UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-10083
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Investment Company Act file number
Excelsior Directional Hedge 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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ITEM 1. REPORTS TO STOCKHOLDERS.
- ----------------------------------
EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS MASTER FUND, LLC
Financial Statements
With Report of Independent Registered Public Accounting Firm
Year Ended March 31, 2008
Excelsior Directional Hedge 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, 2005 and 2004............................................... 9
Notes to Financial Statements.................................................10
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.
Report of Independent Registered Public Accounting Firm
To the Board of Managers and Members of Excelsior Directional Hedge 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 Directional Hedge 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 underlying portfolio funds, provide a
reasonable basis for our opinion. The financial highlights of the Fund for each
of the three years in the period ended March 31, 2006 were audited by other
auditors whose reports dated May 25, 2006 and May 24, 2004, expressed
unqualified opinions on such financial statements.
As explained in Note 2, the financial statements include investments held by the
Fund valued at $315,503,874 (98.73% 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 the general supervision of the Board of
Managers, in the absence of a readily ascertainable market value.
PricewaterhouseCoopers LLP
New York, New York
May 28, 2008
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Assets, Liabilities and Members' Equity - Net Assets
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March 31, 2008
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ASSETS
Investments in Investment Funds, at fair value (cost $230,259,960) $315,503,874
Cash and cash equivalents 7,823,581
Investments in Investment Funds made in advance 42,000,000
Receivables for interests in Investment Funds sold 202,842
Other assets 11,015
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Total Assets $365,541,312
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LIABILITIES
Members' interests received in advance 45,000,000
Due to Adviser 843,201
Professional fees payable 125,377
Other payable 2,873
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Total Liabilities 45,971,451
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Net Assets $319,569,861
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MEMBERS' EQUITY - NET ASSETS
Represented by:
Capital $234,325,947
Accumulated net unrealized appreciation on investments 85,243,914
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Members' Equity - Net Assets $319,569,861
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The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Schedule of Investments
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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 ****
- ------------------------------------------------------------------------------------------------------------------------------------
Hedged Long/Short Equity Funds
- ------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Basix Capital Fund, L.P. 7/1/2004 $ 8,500,000 $10,953,671 3.43% 11.03% N/A Quarterly
Foundation Partners, L.P. 7/1/2002 8,000,000 11,750,391 3.68% 8.33% N/A Quarterly
SAB Capital Partners, L.P. 4/1/2001 - 763,159 0.24% 0.15% N/A Annually
Scopia PX, LLC 9/1/2005 9,000,000 10,950,746 3.43% 4.57% N/A Quarterly
Spring Point Opportunity Partners, L.P. 7/1/2006 17,610,520 22,832,239 7.14% 5.93% N/A Quarterly
Swiftcurrent Partners, L.P. 10/1/2000 8,550,000 13,977,981 4.37% 1.41% N/A Annually
Tonga Partners, L.P. 10/1/2000 4,060,553 10,494,381 3.28% 4.53% N/A Semi-annually
---------------------------------------
Strategy Total 55,721,073 81,722,568 25.57%
---------------------------------------
<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 13,933,456 4.36% 3.75% N/A Quarterly
Cadmus Capital Partners (QP), L.P. 7/1/2003 5,057,241 5,971,527 1.87% 9.48% N/A (1)
Quaker Capital Partners I, L.P. 1/1/2001 3,164,863 11,254,600 3.52% 3.08% N/A Annually
Seminole Capital Partners, L.P. 9/1/2005 17,200,000 19,418,697 6.08% 4.42% N/A Semi-annually
Valinor Capital Partners, L.P. 7/1/2007 10,000,000 10,386,296 3.25% 4.35% (2) Annually
---------------------------------------
Strategy Total 49,422,104 60,964,576 19.08%
---------------------------------------
<Caption>
Hedged Sector Funds
- -------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Coatue Qualified Partners, L.P. 1/1/2002 6,000,000 15,990,680 5.00% 2.08% N/A Quarterly
Durus Life Sciences Fund, LLC 1/1/2001 586,983 67,415 0.02% 2.05% N/A (3)
Longbow Partners, L.P. 5/1/2004 16,200,000 21,001,968 6.57% 5.69% N/A Quarterly
Sivik Global Healthcare Partners, L.P. 11/1/2003 7,100,000 9,562,646 2.99% 6.17% N/A Semi-annually
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Strategy Total 29,886,983 46,622,709 14.58%
---------------------------------------
<Caption>
Arbitrage/Distressed Funds
- --------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Canyon Value Realization Fund, L.P. 7/1/2003 11,400,000 16,373,049 5.12% 0.57% N/A Annually
Farallon Capital Partners, L.P. 11/1/2004 22,000,000 29,835,025 9.34% 0.36% N/A Annually
JMG Capital Partners, L.P. 10/1/2000 5,591,605 12,366,421 3.87% 2.77% N/A Quarterly
Polygon Global Opportunities Fund, L.P. 8/1/2006 15,600,000 16,653,638 5.21% 1.40% N/A Semi-annually
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Strategy Total 54,591,605 75,228,133 23.54%
---------------------------------------
</Table>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Schedule Investments (continued)
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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 ****
- ------------------------------------------------------------------------------------------------------------------------------------
Opportunistic (Global/International) Funds
- ------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
AKO Partners, L.P. 10/1/2005 14,500,000 17,541,428 5.49% 4.16% N/A Quarterly
Delta Fund Europe, L.P. 5/1/2006 14,000,000 14,940,545 4.68% 2.79% N/A Quarterly
Indus Asia Pacific Fund, L.P. 3/1/2004 6,000,000 10,307,915 3.23% 1.93% N/A Quarterly
Indus Event Driven Fund, L.P. 6/1/2005 138,195 234,386 0.07% 3.91% N/A (1)
Indus Japan Fund, L.P. 3/1/2004 6,000,000 7,941,614 2.49% 2.92% N/A Quarterly
---------------------------------------
Strategy Total 40,638,195 50,965,888 15.96%
---------------------------------------
Total investments in Investment Funds $230,259,960 315,503,874 98.73%
============
Other Assets, Less Liabilities 4,065,987 1.27%
--------------------------
Members' Equity - Net Assets $319,569,861 100.00%
==========================
* Non-income producing investments. N/A Initial lock-up period has either expired prior to March 31,
** See definition in Note 2a 2008 or Investment Fund did not have an initial lock-up period.
*** From original investment date. However, specific redemption restrictions may apply.
**** Available frequency of redemptions after initial (1) The Investment Fund is closing, and is in the process of
lock-up period. returning capital to its partners.
(2) $4,162,764 has an initial lock-up period that expires on
7/1/2010 and $6,223,532 has an initial lock-up period that
expires on 7/1/2008.
(3) The Investment Fund is currently in liquidation and has
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
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Year Ended March 31, 2008
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INVESTMENT INCOME
Interest $ 195,215
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Total Investment Income 195,215
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OPERATING EXPENSES
Advisory fee 3,407,337
Professional fees 265,570
Board of Managers' fees and expenses 61,000
Bank note facility fee and interest expense 242,925
Administration fees 21,000
Other 185,242
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Total Operating Expenses 4,183,074
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Net Investment Loss (3,987,859)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from Investment Fund redemptions 6,109,713
Net change in accumulated unrealized appreciation on investments 298,607
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Net Realized and Unrealized Gain on Investments 6,408,320
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INCREASE IN MEMBERS' EQUITY - NET ASSETS
DERIVED FROM OPERATIONS $ 2,420,461
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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
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Year Ended March 31,
2008 2007
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OPERATIONS
Net investment loss $ (3,987,859) $ (5,303,738)
Net realized gain on investments 6,109,713 10,945,329
Net change in accumulated unrealized appreciation 298,607 21,009,426
on investments
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Increase in Members' Equity - Net Assets Derived
from Operations 2,420,461 26,651,017
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CAPITAL TRANSACTIONS
Members' subscriptions 374,515,210 46,569,339
Members' interests repurchased (57,365,810) (54,878,772)
Transfers of Members' interests* (310,364,405) -
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Increase (Decrease) in Members' Equity - Net Assets
Derived from Capital Transactions 6,784,995 (8,309,433)
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Net Increase in Members' Equity - Net Assets 9,205,456 18,341,584
MEMBERS' EQUITY - NET ASSETS AT BEGINNING
OF PERIOD 310,364,405 292,022,821
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MEMBERS' EQUITY - NET ASSETS AT END OF PERIOD $ 319,569,861 $310,364,405
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*On April 23, 2007, all Members' interests were transferred to Excelsior
Directional Hedge Fund of Funds (TI), LLC (the "Fund"). The Fund, in turn,
invested all of its capital in the Company.
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Cash Flows
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Year Ended March 31, 2008
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CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' equity - net assets
derived from operations $ 2,420,461
Adjustments to reconcile net increase in members' equity -
net assets derived from operations to net cash used in
operating activities:
Net change in accumulated unrealized appreciation on
investments (298,607)
Net realized gain from Investment Fund redemptions (6,109,713)
Purchases of Investment Funds (25,100,000)
Proceeds from sales of Investment Funds 30,914,277
Increase in receivables from Investment Funds (61,731)
Increase in contributions to Investment Funds made
in advance (27,900,000)
Decrease in other assets 78,249
Decrease in due to Adviser (291,602)
Decrease in bank note facility fee and interest payable (28,003)
Increase in professional fees payable 30,377
Decrease in administration fees payable (56,549)
Decrease in other payable (176,507)
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Net Cash Used in Operating Activities (26,579,348)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from member subscriptions 88,597,896
Payments for member interests repurchased (59,560,204)
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Net Cash Provided by Financing Activities 29,037,692
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Net increase in cash and cash equivalents 2,458,344
Cash and cash equivalents at beginning of period 5,365,237
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Cash and Cash Equivalents at End of Period $ 7,823,581
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Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Statement of Cash Flows (continued)
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Year Ended March 31, 2008
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OPERATING ACTIVITIES
Supplementary Disclosure of Cash Flow Information
Cash paid during the period for interest $ 141,079
FINANCING ACTIVITIES
Supplementary Disclosure of Non-Cash Information
Contributions from Feeder for transfer of members' interests $ 310,364,405
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge 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 year
ended March 31, ended March 31, ended March 31, ended March 31, ended March 31,
2008* 2007 2006 2005 2004
--------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Net assets, end of
period $319,569,861 $310,364,405 $292,022,821 $240,943,784 $173,964,183
Ratio of net (1.18%) (1.71%) (1.75%) (1.77%) (1.82%)
investment loss
to average Members'
equity - net
assets (a), (b)
Ratio of expenses 1.24% 1.86% 1.85% 1.81% 1.87%
to average Members'
equity - net
assets (a), (b)
Portfolio turnover 7.37% 30.25% 15.33% 15.61% 22.70%
Total return (c) 0.45% 8.82% 10.09% 4.83% 13.68%
</table>
* The Company reorganized into a master-feeder structure for this period.
See Note 2b and Note 3 for further explanation of the change in expense
structure for fiscal year ended March 31, 2008, as compared to prior
fiscal years.
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 is net of expenses and 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.
The accompanying notes are an integral part of these financial statements.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements
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March 31, 2008
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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 (the "Reorganization"). 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 "Feeder Funds") pursue their
investment objectives by investing substantially all of their interests in the
Company. The Feeder Funds have the same investment objective and substantially
the same investment policies as the Company (except that the Feeder Funds pursue
their investment objectives by investing in the Company).
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.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
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March 31, 2008
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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.
The Company was established to hold substantially all of the assets of Excelsior
Directional Hedge Fund of Funds (TI), LLC (the "Feeder Fund") and Excelsior
Directional Hedge Fund of Funds, Ltd. (the "Offshore Fund") as members of the
Company ("Members"). As of March 31, 2008, the Fund and Offshore Fund ownership
of the Company's Members' Equity--Net Assets were 95.12% and 4.88%,
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 its 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 in 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.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
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March 31, 2008
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
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.
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 March 31, 2008. Durus was
fair valued in good faith by the Adviser, in accordance with procedures adopted
by the Board. As of March 31, 2008, Durus is in liquidation and there are no
ongoing redemption rights available to partners. The investments in Investment
Funds, representing 98.73% of the Members' equity, have been fair valued in
accordance with procedures established by the Board.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
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March 31, 2008
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
a. Portfolio Valuation (continued)
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.
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.
As a result of the Reorganization, certain operating expenses that had
previously been charged to the Company are now being charged directly to each of
the Feeder Funds. Changes to the Company's expense structure are discussed in
the Advisory Fee, Related Party Transactions and Other section of the Notes to
Financial Statements.
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.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
c. Income PersonNameTaxes (continued)
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, 2007. Based on Investment Funds owned at December 31, 2007, the cost of
investments for Federal income tax purposes was $303,932,199. This included
aggregate gross unrealized appreciation of $35,480,886 and aggregate gross
unrealized depreciation of $2,332,690.
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
Taxes ("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.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
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 1.0% based on the
Company's net assets on the first business day of each quarter after adjustment
for any subscriptions effective on that date. Each Feeder Fund also pays the
Adviser a quarterly management fee at an annual rate of 0.5% based on the Feeder
Fund's net assets on the first business day of each quarter after adjustment for
any subscriptions effective on that date. Prior to the Reorganization, the
Company paid the Adviser an advisory fee at an annual rate of 1.5% based on the
Company's net assets on the first business day of each quarter after adjustment
for any subscriptions effective on that date. The change in the fee structure
resulting from the Reorganization does not have a material impact on the total
advisory and management fees attributable to the capital accounts of the
investors of the Feeder Funds.
For the year ended March 31, 2008, the Company incurred advisory fees totaling
$3,407,337, based on the current advisory fee rate of 1.0%. Of total advisory
fees, $843,201 was payable as of March 31, 2008.
The Company's 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
$61,000 of retainer and per meeting fees for the year ended March 31, 2008.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
3. Advisory Fee, Related Party Transactions and Other (continued)
The Company has retained J.D. Clark & Company (the "Administrator") to provide
accounting and certain administrative and investor services to the Company. As a
result of the Reorganization, the Company's contract with the Administrator was
amended to reflect the new "master/feeder" structure. Previously, the Company
paid the Administrator a quarterly fee equal to the greater of: (i) $3,000; or
(ii) .00025 of the Company'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. As of April 23, 2007, the Company pays the
Administrator a quarterly fee equal to $3,000 per Feeder Fund invested in the
Company. For the year ended March 31, 2008, the Company incurred $21,000 in
expenses related to such administrative services. The Feeder Funds incur
additional expenses directly for the services provided by the Administrator.
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-five Investment
Funds. The Company, as an investor in these Investment Funds, is charged
management fees ranging from 0.0% to 2.0% (per annum) of the net asset value of
its ownership interests in the Investment Funds, as well as incentive fees or
allocations ranging from 15% to 20% 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 1.5% to
14.7% 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 8.1% 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.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
5. Investments in Investment Funds (continued)
Aggregate purchases and proceeds of interests in Investment Funds for the year
ended March 31, 2008 are $25,100,000 and $30,914,277, respectively.
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 year ended March 31, 2008, the
Company incurred $242,925 in facility fees and interest expenses related to the
bank line of credit. As of March 31, 2008, the Company did not have an
outstanding revolving note balance. The average debt outstanding and the average
interest rate for the year ended March 31, 2008 was $1,561,644 and 6.91%,
respectively. The Company had an outstanding revolving note balance for a total
of 76 days during the fiscal 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 any such claim is considered remote.
8. Subsequent Events
As of March 31, 2008, the Company received subscriptions in advance for
Interests from Members in the amount of $45,000,000, 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 April 1, 2008.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Company Management (Unaudited)
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
Information pertaining to the Board and officers of the Company is set forth
below:
<Table>
<Caption>
Number of
Term of Portfolios in
Position(s) Office and Fund Complex
Held with the Length of Overseen by
Name, Address and Age Company Time Served Principal Occupation During Past Five Years Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Managers
<s> <c> <c> <c> <c>
Gene M. Bernstein Manager Term- Director of NIC Holding Corp. He was Dean of the Skodneck 5
c/o Excelsior Directional Indefinite; Business Development Center at Hofstra University from
Hedge Fund of Funds Length - since 2000-2001. Prior to that, Mr. Bernstein was President and
Master Fund, LLC October 2000 Vice Chairman at Northville Industries, petroleum
225 High Ridge Road marketing, distribution, trading and storage company and
Stamford, CT 06905 wholly-owned subsidiary of NIC Holding Corp. Mr. Bernstein
Age 61 serves as a director or manager of Excelsior Directional
Hedge Fund of Funds (TI), LLC, Excelsior Directional Hedge
Fund of Funds (TE), LLC, Excelsior Venture Partners III,
LLC, and Excelsior Venture Investors III, LLC.
Victor F. Imbimbo, Jr. Manager Term- President and CEO of Caring Today, LLC., the publisher 5
c/o Excelsior Directional Indefinite; of Caring Today Magazine, the leading information
Hedge Fund of Funds Length - since resource within the family caregivers market. Prior to
Master Fund, LLC October 2000 this, Mr. Imbimbo, was Executive Vice President of
225 High Ridge Road TBWA/New York and President for North America with
Stamford, CT 06905 TBWA/WorldHealth, a division of TBWA Worldwide where
Age: 55 he directed consumer marketing program development for
healthcare companies primarily within the pharmaceutical
industry. Mr. Imbimbo serves as a director or manager of
Excelsior Directional Hedge Fund of Funds (TI), LLC,
Excelsior Directional Hedge Fund of Funds (TE), LLC,
Excelsior Venture Partners III, LLC, and Excelsior
Venture Investors III, LLC.
Stephen V. Murphy Manager Term- President of S.V. Murphy & Co., an nvestment banking firm. 5
c/o Excelsior Directional Indefinite; He also serves on the board of directors of The First
Hedge Fund of Funds Length - since of Long Island Corporation, The First National Bank of
Master Fund, LLC October 2000 Long Island and Bowne & Co., Inc. Mr. Murphy serves as
225 High Ridge Road a director or manager of Excelsior Directional Hedge Fund
Stamford, CT 06905 of Funds (TI), LLC, Excelsior DirectionalHedge Fund of
Age 62 Funds (TE), LLC, Excelsior Venture Partners III, LLC, and
Excelsior Venture Investors III, LLC.
</Table>
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Company Management (Unaudited) Continued
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
Information pertaining to the Board and officers of the Company is set forth
below:
<Table>
<Caption>
Number of
Term of Portfolios in
Position(s) Office and Fund Complex
Held with the Length of Overseen by
Name, Address and Age Company Time Served Principal Occupation During Past Five Years Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Managers
<s> <c> <c> <c> <c>
David R. Bailin* Manager Term- Managing Director, Alternative Investment Solutions, 3
225 High Ridge Road Indefinite; Bank of America (7/07 to present); Managing Director
Stamford, CT 06905 Since and Head of Alternative Investments, U.S. Trust (9/06 to
Age 48 September 6/07); co-founder of Martello Investment Management, a
2006 hedge fund-of-funds 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 Directional Hedge Fund of Funds (TI),
LLC and Excelsior Directional Hedge Fund of Funds (TE),
LLC. Also a manager of Excelsior Absolute Return Fund of
Funds Master Fund, LLC, Excelsior Absolute Return Fund of
Funds, LLC, Excelsior Buyout Investors, LLC and Excelsior
LaSalle Property Inc.
Officers who are not Managers
Spencer Boggess Chief Term- Managing Director, Alternative Investment Solutions, Bank N/A
40 West 57th Street Executive Indefinite of America (7/07 to present); President and Chief Executive
New York, NY 10019 Officer Length - Officer of U.S. Trust Hedge Fund Management, Inc. and
Age 41 Since March Portfolio Manager of the Company (7/03 to present); Senior
2006 V.P. and Director of Research, CTC Consulting, Inc. (10/00
to 6/03).
Steven L. Suss Chief Term- Chief Financial Officer, Alternative Investment Solutions, N/A
225 High Ridge Road Financial Indefinite Bank of America (7/07 to present); Director, Chief
Stamford, CT 06905 Officer and Length - Financial Officer and Treasurer (10/07 to present) and
Age: 48 Treasurer Since April Senior Vice President (06/07 to present) of U.S. Trust
2007 Hedge Fund Management, Inc.; Director (4/07 to present),
Senior Vice President (7/07 to present), and President
(4/07 to 6/07) of UST Advisers, 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 Management, L.P. (5/02 to 9/06); Vice
President and Chief Financial Officer, Westway Capital LLC
(9/97 to 1/02).
</Table>
* Manager is an "interested person" (as defined by the 1940 Act) of the Fund
because of his affiliation with the Adviser and its affiliates.
Excelsior Directional Hedge Fund of Funds Master Fund, LLC
Company Management (Unaudited) Continued
- --------------------------------------------------------------------------------
March 31, 2008
- --------------------------------------------------------------------------------
Information pertaining to the Board and officers of the Company is set forth
below:
<Table>
<Caption>
Number of
Term of Portfolios in
Position(s) Office and Fund Complex
Held with the Length of Overseen by
Name, Address and Age Company Time Served Principal Occupation During Past Five Years Manager
- ------------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Mohan Badgujar Chief Term- Director, Alternative Investment Solutions, Bank of N/A
40 West 57th Street Operating Indefinite; America (7/07 to present); Vice President of U.S. Trust
New York, NY 10019 Officer Length - Hedge Fund Management, Inc. (10/05 to present); Managing
Age: 49 Since March Partner of Blue Hill Capital Partners LLC (10/03 to 10/05)
2006 (Registered Investment Adviser); Financial Advisor at UBS
Financial Services, Inc. (1/02 to 9/03); Principal of
Columbia Software Consultants, Inc. (2001 to 2002).
Marina Belaya Secretary Term- Assistant General Counsel, Bank of America (7/07 to N/A
114 W. 47th Street Indefinite; present); Vice President and Senior Attorney of U.S. Trust
New York, NY 10036 Length - (2/06 to 6/07); Vice President, Corporate Counsel,
Age: 41 Since April Prudential Financial (4/05 to 01/06); Associate, Schulte
2007 Roth & Zabel LLP (09/02 to 03/05).
Linda J. Wondrack Chief Term- Director (Columbia Management Group LLC and Investment N/A
One Financial Center Compliance Indefinite; Product Group Compliance), Bank of America (6/05 to
Boston, MA 02111 Officer Length - present); Director of Corporate Compliance and Conflicts
Age: 43 Since Officer, MFS Investment Management (8/04 to 5/05); Managing
September Director, Deutsche Asset Management (prior to 8/04).
2007
</Table>
All officers of the Company are employees and/ or officers of the Adviser.
The SAI (or Statement of Additional Information) includes additional
information about the managers of the Company and is available upon request.
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 Stephen V. Murphy,
possesses the technical attributes identified in Instruction 2(b) of Item 3 to
Form N-CSR to qualify as an "audit committee financial expert", and has
designated Mr. Murphy as the Audit Committee's financial expert. Mr. Murphy is
an "independent" Manager 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 and security counts required under Rule 17f-2 of the
Investment Company Act of 1940 (the "1940 Act") for the fiscal years ended March
31, 2007 and March 31, 2008 were $106,000 and $80,000, 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. No such
services were rendered.
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.
Mr. Spencer N. Boggess is the portfolio manager (the "Portfolio Manager")
primarily responsible for the day-to-day management of the registrant's
portfolio, subject to such policies as may be adopted by the Board of Managers.
Mr. Boggess joined Bank of America Corporation as part of the acquisition of
U.S. Trust and is a managing director. Since July 2003, Mr. Boggess has served
as the portfolio manager of the Registrant and Chief Executive Officer of U.S.
Trust Hedge Fund Management, Inc. ("the Adviser"). From 2000 to 2003, Mr.
Boggess served as Co-Director of Research at CTC where he shared responsibility
for sourcing, due diligence, portfolio construction and monitoring hedge fund
managers for inclusion in the Registrant and for CTC advisory clients. Mr.
Boggess is also the Chairman of the Education Committee of the Greenwich
Roundtable, a non-profit organization focused on education for investors in
hedge funds and private equity. From 1996 to 2000, Mr. Boggess was both
Principal and the senior hedge fund research professional at Winston Partners, a
McLean, VA based alternative investment management firm with three multi-manager
hedge fund of funds products.
(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 Member - As of March 31, 2008:
Registered Investment Pooled Vehicles Other Accounts
Companies Managed Managed Managed
- --------------------- ----------------------- -----------------------
Total Total Total
Number Assets Number Assets Number Assets
------ ------------ ------ -------------- ------ --------------
1 $103,741,069 23 $1,349,622,215 0 N/A
Registered Investment Pooled Vehicles Other Accounts
Companies Managed Managed Managed
- --------------------------- ------------------------ -----------------------
Total Total Total
Assets Number Assets Number Assets
Number with with with with with with
Performance Performance Performance Performance Performance Performance
- -Based Fees -Based Fees -Based Fees -Based Fees -Based Fees -Based Fees
- ----------- ------------- ----------- ------------- ----------- -----------
0 N/A 14 $1,146,871,873 0 N/A
Potential Material Conflicts of Interest
Real, potential or apparent conflicts of interest may arise should Mr. Boggess
have day-to-day portfolio management responsibilities with respect to more than
one fund. Mr. Boggess may manage other accounts with investment strategies
similar to the Registrant, including other investment companies, pooled
investment vehicles and separately managed accounts. Fees earned by the Adviser
may vary among these accounts and Mr. Boggess may personally invest in these
accounts. These factors could create conflicts of interest because Mr. Boggess
may have incentives to favor certain accounts over others, resulting in other
accounts outperforming the Registrant. A conflict may also exist if Mr. Boggess
identifies a limited investment opportunity that may be appropriate for more
than one account, but the Registrant is not able to take full advantage of that
opportunity due to the need to allocate that opportunity among multiple
accounts. In addition, Mr. Boggess may execute transactions for another account
that may adversely impact the value of securities held by the Registrant.
However, the Adviser believes that these risks are mitigated by the fact that
accounts with like investment strategies managed by Mr. Boggess are generally
managed in a similar fashion and the Adviser has a policy that seeks to allocate
opportunities on a fair and equitable basis.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
- - As of March 31, 2008:
Mr. Boggess' compensation consists of a combination of a fixed salary and a
discretionary bonus. The discretionary bonus is not tied directly to the
performance of, or value of assets, of the Registrant or any other fund managed
by the Adviser. The amount of salary and bonus paid to Mr. Boggess is based on a
variety of factors, including, without limitation, the financial performance of
the Adviser, execution of managerial responsibilities, client interactions,
support and general teamwork.
Ownership of Fund Securities
As of March 31, 2008, Mr. Boggess does not directly own any Interests in the
Registrant.
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 that occurred during the Registrant's 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 Directional Hedge Fund of Funds Master Fund, LLC
----------------------------------------------------------
By (Signature and Title) /s/ Spencer N. Boggess
--------------------------
Spencer N. Boggess, 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 Directional Hedge Fund of Funds Master Fund, LLC
----------------------------------------------------------
By (Signature and Title) /s/ Steven L. Suss
------------------------
Steven L. Suss, Principal Financial Officer
Date June 9, 2008
------------