SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-21395
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Investment Company Act file number
Excelsior Absolute Return Fund of Funds Master Fund, 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: 3/31/2008
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<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
- ----------------------------------
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS MASTER FUND, LLC
Financial Statements
With Report of Independent Registered Public Accounting Firm
Year Ended March 31, 2008
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Financial Statements
Year Ended March 31, 2008
Contents
Report of Independent Registered Public Accounting Firm....................... 1
Statement of Assets, Liabilities and Members' Equity - Net Assets as of
March 31, 2008........................................................... 2
Schedule of Investments as of March 31, 2008.................................. 3
Statement of Operations for the Year Ended March 31, 2008..................... 5
Statements of Changes in Members' Equity - Net Assets for the Years Ended
March 31, 2008 and 2007.................................................. 6
Statement of Cash Flows for the Year Ended March 31, 2008..................... 7
Financial Highlights for the Years Ended March 31, 2008, 2007, 2006 and 2005,
and for the Period December 1, 2003 through March 31, 2004............... 8
Notes to Financial Statements................................................. 9
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 December 31 is
available without charge, upon request, by calling collect (203) 352-4497, and
on the Commission's website at http://www.sec.gov.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers and Members of Excelsior Absolute Return Fund of Funds
Master Fund, LLC:
In our opinion, the accompanying statement of assets, liabilities and members'
equity - net assets, including the schedule of investments, and the related
statements of operations, of changes in members' equity - net assets and of cash
flows and the financial highlights present fairly, in all material respects, the
financial position of Excelsior Absolute Return Fund of Funds Master Fund, LLC
(the "Fund") at March 31, 2008, the results of its operations and its cash flows
for the year then ended and the changes in its members' equity - net assets and
the financial highlights for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at March 31, 2008 by
correspondence with the custodian and the underlying portfolio funds, provide a
reasonable basis for our opinion. The financial highlights of the Fund for each
of the two years in the period ended March 31, 2006 and for the period December
1, 2003 (commencement of operations) through March 31, 2004, were audited by
other auditors whose report dated May 25, 2006, expressed an unqualified opinion
on such financial statements.
As explained in Note 2, the financial statements include investments held by the
Fund valued at $211,298,937 (91.31% of the Fund's net assets) at March 31, 2008,
the values of which have been fair valued by the Adviser based on estimates
provided by each portfolio fund, under general supervision of the Board of
Managers, in the absence of readily ascertainable market values.
PricewaterhouseCoopers LLP
New York, New York
May 28, 2008
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Statement of Assets, Liabilities and Members' Equity - Net Assets
March 31, 2008
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ASSETS
Investments in Investment Funds, at fair
value (cost $150,676,979) $ 211,298,937
Cash and cash equivalents 8,669,814
Due from investment funds 13,726,149
Other assets 8,412
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Total Assets 233,703,312
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LIABILITIES
Repurchase of Members' interests payable 1,588,458
Due to Adviser 587,995
Professional fees payable 129,928
Due to custodian 4,692
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Total Liabilities 2,311,073
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Net Assets $231,392,239
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MEMBERS' EQUITY - NET ASSETS
Represented by:
Capital $ 170,770,281
Accumulated net unrealized appreciation on investments 60,621,958
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Members' Equity - Net Assets $ 231,392,239
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The accompanying notes are an integral part of these financial statements.
<Page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Schedule of Investments
March 31, 2008
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<caption>
% of % Ownership First
First Members' of Available
Acquisition Fair Equity - Investment Redemption
Investment Funds* Date Cost** Value** Net Assets Funds Date*** Liquidity****
- ------------------------------------------------------------------------------------------------------------------------------------
Relative Value
- --------------
<s> <c> <c> <c> <c> <c> <c> <c>
Frontpoint Utility and Energy Fund, L.P. 7/1/2006 $ 6,000,000 $ 7,207,424 3.11% 0.34% N/A Quarterly
Ionic Capital LLC 2/1/2008 5,000,000 5,068,927 2.19% 0.93% 2/1/09 Quarterly
Menta Global Master, L.P. 7/1/2007 5,000,000 4,521,401 1.95% 1.47% 7/31/08 Monthly
Polygon Global Opportunities Fund, L.P. 8/1/2004 7,200,000 11,630,615 5.04% 0.98% N/A Quarterly
Suttonbrook Capital Partners, L.P. 10/1/2004 8,500,000 10,814,383 4.67% 3.63% N/A Quarterly
------------------------------------
Strategy Total 31,700,000 39,242,750 16.96%
------------------------------------
<caption>
Equity
- ------
<s> <c> <c> <c> <c> <c> <c> <c>
Cantillon World, L.P. 12/1/2003 5,050,000 7,814,159 3.38% 0.80% N/A Quarterly
Clovis Capital Partners
Institutional, L.P. 2/1/2007 10,000,000 10,742,800 4.64% 1.32% N/A Quarterly
Galleon Partners, SPC L.P. 2/1/2008 9,900,932 9,713,802 4.20% 0.61% N/A Quarterly
Glenview Capital Partners, L.P. 12/1/2003 2,300,000 9,059,252 3.92% 3.38% N/A Quarterly
North River Partners, L.P. 7/1/2005 7,000,000 7,723,523 3.34% 1.60% N/A Quarterly
Sandler Associates 2/1/2008 5,000,000 4,995,781 2.16% 1.34% N/A Quarterly
Savannah-Baltimore Partners
Liquidating Trust 7/1/2006 - 48,237 0.02% 1.84% N/A (1)
Shoshone Partners, L.P. 12/1/2003 2,500,000 7,168,000 3.10% 2.11% N/A Annually
The Tantallon Fund, L.P. 7/1/2006 4,500,000 5,836,525 2.52% 4.29% N/A Monthly
------------------------------------
Strategy Total 46,250,932 63,102,079 27.28%
------------------------------------
<caption>
Macro/CTA/Short-Term Trading
- ----------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Catequil Partners, L.P. 12/1/2003 128,413 130,094 0.06% 1.84% N/A (1)
Caxton Global Investments (USA) LLC 1/1/2005 7,101,200 9,473,962 4.09% 1.61% N/A Annually
Episode L.P. 2/1/2008 4,000,000 3,934,136 1.70% 5.46% 2/1/09 Quarterly
Grinham Diversified Fund (US), L.P. 2/1/2007 4,200,000 5,197,706 2.25% 3.68% N/A Monthly
Placer Creek Partners, L.P. 1/1/2006 3,500,000 6,990,261 3.02% 1.37% N/A Semi-annually
Sunrise Commodities Select Portfolio-
Davco Fund, L.P. 12/1/2003 5,450,000 7,794,336 3.37% 3.34% N/A Monthly
------------------------------------
Strategy Total 24,379,613 33,520,495 14.49%
------------------------------------
</table>
The accompanying notes are an integral part of these financial statements.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Schedule of Investments (continued)
March 31, 2008
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<caption>
% of % Ownership First
First Members' of Available
Acquisition Fair Equity - Investment Redemption
Investment Funds* Date Cost** Value** Net Assets Funds Date*** Liquidity****
- ------------------------------------------------------------------------------------------------------------------------------------
Event Driven
- ------------
<s> <c> <c> <c> <c> <c> <c> <c>
Bennelong Asia Pacific Multi Strategy
Equity Fund, L.P. 7/1/2006 $ 4,000,000 $ 4,956,366 2.14% 4.75% N/A Monthly
Brencourt Multi-Strategy, L.P. 9/1/2005 8,421,521 9,334,399 4.03% 5.20% N/A Quarterly
Canyon Value Realization Fund, L.P. 12/1/2003 7,500,000 12,751,066 5.51% 0.44% N/A Annually
Castlerigg Partners, L.P. 12/1/2003 4,000,000 11,306,555 4.89% 1.87% N/A Quarterly
Empyrean Capital Fund, L.P. 7/1/2004 - 81,747 0.04% 0.03% N/A (1)
King Street Capital, L.P. 8/1/2007 7,500,000 7,969,916 3.44% 0.21% 9/30/09 Quarterly
OZ Asia Domestic Partners, L.P. 7/1/2006 5,000,000 6,112,049 2.64% 0.68% N/A Annually
OZ Europe Domestic Partners II, L.P. 10/1/2005 7,424,913 12,112,969 5.23% 2.42% N/A Quarterly
York Capital Management, L.P. 7/1/2004 4,500,000 10,808,546 4.67% 0.92% N/A Annually
------------------------------------
Strategy Total 48,346,434 75,433,613 32.59%
------------------------------------
Total investments in Investment Funds $150,676,979 211,298,937 91.31%
============
Other Assets, Less Liabilities 20,093,302 8.69%
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Members' Equity - Net Assets $231,392,239 100.00%
======================
* Non-income producing investments. N/A Initial lock-up period has either expired prior to March 31, 2008 or the
** See definition in Note 2a. Investment Fund did not have an initial lock-up period. However,
*** From original investment date. specific redemption restrictions may apply.
**** Available frequency of redemptions after (1) The Company's remaining residual investment in the Investment Fund is
initial lock-up period an illiquid security.
</table>
The accompanying notes are an integral part of these financial statements.
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Statement of Operations
Year Ended March 31, 2008
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INVESTMENT INCOME
Interest $ 827,411
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Total Investment Income 827,411
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OPERATING EXPENSES
Advisory fee 2,652,060
Professional fees 349,730
Bank facility fee 95,313
Administration fees 24,000
Other 168,701
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Total Operating Expenses 3,289,804
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Net Investment Loss (2,462,393)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from Investment Fund redemptions 15,549,594
Net change in accumulated unrealized appreciation
on investments (7,976,959)
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Net Realized and Unrealized Gain on Investments 7,572,635
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INCREASE IN MEMBERS' EQUITY - NET ASSETS
DERIVED FROM OPERATIONS $ 5,110,242
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The accompanying notes are an integral part of these financial statements.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Statements of Changes in Members' Equity - Net Assets
For the Year Ended March 31,
2008 2007
- --------------------------------------------------------------------------------
OPERATIONS
Net investment loss $ (2,462,393) $ (2,292,715)
Net realized gain from Investment Fund redemptions 15,549,594 8,690,426
Net change in accumulated unrealized appreciation
on investments (7,976,959) 21,291,189
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Increase in Members' Equity - Net Assets
Derived from Operations 5,110,242 27,688,900
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CAPITAL TRANSACTIONS
Members' subscriptions 28,758,657 29,524,100
Members' interests repurchased (66,933,852) (89,770,507)
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Decrease in Members' Equity-Net Assets Derived
from Capital Transactions (38,175,195) (60,246,407)
- --------------------------------------------------------------------------------
Net Decrease in Members' Equity - Net Assets (33,064,953) (32,557,507)
MEMBERS' EQUITY - NET ASSETS
AT BEGINNING OF PERIOD 264,457,192 297,014,699
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MEMBERS' EQUITY - NET ASSETS
AT END OF PERIOD $ 231,392,239 $ 264,457,192
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The accompanying notes are an integral part of these financial statements.
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Statement of Cash Flows
Year Ended March 31, 2008
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CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' equity - net assets
derived from operations $ 5,110,242
Adjustments to reconcile net increase in members' equity -
net assets derived from operations to net cash provided by
operating activities:
Net change in accumulated unrealized appreciation
on investments 7,976,959
Net realized gain from Investment Fund redemptions (15,549,594)
Proceeds from Investment Funds 90,046,342
Purchases of Investment Funds (36,700,000)
Increase in due from Investment Funds (10,431,568)
Decrease in other assets 23,132
Decrease in due to Adviser (94,032)
Increase in professional fees payable 59,630
Decrease in other payable (18,746)
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Net Cash Provided by Operating Activities 40,422,365
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from member subscriptions 13,031,657
Payments for member interests repurchased (67,106,846)
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (54,075,189)
- --------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (13,652,824)
Cash and cash equivalents at beginning of period 22,322,638
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Cash and Cash Equivalents at End of Year $8,669,814
- --------------------------------------------------------------------------------
Supplemental Non-Cash Transaction
Transfers of Investment $9,900,932
The accompanying notes are an integral part of these financial statements.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Financial Highlights
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 Year For the year For the year For the year For the period
ended ended ended ended from December 1,
March 31, March 31, March 31, March 31, 2003 * -
2008 2007 2006 2005 March 31, 2004
--------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Net assets, end of $231,392,239 $264,457,192 $297,014,699 $251,729,829 $83,029,523
period
Ratio of net investment
loss to average (0.94%) (0.82%) (1.01%) (1.09%) (0.54%)
members' equity -
net assets (a) (b)
Ratio of expenses to 1.26% 1.13% 1.09% 1.11% 0.54%
average members'
equity - net assets
(a) (b)
Portfolio turnover 18.92% 17.70% 20.24% 7.07% -
Total return (c) 1.30% 10.72% 8.93% 5.26% 5.02%
* Commencement of Operations. The ratios and total return are not
annualized for the period.
(a) Ratio does not reflect the Company's proportionate share of the net income
(loss) and expenses, including incentive fees or allocations, of the
Investment Funds. Please refer to Note 5 for additional information about
the expenses of the Investment Funds that the Company indirectly bears.
(b) Average members' equity - net assets is determined using the net assets at
the end of each month during the period.
(c) Total return assumes a purchase of an interest in the Company on the first
day and a sale of an interest on the last day of the period and is
calculated using geometrically linked monthly returns.
</table>
The accompanying notes are an integral part of these financial statements.
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements
March 31, 2008
- --------------------------------------------------------------------------------
1. Organization
Excelsior Absolute Return Fund of Funds Master Fund, LLC (the "Company") was
organized as a limited liability company under the laws of Delaware on June 17,
2003, and commenced operations on December 1, 2003. The Company is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a non-
diversified, closed-end management investment company. The Company's investment
objective is to provide attractive long-term, risk-adjusted absolute returns in
a variety of capital market conditions. The Company pursues its investment
objective by investing its assets primarily in private investment limited
partnerships, limited liability companies, joint ventures and other similar
investment vehicles (collectively, the "Investment Funds") that are managed by a
select group of alternative investment managers ("Investment Managers") that
utilize a broad range of alternative investment strategies.
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"). 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. 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 at a special meeting of members of the Company held on March 15, 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 Adviser has retained AIG Global Investment Corp. ("AIG Global"), an indirect
wholly-owned subsidiary of American International Group, Inc., to serve as the
investment manager of the Company. AIG Global is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended, and is
responsible for Investment Fund selection and determining the portion of the
Company's assets to be allocated to each Investment Fund, subject to the general
supervision of the Adviser.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
1. Organization (continued)
The Company's Board of Managers (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 is comprised of three
managers who are not "interested persons" (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 Board has engaged the Adviser to manage the
day-to-day operations of the Company.
The Company was established to hold substantially all of the assets of Excelsior
Absolute Return Fund of Funds, LLC (the "Feeder Fund") and Excelsior Absolute
Return Fund of Funds, Ltd. (the "Offshore Fund") as members of the Company
("Members"). As of March 31, 2008, the Feeder Fund and Offshore Fund ownership
of the Company's Members' Equity - Net Assets were 88.47% and 11.53%,
respectively.
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 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 Company 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 Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
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 interest in an Investment
Fund will represent the amount that the Company could reasonably expect to
receive from the Investment Fund if the Company's interest 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.
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 Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
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 each 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 investment 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, 2007. Based on Investment Funds owned at December 31, 2007, the cost of
investments for Federal income tax purposes was $198,720,566. This included
aggregate gross unrealized appreciation of $19,415,893 and aggregate gross
unrealized depreciation of $700,268.
..
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
d. New Accounting Pronouncements
Effective April 1, 2007, the Company adopted the Financial Accounting Standards
Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income
PersonNameTaxes ("FIN 48"). FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Fund's tax returns in order
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. The Company has evaluated the application of FIN 48 and has
determined that it does not have a material impact on the Company's financial
statements. There is no tax liability resulting from unrecognized tax benefits
relating to uncertain income tax positions taken or expected to be taken on the
tax return for the year ended December 31, 2007. No income tax returns are
currently under examination. The statute of limitations on the Company's U.S.
Federal tax returns remains open for the years ended December 31, 2005 through
December 31, 2007. The statute of limitations on the Company's state and local
tax returns may remain open for an additional year depending upon the
jurisdiction.
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
Pursuant to the terms of the advisory agreement between the Adviser and the
Company ("Advisory Agreement"), 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 month, after adjustments for any subscriptions
effective on that date. For the year ended March 31, 2008, the advisory fee was
$2,652,060, of which $587,995 is included in "Due to Adviser" as of March 31,
2008.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
3. Advisory Fee, Related Party Transactions and Other (Continued)
In connection with the services provided by AIG Global pursuant to the
investment sub-advisory agreement between the Adviser and AIG Global, the
Adviser pays AIG Global a quarterly fee computed by applying the following
annual rates to the Company's average monthly net assets determined on the first
business day of each month: 0.80% of assets not exceeding $200 million; 0.70% of
assets exceeding $200 million but less than $400 million; 0.60% of assets
exceeding $400 million but less than $800 million; and 0.50% of assets exceeding
$800 million.
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 year
ended March 31, 2008, the Company incurred $24,000 in expenses related to such
administrative services, none of which was payable as of March 31, 2008.
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 March 31, 2008, the Company had investments in twenty-nine Investment
Funds. The Company, as an investor in these Investment Funds, is charged
management fees ranging from 0.0% to 3.0% (per annum) of the net asset value of
its ownership interests in the Investment Funds, as well as incentive fees or
allocations ranging from 20% to 25% of net profits earned that are attributable
to the Company's ownership interests in such Investment Funds. The Company also
generally bears a pro rata share of the other expenses of each Investment Fund
in which it invests. Total expenses, including incentive fees or allocations,
for the fiscal year ended March 31, 2008, ranged from approximately 1.0% to
11.5% of the Company's average invested capital in each Investment Fund.
Incentive fees or allocations for the same fiscal year ranged from approximately
0.0% to 5.4% of the Company's average invested capital in each Investment Fund.
These ratios may vary over time depending on the allocation of the Company's
assets among the Investment Funds and the actual expenses and investment
performance of the Investment Funds. Although the ranges of Investment Fund
expense ratios are based on audited financial data received from the Investment
Funds, the ranges were not reviewed by the Company's auditors.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2008
- --------------------------------------------------------------------------------
5. Investments in Investment Funds (continued)
The Investment Funds provide for periodic redemptions, with lock-up provisions
ranging from one month to two years from initial investment. In certain
circumstances, the Investment Funds may have the ability to deny or delay a
redemption request depending on the Investment Fund's governing documents.
Aggregate purchases and proceeds of interests in Investment Funds for the year
ended March 31, 2008 are $46,600,932 and $99,947,274, respectively.
6. Bank Note- Line of Credit Facility
The Company maintains a $25,000,000 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 includes a provision for a facility fee of 0.375% per
annum on the unused portion of the note. For the year ended March 31, 2008, the
Company incurred $95,313 in facility fees related to the bank line of credit,
none of which was payable as of March 31, 2008. As of March 31, 2008, the
Company did not have an outstanding revolving note balance. The bank line of
credit was not used during the year ended March 31, 2008.
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 such claims is considered remote.
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Company Management (Unaudited)
March 31, 2008
- --------------------------------------------------------------------------------
Information pertaining to the Board of Managers and officers of the Company is
set forth below:
<table>
<caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held with and Length of Overseen by
and Age the Company Time Served Principal Occupation During Past Five Years Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Disinterested Managers
- ------------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Virginia G. Breen Manager Term - Partner, Blue Rock (8/95 to present; also a manager 5
c/o Excelsior Absolute (Chair) Indefinite; of Excelsior Absolute Return Fund of Funds, LLC,
Return Fund of Funds Length - Excelsior Buyout Investors LLC, Excelsior LaSalle
Master Fund, LLC since June Property Fund, Inc., and UST Global Private Markets
225 High Ridge Road 2003 Fund, LLC. Also a director of CMGI, Inc. and
Stamford, CT 06905 manager of UBS Multi-Strategy Fund, LLC.
Age 43
Jonathan B. Bulkeley Manager Term - CEO of Scanbuy, a wireless software company (3/06 5
c/o Excelsior Absolute Indefinite; to present); Managing Partner of Achilles
Return Fund of Funds Length - Partners (3/02 to 2/06); Non-Executive Chairman of
Master Fund, LLC since June QXL, PLC (2/98 to 2/05); also a manager of
225 High Ridge Road 2003 Excelsior Absolute Return Fund of Funds,LLC,
Stamford, CT 06905 Excelsior Buyout Investors, LLC, Excelsior LaSalle
Age 47 Property Fund, Inc. and UST Global Private Markets
Fund, LLC. Also a director of The Readers Digest
Association, Inc. and Spark Networks, Inc.
Thomas F. McDevitt Manager Term - Managing Partner of Edgewood Capital Partners and 5
c/o Excelsior Absolute Indefinite; President of Edgewood Capital Advisors (5/02 to
Return Fund of Funds Length - present); Managing Director, Societe Generale (6/98
Master Fund, LLC since June to 3/02); also a manager of Excelsior Absolute
225 High Ridge Road 2003 Return Fund of Funds LLC, Excelsior Buyout
Stamford, CT 06905 Investors LLC, Excelsior LaSalle Property Inc. and
Age 51 UST Global Private Markets Fund, LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Manager
- ------------------------------------------------------------------------------------------------------------------------------------
David R. Bailin* Manager and Term Managing Director, Alternative Investment Solutions, 4
225 High Ridge Road President Indefinite; Bank of America (7/07 to present); Managing
Stamford, CT 06905 Length- Director and Head of Alternative Investments, U.S
Age 48 Since Trust (9/06 to 6/07); co-founder of Martello
September Investment Managment, a hedge fund of funds
2006 specializing in trading strategies (2/02 to 9/06);
Chief Operating Officer and Partner of Violy, Byorum
and Partners, LLC an investment banking firm
focusing on Latin America (1/00 to 1/02); also a
manager of Excelsior Absolute Return Fund of Funds,
LLC, Excelsior Buyout Investors LLC and Excelsior
LaSalle Property Fund, Inc. Also a manager of
Excelsior Directional Hedge Fund of Funds Master Fund,
LLC, Excelsior Directional Hedge Fund of Funds (TI),
LLC and Excelsior Directional Hedge Fund of Funds
(TE), LLC
* Manager is an "interested person" (as defined by the 1940 Act) of the Fund
because of his affiliation with the Adviser and its affiliates.
</table>
<page>
Excelsior Absolute Return Fund of Funds Master Fund, LLC
Company Management (Unaudited) Continued
March 31, 2008
- --------------------------------------------------------------------------------
<table>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held with and Length of Overseen by
and Age the Company Time Served Principal Occupation During Past Five Years Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Officers who are not Managers
- ------------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Steven L. Suss Chief Term - Cheif Financial Officer, Alternative Investment N/A
225 High Ridge Road Financial Indefinite; Solutions, Bank of America (7/07 to present);
Stamford, CT 06905 Officer and Length - since Director (4/07 to present), Senior Vice President
Age: 48 Treasurer April 2007 (7/07 to present), and President (4/07 to 6/07)
of UST Advisors, Inc.; Senior Vice President of
U.S Trust's Alternative Investment Division (4/07
to 6/07);Chief Financial Officer and Chief
Compliance Officer, Heirloom Capital Managemnt,
L.P.(5/02 to 9/06; Vice President and Chief
Financial Officer, Westway Capital LLC (9/97 to
1/02).
Marina Belaya Secretary Term - Assistant General Counsel, Bank of America (7/07 N/A
114 W. 47th Street Indefinite; to present); Vice President and Senior Attorney
New York, NY 10036 Length - since of U.S.Trust (2/06 to 6/07):, Vice President,
Age: 41 April 2007 Corporate Counsel, Prudential Financial (4/05 to
1/06); Associate, Schulte Roth & Zabel, LLP (9/02
to 3/05).
Linda J. Wondrack Chief Term - Director (Columbia Management Group LLC and
One Financial Center Compliance Indefinite; Investment Product Group Compliance), Bank of
Boston, MA 02111 Officer Length - Since America (6/05 to present); Director of Corporate
Age: 43 August 2007 Compliance and Conflicts Officer, MFS Investment
Management (8/04 to 5/05); Managing Director,
Deutsche Asset Management (prior to 8/04).
</table>
All officers of the Fund are employees and/or officers of the Adviser.
The SAI (or Statement of Additional Information) includes additional
information about the managers of the Fund and is available upon request.
<page>
Sub-Advisory Agreement Approval (Unaudited)
At a meeting held in person on December 18, 2007, the Board of Managers of the
Company (the "Company Board"), including all of the members of the Company Board
who are not "interested persons," as defined by the 1940 Act, of the Company
(the "Disinterested Managers of the Company"), approved the continuance of the
sub-advisory agreement between the Adviser and AIG Global (the "Sub-Advisory
Agreement") for an additional year, effective as of January 1, 2008. The
Disinterested Managers of the Company were assisted in their review of the
proposal to approve the continuance of the Sub-Advisory Agreement by independent
legal counsel and met in an executive session with such counsel separate from
representatives of AIG Global.
In determining whether to approve the renewal of the Sub-Advisory Agreement, the
Company Board reviewed various written materials, including performance
information on, and expense ratios of, comparable registered investment
companies and information relating to the costs of AIG Global with respect to
its relationship with the Company. The Company Board evaluated and considered:
(i) the nature, extent and quality of services provided by AIG Global; (ii) the
investment performance of the Company; and (iii) the costs of services provided
by AIG Global.
The Company Board considered the nature, extent and quality of operations and
services to date provided by AIG Global to the Company. The Company Board also
discussed the structure and capabilities of AIG Global, including technology and
operational support, which support the services provided to the Company. The
Company Board agreed that the Company benefits from these services. The Company
Board also considered AIG Global's research and portfolio management
capabilities. Additionally, the Company Board reviewed and discussed the
experience and qualifications of key personnel of AIG Global and reviewed
biographical information regarding such personnel. After consideration, the
Company Board noted its overall satisfaction with the nature, quality and extent
of services provided by AIG Global and concluded that the Company was receiving
all services from AIG Global required under the Sub-Advisory Agreement and that
these services were of high quality. The Company Board discussed the fees
charged under the Sub-Advisory Agreement. It was noted that AIG Global does not
receive any significant indirect benefits from its relationship with the
Company.
Based on the information provided to the Company Board, and the considerations
and conclusions described above, the Company Board, including each of the
Disinterested Managers of the Company, determined that: (i) it is appropriate
that AIG Global continue to provide sub-advisory services to the Company; (ii)
the sub-advisory fee to be paid to AIG Global for these services is fair and
reasonable; and (iii) it is in the best interest of the Company and its members
to continue the Sub-Advisory Agreement for an additional annual period.
<page>
ITEM 2. CODE OF ETHICS.
- -------------------------
The Registrant has adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions. For the fiscal
year ended March 31, 2008, there were no amendments to a provision of the code
of ethics, nor were there any waivers granted from a provision of the code of
ethics. A copy of the Registrant's code of ethics is filed with this form N-CSR
under Item 12(a)(1).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ------------------------------------------
The Board of Managers of the Registrant has determined that Virginia G. Breen
and Jonathan B. Bulkeley possess the technical attributes identified in
Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit committee
financial experts", and has designated Ms. Breen and Mr. Bulkeley as the Audit
Committee's financial experts. Ms. Breen and Mr. Bulkeley are "independent"
Managers pursuant to paragraph (a)(2) of Item 3 on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- ------------------------------------------------
(a) Audit Fees
The aggregate fees, billed for professional services rendered by the
Registrant's principal accountant for the audit of the Registrant's annual
financial statements for the fiscal years ended March 31, 2007 and March 31,
2008 were $44,000 and $46,640 respectively.
(b) Audit-Related Fees
There were no audit related services provided by the principal accountant to the
Registrant for the last two fiscal years.
(c) Tax Fees
The principal accountant for the audit of the Registrant's annual financial
statements billed no fees for tax compliance, tax advice or tax planning
services to the Registrant during the last two fiscal years.
(d) All Other Fees
The principal accountant billed no other fees to the Registrant during the last
two fiscal years.
(e) (1) During its regularly scheduled periodic meetings, the Registrant's audit
committee will pre-approve all audit, audit-related, tax and other services to
be provided by the principal accountants of the Registrant. The audit committee
has delegated pre-approval authority to its Chairman for any subsequent new
engagements that arise between regularly scheduled meeting dates provided that
any such pre-approved fees are presented to the audit committee at its next
regularly scheduled meeting.
(e) (2) None
(f) Not applicable.
(g) The amount of non-audit fees that were billed by the Registrant's accountant
for services rendered to: (i) the Registrant, and (ii) the Registrant's
investment adviser and any control person of the adviser that provides ongoing
services to the Registrant for the fiscal year ended March 31, 2008, were $0 and
$0, respectively.
The amount of non-audit fees that were billed by the Registrant's accountant for
services rendered to: (i) the Registrant, and (ii) the Registrant's investment
adviser and any control person of the adviser that provides ongoing services to
the Registrant for the fiscal year ended March 31, 2007, were $0 and $0,
respectively.
(h) The Registrant's audit committee has considered whether the provision of
non-audit services that may be rendered to the Registrant's investment adviser,
and any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Registrant that were
not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
is compatible with maintaining the principal account's independence.
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.
- --------------------------------
A copy of the Proxy Voting Policies and Procedures is included as Exhibit 2 to
this form.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
- --------------------------------------------------------------------------
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and
Description of Role of Portfolio Manager(s) or Management Team Members - As of
the date of the filing.
The following individuals at the Sub-Adviser have primary responsibility for
managing the Fund.
Robert Discolo, CFA, is a Managing Director, Alternative Investments and Head of
the Hedge Fund Strategies Group. Mr. Discolo joined AIGGIC in 1999. Mr. Discolo,
who is also a member of AIGGIC's Hedge Fund Investment Selection and Asset and
Strategy Allocation Committees, has over 20 years experience with major
financial institutions in various capacities relating to investment products,
primarily hedge and private equity funds. Previously, he held positions at
PaineWebber Inc., Bank Julius Baer, and Merrill Lynch & Co., where his
responsibilities included creating portfolios of hedge funds for private and
institutional clients, development of hedge fund and private equity products,
oversight of business structure and development for hedge funds and hedge fund
of funds, and managing the evaluation and selection process of hedge funds for
both discretionary and advisory clients. Mr. Discolo was also President of the
European Warrant Fund (a NYSE listed closed-end fund) and Julius Baer
International Equity Fund. Mr. Discolo received a BS in accounting from St.
John's University and an MBA from the Lubin School of Business at Pace
University. He holds Series 7 and Series 24 licenses and he is a CFA and CAIA
charterholder. Mr. Discolo is also a CPA and a member of the AICPA, CFA
Institute, CAIA Institute, GARP, and NY State Society of Security Analysts.
Eileen Casey, CFA, CPA, is a Managing Director and Head of Hedge Fund Research,
Hedge Fund Strategies Group. Ms. Casey joined AIGGIC in 1998, bringing with her
over eight years of experience in accounting and investment management. She is
responsible for coordinating portfolio manager research for the Hedge Fund
Strategies Group, monitoring existing investments and making recommendations for
investments to the Investment Selection Committee for portfolio construction.
Ms. Casey is also involved in all aspects of the investment process including
sourcing new managers, manager due diligence, risk management and portfolio
construction. Previously, Ms. Casey was at Fischer, Francis, Trees & Watts, Inc.
as the manager of their Client Services Group. Prior to that, she was with
Neuberger & Berman and Arthur Andersen & Co. Ms. Casey is a CFA charterholder
and also a CPA. She received a BS in Accounting and Finance from Fairfield
University.
Vinti Khanna is a Managing Director, Hedge Fund Strategies Group. Ms. Khanna
joined AIGGIC in 2002. She is the Assistant Director of Hedge Fund Research,
with asset management experience since 1997. She is responsible for manager
research, portfolio monitoring and structuring, and making investment
recommendations to the Investment Selection Committee. Before joining AIGGIC,
she was an Associate at Goldman Sachs Princeton, The Hedge Fund Strategies
Group, from 1999 to 2002. Her responsibilities included conducting analysis on
multi-manager hedge fund portfolios, analyzing and evaluating hedge fund
managers using diverse strategies in alternative investments, and recommending
new managers for funding. From 1997 to 1999, she was in the Emerging Markets
Equities Group at Goldman Sachs Asset Management with a focus on Latin America.
Ms. Khanna received a BA from the University of Delhi, India and an MBA from SDA
Bocconi in Milan, Italy. Ms. Khanna holds Series 7 and Series 63 licenses.
(a)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team
Member and Potential Conflicts of Interest
Other Accounts Managed by Portfolio Manager(s) or Management Team Members- As
of March 31, 2008:
The following table indicates the type (Registered Investment Company ("RIC"),
Other Pooled Investments ("OPI"), and Other Accounts ("OA")), number of
accounts, and total assets of the accounts for which each Portfolio Manager had
day-to-day responsibilities as of March 31, 2008. Please note that one
Registered Investment Company and twenty Other Pooled Investments accounts are
subject to performance-based fees (*).
- --------------------------------------------------------------------------------
No. of Accounts Market Value
- --------------------------------------------------------------------------------
Robert Discolo RIC 3 $ 361,743,494
- --------------------------------------------------------------------------------
performance fee* 2 $ 129,937,097
- --------------------------------------------------------------------------------
OPI* 29 $ 5,404,941,553
- --------------------------------------------------------------------------------
performance fee* 27 $ 5,346,655,294
- --------------------------------------------------------------------------------
OA 5 $ 3,116,728,783
- --------------------------------------------------------------------------------
Eileen Casey RIC 3 $ 361,743,494
- --------------------------------------------------------------------------------
performance fee* 2 $ 129,937,097
- --------------------------------------------------------------------------------
OPI* 29 $ 5,404,941,553
- --------------------------------------------------------------------------------
performance fee 27 $ 5,346,655,294
- --------------------------------------------------------------------------------
OA 5 $ 3,116,728,783
- --------------------------------------------------------------------------------
Vinti Khanna RIC 3 $ 361,743,494
- --------------------------------------------------------------------------------
performance fee* 2 $ 129,937,097
- --------------------------------------------------------------------------------
OPI* 29 $ 5,404,941,553
- --------------------------------------------------------------------------------
performance fee* 27 $ 5,346,655,294
- --------------------------------------------------------------------------------
OA 5 $ 3,116,728,783
- --------------------------------------------------------------------------------
Potential Conflicts of Interest
AIG Global Investment Corp. ("AIGGIC") aims to conduct its activities in such a
manner that permits it to deal fairly with each of its clients on an overall
basis in accordance with applicable securities laws and fiduciary obligations.
In that regard, AIGGIC has adopted and implemented policies and procedures,
including brokerage and trade allocation policies and procedures, which AIGGIC
believes address the conflicts associated with managing multiple accounts for
multiple clients (including affiliated clients). AIGGIC also monitors a variety
of areas, including compliance with guidelines of the Fund and other accounts it
manages and compliance with AIGGIC's Code of Ethics. Furthermore, AIGGIC's
management periodically reviews the performance of a portfolio manager. Although
AIGGIC does not track the time a portfolio manager spends on a single portfolio,
AIGGIC does periodically assess whether a portfolio manager has adequate time
and resources to effectively manage all of such portfolio manager's accounts.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
- - As of March 31, 2008:
Compensation for AIGGIC portfolio managers has both a salary and a bonus
component. The salary component is a fixed base salary, which is generally based
upon several factors, including experience and market levels of salary for such
position. The bonus component is based both on a portfolio manager's individual
performance and the organizational performance of AIGGIC. The bonus component is
generally calculated as follows: (1) 60% is linked to the management of a
portfolio manager's funds; (2) 20% is based on AIGGIC's profitability; and (3)
20% is determined on a discretionary basis (including individual qualitative
goals). For the 60% component, the measures for a portfolio manager may vary
according to the day-to-day responsibilities of a particular portfolio manager.
The measures comprise any combination of (a) total return measures, (b)
benchmark measures and (c) peer group measures.
Ownership of Fund Securities
None of the AIGGIC portfolio managers listed under Section I above own shares of
the Fund.
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) Code of Ethics (see Exhibit 1)
(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 Absolute Return Fund of Funds Master Fund, LLC
- --------------------------------------------------------
By (Signature and Title) /s/ David R. Bailin
--------------------------
David R. Bailin, Principal Executive Officer
Date June 9, 2008
----------------
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 Absolute Return Fund of Funds Master Fund, LLC
- --------------------------------------------------------
By (Signature and Title) /s/ Steven L. Suss
------------------------
Steven L. Suss, Principal Financial Officer
Date June 9, 2008
----------------