------------------------------------------------------------------
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
OPERATIONS
Net investment loss $ (47,027)
Net realized gain on investments 59,114
Net change in unrealized depreciation on investments (77,057)
- --------------------------------------------------------------------------------
Decrease in Shareholders' Capital - Net Assets
Derived from Operations (64,970)
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Shareholders' capital subscriptions (5,075.000 shares) 5,075,000
Shareholders' capital redemptions -
- --------------------------------------------------------------------------------
Increase in Shareholders' Capital - Net Assets
Derived From Capital Transactions 5,075,000
- --------------------------------------------------------------------------------
Net Increase in Shareholders' Capital - Net Assets 5,010,030
SHAREHOLDERS' CAPITAL - NET ASSETS AT BEGINNING OF PERIOD -
- --------------------------------------------------------------------------------
SHAREHOLDERS' CAPITAL - NET ASSETS AT END OF PERIOD $ 5,010,030
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of Excelsior
Directional Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Statement of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------
Period from July 1, 2007 (Commencement of Operations) to September 30, 2007
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net decrease in shareholders' capital - net assets $ (64,970)
derived from operations
Adjustments to reconcile net decrease in shareholders' capital -
net assets derived from operations to net cash used in
operating activities:
Net change in unrealized depreciation on investment, net of
foreign withholding taxes withheld at Excelsior Directional
Hedge Fund of Funds Master Fund, LLC 77,057
Net realized gain on investment allocated from Excelsior
Directional Hedge Fund of Funds Master Fund, LLC (59,114)
Net investment loss allocated from Excelsior Directional Hedge
Fund of Funds Master Fund, LLC 16,360
Purchases of investment in Excelsior Directional Hedge Fund of
Funds Master Fund, LLC (8,530,000)
Increase in other assets (19,150)
Increase in professional fees payable 27,667
Increase in administration fees payable 3,000
Increase in other payable 19,150
- --------------------------------------------------------------------------------
Net Cash Used in Operating Activities (8,530,000)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from shareholders' subscriptions 8,530,000
Payments for shareholders' shares repurchased -
- --------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 8,530,000
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents -
Cash and cash equivalents at beginning of period -
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ -
- --------------------------------------------------------------------------------
The accompanying notes and attached unaudited financial statements of Excelsior
Directional Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
Period from July 1, 2007 (Commencement of Operations)to September 30, 2007*
- --------------------------------------------------------------------------------
The following represents per share operating performance ratios to average
shareholders' capital - net assets and total return information for the period
indicated:
Per share operating performance:
(For a share of capital stock outstanding throughout the period)
Net asset value, beginning of period $ 1,000.000
Loss from investment operations:
Investment loss, net (9.266)
Net realized and unrealized loss on (3.536)
investments (3.536)
-------------
Total from investment operations (12.802)
-------------
Net asset value, end of period $ 987.198
=============
Total return (a) (1.28%)
Ratio to net average assets (b):
Net investment loss (0.94%)
Total expenses (0.96%)
* The ratios and total return are not annualized for the period.
(a) Total return is net of expenses and assumes a purchase of capital stock in
the Fund (as defined in Note 1) on the first day and a redemption of
interest on the last day of the period.
(b) The ratio reflects the income and expenses assuming inclusion of the
Fund's proportionate share of income and expenses of the Company (as
defined in Note 1).
The accompanying notes and attached unaudited financial statements of Excelsior
Directional Hedge Fund of Funds Master Fund, LLC are an integral part of these
financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
1. Organization
Excelsior Directional Hedge Fund of Funds, Ltd. (the "Fund") was incorporated as
a Cayman Islands exempted company on May 1, 2007, and commenced operations on
July 1, 2007. The Fund's investment objective is to seek capital appreciation.
The Fund pursues its investment objective by investing substantially all of its
assets in Excelsior Directional Hedge Fund of Funds Master Fund, LLC (the
"Company"). The Company is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a closed-end, non-diversified, management
investment company. The Company pursues its investment objective principally
through a multi-manager, multi-strategy program of investments in a diverse
group of investment funds that primarily invest or trade in a wide range of
equity and debt securities. The investment managers selected by the Company
generally conduct their investment programs through these investment funds
(collectively, the "Investment Funds") in which the Company invests as a limited
partner or member along with other investors.
The financial statements of the Company, including the Schedule of Investments,
are attached to this report and should be read with the Fund's financial
statements. The percentage of the Company's members' equity owned by the Fund at
September 30, 2007 was 1.47%.
The Fund holds substantially all of the assets of Excelsior Directional Hedge
Fund of Funds (TE), LLC (the "Feeder Fund"), a closed-end, non-diversified
management investment company. As of September 30, 2007, the Feeder Fund owned
100% of the Fund's Shareholders' Capital.
U.S. Trust Hedge Fund Management, Inc. serves as the investment adviser of the
Company and as a manager to the Fund (the "Adviser"). On July 1, 2007, the
Adviser became an indirect wholly-owned subsidiary of Bank of America
Corporation ("Bank of America"). As a result, the Adviser is now controlled by
Bank of America. Bank of America is a bank holding and a financial holding
company which has its principal executive offices at 101 North Tryon Street,
Charlotte, North Carolina 28255. Prior to July 1, 2007, the Adviser was a
wholly-owned subsidiary of U.S. Trust Corporation ("U.S. Trust"), a registered
financial holding company, which, in turn, was a wholly-owned subsidiary of The
Charles Schwab Corporation. On July 1, 2007, U.S. Trust and its subsidiaries,
including the Adviser, were acquired by Bank of America (the "Sale"). The
Adviser continued to serve as the investment adviser to the Company after the
Sale pursuant to a new investment advisory agreement with the Company (the "New
Advisory Agreement") that was approved by the Board of Managers of the Company
(the "Board") at a meeting held on January 11, 2007, and was approved by members
of the Company at a special meeting of members of the Company held on March 29,
2007. The New Advisory Agreement is identical in all material respects to the
investment advisory agreement previously in effect except for the term and the
date of effectiveness. The Adviser provides various management and
administrative services to the Company and the Fund.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
1. Organization (continued)
The Fund's Board of Directors (the "Directors") has overall responsibility to
manage and supervise the operations of the Fund, including the exclusive
authority to oversee and to establish policies regarding the management, conduct
and operation of the Fund's business. The Directors have engaged the Adviser to
manage the day-to-day operations of the Fund.
2. Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the estimates
utilized in preparing the Fund's financial statements are reasonable and
prudent; however, actual results could differ from these estimates.
a. Portfolio Valuation
The net asset value and net asset value per share of the Fund is determined by
or at the direction of the Adviser as of the close of business on the last
business day of each month (as defined in the Fund's Memorandum and Articles of
Association), in accordance with the valuation principles set forth below or as
may be determined from time to time pursuant to policies established by the
Directors.
The Fund records its investment in the Company at fair value and is represented
by the Fund's proportionate interest in the Company's members' equity - net
assets at September 30, 2007. Valuation of investments held by the Company is
discussed in the notes to the Company's financial statements.
The net unrealized depreciation on investments, which is included in
Shareholders' Capital - Net Assets on the Statement of Assets, Liabilities and
Shareholders' Capital - Net Assets, reflects the Fund's allocated share of the
Company's net unrealized gain on investments.
Distributions received from the Company, whether in the form of cash or
securities, are applied first as a reduction of the investment's cost, and any
excess is treated as realized gain from investments.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
b. Fund Expenses
The Fund bears its own expenses and, indirectly, bears a pro rata portion of the
Company's expenses, including, but not limited to: fees paid directly or
indirectly to the investment managers of the Investment Funds, all costs and
expenses directly related to portfolio transactions and positions for the
Company's account; legal fees; accounting and auditing fees; custodial fees;
fees paid to the Fund's and the Company's administrator; costs of insurance;
management fees and advisory fees; travel and related expenses of the Fund's
Directors and the Company's Board; all costs with respect to communications
regarding the Fund's and the Company's transactions among the Adviser and any
custodian or other agent engaged by the Fund; and other types of expenses
approved by the Fund's Directors and the Company's Board.
c. Income Taxes
The Fund is not subject to any income, withholding or capital gains taxes in the
Cayman Islands. As a result, no income tax liability or expense has been
recorded in the accompanying financial statements.
In the event that the Company's investments earn dividend income from entities
based in the United States, such income is subject to a 30% withholding tax. For
the period from July 1, 2007 (Commencement of Operations) to September 30, 2007,
the Fund recorded foreign withholding taxes of $2,499 as shown in the
accompanying Statement of Operations.
d. New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation 48, Accounting for Uncertainty in Income PersonNameTaxes, an
interpretation of FASB Statement 109 ("FIN 48"). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Fund is in the
process of evaluating the effects of the adoption of FIN 48 on the financial
statements.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
d. New Accounting Pronouncements (continued)
FASB issued a Statement No. 157 in September 2006, Fair Value Measurements,
which is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. This
statement provides enhanced guidance for using fair value to measure assets and
liabilities. It clarifies fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. The standard applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value in any new circumstances. The Fund is
reviewing the statement and its impact on the financial statements.
e. Other
Cash and cash equivalents consist of amounts maintained in a PFPC Trust Company
interest-bearing account. Interest income is recorded on the accrual basis.
The Fund records its proportionate share of the Company's investment income,
expenses and realized and unrealized gains and losses.
3. Capital Structure
The Fund has authorized capital of U.S. $50,000 divided into 5,000,000 shares,
par value U.S. $0.01 per share. The Fund is offering to certain qualified
shareholders voting participating Class A shares and non-voting participating
Class B shares.
The Directors have authorized the Fund to offer shares four times each year,
generally as of the first business day of each quarter or at other times in the
sole discretion of the Directors. The Fund will be authorized to issue shares in
one or more different classes, as determined from time to time without approval
of existing shareholders, by the Directors in consultation with the Adviser,
which may differ in terms of, among other things, the fees charged, voting and
redemption rights and minimum and additional subscription amounts. Shares will
initially be divided into Class A and Class B shares. For the period from July
1, 2007 (Commencement of Operations) to September 30, 2007, 5,075 Class A shares
were issued as part of the subscription of Fund shares.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
3. Capital Structure (continued)
The Fund may from time to time offer to redeem shares from shareholders. These
redemptions will be made at such times and on such terms as may be determined by
the Directors, in their sole discretion, subject to the liquidity of the
Company's assets and other factors considered by the Adviser. The Adviser
expects that, generally, it will recommend to the Directors that the Fund offer
to redeem shares from shareholders twice in each year, at June 30th and December
31st. For the period from July 1, 2007 (Commencement of Operations) to September
30, 2007, no shares were redeemed by shareholders.
4. Management Fee, Related Party Transactions and Other
Pursuant to the Fund Servicing Agreement between the Fund and the Adviser, the
Adviser provides certain management and administrative services to the Fund
including providing office space and other support services, maintaining files
and records, and preparing and filing various regulatory materials. In
consideration for such services under the Management Agreement, the Fund pays
the Adviser a quarterly management fee (the "Management Fee") at an annual rate
of 0.5% of the net asset value of the Fund's Class B shares on the first
business day of each quarter after adjustments for any subscriptions effective
on that date. For the period from July 1, 2007 (Commencement of Operations) to
September 30, 2007, there were no Class B shares and therefore, no Management
Fee charged. The Fund does not pay the Adviser a Management Fee with respect to
Class A shares.
The Fund has retained J.D. Clark & Company (the "Administrator") to provide
accounting and certain administrative and investor services to the Fund. In
connection with such services provided, the Fund pays the Administrator a
quarterly fee equal to $3,000. For the period from July 1, 2007 (Commencement of
Operations) to September 30, 2007, the Company incurred $3,000 in expenses
related to such administrative services, all of which is payable as of September
30, 2007.
5. Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Investment Funds in which the Company
invests trade various financial instruments and enter into various investment
activities with off-balance sheet risk. These may include, but are not limited
to, short selling activities, writing option contracts, contracts for
differences and equity swaps. However, as a result of the investments by the
Company as a limited partner or member, the Company's liability with respect to
its investments in the Investment Funds is limited to the net asset value of its
interest in each Investment Fund.
<Page>
Excelsior Directional Hedge Fund of Funds, Ltd.
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
6. Guarantees
In the normal course of business, the Fund enters into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is dependent on future claims that may be made against the Fund, and therefore,
cannot be established; however, based on experience, the risk of loss from any
such claims is considered remote.
7. Subsequent Events
At September 30, 2007, the Fund had received subscriptions for Class A shares
from the Feeder Fund in the amount of $3,455,000, which is reflected as
shareholders' shares received in advance on the Statement of Assets, Liabilities
and Shareholders' Capital - Net Assets. These subscriptions became effective
October 1, 2007.
EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS MASTER FUND, LLC
Financial Statements
(Unaudited)
Period from April 1, 2007 to September 30, 2007
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Financial Statements
(Unaudited)
Period from April 1, 2007 to September 30, 2007
Contents
Statement of Assets, Liabilities and Members' Equity - Net Assets as of
September 30, 2007.......................................................1
Schedule of Investments as of September 30, 2007...............................2
Statement of Operations for the Period from April 1, 2007 to
September 30, 2007.......................................................3
Statements of Changes in Members' Equity - Net Assets for the Period from
April 1, 2007 to September 30, 2007 and for the Year Ended
March 31, 2007...........................................................4
Statement of Cash Flows for the Period from April 1, 2007 to
September 30, 2007.......................................................5
Financial Highlights for the Period from April 1, 2007 to September 30, 2007
and for the Years Ended March 31, 2007, 2006, 2005 and 2004..............6
Notes to Financial Statements..................................................7
The Registrant files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (the "Commission") for the first and third
quarters of each fiscal year on Form N-Q. The Registrant's Forms N-Q are
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. Information on Form N-Q is available without charge,
upon request, by calling collect (203) 352-4497.
A description of the policies and procedures that the Registrant uses to
determine how to vote proxies relating to portfolio securities is available
without charge, upon request, by calling collect (203) 352-4497 and on the
Commission's website at http://www.sec.gov.
Information regarding how the Registrant voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge, upon request, by calling collect (203) 352-4497, and
on the Commission's website at http://www.sec.gov.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Assets, Liabilities and Members' Equity - Net Assets (Unaudited)
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
ASSETS
Investments in Investment Funds, at fair value (cost $255,064,524) $349,876,585
Cash and cash equivalents 9,294,435
Receivables for interests in Investment Funds sold 196,723
Other assets 119,284
- --------------------------------------------------------------------------------
Total Assets $359,487,027
- --------------------------------------------------------------------------------
LIABILITIES
Members' interests received in advance 8,180,000
Due to Adviser 861,452
Professional fees payable 45,082
Administration fees payable 6,000
Bank note, facility fee and interest payable 7,566,406
- --------------------------------------------------------------------------------
Total Liabilities 16,658,940
- --------------------------------------------------------------------------------
Net Assets $342,828,087
- --------------------------------------------------------------------------------
MEMBERS' EQUITY - NET ASSETS
Represented by:
Capital $248,016,025
Net unrealized appreciation on investments 94,812,062
- --------------------------------------------------------------------------------
Members' Equity - Net Assets $342,828,087
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
<Caption>
% of First
First Members' % Ownership Available
Acquisition Fair Equity - of Investment Redemption
Investment Funds * Date Cost ** Value ** Net Assets Funds Date *** Liquidity ****
- ------------------------------------------------------------------------------------------------------------------------------------
Hedged Long/Short Equity Funds
- ------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Basix Capital Fund, L.P. 7/1/2004 $ 8,500,000 $11,555,901 3.37% 11.50% N/A Quarterly
Foundation Partners, L.P. 7/1/2002 8,000,000 11,725,918 3.42% 8.25% N/A Quarterly
SAB Capital Partners, L.P. 4/1/2001 - 768,982 0.22% 0.15% N/A Annually
Scopia PX, LLC 9/1/2005 9,000,000 11,184,702 3.26% 5.43% N/A Quarterly
Spring Point Opportunity Partners, L.P. 7/1/2006 17,610,520 20,699,508 6.04% 6.09% N/A Quarterly
Swiftcurrent Partners, L.P. 10/1/2000 8,550,000 14,488,464 4.23% 1.68% N/A Annually
Tonga Partners, L.P. 10/1/2000 4,060,553 11,251,269 3.28% 3.90% N/A Semi-annually
---------------------------------------
Strategy Total 55,721,073 81,674,744 23.82%
---------------------------------------
<Caption>
Opportunistic (U.S. Only) Funds
- -------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Alson Signature Fund, L.P 9/1/2006 14,000,000 15,354,706 4.48% 3.97% N/A Quarterly
Cadmus Capital Partners (QP), L.P. 7/1/2003 12,500,000 14,488,147 4.23% 7.92% N/A Quarterly
Quaker Capital Partners I, L.P. 1/1/2001 3,164,863 10,447,500 3.05% 3.00% N/A Annually
Seminole Capital Partners, L.P. 9/1/2005 17,200,000 20,777,035 6.06% 3.28% N/A Semi-annually
Valinor Capital Partners, L.P. 7/1/2007 10,000,000 10,555,698 3.08% 6.08% 12/31/2009 Annually
---------------------------------------
Strategy Total 56,864,863 71,623,086 20.90%
---------------------------------------
<Caption>
Hedged Sector Funds
- -------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Coatue Qualified Partners, L.P. 1/1/2002 6,000,000 14,298,785 4.17% 2.40% N/A Quarterly
Durus Life Sciences Fund, LLC 1/1/2001 586,983 67,415 0.02% 2.05% N/A (1)
Endicott Partners II, L.P. 1/1/2003 6,500,000 8,315,041 2.43% 7.92% N/A Semi-annually
Longbow Partners, L.P. 5/1/2004 16,200,000 21,641,926 6.30% 5.24% N/A Quarterly
Sivik Global Healthcare Partners, L.P. 11/1/2003 7,100,000 10,354,619 3.02% 5.75% N/A Semi-annually
---------------------------------------
Strategy Total 36,386,983 54,677,786 15.94%
---------------------------------------
<Caption>
Arbitrage/Distressed Funds
- --------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Canyon Value Realization Fund, L.P. 7/1/2003 11,400,000 17,025,757 4.97% 0.59% N/A Annually
Farallon Capital Partners, L.P. 11/1/2004 22,000,000 30,601,611 8.92% 0.39% N/A Annually
JMG Capital Partners, L.P. 10/1/2000 5,591,605 12,208,638 3.56% 2.23% N/A Quarterly
Polygon Global Opportunities Fund, L.P. 8/1/2006 15,600,000 17,829,778 5.20% 1.24% N/A Quarterly
---------------------------------------
Strategy Total 54,591,605 77,665,784 22.65%
---------------------------------------
<Caption>
Opportunistic (Global/International) Funds
- ------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
AKO Partners, L.P. 10/1/2005 14,500,000 19,086,040 5.57% 5.40% N/A Quarterly
Delta Fund Europe, L.P. 5/1/2006 14,000,000 13,905,225 4.06% 2.78% 6/30/2008 Quarterly
Indus Asia Pacific Fund, L.P. 3/1/2004 6,000,000 10,509,538 3.07% 2.00% N/A Quarterly
Indus Event Driven Fund, L.P. 6/1/2005 11,000,000 11,724,045 3.42% 12.34% N/A Quarterly
Indus Japan Fund, L.P. 3/1/2004 6,000,000 9,010,337 2.63% 2.63% N/A Quarterly
---------------------------------------
Strategy Total 51,500,000 64,235,185 18.75%
--------------------------------------
Total investments in Investment Funds $255,064,524 349,876,585 102.06%
============
Other Assets, Less Liabilities (7,048,498) (2.06%)
--------------------------
Members' Equity - Net Assets $342,828,087 100.00%
==========================
* Non-income producing investments. N/A Initial lock-up period has either expired prior to September
** See definition in Note 2a 30, 2007 or Investment Fund did not have an initial lock-up
*** From original investment date. period. However, specific redemption restrictions may apply.
**** Available frequency of redemptions after initial (1) The Investment Fund is currently in liquidation and has
lock-up period. eliminated partner withdrawal rights.
</Table>
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
Period from April 1, 2007 to September 30, 2007
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 99,499
- --------------------------------------------------------------------------------
Total Investment Income 99,499
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Advisory fee 1,687,917
Professional fees 36,464
Board of Managers' fees and expenses 30,500
Bank note facility fee and interest expense 166,598
Administration fees 9,000
Other 112,561
- --------------------------------------------------------------------------------
Total Operating Expenses 2,043,040
- --------------------------------------------------------------------------------
Net Investment Loss (1,943,541)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments in Investment Funds 4,016,265
Net change in unrealized appreciation on investments in Investment
Funds 9,866,755
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 13,883,020
- --------------------------------------------------------------------------------
INCREASE IN MEMBERS' EQUITY - NET ASSETS
DERIVED FROM OPERATIONS $ 11,939,479
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statements of Changes in Members' Equity - Net Assets (Unaudited)
- --------------------------------------------------------------------------------
Period from
April 1, 2007 - Year Ended
September 30, March 31,
2007 2007
- --------------------------------------------------------------------------------
OPERATIONS
Net investment loss $ (1,943,541) $ (5,303,738)
Net realized gain on investments 4,016,265 10,945,329
Net change in unrealized appreciation on investments 9,866,755 21,009,426
- --------------------------------------------------------------------------------
Increase in Members' Equity - Net Assets Derived
from Operations 11,939,479 26,651,017
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Members' subscriptions 354,885,986 46,569,339
Members' interests repurchased (334,361,783) (54,878,772)
- --------------------------------------------------------------------------------
Increase (Decrease) in Members' Equity - Net Assets
Derived from Capital Transactions 20,524,203 (8,309,433)
- --------------------------------------------------------------------------------
Net Increase in Members' Equity - Net Assets 32,463,682 18,341,584
MEMBERS' EQUITY - NET ASSETS
AT BEGINNING OF PERIOD 310,364,405 292,022,821
- --------------------------------------------------------------------------------
MEMBERS' EQUITY - NET ASSETS
AT END OF PERIOD $ 342,828,087 $ 310,364,405
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------
Period from April 1, 2007 to September 30, 2007
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' equity - net assets
derived from operations $ 11,939,479
Adjustments to reconcile net increase in members' equity -
net assets derived from operations to net cash used in
operating activities:
Change in net unrealized appreciation on investments (9,866,755)
Net realized gain from investments (4,016,265)
Purchases of Investment Funds (11,000,000)
Proceeds from sales of Investment Funds 4,016,265
Increase in receivables from Investment Funds (55,612)
Increase in other assets (30,019)
Decrease in due to Adviser (273,351)
Increase in bank note facility fee and interest payable 38,403
Decrease in professional fees payable (49,918)
Decrease in administration fees payable (50,549)
Decrease in due to custodian (179,380)
- --------------------------------------------------------------------------------
Net Cash Used in Operating Activities (9,527,702)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from member subscriptions 342,513,077
Payments for member interests repurchased (336,556,177)
Borrowings on bank loan payable 7,500,000
- --------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 13,456,900
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 3,929,198
Cash and cash equivalents at beginning of period 5,365,237
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 9,294,435
- --------------------------------------------------------------------------------
Supplementary Disclosure of Cash Flow Information
Cash paid during the period for interest $ 96,930
The accompanying notes are an integral part of these financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
The following represents the ratios to average members' equity - net assets,
total return and other supplemental information for the periods indicated:
<Table>
<Caption>
For the period
from April 1, For the year For the year For the year For the year
2007 - ended ended ended ended
September March 31, March 31, March 31, March 31,
30, 2007* 2007 2006 2005 2004
------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Net assets, end of
period $342,828,087 $310,364,405 $292,022,821 $240,943,784 $173,964,183
Ratio of net (0.57%) (1.71%) (1.75%) (1.77%) (1.82%)
investment
loss to average
Members' equity -
net assets (a), (b)
Ratio of expenses 0.60% 1.86% 1.85% 1.81% 1.87%
to average
Members' equity
- net assets (a), (b)
Portfolio turnover 1.17% 30.25% 15.33% 15.61% 22.70%
Total return (c) 3.65% 8.82% 10.09% 4.83% 13.68%
</table>
* The Company (as defined in Note 1) reorganized into a master-feeder
structure for this period. Also the ratios, portfolio turnover and total
returns are not annualized.
(a) Ratio does not reflect the Company's proportionate share of net income
(loss) and expenses, including incentive allocation, of the Investment
Funds.
(b) Average members' equity - net assets is determined using the net assets at
the end of each month during the period.
(c) Total return is net of expenses and assumes a purchase of an interest in
the Company on the first day and a sale of interest on the last day of the
period.
The accompanying notes are an integral part of these financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
1. Organization
Excelsior Directional Hedge Fund of Funds Master Fund, LLC, formerly known as
Excelsior Directional Hedge Fund of Funds, LLC (the "Company"), was organized as
a limited liability company under the laws of Delaware on July 6, 2000, and
commenced operations on October 1, 2000. The Company is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end,
non-diversified, management investment company. The Company's investment
objective is to seek capital appreciation. The Company pursues its investment
objective principally through a multi-manager, multi-strategy program of
investments in a diverse group of investment funds that primarily invest or
trade in a wide range of equity and debt securities. The investment managers
selected by the Company generally conduct their investment programs through
these investment funds (collectively, the "Investment Funds") in which the
Company invests as a limited partner or member along with other investors.
On April 23, 2007, pursuant to member approval, the Company was reorganized into
a "master/feeder" investment structure. Effective that date, the Company became
a master fund and member interests in the Company were transferred to a new
entity, Excelsior Directional Hedge Fund of Funds (TI), LLC, a Delaware limited
liability company that is registered under the 1940 Act as a closed-end,
non-diversified, management investment company (the "Fund"). The Fund in turn
invested substantially all of its assets into the Company. On July 1, 2007,
Excelsior Directional Hedge Fund of Funds, Ltd. (the "Offshore Fund") also
became a feeder of the Company.
The Fund and the Offshore Fund (together the "Feeders") pursue their investment
objectives by investing substantially all of their interests in the Company. The
Feeders have the same investment objective and substantially the same investment
policies as the Company (except that the Feeders pursue their investment
objectives by investing in the Company). As of September 30, 2007, the Fund and
the Offshore Fund ownership of the Company's Members' Equity - Net Assets were
98.38% and 1.47%, respectively.
U.S. Trust Hedge Fund Management, Inc. serves as the investment adviser of the
Company (the "Adviser"). On July 1, 2007, the Adviser became an indirect
wholly-owned subsidiary of Bank of America Corporation ("Bank of America"). As a
result, the Adviser is now controlled by Bank of America. Bank of America is a
bank holding and a financial holding company which has its principal executive
offices at 101 North Tryon Street, Charlotte, North Carolina 28255. Prior to
July 1, 2007, the Adviser was a wholly-owned subsidiary of U.S. Trust
Corporation ("U.S. Trust"), a registered financial holding company, which, in
turn, was a wholly-owned subsidiary of The Charles Schwab Corporation.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
1. Organization (continued)
On July 1, 2007, U.S. Trust and its subsidiaries, including the Adviser, were
acquired by Bank of America (the "Sale"). The Adviser continued to serve as the
investment adviser to the Company after the Sale pursuant to a new investment
advisory agreement with the Company (the "New Advisory Agreement") that was
approved by the Board of Managers (the "Board") of the Company at a meeting held
on January 11, 2007 and was approved by members of the Company at a special
meeting of members of the Company held on March 29, 2007. The New Advisory
Agreement is identical in all material respects to the previous investment
advisory agreement except for the term and the date of effectiveness. The
Adviser is responsible for developing, implementing and supervising the
investment program and providing day-to-day management services.
The Board has overall responsibility to manage and supervise the operations of
the Company, including the exclusive authority to oversee and to establish
policies regarding the management, conduct and operation of the Company's
business. The Board has engaged the Adviser to provide investment advice
regarding the selection of Investment Funds and to manage the day-to-day
operations of the Company.
Member subscriptions for interests in the Company ("Interests") by eligible
investors may be accepted as of the first day of each calendar quarter, or at
such times as the Board may determine. The Company may, from time to time, offer
to repurchase Interests from its members ("Members") pursuant to written tenders
by Members. These repurchase offers will be made at such times and on such terms
as may be determined by the Board, in its sole discretion, subject to the
liquidity of the Company's assets and other factors considered by the Board. The
Adviser expects that, generally, it will recommend to the Board that the Company
offer to repurchase interests from Members twice each year, at June 30th and
December 31st. Members can only transfer or assign Interests under certain
limited circumstances.
2. Significant Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
the Company's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
a. Portfolio Valuation
The net asset value of the Company is determined by, or at the direction of, the
Adviser as of the close of business at the end of each fiscal period (as defined
in the Company's Limited Liability Company Agreement), in accordance with the
valuation principles set forth below, or as may be determined from time to time
pursuant to policies established by the Board.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
a. Portfolio Valuation (continued)
Ordinarily, the Company's investments in Investment Funds are carried at fair
value as determined by the Company's pro-rata interest in the net assets of each
Investment Fund as reported by the investment manager, who determines the value
of the Investment Fund's net assets. The values of the Investment Funds' net
assets are determined in accordance with their valuation policies as described
in their respective offering memoranda or operating agreements. All valuations
utilize financial information supplied by the investment manager of each
Investment Fund, and are net of management and performance incentive fees or
allocations pursuant to the Investment Funds' agreements.
As a general matter, the fair value of the Company's interests in an Investment
Fund will represent the amount that the Company could reasonably expect to
receive from the Investment Fund if the Company's interests were redeemed at the
time of valuation, based on information reasonably available at the time the
valuation is made and that the Adviser believes to be reliable. The Adviser, or,
in certain cases, the Board, will consider such information, and may conclude in
certain circumstances that the information provided by an Investment Fund's
manager does not represent the fair value of the Company's interests in an
Investment Fund. Following procedures adopted by the Board, and in the absence
of specific transaction activity in interests in a particular Investment Fund,
the Company could consider whether it was appropriate, in light of all relevant
circumstances, to value such a position at the Investment Fund's net asset value
as reported at the time of valuation, or whether to adjust such value to reflect
a premium or discount to net asset value. Any such decision must be made in good
faith, and subject to the review and supervision of the Board. Because of the
inherent uncertainty of valuation, the values of the Company's investments may
differ significantly from the values that would have been used had a ready
market for the investments held by the Company been available.
The Company's investment in Durus Life Sciences Fund, LLC ("Durus") is valued at
$67,415 and represents 0.02% of Members' equity - net assets as of September 30,
2007. Durus was fair valued in good faith by the Adviser, in accordance with
procedures adopted by the Board. As of September 30, 2007, Durus is in
liquidation and there are no ongoing redemption rights available to partners.
Distributions received from Investment Funds, whether in the form of cash or
securities, are applied first as a reduction of the investment's cost, and any
excess is treated as realized gain from investments in Investment Funds.
Realized gains or losses on investments in Investment Funds are measured by the
difference between the proceeds from the sale or liquidation and the cost basis
of the Investment using the specific identification method without regard to
unrealized appreciation or depreciation reported in prior years.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
b. Company Expenses
The Company bears certain expenses incurred in its business, including, but not
limited to, the following: fees paid directly or indirectly to the investment
managers of the Investment Funds, all costs and expenses directly related to
portfolio transactions and positions for the Company's account; legal fees;
accounting and auditing fees; custodial fees; fees paid to the Company's
administrator; costs of insurance; advisory fees; travel and related expenses of
the Board; all costs with respect to communications regarding the Company's
transactions among the Adviser and any custodian or other agent engaged by the
Company; and other types of expenses approved by the Board.
c. Income Taxes
As a limited liability company, no provision for the payment of Federal, state
or local income taxes has been provided by the Company. Each Member is
individually required to report on its own tax return its share of the Company's
taxable income or loss. The Company has a tax year end of December 31.
Net investment income or loss and net realized and unrealized gain or loss from
investments of the Company for each fiscal period are allocated among, and
credited to or debited against, the capital accounts of all Members as of the
last day of the fiscal period in accordance with each Member's respective
investment percentage for the fiscal period, as defined in the Company's Limited
Liability Company Agreement.
The cost of the Company's investments in Investment Funds for Federal income tax
purposes is based on amounts reported to the Company by the Investment Funds on
a Schedule K-1 or PFIC annual information statement for the year ended December
31, 2006. Based on Investment Funds owned at December 31, 2006, the cost of
investments for Federal income tax purposes was $275,386,601. This included
aggregate gross unrealized appreciation of $30,248,573 and aggregate gross
unrealized depreciation of $898,733.
d. New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation 48, Accounting for Uncertainty in Income Taxes, an interpretation
of FASB Statement 109 ("FIN 48"). FIN 48 clarifies the accounting for income
taxes by prescribing the minimum recognition threshold a tax position must meet
before being recognized in the financial statements. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company is in the process of
evaluating the effects of the adoption of FIN 48 on the financial statements.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
d. New Accounting Pronouncements (continued)
FASB issued a Statement No. 157 in September 2006, Fair Value Measurements,
which is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. This
statement provides enhanced guidance for using fair value to measure assets and
liabilities. It clarifies fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. The standard applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value in any new circumstances. The Company is
reviewing the statement and its impact on the financial statements.
e. Other
Cash and cash equivalents consist of amounts maintained in a PFPC Trust Company
interest-bearing account. Interest income is recorded on the accrual basis.
3. Advisory Fee, Related Party Transactions and Other
The Adviser provides certain investment advisory services and incurs research,
travel and other expenses related to the selection and monitoring of investment
managers. Further, the Adviser provides certain management and administrative
services to the Company, including providing office space and other support
services, maintaining files and records, and preparing and filing various
regulatory materials. In consideration for such services, the Company pays the
Adviser a quarterly advisory fee at an annual rate of 1% based on the Company's
net assets on the first business day of each quarter after adjustment for any
subscriptions effective on that date. For the period from April 1, 2007 to
September 30, 2007, the advisory fee was $1,687,917, of which $861,452 is
included in "Due to Adviser" as of September 30, 2007.
As of September 30, 2007, the Adviser has an interest of approximately 0.15% of
the Members' equity - net assets. The Adviser intends to redeem its entire
investment as of December 31, 2007, the valuation date of the next repurchase of
Interests.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
3. Advisory Fee, Related Party Transactions and Other (continued)
The Board is made up of three Managers who are independent of the Adviser (the
"Disinterested Managers"), and one Manager who is an "interested person," as
defined by Section 2(a)(19) of the 1940 Act, of the Company. The Disinterested
Managers receive an annual retainer of $10,000 and per-meeting fees of: $2,000
for in-person attendance at quarterly meetings 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 $1,000 for each audit committee
meeting (whether held in-person or by telephone). All Disinterested Managers may
be reimbursed for expenses of attendance, if any, at each regular or special
meeting of the Board or of any committee thereof and for their expenses, if any,
in connection with any other service or activity they perform or engage in as
Managers. Any Manager who is an "interested person" does not receive any
retainer or other fee from the Company. The Company incurred $30,500 of retainer
and per meeting fees for the period from April 1, 2007 to September 30, 2007.
The Company has retained J.D. Clark & Company (the "Administrator") to provide
accounting and certain administrative and investor services to the Company. In
connection with such services provided, the Company pays the Administrator a
quarterly fee equal to $3,000 per fund invested in the Company. For the period
from April 1, 2007 to September 30, 2007, the Company incurred $9,000 in
expenses related to such administrative services, $6,000 of which is payable as
of September 30, 2007.
4. Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Investment Funds in which the Company
invests trade various financial instruments and enter into various investment
activities with off-balance sheet risk. These may include, but are not limited
to, short selling activities, writing option contracts, contracts for
differences and equity swaps. However, as a result of the investments by the
Company as a limited partner or member, the Company's liability with respect to
its investments in the Investment Funds is limited to the net asset value of its
interest in each Investment Fund.
5. Investments in Investment Funds
As of September 30, 2007, the Company had investments in twenty-six Investment
Funds. The agreements related to investments in Investment Funds provide for
compensation to the general partners/managers of the Investment Funds in the
form of management fees of 0.5% to 2.0% (per annum) of net assets and incentive
fees or allocations ranging from 15% to 20% of net profits earned. The
Investment Funds provide for periodic redemptions, with lock-up provisions
ranging from three months to three years from initial investment.
Aggregate purchases and proceeds of interests in Investment Funds for the period
from April 1, 2007 to September 30, 2007 are $25,100,000 and $4,016,264,
respectively.
<Page>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (Unaudited) continued
- --------------------------------------------------------------------------------
September 30, 2007
- --------------------------------------------------------------------------------
6. Bank Note- Line of Credit Facility
The Company maintains a $30,000,000 revolving line of credit agreement with a
U.S. financial institution that is collateralized by the Company's cash and
investments. Based upon the election of the Company, interest accrues at either
the financial institution's prime rate less 1.25% per annum or LIBOR plus 1.5%
per annum. The note also included a provision for a facility fee of 0.375% per
annum on the unused portion of the note. For the period from April 1, 2007 to
September 30, 2007, the Company incurred $166,598 in facility fees and interest
expenses related to the bank note, of which $66,406 was payable as of September
30, 2007. As of September 30, 2007 the Company had an outstanding revolving note
balance of $7,500,000. The average debt outstanding and the average interest
rate for the period from April 1, 2007 to September 30, 2007 was $2,540,984 and
6.97%, respectively.
7. Guarantees
In the normal course of business, the Company enters into contracts that provide
general indemnifications. The Company's maximum exposure under these
arrangements is dependent on future claims that may be made against the Company,
and therefore, cannot be established; however, based on experience, the risk of
loss from any such claim is considered remote.
8. Subsequent Events
As of September 30, 2007, the Company received capital subscriptions from
Members in the amount of $8,180,000, which is reflected as Members' interests
received in advance on the Statement of Assets, Liabilities and Members' Equity
- - Net Assets. These subscriptions became Interests in the Company effective
October 1, 2007.
ITEM 2. CODE OF ETHICS.
- -------------------------
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ------------------------------------------
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- ------------------------------------------------
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ------------------------------------------------
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
- ----------------------------------
The Schedule of Investments is included as part of the report to members filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- ---------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
- --------------------------------------------------------------------------
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSE-END MANAGEMENT INVESTMENT
- --------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASERS.
- ----------------------------------
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------
There have been no material changes to the procedures by which members may
recommend nominees to the Registrant's board of managers that would require
disclosure.
ITEM 11. CONTROLS AND PROCEDURES.
- ----------------------------------
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded that the Registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act")) were effective as of a date within 90 days prior to
the filing date of this report, based on their evaluation of the effectiveness
of the Registrant's disclosure controls and procedures, as required by Rule
30a-3(b) of the 1940 Act.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
- -------------------
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certifications for the Registrant's Principal Executive
Officer and Principal Financial Officer, as required by Rule 30a-2(a)
under the 1940 Act are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Excelsior Directional Hedge Fund of Funds (TE), LLC
----------------------------------------------------------
By (Signature and Title) /s/ Spencer N. Boggess
--------------------------
Spencer N. Boggess, Principal Executive Officer
Date December 7, 2007
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Excelsior Directional Hedge Fund of Funds (TE), LLC
----------------------------------------------------------
By (Signature and Title) /s/ Steven L. Suss
------------------------
Steven L. Suss, Principal Financial Officer
Date December 7, 2007
----------------