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<PAGE> PAGE 2
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SIGNATURE MARY JANE MALONEY
TITLE MANAGER
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<NAME> XANTHUS FUND, L.L.C.
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EXHIBIT INDEX
EXHIBIT A:
Attachment to item 77B:
Accountants report on internal control
EXHIBIT B:
Attachment to item 77O:
Transactions effected pursuant to Rule 10f-3
- ------------------------------------------------------------------
EXHIBIT A:
Report of Independent Auditors
To the Members of
Xanthus Fund, L.L.C.
In planning and performing our audit of the financial
statements of Xanthus Fund, L.L.C. for the period from May 4,
1999 (commencement of operations) to December 31, 1999, we
considered its internal control, including control activities
for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our opinion
on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on
internal control.
The management of Xanthus Fund, L.L.C. is responsible for
establishing and maintaining internal control. In fulfilling
this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of
controls. Generally, controls that are relevant to an audit
pertain to the entity's objective of preparing financial
statements for external purposes that are fairly presented in
conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, error or
fraud may occur and not be detected. Also, projection of any
evaluation of internal control to future periods is subject to
the risk that it may become inadequate because of changes in
conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of
one or more of the internal control components does not reduce
to a relatively low level the risk that misstatements caused
by error or fraud in amounts that would be material in
relation to the financial statements being audited may occur
and not be detected within a timely period by employees in the
normal course of performing their assigned functions. However,
we noted no matters involving internal control and its
operation, including controls for safeguarding securities,
that we consider to be material weaknesses as defined above at
December 31, 1999.
This report is intended solely for the information and use of
management, the Board of Managers of Xanthus Fund, L.L.C., and
the Securities and Exchange Commission and is not intended to
be and should not be used by anyone other than these specified
parties.
ERNST & YOUNG LLP
February 11, 2000
EXHIBIT B:
Xanthus Fund, L.L.C.
For the twelve month period ended December 31, 1999, Xanthus
Fund, L.L.C. ( the "Fund" ) engaged in several transactions that
involved the purchase of securities during the existence of an
underwriting or selling syndicate in which CIBC World Markets
Corp., an affiliated person of the Fund, participated as an
underwriter. The Fund did not purchase securities from CIBC
World Markets Corp., or any of its affiliates, in any of such
transactions.
The members of the Board of Managers of the Fund (the "Managers")
(who constitute the "directors" of the Fund for the purposes of
the Investment Company Act of 1940 (the "1940 Act")), including a
majority of the Managers who are not interested persons of the
Fund, have adopted Rule 10f-3 procedures, pursuant to which such
transactions may be effected by the Fund. At their regular
quarterly meetings, the Board of Managers reviewed such
transactions and determined that each of the transactions met the
requirements of Rule 10f-3 under the 1940 Act, with the exception
of the purchase of NorthPoint Communications Group, Inc. on May
5, 1999. This issuer did not meet the requirement of being in
continuous operation for three years or more. This security was
sold by the Fund on May 10, 1999 resulting in a short-term
capital gain of $ 16,750. Details of the transactions have been
attached as an exhibit.
SCHEDULE B
RULE 10f-3 REPORT
A. INFORMATION REGARDING THE OFFERING AND TRANSACTION
Date of Purchase: 05/05/99
Name of Issuer/Issue: Goldman Sachs / Northpoint
Communications Group
Principal Amount of Offering: $15 million
Price/Spread: 24
Amount Purchased by the Fund: 500 shares
B. COMPLIANCE CHECKLIST
Indicate whether the following conditions were met in connection
with the purchase of the security described in Section A above:
1. Y Securities are (i) part of an issue
registered under the Securities Act of 1933 that is
being offered to the public, (ii) Eligible Municipal
Securities, (iii) sold in an Eligible Foreign
Offering, or (iv) sold in an Eligible Rule 144A
Offering.
2. Y The purchase for the Fund was made prior to
the end of the first full business day on which any
sales are made, and, if the securities are offered for
subscription upon exercise of rights, on or before the
fourth day preceding the day on which the rights
offering terminates.
3. Y The underwriting was a firm commitment
underwriting.
4. Y The commission, spread or profit received or to be
received by the principal underwriters was fair and
reasonable as compared to the commission, spread or
profit received by other principal underwriters in
connection with underwritings of similar securities
during a comparable period of time.
5. No Except for Eligible Municipal Securities, the
issuer has been in continuous operation for not less
than 3 years, including the operations of any
predecessors.
6. Y The amount of securities of any class purchased by
the Fund, alone or together within one or more
investment companies to which the Adviser serves as
investment adviser, (i) for all offerings other than
Eligible Rule 144A Offerings, does not exceed 25% of
the principal amount of the offering of such class, and
(ii) for Eligible Rule 144A Offerings, does not exceed
25% of the total principal amount of the offering of
such class sold to qualified institutional buyers, plus
the principal amount of the offering in any concurrent
public offering.
7. Y The securities were not purchased directly or
indirectly from: (a) an officer, director, Manager,
investment adviser or employee of the Fund or (b) a
person of which any of the persons noted in (a) is an
affiliated person.
8. Y If securities were purchased from a syndicate
manager, the purchase was not part of a group sale or
otherwise allocated to the account of any of the
persons specified in 7 above.
07/07/99
Name: Takis Sparaggis Date
Title: Portfolio Manager
SCHEDULE B
RULE 10f-3 REPORT
A. INFORMATION REGARDING THE OFFERING AND TRANSACTION
Date of Purchase: 05/25/99
Name of Issuer/Issue: Goldman Sachs / Merrill Lynch / Barnes &
Noble.com
Principal Amount of Offering: $25 million
Price/Spread: 18
Amount Purchased by the Fund: 500 shares
B. COMPLIANCE CHECKLIST
Indicate whether the following conditions were met in connection
with the purchase of the security described in Section A above:
1. Y Securities are (i) part of an issue
registered under the Securities Act of 1933 that is
being offered to the public, (ii) Eligible Municipal
Securities, (iii) sold in an Eligible Foreign
Offering, or (iv) sold in an Eligible Rule 144A
Offering.
2. Y The purchase for the Fund was made prior to
the end of the first full business day on which any
sales are made, and, if the securities are offered for
subscription upon exercise of rights, on or before the
fourth day preceding the day on which the rights
offering terminates.
3. Y The underwriting was a firm commitment
underwriting.
4. Y The commission, spread or profit received or to be
received by the principal underwriters was fair and
reasonable as compared to the commission, spread or
profit received by other principal underwriters in
connection with underwritings of similar securities
during a comparable period of time.
5. Y Except for Eligible Municipal Securities, the
issuer has been in continuous operation for not less
than 3 years, including the operations of any
predecessors.
6. Y The amount of securities of any class purchased by
the Fund, alone or together within one or more
investment companies to which the Adviser serves as
investment adviser, (i) for all offerings other than
Eligible Rule 144A Offerings, does not exceed 25% of
the principal amount of the offering of such class, and
(ii) for Eligible Rule 144A Offerings, does not exceed
25% of the total principal amount of the offering of
such class sold to qualified institutional buyers, plus
the principal amount of the offering in any concurrent
public offering.
7. Y The securities were not purchased directly or
indirectly from: (a) an officer, director, Manager,
investment adviser or employee of the Fund or (b) a
person of which any of the persons noted in (a) is an
affiliated person.
8. Y If securities were purchased from a syndicate
manager, the purchase was not part of a group sale or
otherwise allocated to the account of any of the
persons specified in 7 above.
07/07/99
Name: Takis Sparaggis Date
Title: Portfolio Manager
SCHEDULE B
RULE 10f-3 REPORT
A. INFORMATION REGARDING THE OFFERING AND TRANSACTION
Date of Purchase: 09/24/99
Name of Issuer/Issue: Lehman Brothers/ Alteon Websystems Inc.
Principal Amount of Offering: $76 million
Price/Spread: 9/1.33
Amount Purchased by the Fund: 1000 shares
B. COMPLIANCE CHECKLIST
Indicate whether the following conditions were met in connection
with the purchase of the security described in Section A above:
1. Y Securities are (i) part of an issue
registered under the Securities Act of 1933 that is
being offered to the public, (ii) Eligible Municipal
Securities, (iii) sold in an Eligible Foreign
Offering, or (iv) sold in an Eligible Rule 144A
Offering.
2. Y The purchase for the Fund was made prior to
the end of the first full business day on which any
sales are made, and, if the securities are offered for
subscription upon exercise of rights, on or before the
fourth day preceding the day on which the rights
offering terminates.
3. Y The underwriting was a firm commitment
underwriting.
4. Y The commission, spread or profit received or to be
received by the principal underwriters was fair and
reasonable as compared to the commission, spread or
profit received by other principal underwriters in
connection with underwritings of similar securities
during a comparable period of time.
5. Y Except for Eligible Municipal Securities, the
issuer has been in continuous operation for not less
than 3 years, including the operations of any
predecessors.
6. Y The amount of securities of any class purchased by
the Fund, alone or together within one or more
investment companies to which the Adviser serves as
investment adviser, (i) for all offerings other than
Eligible Rule 144A Offerings, does not exceed 25% of
the principal amount of the offering of such class, and
(ii) for Eligible Rule 144A Offerings, does not exceed
25% of the total principal amount of the offering of
such class sold to qualified institutional buyers, plus
the principal amount of the offering in any concurrent
public offering.
7. Y The securities were not purchased directly or
indirectly from: (a) an officer, director, Manager,
investment adviser or employee of the Fund or (b) a
person of which any of the persons noted in (a) is an
affiliated person.
8. Y If securities were purchased from a syndicate
manager, the purchase was not part of a group sale or
otherwise allocated to the account of any of the
persons specified in 7 above.
10/19/99
Name: Greg D Jakubousky Date
Title: Head Trader
Eligible Municipal Securities means "municipal securities,"
as defined in Section 3(a)(29) of the Exchange
Act, that have received an investment grade rating from at least
one NRSRO; provided, that if the issuer of the
municipal securities, or the entity supplying the revenues or
other payments from which the issue is to be paid, has
been in continuous operation for less than three years, including
the operation of any predecessors, the securities
shall have received one of the three highest ratings from an
NRSRO.
Eligible Municipal Securities means "municipal securities,"
as defined in Section 3(a)(29) of the Exchange
Act, that have received an investment grade rating from at least
one NRSRO; provided, that if the issuer of the
municipal securities, or the entity supplying the revenues or
other payments from which the issue is to be paid, has
been in continuous operation for less than three years, including
the operation of any predecessors, the securities
shall have received one of the three highest ratings from an
NRSRO.
Eligible Municipal Securities means "municipal securities,"
as defined in Section 3(a)(29) of the Exchange
Act, that have received an investment grade rating from at least
one NRSRO; provided, that if the issuer of the
municipal securities, or the entity supplying the revenues or
other payments from which the issue is to be paid, has
been in continuous operation for less than three years, including
the operation of any predecessors, the securities
shall have received one of the three highest ratings from an
NRSRO.
