<PAGE> 1
As filed with the Securities and Exchange Commission on July 2, 1999
Investment Company Act File No. 811-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. _______________
[ ] Post-Effective Amendment No. ______________
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[ ] Amendment No. _____
---------------------
WHISTLER FUND, L.L.C.
(Exact name of Registrant as specified in Charter)
One World Financial Center
31st Floor
200 Liberty Street
New York, New York 10281
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (212) 667-4225
---------------------
c/o HOWARD M. SINGER
Managing Director
CIBC World Markets Corp.
One World Financial Center
31st Floor
200 Liberty Street
New York, New York 10281
(Name and address of agent for service)
Copy to:
KENNETH S. GERSTEIN, ESQ.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
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This Registration Statement has been filed by Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended. Interests in the
Registrant are not being registered under the Securities Act of 1933, as
amended (the "1933 Act"), and will be issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in Registrant may only be made by
individuals or entities which are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
interests in Registrant.
<PAGE> 2
FORM N-2
WHISTLER FUND, L.L.C.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
----------- ------- ------------------
<S> <C> <C>
1. Outside Front Cover Outside Front Cover of Confidential
Memorandum
2. Inside Front and Outside Back Outside Front Cover of Confidential
Cover Page Memorandum
3. Fee Table and Synopsis Summary of Terms; Fees and Expenses;
Capital Accounts and Allocations -
Incentive Allocation
4. Financial Highlights Not Applicable
5. Plan of Distribution Not Applicable
6. Selling Shareholders Not Applicable
7. Use of Proceeds Not Applicable
8. General Description of the Summary of Terms; The Company; Structure;
Registrant Investment Program; Types of Investments
and Related Risk Factors; Additional Risk
Factors
9. Management Summary of Terms; The Company; Board of
Managers; The Adviser and CIBC WM;
Brokerage; Fees and Expenses; Capital
Accounts and Allocations - Incentive
Allocation; Additional Information and
Summary of Limited Liability Company
Agreement - Custodian
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
----------- ------- ------------------
<S> <C> <C>
10. Capital Stock, Long-Term Debt, Summary of Terms; Voting; Capital Accounts
and Other Securities and Allocations; Subscription for
Interests; Tax Aspects; Additional
Information and Summary of Limited
Liability Company Agreement
11. Defaults and Arrears on Senior Not Applicable
Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of the Not Applicable
Statement of Additional
Information
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION STATEMENT OF ADDITIONAL INFORMATION
----------- ------- CAPTION
-------
<S> <C> <C>
14. Cover Page Not Applicable
15. Table of Contents Not Applicable
16. General Information and Not Applicable
History
17. Investment Objective and Summary of Terms; Investment Program; Types
Policies of Investments and Related Risk Factors;
Additional Risk Factors; Brokerage
18. Management Summary of Terms; Board of Managers
19. Control Persons and Principal Board of Managers
Holders of Securities
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION STATEMENT OF ADDITIONAL INFORMATION
----------- ------- CAPTION
-------
<S> <C> <C>
20. Investment Advisory and Other Summary of Terms; The Adviser and CIBC WM;
Services Fees and Expenses; Capital Accounts and
Allocations - Incentive Allocations;
Additional Information and Summary of
Limited Liability Company Agreement
21. Brokerage Allocation and Other Conflicts of Interest; Brokerage
Practices
22. Tax Status Summary of Terms; Tax Aspects
23. Financial Statements As Registrant has no assets, financial
statements are omitted.
</TABLE>
4
<PAGE> 5
Copy Number: ________________
WHISTLER FUND, L.L.C.
CONFIDENTIAL MEMORANDUM
JULY 1999
CIBC OPPENHEIMER ADVISERS, L.L.C.
INVESTMENT ADVISER
ONE WORLD FINANCIAL CENTER, 31ST FLOOR
200 LIBERTY STREET
NEW YORK, NEW YORK 10281
(212) 667-4225
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY UPON THEIR OWN
EXAMINATION OF WHISTLER FUND, L.L.C. AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE LIMITED LIABILITY COMPANY INTERESTS
("INTERESTS") OF WHISTLER FUND, L.L.C. HAVE NOT BEEN REGISTERED WITH OR
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
OTHER FEDERAL OR STATE GOVERNMENTAL AGENCY OR REGULATORY AUTHORITY OR ANY
NATIONAL SECURITIES EXCHANGE. NO AGENCY, AUTHORITY OR EXCHANGE HAS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL MEMORANDUM OR THE MERITS
OF AN INVESTMENT IN THE INTERESTS OF WHISTLER FUND, L.L.C. OFFERED HEREBY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
TO ALL INVESTORS
INTERESTS ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. INTERESTS ARE NOT DEPOSITS OR
OTHER OBLIGATIONS OF, AND ARE NOT GUARANTEED BY, CANADIAN IMPERIAL BANK OF
COMMERCE OR ANY OTHER BANK. INTERESTS ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE FULL AMOUNT INVESTED.
INTERESTS IN WHISTLER FUND, L.L.C. WHICH ARE DESCRIBED IN THIS
CONFIDENTIAL MEMORANDUM, HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
OFFERING CONTEMPLATED BY THIS CONFIDENTIAL MEMORANDUM WILL BE MADE IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, FOR OFFERS AND SALES OF SECURITIES WHICH
DO NOT INVOLVE ANY PUBLIC OFFERING, AND ANALOGOUS EXEMPTIONS UNDER STATE
SECURITIES LAWS.
THIS CONFIDENTIAL MEMORANDUM SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
INTERESTS IN WHISTLER FUND, L.L.C. IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS CONCERNING WHISTLER FUND, L.L.C. THAT
ARE INCONSISTENT WITH THOSE CONTAINED IN THIS CONFIDENTIAL MEMORANDUM.
PROSPECTIVE INVESTORS SHOULD NOT RELY ON ANY INFORMATION NOT CONTAINED IN
THIS CONFIDENTIAL MEMORANDUM OR THE EXHIBITS HERETO.
THIS CONFIDENTIAL MEMORANDUM IS INTENDED SOLELY FOR THE USE OF
THE PERSON TO WHOM IT HAS BEEN DELIVERED FOR THE PURPOSE OF EVALUATING A
POSSIBLE INVESTMENT BY THE RECIPIENT IN THE INTERESTS DESCRIBED HEREIN, AND
IS NOT TO BE REPRODUCED OR DISTRIBUTED TO ANY OTHER PERSONS (OTHER THAN
PROFESSIONAL ADVISERS OF THE PROSPECTIVE INVESTOR RECEIVING THIS DOCUMENT).
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS
CONFIDENTIAL MEMORANDUM AS LEGAL, TAX OR FINANCIAL ADVICE. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OR HER OWN PROFESSIONAL ADVISERS AS TO THE LEGAL,
TAX, FINANCIAL OR OTHER MATTERS RELEVANT TO THE SUITABILITY OF AN INVESTMENT
IN WHISTLER FUND, L.L.C. FOR SUCH INVESTOR.
THESE SECURITIES ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE LIMITED LIABILITY COMPANY AGREEMENT OF WHISTLER FUND,
L.L.C., THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR UP TO TWO (2) YEARS FROM THE DATE THAT A REPURCHASE REQUEST
HAS BEEN MADE BY AN INVESTOR.
<PAGE> 7
FOR GEORGIA RESIDENTS ONLY
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973,
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
<PAGE> 8
TABLE OF CONTENTS
Page
SUMMARY OF TERMS.............................................................1
THE COMPANY.................................................................15
STRUCTURE...................................................................15
INVESTMENT PROGRAM..........................................................16
TYPES OF INVESTMENTS AND RELATED RISK FACTORS...............................20
ADDITIONAL RISK FACTORS.....................................................34
BOARD OF MANAGERS...........................................................37
THE ADVISER AND CIBC WM.....................................................39
VOTING......................................................................41
CONFLICTS OF INTEREST.......................................................42
BROKERAGE...................................................................45
FEES AND EXPENSES...........................................................46
CAPITAL ACCOUNTS AND ALLOCATIONS............................................49
SUBSCRIPTION FOR INTERESTS..................................................53
REDEMPTIONS, REPURCHASES OF INTERESTS AND TRANSFERS........................55
TAX ASPECTS.................................................................59
ERISA CONSIDERATIONS........................................................73
ADDITIONAL INFORMATION AND SUMMARY OF LIMITED LIABILITY COMPANY AGREEMENT...74
APPENDIX A - LIMITED LIABILITY COMPANY AGREEMENT...........................A-1
<PAGE> 9
SUMMARY OF TERMS
The following summary is qualified entirely by the detailed
information appearing elsewhere in this Confidential Memorandum and by the
terms and conditions of the Limited Liability Company Agreement of Whistler
Fund, L.L.C. (the "Company Agreement"), each of which should be read
carefully and retained by any prospective investor.
The Company Whistler Fund, L.L.C. (the "Company") is a newly
organized Delaware limited liability company,
registered under the Investment Company Act of
1940 (the "1940 Act") as a closed-end,
non-diversified, management investment company.
The Company is a specialized investment vehicle
that may be referred to as a registered private
investment fund. The Company is similar to an
unregistered private investment fund in that (i)
interests in the Company ("Interests") will be
sold in large minimum denominations in private
placements solely to high net worth individual and
institutional investors, and thus will be
restricted as to transfer and (ii) the capital
accounts of persons who purchase Interests offered
hereby ("Members") will be subject to both
asset-based charges and performance-based
allocations in connection with the Company's
activities. Unlike a private investment fund but
like other registered investment companies,
however, the Company has registered under the 1940
Act to be able to offer its Interests without
limiting the number of investors that can
participate in its investment program.
Investment Program The Company seeks to achieve capital appreciation
while attempting to limit risk through the use of
a multi-strategy, multi-manager, diversified
investment philosophy. It pursues this objective
through investment strategies which have a low
correlation with the equity and fixed income
markets, or which, when balanced with other
strategies, lower the correlation of the Company's
total performance to the equity and fixed income
markets.
The Company will allocate its assets among a broad
group of investment managers (the "Investment
Managers"), selected based on their experience or
expertise in a particular investment strategy or
investment strategies. The assets of the Company
will be allocated by its investment adviser, CIBC
Oppenheimer Advisers, L.L.C. (the "Adviser"), by
investing in private investment funds or other
entities, or investing in
<PAGE> 10
managed accounts pursuant to investment advisory
agreements with different investment managers.
CIBC World Markets Corp. (CIBC WM"), the managing
member of the Adviser, will rely on its Hedge Fund
Due Diligence Committee to oversee the Adviser's
investment decision making on behalf of the
Company. The Committee has chosen Kenneth Stemme,
an Executive Director of CIBC WM, as the Committee
member primarily responsible for the day-to-day
management of the Company's portfolio, subject to
such policies as may be adopted by the Board of
Managers. Investment Managers will be selected on
the basis of various criteria, generally
including, among other things, an analysis of:
the Investment Manager's performance during
various time periods and market cycles; the
Investment Manager's reputation, experience and
training; its articulation of, and adherence to,
its investment philosophy; the presence and deemed
effectiveness of risk management discipline;
on-site interviews of the management team; the
quality and stability of the Investment Manager's
organization, including internal and external
professional staff; and whether the Investment
Manager has a substantial personal investment in
the investment program.
The Investment Managers generally conduct their
investment programs through unregistered
investment funds, which have investors other than
the Company, and in other registered investment
companies (collectively, "Investment Funds"). The
Company currently intends to invest its assets
primarily in Investment Funds. It also may invest
its assets directly pursuant to investment
advisory agreements, granting the Investment
Managers discretionary investment authority on a
managed account basis with respect to a portion of
the Company's assets. In addition, to facilitate
the efficient investment of the Company's assets,
separate investment vehicles may be created by the
Company for one or more of the Investment
Managers. Generally, with respect to any such
vehicle, an Investment Manager will serve as
general partner and the Company will be the sole
limited partner. (Investment Managers for which
such an investment vehicle is formed and
Investment Managers who manage assets directly for
the Company on a managed account basis are
collectively referred to as "Subadvisers".) No
more than 10% of the Company's assets will be
allocated to any Investment Fund that is advised
by a Subadviser and the investment in any
Investment Fund
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<PAGE> 11
that is not advised by a Subadviser will be
limited to less than 5% of the Investment Fund's
voting securities. However, to permit it to
invest more of its assets in Investment Funds
deemed attractive by the Adviser, the Company may
purchase non-voting securities of Investment Funds
that are not advised by a Subadviser or, as to
these Investment Funds, contractually forgo its
right to vote on any matter that requires the
approval of the investors. The Company may invest
a majority of its assets in non-voting securities
of Investment Funds. When acquiring the
non-voting securities of an Investment Fund not
managed by a Subadviser, the Company will limit
its investment to less than 25% of such Investment
Fund's outstanding equity. (See "Additional Risk
Factors--Special Risks of Multi-Manager
Structure.")
The Adviser will evaluate regularly each
Investment Manager to determine whether its
investment program is consistent with the
Company's investment objective and whether its
investment performance is satisfactory. The
Company's assets may be reallocated among
Investment Managers, existing Investment Managers
may be terminated and additional Investment
Managers selected, subject to the condition that
retention of a Subadviser will require approval of
a majority (as defined in the 1940 Act) of the
Company's outstanding voting securities, unless
the Company receives an exemption from certain
provisions of the 1940 Act. (See "Summary of
Terms--Management.")
Unregistered investment funds typically provide
greater flexibility than traditional investment
funds (e.g., registered investment companies) over
the types of securities that may be owned, the
types of trading strategies employed, and in some
cases, the amount of leverage that can be used.
Investment Managers may invest and trade in a wide
range of instruments and markets, including, but
not limited to, domestic and foreign equities and
equity-related instruments, currencies, financial
futures, and fixed income and other debt-related
instruments. In addition, Investment Managers may
sell securities short. Investment Managers are
generally not limited in the markets (either by
location or type, such as large capitalization,
small capitalization or non-U.S. markets) in which
they invest or the investment discipline that they
may employ (such as value or growth or bottom-up
or top-down analysis).
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<PAGE> 12
Investment Managers may use various investment
techniques for hedging and non-hedging purposes.
For example, an Investment Manager may sell
securities short and purchase and sell options and
futures contracts and engage in other derivative
transactions, subject to certain limitations
described elsewhere in this Confidential
Memorandum. The use of these techniques will be
an integral part of their investment programs, and
involves certain risks to the Company. Investment
Managers may use leverage, which also entails
risk. (See "Types of Investments and Related Risk
Factors.") For purposes of the Company's
investment restrictions and certain investment
limitations under the 1940 Act, the Company will
look through any Investment Funds managed by the
Subadvisers to their underlying securities.
Potential Benefits of
Investing in the Company An investment in the Company will enable investors
to invest with a group of Investment Managers
whose services generally are not available to the
investing public, whose investment funds may be
closed from time to time to new investors or who
otherwise may place stringent restrictions on the
number and type of persons whose money they will
manage. An investment in the Company also will
enable investors to invest with a cross-section of
Investment Managers without incurring the high
minimum investment requirements that Investment
Managers typically would impose on investors.
In addition to the potential benefits of the
Investment Managers' individual investment
strategies, the Company will offer the potential
benefit of diversification by allocating its
assets among a carefully selected group of
Investment Managers. The Adviser expects that by
investing through multiple Investment Managers,
the Company may reduce the volatility inherent in
a direct investment with a single Investment
Manager.
Fees and Expenses CIBC WM provides certain management and
administrative services to the Company, including,
among other things, providing office space and
other support services to the Company, maintaining
and preserving certain records of the Company,
preparing and filing various materials with state
and Federal regulators, providing legal and
regulatory advice in connection with
administrative functions and reviewing and
arranging for payment of the Company's expenses.
In consideration for these services, the Company
will pay CIBC
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<PAGE> 13
WM a monthly management fee of 0.08333% (1% on an
annualized basis) of the Company's net assets (the
"CIBC WM Fee"). The CIBC WM Fee will be an
expense paid to CIBC WM out of the Company's
assets, and will be reflected in each Member's
capital account (including the Adviser's capital
account but excluding the Special Advisory Account
(defined below)) as a reduction to net profits or
an increase to net losses credited to or debited
against each Member's capital account. (See
"Capital Accounts and Allocations.")
The Company will bear all expenses incurred in
connection with its operations, including, but not
limited to, the following: all costs and expenses
related to portfolio transactions and positions
for the Company's account, the establishment of
any Investment Funds managed by the Subadvisers,
and with the selection of Investment Managers,
including due diligence and travel-related
expenses; legal fees; accounting fees; costs of
insurance; organizational and registration
expenses; certain offering expenses; expenses of
meetings of the Board of Managers and Members; and
fees payable to PFPC, Inc. for providing certain
administration, accounting and investor services
to the Company. (See "Fees and Expenses.") These
expenses will not be charged to the Special
Advisory Account (defined below).
Allocation of Profit and Loss The net profits or net losses of the
Company (including, without limitation, net
realized gain or loss and the net change in
unrealized appreciation or depreciation of
securities positions) will be credited to or
debited against the capital accounts of Members at
the end of each fiscal period in accordance with
their respective investment percentages for such
period. Each Member's investment percentage will
be determined by dividing as of the start of a
fiscal period the balance of the Member's capital
account by the sum of the balances of the capital
accounts of all Members. (See "Capital Accounts
and Allocations - Allocation of Net Profits and
Net Losses.")
Incentive Allocation Generally at the end of each fiscal year, an
incentive allocation of 10% of the net profits, if
any, that have been credited to the capital
account of a Member during the period (an
"Incentive Allocation") will be debited from the
Member's capital account (including the Adviser's
capital account) and credited to the Special
Advisory Account (defined below). The Incentive
Allocation will be charged to a Member only to the
extent that
-5-
<PAGE> 14
cumulative net profits with respect to the Member
through the close of the current period exceeds
the highest level of cumulative net profits with
respect to the Member through the close of any
prior period. For this purpose, cumulative net
profits will be adjusted to reflect any
repurchases of a Member's Interests. The Adviser
may withdraw any Incentive Allocation credited to
its Special Advisory Account (defined below) by
the last business day of any month following the
date on which the Incentive Allocation was made.
(See "Capital Accounts and Allocations - Incentive
Allocation.")
Sales Charge Investors purchasing Interests may be charged a
sales commission of up to 3% of the purchase price
of the Interests. (See "Subscription for
Interests.")
Risk Factors The Company's investment program is speculative
and entails substantial risks. There can be no
assurance that the Company's investment objective
will be achieved. The Company's performance
depends upon the performance of the Investment
Managers, and the Adviser's ability to select,
allocate and reallocate effectively the Company's
assets among them. Each Investment Manager's use
of leverage, short sales and derivative
transactions, in certain circumstances, can result
in significant losses. (See "Types of Investments
and Related Risk Factors.")
As a non-diversified investment company, there are
no percentage limitations imposed by the 1940 Act
on the portion of the Company's assets that may be
invested in the securities of any one issuer. As
a result, the Company's investment portfolio may
be subject to greater risk and volatility than if
investments had been made in the securities of a
broader range of issuers.
Each Investment Manager generally will charge the
Company an asset-based fee, and some or all of the
Investment Managers will receive performance-based
allocations. The asset-based fees of the
Investment Managers are generally expected to
range from 1% to 2% and the performance-based
allocations of the Investment Managers are
generally expected to range from 15% to 25% of net
profits.
The performance-based allocation received by an
Investment Manager may create an incentive for the
Investment Manager to make investments that are
riskier or more speculative than
-6-
<PAGE> 15
those that might have been made in the absence of
the performance-based allocation. In addition,
because a performance-based allocation will be
calculated on a basis that includes unrealized
appreciation of an Investment Fund's assets, the
performance-based allocation may be greater than
if it were based solely on realized gains.
In addition, as described above, the Adviser will
charge the Company an asset-based fee and will be
entitled to receive a performance-based
allocation, which gives rise to similar risks.
There are special tax risks associated with an
investment in the Company. (See "Additional Risk
Factors - Distributions to Members and Payment of
Tax Liability.")
The Company is a newly formed entity and has no
operating history upon which investors can
evaluate its performance. However, personnel of
CIBC WM, which, as a member of the Adviser is
responsible for managing the Company's investment
portfolio, have substantial experience in managing
investments, and private investment companies,
and, as described above, the Company intends to
invest primarily with Investment Managers which
have established track records.
Interests in the Company will not be traded on any
securities exchange or other market and are
subject to substantial restrictions on transfer.
Although the Company may offer to repurchase
Interests from time to time, a Member may not be
able to liquidate its Interest for up to two
years. (See "Types of Investments and Related
Risk Factors," "Tax Aspects," and "Redemptions,
Repurchases of Interests and Transfers.")
INVESTING IN A MULTI-MANAGER FUND, SUCH AS THE
COMPANY, INVOLVES ADDITIONAL SPECIAL RISKS,
INCLUDING THE FOLLOWING:
The Investment Funds will not be registered as
investment companies under the 1940 Act and,
therefore, the Company will not be able to avail
itself of the protections of the 1940 Act with
respect to the Investment Funds. Although the
Adviser will receive detailed information from
each Investment Manager regarding its historical
performance and investment strategy, in most cases
the Adviser has little or no means of
independently verifying this information. An
Investment Manager may use proprietary investment
strategies that are not
-7-
<PAGE> 16
fully disclosed to the Adviser, which may involve
risks under some market conditions that are not
anticipated by the Adviser.
An investor who meets the conditions imposed by
the Investment Managers, including investment
minimums that may be considerably higher than
$150,000, could invest directly with the
Investment Managers. By investing in the
Investment Funds indirectly through the Company,
the investor bears asset-based fees and
performance-based allocations at the Company level
and the Investment Fund level. In addition, the
investor bears a proportionate share of the fees
and expenses of the Company (including operating
costs, distribution expenses and administrative
fees) and, indirectly, similar expenses of the
Investment Funds.
Each Investment Manager will receive any
performance-based allocations to which it is
entitled irrespective of the performance of the
other Investment Managers and the Company
generally. Accordingly, an Investment Manager
with positive performance may receive compensation
from the Company, and thus indirectly from
investors, even if the Company's overall returns
are negative.
Investment decisions of the Investment Funds are
made by the Investment Managers independently of
each other. As a result, at any particular time,
one Investment Fund may be purchasing shares of an
issuer whose shares are being sold by another
Investment Fund. Consequently, the Company could
incur indirectly certain transaction costs without
accomplishing any net investment result.
Since the Company may make additional investments
or withdrawals in the Investment Funds only at
certain times pursuant to limitations set forth in
the governing documents of the Investment Funds,
the Company from time to time may have to invest
some of its assets temporarily in money market
securities.
To the extent the Company purchases non-voting
securities of, or contractually forgoes the right
to vote in respect of, an Investment Fund, it will
not be able to vote on matters that require the
approval of the investors of the Investment Fund,
including a matter that could adversely affect the
Company's investment in it.
-8-
<PAGE> 17
Investment Funds may be permitted to redeem their
Interests in-kind. Thus, upon the Company's
withdrawal of all or a portion of its interest in
an Investment Fund, the Company may receive
securities that are illiquid or difficult to
value. In such circumstances, the Adviser would
seek to dispose of these securities in a manner
that is in the best interests of the Company.
Management The Board of Managers of the Company (the "Board
of Managers") has overall responsibility for the
management and supervision of the operations of
the Company. None of the Managers is an
"interested person," as defined by the 1940 Act,
of CIBC WM or the Adviser. The initial Managers
serving on the Board of Managers have been elected
by the organizational Member of the Company (who
is not affiliated with CIBC WM). By signing the
Company Agreement, each Member will be deemed to
have voted for the election of each of the initial
Managers. Any vacancy on the Board of Managers
may be filled by the remaining Managers, or, if
required by the 1940 Act, by a vote of a plurality
of the outstanding voting securities of the
Company (other than any such securities held by
CIBC WM or any of its affiliates) at a meeting of
the Members at which a quorum of Members is
present in person or by proxy. (See "Board of
Managers" and "Voting.") The Managers also serve
as managers of Wynstone Fund, L.L.C. and of
Xanthus Fund, L.L.C. ("Xanthus"), each a Delaware
limited liability company, both of which, like the
Company, are registered under the 1940 Act as
closed-end, non-diversified, management investment
companies. The Adviser serves as the investment
adviser of Wynstone and Xanthus.
Adviser As noted above, CIBC Oppenheimer Advisers, L.L.C.
(the "Adviser"), a Delaware limited liability
company, serves as the investment adviser of the
Company. CIBC WM, the managing member of the
Adviser, will rely on its Hedge Fund Due Diligence
Committee to oversee the Adviser's investment
decision making on behalf of the Company. The
Committee has chosen Kenneth Stemme, an Executive
Director of CIBC WM as the Committee member
primarily responsible for the Company's day-to-day
portfolio management, subject to the policies of
the Board of Managers.
The Adviser holds a non-voting Special Advisory
Member interest (the "Special Advisory Account")
in the Company solely for the purpose of receiving
a special performance-based
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<PAGE> 18
allocation with respect to each Member, based upon
the Company's net profits. (See "Capital Accounts
and Allocations - Incentive Allocation.") At the
initial closing, the Adviser or an affiliate of
the Adviser will make a capital contribution to
the Company as a Member in the approximate amount
of at least 1% of the aggregate outstanding
capital account balances of all Members. (See
"Additional Information and Summary of Limited
Liability Company Agreement - Member Interests.")
The Company has entered into an investment
advisory agreement (the "Investment Advisory
Agreement") with the Adviser which is effective
for an initial term expiring July 14, 2001, and
may be continued in effect from year to year
thereafter if the continuance is approved annually
by the Board of Managers. The Board of Managers
may terminate the Investment Advisory Agreement on
60 days' prior written notice to the Adviser.
The Adviser serves as the investment adviser of
and holds a non-voting Special Advisory Member
interest in Wynstone. An affiliate of the Adviser
also has made a capital contribution to Wynstone
as a member which currently exceeds 25% of the
aggregate outstanding balances of all members of
Wynstone. As long as the Adviser holds more than
4.9% of the aggregate outstanding balances of all
members of Wynstone, the Adviser may be deemed to
"control" Wynstone for purposes of the Bank
Holding Company Act of 1956 (the "BHC Act"), to
which the Adviser, CIBC WM and affiliates of CIBC
WM are subject. Because the Managers also serve
as managers of Wynstone, the Adviser may also be
deemed to "control" the Company for purposes of
the BHC Act. As a result, certain activities of
the Company may be restricted by the BHC Act and
rules and regulations thereunder, as described
elsewhere in this Confidential Memorandum.
CIBC WM, the managing member of the Adviser,
directly or through affiliates (including the
Adviser), provides investment advisory services to
registered investment companies, private
investment companies and individual client
accounts.
Conflicts of Interest The investment activities of the Adviser, the
Investment Managers and their affiliates for their
own accounts and other accounts they manage may
give rise to conflicts of interest which may
disadvantage the Company. In addition, the
Adviser, CIBC WM and affiliates of CIBC WM are
subject to
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<PAGE> 19
regulation under the BHC Act and to restrictions
imposed by the Board of Governors of the Federal
Reserve System on their transactions and
relationships with the Company and these
restrictions may affect the investments made by
the Company. (See "Conflicts of Interest.")
Placement Agent CIBC WM acts as the non-exclusive placement agent
for the Company, without special compensation from
the Company, and will bear its own costs
associated with its activities as placement
agent. The Board of Managers may terminate CIBC
WM as placement agent upon 30 days' prior written
notice. (See "Conflicts Of Interest - CIBC WM.")
CIBC WM (subject to the approval of the Board of
Managers) may delegate any of its duties,
functions or powers as placement agent to
unaffiliated third-parties to act as sub-placement
agents for the Company. The Company will not bear
any costs associated with any such arrangements.
Subscription for Interests The minimum initial investment in the Company is
$150,000 and the minimum additional investment in
the Company is $25,000, subject to the discretion
of the Board of Managers to accept initial and
additional investments in lesser amounts. In
connection with initial and additional
investments, an investor's broker may impose a
sales charge of up to 3% of the purchase price.
During any period in which the Adviser is deemed
to control the Company for purposes of the BHC
Act, the Board of Managers may accept initial and
additional subscriptions for Interests by eligible
investors as of the first day of each calendar
quarter. At all other times, the Board of
Managers may accept initial and additional
subscriptions for Interests by eligible investors
as of the first day of each month. All
subscriptions are subject to the receipt of
cleared funds on or before the acceptance date and
require the investor to submit a completed
subscription document before the acceptance date.
The Board of Managers reserves the right to reject
any subscription for Interests in the Company and
may, in its sole discretion, suspend subscriptions
for Interests at any time. Interests may not be
purchased by nonresident aliens, foreign
corporations, foreign partnerships, foreign trusts
or foreign estates, all as defined in the Internal
Revenue Code of 1986, as amended (the "Code"). In
addition, because the Company may generate
"unrelated business taxable income" with respect
to tax-exempt investors, charitable remainder
trusts may not want to purchase Interests.
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<PAGE> 20
Initial Closing Date The initial closing date for subscriptions of
Interests is October 1, 1999. The Company, in its
sole discretion, may postpone the closing date for
up to 90 days.
Transfer Restrictions Interests in the Company held by Members may be
transferred only (i) by operation of law pursuant
to the death, bankruptcy, insolvency or
dissolution of a Member or (ii) under certain
limited circumstances, with the consent of the
Management Board (which may be withheld in its
sole and absolute discretion and is expected to be
granted, if at all, only under extenuating
circumstances). The Management Board generally
will not consent to a transfer unless the
following conditions, among others, are met: (i)
the transferring Member has been a Member for at
least six months; (ii) the proposed transfer is to
be made on the effective date of an offer by the
Company to repurchase Interests; and (iii) the
transfer does not constitute a change in
beneficial ownership. The foregoing permitted
transferees will not be allowed to become
substituted Members without the consent of the
Board of Managers, which may be withheld in its
sole and absolute discretion. A Member who
transfers an Interest may be charged reasonable
expenses, including attorneys' and accountants'
fees, incurred by the Company in connection with
the transfer. (See "Redemptions, Repurchases of
Interests and Transfers - Transfers of Interests.")
Withdrawals and Repurchases No Member will have the right to require
the Company to re-
of Interests by the Company deem its Interest. The Company may from
time to time offer to repurchase Interests
pursuant to written tenders by Members.
Repurchases will be made at such times and on such
terms as may be determined by the Board of
Managers, in its complete and exclusive
discretion. In determining whether the Company
should repurchase Interests or portions thereof
from Members pursuant to written tenders, the
Board of Managers will consider the recommendation
of the Adviser. The Adviser expects that it will
recommend to the Board of Managers that the
Company offer to repurchase Interests from Members
at the end of 2000. Thereafter, the Adviser
expects that generally it will recommend to the
Board of Managers that the Company offer to
repurchase Interests from Members at least
annually, effective at the end of the calendar
year. The Board of Managers will also consider
the following factors, among others, in making
this determination: (i) whether any Members have
requested to tender Interests or portions thereof
to the Company; (ii) the liquidity of the
Company's assets; (iii) the
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<PAGE> 21
investment plans and working capital requirements
of the Company; (iv) the relative economies of
scale with respect to the size of the Company; (v)
the history of the Company in repurchasing
Interests or portions thereof; (vi) the economic
condition of the securities markets; and (vii) the
anticipated tax consequences of any proposed
repurchases of Interests or portions thereof.
(See "Redemptions, Repurchases of Interests and
Transfers - No Right of Redemption" and "-
Repurchases of Interests.")
The Company Agreement provides that the Company
shall be dissolved if the Interest of any Member
that has submitted a written request, in
accordance with the terms of the Company
Agreement, to tender its entire Interest for
repurchase by the Company has not been repurchased
within a period of two years after the request.
Summary of Taxation Counsel to the Company will render an opinion that
the Company will be treated as a partnership and
not as an association taxable as a corporation for
Federal income tax purposes. Counsel to the
Company also will render its opinion that, under a
"facts and circumstances" test set forth in
regulations adopted by the U.S. Treasury
Department, the Company will not be treated as a
"publicly traded partnership" taxable as a
corporation. Accordingly, the Company should not
be subject to Federal income tax, and each Member
will be required to report on its own annual tax
return such Member's distributive share of the
Company's taxable income or loss.
If it were determined that the Company should be
treated as an association or a publicly traded
partnership taxable as a corporation (as a result
of a successful challenge to the opinions rendered
by counsel to the Company or otherwise), the
taxable income of the Company would be subject to
corporate income tax and any distributions of
profits from the Company would be treated as
dividends. (See "Tax Aspects.")
ERISA Plans and Other Investors subject to the Employee Retirement
Income Security
Tax-Exempt Entities Act of 1974, as amended ("ERISA"), and other
tax-exempt entities (each a "tax-exempt" entity)
may purchase Interests in the Company. The
Investment Managers may utilize leverage in
connection with their trading activities.
Therefore, a tax-exempt Member may incur income
tax liability with respect to its share of the net
profits from these leveraged transactions to the
extent they are treated as giving rise to
"unrelated business
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<PAGE> 22
taxable income." The Company will provide to
tax-exempt Members such accounting information as
is available to the Company to assist Members in
reporting "unrelated business taxable income" for
income tax purposes.
Investment in the Company by tax-exempt entities
requires special consideration. Trustees or
administrators of these entities are urged to
carefully review the matters discussed in this
Confidential Memorandum.
Term The Company's term is perpetual unless the Company
is otherwise terminated under the terms of the
Company Agreement.
Reports to Members The Company will furnish to Members as soon as
practicable after the end of each taxable year
such information as is necessary for them to
complete Federal and state income tax or
information returns, along with any other tax
information required by law. However, an
Investment Manager's delay in providing this
information could delay the Company's preparation
of tax information for investors, which might
require Members to seek extensions on the time to
file their tax returns, or could delay the
preparation of the Company's annual report. (See
"Additional Risk Factors - Special Risks of
Multi-Manager Structure.") The Company
anticipates sending Members an unaudited
semi-annual and an audited annual report within 60
days after the close of the fiscal period for
which the report is being made. Members also will
be sent quarterly reports regarding the Company's
operations during each quarter.
Fiscal Year For accounting purposes, the 12-month period
ending March 31. The first fiscal year of the
Company will commence on the date of the initial
closing and will end on March 31, 2000. For tax
purposes, the 12-month period ending December 31
of each year will be the taxable year of the
Company.
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<PAGE> 23
&f1X&f3X"
-99-
&f1X&f3X"
-15-
THE COMPANY
Whistler Fund, L.L.C. (the "Company") is registered under the
Investment Company Act of 1940 (the "1940 Act") as a non-diversified,
closed-end management investment company. The Company was organized as a
limited liability company under the laws of Delaware on July 1, 1999 and has
no operating history. The Company's principal office is located at One World
Financial Center, 31st Floor, 200 Liberty Street, New York, New York 10281,
and its telephone number is (212) 667-4225. Investment advisory services are
provided to the Company by CIBC Oppenheimer Advisers, L.L.C. (the "Adviser"),
a Delaware limited liability company, pursuant to an investment advisory
agreement. Responsibility for the overall management and supervision of the
operations of the Company is vested in the individuals who serve as the Board
of Managers of the Company (the " Board of Managers "). (See "Board of
Managers.") Investors who acquire interests in the Company ("Interests") in
the offering being made by hereby, will become members of the Company
("Members").
STRUCTURE
The Company is a specialized investment vehicle that combines
many of the features of a private investment fund with those of a closed-end
investment company. Private investment funds are unregistered, commingled
asset pools that are often aggressively managed and offered in large minimum
denominations (often over $1 million) through private placements to a limited
number of high net worth individual and institutional investors. The
investment advisers of these funds are typically compensated through
asset-based fees and performance-based allocations. Closed-end investment
companies are 1940 Act registered pools typically organized as corporations
or business trusts that usually are managed more conservatively than most
private investment funds, subject to relatively modest minimum investment
requirements (often less than $2,000) and publicly offered to a broad range
of investors. The advisers to these companies are typically compensated
through asset-based (but not performance-based) fees.
The Company is similar to private investment funds in that the
investment portfolios of the investment funds in which the Company invests
may be actively managed and Interests in the Company will be sold in
comparatively large minimum denominations ($150,000) in private placements
solely to high net worth individual and institutional investors, whose
capital accounts will be subject to both asset-based fees and
performance-based allocations. Like other closed-end investment companies,
however, the Company has registered under the 1940 Act to be able to offer
Interests without limiting the number of investors that can participate in
its investment program. This permits a larger number of investors that have
a higher tolerance for investment risk to participate in an aggressive
investment program without making the more substantial minimum capital
commitment that is required by many private investment funds.
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<PAGE> 24
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE
The Company seeks to achieve capital appreciation while
attempting to limit risk through the use of a multi-strategy, multi-manager,
diversified investment philosophy. It pursues this objective through
investment strategies which have a low correlation with the equity and fixed
income markets, or which, when balanced with other strategies, lower the
correlation of the Company's total performance to the equity and fixed income
markets.
The Company will allocate its assets among a broad group of
investment managers ("Investment Managers"), selected based on their
experience and expertise in a particular investment strategy or investment
strategies. The assets of the Company will be allocated among different
investment strategies by investing in private investment funds or other
entities or investing in managed accounts pursuant to investment advisory
agreements with different Investment Managers. Investment Managers generally
conduct their investment programs through unregistered private investment
funds, which have investors other than the Company, and in some cases,
registered investment companies ("Investment Funds"). (Investment Managers
who manage assets directly for the Company on a managed account basis are
referred to as "Subadvisers.")
INVESTMENT STRATEGY
Certain Investment Managers have shown a consistent ability to
achieve above-average results within their particular investment strategies
and investment styles. However, history shows that no one particular
investment strategy or investment style produces consistent or above-average
total return results, either on an absolute or relative basis, over all
phases of a cycle in the equity and fixed income markets. For example, there
are periods of time when fixed-income securities outperform equities and vice
versa. There are also periods of time when equities with particular
characteristics outperform other types of equities. Although these cycles
tend to repeat themselves, they do so with no regularity. While a particular
investment strategy or investment style within an investment strategy may not
achieve above-average performance over any given period within a cycle, the
blending of investment strategies and investment styles within those
strategies can be used to seek more consistent returns with a reduction of
risk and volatility.
Consistent with these concepts, the assets of the Company will be
allocated to a diverse group of Investment Managers that represent a variety
of investment strategies and styles and that have demonstrated the ability to
achieve superior investment results as compared to others using the same
strategy or style. This investment allocation strategy is intended to permit
the Company to achieve more consistent investment returns, with lower risk,
than could be achieved by investing in any one investment strategy or with
any one Investment Manager.
The Adviser is responsible for the allocation of assets to
various Investment Funds, subject to such policies as may be adopted by the
Board of Managers. It is also responsible for the selection of Subadvisers,
subject to the approval of the Board of Managers
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<PAGE> 25
and, to the extent required by the 1940 Act, by investors in the Company.
CIBC World Markets Corporation ("CIBC WM"), the managing member of the
Adviser, will rely on its Hedge Fund Due Diligence Committee to oversee the
Adviser's investment decision making on behalf of the Company. The Committee
has chosen Kenneth Stemme, an Executive Director of CIBC WM, as the Committee
member primarily responsible for the day-to-day management of the Company's
portfolio. Other than for the selection of money market investments and
mutual funds for cash management purposes, the Adviser will generally not
directly manage any of the Company's assets. (See "Investment Program.")
The strategies employed by the Investment Managers may include
but are not limited to:
1. Hedged Equities - Discretionary long and short equity investing in
securities that are deemed to be undervalued or overvalued. Market
exposure can be variable, and may range from net short to net long.
Certain Investment Managers may specialize in a particular industry,
sector or region. Investment Managers in this strategy typically
employ a low to moderate degree of leverage.
2. Relative Value Arbitrage - The simultaneous purchase and sale of
related securities to exploit pricing differentials. The portfolios of
Investment Managers using this strategy are generally neutral to
changes in both debt and equity markets. Relative value arbitrage
strategies include, but are not limited to: convertible bond
arbitrage, statistical arbitrage, fixed income arbitrage and closed-end
fund arbitrage. The types of instruments traded vary considerable
depending on the particular strategy. Moderate to substantial leverage
is used in an attempt to profit from the relatively small mispricings
between two related securities.
3. Event Driven/Risk Arbitrage - Trading in securities of companies which
are involved in mergers, acquisitions, or reorganizations. Risk
management and hedging techniques are employed to partially mitigate
the effects of transactions that fail to materialize.
4. Distressed Securities - Discretionary investing in equities, bonds or
claims of companies in or emerging from bankruptcy, or undergoing a
restructuring process. This strategy can also include investments in
nonperforming or subperforming bank loans and emerging market debt.
Investments are usually concentrated in debt instruments. Some
Investment Managers may actively participate in the restructuring of
companies in which they invest. The extent of leverage employed varies.
5. Short Selling - Selling short the stock of companies which are
perceived to be overvalued or may be subject to a downward price
movement due to fundamental factors such as fraud, overpromotion,
excess debt or cash flow problems. Investment Managers use a range of
discretionary investment methodologies, may or may not remain fully
invested and use varying degrees of leverage.
6. Opportunistic/Macro - Directional trading in markets and strategies
that are determined by the Investment Manager based upon its
fundamental view of equity, fixed income,
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<PAGE> 26
commodities or currency markets. Investment Managers typically rely on
macroeconomic, discretionary models to invest across countries,
markets, sectors and companies, and have the flexibility to invest in a
wide range of financial instruments. The use of leverage varies
considerably.
7. Equity Strategies - Generally long-only, discretionary, directional
trading in a specific market sector or region or by utilizing a
specific investment methodology.
8. Commodities - Generally fundamental, discretionary, directional trading
in commodities, futures and their derivatives.
Investment Managers have complete discretion to purchase and sell
securities and other investments for their respective Investment Funds
consistent with the relevant investment advisory agreements, partnership
agreements or other governing documents. They may invest in a wide range of
securities and other financial instruments and use a broad array of
investment techniques for hedging and non-hedging purposes. In circumstances
deemed appropriate by the relevant Investment Manager, the Investment Manager
may: (i) make substantial investments in bonds or other fixed income
securities of the United States Government and of domestic and foreign
issuers or make investments in stocks or other equity securities of domestic
and foreign issuers or make investments in stocks or other equity securities
of domestic and foreign issuers; (ii) make substantial hedged investments in
bonds or other fixed-income securities of the United States Government and of
domestic and foreign issuers or make hedged investments in stocks or other
equity securities of domestic and foreign issuers; (iii) effect transactions
in commodities and futures contracts (and, when available, options thereon);
(iv) engage in hedging in related equity, convertible and interest rate
securities; (v) engage in risk arbitrage involving the purchase of securities
of companies already in bankruptcy; (vi) invest in instruments of failing
companies or companies already in bankruptcy; (vii) engage in strategic
block investing, leveraged buy outs and acquisitions; (viii) utilize short
sales and leverage, repurchase agreements and options; and (ix) invest with
asset allocators who utilize a variety of the strategies delineated above.
Each of the above described activities entails risk. (See "Types
of Investments and Related Risk Factors--Leverage," "--Short Sales" and
"--Special Investment Instruments and Techniques.")
As noted above, the Investment Managers with which the Company
invests may use leverage. In addition, the Company may borrow funds on a
secured or unsecured basis, primarily to provide liquidity as further
described below.
The Company currently intends to invest its assets primarily in
the Investment Funds. However, the Company also may invest its assets
directly by entering into an investment advisory agreement granting an
Investment Manager discretionary investment authority to manage a portion of
the Company's assets on a managed account basis. In addition, to facilitate
the efficient investment of the Company's assets, a separate investment
vehicle may be created for an Investment Manager in which the Investment
Manager serves as general partner and the Company is the sole limited
partner. No more than 10% of the Company's assets will be allocated to any
Investment Fund that is advised by a Subadviser and investment in any
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<PAGE> 27
Investment Fund that is not advised by a Subadviser will be limited to less
than 5% of the Investment Fund's voting securities. The Company may purchase
non-voting securities of Investment Funds that are not advised by a
Subadviser or, as to these Investment Funds, contractually forgo its right to
vote on any matter that requires the approval of the investors of the
Investment Fund, to permit it to invest more of its assets in Investment
Funds deemed desirable by the Adviser. The Company may invest a majority of
its assets in such non-voting securities of Investment Funds. When acquiring
the non-voting securities of an Investment Fund not managed by a Subadviser,
however, the Company will limit its investment to less than 25% of such
Investment Fund's outstanding equity. (See "Additional Risk Factors--Special
Risks of Multi-Manager Structure.")
The Adviser will evaluate regularly each Investment Manager to
determine whether its investment program is consistent with the Company's
investment objective and whether its investment performance is satisfactory.
The Company's assets may be reallocated among the Investment Managers,
existing Investment Managers may be terminated and additional Investment
Managers selected, subject to the condition that retention of a Subadviser
requires approval of the Board of Managers and of a majority (as defined in
the 1940 Act) of the Company's outstanding voting securities, unless the
Company receives an exemption from certain provisions of the 1940 Act.
Each Investment Manager may invest, for defensive purposes or
otherwise, some or all of its assets in high quality fixed income securities
and money market instruments, or may hold cash or cash equivalents in such
amounts as the Investment Manager deems appropriate under the circumstances.
Pending allocation of the offering proceeds, and thereafter, from time to
time, the Company also may invest in these instruments. (See "Types of
Investments and Related Risk Factors--Money Market Instruments.")
Additional information about the types of investments that are
expected to be made by the Investment Managers, their investment practices
and related risk factors is provided below. Except as otherwise indicated,
the Company's investment policies and restrictions are not fundamental and
may be changed without a vote of Members. (See "Types of Investments and
Related Risk Factors--Investment Restrictions.")
THE COMPANY'S INVESTMENT PROGRAM IS SPECULATIVE AND ENTAILS
SUBSTANTIAL RISKS. THERE CAN BE NO ASSURANCE THAT THE COMPANY'S OR THE
INVESTMENT FUNDS' INVESTMENT OBJECTIVES WILL BE ACHIEVED OR THAT THEIR
INVESTMENT PROGRAMS WILL BE SUCCESSFUL. IN PARTICULAR, EACH INVESTMENT
MANAGER'S USE OF LEVERAGE, SHORT SALES AND DERIVATIVE TRANSACTIONS, AND
LIMITED DIVERSIFICATION CAN, IN CERTAIN CIRCUMSTANCES, RESULT IN SIGNIFICANT
LOSSES TO THE COMPANY. INVESTORS SHOULD CONSIDER THE COMPANY AS A SUPPLEMENT
TO AN OVERALL INVESTMENT PROGRAM AND SHOULD INVEST ONLY IF THEY ARE WILLING
TO UNDERTAKE THE RISKS INVOLVED. INVESTORS COULD LOSE SOME OR ALL OF THEIR
INVESTMENT.
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<PAGE> 28
TYPES OF INVESTMENTS AND RELATED RISK FACTORS
GENERAL
All securities investments risk the loss of capital. The value
of the Company's total net assets should be expected to fluctuate. To the
extent that the Company's portfolio (which, for this purpose, means the
aggregate securities positions held by the Investment Managers) is
concentrated in securities of a single issuer or issuers in a single
industry, the risk of any investment decision is increased. An Investment
Manager's use of leverage is likely to cause the Company's net assets to
appreciate or depreciate at a greater rate than if leverage were not used.
For purposes of the Company's investment restrictions and certain
investment limitations under the 1940 Act, the Company will look through the
Investment Funds managed by the Subadvisers, if any, to their underlying
securities.
EQUITY SECURITIES
Investment Managers' investment portfolios may include long and
short positions in common stocks, preferred stocks and convertible securities
of U.S. and foreign issuers. Investment Managers also may invest in
depository receipts relating to foreign securities. (See "Foreign
Securities" below.) Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced.
Investment Managers may invest in equity securities without
restriction as to market capitalization, such as those issued by smaller
capitalization companies, including micro cap companies. The prices of the
securities of smaller companies may be subject to more abrupt or erratic
market movements than larger, more established companies, because these
securities typically are traded in lower volume and the issuers typically are
more subject to changes in earnings and prospects. Investment Managers may
purchase securities in all available securities trading markets.
COMMON STOCKS. Common stocks are shares of a corporation or
other entity that entitle the holder to a pro rata share of the profits, if
any, of the entity without preference over any other shareholder or claim of
shareholders, after making required payments to holders of the entity's
preferred stock and other senior equity. Common stock usually carries with
it the right to vote and frequently an exclusive right to do so.
PREFERRED STOCKS. Preferred stock generally has a preference as
to dividends and upon the event of liquidation, over an issuer's common
stock, but it ranks junior to debt securities in an issuer's capital
structure. Preferred stock generally pays dividends in cash (or additional
shares of preferred stock) at a defined rate, but unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by
the issuer's board of directors. Dividends on preferred stock may be
cumulative, meaning that, in the event the issuer fails to make one or more
dividend payments on the preferred stock, no dividends may be paid on the
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<PAGE> 29
issuer's common stock until all unpaid preferred stock dividends have been
paid. Preferred stock may also be subject to optional or mandatory
redemption provisions.
CONVERTIBLE SECURITIES. Convertible securities are bonds,
debentures, notes, preferred stocks or other securities that may be converted
into or exchanged for a specified amount of common stock of the same or
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest that
is generally paid or accrued on debt or a dividend that is paid or accrued on
preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Convertible securities have unique investment
characteristics, in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying common stock due to
their fixed-income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases.
The value of a convertible security is a function of its
"investment value" (determined by its yield in comparison with the yields of
other securities of comparable maturity and quality that do not have a
conversion privilege) and its "conversion value" (the security's worth, at
market value, if converted into the underlying common stock). The investment
value of a convertible security is influenced by changes in interest rates,
with investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
may also have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price
of the underlying common stock. If the conversion value is low relative to
the investment value, the price of the convertible security is governed
principally by its investment value. Generally, the conversion value
decreases as the convertible security approaches maturity. To the extent the
market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. A convertible security generally will
sell at a premium over its conversion value by the extent to which investors
place value on the right to acquire the underlying common stock while holding
a fixed-income security.
A convertible security may be subject to redemption at the option
of the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by an Investment Fund is called
for redemption, the Investment Fund will be required to permit the issuer to
redeem the security, convert it into the underlying common stock or sell it
to a third party. Any of these actions could have an adverse effect on the
Company's ability to achieve its investment objective.
BONDS AND OTHER FIXED-INCOME SECURITIES
Investment Managers may invest in bonds and other fixed-income
securities. Investment Managers will invest in these securities when they
offer opportunities for capital appreciation and may also invest in these
securities for temporary defensive purposes and to maintain liquidity.
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Fixed-income securities include, among other securities: bonds,
notes and debentures issued by corporations; debt securities issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities
("U.S. Government Securities") or by a foreign government; municipal
securities; and mortgage-backed and asset-backed securities. These
securities may pay fixed, variable or floating rates of interest, and may
include zero coupon obligations. Fixed-income securities are subject to the
risk of the issuer's inability to meet principal and interest payments on its
obligations (i.e., credit risk) and are subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (i.e., market
risk).
Investment Managers may invest in both investment grade and
non-investment grade debt securities. Investment grade debt securities are
securities that have received a rating from at least one nationally
recognized statistical rating organization ("NRSRO") in one of the four
highest rating categories or, if not rated by any NRSRO, have been determined
by the Adviser to be of comparable quality. Non-investment grade debt
securities (typically called "junk bonds") are securities that have received
a rating from a NRSRO of below investment grade or have been given no rating,
and are considered by the NRSRO to be predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal. Non-investment
grade debt securities in the lowest rating categories may involve a
substantial risk of default or may be in default. Adverse changes in
economic conditions or developments regarding the individual issuer are more
likely to cause price volatility and weaken the capacity of the issuers of
non-investment grade debt securities to make principal and interest payments
than is the case for higher grade debt securities. An economic downturn
affecting an issuer of non-investment grade debt securities may result in an
increased incidence of default. In addition, the market for lower grade debt
securities may be thinner and less active than for higher grade debt
securities.
FOREIGN SECURITIES
Investment Managers may invest in securities of foreign issuers
and in depository receipts, such as American Depository Receipts ("ADRs"),
that represent indirect interests in securities of foreign issuers. Foreign
securities in which Investment Managers may invest may be listed on foreign
securities exchanges or traded in foreign over-the-counter markets.
Investments in foreign securities are affected by risk factors generally not
thought to be present in the U.S. These factors include, but are not limited
to, the following: varying custody, brokerage and settlement practices;
difficulty in pricing; less public information about issuers of foreign
securities; less governmental regulation and supervision over the issuance
and trading of securities than in the U.S.; the unavailability of financial
information regarding the foreign issuer or the difficulty of interpreting
financial information prepared under foreign accounting standards; less
liquidity and more volatility in foreign securities markets; the possibility
of expropriation or nationalization; the imposition of withholding and other
taxes; adverse political, social or diplomatic developments; limitations on
the movement of funds or other assets of an Investment Fund between different
countries; difficulties in invoking legal process abroad and enforcing
contractual obligations; and the difficulty of assessing economic trends in
foreign countries. Moreover, governmental issuers of foreign securities may
be unwilling to repay
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principal and interest due, and may require that the conditions for payment
be renegotiated. Investment in foreign countries also involves higher
brokerage and custodian expenses than does investment in domestic securities.
Other risks of investing in foreign securities include changes in
currency exchange rates (in the case of securities that are not denominated
in U.S. dollars) and currency exchange control regulations or other foreign
or U.S. laws or restrictions, or devaluations of foreign currencies. A
decline in the exchange rate would reduce the value of certain of an
Investment Fund's foreign currency denominated portfolio securities
irrespective of the performance of the underlying investment. In addition,
an Investment Fund may incur costs in connection with conversion between
various currencies. The foregoing risks may be greater in emerging
industrialized and less developed countries.
Investment Managers may enter into forward currency exchange
contracts ("forward contracts") for hedging purposes and non-hedging purposes
to pursue its investment objective. Forward contracts are transactions
involving an Investment Fund's obligation to purchase or sell a specific
currency at a future date at a specified price. Forward contracts may be
used by an Investment Fund for hedging purposes to protect against
uncertainty in the level of future foreign currency exchange rates, such as
when an Investment Fund anticipates purchasing or selling a foreign
security. This technique would allow the Investment Fund to "lock in" the
U.S. dollar price of the security. Forward contracts may also be used to
attempt to protect the value of an Investment Fund's existing holdings of
foreign securities. There may be, however, imperfect correlation between an
Investment Fund's foreign securities holdings and the forward contracts
entered into with respect to those holdings. Forward contracts may also be
used for non-hedging purposes to pursue an Investment Fund's investment
objective, such as when an Investment Manager anticipates that particular
foreign currencies will appreciate or depreciate in value, even though
securities denominated in those currencies are not then held in the
Investment Fund's investment portfolio. There is no requirement that the
Investment Funds hedge all or any portion of their exposure to foreign
currency risks.
NON-DIVERSIFIED STATUS
The Company is a "non-diversified" investment company. Thus,
there are no percentage limitations imposed by the 1940 Act on the percentage
of the Company's assets that may be invested in the securities of any one
issuer. However, the Company generally will not invest more than 10% of the
value of its total assets (measured at the time of purchase) in a single
company or in a single Investment Fund. The Adviser believes that this
approach helps to reduce overall investment risk.
LEVERAGE
Some or all of the Investment Managers may make margin purchases
of securities and, in that regard, borrow money from brokers and banks for
investment purposes. This practice, which is known as "leverage," is
speculative and involves certain risks. The Company may also borrow money
for temporary or emergency purposes or in connection with the repurchase of
Interests.
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Trading equity securities on margin involves an initial cash
requirement representing at least 50% of the underlying security's value with
respect to transactions in U.S. markets and varying (typically lower)
percentages with respect to transactions in foreign markets. Borrowings to
purchase equity securities typically will be secured by the pledge of those
securities. The financing of securities purchases may also be effected
through reverse repurchase agreements with banks, brokers and other financial
institutions.
Although leverage will increase investment return if an
Investment Fund earns a greater return on the investments purchased with
borrowed funds than it pays for the use of those funds, the use of leverage
will decrease investment return if an Investment Fund fails to earn as much
on investments purchased with borrowed funds as it pays for the use of those
funds. The use of leverage will therefore magnify the volatility of changes
in the value of the Company's investments in Investment Funds. In the event
that an Investment Fund's equity or debt instruments decline in value, the
Investment Fund could be subject to a "margin call" or "collateral call,"
pursuant to which the Investment Fund must either deposit additional
collateral with the lender or suffer mandatory liquidation of the pledged
securities to compensate for the decline in value. In the event of a sudden,
precipitous drop in value of an Investment Fund's assets, the Investment
Manager might not be able to liquidate assets quickly enough to pay off its
borrowing. Money borrowed for leveraging will be subject to interest costs
that may or may not be recovered by return on the securities purchased. The
Investment Manager also may be required to maintain minimum average balances
in connection with its borrowings or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
The 1940 Act requires an investment company to satisfy an asset
coverage requirement of 300% of its indebtedness, including amounts borrowed,
measured at the time the investment company incurs the indebtedness (the
"Asset Coverage Requirement"). This means that the value of the investment
company's total indebtedness may not exceed one-third the value of its total
assets (including such indebtedness). These limits do not apply to
Investment Funds that are not managed by a Subadviser and, therefore, the
Company's portfolio may be exposed to the risk of highly leveraged investment
programs of certain Investment Funds and the volatility of the value of
Interests may be great.
In order to obtain "leveraged" market exposure in certain
investments and to increase overall returns, an Investment Manager may
purchase options and other synthetic instruments that do not constitute
"indebtedness" for purposes of the Asset Coverage Requirement. These
instruments may nevertheless involve significant economic leverage and
therefore may, in some cases, involve significant risks of loss.
SHORT SALES
Some or all of the Investment Managers may attempt to limit an
Investment Fund's exposure to a possible market decline in the value of its
portfolio securities through short sales of securities that the Investment
Manager believes possess volatility characteristics similar to those being
hedged. In addition, the Investment Managers may use short sales for non-
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hedging purposes to pursue their investment objectives. For example, an
Investment Fund may "short" a security of a company if, in the Investment
Manager's view, the security is over-valued in relation to the issuer's
prospects for earnings growth.
To effect a short sale, the Investment Manager will borrow a
security from a brokerage firm to make delivery to the buyer. The Investment
Fund is then obligated to replace the borrowed security by purchasing it at
the market price at the time of replacement. The price at such time may be
more or less than the price at which the security was sold by the Investment
Manager, which would result in a loss or gain, respectively. These
techniques are speculative and, in certain circumstances, can substantially
increase the impact of adverse price movements of the Company's portfolio. A
short sale of a security involves the risk of an unlimited increase in the
market price of the security which could result in an inability to cover the
short position and thus a theoretically unlimited loss. There can be no
assurance that securities necessary to cover a short position will be
available for purchase.
An Investment Fund may also make short sales against-the-box, in
which it sells short securities it owns or has the right to obtain without
payment of additional consideration. If an Investment Fund makes a short
sale against-the-box, it will be required to set aside securities equivalent
in kind and amount to the securities sold short (or securities convertible or
exchangeable into those securities) and will be required to hold those
securities while the short sale is outstanding. An Investment Fund will
incur transaction costs, including interest expenses, in connection with
opening, maintaining and closing short sales against-the-box.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve a sale of a security by an
Investment Fund to a bank or securities dealer and the Investment Fund's
simultaneous agreement to repurchase that security for a fixed price
(reflecting a market rate of interest) on a specific date. These
transactions involve a risk that the other party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as
scheduled, which may result in losses to the Company. Reverse repurchase
transactions are a form of leverage which may also increase the volatility of
the Company's investment portfolio.
FOREIGN CURRENCY TRANSACTIONS
The Investment Managers may engage in foreign currency
transactions for a variety of purposes, including to fix in U.S. dollars,
between trade and settlement date, the value of a security an Investment Fund
has agreed to buy or sell, or to hedge the U.S. dollar value of securities
the Investment Fund already owns, particularly if the Investment Manager
expects a decrease in the value of the currency in which the foreign security
is denominated.
Foreign currency transactions may involve, for example, the
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve an Investment Fund
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value
of the currency sold relative to the currency the Investment Fund contracted
to receive in the exchange.
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An Investment Manager's success in these transactions will depend principally
on its ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
MONEY MARKET INSTRUMENTS
Each Investment Manager may invest, for defensive purposes or
otherwise, some or all of an Interest Fund's assets in high qualify
fixed-income securities, money market instruments, and money market mutual
funds, or hold cash or cash equivalents in such amounts as the Investment
Manager deems appropriate under the circumstances. Pending allocation of the
offering proceeds and thereafter, from time to time, the Company also may
invest in these instruments. Money market instruments are high quality,
short-term fixed-income obligations, which generally have remaining
maturities of one year or less, and may include U.S. Government securities,
commercial paper, certificates of deposit and bankers' acceptances issued by
domestic branches of United States banks that are members of the Federal
Deposit Insurance Corporation, and repurchase agreements.
PURCHASING INITIAL PUBLIC OFFERINGS
The Investment Managers may purchase securities of companies in
initial public offerings or shortly thereafter. Special risks associated
with these securities may include a limited number of shares available for
trading, unseasoned trading, lack of investor knowledge of the issuer, and
limited operating history. These factors may contribute to substantial price
volatility for the shares of these companies and, thus, for Interests. The
limited number of shares available for trading in some initial public
offerings may make it more difficult for an Investment Fund to buy or sell
significant amounts of shares without an unfavorable impact on prevailing
market prices. In addition, some companies in initial public offerings are
involved in relatively new industries or lines of business, which may not be
widely understood by investors. Some of these companies may be
undercapitalized or regarded as developmental stage companies, without
revenues or operating income, or the near-term prospectus of achieving them.
SPECIAL INVESTMENT INSTRUMENTS AND TECHNIQUES
The Investment Managers may utilize a variety of special
investment instruments and techniques (described below) to hedge the
portfolios of the Investment Funds against various risks (such as changes in
interest rates or other factors that affect security values) or for
non-hedging purposes to pursue an Investment Fund's investment objective.
These strategies may be executed through derivative transactions. The
instruments the Investment Managers may use and the particular manner in
which they may be used may change over time as new instruments and techniques
are developed or regulatory changes occur. Certain of the special investment
instruments and techniques that the Investment Managers may use are
speculative and involve a high degree of risk, particularly in the context of
non-hedging transactions.
DERIVATIVES. Some or all of the Investment Managers may invest
in, or enter into, derivatives ("Derivatives"). These are financial
instruments which derive their performance, at least in part, from the
performance of an underlying asset, index or interest rate. Derivatives can
be volatile and involve various types and degrees of risk, depending upon the
characteristics of
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the particular Derivative and the portfolio as a whole. Derivatives permit
an Investment Manager to increase or decrease the level of risk of an
investment portfolio, or change the character of the risk, to which an
investment portfolio is exposed in much the same way as the Investment
Manager can increase or decrease the level of risk, or change the character
of the risk, of an investment portfolio by making investments in specific
securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Company's performance.
If an Investment Manager invests in Derivatives at inopportune
times or judges market conditions incorrectly, such investments may lower the
Company's return or result in a loss. The Company also could experience
losses if Derivatives are poorly correlated with its other investments, or if
an Investment Manager is unable to liquidate its position because of an
illiquid secondary market. The market for many Derivatives is, or suddenly
can become, illiquid. Changes in liquidity may result in significant, rapid
and unpredictable changes in the prices for Derivatives.
OPTIONS AND FUTURES. The Investment Managers may utilize options
and futures contracts. They also may use so-called "synthetic" options or
other derivative instruments written by broker-dealers or other permissible
financial intermediaries. Options transactions may be effected on securities
exchanges or in the over-the-counter market. When options are purchased
over-the-counter, the Company's portfolio bears the risk that the
counterparty that wrote the option will be unable or unwilling to perform its
obligations under the option contract. Such options may also be illiquid
and, in such cases, an Investment Manager may have difficulty closing out its
position. Over-the-counter options purchased and sold by the Investment
Managers also may include options on baskets of specific securities.
The Investment Managers may purchase call and put options on
specific securities, and may write and sell covered or uncovered call and put
options for hedging purposes and non-hedging purposes to pursue their
investment objectives. A put option gives the purchaser of the option the
right to sell, and obligates the writer to buy, the underlying security at a
stated exercise price at any time prior to the expiration of the option.
Similarly, a call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying security at a stated
exercise price at any time prior to the expiration of the option. A covered
call option is a call option with respect to which an Investment Fund owns
the underlying security. The sale of such an option exposes an Investment
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or to possible
continued holding of a security that might otherwise have been sold to
protect against depreciation in the market price of the security. A covered
put option is a put option with respect to which cash or liquid securities
have been placed in a segregated account on an Investment Fund's books or
with the Investment Fund's custodian to fulfill the obligation undertaken.
The sale of such an option exposes an Investment Fund during the term of the
option to a decline in price of the underlying security while depriving the
Investment Fund of the opportunity to invest the segregated assets.
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An Investment Manager may close out a position when writing
options by purchasing an option on the same security with the same exercise
price and expiration date as the option that it has previously written on the
security. An Investment Fund will realize a profit or loss if the amount
paid to purchase an option is less or more, as the case may be, than the
amount received from the sale thereof. To close out a position as a
purchaser of an option, an Investment Manager would ordinarily make a similar
"closing sale transaction," which involves liquidating the Investment Fund's
position by selling the option previously purchased, although the Investment
Manager would be entitled to exercise the option should it deem it
advantageous to do so.
The use of Derivatives that are subject to regulation by the
Commodity Futures Trading Commission (the "CFTC") by Investment Funds could
cause the Company to be a commodity pool, which would require the Company to
comply with certain rules of the CFTC. However, the Company intends to
conduct its operations to avoid regulation as a commodity pool. In this
regard, the Company's pro rata share of the sum of the amount of initial
margin deposits on futures contracts entered into by the Investment Funds and
premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, may not exceed 5% of the liquidation
value of the Company's assets, after taking into account unrealized profits
and unrealized losses on such contracts and options; provided, however, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
Company intends to monitor use of futures and related options by Investment
Funds to help assure compliance with this limitation. If applicable CFTC
rules change, such percentage limitations may change or different conditions
may be applied to the Company's use of certain Derivatives.
The Investment Managers may enter into futures contracts in U.S.
domestic markets or on exchanges located outside the United States. Foreign
markets may offer advantages such as trading opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however,
may have greater risk potential than domestic markets. For example, some
foreign exchanges are principal markets so that no common clearing facility
exists and an investor may look only to the broker for performance of the
contract. In addition, any profits an Investment Manager might realize in
trading could be eliminated by adverse changes in the exchange rate, or the
Company could incur losses as a result of those changes. Transactions on
foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
CFTC.
Engaging in these transactions involves risk of loss to the
Company which could adversely affect the value of the Company's net assets.
No assurance can be given that a liquid market will exist for any particular
futures contract at any particular time. Many futures exchanges and boards
of trade limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit or trading may be suspended for specified periods during the trading
day. Futures contract prices could move to the limit for
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several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting
the Company to substantial losses.
Successful use of futures also is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
Pursuant to regulations or published positions of the SEC, a
Subadviser may be required to segregate permissible liquid assets in
connection with its commodities transactions in an amount generally equal to
the value of the underlying commodity. The segregation of such assets will
have the effect of limiting the Subadviser's ability otherwise to invest
those assets.
Some or all of the Investment Managers may purchase and sell
stock index futures contracts for the Investment Funds. A stock index future
obligates an Investment Fund to pay or receive an amount of cash equal to a
fixed dollar amount specified in the futures contract multiplied by the
difference between the settlement price of the contract on the contract's
last trading day and the value of the index based on the stock prices of the
securities that comprise it at the opening of trading in such securities on
the next business day.
Some or all of the Investment Managers may purchase and sell
interest rate futures contracts for the Investment Funds. An interest rate
future obligates an Investment Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.
Some or all of the Investment Managers may purchase and sell
currency futures. A currency future obligates an Investment Fund to purchase
or sell an amount of a specific currency at a future date at a specific price.
CALL AND PUT OPTIONS ON SECURITIES INDICES. Some or all of the
Investment Managers may purchase and sell for the Investment Funds call and
put options on stock indices listed on national securities exchanges or
traded in the over-the-counter market for hedging purposes and non-hedging
purposes to pursue its investment objective. A stock index fluctuates with
changes in the market values of the stocks included in the index.
Accordingly, successful use by the Investment Manager of options on stock
indexes will be subject to the Investment Manager's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry or market segment. This requires different skills and
techniques than predicting changes in the price of individual stocks.
WARRANTS AND RIGHTS. Warrants are derivative instruments that
permit, but do not obligate, the holder to subscribe for other securities or
commodities. Rights are similar to warrants, but normally have a shorter
duration and are offered or distributed to shareholders of a company.
Warrants and rights do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle the holder to
purchase, and they do not represent any rights in the assets of the issuer.
As a result, warrants and rights may be considered more speculative than
certain other types of equity-like securities. In addition, the values of
warrants
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and rights do not necessarily change with the values of the underlying
securities or commodities and these instruments cease to have value if they
are not exercised prior to their expiration dates.
SWAP AGREEMENTS. Some or all of the Investment Managers may
enter into equity, interest rate, index and currency rate swap agreements on
behalf of the Investment Funds. These transactions are entered into in an
attempt to obtain a particular return when it is considered desirable to do
so, possibly at a lower cost than if an Investment Fund had invested directly
in the asset that yielded the desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than a year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments
or instruments, which may be adjusted for an interest factor. The gross
returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. Forms of swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent interest rates exceed a specified
rate or "cap"; interest rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent interest rates
fall below a specified level or "floor"; and interest rate collars, under
which a party sells a cap and purchases a floor or vice versa in an attempt
to protect itself against interest rate movements exceeding given minimum or
maximum levels.
Most swap agreements entered into by the Investment Fund would
require the calculation of the obligations of the parties to the agreements
on a "net basis." Consequently, an Investment Fund's current obligations (or
rights) under a swap agreement generally will be equal only to the net amount
to be paid or received under the agreement based on the relative values of
the positions held by each party to the agreement (the "net amount"). The
risk of loss with respect to swaps is limited to the net amount of interest
payments that an Investment Fund is contractually obligated to make. If the
other party to a swap defaults, an Investment Fund's risk of loss consists of
the net amount of payments that the Investment Fund contractually is entitled
to receive.
To achieve investment returns equivalent to those achieved by an
investment adviser in whose investment vehicles the Company could not invest
directly, perhaps because of its investment minimum or its unavailability for
direct investment, the Company may enter into swap agreements under which the
Company may agree, on a net basis, to pay a return based on a floating
interest rate, such as LIBOR, and to receive the total return of the
reference investment vehicle over a stated time period. The Company may seek
to achieve the same investment result through the use of other derivatives in
similar circumstances. The Federal income tax treatment of swap agreements
and other derivatives used in the above manner is unclear. Until the
Federal income tax treatment of derivatives on hedge funds is clarified, the
Company will not invest in such derivatives.
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LENDING PORTFOLIO SECURITIES
Some or all of the Investment Managers may lend securities from
their portfolios to brokers, dealers and other financial institutions needing
to borrow securities to complete certain transactions. The lending portfolio
continues to be entitled to payments in amounts equal to the interest,
dividends or other distributions payable on the loaned securities which
affords it an opportunity to earn interest on the amount of the loan and on
the loaned securities' collateral. Loans of portfolio securities by a
Subadviser may not exceed 33-1/3% of the value of an Investment Fund's total
assets, and, in respect of such transactions, the Investment Fund will
receive collateral consisting of cash, U.S. Government Securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. The Company might experience risk of loss if the institution
with which an Investment Fund has engaged in a portfolio loan transaction
breaches its agreement with the Investment Fund.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
Some or all of the Investment Managers may purchase securities on
a "when-issued" basis and may purchase or sell securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. These transactions involve a commitment by an Investment
Fund to purchase or sell securities at a future date (ordinarily one or two
months later). The price of the underlying securities, which is generally
expressed in terms of yield, is fixed at the time the commitment is made, but
delivery and payment for the securities takes place at a later date. No
income accrues on securities that have been purchased pursuant to a forward
commitment or on a when-issued basis prior to delivery to the Investment
Fund. When-issued securities and forward commitments may be sold prior to
the settlement date. If an Investment Fund disposes of the right to acquire
a when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or
loss. These transactions, when effected by the Company and by a Subadviser,
will be subject to the Company's limitation on indebtedness unless, at the
time the transaction is entered into, a segregated account consisting of
cash, U.S. Government Securities or liquid securities equal to the value of
the when-issued or forward commitment securities is established and
maintained. There is a risk that securities purchased on a when-issued basis
may not be delivered and that the purchaser of securities sold by an
Investment Manager on a forward basis will not honor its purchase
obligation. In such cases, the Company may incur a loss.
RESTRICTED AND ILLIQUID INVESTMENTS
Although it is anticipated that most Investment Funds will invest
primarily in publicly traded securities, they generally may invest a portion
of the value of their total assets in restricted securities and other
investments which are illiquid. Restricted securities are securities that
may not be sold to the public without an effective registration statement
under the Securities Act of 1933 ("1933 Act") or, if they are unregistered,
may be sold only in a privately negotiated transaction or pursuant to an
exemption from registration.
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Where registration is required to sell a security, the Company or
an Investment Fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the decision to sell
and the time the Investment Manager may be permitted to sell a security under
an effective registration statement. If, during such period, adverse market
conditions were to develop, the Company or an Investment Fund might obtain a
less favorable price than prevailed when it decided to sell. For Investment
Funds which are managed by a Subadviser, restricted securities for which no
market exists and other illiquid investments are valued at fair value, as
determined in accordance with procedures approved and periodically reviewed
by the Board of Managers. Investment Managers may be unable to sell
restricted and other illiquid securities at the most opportune times or at
prices approximating the value at which they purchased such securities.
In addition, the Company's interests in unregistered Investment
Funds are themselves illiquid and subject to substantial restrictions on
transfer. The Company may liquidate an interest and withdraw from an
unregistered Investment Fund pursuant to limited withdrawal rights. The
illiquidity of these interests may adversely affect the Company were it to
have to sell interests at an inopportune time.
INVESTMENT POLICIES AND RESTRICTIONS
The Company has adopted certain fundamental investment
restrictions, which cannot be changed without the vote of a majority of the
Company's outstanding voting securities (as defined by the 1940 Act). In
applying these restrictions, the Company will aggregate its investments and
transactions with those of each Investment Fund, if any, that is advised by a
Subadviser. The Company's fundamental investment restrictions are as follows:
(1) The Company will not invest 25% or more of the value of its
total assets in the securities (other than U.S. Government
Securities) of issuers engaged in any single industry.
(This restriction does not apply to the Company's
investments in Investment Funds).
(2) The Company will not issue senior securities representing
stock, except that, to the extent permitted by the 1940
Act, (a) the Company may borrow money from banks, brokers
and other lenders, to finance portfolio transactions and
engage in other transactions involving the issuance by the
Company of "senior securities" representing indebtedness,
and (b) the Company may borrow money from banks for
temporary or emergency purposes or in connection with
repurchases of, or tenders for, Interests.
(3) The Company will not underwrite securities of other
issuers, except insofar as the Company may be deemed an
underwriter under the 1933 Act in connection with the
disposition of its portfolio securities.
(4) The Company will not make loans of money or securities to
other persons, except through purchasing fixed-income
securities, lending portfolio
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securities or entering into repurchase agreements in a
manner consistent with the Company's investment policies.
(5) The Company will not purchase or sell commodities or
commodity contracts, except that it may purchase and sell
foreign currency, options, futures and forward contracts,
including those related to indexes, and options on indices,
and may invest in commodity pools and other entities that
purchase and sell commodities and commodity contracts.
(6) The Company will not purchase, hold or deal in real estate,
except that it may invest in securities that are secured by
real estate or that are issued by companies that invest or
deal in real estate.
The investment objective of the Company is also fundamental and
may not be changed without a vote of a majority of the Company's outstanding
voting securities.
Under the 1940 Act, the vote of a majority of the outstanding
voting securities of an investment company, such as the Company, means the
vote, at an annual or a special meeting of the security holders of the
Company duly called, (A) of 67% or more of the voting securities present at
the meeting, if the holders of more than 50% of the outstanding voting
securities of the Company are present or represented by proxy or (B) of more
than 50% of the outstanding voting securities of the company, whichever is
less.
With respect to these investment restrictions, and other policies
described in this Confidential Memorandum, the Company will not look through
the Investment Funds not managed by Subadvisers to their underlying
securities. If a percentage restriction is adhered to at the time of an
investment or transaction, a later change in percentage resulting from a
change in the values of investments or the value of the Company's total
assets, unless otherwise stated, will not constitute a violation of such
restriction or policy.
The Bank Holding Company Act of 1956 (the "BHC Act"), together
with the rules and regulations of the Board of Governors of the Federal
Reserve (the "Federal Reserve"), impose certain restrictions on the ability
of bank holding companies and their subsidiaries to own equity securities of
certain issuers. Canadian Imperial Bank of Commerce ("CIBC"), the parent
company of CIBC WM, the managing member of the Adviser, is subject to the BHC
Act and those rules and regulations. CIBC may also be deemed to "control"
the Company for purposes of the BHC Act as a result of : (i) the Adviser
holding more than 4.9% of the aggregate outstanding capital account balances
of all members of Wynstone Fund, L.L.C. ("Wynstone"), a Delaware limited
liability company registered under the 1940 Act as a non-diversified,
closed-end management company for which the Adviser serves as the investment
adviser; and (ii) the managers of Wynstone serving as the Managers of the
Company. Therefore, the Company may also be subject to these restrictions.
In particular, CIBC generally may not own or control, directly or
indirectly, more than 5% of the outstanding shares of any class of voting
securities or more than 25% of the outstanding equity (including subordinated
debt) of a non-banking company with business
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activities in the United States, or, without the approval of the Federal
Reserve and other appropriate regulatory agencies, more than 5% of the
outstanding shares of any class of voting securities or more than 25% of the
outstanding equity (including subordinated debt) of any issuer that is a
bank, bank holding company, thrift or thrift holding company (the "Equity
Limit"). Because CIBC may be deemed to control the Company within the
meaning of the BHC Act, the Company's holdings of all such securities will be
aggregated with those of CIBC and its subsidiaries (including CIBC WM) for
purposes of calculating the Equity Limit. Consequently, the Company
generally will be unable to purchase equity securities that, when taken
together with the equity securities of an issuer owned or controlled by CIBC
and its subsidiaries, would cause the Equity Limit to be exceeded. In
addition, CIBC and its subsidiaries generally will be precluded under the BHC
Act from exerting a "controlling influence over the management or policies"
of a company with business activities in the United States. Consequently,
activities in relation to companies in which the Company may invest will need
to be conducted so as not to result in a determination of "control" within
the meaning of the BHC Act.
The Adviser does not expect that the restrictions imposed by the
BHC Act will adversely impact the investment operations of the Company.
The Adviser will not cause the Company to make loans to or to
receive loans from the Adviser or its affiliates, except to the extent
permitted by the 1940 Act or as otherwise permitted by applicable law. The
Company may effect brokerage transactions through the affiliates of the
Adviser, subject to compliance with the 1940 Act. (See "Conflicts Of
Interest - CIBC WM," and "Brokerage.")
ADDITIONAL RISK FACTORS
INCENTIVE ALLOCATION
Each Investment Manager generally will receive performance-based
allocations, expected to range from 15% to 25% of net profits. The
performance-based allocation that will be received by an Investment Manager
may create an incentive for the Investment Manager to make investments that
are riskier or more speculative than those that might have been made in the
absence of the performance-based allocation. In addition, because the
performance-based allocation is calculated on a basis that includes realized
and unrealized appreciation of an Investment Fund's assets, the allocation
may be greater than if it were based solely on realized gains.
In addition, the Adviser will receive a performance-based special
allocation (the "Incentive Allocation"). This special allocation of 10% of
net profits to the Special Advisory Account (defined below) of the Adviser
may create an incentive for the Adviser to cause the Company to make
investments that are riskier or more speculative than would be the case in
the absence of the Incentive Allocation. In addition, because the Incentive
Allocation is calculated on a basis that includes unrealized appreciation of
the Company's assets, the Incentive Allocation may be greater than if it were
based solely on realized gains. (See "Capital Accounts and Allocations -
Incentive Allocation.")
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LACK OF OPERATING HISTORY
The Company is a newly formed entity and has no operating history
upon which investors can evaluate the performance of the Company. However,
as discussed below, the personnel of CIBC WM, which, as a member of the
Adviser is responsible for managing the Company's investment portfolio, have
substantial experience in managing investments and private investment funds,
and the Company intends to invest primarily with Investment Managers which
have established track records. In addition, CIBC WM's Hedge Fund Due
Diligence Committee has designated Kenneth Stemme as the Committee member
primarily responsible for the day-to-day management of the Company's
portfolio. Mr. Stemme has substantial experience in the selection of
investment managers for multi-strategy products such as the Company. (See
"The Adviser and CIBC WM" and "Conflicts of Interest - Participation in
Investment Opportunities.")
LIQUIDITY RISKS
Interests in the Company will not be traded on any securities
exchange or other market and are subject to substantial restrictions on
transfer. Although the Company may offer to repurchase Interests from time
to time, a Member may not be able to liquidate its Interest in the Company
for up to two years. The Adviser expects that it will recommend to the Board
of Managers that the Company offer to repurchase Interests from Members at
the end of 2000, and, thereafter, at least annually, effective at the end of
the year. (See "Redemptions, Repurchases of Interests and Transfers.")
DISTRIBUTIONS TO MEMBERS AND PAYMENT OF TAX LIABILITY
The Company does not intend to make periodic distributions of its
net income or gains, if any, to Members. Whether or not distributions are
made, Members will be required each year to pay applicable Federal and state
income taxes on their respective shares of the Company's taxable income, and
will have to pay applicable taxes from other sources. The amount and times
of any distributions will be determined in the sole discretion of the Board
of Managers.
SPECIAL RISKS OF MULTI-MANAGER STRUCTURE
The Investment Funds will not be registered as investment
companies under the 1940 Act and, therefore, the Company will not have the
protections of the 1940 Act with respect to its investments in the Investment
Funds. Although the Adviser will receive detailed information from each
Investment Manager regarding its historical performance and investment
strategy, in most cases the Adviser has little or no means of independently
verifying this information. An Investment Manager may use proprietary
investment strategies that are not fully disclosed to the Adviser, which may
involve risks under some market conditions that are not anticipated by the
Adviser.
For the Company to complete its tax reporting requirements and to
provide an audited annual report to Members, it must receive information on a
timely basis from the
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Investment Managers. An Investment Manager's delay in providing this
information could delay the Company's preparation of tax information for
investors, which might require Members to seek extensions on the time to file
their tax returns, or could delay the preparation of the Company's annual
report.
An investor who met the conditions imposed by the Investment
Managers could invest directly with the Investment Managers. These
conditions may include investment minimums that are considerably higher than
$150,000. By investing in investment vehicles indirectly through the
Company, an investor bears asset-based fees and performance-based allocations
at the Company level and the Investment Fund level. In addition, the
investor bears a proportionate share of the other fees and expenses of the
Company (including operating costs, distribution expenses and administrative
fees) and, indirectly, similar fees and expenses of the Investment Funds.
Each Investment Manager will receive any performance-based
allocations to which it is entitled irrespective of the performance of the
other Investment Managers and the Company generally. Accordingly, an
Investment Manager with positive performance may receive compensation from
the Company, and thus indirectly from investors, even if the Company's
overall investment return is negative. Investment decisions of the
Investment Funds are made by the Investment Managers entirely independently
of each other. As a result, at any particular time, one Investment Fund may
be purchasing shares of an issuer whose shares are being sold by another
Investment Fund. Consequently, the Company could directly or indirectly
incur certain transaction costs without accomplishing any net investment
result.
Since the Company may make additional investments in Investment
Funds only at certain times pursuant to limitations set forth in the
governing documents of the Investments Funds, the Company from time to time
may have to invest some of its assets temporarily in money market securities.
To the extent the Company holds non-voting securities of, or
contractually forgoes the right to vote in respect of, an Investment Fund, it
will not be able to vote on matters that require the approval of the
investors in the Investment Fund, including a matter that could adversely
affect the Company's investment in it.
Investment Funds generally are permitted to redeem their
interests in-kind. Thus, upon the Company's withdrawal of all or a portion
of its interest in an Investment Fund, the Company may receive securities
that are illiquid or difficult to value. In such circumstances, the Adviser
would seek to dispose of these securities in a manner that is in the best
interests of the Company.
A noncorporate investor's share of the Company's investment
expenses (including the asset-based fees and performance-based allocations at
the Company and Investment Fund levels) may be subject to certain limitations
on deductibility for regular Federal income tax purposes and may be
completely disallowed for purposes of determining the noncorporate investor's
alternative minimum tax liability.
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The Company may agree to indemnify certain of the Investment
Funds and their Investment Managers from any liability, damage, cost or
expense arising out of, among other things, certain acts or omissions
relating to the offer or sale of the Interests.
BOARD OF MANAGERS
The Board of Managers has overall responsibility for the overall
management and supervision of the operations of the Company and has approved
the Company's investment program. The Board of Managers exercises the same
powers, authority and responsibilities on behalf of the Company as are
customarily exercised by the board of directors of a registered investment
company organized as a corporation, and it has complete and exclusive
authority to oversee and to establish policies regarding the management,
conduct and operation of the Company's business. None of the Managers is (or
will be) an "interested person" (as defined in the 1940 Act) of the Company.
Managers will not contribute to the capital of the Company in their capacity
as Managers, but may subscribe for Interests, subject to the eligibility
requirements described in this Confidential Memorandum.
The identities of the Board of Managers, and brief biographical
information regarding each of them, is set forth below.
NAME AND AGE PRINCIPAL OCCUPATION(s) DURING PAST 5 YEARS
Director, Program for the Human
Environment and Senior Research Associate,
The Rockefeller University (1993 to
present); Program Director, Alfred P.
Sloan Foundation (1994 to present);
Adjunct Scientist, Woods Hole
Oceanographic Institution (1995 to
present). Mr. Ausubel also is a Manager
of Wynstone and Xanthus, for which the
Jesse H. Ausubel, 47 Adviser serves as investment adviser.
Advisor, Salomon Smith Barney (1988 to
present); Director, Deck House Inc. (1970
to present); Director, Central European
Value Fund (1994 to present); Director,
Surety Loan Funding Corporation (1998 to
present). Mr. Belica also is a Manager of
Wynstone and Xanthus, for which the
Paul Belica, 77 Adviser serves as investment adviser.
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Professor, Columbia University; from 1974
to 1998, served in numerous executive
capacities with Salomon Brothers Inc.,
including Chairman and Chief Executive
Officer of Salomon Brothers Asset
Management, Inc. (1994 to 1998), Chief
Administrative Officer (1991 to 1994) and
Director of Global Research (1988 to
1991). Mr. Brock also serves as a Manager
of Wynstone and Xanthus, for which the
Thomas W. Brock, 52 Adviser serves as investment adviser..
Consultant; Former Chairman of the Board,
ASARCO Incorporated; Director of 16
investment companies advised by Salomon
Brothers Asset Management, Inc. Mr.
Barber also is a Manager of Wynstone and
Xanthus, for which the Adviser serves as
the investment adviser, and is a Director
of the India Fund, Inc. and the Asia
Tigers Fund, Inc., for which affiliates of
Charles F. Barber, 81 the Adviser serve as investment adviser.
Each of the Managers was elected to the Board of Managers by the
organizational Member of the Company (who is not affiliated with CIBC WM).
By signing the limited liability company agreement (the "Company Agreement")
of the Company, each Member will be deemed to have voted for the election of
each of the Managers.
The Managers serve on the Board of Managers for terms of
indefinite duration. A Manager's position in that capacity will terminate if
the Manager is removed, resigns or is subject to various disabling events
such as death, incapacity or bankruptcy. A Manager may resign, subject to
giving 90 days' prior written notice to the other Managers if such
resignation is likely to affect adversely the tax status of the Company, and
may be removed either by vote of two-thirds (2/3) of the Managers serving on
the Board of Managers not subject to the removal vote or by a vote of Members
holding not less than two-thirds (2/3) of the total number of votes eligible
to be cast by all Members. In the event of any vacancy in the position of a
Manager, the remaining Managers serving on the Board of Managers may appoint
an individual to serve as a Manager on the Board of Managers, so long as
immediately after the appointment at least two-thirds (2/3) of the Managers
then serving on the Board of Managers would have been elected by the
Members. The Board of Managers may call a meeting of Members to fill any
vacancy in the position of a Manager, and must do so within 60 days after any
date on which Managers who were elected by the Members cease to constitute a
majority of the Board of Managers then serving. Any Manager appointed in the
future will not be affiliated with CIBC WM.
The Managers currently are each paid an annual retainer of $5,000
and per meeting fees of $700 (or $100 in the case of telephonic meetings) by
the Company. All
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Managers are reimbursed by the Company for their reasonable out-of-pocket
expenses. It is estimated that the aggregate annual compensation paid by the
Company to each Manager will be approximately $6,300 during 1999, and that
the aggregate compensation paid by all other registered investment companies
for which the Adviser or an affiliate of the Adviser serves as the investment
adviser will be approximately $14,200, $14,200, $14,200 and $29,800 during
1999 for Mr. Ausubel, Mr. Belica, Mr. Brock and Mr. Barber, respectively.
For 1998, the aggregate annual compensation paid by all other registered
investment companies for which the Adviser or an affiliate of the Adviser
serves as the investment adviser to Mr. Ausubel, Mr. Belica and Mr. Barber
was $2,500, $2,500 and $18,600, respectively. The Managers do not receive
any pension or retirement benefits from the Company.
THE ADVISER AND CIBC WM
The Adviser serves as the Company's investment adviser, subject
to the ultimate supervision of and subject to any policies established by the
Board of Managers, pursuant to the terms of an investment advisory agreement
entered into between the Company and the Adviser dated as of July 14, 1999
(the "Investment Advisory Agreement"). The Adviser will initially allocate
the Company's assets and, thereafter, will evaluate regularly each Investment
Manager to determine whether its investment program is consistent with the
Company's investment objective and whether its investment performance is
satisfactory. The Adviser may reallocate the Company's assets among the
Investment Managers, terminate existing Investment Managers and select
additional Investment Managers, subject in each case to the ultimate
supervision of and subject to any policies established by the Board of
Managers and to the condition that selection of a new Subadviser requires
approval of a majority (as defined in the 1940 Act) of the Company's
outstanding voting securities, unless the Company receives an exemption from
certain provisions of the 1940 Act.
The Adviser was formed as a Delaware limited liability company in
October, 1997 and is registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act"). The offices of the Adviser are
located at, One World Financial Center, 31st Floor, 200 Liberty Street, New
York, New York 10281, and its telephone number is (212) 667-4225.
The Adviser serves or will serve as an investment adviser and/or
general partner of other registered and private investment companies. The
Adviser holds a non-voting Special Advisory Member interest in Wynstone and
Xanthus, and serves as investment adviser for both. The Adviser also has
made a capital contribution to Wynstone as a member which currently exceeds
25% of aggregate outstanding balances of all members of Wynstone. As long as
the Adviser holds more than 4.9% of the aggregate outstanding balances of all
members of Wynstone, the Adviser may be deemed to "control" Wynstone for
purposes of the BHC Act, to which the Adviser, CIBC WM and affiliates of CIBC
WM are subject. Because the Managers also serve as Individual General
Partners of Wynstone, the Adviser may also be deemed to "control" Xanthus and
the Company for purposes of the BHC Act. As a result, certain activities of
the Company may be restricted by the BHC Act and rules and regulations
thereunder, as described elsewhere in this Confidential Memorandum.
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As described above, CIBC WM's Hedge Fund Due Diligence Committee
has chosen Kenneth Stemme to serve as the Committee member primarily
responsible for the day-to-day portfolio management of the Company. Mr.
Stemme joined CIBC WM in January 1999 as an Executive Director for Hedge Fund
Consulting. Prior to that time, Mr. Stemme spent eight and one-half years at
Harris Associates. Harris Associates is a money management firm located in
Chicago with approximately $15 billion under discretionary management at
December 31, 1998. While at Harris, Mr. Stemme participated in a group that
managed up to $1.3 billion in assets in multi-strategy hedge fund portfolios
allocated among up to 60 investment managers. For the last five years, Mr.
Stemme was one of three professionals responsible for these portfolios,
performing quantitative and qualitative due diligence on existing and
prospective managers, as well as asset allocation among strategies and
managers. Mr. Stemme holds a B.A. in Mathematics and Economics from Cornell
University (1989) and an M.B.A. (with High Honors) from DePaul University
(1994). Mr. Stemme is also a CFA.
CIBC WM is the managing member of (and therefore controls) the
Adviser and oversees the Adviser's provision of investment advisory services
to the Company. The interest of CIBC WM in the Adviser as it relates to the
Adviser's business of providing services to the Company, is represented by a
separate series of interests in the Adviser relating specifically to that
business. Pursuant to applicable law, the debts, liabilities and obligations
of the Adviser related to that series of interests are enforceable against
the assets of that series only, and not against the assets of any other
series or of the Adviser generally. Similarly, the debts, liabilities and
obligations of the Adviser relating to any other series of interests are not
enforceable against the assets of the series relating to the Company. Other
series of interests in the Adviser represent interests in other business
activities of the Adviser.
CIBC WM is a member of the New York Stock Exchange and other
principal securities exchanges. As a registered broker-dealer, CIBC WM is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files reports with the
Securities and Exchange Commission (the "SEC"). Such reports filed by CIBC
WM with the SEC will be made available to any prospective investor upon
request. CIBC WM is registered as an investment adviser with the SEC
pursuant to the Advisers Act.
The parent and controlling person of CIBC WM is Canadian Imperial
Bank of Commerce ("CIBC"). CIBC WM is the U.S. corporate, investment,
institutional and private client banking arm of CIBC, which currently is the
second-largest bank in Canada, with assets of approximately U.S. $182 billion
and a market capitalization of U.S. $10.5 billion as of April 30, 1999. In
November, 1997 CIBC Wood Gundy Securities Corp. acquired Oppenheimer Co.,
Inc., one of the largest privately owned, full-service securities firms in
the U.S. At the time of the acquisition, the combined company was renamed
"CIBC Oppenheimer Corp.", and effective May 3, 1999, changed its name to CIBC
World Markets Corp. Known globally under the marketing name CIBC World
Markets, this worldwide business offers a complete range of investment and
corporate banking, capital markets, asset management and brokerage
activities. There are approximately 4,500 employees in the United States and
9,000 worldwide. CIBC and its affiliates, including CIBC WM, are subject to
the BHC Act and the rules and regulations of the Board of Governors of the
Federal Reserve.
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Pursuant to the Investment Advisory Agreement, the Adviser is
responsible, subject to the supervision of the Board of Managers, for
formulating a continuing investment program for the Company. It makes all
decisions regarding the Company's purchases and withdrawals of interests in
Investment Funds and also advises the Board of Managers regarding the
selection of Subadvisers. The Investment Advisory Agreement was approved by
the Board of Managers (each of whom is an individual who is not an
"interested person," as defined by the 1940 Act, of the Company), at a
meeting held in person on July 14, 1999, and was also approved on such date
by Paul Belica, the then sole Member of the Company. The Investment Advisory
Agreement is terminable without penalty, on 60 days' prior written notice: by
the Board of Managers; by vote of a majority (as defined by the 1940 Act) of
the outstanding voting securities of the Company; or by the Adviser. The
initial term of the Investment Advisory Agreement expires on July 14, 2001.
However, the agreement may be continued in effect from year to year
thereafter if such continuance is approved annually by either the Board of
Managers or the vote of a majority (as defined by the 1940 Act) of the
outstanding voting securities of the Company; provided that in either event
the continuance is also approved by a majority of the Managers who are not
"interested persons" of the Company or the Adviser by vote cast in person at
a meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement also provides that it will terminate automatically in the
event of its "assignment," as defined by the 1940 Act and the rules
thereunder.
The Investment Advisory Agreement provides that, in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations to the Company, the Adviser and any member, director, officer
or employee thereof, or any of their affiliates, executors, heirs, assigns,
successors or other legal representative, will not be liable to the Company
for any error of judgment, for any mistake of law or for any act or omission
by such person in connection with the performance of services to the
Company. The Investment Advisory Agreement also provides for
indemnification, to the fullest extent permitted by law, by the Company of
the Adviser, or any member, director, officer or employee thereof, and any of
their affiliates, executors, heirs, assigns, successors or other legal
representatives, against any liability or expense to which such person may be
liable which arise in connection with the performance of services to the
Company, provided that the liability or expense is not incurred by reason of
the person's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations to the Company.
The Investment Advisory Agreement provides that in consideration
of the services provided by the Adviser, the Adviser shall be entitled to be
the Special Advisory Member of the Company. In such capacity, the Adviser is
entitled to receive the Incentive Allocation. (See "Capital Accounts and
Allocations - Incentive Allocation.") The Incentive Allocation between the
Company and the Adviser was also initially approved by the Board of Managers,
and by vote of Jesse H. Ausubel, as the then sole Member of the Company, on
July 14, 1999.
VOTING
Each Member will have the right to cast a number of votes based
on the value of the Member's respective capital account at any meeting of
Members called by the Board of
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Managers or by Members holding 25% or more of the total number of votes
eligible to be cast. Members will be entitled to vote on any matter on which
shareholders of a registered investment company organized as a corporation
would normally be entitled to vote, including election of Managers to the
Board of Managers, approval of the agreement with the investment adviser of
the Company, and approval of the Company's auditors, and on certain other
matters. Except for the exercise of their voting privileges, Members in
their capacity as such will not be entitled to participate in the management
or control of the Company's business, and may not act for or bind the
Company. The Interest of the Special Advisory Member is non-voting.
CONFLICTS OF INTEREST
CIBC WM
In addition to serving as the managing member of the Adviser,
CIBC WM (directly or through its affiliates, including the Adviser) carries
on substantial investment activities for its own account and for other
registered investment companies, private investment funds, institutions and
individual clients (collectively, "CIBC WM Clients"). The Company has no
interest in these activities. CIBC WM and its officers or employees who
assist CIBC WM in its oversight of the Adviser will be engaged in substantial
activities other than on behalf of the Adviser and may have conflicts of
interest in allocating their time and activity between the Adviser and CIBC
WM Clients. CIBC WM and its officers and employees will devote so much time
to the affairs of the Adviser as in their judgment is necessary and
appropriate.
The Adviser or its affiliates may determine that an investment
opportunity in a particular investment vehicle is appropriate for a
particular CIBC WM Client or for itself or its officers, directors, partners,
members or employees, but not for the Company. Situations may arise in which
the Adviser, its affiliates or CIBC WM Clients have made investments which
would have been suitable for investment by the Company but, for various
reasons, were not pursued by, or available to, the Company. The investment
activities of the Adviser, its affiliates and any of their respective
officers, directors, partners, members or employees may disadvantage the
Company in certain situations, if among other reasons, the investment
activities limit the Company's ability to invest in an investment vehicle.
CIBC WM acts as the non-exclusive placement agent for the Company
and will bear costs associated with its activities as placement agent. CIBC
WM, as managing member of the Adviser and in its capacity as placement agent
for the Company, intends to compensate its account executives for their
ongoing servicing of CIBC WM Clients with whom they have placed Interests in
the Company. CIBC WM intends to compensate its account executives based upon
a formula that takes into account the amount of client assets being serviced
as well as the investment results attributable to clients' assets invested in
the Company. Additionally, investors may be charged by account executives
sales commissions of up to 3% of the purchase price of the Interests being
purchased, at the sole discretion of the account executive. (See "Fees and
Expenses," "Capital Accounts and Allocations - Incentive Allocation," and
"Subscription for Interests - Sales Charge.")
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CIBC WM or its affiliates may provide brokerage and other
services from time to time to one or more accounts or entities managed by the
Investment Managers or their affiliates, including the Investment Funds.
(All Investment Funds and other accounts managed by the Investment Managers
or their affiliates, excluding the Company are referred to collectively as
the "Investment Manager Accounts.")
The Adviser, its affiliates or CIBC WM Clients may have an
interest in an account managed by, or enter into relationships with, an
Investment Manager or its affiliates on terms different than an interest in
the Company. In addition, the Investment Managers may receive research
products and services in connection with the brokerage services that the
Adviser and its affiliates may provide from time to time to one or more
Investment Manager Accounts or to the Company.
INVESTMENT MANAGERS
PARTICIPATION IN INVESTMENT OPPORTUNITIES. The Adviser
anticipates that each Investment Manager will employ an investment program
for the vehicle through which the Company invests that is substantially
similar to the investment program employed by such Investment Manager for its
other accounts, if any. Accordingly, as a general matter, the Investment
Manager will consider participation by the Company or the relevant Investment
Fund in all appropriate investment opportunities that are under consideration
for investment by the Investment Manager for their Investment Manager
Accounts. There may be, however, circumstances under which an Investment
Manager will cause its Investment Manager Accounts to commit a larger
percentage of their respective assets to an investment opportunity than to
which the Investment Manager will commit the Company's or the relevant
Investment Fund's assets. There also may be circumstances under which an
Investment Manager will consider participation by its Investment Manager
Accounts in investment opportunities in which the Investment Manager does not
intend to invest on behalf of the Company or the relevant Investment Fund, or
vice versa.
Each Investment Manager will evaluate a variety of factors that
may be relevant in determining whether a particular investment opportunity or
strategy is appropriate and feasible for the Company or the relevant
Investment Fund and Investment Manager Accounts at a particular time,
including, but not limited to, the following: (1) the nature of the
investment opportunity taken in the context of the other investments at the
time; (2) the liquidity of the investment relative to the needs of the
particular entity or account; (3) the availability of the opportunity (i.e.,
size of obtainable position); (4) the transaction costs involved; and (5) the
investment or regulatory limitations applicable to the particular entity or
account. Because these considerations may differ for the Company, the
Investment Fund and relevant Investment Manager Accounts in the context of
any particular investment opportunity, the investment activities of the
Company or Investment Fund, on the one hand, and Investment Manager Accounts,
on the other, may differ considerably from time to time. In addition, the
fees and expenses of the Investment Fund will differ from those of the
Investment Manager Accounts and the Company. Accordingly, prospective
Members should note that the future performance of the Investment Funds and
the Investment Manager Accounts will vary.
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When an Investment Manager determines that it would be
appropriate for the Company or its respective Investment Fund and one or more
of its Investment Manager Accounts to participate in an investment
opportunity at the same time, it will attempt to aggregate, place and
allocate orders on a basis that the Investment Manager believes to be fair
and equitable, consistent with its responsibilities under applicable law.
Decisions in this regard are necessarily subjective and there is no
requirement that the Company or any Investment Fund participate, or
participate to the same extent as the Investment Manager Accounts, in all
trades. However, no participating entity or account will receive
preferential treatment over any other and the Subadviser will take steps to
ensure that no participating entity or account will be systematically
disadvantaged by the aggregation, placement and allocation of orders.
Situations may occur, however, where the Company could be
disadvantaged because of the investment activities conducted by the
Investment Manager for the Investment Manager Accounts. Such situations may
be based on, among other things, the following: (1) legal restrictions on the
combined size of positions that may be taken for the Company, the Investment
Funds and the Investment Manager Accounts, thereby limiting the size of the
Company's or Investment Fund's position; (2) the difficulty of liquidating an
investment for the Company, Investment Funds and the Investment Manager
Accounts where the market cannot absorb the sale of the combined positions;
and (3) the determination that a particular investment is warranted only if
hedged with an option or other instrument and there is a limited availability
of such options or other instruments. In particular, the Subadvisers may be
legally restricted from entering into "joint transactions" (as defined in the
1940 Act) in which the Investment Funds participate with affiliates of the
Subadvisers, including their Investment Manager Accounts, without first
obtaining exemptive relief from the SEC. (See "Conflicts of Interest-Other
Matters.")
Each Investment Manager and its principals, officers, employees
and affiliates, may buy and sell securities or other investments for their
own accounts and may have actual or potential conflicts of interest with
respect to investments made on behalf of the Company or an Investment Fund.
As a result of differing trading and investment strategies or constraints,
positions may be taken by principals, officers, employees and affiliates of
the Investment Manager that are the same, different or made at a different
time than positions taken for the Company.
OTHER MATTERS. Except in accordance with applicable law, no
Investment Manager is permitted to buy securities or other property from, or
sell securities or other property to, its respective Investment Fund.
However, an Investment Fund may effect certain principal transactions in
securities with one or more Investment Manager Accounts, except for accounts
in which the Investment Manager of such fund or any affiliate thereof serves
as a general partner or in which it has a financial interest, other than an
interest that results solely from the Investment Manager's appointment as an
investment adviser to the account. Such transactions would be made in
circumstances where the Investment Manager has determined it would be
appropriate for the Investment Fund to purchase and an Investment Manager
Account to sell, or the Investment Fund to sell and an Investment Manager
Account to purchase, the same security or instrument on the same day. Future
investment activities of the Investment Mangers, or their affiliates, and the
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principals, partners, directors, officers or employees of the foregoing may
give rise to additional conflicts of interest.
CIBC WM and its directors, officers and employees, may buy and
sell securities or other investments for their own accounts and may have
actual or potential conflicts of interest with respect to investments made by
the Adviser on behalf of the Company. As a result of differing trading and
investment strategies or constraints, positions may be taken by directors,
officers and employees of CIBC WM (including personnel of the Adviser) that
are the same, different or made at a different time than positions taken for
the Company. In order to mitigate the possibility that the Company will be
adversely affected by this personal trading, the Company and the Adviser have
adopted a Joint Code of Ethics in compliance with Rule 17j-1 under the 1940
Act that restricts securities trading in the personal accounts of investment
professionals and others who normally come into possession of information
regarding the Company's portfolio transactions.
The Adviser, CIBC WM and their affiliates will not purchase
securities or other property from, or sell securities or other property to,
the Company except that the Company may engage in transactions with accounts
which are affiliated with the Company only because they are advised by CIBC
WM or one of its affiliates or because they have common officers, directors
or managing members. Such transactions would be made in circumstances where
the Adviser has determined that it would be appropriate for the Company to
purchase and another CIBC WM Client to sell, or the Company to sell and
another CIBC WM Client to purchase, the same security or instrument on the
same day. All such purchases and sales would be made pursuant to procedures
that the Company has adopted under Rule 17a-7 under the 1940 Act. Among
other things, those procedures are intended to ensure that (1) each such
transaction will be effected for cash consideration at the current market
price of the particular securities, (2) no such transaction will involve
restricted securities or securities for which market quotations are not
readily available and (3) no brokerage commissions, fees (except for
customary transfer fees) or other remuneration will be paid in connection
with any such transaction. CIBC WM and its affiliated broker-dealers may act
as broker for the Company or the Investment Funds in effecting securities
transactions. (See "Brokerage.")
Under the BHC Act, or other U.S. banking laws, and the rules,
regulations, guidelines and policies of the regulatory agencies and the staff
thereof, CIBC WM and its affiliates are subject to restrictions on the
transactions which it may make with the Company, and their restrictions may
affect the investments made by the Company.
Future investment activities of CIBC WM (or its affiliates) and
their principals, partners, directors, officers or employees may give rise to
additional conflicts of interest.
BROKERAGE
Each Investment Manager is directly responsible for the execution
of its portfolio transactions and the allocation of brokerage. Transactions
on U.S. stock exchanges and on some foreign stock exchanges involve the
payment of negotiated brokerage commissions. On the great majority of
foreign stock exchanges, commissions are fixed. No stated commission is
generally
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applicable to securities traded in over-the-counter markets, but the prices
of those securities include undisclosed commissions or mark-ups.
In executing transactions on behalf of its Investment Fund, each
Subadviser will seek to obtain the best price and execution for the
transactions, taking into account factors such as price, size of order,
difficulty of execution and operational facilities of a brokerage firm, and
in the case of transactions effected by the Subadviser with unaffiliated
brokers, the firm's risk in positioning a block of securities. Although each
Subadviser generally will seek reasonably competitive commission rates, a
Subadviser will not necessarily pay the lowest commission available on each
transaction. The Subadvisers will have no obligation to deal with any broker
or group or brokers in executing transactions in portfolio securities.
Consistent with the principle of seeking best price and
execution, a Subadviser may place orders with brokers that provide the
Subadviser and its affiliates with supplemental research, market and
statistical information, including advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts. The expenses of the Subadviser are not necessarily reduced as a
result of the receipt of this supplemental information, which may be useful
to the Subadviser or its affiliates in providing services to clients other
than the Company. In addition, not all of the supplemental information is
used by the Subadviser in connection with the Company. Conversely, the
information provided to the Subadviser by brokers and dealers through which
other clients of the Subadviser and its affiliates effect securities
transactions may be useful to the Subadviser in providing services to the
Company.
It is anticipated that Investment Managers which are not
Subadvisers will follow brokerage placement practices similar to those
described above. However, the Investment Funds may, in some cases, utilize
brokerage commissions of an Investment Fund to obtain products or services
which are not research related and which may benefit the Investment Managers.
FEES AND EXPENSES
CIBC WM provides certain administration and investor services to
the Company, including, among other things, providing office space and other
support services to the Company, screening potential investors, preparing
marketing and investor communications, maintaining and preserving certain
records of the Company, preparing and filing various materials with state and
Federal regulators, providing legal and regulatory advice in connection with
administrative functions and reviewing and arranging for payment of the
Company's expenses. In consideration for these services, the Company will
pay CIBC WM a monthly fee of 0.08333% (1% on an annualized basis) of the
Company's net assets (the "CIBC WM Fee"). Net assets means the total value
of all assets of the Company, less an amount equal to all accrued debts,
liabilities and obligations of the Company, calculated before giving effect
to any repurchases of Interests. The CIBC WM Fee will be computed based on
the net assets of the Company as of the start of business on the first
business day of each month, after adjustment for
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any subscriptions effective on that date, and will be due and payable in
arrears within five business days after the end of that month. The CIBC WM
Fee will be an expense paid to CIBC WM out of the Company's assets, and will
be reflected in each Member's capital account (except the Special Advisory
Account (defined below)) as a reduction to net profits or an increase to net
losses credited to or debited against each Member's Capital Account.
PFPC Inc. ("PFPC") provides administration, accounting and
investor services to the Company, which are in addition to the services
provided by CIBC WM to the Company, as described above. In consideration for
these services, the Company will pay PFPC a fee (the "PFPC Fee") that is not
anticipated to exceed 0.35% (annualized) of the Company's net assets (as
defined above), plus reimbursement of certain out-of-pocket expenses.
In addition, the capital accounts of Members (except the Special
Advisory Account (defined below)) may be subject to an Incentive Allocation
depending upon the investment performance of the Company. (See "Capital
Accounts and Allocations - Incentive Allocation.")
The Company will bear all expenses incurred in connection with
its operations other than those specifically required to be borne by CIBC
WM. Expenses to be borne by the Company include, but are not limited to, the
following:
all costs and expenses directly related to portfolio
transactions and positions for the Company's account,
including, but not limited to, brokerage commissions,
research fees, interest and commitment fees on loans and
debit balances, borrowing charges on securities sold short,
dividends on securities sold but not yet purchased,
custodial fees, margin fees, transfer taxes and premiums,
taxes withheld on foreign dividends and indirect expenses
from investments in Investment Funds;
all costs and expenses associated with the organization
and registration of the Company, certain offering costs and
the costs of compliance with any applicable Federal or
state laws;
all costs and expenses associated with the organization of
Investment Funds managed by Subadvisers, if any, and with
the selection of Investment Managers, including due
diligence and travel-related expenses;
Attorneys' fees and disbursements associated with updating
the Company's Confidential Memorandum and subscription
documents (the "Offering Materials"); the costs of
printing the Offering Materials; the costs of distributing
the Offering Materials to prospective investors; and
attorneys' fees and disbursements associated with the
review of subscription documents executed and delivered to
the Company in connection with offerings of Interests;
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the costs and expenses of holding meetings of the Board of
Managers and any meetings of Members;
fees and disbursements of any attorneys, accountants,
auditors and other consultants and professionals engaged on
behalf of the Company;
the CIBC WM Fee and the fees of custodians and persons
(such as PFPC) providing administrative services to the
Company;
the costs of a fidelity bond and any liability insurance
obtained on behalf of the Company or the Board of Managers;
all costs and expenses of preparing, setting in type,
printing and distributing reports and other communications
to Members;
all expenses of computing the Company's net asset value,
including any equipment or services obtained for these
purposes;
all charges for equipment or services used in
communicating information regarding the Company's
transactions among the Adviser and any custodian or other
agent engaged by the Company; and
such other types of expenses as may be approved from time
to time by the Board of Managers.
The Adviser will be reimbursed by the Company for any of the
above expenses that it pays on behalf of the Company.
The Company's organizational expenses are estimated at $250,000,
and the Company will also bear certain expenses, not to exceed $100,000,
associated with the initial offering of Interests. Before a recent change to
the guidelines followed by the American Institute of Certified Public
Accountants applicable to the Company, the Company would have been able to
amortize the organizational expenses over a 60 month period. Because of that
change, however, the organizational expenses now must be expensed as
incurred. In order to achieve a more equitable distribution of the impact of
those expenses among the Company's Members, an amount equal to the
organizational expenses incurred by the Company will be allocated among and
credited to or debited against the capital accounts (described below) of all
Members based on the percentage that a Member's contributed capital to the
Company bears to the total capital contributed to the Company by all Members
as of the relevant allocation date. An initial allocation of organizational
costs will be made as of the first date on which capital contributions of
Members are made. These allocations will thereafter be adjusted as of each
date, through and including April 1, 2000, on which additional capital is
contributed to the Company by Members. Offering costs cannot be deducted by
the Company or the Members.
The Investment Funds will bear all expenses incurred in
connection with their operations. These expenses are similar to those
incurred by the Company. The Investment
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Managers generally will charge asset-based fees to and receive
performance-based allocations from the Investment Funds, which effectively
will reduce the investment returns of the Investment Funds and the amount of
any distributions from the Investment Funds to the Company. These expenses,
fees and allocations will be in addition to those incurred by the Company
itself.
CAPITAL ACCOUNTS AND ALLOCATIONS
CAPITAL ACCOUNTS
The Company will maintain a separate capital account for each
Member (including the Adviser in respect of the Adviser's capital
contribution to the Company, as a Member), which will have an opening balance
equal to the Member's initial contribution to the capital of the Company.
Each Member's capital account will be increased by the sum of the amount of
cash and the value of any securities constituting additional contributions by
the Member to the capital of the Company, plus any amounts credited to the
Member's capital account as described above with respect to organization
expenses or as described below. Similarly, each Member's capital account
will be reduced by the sum of the amount of any repurchase by the Company of
the Interest, or portion thereof, of the Member, plus the amount of any
distributions to the Member which are not reinvested, plus any amounts
debited against the Member's capital account as described above with respect
to organization expenses or as described below.
Capital accounts of Members are adjusted as of the close of
business on the last day of each fiscal period. Fiscal periods begin on the
day after the last day of the preceding fiscal period and end at the close of
business on (1) the last day of each fiscal year, (2) the last day of each
taxable year; (3) the day preceding the date on which a contribution to the
capital of the Company is made, (4) the day on which the Company repurchases
any Interest or portion of an Interest of any Member, or (5) the day on which
any amount is credited to or debited from the capital account of any Member
other than an amount to be credited to or debited from the capital accounts
of all Members in accordance with their respective investment percentages.
An investment percentage will be determined for each Member as of the start
of each fiscal period by dividing the balance of the Member's capital account
as of the commencement of the period by the sum of the balances of all
capital accounts of all Members as of that date.
The Company will maintain a "Special Advisory Account" for the
Adviser solely for the purpose of receiving the Incentive Allocation, as
described below.
ALLOCATION OF NET PROFITS AND NET LOSSES
Net profits or net losses of the Company for each fiscal period
will be allocated among and credited to or debited against the capital
accounts of all Members (but not the Special Advisory Account) as of the last
day of each fiscal period in accordance with Members' respective investment
percentages for the fiscal period. Net profits or net losses will be
measured as the net change in the value of the net assets of the Company
(including any net change in unrealized appreciation or depreciation of
investments and realized income and gains
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or losses and expenses (including organizational expenses) during a fiscal
period), before giving effect to any repurchases by the Company of Interests
or portions thereof, and excluding the amount of any items to be allocated
among the capital accounts of the Members other than in accordance with the
Members' respective investment percentages.
Allocations for Federal income tax purposes generally will be
made among the Members so as to reflect equitably amounts credited or debited
to each Member's capital account for the current and prior fiscal years.
(See "Tax Aspects - Allocation of Profits and Losses.")
INCENTIVE ALLOCATION
So long as the Adviser serves as the investment adviser of the
Company, the Adviser will be entitled to be the Special Advisory Member of
the Company. In such capacity, the Adviser will be entitled to receive an
incentive allocation (the "Incentive Allocation"), charged to the capital
account of each Member as of the last day of each "allocation period," of 10%
of the amount by which any "allocated gain" during an "allocation period"
exceeds the positive balance in the Member's "loss recovery account." The
Incentive Allocation will be credited to the Special Advisory Account of the
Adviser.
For purposes of calculating the Incentive Allocation, "allocated
gain" means the excess of the balance of a Member's capital account at the
end of an "allocation period" (after giving effect to allocations other than
the Incentive Allocation, but before giving effect to repurchases of
Interests by the Company or debits to the Member's capital account to reflect
any item not chargeable ratably to all Members), over the balance of the
Member's capital account at the start of the "allocation period."
Consequently, any Incentive Allocation to be credited to the Adviser will be
increased by a portion of the amount of any net unrealized appreciation, as
well as net realized gains, allocable to a Member.
An Incentive Allocation will be charged only with respect to any
"allocated gain" in excess of the positive balance of a "loss recovery
account" maintained for each Member. A "loss recovery account" is a
memorandum account maintained by the Company for each Member, which has an
initial balance of zero and is (1) increased after the close of each
"allocation period" by the amount of any negative performance for the Member
during the "allocation period," and (2) decreased (but not below zero) after
the close of each "allocation period" by the amount of any allocated gain for
the Member during the "allocation period." Any positive balance in a
Member's "loss recovery account" would be reduced as the result of a
repurchase or certain transfers with respect to the Member's Interest in the
Company in proportion to the reduction of the Member's capital account
attributable to the repurchase or transfer.
An "allocation period" as to each Member is a period commencing
on the admission of the Member to the Company, and thereafter each period
commencing as of the day following the last day of the preceding allocation
period with respect to such Member, and ending as of the close of business on
the first to occur of (1) the last day of a fiscal year of the Company, (2)
the day as of which the Company repurchases the entire Interest of the
Member, (3) the day as of which the Company admits as a substitute Member a
person to whom the entire
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Interest of the Member has been transferred or (4) the day as of which the
Investment Advisory Agreement terminates. The measurement of any Incentive
Allocation for an "allocation period" must take into account any negative
performance from a prior allocation period to the extent reflected in the
"loss recovery account." Therefore, the Incentive Allocation for any
allocation period after the initial allocation period in effect is a
reflection of the extent to which cumulative performance achieved with
respect to a Member's account since the Member's admission to the Company
exceeds the highest previous level of performance achieved through the close
of any prior allocation period. By the last business day of any month
following the date on which an Incentive Allocation is made, the Adviser may
withdraw up to 100% of the Incentive Allocation (computed on the basis of
unaudited data) that was credited to the Special Advisory Account and debited
from the Member's capital account with respect to the allocation period.
Within 30 days after the completion of the audit of the Company's books, the
Company will pay to the Adviser any additional amount determined to be owed
to the Adviser based upon the audit, and the Adviser will pay to the Company
any excess amount determined to be owed to the Company.
ALLOCATION OF SPECIAL ITEMS - CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES
Withholding taxes or other tax obligations incurred by the
Company which are attributable to any Member will be debited against the
capital account of that Member as of the close of the fiscal period during
which the Company paid those obligations, and any amounts then or thereafter
distributable to the Member will be reduced by the amount of those taxes. If
the amount of those taxes is greater than the distributable amounts, then the
Member and any successor to the Member's Interest is required to pay upon
demand to the Company, as a contribution to the capital of the Company, the
amount of the excess. The Company is not obligated to apply for or obtain a
reduction of or exemption from withholding tax on behalf of any Member,
although in the event that the Company determines that a Member is eligible
for a refund of any withholding tax, it may, at the request and expense of
that Member, assist the Member in applying for a refund.
Generally, any expenditures payable by the Company, to the extent
paid or withheld on behalf of, or by reason of particular circumstances
applicable to, one or more, but fewer than all of the Members, will be
charged to only those Members on whose behalf the payments are made or whose
particular circumstances gave rise to the payments. These charges shall be
debited to the capital accounts of the applicable Members as of the close of
the fiscal period during which the items were paid or accrued by the Company.
RESERVES
Appropriate reserves may be created, accrued and charged against
net assets and proportionately against the capital accounts of the Members
for contingent liabilities as of the date the contingent liabilities become
known to the Company. Reserves will be in such amounts (subject to increase
or reduction) which the Company may deem necessary or appropriate. The
amount of any reserve (or any increase or decrease therein) will be
proportionately charged or credited, as appropriate, to the capital accounts
of those investors who are Members at the time when the reserve is created,
increased or decreased, as the case may be; provided, however, that
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if the reserve (or any increase or decrease therein) exceeds the lesser of
$500,000 or 1% of the aggregate value of the capital accounts of all those
Members, the amount of the reserve, increase, or decrease shall instead be
charged or credited to those investors who were Members at the time, as
determined by the Company, of the act or omission giving rise to the
contingent liability for which the reserve was established, increased or
decreased in proportion to their capital accounts at that time.
NET ASSET VALUATION
The value of the net assets of the Company will be determined as
of the close of business at the end of any fiscal period in accordance with
the procedures set forth below or as may be determined from time to time
pursuant to policies established by the Board of Managers.
The Company will value interests in Investment Funds not managed
by the Subadvisers at fair value, which ordinarily will be the value
determined by their Investment Managers in accordance with the policies
established by the relevant Investment Fund.
To the extent Subadvisers are engaged to manage the Company's
assets, the Company will value the portfolio securities of the Investments
Funds managed by the Subadvisers as described below.
Domestic exchange traded and NASDAQ listed equity securities held
by the Company (other than options) will be valued at their last composite
sale prices as reported on the exchanges where those securities are traded.
If no sales of those securities are reported on a particular day, the
securities will be valued based upon their composite bid prices for
securities held long, or their composite ask prices for securities held
short, as reported by those exchanges. Securities traded on a foreign
securities exchange will be valued at their last sale prices on the exchange
where the securities are primarily traded, or in the absence of a reported
sale on a particular day, at their bid prices (in the case of securities held
long) or ask prices (in the case of securities held short) as reported by
that exchange. Other securities for which market quotations are readily
available will be valued at their bid prices (or ask prices in the case of
securities held short) as obtained from one or more dealers making markets
for those securities. If market quotations are not readily available,
securities and other assets will be valued at fair value as determined in
good faith by, or under the supervision of, the Board of Managers.
Debt securities held by the Company (other than convertible debt
securities) will be valued in accordance with the procedures described above,
which with respect to these securities may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional size trading units. The Board of Managers will
periodically monitor the reasonableness of valuations provided by the pricing
service. Such debt securities with remaining maturities of 60 days or less
will, absent unusual circumstances, be valued at amortized cost, so long as
this method of valuation is determined by the Board of Managers to represent
fair value.
If in the view of the Adviser, the bid price of a listed option
held by the Company (or ask price in the case of any such security held
short) does not fairly reflect the market value
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of the security, the Adviser may request a valuation committee comprised of
two Managers to instead value the security at fair value. In any such
situation, the valuation committee will consider the recommendation of the
Adviser, and, if it determines in good faith that an override of the value
assigned to the security under the procedures described above is warranted,
will value the security at fair value as determined by the valuation
committee in good faith.
All assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars using foreign exchange rates
provided by a pricing service compiled as of 4:00 p.m. London time. Trading
in foreign securities generally is completed, and the values of foreign
securities are determined, prior to the close of securities markets in the
U.S. Foreign exchange rates are also determined prior to such close. On
occasion, the values of foreign securities and exchange rates may be affected
by events occurring between the time as of which determination of values or
exchange rates are made and the time as of which the net asset value of the
Company is determined. When an event materially affects the values of
securities held by the Company or its liabilities, such securities and
liabilities may be valued at fair value as determined in good faith by, or
under the supervision of, the Board of Managers.
Prospective investors should be aware that situations involving
uncertainties as to the valuation of portfolio positions could have an
adverse effect on the Company's net assets if the Board's judgments regarding
appropriate valuations should prove incorrect.
SUBSCRIPTION FOR INTERESTS
SUBSCRIPTION TERMS
For the first nine months from the date the Company commences
operations, the Board of Managers may accept initial and additional
subscriptions for Interests by eligible investors (as described below) as of
the first day of each month. Thereafter, during any period in which the
Adviser is deemed to control the Company for purposes of the BHC Act, the
Board of Managers may accept initial and additional subscriptions for
Interests by eligible investors as of the first day of each calendar
quarter. At all other times, the Board of Managers may accept initial and
additional subscriptions for Interests by eligible investors as of the first
day of each month. All subscriptions are subject to the receipt of cleared
funds on or before the acceptance date in the full amount of the
subscription, plus the applicable sales charge, if any. (See Subscription
for Interests - Sales Charge.") The investor must also submit a completed
subscription document before the acceptance date. The Board of Managers may,
in its discretion, suspend subscriptions for Interests at any time. The
Board of Managers reserves the right to reject any subscription for
Interests. The minimum required initial investment in the Company from each
investor is $150,000, and the minimum additional investment in the Company is
$25,000, subject to the discretion of the Board of Managers to accept initial
and additional investments in lesser amounts. However, the Company may
accept initial subscriptions for Interests from eligible investors who are
directors, officers or employees of CIBC WM or its affiliates in amounts of
$50,000 or more. The initial closing date for subscriptions of Interests is
October 1, 1999. The Board of Managers, in its sole discretion, may postpone
the closing date for up to 90 days. Interests may not be purchased by
nonresident aliens, foreign corporations,
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foreign partnerships, foreign trusts or foreign estates, all as defined in
the Code. In addition, because the Company may generate "unrelated business
taxable income" ("UBTI") with respect to tax-exempt investors, charitable
remainder trusts may not want to purchase Interests because a charitable
remainder trust will not be exempt from Federal income tax under Section
664(c) of the Code for any year in which it has UBTI.
Except as otherwise permitted by the Board of Managers, initial
and any additional contributions to the capital of the Company by any Member
will be payable in cash, and all contributions must be transmitted by the
time and in such the manner as is specified in the subscription documents of
the Company. Initial and any additional contributions to the capital of the
Company will be payable in one installment and will be due at least three
business days prior to the proposed acceptance of the contribution, although
the Board of Managers may accept, in its discretion, a subscription prior to
its receipt of cleared funds.
Each new Member will be obligated to agree to be bound by all of
the terms of the Company Agreement. Each potential investor will also be
obligated to represent and warrant in a subscription agreement, among other
things, that the investor is purchasing an Interest for its own account, and
not with a view to the distribution, assignment, transfer or other
disposition of the Interest.
If and when the Board of Managers determines to accept securities
as a contribution to the capital of the Company, the Company will charge each
Member making a contribution of securities an amount determined by the Board
of Managers and not exceeding 2% of the value of the contribution in order to
reimburse the Company for any costs it incurs in liquidating and accepting
the securities. This charge will be due and payable by the contributing
Member in full at the time the contribution to the capital of the Company to
which the charge relates is due.
ELIGIBLE INVESTORS
Each prospective investor will be required to certify that the
Interest subscribed for is being acquired directly or indirectly for the
account of an "accredited investor" as defined in Regulation D under the 1933
Act, and that the investor (as well as each of the investor's beneficial
owners under certain circumstances) has a net worth immediately prior to the
time of subscription of at least $1.5 million or such greater amounts as may
be required by applicable law or by the Board of Managers, in its sole
discretion. In addition, trusts and other entities will generally be
required to have total assets of $5 million. Existing Members who subscribe
for additional Interests will be required to meet the foregoing eligibility
criteria at the time of the additional subscription. The relevant investor
qualifications will be set forth in a subscription agreement to be provided
to prospective investors, which must be completed by each prospective
investor.
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SALES CHARGE
In connection with initial and additional purchases of Interests,
investors may be charged by their brokers sales commissions of up to 3% of
the purchase price of the Interests being purchased, at the sole discretion
of the investor's broker.
REDEMPTIONS, REPURCHASES OF
INTERESTS AND TRANSFERS
NO RIGHT OF REDEMPTION
No Member or other person holding an Interest or a portion of an
Interest acquired from a Member will have the right to require the Company to
redeem that Interest or portion thereof. There is no public market for
Interests, and none is expected to develop. Consequently, investors may not
be able to liquidate their investment other than as a result of repurchases
of Interests, as described below. (The Adviser will have certain rights to
withdraw amounts from its Special Advisory Account.)
REPURCHASES OF INTERESTS
The Board of Managers may, from time to time and in its complete
and exclusive discretion, determine to cause the Company to repurchase
Interests or portions thereof from Members other than the Adviser in its
capacity as the Special Advisory Member pursuant to written tenders by
Members on such terms and conditions as it may determine. In determining
whether the Company should repurchase Interests or portions thereof from
Members pursuant to written tenders, the Board of Managers will consider the
recommendation of the Adviser. The Adviser expects that it will recommend to
the Board of Managers that the Company offer to repurchase Interests from
Members at the end of 2000. Thereafter, the Adviser expects that generally
it will recommend to the Board of Managers that the Company offer to
repurchase Interests from Members each year, effective at the end of the
calendar year. The Board of Managers will also consider the following
factors, among others, in making its determination:
whether any Members have requested to tender Interests or
portions thereof to the Company;
the liquidity of the Company's assets;
the investment plans and working capital requirements of
the Company;
the relative economies of scale with respect to the size
of the Company;
the history of the Company in repurchasing Interests or
portions thereof;
the economic condition of the securities markets; and
the anticipated tax consequences of any proposed
repurchases of Interests or portions thereof.
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The Board of Managers will determine that the Company repurchase
Interests or portions thereof from Members pursuant to written tenders only
on the terms and conditions it determines to be fair to the Company and to
all Members or persons holding Interests acquired from Members, or to one or
more classes of Members, as applicable. When the Board of Managers
determines that the Company shall repurchase Interests or portions thereof,
notice will be provided to Members describing the terms thereof, containing
information Members should consider in deciding whether to participate in the
repurchase opportunity and containing information on how to participate.
Members who are deciding whether to tender their Interests or portions
thereof during the period that a repurchase offer is open may ascertain the
net asset value of their Interests from PFPC during the period.
The Company Agreement provides that the Company shall be
dissolved if the Interest of any Member that has submitted a written request
to tender its entire Interest for repurchase by the Company has not been
repurchased within a period of two years after such request.
Repurchases of Interests from Members by the Company may be made,
in the complete and absolute discretion of the Company, and may be paid in
cash or by the distribution of securities in-kind, or partly in cash and
partly in-kind. However, the Company does not expect to distribute
securities in-kind except in the unlikely event that making a cash payment
would result in a material adverse effect on the Company or on Members not
tendering Interests for repurchase. Repurchases will be effective after
receipt and acceptance by the Company of all eligible written tenders of
Interests or portions thereof from Members. Any in-kind distribution of
securities will consist of marketable securities traded on an established
securities exchange (valued in accordance with the Company Agreement), which
will be distributed to all tendering Members on a pari passu basis. The
Company does not impose any charges in connection with repurchases of
Interests or portion of Interests.
Due to liquidity restraints associated with the Company's
investments in Investment Funds and the fact that the Company may have to
effect withdrawals from those funds to pay for Interests being repurchased,
it is presently expected that, under the procedures applicable for the
repurchase of Interests, Interests will be valued for purposes of determining
their repurchase price approximately one month after the date by which
Members must submit a repurchase request and that the Company will pay at
least 90% of the value of the Interests or portions thereof repurchased
approximately one month after the valuation date. It is presently
anticipated that the procedures applicable to repurchases of Interests will
be as follows:
The value of Interests or portions thereof being repurchased will
be determined on a specified date (the "Valuation Date") that will be
approximately one month after the date by which Members must tender their
Interests for repurchase (the "Expiration Date"). Promptly after the
Expiration Date, each Member whose Interest or portion thereof has been
accepted for repurchase will be given a non-interest bearing,
non-transferable promissory note by the Company entitling the Member to be
paid an amount equal to the value, determined as of the Valuation Date, of
the Interest or portion thereof being repurchased (subject to adjustment upon
completion of the next annual audit of the Company's financial statements).
This amount will be
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the value of the Member's capital account (or the portion thereof being
repurchased) determined as of the Valuation Date and will be based upon the
net asset value of the Company's assets as of that date, after giving effect
to all allocations to be made as of that date to the Member's capital
account. The promissory note will entitle the Member to receive an initial
payment in an amount equal to at least 90% of the estimated net asset value
of the Interest tendered, determined as of the Valuation Date (the "Initial
Payment"). Payment of this amount will be made 30 days after the Valuation
Date or, if the Company has requested withdrawals of its capital from any
Investment Funds in order to fund the repurchase of Interests, ten business
days after the Company has received at least 90% of the aggregate amount
withdrawn by the Company from such Investment Funds. The promissory note
will also entitle a Member to receive a contingent payment (the "Contingent
Payment") equal to the excess, if any, of (a) the net asset value of the
Interest tendered as of the Valuation Date, as it may be adjusted based upon
the next annual audit of the Company's financial statements), over (b) the
Initial Payment. The Contingent Payment would be payable promptly after the
completion of the Company's next annual audit. It is anticipated that the
annual audit of the Company's financial statements will be completed within
60 days after the end of each fiscal year of the Company.
Repurchases of Interests by the Company are subject to certain
regulatory requirements imposed by SEC rules. The Company believes that the
repurchase procedures described above comply with these requirements.
However, it intends to seek the assurances of the SEC staff to confirm the
permissibility of these procedures. If modification of the Company's
repurchase procedures is deemed necessary to comply with regulatory
requirements, the Board of Managers will adopt revised procedures designed to
provide Members substantially the same liquidity for Interests as would be
available under the procedures described above.
Upon its acceptance of tendered Interests for repurchase, the
Company will maintain daily on its books a segregated account consisting of
(i) cash, (ii) liquid securities or (iii) interests in Investment Funds that
the Company has requested be withdrawn (or any combination of the foregoing),
in an amount equal to the aggregate estimated unpaid dollar amount of the
promissory notes issued to Members tendering Interests.
Payment for repurchased Interests may require the Company to
liquidate portfolio holdings earlier than the Adviser would otherwise
liquidate these holdings, potentially resulting in losses, and may increase
the Company's portfolio turnover. The Adviser intends to take measures
(subject to such policies as may be established by the Board of Managers) to
attempt to avoid or minimize potential losses and turnover resulting from the
repurchase of Interests.
A Member who tenders for repurchase only a portion of such
Member's Interest will be required to maintain a capital account balance
equal to the greater of: (1) $150,000, net of the Incentive Allocation, if
any, that would be debited against the capital account if the date of
repurchase of the Interest or portion thereof were a date on which an
Incentive Allocation would otherwise be made (the "Tentative Incentive
Allocation") or (2) the amount of the Tentative Incentive Allocation.
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The Company may repurchase an Interest or portion thereof of a
Member or any person acquiring an Interest or portion thereof from or through
a Member in the event that:
the Interest or a portion thereof has been transferred or
the Interest or a portion thereof has vested in any person
by operation of law as the result of the death,
dissolution, bankruptcy or incompetency of a Member;
ownership of the Interest by a Member or other person will
cause the Company to be in violation of, or require
registration of any Interest or portion thereof under, or
subject the Company to additional registration or
regulation under, the securities, commodities or other laws
of the United States or any other relevant jurisdiction;
continued ownership of the Interest may be harmful or
injurious to the business or reputation of the Company, the
Board of Managers or the Adviser, or may subject the
Company or any Members to an undue risk of adverse tax or
other fiscal consequences;
any of the representations and warranties made by a Member
in connection with the acquisition of an Interest or
portion thereof was not true when made or has ceased to be
true; or
it would be in the best interests of the Company for the
Company to repurchase the Interest or a portion thereof.
In the event that the Adviser holds any Interests in its capital
account in its capacity as a Member, such Interest or a portion thereof may
be tendered for repurchase in connection with any repurchase offer made by
the Company. The Adviser is also entitled to withdraw its Interests from its
Special Advisory Account at the times described under "Capital Accounts and
Allocations - Incentive Allocation."
TRANSFERS OF INTERESTS
Except as otherwise described below, no person shall become a
substituted Member without the written consent of the Board of Managers,
which consent may be withheld for any reason in its sole and absolute
discretion. Interests in the Company held by Members may be transferred only
(i) by operation of law pursuant to the death, bankruptcy, insolvency or
dissolution of a Member or (ii) under certain limited circumstances, with the
written consent of the Board of Managers (which may be withheld in its sole
and absolute discretion and is expected to be granted, if at all, only under
extenuating circumstances). The Board of Managers generally will not consent
to a transfer unless the following conditions are met: (i) the transferring
Member has been a Member for at least six months; (ii) the proposed transfer
is to be made on the effective date of an offer by the Company to repurchase
Interests; and (iii) the transfer does not constitute a change in beneficial
ownership. Notice to the Company of any proposed transfer must include
evidence satisfactory to the Board of Managers that the proposed transfer is
exempt from registration under the 1933 Act, that the proposed transferee
meets any
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requirements imposed by the Company with respect to investor eligibility and
suitability, including the requirement that any investor (or investor's
beneficial owners in certain circumstances) has a net worth immediately prior
to the time of subscription of at least $1.5 million or such greater amounts
as may be required by applicable law or by the Board of Managers, in its sole
discretion, and must be accompanied by a properly completed subscription
agreement. The Board of Managers is not authorized under the Company
Agreement to consent to a transfer of an Interest of a Member unless the
entire Interest of the Member is transferred to a single transferee and after
the transfer the balance of the capital account of the transferee is not less
than $150,000. A Member who transfers an Interest may be charged reasonable
expenses, including attorneys' and accountants' fees, incurred by the Company
in connection with the transfer.
Any transferee that acquires an Interest or portion thereof in
the Company by operation of law as the result of the death, dissolution,
bankruptcy or incompetency of a Member or otherwise, shall be entitled to the
allocations and distributions allocable to the Interest so acquired and to
transfer the Interest in accordance with the terms of the Company Agreement,
but shall not be entitled to the other rights of a Member unless and until
the transferee becomes a substituted Member as provided in the Company
Agreement. If a Member transfers an Interest or portion thereof with the
approval of the Board of Managers, the Company shall promptly take all
necessary actions so that each transferee or successor to whom the Interest
or portion thereof is transferred is admitted to the Company as a Member.
Each Member and transferee may be charged for all expenses, including
attorneys' and accountants' fees, incurred by the Company in connection with
the transfer.
By subscribing for an Interest in the Company, each Member has
agreed to indemnify and hold harmless the Company, the Managers, the Adviser,
each other Member and any affiliate of the foregoing against all losses,
claims, damages, liabilities, costs and expenses (including legal or other
expenses incurred in investigating or defending against any losses, claims,
damages, liabilities, costs and expenses or any judgments, fines and amounts
paid in settlement), joint or several, to which such persons may become
subject by reason of or arising from any transfer made by that Member in
violation of these provisions or any misrepresentation made by that Member in
connection with any such transfer.
The Adviser may not transfer its interest as the Special Advisory
Member.
TAX ASPECTS
The following is a summary of certain aspects of the income
taxation of the Company and its Members which should be considered by a
prospective Member. The Company has not sought a ruling from the Internal
Revenue Service (the "Service") or any other Federal, state or local agency
with respect to any of the tax issues affecting the Company, nor has it
obtained an opinion of counsel with respect to any Federal tax issues other
than the characterization of the Company as a partnership for Federal income
tax purposes.
This summary of certain aspects of the Federal income tax
treatment of the Company is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), judicial
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decisions, Treasury Regulations (the "Regulations") and rulings in existence
on the date hereof, all of which are subject to change. This summary does
not discuss the impact of various proposals to amend the Code which could
change certain of the tax consequences of an investment in the Company. This
summary also does not discuss all of the tax consequences that may be
relevant to a particular investor or to certain investors subject to special
treatment under the Federal income tax laws, such as insurance companies.
EACH PROSPECTIVE MEMBER SHOULD CONSULT WITH ITS OWN TAX ADVISER
IN ORDER FULLY TO UNDERSTAND THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE COMPANY.
In addition to the particular matters set forth in this section,
tax-exempt organizations should review carefully those sections of the
Memorandum regarding liquidity and other financial matters to ascertain
whether the investment objectives of the Company are consistent with their
overall investment plans. Each prospective tax-exempt Member is urged to
consult its own counsel regarding the acquisition of Interests.
TAX TREATMENT OF COMPANY OPERATIONS
Classification of the Company. The Company will receive an
opinion of Schulte Roth & Zabel LLP, counsel to the Company, that under the
provisions of the Code and the Regulations, as in effect on the date of the
opinion, as well as under the relevant authority interpreting the Code and
the Regulations, and based upon certain representations of the Board of
Managers, the Company will be treated as a partnership for Federal income tax
purposes and not as an association taxable as a corporation.
Under Section 7704 of the Code, "publicly traded partnerships"
are generally treated as corporations for Federal income tax purposes. A
publicly traded partnership is any partnership the interests in which are
traded on an established securities market or which are readily tradable on a
secondary market (or the substantial equivalent thereof). Interests in the
Company will not be traded on an established securities market. Regulations
concerning the classification of partnerships as publicly traded partnerships
(the "Section 7704 Regulations") provide certain safe harbors under which
interests in a partnership will not be considered readily tradable on a
secondary market (or the substantial equivalent thereof). The Company may
not be eligible for any of those safe harbors. In particular, it will not
qualify under the private placement safe harbor set forth in the Section 7704
Regulations if the Company has more than 100 Members.
The Section 7704 Regulations specifically provide that the fact
that a partnership does not qualify for the safe harbors is disregarded for
purposes of determining whether interests in a partnership are readily
tradable on a secondary market (or the substantial equivalent thereof).
Rather, in this event the partnership's status is examined under a general
facts and circumstances test set forth in the Section 7704 Regulations.
Schulte Roth & Zabel LLP also will render its opinion that, under this "facts
and circumstances" test, and based upon the anticipated operations of the
Company as well as the legislative history to Section 7704, the text of the
Section 7704 Regulations and certain representations of the Board of
Managers, the Interests will not be
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readily tradable on a secondary market (or the substantial equivalent
thereof) and, therefore, that the Company will not be treated as a publicly
traded partnership taxable as a corporation.
Neither of the opinions of counsel described above, however, is
binding on the Service or the courts. If it were determined that the Company
should be treated as an association or a publicly traded partnership taxable
as a corporation for Federal income tax purposes (as a result of a successful
challenge to such opinions by the Service, changes in the Code, the
Regulations or judicial interpretations thereof, a material adverse change in
facts, or otherwise), the taxable income of the Company would be subject to
corporate income tax when recognized by the Company; distributions of such
income, other than in certain redemptions of Interests, would be treated as
dividend income when received by the Members to the extent of the current or
accumulated earnings and profits of the Company; and Members would not be
entitled to report profits or losses realized by the Company.
As an entity taxable as a partnership, the Company is not itself
subject to Federal income tax. The Company files an annual partnership
information return with the Service which reports the results of operations.
Each Member is required to report separately on its income tax return its
distributive share of the Company's net long-term capital gain or loss, net
short-term capital gain or loss and all other items of ordinary income or
loss. Each Member is taxed on its distributive share of the Company's
taxable income and gain regardless of whether it has received or will receive
a distribution from the Company.
Recently enacted legislation generally allows certain
partnerships or entities taxable as partnerships such as the Company with 100
or more partners to elect to have a special set of rules and procedures apply
that are intended to simplify the calculation and reporting of certain
partnership items, and the handling of partnership audits. Among the items
that would be affected by the election are the calculation of long-term
capital gains and the tax treatment of expenses, if any, that are treated as
itemized deductions by the partners. If the Company is eligible, it may
elect to have such rules and procedures apply to the Company if it believes
that they may be beneficial to a majority of the Members. Once the election
is made, it cannot be revoked without the consent of the Service. There can
be no assurance that, if such an election is made, the anticipated benefits
will be realized. Furthermore, in certain cases, it is possible that the
election would have an adverse effect on the Members.
Allocation of Profits and Losses. Under the Company Agreement,
the Company's net capital appreciation or net capital depreciation for each
accounting period is allocated among the Members and to their capital
accounts without regard to the amount of income or loss actually recognized
by the Company for Federal income tax purposes. The Company Agreement
provides that items of income, deduction, gain, loss or credit actually
recognized by the Company for each fiscal year generally are to be allocated
for income tax purposes among the Members pursuant to Regulations issued
under Sections 704(b) and 704(c) of the Code.
Under the Company Agreement, the Company has the discretion to
allocate specially an amount of its capital gain and loss for Federal income
tax purposes to the Special Advisory Member and to a Member whose Interests
or portions thereof are repurchased, in either
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case to the extent that the Member's capital account exceeds, or is less
than, as the case may be, its Federal income tax basis in its partnership
interest. There can be no assurance that, if the Company makes any such
special allocations, the Service will accept such allocations. If such
allocations are successfully challenged by the Service, the Company's gains
or losses allocable to the remaining Members would be increased.
Tax Elections; Returns; Tax Audits. The Code provides for
optional adjustments to the basis of partnership property upon distributions
of partnership property to a partner and transfers of partnership interests
(including by reason of death) provided that a partnership election has been
made pursuant to Section 754. Under the Company Agreement, at the request of
a Member, the Company, in its sole discretion, may make such an election.
Any such election, once made, cannot be revoked without the Service's
consent. As a result of the complexity and added expense of the tax
accounting required to implement such an election, the Company presently does
not intend to make such election.
The Company decides how to report the partnership items on the
Company's tax returns, and all Members are required under the Code to treat
the items consistently on their own returns, unless they file a statement
with the Service disclosing the inconsistency. In the event the income tax
returns of the Company are audited by the Service, the tax treatment of the
Company's income and deductions generally is determined at the limited
liability company level in a single proceeding rather than by individual
audits of the Members. A Manager who has been delegated the power and
authority to act as the "Tax Matters Partner" has considerable authority to
make decisions affecting the tax treatment and procedural rights of all
Members. In addition, the Tax Matters Partner has the authority to bind
certain Partners to settlement agreements and the right on behalf of all
Members to extend the statute of limitations relating to the Members' tax
liabilities with respect to Company items.
TAX CONSEQUENCES TO A WITHDRAWING MEMBER
A Member receiving a cash liquidating distribution from the
Company, in connection with a complete withdrawal from the Company, generally
will recognize capital gain or loss to the extent of the difference between
the proceeds received by such Member and such Member's adjusted tax basis in
its partnership interest. Such capital gain or loss will be short-term or
long-term depending upon the Member's holding period for its Interest in the
Company. However, a withdrawing Member will recognize ordinary income to the
extent such Member's allocable share of the Company's "unrealized
receivables" exceeds the Member's basis in such unrealized receivables (as
determined pursuant to the Regulations). For these purposes, accrued but
untaxed market discount, if any, on securities held by the Company will be
treated as an unrealized receivable, with respect to which a withdrawing
Member would recognize ordinary income. A Member receiving a cash
nonliquidating distribution will recognize income in a similar manner only to
the extent that the amount of the distribution exceeds such Member's adjusted
tax basis in its partnership interest.
As discussed above, the Company Agreement provides that the
Company may specially allocate items of its capital gain and loss to a
withdrawing Member to the extent its
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capital account would otherwise exceed or be less than, as the case may be,
its adjusted tax basis in its partnership interest. Such a special
allocation of gain may result in the withdrawing Member recognizing capital
gain, which may include short-term gain, in the Member's last taxable year in
the Company, thereby reducing the amount of long-term capital gain recognized
during the tax year in which it receives its liquidating distribution upon
withdrawal. Such a special allocation of loss may result in the withdrawing
Member recognizing capital loss, which may include long-term loss, in the
Member's last taxable year in the Company, thereby reducing the amount of
short-term loss recognized during the tax year in which it receives its
liquidating distribution upon withdrawal.
Distributions of Property. A partner's receipt of a distribution
of property from a partnership is generally not taxable. However, under
Section 731 of the Code, a distribution consisting of marketable securities
generally is treated as a distribution of cash (rather than property) unless
the distributing partnership is an "investment partnership" within the
meaning of Section 731(c)(3)(C)(i) and the recipient is an "eligible partner"
within the meaning of Section 731(c)(3)(C)(iii). The Company will determine
at the appropriate time whether it qualifies as an "investment partnership."
Assuming it so qualifies, if a Member is an "eligible partner", which term
should include a Member whose contributions to the Company consisted solely
of cash, the recharacterization rule described above would not apply.
TAX TREATMENT OF COMPANY INVESTMENTS
In General. The Company through the Investment Funds expects to
act as a trader or investor, and not as a dealer, with respect to its
securities transactions. A trader and an investor are persons who buy and
sell securities for their own accounts. A dealer, on the other hand, is a
person who purchases securities for resale to customers rather than for
investment or speculation.
Generally, the gains and losses realized by a trader or investor
on the sale of securities are capital gains and losses. Thus, subject to the
treatment of certain currency exchange gains as ordinary income (see
"Currency Fluctuations - 'Section 988' Gains or Losses" below) and certain
other transactions described below, the Company expects that its gains and
losses from its securities transactions typically will be capital gains and
capital losses. These capital gains and losses may be long-term or
short-term depending, in general, upon the length of time a particular
investment position is maintained and, in some cases, upon the nature of the
transaction. Property held for more than one year generally will be eligible
for long-term capital gain or loss treatment. The application of certain
rules relating to short sales, to so-called "straddle" and "wash sale"
transactions and to Section 1256 Contracts (defined below) may serve to alter
the manner in which the holding period for a security is determined or may
otherwise affect the characterization as short-term or long-term, and also
the timing of the realization, of certain gains or losses. Moreover, the
straddle rules and short sale rules may require the capitalization of certain
related expenses.
The maximum ordinary income tax rate for individuals is 39.6%
and, in general, the maximum individual income tax rate for long-term capital
gains is 20% (unless the taxpayer
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elects to be taxed at ordinary rates - see "Limitation on Deductibility of
Interest" below), although in all cases the actual rates may be higher due to
the phase out of certain tax deductions, exemptions and credits. The excess
of capital losses over capital gains may be offset against the ordinary
income of an individual taxpayer, subject to an annual deduction limitation
of $3,000. For corporate taxpayers, the maximum income tax rate is 35%.
Capital losses of a corporate taxpayer may be offset only against capital
gains, but unused capital losses may be carried back three years (subject to
certain limitations) and carried forward five years.
The Company may realize ordinary income from accruals of interest
and dividends on securities. The Company through the Investment Funds may
hold debt obligations with "original issue discount." In such case, the
Company would be required to include amounts in taxable income on a current
basis even though receipt of such amounts may occur in a subsequent year.
The Company through the Investment Funds may also acquire debt obligations
with "market discount." Upon disposition of such an obligation, the Company
generally would be required to treat gain realized as interest income to the
extent of the market discount which accrued during the period the debt
obligation was held by the Company. Income or loss from transactions
involving certain derivative instruments, such as swap transactions, will
also generally constitute ordinary income or loss. In addition, periodic
amounts, if any, payable by the Investment Funds in connection with equity
swaps, interest rate swaps, caps, floors and collars may be considered
"miscellaneous itemized deductions" which, for a noncorporate Member, may be
subject to restrictions on their deductibility. See "Deductibility of
Company Investment Expenditures by Noncorporate Members" below. Moreover,
gain recognized from certain "conversion transactions" will be treated as
ordinary income.1
Currency Fluctuations - "Section 988" Gains or Losses. To the
extent that its investments are made in securities denominated in a foreign
currency, gain or loss realized by the Company frequently will be affected by
the fluctuation in the value of such foreign currencies relative to the value
of the dollar. Generally, gains or losses with respect to investments in
common stock of foreign issuers will be taxed as capital gains or losses at
the time of the disposition of such stock. However, under Section 988 of the
Code, gains and losses on the acquisition and disposition of foreign currency
(e.g., the purchase of foreign currency and subsequent use of the currency to
acquire stock) will be treated as ordinary income or loss. Moreover, under
Section 988, gains or losses on disposition of debt securities denominated in
a foreign currency to the extent attributable to fluctuation in the value of
the foreign currency between the date of acquisition of the debt security and
the date of disposition will be treated as ordinary income or loss.
Similarly, gains or losses attributable to fluctuations in exchange rates
that occur between the time the taxpayer accrues interest or other
receivables or accrues expenses
1 Generally, a conversion transaction is one of several enumerated
transactions where substantially all of the taxpayer's return is
attributable to the time value of the net investment in the
transaction. The enumerated transactions are (i) the holding of any
property (whether or not actively traded) and entering into a contract
to sell such property (or substantially identical property) at a price
determined in accordance with such contract, but only if such property
was acquired and such contract was entered into on a substantially
contemporaneous basis, (ii) certain straddles, (iii) generally any other
transaction that is marketed or sold on the basis that it would have the
economic characteristics of a loan but the interest-like return would be
taxed as capital gain or (iv) any other transaction specified in
Regulations.
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or other liabilities denominated in a foreign currency and the time the
taxpayer actually collects such receivables or pays such liabilities may be
treated as ordinary income or ordinary loss.
As indicated above (see "Types of Investments and Related Risk
Factors - Foreign Securities"), the Company through the Investment Funds may
acquire foreign currency forward contracts. Generally, any gain or loss
realized with respect to such forward contracts will be ordinary, unless (i)
the contract is a capital asset in the hands of the holder and is not a part
of a straddle transaction and (ii) the holder makes an election (by the close
of the day the transaction is entered into) to treat the gain or loss
attributable to such contract as capital gain or loss.
Section 1256 Contracts. In the case of Section 1256 Contracts,
the Code generally applies a "mark to market" system of taxing unrealized
gains and losses on such contracts and otherwise provides for special rules
of taxation. A Section 1256 Contract includes certain regulated futures
contracts, certain foreign currency forward contracts, and certain options
contracts. Under these rules, Section 1256 Contracts held at the end of each
taxable year are treated for Federal income tax purposes as if they were sold
for their fair market value on the last business day of such taxable year.
The net gain or loss, if any, resulting from such deemed sales (known as
"marking to market"), together with any gain or loss resulting from actual
sales of Section 1256 Contracts, must be taken into account by the holder in
computing its taxable income for such year. If a Section 1256 Contract held
at the end of a taxable year is sold in the following year, the amount of any
gain or loss realized on such sale will be adjusted to reflect the gain or
loss previously taken into account under the "mark to market" rules.
Capital gains and losses from such Section 1256 Contracts
generally are characterized as short-term capital gains or losses to the
extent of 40% thereof and as long-term capital gains or losses to the extent
of 60% thereof. Such gains and losses will be taxed under the general rules
described above. Gains and losses from certain foreign currency transactions
will be treated as ordinary income and losses. (See "Currency Fluctuations -
'Section 988' Gains or Losses.") If an individual taxpayer incurs a net
capital loss for a year, the portion thereof, if any, which consists of a net
loss on Section 1256 Contracts may, at the election of the taxpayer, be
carried back three years. Losses so carried back may be deducted only
against net capital gain to the extent that such gain includes gains on
Section 1256 Contracts.
Mixed Straddle Election. The Code allows a taxpayer to elect to
offset gains and losses from positions which are part of a "mixed straddle."
A "mixed straddle" is any straddle in which one or more but not all positions
are Section 1256 Contracts. Temporary Regulations, provide for the
establishment of one or more mixed straddle accounts for certain mixed
straddle trading positions. The mixed straddle account rules require a daily
"marking to market" of all open positions in the account and a daily netting
of gains and losses from positions in the account. At the end of a taxable
year, the annual net gains or losses from the mixed straddle account are
recognized for tax purposes. The application of the Temporary Regulations'
mixed straddle account rules is not entirely clear. Therefore, there is no
assurance that a mixed straddle account election in the circumstances here
will be accepted by the Service.
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Short Sales. Gain or loss from a short sale of property is
generally considered as capital gain or loss to the extent the property used
to close the short sale constitutes a capital asset in the taxpayer's hands.
Except with respect to certain situations where the property used to close a
short sale has a long-term holding period on the date the short sale is
entered into, gains on short sales generally are short-term capital gains. A
loss on a short sale will be treated as a long-term capital loss if, on the
date of the short sale, "substantially identical property" has been held by
the taxpayer for more than one year. In addition, these rules may also
terminate the running of the holding period of "substantially identical
property" held by the taxpayer.
Gain or loss on a short sale will generally not be realized until
such time that the short sale is closed. However, if the taxpayer holds a
short sale position with respect to stock, certain debt obligations or
partnership interests that has appreciated in value and then acquires
property that is the same as or substantially identical to the underlying
property, the taxpayer generally will recognize gain on the date it acquires
such property as if the short sale were closed on such date with such
property. Similarly, if the taxpayer holds an appreciated financial position
with respect to stock, certain debt obligations, or partnership interests and
then enters into a short sale with respect to the same or substantially
identical property, the taxpayer generally will recognize gain as if the
appreciated financial position were sold at its fair market value on the date
it enters into the short sale. The subsequent holding period for any
appreciated financial position that is subject to these constructive sale
rules will be determined as if such position were acquired on the date of the
constructive sale.
Effect of Straddle Rules on Members' Securities Positions. The
Service may treat certain positions in securities held (directly or
indirectly) by a Member and its indirect interest in similar securities held
by the Company as "straddles" for Federal income tax purposes. The
application of the "straddle" rules in such a case could affect a Member's
holding period for the securities involved and may defer the recognition of
losses with respect to such securities.
Limitation on Deductibility of Interest and Short Sale Expenses.
For noncorporate taxpayers, Section 163(d) of the Code limits the deduction
for "investment interest" (i.e., interest or short sale expenses for
"indebtedness properly allocable to property held for investment").
Investment interest is not deductible in the current year to the extent that
it exceeds the taxpayer's "investment income," consisting of net gain and
ordinary income derived from investments in the current year. For this
purpose, any long-term capital gain is excluded from investment income unless
the taxpayer elects to pay tax on such amount at ordinary income tax rates.
For purposes of this provision, the Company's activities will be
treated as giving rise to investment income for a Member, and the investment
interest limitation would apply to a noncorporate Member's share of the
interest and short sale expenses attributable to the Company's operation. In
such case, a noncorporate Member would be denied a deduction for all or part
of that portion of its distributive share of the Company's ordinary losses
attributable to interest and short sale expenses unless it had sufficient
investment income from all sources including the Company. A Member that
could not deduct losses currently as a result of the application of Section
163(d) would be entitled to carry forward such losses to future years,
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subject to the same limitation. The investment interest limitation would
also apply to interest paid by a noncorporate Member on money borrowed to
finance its investment in the Company. Potential investors are advised to
consult with their own tax advisers with respect to the application of the
investment interest limitation in their particular tax situations.
Deductibility of Company Investment Expenditures by Noncorporate
Members. Investment expenses (e.g., investment advisory fees) of an
individual, trust or estate are deductible only to the extent they exceed 2%
of adjusted gross income.2 In addition, the Code further restricts the
ability of an individual with an adjusted gross income in excess of a
specified amount (for 1999, $126,600 or $63,300 for a married person filing a
separate return) to deduct such investment expenses. Under such provision,
investment expenses in excess of 2% of adjusted gross income may only be
deducted to the extent such excess expenses (along with certain other
itemized deductions) exceed the lesser of (i) 3% of the excess of the
individual's adjusted gross income over the specified amount or (ii) 80% of
the amount of certain itemized deductions otherwise allowable for the taxable
year. Moreover, such investment expenses are miscellaneous itemized
deductions which are not deductible by a noncorporate taxpayer in calculating
its alternative minimum tax liability.
It is unclear whether all or a portion of the Company's
operations will qualify as trading -- rather than investment -- activities,
the expenses for which would not be treated as investment expenses.
Therefore, pursuant to Temporary Regulations issued by the Treasury
Department, these limitations on deductibility may apply to a noncorporate
Member's share of the expenses of the Company, including the CIBC WM Fee.
The consequences of these limitations will vary depending upon
the particular tax situation of each taxpayer. Accordingly, noncorporate
Members should consult their tax advisers with respect to the application of
these limitations.
Application of Rules for Income and Losses from Passive
Activities. The Code restricts the deductibility of losses from a "passive
activity" against certain income which is not derived from a passive
activity. This restriction applies to individuals, personal service
corporations and certain closely held corporations. Pursuant to Temporary
Regulations issued by the Treasury Department, income or loss from the
Company's securities investment and trading activity generally will not
constitute income or loss from a passive activity. Therefore, passive losses
from other sources generally could not be deducted against a Member's share
of such income and gain from the Company.
2 However, Section 67(e) of the Code provides that, in the case of a trust
or an estate, such limitation does not apply to deductions or costs
which are paid or incurred in connection with the administration of the
estate or trust and would not have been incurred if the property were
not held in such trust or estate. The Federal Court of Appeals for the
Sixth Circuit, reversing a Tax Court decision, has held that the
investment advisory fees incurred by a trust were exempt (under Section
67(e)) from the 2% of adjusted gross income floor on deductibility. The
Service, however, has stated that it will not follow this decision
outside of the Sixth Circuit. Members that are trusts or estates should
consult their tax advisors as to the applicability of this case to the
investment expenses that are allocated to them.
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"Phantom Income" From Company Investments. Pursuant to various
"anti-deferral" provisions of the Code (the "Subpart F," "passive foreign
investment company" and "foreign personal holding company" provisions),
investments (if any) by the Company in certain foreign corporations may cause
a Member to (i) recognize taxable income prior to the Company's receipt of
distributable proceeds, (ii) pay an interest charge on receipts that are
deemed as having been deferred or (iii) recognize ordinary income that, but
for the "anti-deferral" provisions, would have been treated as long-term or
short-term capital gain.
FOREIGN TAXES
It is possible that certain dividends and interest received by
the Company from sources within foreign countries will be subject to
withholding taxes imposed by such countries. In addition, some foreign
countries may impose capital gains taxes on certain securities transactions
involving foreign issuers.
The Members will be informed by the Company as to their
proportionate share of the foreign taxes paid by the Company, which they will
be required to include in their income. The Members generally will be
entitled to claim either a credit (subject, however, to various limitations
on foreign tax credits) or, if they itemize their deductions, a deduction
(subject to the limitations generally applicable to deductions) for their
share of such foreign taxes in computing their Federal income taxes. A
Member that is tax exempt will not ordinarily benefit from such credit or
deduction.
UNRELATED BUSINESS TAXABLE INCOME
Generally, an exempt organization is exempt from Federal income
tax on its passive investment income, such as dividends, interest and capital
gains, whether realized by the organization directly or indirectly through a
partnership in which it is a partner.3 This type of income is exempt even if
it is realized from securities trading activity which constitutes a trade or
business.
This general exemption from tax does not apply to the "unrelated
business taxable income" ("UBTI") of an exempt organization. UBTI includes
"unrelated debt-financed income," which generally consists of (i) income
derived by an exempt organization (directly or through a partnership) from
income-producing property with respect to which there is "acquisition
indebtedness" at any time during the taxable year, and (ii) gains derived by
an exempt organization (directly or through a partnership) from the
disposition of property with respect to which there is "acquisition
indebtedness" at any time during the twelve-month period ending with the date
of such disposition.
3 With certain exceptions, tax-exempt organizations which are private
foundations are subject to a 2% Federal excise tax on their "net
investment income." The rate of the excise tax for any taxable year may
be reduced to 1% if the private foundation meets certain distribution
requirements for the taxable year. A private foundation will be
required to make payments of estimated tax with respect to this excise
tax.
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The Company through the Investment Funds may incur "acquisition
indebtedness" with respect to certain of its transactions, such as the
purchase of securities on margin. Based upon a published ruling issued by
the Service which generally holds that income and gain with respect to short
sales of publicly traded stock does not constitute income from debt financed
property for purposes of computing UBTI, the Company will treat its short
sales of securities as not involving acquisition indebtedness and therefore
not resulting in UBTI.4 To the extent the Company recognizes income (i.e.,
dividends and interest) from securities with respect to which there is
"acquisition indebtedness" during a taxable year, the percentage of such
income which will be treated as UBTI generally will be based on the
percentage which the "average acquisition indebtedness" incurred with respect
to such securities is of the "average amount of the adjusted basis" of such
securities during the taxable year.
To the extent the Company recognizes capital gain from securities
with respect to which there is "acquisition indebtedness" at any time during
the twelve-month period ending with the date of their disposition, the
percentage of such gain which will be treated as UBTI will be based on the
percentage which the highest amount of such "acquisition indebtedness" is of
the "average amount of the adjusted basis" of such securities during the
taxable year. In determining the unrelated debt-financed income of the
Company, an allocable portion of deductions directly connected with the
Company's debt-financed property is taken into account. Thus, for instance,
a percentage of capital losses from debt-financed securities (based on the
debt/basis percentage calculation described above) would offset gains treated
as UBTI.
Since the calculation of the Company's "unrelated debt-financed
income" is complex and will depend in large part on the amount of leverage,
if any, used by the Company from time to time,5 it is impossible to predict
what percentage of the Company's income and gains will be treated as UBTI for
a Member which is an exempt organization. An exempt organization's share of
the income or gains of the Company which is treated as UBTI may not be offset
by losses of the exempt organization either from the Company or otherwise,
unless such losses are treated as attributable to an unrelated trade or
business (e.g., losses from securities for which there is acquisition
indebtedness).
To the extent that the Company generates UBTI, the applicable
Federal tax rate for such a Member generally would be either the corporate or
trust tax rate depending upon the nature of the particular exempt
organization. An exempt organization may be required to support, to the
satisfaction of the Service, the method used to calculate its UBTI. The
Company will be required to report to a Member which is an exempt
organization information as to the portion of its income and gains from the
Company for each year which will be treated as UBTI. The calculation of such
amount with respect to transactions entered into by the Company is
4 Moreover, income realized from option writing and futures contract
transactions generally would not constitute UBTI.
5 The calculation of a particular exempt organization's UBTI would also be
affected if it incurs indebtedness to finance its investment in the
Company. An exempt organization is required to make estimated tax
payments with respect to UBTI.
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highly complex, and there is no assurance that the Company's calculation of
UBTI will be accepted by the Service.
In general, if UBTI is allocated to an exempt organization such
as a qualified retirement plan or a private foundation, the portion of the
Company's income and gains which is not treated as UBTI will continue to be
exempt from tax, as will the organization's income and gains from other
investments which are not treated as UBTI. Therefore, the possibility of
realizing UBTI from its investment in the Company generally should not affect
the tax-exempt status of such an exempt organization.6 However, a charitable
remainder trust will not be exempt from Federal income tax under Section
664(c) of the Code for any year in which it has UBTI. A title-holding
company will not be exempt from tax if it has certain types of UBTI.
Moreover, the charitable contribution deduction for a trust under Section
642(c) of the Code may be limited for any year in which the trust has UBTI.
A prospective investor should consult its tax adviser with respect to the tax
consequences of receiving UBTI from the Company. (See "ERISA
Considerations.")
CERTAIN ISSUES PERTAINING TO SPECIFIC EXEMPT ORGANIZATIONS
Private Foundations. Private foundations and their managers are
subject to excise taxes if they invest "any amount in such a manner as to
jeopardize the carrying out of any of the foundation's exempt purposes."
This rule requires a foundation manager, in making an investment, to exercise
"ordinary business care and prudence" under the facts and circumstances
prevailing at the time of making the investment, in providing for the
short-term and long-term needs of the foundation to carry out its exempt
purposes. The factors which a foundation manager may take into account in
assessing an investment include the expected rate of return (both income and
capital appreciation), the risks of rising and falling price levels, and the
need for diversification within the foundation's portfolio.
In order to avoid the imposition of an excise tax, a private
foundation may be required to distribute on an annual basis its
"distributable amount," which includes, among other things, the private
foundation's "minimum investment return," defined as 5% of the excess of the
fair market value of its nonfunctionally related assets (assets not used or
held for use in carrying out the foundation's exempt purposes), over certain
indebtedness incurred by the foundation in connection with such assets. It
appears that a foundation's investment in the Company would most probably be
classified as a nonfunctionally related asset. A determination that an
Interest in the Company is a nonfunctionally related asset could conceivably
cause cash flow problems for a prospective Member which is a private
foundation. Such an organization could be required to make distributions in
an amount determined by reference to unrealized appreciation in the value of
its Interest in the Company. Of course, this factor would create less of a
problem to the extent
6 Certain exempt organizations which realize UBTI in a taxable year will
not constitute "qualified organizations" for purposes of Section
514(c)(9)(B)(vi)(I) of the Code, pursuant to which, in limited
circumstances, income from certain real estate partnerships in which
such organizations invest might be treated as exempt from UBTI. A
prospective tax-exempt Member should consult its tax adviser in this
regard.
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that the value of the investment in the Company is not significant in
relation to the value of other assets held by a foundation.
In some instances, an investment in the Company by a private
foundation may be prohibited by the "excess business holdings" provisions of
the Code. For example, if a private foundation (either directly or together
with a "disqualified person") acquires more than 20% of the capital interest
or profits interest of the Company, the private foundation may be considered
to have "excess business holdings." If this occurs, such foundation may be
required to divest itself of its Interest in the Company in order to avoid
the imposition of an excise tax. However, the excise tax will not apply if
at least 95% of the gross income from the Company is "passive" within the
applicable provisions of the Code and Regulations. Although there can be no
assurance, the Company believes that it will meet this 95% gross income test.
A substantial percentage of investments of certain "private
operating foundations" may be restricted to assets directly devoted to their
tax-exempt purposes. Otherwise, generally, rules similar to those discussed
above govern their operations.
Qualified Retirement Plans. Employee benefit plans subject to
the provisions of ERISA, Individual Retirement Accounts and Keogh Plans
should consult their counsel as to the implications of such an investment
under ERISA. (See "ERISA Considerations.")
Endowment Funds. Investment managers of endowment funds should
consider whether the acquisition of an Interest is legally permissible. This
is not a matter of Federal law, but is determined under state statutes. It
should be noted, however, that under the Uniform Management of Institutional
Funds Act, which has been adopted, in various forms, by a large number of
states, participation in investment partnerships or similar organizations in
which funds are commingled and investment determinations are made by persons
other than the governing board of the endowment fund is allowed.
STATE AND LOCAL TAXATION
In addition to the Federal income tax consequences described
above, prospective investors should consider potential state and local tax
consequences of an investment in the Company. State and local tax laws
differ in the treatment of limited liability companies such as the Company.
A few jurisdictions may impose entity level taxes on a limited liability
company if it is found to have sufficient contact with that jurisdiction.
Such taxes are frequently based on the income and capital of the entity that
is allocated to the jurisdiction. Although there can be no assurance, except
as noted below, the Company intends to conduct its activities so that it will
not be subject to entity level taxation by any state or local jurisdiction.
State and local laws often differ from Federal income tax laws
with respect to the treatment of specific items of income, gain, loss,
deduction and credit. A Member's distributive share of the taxable income or
loss of the Company generally will be required to be included in determining
its reportable income for state and local tax purposes in the jurisdiction in
which it is a resident.
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The Company, which is treated as a partnership for New York State
and New York City income tax purposes, should not be subject to the New York
City unincorporated business tax, which is not imposed on a partnership which
purchases and sells securities for its "own account." By reason of a similar
"own account" exemption, it is also expected that a nonresident individual
Member should not be subject to New York State personal income tax with
respect to his share of income or gain realized directly by the Company. A
nonresident individual Member will not be subject to New York City earnings
tax on nonresidents with respect to his investment in the Company.
Individual Members who are residents of New York State and New
York City should be aware that the New York State and New York City personal
income tax laws limit the deductibility of itemized deductions for individual
taxpayers at certain income levels. These limitations may apply to a
Member's share of some or all of the Company's expenses. Prospective Members
are urged to consult their tax advisers with respect to the impact of these
provisions and the Federal limitations on the deductibility of certain
itemized deductions and investment expenses on their New York State and New
York City tax liability.
For purposes of the New York State corporate franchise tax and
the New York City general corporation tax, a corporation generally is treated
as doing business in New York State and New York City, respectively, and is
subject to such corporate taxes as a result of the ownership of a partnership
interest in a partnership which does business in New York State and New York
City, respectively.7 Each of the New York State and New York City corporate
taxes are imposed, in part, on the corporation's taxable income or capital
allocable to the relevant jurisdiction by application of the appropriate
allocation percentages. Moreover, a non-New York corporation which does
business in New York State may be subject to a New York State license fee. A
corporation which is subject to New York State corporate franchise tax solely
as a result of being a non-managing member in a New York partnership may,
under certain circumstances, elect to compute its New York State corporate
franchise tax by taking into account only its distributive share of such
partnership's income and loss. There is currently no similar provision in
effect for purposes of the New York City general corporation tax.
Regulations under both the New York State corporate franchise tax
and the New York City general corporation tax, however, provide an exception
to this general rule in the case of a "portfolio investment partnership",
which is defined, generally, as a partnership which meets the gross income
requirements of Section 851(b)(2) of the Code. New York State (but not New
York City) has adopted regulations that also include income and gains from
commodity transactions described in Section 864(b)(2)(B)(iii) as qualifying
gross income for this purpose. The Company's qualification as such a
portfolio investment partnership must be determined on
7 New York State (but not New York City) generally exempts from corporate
franchise tax a non-New York corporation which (i) does not actually or
constructively own a 1% or greater limited partnership interest in a
partnership doing business in New York and (ii) has a tax basis in such
limited partnership interest not greater than $1 million.
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an annual basis and, with respect to a taxable year, the Company may not
qualify as a portfolio investment partnership.
A trust or other unincorporated organization which by reason of
its purposes or activities is exempt from Federal income tax is also exempt
from New York State and New York City personal income tax. A non-stock
corporation which is exempt from Federal income tax is generally presumed to
be exempt from New York State corporate franchise tax and New York City
general corporation tax. New York State imposes a tax with respect to such
exempt entities on UBTI (including unrelated debt-financed income) at a rate
which is currently equal to the New York State corporate franchise tax rate
(plus the corporate surtax). There is no New York City tax on the UBTI of an
otherwise exempt entity.
Each prospective corporate Member should consult its tax adviser
with regard to the New York State and New York City tax consequences of an
investment in the Company.
ERISA CONSIDERATIONS
Persons who are fiduciaries with respect to an employee benefit
plan, IRA, Keogh plan or other arrangement subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or the Code (an "ERISA
Plan") should consider, among other things, the matters described below
before determining whether to invest in the Company.
ERISA imposes certain general and specific responsibilities on
persons who are fiduciaries with respect to an ERISA Plan, including
prudence, diversification, prohibited transaction and other standards. In
determining whether a particular investment is appropriate for an ERISA Plan,
Department of Labor ("DOL") regulations provide that a fiduciary of an ERISA
Plan must give appropriate consideration to, among other things, the role
that the investment plays in the ERISA Plan's portfolio, taking into
consideration whether the investment is designed reasonably to further the
ERISA Plan's purposes, an examination of the risk and return factors, the
portfolio's composition with regard to diversification, the liquidity and
current return of the total portfolio relative to the anticipated cash flow
needs of the ERISA Plan, the income tax consequences of the investment (see
"Tax Aspects - Unrelated Business Taxable Income" and "- Certain Issues
Pertaining to Specific Exempt Organizations"), and the projected return of
the total portfolio relative to the ERISA Plan's funding objectives. Before
investing the assets of an ERISA Plan in the Company, a fiduciary should
determine whether such an investment is consistent with its fiduciary
responsibilities and the foregoing regulations. For example, a fiduciary
should consider whether an investment in the Company may be too illiquid or
too speculative for a particular ERISA Plan, and whether the assets of the
ERISA Plan would be sufficiently diversified. If a fiduciary with respect to
any such ERISA Plan breaches his responsibilities with regard to selecting an
investment or an investment course of action for such ERISA Plan, the
fiduciary may be held personally liable for losses incurred by the ERISA Plan
as a result of such breach.
Because the Company will register as an investment company under
the 1940 Act, the underlying assets of the Company should not be considered
to be "plan assets" of the ERISA Plans investing in the Company for purposes
of ERISA's fiduciary responsibility and prohibited
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transaction rules. Thus, neither the Adviser nor any of the Managers will be
fiduciaries within the meaning of ERISA.
The Board of Managers will require an ERISA Plan proposing to
invest in the Company to represent that it, and any fiduciaries responsible
for the Plan's investments, are aware of and understand the Company's
investment objective, policies and strategies, that the decision to invest
plan assets in the Company was made with appropriate consideration of
relevant investment factors with regard to the ERISA Plan and is consistent
with the duties and responsibilities imposed upon fiduciaries with regard to
their investment decisions under ERISA.
Certain prospective Plan investors may currently maintain
relationships with the Adviser or the Managers, or with other entities which
are affiliated with the Adviser or the Managers. Each of such persons may be
deemed to be a party in interest to and/or a fiduciary of any ERISA Plan to
which it provides investment management, investment advisory or other
services. ERISA prohibits ERISA Plan assets to be used for the benefit of a
party in interest and also prohibits an ERISA Plan fiduciary from using its
position to cause the ERISA Plan to make an investment from which it or
certain third parties in which such fiduciary has an interest would receive a
fee or other consideration. ERISA Plan investors should consult with counsel
to determine if participation in the Company is a transaction which is
prohibited by ERISA or the Code. Fiduciaries of ERISA or Benefit Plan
investors will be required to represent that the decision to invest in the
Company was made by them as fiduciaries that are independent of such
affiliated persons, that are duly authorized to make such investment decision
and that have not relied on any individualized advice or recommendation of
such affiliated persons, as a primary basis for the decision to invest in the
Company.
The provisions of ERISA are subject to extensive and continuing
administrative and judicial interpretation and review. The discussion of
ERISA contained in this Confidential Memorandum, is, of necessity, general
and may be affected by future publication of regulations and rulings.
Potential investors should consult with their legal advisors regarding the
consequences under ERISA of the acquisition and ownership of Interests.
ADDITIONAL INFORMATION AND SUMMARY OF
LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary description of additional items and of
select provisions of the Company Agreement which are not described elsewhere
in this Confidential Memorandum. The description of such items and
provisions is not definitive and reference should be made to the complete
text of the Company Agreement, which is attached hereto as Appendix A.
MEMBER INTERESTS
Persons who purchase Interests in the offering being made hereby
will be Members. The Adviser and its affiliates may contribute capital to
and maintain an investment in the Company in an amount not exceeding 4.9% of
the total outstanding capital of the Company, and to that extent will be a
Member of the Company. The Adviser, or its successor as investment
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adviser of the Company, will also be a Special Advisory Member of the
Company. In that regard, the Company has established a Special Advisory
Account solely for the purpose of receiving the Incentive Allocation. The
interest of the Special Advisory Member has no right to participate in the
income or gains of the Company, no voting rights and no right to a share of
the assets of the Company upon its liquidation, except to the extent that the
Special Advisory Member has received or is entitled to receive the Incentive
Allocation credited to the Special Advisory Account and all or a portion of
that allocation has not been withdrawn. The Adviser may not contribute to
the Company as Special Advisory Member.
LIABILITY OF MEMBERS
Under Delaware law and the Company Agreement, each Member will be
liable for the debts and obligations of the Company only to the extent of any
contributions to the capital of the Company (plus any accretions in value
thereto prior to withdrawal) and a Member, in the discretion of the Board of
Managers, may be obligated to return to the Company amounts distributed to
him in accordance with the Company Agreement in certain circumstances where
after giving effect to the distribution, certain liabilities of the Company
exceed the fair market value of the Company's assets.
DUTY OF CARE OF BOARD OF MANAGERS
The Company Agreement provides that a Manager shall not be liable
to the Company or any of the Members for any loss or damage occasioned by any
act or omission in the performance of the Manager's services as such in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the Manager's office. The
Company Agreement also contains provisions for the indemnification, to the
extent permitted by law, of a Manager by the Company (but not by the Members
individually) against any liability and expense to which the Manager may be
liable which arise in connection with the performance of the Manager's
activities on behalf of the Company. Managers shall not be personally liable
to any Member for the repayment of any positive balance in the Member's
capital account or for contributions by the Member to the capital of the
Company or by reason of any change in the Federal or state income tax laws
applicable to the Company or its investors. The rights of indemnification
and exculpation provided under the Company Agreement shall not be construed
so as to provide for indemnification of a Manager for any liability
(including liability under Federal securities laws which, under certain
circumstances, impose liability even on persons that act in good faith), to
the extent (but only to the extent) that such indemnification would be in
violation of applicable law, but shall be construed so as to effectuate the
applicable provisions of the Company Agreement to the fullest extent
permitted by law.
AMENDMENT OF THE COMPANY AGREEMENT
The Company Agreement may generally be amended, in whole or in
part, with the approval of the Board of Managers (subject to the approval of
a majority of the Managers who are not "interested persons," as defined by
the 1940 Act, of the Company, if required by the 1940 Act) without the
approval of other Members and if required by the 1940 Act, the approval
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<PAGE> 84
of the Members by such vote as is required by the 1940 Act. In addition,
certain amendments to the Company Agreement involving capital accounts and
allocations thereto may not be made without the written consent of any Member
adversely affected thereby or unless each Member has received written notice
of the amendment and any Member objecting to the amendment has been allowed a
reasonable opportunity (pursuant to any procedures as may be prescribed by
the Board of Managers) to tender its entire Interest for repurchase by the
Company. However, the Board of Managers may at any time, without the consent
of the other Members of the Company, amend the Company Agreement, among other
things, to satisfy the requirements or to reflect any relaxation of such
requirements in the future of the Bank Holding Company Act or other U.S. or
Canadian banking laws or any regulations, guidelines or policies or
interpretations of the banking regulatory agencies or the staff thereof.
POWER OF ATTORNEY
By subscribing for an Interest in the Company, each Member will
appoint each of the Managers his attorney-in-fact for purposes of filing
required certificates and documents relating to the formation and maintenance
of the Company as a limited liability company under Delaware law or signing
all instruments effecting authorized changes in the Company or the Company
Agreement and conveyances and other instruments deemed necessary to effect
the dissolution or termination of the Company.
The power-of-attorney granted as part of each Member's
subscription agreement is a special power-of-attorney and is coupled with an
interest in favor of the Board of Managers and as such shall be irrevocable
and will continue in full force and effect notwithstanding the subsequent
death or incapacity of any Member granting the power-of-attorney, and shall
survive the delivery of a transfer by a Member of the whole or any portion of
the Member's Interest, except that where the transferee thereof has been
approved by the Board of Managers for admission to the Company as a
substitute Member, or upon the withdrawal of a Member from the Company
pursuant to a periodic tender or otherwise this power-of-attorney given by
the transferor shall terminate.
TERM, DISSOLUTION AND LIQUIDATION
The Company shall be dissolved:
upon the affirmative vote to dissolve the Company by: (1)
the Board of Managers or (2) Members holding at least
two-thirds (2/3) of the total number of votes eligible to
be cast by all Members;
upon the expiration of any two year period which commences
on the date on which any Member has submitted a written
notice to the Company requesting to tender its entire
Interest for repurchase by the Company if that Interest has
not been repurchased by the Company;
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<PAGE> 85
- upon the failure of Members to elect successor Managers at
a meeting called by the Adviser when no Manager remains to
continue the business of the Company; or
as required by operation of law.
Upon the occurrence of any event of dissolution, the Board of
Managers or CIBC WM, acting as liquidator under appointment by the Board of
Managers (or another liquidator, if the Board of Managers does not appoint
CIBC WM to act as liquidator or is unable to perform this function) are
charged with winding up the affairs of the Company and liquidating its
assets. Net profits or net losses during the fiscal period including the
period of liquidation will be allocated as described in the section titled
"Capital Accounts and Allocations - Allocation of Net Profits and Net Loss."
Upon the liquidation of the Company, its assets are to be
distributed (1) first to satisfy the debts, liabilities and obligations of
the Company (other than debts to Members) including actual or anticipated
liquidation expenses, (2) next to repay debts owing to the Members, and (3)
finally to the Members proportionately in accordance with the balances in
their respective capital accounts. Assets may be distributed in-kind on a
pro rata basis if the Board of Managers or liquidator determines that the
distribution of assets in-kind would be in the interests of the Members in
facilitating an orderly liquidation.
REPORTS TO MEMBERS
The Company will furnish to Members as soon as practicable after
the end of each taxable year such information as is necessary for such
Members to complete Federal and state income tax or information returns,
along with any other tax information required by law. (See "Additional Risk
Factors - Special Risks of Multi-Manager Structure.") The Company will send
to Members an unaudited semi-annual and an audited annual report within 60
days after the close of the fiscal period for which it is being made, or as
otherwise required by the 1940 Act. Quarterly reports regarding the
Company's operations during the period will also be sent to Members.
FISCAL YEAR
For accounting purposes, the Company's fiscal year is the
12-month period ending on March 31. The first fiscal year of the Company
will commence on the date of the initial closing and will end on March 31,
2000. The 12-month period ending December 31 of each year will be the
taxable year of the Company.
ACCOUNTANTS AND LEGAL COUNSEL
The Board of Managers has selected Ernst & Young LLP as the
independent public accountants of the Company. Ernst & Young LLP's principal
business address is located at 787 Seventh Avenue, 15th Floor, New York, New
York.
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<PAGE> 86
Schulte Roth & Zabel LLP, New York, New York, acts as legal
counsel to the Company and to the Adviser in connection with this
Confidential Memorandum and as legal counsel to the Adviser, CIBC WM and its
affiliates with respect to certain other matters. Stroock & Stroock & Lavan
LLP, New York, New York, acts as legal counsel to the Board of Managers.
CUSTODIAN
PFPC Trust Company (the "Custodian") serves as the primary
custodian of the assets of the Company and the Investment Funds managed by
the Subadvisers, and may maintain custody of such assets with domestic and
foreign subcustodians (which may be banks, trust companies, securities
depositories and clearing agencies) approved by the Board of Managers.
Assets of the Company and of the Investment Funds are not held by the Adviser
or Subadvisers, respectively, or commingled with the assets of other
accounts, other than to the extent that securities are held in the name of a
custodian in a securities depository, clearing agency or omnibus customer
account of such custodian. The Custodian's principal business address is
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113.
INQUIRIES
Inquiries concerning the Company and Interests (including
information concerning subscription and withdrawal procedures) should be
directed to:
CIBC Oppenheimer Advisers, L.L.C.
c/o CIBC World Markets Corp.
One World Financial Center
31st Floor
200 Liberty Street
New York, New York 10281
Telephone: 212-667-4225
Telecopier: 212-667-5689
For additional information contact:
Howard M. Singer
Managing Director
CIBC World Markets Corp.
* * * * *
All potential investors in the Company are encouraged to consult
appropriate legal and tax counsel.
-78-
<PAGE> 87
APPENDIX A
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 88
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements:
As Registrant has no assets, financial statements
are omitted.
(2) Exhibits:
(a) (1) Certificate of Formation of Limited
Liability Company.
(2) Form of Limited Liability Company
Agreement.
(b) Not Applicable.
(c) Not Applicable.
(d) See Item 24(2)(a)(2).
(e) Not Applicable.
(f) Not Applicable.
(g) Form of Investment Advisory Agreement.*
(h) Form of Placement Agency Agreement.*
(i) Not Applicable.
(j) Form of Custody Agreement.*
(k) (1) Form of Administrative Services
Agreement.*
(2) Form of Administration, Accounting and
Investor Services Agreement.*
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
(p) Not Applicable.
(q) Not Applicable.
(r) Not Applicable.
* To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
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<PAGE> 89
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Blue Sky Fees and Expenses (including fees
of counsel).................................
Transfer Agent fees.............................
Accounting fees and expenses....................
Legal fees and expenses.........................
Printing and engraving..........................
Offering Expenses...............................
Miscellaneous...................................
-----------
$
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
After completion of the private offering of interests, Registrant expects
that no person will be directly or indirectly under common control with
Registrant.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Limited Liability Company Interests 1 (Registrant anticipates that as a result of
the initial private offering of interests there
will be more than 100 record holders of such
interests.)
</TABLE>
ITEM 29. INDEMNIFICATION
Reference is made to Section 3.7 of Registrant's Form of Limited
Liability Company Agreement (the "Company Agreement") filed as Exhibit 2(a)(2)
hereto. Registrant hereby undertakes that it will apply the indemnification
provision of the Company Agreement in a manner consistent with Release 40-11330
of the Securities and Exchange Commission under the Investment Company Act of
1940, so long as the interpretation therein of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the CIBC Oppenheimer Advisers, L.L.C.
(the "Adviser") and Registrant's Managers, maintains insurance on behalf of any
person who is or was a Independent Manager, officer, employee, or agent of
Registrant, against certain liability asserted against him or her and incurred
by him or her or arising out of his or her position. However, in no event will
Registrant pay that portion of the premium, if any, for insurance to indemnify
any such person or any act for which Registrant itself is not permitted to
indemnify.
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<PAGE> 90
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
A description of any other business, profession, vocation, or employment
of a substantial nature in which the Adviser, and each director, executive
officer, managing member or partner of the Adviser, is or has been, at any time
during the past two fiscal years, engaged in for his or her own account or in
the capacity of director, officer, employee, managing member, partner or
trustee, is set forth in Registrant's Confidential Memorandum in the section
entitled "THE ADVISER AND CIBC WM." Information as to the directors and officers
of the Adviser is included in its Form ADV as filed with the Commission (File
No. 801-55640), and is incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Administrator maintains certain required accounting related and
financial books and records of Registrant at PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809. The other required books and records are maintained
by the Adviser, One World Financial Center, 200 Liberty Street, New York, New
York 10281.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
Not Applicable.
C-3
<PAGE> 91
FORM N-2
WHISTLER FUND, L.L.C.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Briarcliff
Manor, and State of New York, on the 2nd day of July, 1999.
WHISTLER FUND, L.L.C.
By: /s/ Paul Belica
---------------
Name: Paul Belica
Title: Manager
C-4
<PAGE> 92
FORM N-2
WHISTLER FUND, L.L.C.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DOCUMENT DESCRIPTION
<S> <C>
(a) (1) Certificate of Formation of Limited Liability Company
(2) Form of Limited Liability Company Agreement
(c) Not Applicable
(d) See Exhibit (a)(2) above
(e) Not Applicable
(f) Not Applicable
(g) Form of Investment Advisory Agreement*
(h) Form of Placement Agency Agreement*
(i) Not Applicable
(j) Form of Custody Agreement*
(k) (1) Form of Administrative Services Agreement*
(2) Form of Administration, Accounting and Investor Services
Agreement*
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
(p) Not Applicable
(q) Not Applicable
</TABLE>
* To be filed by amendment.
C-5
<PAGE> 1
EXHIBIT (a)(1)
CERTIFICATE OF FORMATION
OF
WHISTLER FUND, L.L.C.
---------------------
UNDER SECTION 18-201 OF THE LIMITED LIABILITY COMPANY ACT
OF THE STATE OF DELAWARE
Article 1. Name. The name of the limited liability company (the
"Company") is WHISTLER FUND, L.L.C.
Article 2. Registered Office; Registered Agent. The registered
office of the Company in the State of Delaware is Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805-1297, County of New Castle. The
name and address of the registered agent of the Company for service of process
on the Company in the State of Delaware is Corporation Service Company, 1013
Centre Road, Wilmington, Delaware 19805-1297, County of New Castle.
Article 3. Effective Date. The Certificate of Formation shall
be effective upon filing.
IN WITNESS WHEREOF, this certificate has been subscribed on this
30th day of June, 1999 by the undersigned who affirms that the statements made
herein are true under the penalties of perjury.
/s/ Paul Belica
---------------
Name: Paul Belica
Title: Manager
<PAGE> 1
EXHIBIT (a)(2)
------------------------------------
WHISTLER FUND, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
DATED AS OF JULY 14, 1999
------------------------------------
ONE WORLD FINANCIAL CENTER, 31ST FLOOR
200 LIBERTY STREET
NEW YORK, NEW YORK 10281
(212) 667-4225
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I DEFINITIONS......................................................................................1
ARTICLE II ORGANIZATION; ADMISSION OF MEMBERS.............................................................10
2.1 Formation of Limited Liability Company.............................................................10
2.2 Name...............................................................................................10
2.3 Principal and Registered Office....................................................................10
2.4 Duration...........................................................................................10
2.5 Objective and Business of the Company..............................................................11
2.6 Board of Managers..................................................................................11
2.7 Members............................................................................................12
2.8 Special Advisory Member............................................................................12
2.9 Organizational Member..............................................................................12
2.10 Both Managers and Members.........................................................................12
2.11 Limited Liability.................................................................................13
ARTICLE III MANAGEMENT....................................................................................13
3.1 Management and Control.............................................................................13
3.2 Actions by the Board of Managers...................................................................14
3.3 Meetings of Members................................................................................14
3.4 Custody of Assets of the Company...................................................................15
3.5 Other Activities of Members and Managers...........................................................15
3.6 Duty of Care.......................................................................................16
3.7 Indemnification....................................................................................16
3.8 Fees, Expenses and Reimbursement...................................................................18
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV TERMINATION OF STATUS OF ADVISER AND MANAGERS, TRANSFERS AND REPURCHASES.......................20
4.1 Termination of Status of the Adviser...............................................................20
4.2 Termination of Status of a Manager.................................................................20
4.3 Removal of the Managers............................................................................20
4.4 Transfer of Interests of Members...................................................................20
4.5 Transfer of Interests of Special Advisory Member...................................................21
4.6 Repurchase of Interests............................................................................21
ARTICLE V CAPITAL........................................................................................ 24
5.1 Contributions to Capital...........................................................................24
5.2 Rights of Members to Capital.......................................................................25
5.3 Capital Accounts...................................................................................25
5.4 Allocation of Net Profit and Loss..................................................................25
5.5 Allocation of Insurance Premiums and Proceeds......................................................25
5.6 Allocation of Certain Withholding Taxes and Other Expenditures.....................................26
5.7 Reserves...........................................................................................26
5.8 Incentive Allocation...............................................................................27
5.9 Allocation of Organizational Expenses..............................................................28
5.10 Tax Allocations...................................................................................28
5.11 Distributions.....................................................................................30
5.12 Foreign Withholding...............................................................................30
ARTICLE VI DISSOLUTION AND LIQUIDATION....................................................................31
6.1 Dissolution........................................................................................31
6.2 Liquidation of Assets..............................................................................31
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS..................................................32
7.1 Accounting and Reports.............................................................................32
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.2 Determinations by the Board of Managers............................................................33
7.3 Valuation of Assets................................................................................33
ARTICLE VIII MISCELLANEOUS PROVISIONS.....................................................................34
8.1 Amendment of Limited Liability Company Agreement...................................................34
8.2 Special Power of Attorney..........................................................................35
8.3 Notices............................................................................................36
8.4 Agreement Binding Upon Successors and Assigns......................................................36
8.5 Applicability of 1940 Act and Form N-2.............................................................37
8.6 Choice of Law; Arbitration.........................................................................37
8.7 Not for Benefit of Creditors.......................................................................38
8.8 Consents...........................................................................................38
8.9 Merger and Consolidation...........................................................................38
8.10 Pronouns..........................................................................................39
8.11 Confidentiality...................................................................................39
8.12 Certification of Non-Foreign Status...............................................................39
8.13 Severability......................................................................................40
8.14 Filing of Returns.................................................................................40
8.15 Tax Matters Partner...............................................................................40
8.16 Section 754 Election..............................................................................41
</TABLE>
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<PAGE> 5
WHISTLER FUND, L.L.C
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT of Whistler Fund, L.L.C. (the
"Company") is dated as of July 14, 1999 by and among Jesse H. Ausubel, Charles
F. Barber, Paul Belica and Thomas W. Brock as the Managers, CIBC Oppenheimer
Advisers, L.L.C., as the Special Advisory Member, Jesse H. Ausubel as the
Organizational Member, and those persons hereinafter admitted as Members.
W I T N E S S E T H :
WHEREAS, the Company has heretofore been formed as a limited liability
company under the Delaware Limited Liability Company Act pursuant to an initial
Certificate of Formation (the "Certificate") dated and filed with the Secretary
of State of Delaware on July 1, 1999;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
----------------------
ARTICLE I
DEFINITIONS
----------------------
For purposes of this Agreement:
<TABLE>
<S> <C>
ADMINISTRATOR The person who provides administrative services to the Company
pursuant to an administrative services agreement.
ADVISER CIBC Oppenheimer Advisers, L.L.C., a limited liability company
organized under Delaware law, or any person who may hereinafter
serve as the investment adviser to the Company pursuant to an
Investment Advisory Agreement.
ADVISERS ACT The Investment Advisers Act of 1940 and the rules, regulations
and orders thereunder, as amended from time to time, or any
successor law.
AFFILIATE An affiliated person of a person as such term is defined in the
1940 Act.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
AGREEMENT This Limited Liability Company Agreement, as amended from time
to time.
ALLOCATION CHANGE With respect to each Member for each Allocation Period, the
difference between:
(1) the sum of (a) the balance of such Member's Capital
Account as of the close of the Allocation Period (after
giving effect to all allocations to be made to such
Member's Capital Account as of such date other than any
Incentive Allocation to be debited against such Member's
Capital Account), plus (b) any debits to such Member's
Capital Account during the Allocation Period to reflect
any actual or deemed distributions or repurchases with
respect to such Member's Interest, plus (c) any debits to
such Member's Capital Account during the Allocation
Period to reflect any Insurance premiums allocable to
such Member, plus (d) any debits to such Member's Capital
Account during the Allocation Period to reflect any items
allocable to such Member's Capital Account pursuant to
Section 5.6 hereof; and
(2) the sum of (a) the balance of such Member's Capital
Account as of the commencement of the Allocation Period,
plus (b) any credits to such Member's Capital Account
during the Allocation Period to reflect any
contributions by such Member to the capital of the
Company, plus (c) any credits to such Member's Capital
Account during the Allocation Period to reflect any
Insurance proceeds allocable to such Member.
If the amount specified in clause (1) exceeds the amount specified
in clause (2), such difference shall be a POSITIVE ALLOCATION
CHANGE, and if the amount specified in clause (2) exceeds the amount
specified in clause (1), such difference shall be a NEGATIVE
ALLOCATION CHANGE.
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
ALLOCATION PERIOD With respect to each Member, the period commencing as of the date
of admission of such Member to the Company, and thereafter each
period commencing as of the day following the last day of the
preceding Allocation Period with respect to such Member, and
ending at the close of business on the first to occur of the
following:
(1) the last day of a Fiscal Year;
(2) the day as of which the Company entire Interest of
such Member;
(3) the day as of which the Company admits as a substituted
Member a person to whom the Interest of such Member has
been Transferred (unless there is no change of beneficial
ownership); and
(4) the day as of which the Adviser's status as the Special
Advisory Member is terminated pursuant to Section 4.1
hereof.
BOARD OF MANAGERS The Board of Managers established pursuant to Section 2.6.
CAPITAL ACCOUNT With respect to each Member, the capital account established and
maintained on behalf of each Member pursuant to Section 5.3 hereof.
CAPITAL PERCENTAGE A percentage established for each Member on the Company's books as
of each Expense Allocation Date. The Capital Percentage of a Member
on an Expense Allocation Date shall be determined by dividing the
amount of capital contributed to the Company by the Member pursuant
to Section 5.1 hereof by the sum of the capital contributed to the
Company by each Member pursuant to Section 5.1 hereof on or prior
to such Expense Allocation Date. The sum of the Capital Percentages
of all Members on each Expense Allocation Date shall equal 100%.
CERTIFICATE The Certificate of Formation of the Company and any amendments
thereto as filed with the office of the Secretary of State of
Delaware.
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
CIBC WM CIBC World Markets Corp., or any successor thereto.
CIBC WM SERVICES Such administrative services as CIBC WM shall provide to the
Company pursuant to a separate written agreement with the
Company as contemplated by Section 3.8(a) hereof.
CLOSING DATE The first date on or as of which a Member other than the
Organizational Member is admitted to the Company.
CODE The United States Internal Revenue Code of 1986, as amended and as
hereafter amended from time to time, or any successor law.
COMPANY The limited liability company governed hereby, as such limited
liability company may from time to time be constituted.
DELAWARE ACT The Delaware Limited Liability Company Act as in effect on the date
hereof and as amended from time to time, or any successor law.
EXPENSE ALLOCATION The Closing Date, and thereafter each day on or before December 1,
DATE 1999, as of which a contribution to the capital of the Company is
made pursuant to Section 5.1 hereof.
FISCAL PERIOD The period commencing on the Closing Date, and thereafter each
period commencing on the day immediately following the last
day of the preceding Fiscal Period, and ending at the close
of business on the first to occur of the following dates:
(1) the last day of a Fiscal Year;
(2) the day preceding any day as of which a contribution to
the capital of the Company is made pursuant to Section
5.1; or
</TABLE>
-4-
<PAGE> 9
<TABLE>
<S> <C>
(3) any day (other than one specified in clause (2) above) as
of which this Agreement provides for any amount to be
credited to or debited against the Capital Account of any
Member, other than an amount to be credited to or
debited against the Capital Accounts of all Members in
accordance with their respective Investment Percentages.
FISCAL YEAR The period commencing on the Closing Date and ending on December 31,
1999, and thereafter each period commencing on January 1 of each
year and ending on December 31 of each year (or on the date of a
final distribution pursuant to Section 6.2 hereof), unless the Board
of Managers shall elect another fiscal year for the Company that is
a permissible taxable year under the Code.
FORM N-2 The Company's Registration Statement on Form N-2 filed with the
Securities and Exchange Commission, as amended from time to time.
INCENTIVE ALLOCATION With respect to each Member, 10% of the amount, determined as of the
close of each Allocation Period with respect to such Member, by
which such Member's Positive Allocation Change for such Allocation
Period, if any, exceeds any positive balance in such Member's Loss
Recovery Account as of the most recent prior date as of which any
adjustment has been made thereto.
INDEPENDENT MANAGERS Those Managers who are not "interested persons" of the Company as
such term is defined in the 1940 Act.
INSURANCE One or more "key man" insurance policies on the life of any
principal of a member of the Adviser, the benefits of which are
payable to the Company.
INTEREST The entire ownership interest in the Company at any particular
time of a Member or the Special Advisory Member, or other person to
whom an Interest of a Member or portion thereof has been transferred
pursuant to Section 4.4 hereof, including the rights and obligations
of such Member or other person under this Agreement and the Delaware
Act.
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C>
INVESTMENT ADVISORY A separate written agreement entered into by the Company pursuant to
AGREEMENT which the Adviser provides investment advisory services to the
Company.
INVESTMENT FUNDS Unregistered general or limited partnerships or other pooled
investment vehicles and registered investment companies which are
advised by an Investment Manager or Subadviser.
INVESTMENT MANAGERS Portfolio managers among which the Company deploys some or all of
its assets.
INVESTMENT PERCENTAGE A percentage established for each Member on the Company's books as
of the first day of each Fiscal Period. The Investment Percentage
of a Member for a Fiscal Period shall be determined by dividing
the balance of the Member's Capital Account as of the commencement
of such Fiscal Period by the sum of the Capital Accounts of all of
the Members as of the commencement of such Fiscal Period. The sum of
the Investment Percentages of all Members for each Fiscal Period
shall equal 100%.
LOSS RECOVERY ACCOUNT A memorandum account to be recorded in the books and records of the
Company with respect to each Member, which shall have an initial
balance of zero and which shall be adjusted as follows:
(1) As of the first day after the close of each Allocation
Period for such Member, the balance of the Loss Recovery
Account shall be increased by the amount, if any, of
such Member's Negative Allocation Change for such
Allocation Period and shall be reduced (but not below
zero) by the amount, if any, of such Member's Positive
Allocation Change for such Allocation Period.
(2) The balance of the Loss Recovery Account shall be reduced
(but not below zero) as of the first date as of which the
Capital Account balance of any Member is reduced as a
result of repurchase or transfer with respect to such
Member's Interest by an amount determined by multiplying
(a) such positive balance by b) a fraction, (i) the
numerator of which is equal to the amount of the
repurchase or transfer, and (ii) the denominator
</TABLE>
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<TABLE>
<S> <C>
of which is equal to the balance of such Member's Capital
Account immediately before giving effect to such
repurchase or transfer.
No transferee of any Interest shall succeed to any Loss Recovery
Account balance or portion thereof attributable to the
transferor unless the Transfer by which such transferee received
such Interest did not involve a change of beneficial ownership.
MANAGER An individual designated as a manager of the Company pursuant to the
provisions of Section 2.6 of the Agreement and who serves on the
Board of Managers of the Company.
MEMBER Any person who shall have been admitted to the Company as a member
(including any Manager in such person's capacity as a member of the
Company but excluding any Manager in such person's capacity as a
Manager of the Company) until the Company repurchases the entire
Interest of such person as a member pursuant to Section 4.6 hereof
or a substituted Member or Members are admitted with respect to any
such person's entire Interest as a member pursuant to Section 4.4
hereof; such term includes the Adviser to the extent the Adviser
makes a capital contribution to the Company and shall have been
admitted to the Company as a member, and shall not include the
Special Advisory Member.
NEGATIVE ALLOCATION The meaning given such term in the definition of Allocation Change.
CHANGE
NET ASSETS The total value of all assets of the Company, less an amount equal
to all accrued debts, liabilities and obligations of the Company,
calculated before giving effect to any repurchases of Interests.
NET PROFIT OR NET LOSS The amount by which the Net Assets as of the close of
business on the last day of a Fiscal Period exceed (in the case of
Net Profit) or are less than (in the case of Net Loss) the Net
Assets as of the commencement of the same Fiscal Period (or, with
respect to the initial Fiscal Period of the Company, at the
close of business on the Closing Date), such amount to be adjusted
to exclude:
</TABLE>
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<TABLE>
<S> <C>
(1) the amount of any Insurance premiums or proceeds to be
allocated among the Capital Accounts of the Members
pursuant to Section 5.5 hereof;
(2) any items to be allocated among the Capital Accounts of
the Members on a basis which is not in accordance with
the respective Investment Percentages of all Members as
of the commencement of such Fiscal Period pursuant to
Sections 5.6 and 5.7 hereof; and
(3) Organizational Expenses allocated among the Capital
Accounts of the Members pursuant to Section 5.9 hereof.
1940 ACT The Investment Company Act of 1940 and the rules, regulations and
orders thereunder, as amended from time to time, or any successor
law.
1934 ACT The Securities Exchange Act of 1934 and the rules, regulations and
orders thereunder, as amended from time to time, or any successor
law.
ORGANIZATIONAL EXPENSES The expenses incurred by the Company in connection with its
formation, its initial registration as an investment company under
the 1940 Act, and the initial offering of Interests.
ORGANIZATIONAL MEMBER Jesse H. Ausubel
POSITIVE ALLOCATION The meaning given such term in the definition of Allocation Change.
CHANGE
SECURITIES Securities (including, without limitation, equities, debt
obligations, options, and other "securities" as that term is defined
in Section 2(a)(36) of the 1940 Act) and any contracts for forward
or future delivery of any security, debt obligation or currency, or
commodity, all manner of derivative instruments and any contracts
based on any index or group of securities, debt obligations or
currencies, or commodities, and any options thereon.
</TABLE>
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<TABLE>
<S> <C>
SPECIAL ADVISORY ACCOUNT A capital account established and maintained on behalf of the
Special Advisory Member pursuant to Section 5.3 hereof solely for
the purpose of receiving the Incentive Allocation.
SPECIAL ADVISORY MEMBER The Adviser in its capacity as the investment adviser to the
Company.
SUBADVISERS Those Investment Managers for which a separate investment
vehicle has been created in which the Investment Manager serves as
general partner and the Company is the sole limited partner and
those Investment Managers who manage the Company's assets
directly through a separate managed account.
TRANSFER The assignment, transfer, sale, encumbrance, pledge or other
disposition of all or any portion of an Interest, including any
right to receive any allocations and distributions attributable to
an Interest.
</TABLE>
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-------------------------
ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS
-------------------------
2.1 FORMATION OF LIMITED LIABILITY COMPANY
The Board of Managers shall execute and file in accordance with
the Delaware Act any amendment to the Certificate and shall execute and file
with applicable governmental authorities any other instruments, documents and
certificates which, in the opinion of the Company's legal counsel, may from time
to time be required by the laws of the United States of America, the State of
Delaware or any other jurisdiction in which the Company shall determine to do
business, or any political subdivision or agency thereof, or which such legal
counsel may deem necessary or appropriate to effectuate, implement and continue
the valid existence and business of the Company.
2.2 NAME.
The name of the Company shall be "Whistler Fund, L.L.C." or such
other name as the Board of Managers may hereafter adopt upon (i) causing an
appropriate amendment to the Certificate to be filed in accordance with the
Delaware Act and (ii) sending notice thereof to each Member.
2.3 PRINCIPAL AND REGISTERED OFFICE.
The Company shall have its principal office at One World
Financial Center, 31st Floor, 200 Liberty Street, New York, New York 10281, or
at such other place designated from time to time by the Board of Managers.
The Company shall have its registered office in Delaware at 1013
Center Road, Wilmington, Delaware 19805-1297, and shall have Corporation Service
Company as its registered agent for service of process in Delaware, unless a
different registered office or agent is designated from time to time by the
Board of Managers.
2.4 DURATION.
The term of the Company commenced on the filing of the
Certificate with the Secretary of State of Delaware and shall continue until the
Company is dissolved pursuant to Section 6.1 hereof.
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2.5 OBJECTIVE AND BUSINESS OF THE COMPANY.
(a) The objective and business of the Company is to purchase,
sell (including short sales), invest and trade in Securities, on margin or
otherwise, and to engage in any financial or derivative transactions relating
thereto or otherwise. The Company may execute, deliver and perform all
contracts, agreements and other undertakings and engage in all activities and
transactions as may in the opinion of the Board of Managers be necessary or
advisable to carry out its objective or business.
(b) The Company shall operate as a closed-end, non-diversified,
management investment company in accordance with the 1940 Act and subject to
any fundamental policies and investment restrictions set forth in the Form N-2.
2.6 BOARD OF MANAGERS.
(a) Prior to the Closing Date, the Organizational Member may
designate such persons who shall agree to be bound by all of the terms of
this Agreement to serve as the initial Managers on the Board of Managers,
subject to the election of such persons prior to the Closing Date by the
Organizational Member. By signing this Agreement or the signature page of the
Company's subscription agreement, a Member admitted on the Closing Date shall be
deemed to have voted for the election of each of the initial Managers to the
Board of Managers. After the Closing Date, the Board of Managers may, subject to
the provisions of paragraphs (a) and (b) of this Section 2.6 with respect to the
number of and vacancies in the position of Manager of and the provisions of
Section 3.3 hereof with respect to the election of Managers to the Board of
Managers by Members, designate any person who shall agree to be bound by all of
the terms of this Agreement as a Manager. The names and mailing addresses of the
Managers shall be set forth in the books and records of the Company. The number
of Managers shall be fixed from time to time by the Board of Managers but, at
the Closing Date, shall not be less than three. At and after the Closing Date,
all of the Managers shall be Independent Managers.
(b) Each Manager shall serve on the Board of Managers for the
duration of the term of the Company, unless his status as a Manager shall be
sooner terminated pursuant to Section 4.2 hereof. In the event of any vacancy in
the position of Manager, the remaining Managers may appoint an individual to
serve in such capacity, so long as immediately after such appointment at least
two-thirds (2/3) of the Managers then serving would have been elected by the
Members. The Board of Managers may call a meeting of Members to fill any vacancy
in the position of member of Manager, and shall do so within 60 days after any
date on which Managers who were elected by the Members cease to constitute a
majority of the Managers then serving on the Board of Managers.
(c) In the event that no Manager remains to continue the business
of the Company, the Adviser shall promptly call a meeting of the Members, to be
held within 60 days after the date on which the last Manager ceased to act in
that capacity, for the purpose of determining whether to continue the business
of the Company and, if the business shall be continued, of electing the required
number of Managers to the Board of Managers. If the Members shall determine at
such meeting not to continue the business of the Company or if the required
number of Managers is not elected within 60 days after the date on which the
last Manager ceased
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<PAGE> 16
to act in that capacity, then the Company shall be dissolved pursuant to
Section 6.1 hereof and the assets of the Company shall be liquidated and
distributed pursuant to Section 6.2 hereof.
2.7 MEMBERS.
For the first nine months from the Closing Date, the Board of
Managers may admit one or more Members as of the beginning of each calendar
month. Thereafter, the Board of Managers may admit one or more Members as of the
beginning of each calendar quarter, provided, however, that after the Board of
Managers has received notice from the Adviser that the Adviser does not control
the Company for purposes of the Bank Holding Company Act of 1956, as amended,
the Board of Managers may admit one or more Members as of the beginning of each
calendar month or at such other times, but not more frequently than monthly, as
the Board of Managers may determine. Subject to the foregoing terms, Members may
be admitted to the Company subject to the condition that each such Member shall
execute an appropriate signature page of this Agreement or of the Company's
subscription agreement pursuant to which such Member agrees to be bound by all
the terms and provisions hereof. The Board of Managers may in its absolute
discretion reject subscriptions for member Interests in the Company. The
admission of any person as a Member shall be effective upon the revision of the
books and records of the Company to reflect the name and the contribution to the
capital of the Company of such additional Member.
2.8 SPECIAL ADVISORY MEMBER.
Upon signing this Agreement, the Adviser shall be admitted to the
Company as the Special Advisory Member, subject to due approval, in accordance
with the requirements of the 1940 Act, of the Investment Advisory Agreement. The
Interest of the Special Advisory Member shall be non-voting. If at anytime the
Investment Advisory Agreement between the Company and the person then serving as
Adviser terminates, the Board of Managers shall admit as a substitute Special
Advisory Member, upon its signing this Agreement, such person as may be retained
by the Company to provide investment advisory services pursuant to an Investment
Advisory Agreement, subject to the due approval of such Investment Advisory
Agreement in accordance with the requirements of the 1940 Act.
2.9 ORGANIZATIONAL MEMBER.
Upon the admission of any Member, the Organizational Member shall
withdraw from the Company as the Organizational Member and shall be entitled to
the return of his Capital Contribution, if any, without interest or
deduction.
2.10 BOTH MANAGERS AND MEMBERS.
A Member may at the same time be a Manager and a Member, or a
Special Advisory Member and Member, in which event such Member's rights and
obligations in each capacity shall be determined separately in accordance with
the terms and provisions hereof or as provided in the Delaware Act.
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<PAGE> 17
2.11 LIMITED LIABILITY.
Except as provided under applicable law, a Member and the Special
Advisory Member shall not be liable for the Company's debts, obligations and
liabilities in any amount in excess of the capital account balance of such
Member, plus such Member's share of undistributed profits and assets. Except as
provided under applicable law, a Manager shall not be liable for Company's
debts, obligations and liabilities.
--------------------------
ARTICLE III
MANAGEMENT
--------------------------
3.1 MANAGEMENT AND CONTROL.
(a) Management and control of the business of the Company
shall be vested in the Board of Managers, which shall have the right, power and
authority, on behalf of the Company and in its name, to exercise all rights,
powers and authority of Managers under the Delaware Act and to do all things
necessary and proper to carry out the objective and business of the Company and
their duties hereunder. No Manager shall have the authority individually to act
on behalf of or to bind the Company except within the scope of such Manager's
authority as delegated by the Board of Managers. The parties hereto intend that,
except to the extent otherwise expressly provided herein, (i) each Manager shall
be vested with the same powers, authority and responsibilities on behalf of the
Company as are customarily vested in each director of a Delaware corporation and
(ii) each Independent Manager shall be vested with the same powers, authority
and responsibilities on behalf of the Company as are customarily vested in each
director of a closed-end management investment company registered under the 1940
Act that is organized as a Delaware corporation who is not an "interested
person" of such company as such term is defined in the 1940 Act. During any
period in which the Company shall have no Managers, the Adviser shall continue
to serve as the Adviser to the Company. During such time period, CIBC WM shall
continue to provide the CIBC WM Services to the Company.
(b) Each Member agrees not to treat, on his personal income tax
return or in any claim for a tax refund, any item of income, gain, loss,
deduction or credit in a manner inconsistent with the treatment of such item by
the Company. The Board of Managers shall have the exclusive authority and
discretion to make any elections required or permitted to be made by the Company
under any provisions of the Code or any other revenue laws.
(c) Members shall have no right to participate in and shall take
no part in the management or control of the Company's business and shall have no
right, power or authority to act for or bind the Company. Members shall have the
right to vote on any matters only as provided in this Agreement or on any
matters that require the approval of the holders of voting securities under the
1940 Act or as otherwise required in the Delaware Act.
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<PAGE> 18
(d) The Board of Managers may delegate to any other
person any rights, power and authority vested by this Agreement in the Board of
Managers to the extent permissible under applicable law.
3.2 ACTIONS BY THE BOARD OF MANAGERS.
(a) Unless provided otherwise in this Agreement, the Board of
Managers shall act only: (i) by the affirmative vote of a majority of the
Managers (which majority shall include any requisite number of Independent
Managers required by the 1940 Act) present at a meeting duly called at which a
quorum of the Managers shall be present (in person or, if in person attendance
is not required by the 1940 Act, by telephone) or (ii) by unanimous written
consent of all of the Managers without a meeting, if permissible under the 1940
Act.
(b) The Board of Managers may designate from time to time a
Principal Manager who shall preside at all meetings. Meetings of the Board of
Managers may be called by the Principal Manager or by any two Managers, and may
be held on such date and at such time and place as the Board of Managers shall
determine. Each Manager shall be entitled to receive written notice of the date,
time and place of such meeting within a reasonable time in advance of the
meeting. Notice need not be given to any Manager who shall attend a meeting
without objecting to the lack of notice or who shall execute a written waiver
of notice with respect to the meeting. Managers may attend and participate in
any meeting by telephone except where in person attendance at a meeting is
required by the 1940 Act. A majority of the Managers shall constitute a quorum
at any meeting.
3.3 MEETINGS OF MEMBERS.
(a) Actions requiring the vote of the Members may be taken at any
duly constituted meeting of the Members at which a quorum is present. Meetings
of the Members may be called by the Board of Managers or by Members holding 25%
or more of the total number of votes eligible to be cast by all Members, and may
be held at such time, date and place as the Board of Managers shall determine.
The Board of Managers shall arrange to provide written notice of the meeting,
stating the date, time and place of the meeting and the record date therefor,
to each Member entitled to vote at the meeting within a reasonable time prior
thereto. Failure to receive notice of a meeting on the part of any Member shall
not affect the validity of any act or proceeding of the meeting, so long as a
quorum shall be present at the meeting, except as otherwise required by
applicable law. Only matters set forth in the notice of a meeting may be voted
on by the Members at a meeting. The presence in person or by proxy of Members
holding a majority of the total number of votes eligible to be cast by all
Members as of the record date shall constitute a quorum at any meeting. In the
absence of a quorum, a meeting of the Members may be adjourned by action of a
majority of the Members present in person or by proxy without additional notice
to the Members. Except as otherwise required by any provision of this Agreement
or of the 1940 Act, (i) those candidates receiving a plurality of the votes cast
at any meeting of Members shall be elected as Managers and (ii) all other
actions of the Members taken at a meeting shall require the affirmative vote of
Members holding a majority of the total number of votes eligible to be cast by
those Members who are present in person or by proxy at such meeting.
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(b) Each Member shall be entitled to cast at any meeting of
Members a number of votes equivalent to such Member's Investment Percentage as
of the record date for such meeting. The Board of Managers shall establish a
record date not less than 10 nor more than 60 days prior to the date of any
meeting of Members to determine eligibility to vote at such meeting and the
number of votes which each Member will be entitled to cast thereat, and shall
maintain for each such record date a list setting forth the name of each Member
and the number of votes that each Member will be entitled to cast at the
meeting.
(c) A Member may vote at any meeting of Members by a proxy
properly executed in writing by the Member and filed with the Company before or
at the time of the meeting. A proxy may be suspended or revoked, as the case may
be, by the Member executing the proxy by a later writing delivered to the
Company at any time prior to exercise of the proxy or if the Member executing
the proxy shall be present at the meeting and decide to vote in person. Any
action of the Members that is permitted to be taken at a meeting of the Members
may be taken without a meeting if consents in writing, setting forth the action
taken, are signed by Members holding a majority of the total number of votes
eligible to be cast or such greater percentage as may be required in order to
approve such action.
3.4 CUSTODY OF ASSETS OF THE COMPANY.
The physical possession of all funds, Securities or other
properties of the Company shall at all times, be held, controlled and
administered by one or more custodians retained by the Company in accordance
with the requirements of the 1940 Act and the rules thereunder.
3.5 OTHER ACTIVITIES OF MEMBERS AND MANAGERS.
(a) The Managers shall not be required to devote full time to the
affairs of the Company, but shall devote such time as may reasonably be required
to perform their obligations under this Agreement.
(b) Any Member or Manager, and any Affiliate of any Member or
Manager, may engage in or possess an interest in other business ventures or
commercial dealings of every kind and description, independently or with others,
including, but not limited to, acquisition and disposition of Securities,
provision of investment advisory or brokerage services, serving as directors,
officers, employees, advisors or agents of other companies, partners of any
partnership, members of any limited liability company, or trustees of any trust,
or entering into any other commercial arrangements. No Member shall have any
rights in or to such activities of any other Member or Manager, or any profits
derived therefrom.
3.6 DUTY OF CARE.
(a) A Manager shall not be liable to the Company or to any of its
Members for any loss or damage occasioned by any act or omission in the
performance of his services under this Agreement, unless it shall be determined
by final judicial decision on the merits from which there is no further right to
appeal that such loss is due to an act or omission of such Manager constituting
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willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Manager's office.
(b) Members not in breach of any obligation hereunder or under
any agreement pursuant to which the Member subscribed for an Interest shall be
liable to the Company, any Member or third parties only as provided under the
Delaware Act.
3.7 INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Company shall,
subject to Section 3.7(b) hereof, indemnify each Manager (including for this
purpose their executors, heirs, assigns, successors or other legal
representatives), against all losses, claims, damages, liabilities, costs and
expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel fees,
incurred in connection with the defense or disposition of any action, suit,
investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which such indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter, by
reason of being or having been a Manager of the Company or the past or present
performance of services to the Company by such indemnitee, except to the extent
such loss, claim, damage, liability, cost or expense shall have been finally
determined in a decision on the merits in any such action, suit, investigation
or other proceeding to have been incurred or suffered by such indemnitee by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such indemnitee's office. The
rights of indemnification provided under this Section 3.7 shall not be construed
so as to provide for indemnification of a Manager for any liability (including
liability under federal securities laws which, under certain circumstances,
impose liability even on persons that act in good faith) to the extent (but only
to the extent) that such indemnification would be in violation of applicable
law, but shall be construed so as to effectuate the applicable provisions of
this Section 3.7 to the fullest extent permitted by law.
(b) Expenses, including reasonable counsel fees, so incurred by
any such indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties), may be paid from time to time by the
Company in advance of the final disposition of any such action, suit,
investigation or proceeding upon receipt of an undertaking by or on behalf of
such indemnitee to repay to the Company amounts so paid if it shall ultimately
be determined that indemnification of such expenses is not authorized under
Section 3.7(a) hereof; provided, however, that (i) such indemnitee shall provide
security for such undertaking, (ii) the Company shall be insured by or on behalf
of such indemnitee against losses arising by reason of such indemnitee's failure
to fulfill his or its undertaking, or (iii) a majority of the Managers
(excluding any Manager who is either seeking advancement of expenses hereunder
or is or has been a party to any other action, suit, investigation or proceeding
involving claims similar to those involved in the action, suit, investigation or
proceeding giving rise to a claim for advancement of expenses hereunder) or
independent legal counsel in a written opinion shall determine based on a review
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe such indemnitee ultimately will be entitled to
indemnification.
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(c) As to the disposition of any action, suit, investigation or
proceeding (whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication or a decision on the merits by a court, or by
any other body before which the proceeding shall have been brought, that an
indemnitee is liable to the Company or its Members by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office, indemnification shall be
provided pursuant to Section 3.7(a) hereof if (i) approved as in the best
interests of the Company by a majority of the Managers (excluding any
Manager who is either seeking indemnification hereunder or is or has been a
party to any other action, suit, investigation or proceeding involving claims
similar to those involved in the action, suit, investigation or proceeding
giving rise to a claim for indemnification hereunder) upon a determination based
upon a review of readily available facts (as opposed to a full trial-type
inquiry) that such indemnitee acted in good faith and in the reasonable belief
that such actions were in the best interests of the Company and that such
indemnitee is not liable to the Company or its Members by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office, or (ii) the Board of
Managers secures a written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry) to
the effect that such indemnification would not protect such indemnitee against
any liability to the Company or its Members to which such indemnitee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of such
indemnitee's office.
(d) Any indemnification or advancement of expenses made pursuant
to this Section 3.7 shall not prevent the recovery from any indemnitee of any
such amount if such indemnitee subsequently shall be determined in a decision on
the merits in any action, suit, investigation or proceeding involving the
liability or expense that gave rise to such indemnification or advancement of
expenses to be liable to the Company or its Members by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office. In (i) any suit brought by
a Manager (or other person entitled to indemnification hereunder) to enforce a
right to indemnification under this Section 3.7 it shall be a defense that, and
(ii) in any suit in the name of the Company to recover any indemnification or
advancement of expenses made pursuant to this Section 3.7 the Company shall be
entitled to recover such expenses upon a final adjudication that, the Manager or
other person claiming a right to indemnification under this Section 3.7 has not
met the applicable standard of conduct set forth in this Section 3.7. In any
such suit brought to enforce a right to indemnification or to recover any
indemnification or advancement of expenses made pursuant to this Section 3.7,
the burden of proving that the Manager or other person claiming a right to
indemnification is not entitled to be indemnified, or to any indemnification or
advancement of expenses, under this Section 3.7 shall be on the Company (or any
Member acting derivatively or otherwise on behalf of the Company or its
Members).
(e) An indemnitee may not satisfy any right of indemnification or
advancement of expenses granted in this Section 3.7 or to which he or it may
otherwise be entitled except out of the assets of the Company, and no Member
shall be personally liable with respect to any such claim for indemnification or
advancement of expenses.
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(f) The rights of indemnification provided hereunder shall not be
exclusive of or affect any other rights to which any person may be entitled by
contract or otherwise under law. Nothing contained in this Section 3.7 shall
affect the power of the Company to purchase and maintain liability insurance on
behalf of any Manager or other person.
3.8 FEES, EXPENSES AND REIMBURSEMENT.
(a) So long as CIBC WM provides CIBC WM Services to the Company,
it shall be entitled to receive fees for such services as may be agreed to by
CIBC WM and the Company pursuant to a separate written agreement.
(b) The Board of Managers may cause the Company to compensate
each Manager for his services as such. In addition, the Managers shall be
reimbursed by the Company for reasonable out-of-pocket expenses incurred by them
in performing their duties under this Agreement.
(c) The Company shall bear all expenses incurred in the business
of the Company other than those specifically required to be borne by the Adviser
pursuant to the Investment Advisory Agreement or by CIBC WM pursuant to the
agreement referred to in Section 3.8(a) hereof. Expenses to be borne by the
Company include, but are not limited to, the following:
<TABLE>
<S> <C>
(1) all costs and expenses directly related to
portfolio transactions and positions for the
Company's account, including, but not
limited to, brokerage commissions, research
fees, interest and commitment fees on loans
and debit balances, borrowing charges on
Securities sold short, dividends on
Securities sold short but not yet purchased,
custodial fees, margin fees, transfer taxes
and premiums, taxes withheld on foreign
dividends and indirect expenses from
investments in investment funds;
(2) all costs and expenses associated with the
organization and registration of the
Company, certain offering costs and the
costs of compliance with any applicable
Federal or state laws;
(3) all costs and expenses associated with the
organization of Investment Funds managed by
Subadvisers, if any, and with the selection
of Investment Managers, including due
diligence and travel-related expenses.
(4) Attorneys' fees and disbursements associated
with updating the Company's Confidential
Memorandum and subscription documents (the
"Offering Materials"); the costs of printing
the Offering Materials; the costs of
distributing the Offering Materials to
prospective investors; and attorneys' fees
and disbursements associated with the review
of subscription documents executed and
</TABLE>
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<TABLE>
<S> <C>
delivered to the Company in connection with
offerings of interests in the Company;
(5) the costs and expenses of holding meetings
of the Board of Managers and any meetings
of Members;
(6) fees and disbursements of any attorneys,
accountants, auditors and other consultants
and professionals engaged on behalf of the
Company;
(7) the costs of a fidelity bond and any
liability insurance obtained on behalf of
the Company or its Managers;
(8) any fees payable to CIBC WM for CIBC WM
Services and the fees of custodians and
persons providing administrative services
to the Company;
(9) all expenses of computing the Company's net
asset value, including any equipment or
services obtained for such purposes;
(10) all charges for equipment or services used
in communicating information regarding the
Company's transactions among the Adviser and
any custodian or other agent engaged by the
Company; and
(11) such other types of expenses as may be
approved from time to time by the Board of
Managers, other than those required to be
borne by the Adviser or CIBC WM.
</TABLE>
The Adviser shall be entitled to reimbursement from the Company for any of the
above expenses that it pays on behalf of the Company.
(d) Subject to procuring any required regulatory approvals, from
time to time the Company may, alone or in conjunction with other accounts for
which the Adviser, or any Affiliate of the Adviser, acts as general partner or
investment adviser, purchase Insurance in such amounts, from such insurers and
on such terms as the Board of Managers shall determine.
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---------------------------------
ARTICLE IV
TERMINATION OF STATUS OF ADVISER
AND MANAGERS, TRANSFERS AND REPURCHASES
---------------------------------
4.1 TERMINATION OF STATUS OF THE ADVISER.
The status of the Adviser as the Special Advisory Member shall
terminate if the Investment Advisory Agreement with the Adviser terminates and
the Company does not enter into a new Investment Advisory Agreement with the
Adviser, effective as of the date of such termination.
4.2 TERMINATION OF STATUS OF A MANAGER.
The status of a Manager shall terminate if the Manager (i) shall
die; (ii) shall be adjudicated incompetent; (iii) shall voluntarily withdraw as
a Manager (upon not less than 90 days' prior written notice to the other
Managers); (iv) shall be removed; (v) shall be certified by a physician to be
mentally or physically unable to perform his duties hereunder; (vi) shall be
declared bankrupt by a court with appropriate jurisdiction, file a petition
commencing a voluntary case under any bankruptcy law or make an assignment for
the benefit of creditors; (vii) shall have a receiver appointed to administer
the property or affairs of such Manager; or (viii) shall otherwise cease to be
a Manager of the Company under the Delaware Act.
4.3 REMOVAL OF THE MANAGERS.
Any Manager may be removed either by (a) the vote or written
consent of at least two-thirds (2/3) of the Managers not subject to the removal
vote or (b) the vote or written consent of Members holding not less than
two-thirds (2/3) of the total number of votes eligible to be cast by all
Members.
4.4 TRANSFER OF INTERESTS OF MEMBERS.
(a) An Interest of a Member may be Transferred only (i) by
operation of law pursuant to the death, bankruptcy, insolvency or dissolution
of such Member or (ii) with the written consent of the Board of Managers (which
may be withheld in its sole and absolute discretion); provided, however, that
the Board of Managers may not consent to any Transfer other than a Transfer (i)
in which the tax basis of the interest in the hands of the transferee is
determined, in whole or in part, by reference to its tax basis in the hands of
the transferor (e.g., certain Transfers to affiliates, gifts and contributions
to family partnerships), (ii) to members of the Member's immediate family
(brothers, sisters, spouse, parents and children), or (iii) a distribution from
a qualified retirement plan or an individual retirement account, unless it
consults with counsel to the Company and counsel to the Company confirms that
such Transfer will not cause the Company to be treated as a "publicly traded
partnership" taxable as a corporation.
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(b) The Board of Managers may not consent to a Transfer of
an Interest or a portion thereof of a Member unless: (i) the person to whom
such Interest is Transferred (or each of such person's beneficial owners if
such a person is a "private investment company" as defined in paragraph (d)(3)
of Rule 205-3 under the Advisers Act) is a person whom the Board of Managers
believe meets the requirements of paragraph (d)(1) of Rule 205-3 under the
Advisers Act or successor rule thereto; (ii) the entire Interest of the Member
is Transferred to a single transferee; and (iii) after the Transfer, the
balance of the Capital Account of the Transferee is not less than $150,000. Any
transferee which acquires an Interest by operation of law as the result of the
death, bankruptcy, insolvency or dissolution of a Member or otherwise, shall be
entitled to the allocations and distributions allocable to the Interest so
acquired and to Transfer such Interest in accordance with the terms of this
Agreement, but shall not be entitled to the other rights of a Member unless and
until such transferee becomes a substituted Member. If a Member transfers an
Interest with the approval of the Board of Managers, the Board of Managers
shall promptly take all necessary actions so that the transferee to whom such
Interest is transferred is admitted to the Company as a Member. Each Member
effecting a Transfer and its transferee agree to pay all expenses, including
attorneys' and accountants' fees, incurred by the Company in connection with
such Transfer.
(c) Each Member shall indemnify and hold harmless the
Company, the Managers, the Adviser, each other Member and any Affiliate of the
foregoing against all losses, claims, damages, liabilities, costs and expenses
(including legal or other expenses incurred in investigating or defending
against any such losses, claims, damages, liabilities, costs and expenses or
any judgments, fines and amounts paid in settlement), joint or several, to
which such persons may become subject by reason of or arising from (i) any
Transfer made by such Member in violation of this Section 4.4 and (ii) any
misrepresentation by such Member in connection with any such Transfer.
4.5 TRANSFER OF INTERESTS OF SPECIAL ADVISORY MEMBER.
The Adviser may not Transfer its Interest as the Special
Advisory Member.
4.6 REPURCHASE OF INTERESTS.
(a) Except as otherwise provided in this Agreement, no
Member or other person holding an Interest or portion thereof shall have the
right to withdraw or tender to the Company for repurchase that Interest or
portion thereof. The Board of Managers may from time to time, in its complete
and exclusive discretion and on such terms and conditions as it may determine,
cause the Company to repurchase Interests or portions thereof pursuant to
written tenders. However, the Company shall not offer to repurchase Interests
on more than two occasions during any one Fiscal Year unless it has received an
opinion of counsel to the effect that such more frequent offers would not cause
any adverse tax consequences to the Company or the Members. In determining
whether to cause the Company to repurchase Interests or portions thereof
pursuant to written tenders, the Board of Managers shall consider the
recommendation of the Adviser, and shall also consider the following factors,
among others:
(1) whether any Members have requested to
tender Interests or portions thereof to the
Company;
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(2) the liquidity of the Company's assets;
(3) the investment plans and working capital
requirements of the Company;
(4) the relative economies of scale with
respect to the size of the Company;
(5) the history of the Company in repurchasing
Interests or portions thereof;
(6) the economic condition of the securities
markets; and
(7) the anticipated tax consequences of any
proposed repurchases of Interests or
portions thereof.
The Board of Managers shall cause the Company to repurchase Interests or
portions thereof pursuant to written tenders only on terms fair to the Company
and to all Members or one or more classes of Members (including persons holding
Interests acquired from Members), as applicable.
(b) A Member who tenders for repurchase only a portion of
such Member's Interest shall be required to maintain a Capital Account balance
equal to the greater of (i) $150,000, net of the Incentive Allocation, if any,
that would be debited against such Capital Account if the date of repurchase of
such Interest or portion thereof were a date on which an Incentive Allocation
would otherwise be made (the "Tentative Incentive Allocation") or (ii) the
amount of the Tentative Incentive Allocation.
(c) The Adviser may tender its Interest or a portion
thereof as a Member or Special Advisory Member of the Company under Section
4.6(a) hereof.
(d) If the Adviser's status as Special Advisory Member is
terminated pursuant to Section 4.1 hereof, it (or its trustee or other legal
representative) may, by written notice to the Board of Managers within 60 days
of the effective date of such termination, tender to the Company for repurchase
all or any portion of its Special Advisory Account. Not later than thirty (30)
days after the receipt of such notice, the Board of Managers shall cause such
tendered portion of the Special Advisory Account to be repurchased by the
Company for cash.
(e) The Board of Managers may cause the Company to
repurchase an Interest or portion thereof of a Member or any person acquiring
an Interest or portion thereof from or through a Member in the event that the
Board of Managers determines or has reason to believe that:
(1) such an Interest or portion thereof has
been transferred in violation of Section
4.4 hereof, or such an Interest or portion
thereof has vested in any person by
operation of law as the result of the
death, dissolution, bankruptcy or
incompetency of a Member;
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(2) ownership of such an Interest by a Member
or other person will cause the Company to
be in violation of, or require registration
of any Interest or portion thereof under,
or subject the Company to additional
registration or regulation under, the
securities laws of the United States or any
other relevant jurisdiction;
(3) continued ownership of such an Interest may
be harmful or injurious to the business or
reputation of the Company, the Managers or
the Adviser, or may subject the Company or
any of the Members to an undue risk of
adverse tax or other fiscal consequences;
(4) any of the representations and warranties
made by a Member in connection with the
acquisition of an Interest or portion
thereof was not true when made or has
ceased to be true; or
(5) it would be in the best interests of the
Company, as determined by the Board of
Managers in their absolute discretion, for
the Company to repurchase such an Interest
or portion thereof.
(f) Repurchases of Interests or portions thereof by the
Company shall be payable promptly after the expiration date of such repurchase
in accordance with the terms of the Company's repurchase offer. Payment of the
purchase price shall consist of cash and/or: (i) a promissory note from the
Company, or (ii) marketable Securities (valued at net asset value in accordance
with this Agreement and distributed to tendering Members on a pari passu basis)
in an aggregate amount equal to at least 90% of the estimated unaudited net
asset value of the interests tendered, determined as of the expiration date.
Payment of this estimated amount will be made promptly after the expiration
date of the tender offer in accordance with the terms of any written offer from
the Company to repurchase interests. Generally, in addition to any payments
made as described above, payment pursuant to a tender will also consist of a
promissory note from the Company that neither bears interest nor is
transferable entitling the holder thereof to a contingent payment equal to the
excess, if any, of (a) the net asset value of the interests tendered as of the
expiration date, determined based on the audited financial statements of the
Company, over (b) the cash payment (the "Contingent Amount Note"). The
Contingent Amount Note would be delivered to the tendering Member promptly
after the expiration date and would be payable in cash promptly after
completion of the audit of the financial statements of the Company. It is
anticipated that the audit of the Company's financial statements will be
completed within 60 days after the end of each year. The Company does not
impose any charges on a repurchase of interests or portion of interests in the
Company.
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------------------------------------
ARTICLE V
CAPITAL
------------------------------------
5.1 CONTRIBUTIONS TO CAPITAL.
a) The minimum initial contribution of each Member to the
capital of the Company shall be such amount as the Board of Managers, in its
discretion, may determine from time to time, but in no event shall be less than
$150,000; provided, however, that the minimum initial contribution of each
Member that is a director, officer or employee of CIBC WM or its affiliates may
be as determined by the Board of Managers from time to time. The amount of the
initial contribution of each Member shall be recorded on the books and records
of the Company upon acceptance as a contribution to the capital of the Company.
The Managers shall not be entitled to make voluntary contributions of capital
to the Company as Managers of the Company, but may make voluntary contributions
to the capital of the Company as Members. The Adviser may make voluntary
contributions to the capital of the Company as a Member.
(b) The Members and the Adviser, as a Member, may make
additional contributions to the capital of the Company of at least $25,000,
effective as of such times as the Board of Managers in its discretion may
permit, subject to Section 2.7 hereof, but no Member shall be obligated to make
any additional contribution to the capital of the Company except to the extent
provided in Section 5.7 hereof.
(c) Except as otherwise permitted by the Board of Managers,
(i) initial and any additional contributions to the capital of the Company by
any Member shall be payable in cash or in such Securities that the Board of
Managers, in its absolute discretion, may agree to accept on behalf of the
Company, and (ii) initial and any additional contributions in cash shall be
payable in readily available funds at the date of the proposed acceptance of
the contribution. The Company shall charge each Member making a contribution in
Securities to the capital of the Company such amount as may be determined by
the Board of Managers not exceeding 2% of the value of such contribution in
order to reimburse the Company for any costs incurred by the Company by reason
of accepting such Securities, and any such charge shall be due and payable by
the contributing Member in full at the time the contribution to the capital of
the Company to which such charges relate is due. The value of contributed
Securities shall be determined in accordance with Section 7.3 hereof as of the
date of contribution.
(d) The minimum initial and additional contributions set
forth in (a) and (b) of this Section 5.1 may be reduced by the Board of
Managers.
5.2 RIGHTS OF MEMBERS TO CAPITAL.
No Member shall be entitled to interest on his contribution to
the capital of the Company, nor shall any Member be entitled to the return of
any capital of the Company except
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(i) upon the repurchase by the Company of a part or all of such Member's
Interest pursuant to Section 4.6 hereof, (ii) pursuant to the provisions of
Section 5.7(c) hereof or (iii) upon the liquidation of the Company's assets
pursuant to Section 6.2 hereof. No Member shall be liable for the return of any
such amounts. No Member shall have the right to require partition of the
Company's property or to compel any sale or appraisal of the Company's assets.
5.3 CAPITAL ACCOUNTS.
(a) The Company shall maintain a separate Capital Account
for each Member.
(b) Each Member's Capital Account shall have an initial
balance equal to the amount of cash and the value of any Securities (determined
in accordance with Section 7.3 hereof) constituting such Member's initial
contribution to the capital of the Company.
(c) Each Member's Capital Account shall be increased by the
sum of (i) the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 hereof) constituting additional contributions by
such Member to the capital of the Company permitted pursuant to Section 5.1
hereof, plus (ii) all amounts credited to such Member's Capital Account
pursuant to Sections 5.4 through 5.7 or 5.9 hereof.
(d) Each Member's Capital Account shall be reduced by the
sum of (i) the amount of any repurchase of the Interest, or portion thereof, of
such Member or distributions to such Member pursuant to Sections 4.6, 5.11 or
6.2 hereof which are not reinvested, plus (ii) any amounts debited against such
Capital Account pursuant to Sections 5.4 through 5.9 hereof.
(e) The Company shall maintain a Special Advisory Account
for the Adviser in its capacity as Special Advisory Member solely for purposes
of receiving the Incentive Allocation pursuant to Section 5.8 hereof. The
Special Advisory Account shall have an initial balance of zero.
5.4 ALLOCATION OF NET PROFIT AND LOSS.
As of the last day of each Fiscal Period, any Net Profit or Net
Loss for the Fiscal Period shall be allocated among and credited to or debited
against the Capital Accounts of the Members in accordance with their respective
Investment Percentages for such Fiscal Period.
5.5 ALLOCATION OF INSURANCE PREMIUMS AND PROCEEDS.
(a) Any premiums payable by the Company for Insurance
purchased pursuant to Section 3.8(d) hereof shall be apportioned evenly over
each Fiscal Period or portion thereof falling within the period to which such
premiums relate under the terms of such Insurance, and the portion of the
premiums so apportioned to any Fiscal Period shall be allocated among and
debited against the Capital Accounts of each Member who is a member of the
Company during such Fiscal Period in accordance with such Member's Investment
Percentage for such Fiscal Period.
(b) Proceeds, if any, to which the Company may become
entitled pursuant to such Insurance shall be allocated among and credited to
the Capital Accounts of each Member who
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is a member of the Company during the Fiscal Period in which the event which
gives rise to recovery of proceeds occurs in accordance with such Member's
Investment Percentage for such Fiscal Period.
5.6 ALLOCATION OF CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES.
(a) If the Company incurs a withholding tax or other tax
obligation with respect to the share of Company income allocable to any Member,
then the Board of Managers, without limitation of any other rights of the
Company or the Managers, shall cause the amount of such obligation to be
debited against the Capital Account of such Member when the Company pays such
obligation, and any amounts then or thereafter distributable to such Member
shall be reduced by the amount of such taxes. If the amount of such taxes is
greater than any such distributable amounts, then such Member and any successor
to such Member's Interest shall pay to the Company as a contribution to the
capital of the Company, upon demand of the Board of Managers, the amount of
such excess. The Board of Managers shall not be obligated to apply for or
obtain a reduction of or exemption from withholding tax on behalf of any Member
that may be eligible for such reduction or exemption; provided, that in the
event that the Board of Managers determines that a Member is eligible for a
refund of any withholding tax, the Board of Managers may, at the request and
expense of such Member, assist such Member in applying for such refund.
(b) Except as otherwise provided for in this Agreement and
unless prohibited by the 1940 Act, any expenditures payable by the Company, to
the extent determined by the Board of Managers to have been paid or withheld on
behalf of, or by reason of particular circumstances applicable to, one or more
but fewer than all of the Members, shall be charged to only those Members on
whose behalf such payments are made or whose particular circumstances gave rise
to such payments. Such charges shall be debited from the Capital Accounts of
such Members as of the close of the Fiscal Period during which any such items
were paid or accrued by the Company.
5.7 RESERVES.
(a) Appropriate reserves may be created, accrued and
charged against Net Assets and proportionately against the Capital Accounts of
the Members for contingent liabilities, if any, as of the date any such
contingent liability becomes known to the Adviser or the Board of Managers,
such reserves to be in the amounts which the Board of Managers in its sole
discretion deems necessary or appropriate. The Board of Managers may increase
or reduce any such reserves from time to time by such amounts as the Board of
Managers in its sole discretion deems necessary or appropriate. The amount of
any such reserve, or any increase or decrease therein, shall be proportionately
charged or credited, as appropriate, to the Capital Accounts of those parties
who are Members at the time when such reserve is created, increased or
decreased, as the case may be; provided, however, that if any such individual
reserve item, adjusted by any increase therein, exceeds the lesser of $500,000
or 1% of the aggregate value of the Capital Accounts of all such Members, the
amount of such reserve, increase, or decrease shall instead be charged or
credited to those parties who were Members at the time, as determined by the
Board of Managers in its sole discretion, of the act or omission giving rise to
the contingent liability for which the reserve was established, increased or
decreased in proportion to their Capital Accounts at that time.
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(b) If at any time an amount is paid or received by the
Company (other than contributions to the capital of the Company, distributions
or repurchases of Interests or portions thereof) and such amount exceeds the
lesser of $500,000 or 1% of the aggregate value of the Capital Accounts of all
Members at the time of payment or receipt and such amount was not accrued or
reserved for but would nevertheless, in accordance with the Company's
accounting practices, be treated as applicable to one or more prior Fiscal
Periods, then such amount shall be proportionately charged or credited, as
appropriate, to those parties who were Members during such prior Fiscal Period
or Periods.
(c) If any amount is required by paragraph (a) or (b) of
this Section 5.7 to be charged or credited to a party who is no longer a
Member, such amount shall be paid by or to such party, as the case may be, in
cash, with interest from the date on which the Board of Managers determines
that such charge or credit is required. In the case of a charge, the former
Member shall be obligated to pay the amount of the charge, plus interest as
provided above, to the Company on demand; provided, however, that (i) in no
event shall a former Member be obligated to make a payment exceeding the amount
of such Member's Capital Account at the time to which the charge relates; and
(ii) no such demand shall be made after the expiration of three years since the
date on which such party ceased to be a Member. To the extent that a former
Member fails to pay to the Company, in full, any amount required to be charged
to such former Member pursuant to paragraph (a) or (b), whether due to the
expiration of the applicable limitation period or for any other reason
whatsoever, the deficiency shall be charged proportionately to the Capital
Accounts of the Members at the time of the act or omission giving rise to the
charge to the extent feasible, and otherwise proportionately to the Capital
Accounts of the current Members.
5.8 INCENTIVE ALLOCATION.
(a) So long as the Adviser serves as the Special Advisory
Member of the Company, the Incentive Allocation shall be debited against the
Capital Account of each Member as of the last day of each Allocation Period
with respect to such Member and the amount so debited shall simultaneously be
credited to the Special Advisory Account or, subject to compliance with the
1940 Act and the Advisers Act, to the Capital Accounts of such Members who are
directors, officers or employees of CIBC WM or its Affiliates, or with respect
to which such directors, officers or employees are the sole beneficial owners,
as have been designated in any written notice delivered by the Adviser to the
Board of Managers within 90 days after the close of such Allocation Period.
(b) By the last business day of the month following the
date on which an Incentive Allocation is made, the Special Advisory Member may
withdraw up to 100% of the Incentive Allocation (computed on the basis of
unaudited data) that was credited to the Special Advisory Account. Within 30
days after the completion of the audit of the books of the Company for the year
in which allocations to the Special Advisory Account are made, the Company
shall pay to the Special Advisory Member any additional amount of Incentive
Allocation determined to be owed to the Special Advisory Member based on the
audit, and the Special Advisory Member shall pay to the Company any excess
amount of Incentive Allocation determined to be owed to the Company.
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5.9 ALLOCATION OF ORGANIZATIONAL EXPENSES.
(a) As of the first Expense Allocation Date, Organizational
Expenses shall be allocated among and debited against the Capital Accounts of
the Members in accordance with their respective Capital Percentages on such
Expense Allocation Date.
(b) As of each Expense Allocation Date following the first
Expense Allocation Date, all amounts previously debited against the Capital
Account of a Member pursuant to this Section 5.9 on the preceding Expense
Allocation Date will be credited to the Capital Account of such Member, and
Organizational Expenses shall then be re-allocated among and debited against
the Capital Accounts of all Members in accordance with their respective Capital
Percentages on such Expense Allocation Date.
5.10 TAX ALLOCATIONS.
For each fiscal year, items of income, deduction, gain, loss or
credit shall be allocated for income tax purposes among the Members in such
manner as to reflect equitably amounts credited or debited to each Member's
Capital Account for the current and prior fiscal years (or relevant portions
thereof). Allocations under this Section 5.10 shall be made pursuant to the
principles of Sections 704(b) and 704(c) of the Code and in conformity with
Regulations Sections 1.704-1(b)(2)(iv)(f), 1.704-1(b)(4)(i) and 1.704-3(e)
promulgated thereunder, as applicable, or the successor provisions to such
Section and Regulations. Notwithstanding anything to the contrary in this
Agreement, there shall be allocated to the Members such gains or income as
shall be necessary to satisfy the "qualified income offset" requirement of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
If the Company realizes capital gains (including short-term
capital gains) for Federal income tax purposes ("gains") for any fiscal year
during or as of the end of which one or more Positive Basis Members (as
hereinafter defined) withdraw from the Company pursuant to Article IV or VI,
the Board of Managers, unless otherwise determined by the Board of Managers, in
its sole discretion, shall allocate such gains as follows: (i) to allocate such
gains among such Positive Basis Members, pro rata in proportion to the
respective Positive Basis (as hereinafter defined) of each such Positive Basis
Member, until either the full amount of such gains shall have been so allocated
or the Positive Basis of each such Positive Basis Member shall have been
eliminated and (ii) to allocate any gains not so allocated to Positive Basis
Members to the other Members in such manner as shall equitably reflect the
amounts allocated to such Members' Capital Accounts pursuant to Section 5.3;
provided, however, that if, following such fiscal year, the Company realizes
gains from a sale of Securities the proceeds of which are designated on the
Company's books and records as being used to effect payments of all or part of
the interest in the Company of any Positive Basis Member, there shall be
allocated to any Positive Basis Member an amount of such gains equal to the
amount, if any, by which his or its Positive Basis as of the effective date of
his or its withdrawal exceeds the amount allocated to him or it pursuant to
clause (i) of this sentence.
If the Company realizes capital losses (including long-term
capital losses) for Federal income tax purposes ("losses") for any fiscal year
during or as of the end of which one or more Negative Basis Members (as
hereinafter defined) withdraw from the Company pursuant to
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Article IV or VI, the Board of Managers, unless otherwise determined by the
Board of Managers, in its sole discretion, shall allocate such losses as
follows: (i) to allocate such losses among such Negative Basis Members, pro
rata in proportion to the respective Negative Basis (as hereinafter defined) of
each such Negative Basis Member, until either the full amount of such losses
shall have been so allocated or the Negative Basis of each such Negative Basis
Member shall have been eliminated and (ii) to allocate any losses not so
allocated to Negative Basis Members to the other Members in such manner as
shall equitably reflect the amounts allocated to such Members' Capital Accounts
pursuant to Section 5.3; provided, however, that if, following such fiscal
year, the Company realizes losses from a sale of Securities the proceeds of
which are designated on the Company's books and records as being used to effect
payments of all or part of the interest in the Company of any Negative Basis
Member, there shall be allocated to any Negative Basis Member an amount of such
losses equal to the amount, if any by which his or its Negative Basis as of the
effective date of his or its withdrawal exceeds the amount allocated to him or
it pursuant to clause (i) of this sentence.
As used herein, (i) the term "Positive Basis" shall mean, with
respect to any Member and as of any time of calculation, the amount by which
its interest in the Company as of such time exceeds its "adjusted tax basis",
for Federal income tax purposes, in its interest in the Company as of such time
(determined without regard to any adjustments made to such "adjusted tax basis"
by reason of any transfer or assignment of such interest, including by reason
of death, and without regard to such Member's share of the liabilities of the
Company under Section 752 of the Code), and (ii) the term "Positive Basis
Member" shall mean any Member who withdraws from the Company and who has
Positive Basis as of the effective date of its withdrawal, but such Member
shall cease to be a Positive Basis Member at such time as it shall have
received allocations pursuant to clause (i) of the second paragraph of this
Section 5.10 equal to its Positive Basis as of the effective date of its
withdrawal.
As used herein, (i) the term "Negative Basis" shall mean, with
respect to any Member and as of any time of calculation, the amount by which
its interest in the Company as of such time is less than its "adjusted tax
basis", for Federal income tax purposes, in its interest in the Company as of
such time (determined without regard to any adjustments made to such "adjusted
tax basis" by reason of any transfer or assignment of such interest, including
by reason of death, and without regard to such Member's share of the
liabilities of the Company under Section 752 of the Code), and (ii) the term
"Negative Basis Member" shall mean any Member who withdraws from the Company
and who has Negative Basis as of the effective date of its withdrawal, but such
Member shall cease to be a Negative Basis Member at such time as it shall have
received allocations pursuant to clause (i) of the third paragraph of this
Section 5.10 equal to its Negative Basis as of the effective date of its
withdrawal.
Notwithstanding anything to the contrary in the foregoing, if
the Company realizes taxable gains in any fiscal year with respect to which the
Special Advisory Member is entitled to an Incentive Allocation under Section
5.8 hereof, the Board of Managers (at the request of the Special Advisory
Member) may specially allocate such gains to the Special Advisory Member in an
amount by which the Incentive Allocation exceeds the Special Advisory Member's
"adjusted tax basis" (determined without regard to any allocation to be made
pursuant
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to this paragraph) in its interest in the Company as of the time it withdraws
such Incentive Allocation. The Special Advisory Member's "adjusted tax basis",
for these purposes, shall be increased by any amount of the Incentive
Allocation withdrawal which it elects to contribute as a Member to the Company
as of the date of the withdrawal of the Incentive Allocation.
5.11 DISTRIBUTIONS.
(a) The Board of Managers may, in its sole
discretion, authorize the Company to make distributions in cash at any time to
all of the Members on a pro rata basis in accordance with the Members'
Investment Percentages.
(b) The Board of Managers may withhold taxes from
any distribution to any Member to the extent required by the Code or any other
applicable law. For purposes of this Agreement, any taxes so withheld by the
Company with respect to any amount distributed by the Company to any Member
shall be deemed to be a distribution or payment to such Member, reducing the
amount otherwise distributable to such Member pursuant to this Agreement and
reducing the Capital Account of such Member.
5.12 FOREIGN WITHHOLDING.
Notwithstanding any provision of this Agreement to the contrary,
the Board of Managers shall withhold and pay over to the Internal Revenue
Service, pursuant to Section 1441, 1442, 1445 or 1446 of the Code, or any
successor provisions, at such times as required by such Sections, such amounts
as the Company is required to withhold under such Sections, as from time to
time are in effect. To the extent that a foreign Member claims to be entitled
to a reduced rate of, or exemption from, U.S. withholding tax pursuant to an
applicable income tax treaty, or otherwise, the foreign Member shall furnish
the Board of Managers with such information and forms as such foreign Member
may be required to complete where necessary to comply with any and all laws and
regulations governing the obligations of withholding tax agents. Each foreign
Member represents and warrants that any such information and forms furnished by
such foreign Member shall be true and accurate and agrees to indemnify the
Company and each of the Members from any and all damages, costs and expenses
resulting from the filing of inaccurate or incomplete information or forms
relating to such withholding taxes.
Any amount of withholding taxes withheld and paid over
by the Board of Managers with respect to a foreign Member's distributive share
of the Company's gross income, income or gain shall be treated as a
distribution to such foreign Member and shall be charged against the Capital
Account of such foreign Member.
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--------------------------
ARTICLE VI
DISSOLUTION AND LIQUIDATION
---------------------------
6.1 DISSOLUTION.
The Company shall be dissolved:
(1) upon the affirmative vote to dissolve the
Company by: (i) the Board of Managers or (ii)
Members holding at least two-thirds (2/3) of
the total number of votes eligible to be cast
by all Members;
(2) upon the failure of Members to elect a
successor Manager at a meeting called by the
Adviser in accordance with Section 2.6(c)
hereof when no Manager remains to continue the
business of the Company;
(3) upon the expiration of any two year period
which commences on the date on which any
Member has submitted a written notice to the
Company requesting to tender its entire
Interest for repurchase by the Company if such
Interest has not been repurchased by the
Company;
(4) as required by operation of law.
Dissolution of the Company shall be effective on the later of the day on which
the event giving rise to the dissolution shall occur or the conclusion of any
applicable 60 day period during which the Board of Managers and Members may
elect to continue the business of the Company as provided above, but the
Company shall not terminate until the assets of the Company have been
liquidated in accordance with Section 6.2 hereof and the Certificate has been
canceled.
6.2 LIQUIDATION OF ASSETS.
(a) Upon the dissolution of the Company as provided in
Section 6.1 hereof, the Board of Managers shall promptly appoint the
Administrator as the liquidator and the Administrator shall liquidate the
business and administrative affairs of the Company, except that if the Board of
Managers does not appoint the Administrator as the liquidator or the
Administrator is unable to perform this function, a liquidator elected by
Members holding a majority of the total number of votes eligible to be cast by
all Members shall promptly liquidate the business and administrative affairs of
the Company. Net Profit and Net Loss during the period of liquidation shall be
allocated pursuant to Section 5.4 hereof. The proceeds from liquidation (after
establishment of appropriate reserves for contingencies in such amount as the
Board of Managers or
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liquidator shall deem appropriate in its sole discretion as applicable) shall
be distributed in the following manner:
(1) the debts of the Company, other than debts,
liabilities or obligations to Members, and the
expenses of liquidation (including legal and
accounting expenses incurred in connection
therewith), up to and including the date that
distribution of the Company's assets to the
Members has been completed, shall first be
paid on a pro rata basis;
(2) such debts, liabilities or obligations as are
owing to the Members shall next be paid in
their order of seniority and on a pro rata
basis;
(3) The Special Advisory Member shall next be paid
any balance in the Special Advisory Account
after giving effect to the Incentive
Allocation, if any, to be made pursuant to
Section 5.8 hereof; and
(4) the Members shall next be paid on a pro rata
basis the positive balances of their
respective Capital Accounts after giving
effect to all allocations to be made to such
Members' Capital Accounts for the Fiscal
Period ending on the date of the distributions
under this Section 6.2(a)(3).
(b) Anything in this Section 6.2 to the contrary
notwithstanding, upon dissolution of the Company, the Board of Managers or
other liquidator may distribute ratably in kind any assets of the Company;
provided, however, that if any in-kind distribution is to be made (i) the
assets distributed in kind shall be valued pursuant to Section 7.3 hereof as of
the actual date of their distribution and charged as so valued and distributed
against amounts to be paid under Section 6.2(a) above, and (ii) any profit or
loss attributable to property distributed in-kind shall be included in the Net
Profit or Net Loss for the Fiscal Period ending on the date of such
distribution.
-----------------------------
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
-----------------------------
7.1 ACCOUNTING AND REPORTS.
(a) The Company shall adopt for tax accounting purposes any
accounting method which the Board of Managers shall decide in its sole
discretion is in the best interests of the Company. The Company's accounts
shall be maintained in U.S. currency.
(b) After the end of each taxable year, the Company shall
furnish to each Member such information regarding the operation of the Company
and such Member's Interest as is necessary for Members to complete Federal,
state and local income tax or information returns and any other tax information
required by Federal, state or local law.
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(c) Except as otherwise required by the 1940 Act, or as may
otherwise be permitted by rule, regulation or order, within 60 days after the
close of the period for which a report required under this Section 7.1(c) is
being made, the Company shall furnish to each Member a semi-annual report and
an annual report containing the information required by such Act. The Company
shall cause financial statements contained in each annual report furnished
hereunder to be accompanied by a certificate of independent public accountants
based upon an audit performed in accordance with generally accepted accounting
principles. The Company may furnish to each Member such other periodic reports
as it deems necessary or appropriate in its discretion.
7.2 DETERMINATIONS BY THE BOARD OF MANAGERS.
(a) All matters concerning the determination and allocation
among the Members of the amounts to be determined and allocated pursuant to
Article V hereof, including any taxes thereon and accounting procedures
applicable thereto, shall be determined by the Board of Managers unless
specifically and expressly otherwise provided for by the provisions of this
Agreement or required by law, and such determinations and allocations shall be
final and binding on all the Members.
(b) The Board of Managers may make such adjustments to the
computation of Net Profit or Net Loss, the Allocation Change with respect to
any Member, or any components comprising any of the foregoing as it considers
appropriate to reflect fairly and accurately the financial results of the
Company and the intended allocation thereof among the Members.
7.3 VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the Board of
Managers shall value or have valued any Securities or other assets and
liabilities of the Company as of the close of business on the last day of each
Fiscal Period in accordance with such valuation procedures as shall be
established from time to time by the Board of Managers and which conform to the
requirements of the 1940 Act. In determining the value of the assets of the
Company, no value shall be placed on the goodwill or name of the Company, or
the office records, files, statistical data or any similar intangible assets of
the Company not normally reflected in the Company's accounting records, but
there shall be taken into consideration any items of income earned but not
received, expenses incurred but not yet paid, liabilities, fixed or contingent,
and any other prepaid expenses to the extent not otherwise reflected in the
books of account, and the value of options or commitments to purchase or sell
Securities or commodities pursuant to agreements entered into prior to such
valuation date.
(b) The Company will value interests in Investment Funds
not managed by the Subadvisers at fair value, which ordinarily will be the
value determined by their Investment Managers in accordance with the policies
established by the relevant Investment Fund.
(c) The value of Securities and other assets of the Company
and the net worth of the Company as a whole determined pursuant to this Section
7.3 shall be conclusive and binding on all of the Members and all parties
claiming through or under them.
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---------------------------
ARTICLE VIII
MISCELLANEOUS PROVISIONS
-----------------------------
8.1 AMENDMENT OF LIMITED LIABILITY COMPANY AGREEMENT.
(a) Except as otherwise provided in this Section 8.1, this
Agreement may be amended, in whole or in part, with: (i) the approval of the
Board of Managers (including the vote of a majority of the Independent
Managers, if required by the 1940 Act) and (ii) if required by the 1940 Act,
the approval of the Members by such vote as is required by the 1940 Act.
(b) Any amendment that would:
(1) increase the obligation of a Member to make
any contribution to the capital of the
Company;
(2) reduce the Capital Account of a Member or
Special Advisory Account other than in
accordance with Article V; or
(3) modify the events causing the dissolution of
the Company;
may be made only if (i) the written consent of each Member adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each Member has received written notice of
such amendment and (B) any Member objecting to such amendment has been afforded
a reasonable opportunity (pursuant to such procedures as may be prescribed by
the Board of Managers) to tender his entire Interest for repurchase by the
Company.
(c) The power of the Board of Managers to amend this
Agreement at any time without the consent of the other Members as set forth in
paragraph (a) of this Section 8.01 shall specifically include the power to:
(1) restate this Agreement together with any
amendments hereto which have been duly adopted
in accordance herewith to incorporate such
amendments in a single, integrated document;
(2) amend this Agreement (other than with respect
to the matters set forth in Section 8.1(b)
hereof) to effect compliance with any
applicable law or regulation, including but
not limited to, to satisfy the requirements,
or to reflect any relaxation of such
requirements in the future, of the Bank
Holding Company Act or other U.S. or Canadian
banking laws, or any regulations, guidelines
or policies or interpretations of the banking
regulatory agencies or the staff thereof, or
to cure any ambiguity or to correct or
supplement any provision
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hereof which may be inconsistent with any
other provision hereof, provided that such
action does not adversely affect the rights of
any Member in any material respect; and
(3) amend this Agreement to make such changes as
may be necessary or advisable to ensure that
the Partnership will not be treated as an
association taxable as a corporation or as a
publicly traded partnership as defined in
Section 7704(b) of the Code.
(d) The Board of Managers shall cause written notice to be
given of any amendment to this Agreement (other than any amendment of the type
contemplated by clause (1) of Section 8.1(c) hereof) to each Member, which
notice shall set forth (i) the text of the amendment or (ii) a summary thereof
and a statement that the text thereof will be furnished to any Member upon
request.
8.2 SPECIAL POWER OF ATTORNEY.
(a) Each Member hereby irrevocably makes, constitutes and
appoints each Manager, acting severally, and any liquidator of the Company's
assets appointed pursuant to Section 6.2 hereof with full power of
substitution, the true and lawful representatives and attorneys-in-fact of, and
in the name, place and stead of, such Member, with the power from time to time
to make, execute, sign, acknowledge, swear to, verify, deliver, record, file
and/or publish:
(1) any amendment to this Agreement which complies
with the provisions of this Agreement
(including the provisions of Section 8.1
hereof);
(2) any amendment to the Certificate required
because this Agreement is amended, including,
without limitation, an amendment to effectuate
any change in the membership of the Company;
and
(3) all such other instruments, documents and
certificates which, in the opinion of legal
counsel to the Company, may from time to time
be required by the laws of the United States
of America, the State of Delaware or any other
jurisdiction in which the Company shall
determine to do business, or any political
subdivision or agency thereof, or which such
legal counsel may deem necessary or
appropriate to effectuate, implement and
continue the valid existence and business of
the Company as a limited liability company
under the Delaware Act.
(b) Each Member is aware that the terms of this Agreement
permit certain amendments to this Agreement to be effected and certain other
actions to be taken or omitted by or with respect to the Company without such
Member's consent. If an amendment to the Certificate or this Agreement or any
action by or with respect to the Company is taken in the manner contemplated by
this Agreement, each Member agrees that, notwithstanding any objection which
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such Member may assert with respect to such action, the attorneys-in-fact
appointed hereby are authorized and empowered, with full power of substitution,
to exercise the authority granted above in any manner which may be necessary or
appropriate to permit such amendment to be made or action lawfully taken or
omitted. Each Member is fully aware that each Member will rely on the
effectiveness of this special power-of-attorney with a view to the orderly
administration of the affairs of the Company.
(c) This power-of-attorney is a special power-of-attorney
and is coupled with an interest in favor of each of the Managers and as such:
(1) shall be irrevocable and continue in full
force and effect notwithstanding the
subsequent death or incapacity of any party
granting this power-of-attorney, regardless of
whether the Company or Board of Managers shall
have had notice thereof; and
(2) shall survive the delivery of a Transfer by a
Member of the whole or any portion of such
Member's Interest, except that where the
transferee thereof has been approved by the
Board of Managers for admission to the Company
as a substituted Member, this
power-of-attorney given by the transferor
shall survive the delivery of such assignment
for the sole purpose of enabling the Board of
Managers to execute, acknowledge and file any
instrument necessary to effect such
substitution.
8.3 NOTICES.
Notices which may or are required to be provided under this
Agreement shall be made, if to a Member, by regular mail, or if to the Board of
Managers or the Adviser, by hand delivery, registered or certified mail return
receipt requested, commercial courier service, telex or telecopier, and shall
be addressed to the respective parties hereto at their addresses as set forth
in the books and records of the Company. Notices shall be deemed to have been
provided when delivered by hand, on the date indicated as the date of receipt
on a return receipt or when received if sent by regular mail, commercial
courier service, telex or telecopier. A document that is not a notice and that
is required to be provided under this Agreement by any party to another party
may be delivered by any reasonable means.
8.4 AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors, assigns, executors,
trustees or other legal representatives, but the rights and obligations of the
parties hereunder may not be Transferred or delegated except as provided in
this Agreement and any attempted Transfer or delegation thereof which is not
made pursuant to the terms of this Agreement shall be void.
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8.5 APPLICABILITY OF 1940 ACT AND FORM N-2.
The parties hereto acknowledge that this Agreement is not
intended to, and does not, set forth the substantive provisions contained in
the 1940 Act and the Form N-2 which affect numerous aspects of the conduct of
the Company's business and of the rights, privileges and obligations of the
Members. Each provision of this Agreement shall be subject to and interpreted
in a manner consistent with the applicable provisions of the 1940 Act and the
Form N-2.
8.6 CHOICE OF LAW; ARBITRATION.
(a) Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Delaware, including the Delaware Act without regard to the conflict of law
principles of such State.
(b) UNLESS OTHERWISE AGREED IN WRITING, EACH MEMBER AND THE
SPECIAL ADVISORY MEMBER AGREES TO SUBMIT ALL CONTROVERSIES ARISING BETWEEN
MEMBERS OR ONE OR MORE MEMBERS OR THE SPECIAL ADVISORY MEMBER AND THE COMPANY
TO ARBITRATION IN ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND
UNDERSTANDS THAT:
(1) ARBITRATION IS FINAL AND BINDING ON THE
PARTIES;
(2) THEY ARE WAIVING THEIR RIGHT TO SEEK REMEDIES
IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL;
(3) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE
LIMITED AND DIFFERENT FROM COURT PROCEEDINGS;
(4) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO
INCLUDE FACTUAL FINDINGS OR LEGAL REASONING
AND A PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY ARBITRATORS IS
STRICTLY LIMITED; AND
(5) THE PANEL OF ARBITRATORS WILL TYPICALLY
INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR
ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(c) ALL CONTROVERSIES THAT MAY ARISE AMONG MEMBERS AND ONE
OR MORE MEMBERS OR THE SPECIAL ADVISORY MEMBER AND THE COMPANY CONCERNING THIS
AGREEMENT SHALL BE DETERMINED BY ARBITRATION IN NEW YORK CITY IN ACCORDANCE
WITH THE FEDERAL ARBITRATION ACT, TO THE FULLEST EXTENT PERMITTED BY LAW. ANY
ARBITRATION UNDER THIS AGREEMENT SHALL BE DETERMINED BEFORE AND IN ACCORDANCE
WITH THE RULES THEN OBTAINING OF EITHER THE NEW YORK STOCK EXCHANGE, INC. (THE
"NYSE") OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "NASD"),
AS THE MEMBER OR SPECIAL ADVISORY MEMBER OR ENTITY INSTITUTING THE ARBITRATION
MAY ELECT. IF THE NYSE OR NASD DOES NOT ACCEPT THE ARBITRATION FOR
CONSIDERATION, THE ARBITRATION SHALL BE SUBMITTED TO, AND DETERMINED IN
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ACCORDANCE WITH THE RULES THEN OBTAINING OF, THE CENTER FOR PUBLIC RESOURCES,
INC. IN NEW YORK CITY. JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE
ENTERED IN THE SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT
HAVING JURISDICTION OF THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS
RENDERED. ANY NOTICE OF SUCH ARBITRATION OR FOR THE CONFIRMATION OF ANY AWARD
IN ANY ARBITRATION SHALL BE SUFFICIENT IF GIVEN IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT. EACH MEMBER AGREES THAT THE DETERMINATION OF THE
ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM.
(d) NO MEMBER SHALL BRING A PUTATIVE OR CERTIFIED CLASS
ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION
AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS
ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE
CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION
UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; OR (ii) THE CLASS IS DECERTIFIED;
OR (iii) THE MEMBER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE
TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY
RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
8.7 NOT FOR BENEFIT OF CREDITORS.
The provisions of this Agreement are intended only for the
regulation of relations among past, present and future Members, Managers, the
Special Advisory Member and the Company. This Agreement is not intended for the
benefit of non-Member creditors and no rights are granted to non-Member
creditors under this Agreement.
8.8 CONSENTS.
Any and all consents, agreements or approvals provided for or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Company.
8.9 MERGER AND CONSOLIDATION.
(a) The Company may merge or consolidate with or into one
or more limited liability companies formed under the Delaware Act or other
business entities pursuant to an agreement of merger or consolidation which has
been approved in the manner contemplated by Section 18-209(b) of the Delaware
Act.
(b) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, an agreement of merger or consolidation approved
in accordance with Section 18-209(b) of the Delaware Act may, to the extent
permitted by Section 18-209(f) of the Delaware Act, (i) effect any amendment to
this Agreement, (ii) effect the adoption of a new limited liability company
agreement for the Company if it is the surviving or resulting limited liability
company in the merger or consolidation, or (iii) provide that the limited
liability company agreement of any other constituent partnership to the merger
or consolidation (including a limited liability company formed for the purpose
of consummating the merger or consolidation) shall be the limited liability
company agreement of the surviving or resulting limited liability company.
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8.10 PRONOUNS.
All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
8.11 CONFIDENTIALITY.
(a) A Member may obtain from the Company such information
regarding the affairs of the Company as is just and reasonable under the
Delaware Act, subject to reasonable standards (including standards governing
what information and documents are to be furnished, at what time and location
and at whose expense) established by the Board of Managers.
(b) Each Member covenants that, except as required by
applicable law or any regulatory body, it will not divulge, furnish or make
accessible to any other person the name and/or address (whether business,
residence or mailing) of any Member (collectively, "Confidential Information")
without the prior written consent of the Board of Managers, which consent may
be withheld in their sole discretion.
(c) Each Member recognizes that in the event that this
Section 8.11 is breached by any Member or any of its principals, partners,
members, directors, officers, employees or agents or any of its affiliates,
including any of such affiliates' principals, partners, members, directors,
officers, employees or agents, irreparable injury may result to the
non-breaching Members and the Company. Accordingly, in addition to any and all
other remedies at law or in equity to which the non-breaching Members and the
Company may be entitled, such Members shall also have the right to obtain
equitable relief, including, without limitation, injunctive relief, to prevent
any disclosure of Confidential Information, plus reasonable attorneys' fees and
other litigation expenses incurred in connection therewith. In the event that
any non-breaching Member or the Company determines that any of the other
Members or any of its principals, partners, members, directors, officers,
employees or agents or any of its affiliates, including any of such affiliates'
principals, partners, members, directors, officers, employees or agents should
be enjoined from or required to take any action to prevent the disclosure of
Confidential Information, each of the other non-breaching Members agrees to
pursue in a court of appropriate jurisdiction such injunctive relief.
8.12 CERTIFICATION OF NON-FOREIGN STATUS.
Each Member or transferee of an Interest from a Member shall
certify, upon admission to the Company and at such other times thereafter as
the Board of Managers may request, whether he is a "United States Person"
within the meaning of Section 7701(a)(30) of the Code on forms to be provided
by the Company, and shall notify the Company within 30 days of any change in
such Member's status. Any Member who shall fail to provide such certification
when requested to do so by the Board of Managers may be treated as a non-United
States Person for purposes of U.S. federal tax withholding.
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8.13 SEVERABILITY.
If any provision of this Agreement is determined by a court of
competent jurisdiction not to be enforceable in the manner set forth in this
Agreement, each Member agrees that it is the intention of the Members that such
provision should be enforceable to the maximum extent possible under applicable
law. If any provisions of this Agreement are held to be invalid or
unenforceable, such invalidation or unenforceability shall not affect the
validity or enforceability of any other provision of this Agreement (or portion
thereof).
8.14 FILING OF RETURNS.
The Board of Managers or their designated agent shall prepare
and file, or cause the accountants of the Company to prepare and file, a
Federal information tax return in compliance with Section 6031 of the Code and
any required state and local income tax and information returns for each tax
year of the Company.
8.15 TAX MATTERS PARTNER.
(a) A Manager who is a Member shall be designated on the
Company's annual Federal income tax return, and have full powers and
responsibilities, as the Tax Matters Partner of the Company for purposes of
Section 6231(a)(7) of the Code. In the event that no Manager is a Member, a
Member shall be so designated. Should any Member be designated as the Tax
Matters Partner for the Company pursuant to Section 6231(a)(7) of the Code, it
shall, and each Member hereby does, to the fullest extent permitted by law,
delegate to a Manager selected by the Board of Managers all of its rights,
powers and authority to act as such Tax Matters Partner and hereby constitutes
and appoints such Manager as its true and lawful attorney-in-fact, with power
to act in its name and on its behalf, including the power to act through such
agents or attorneys as it shall elect or appoint, to receive notices, to make,
execute and deliver, swear to, acknowledge and file any and all reports,
responses and notices and to do any and all things required or advisable, in
the Manager's judgment, to be done by such a Tax Matters Partner. Any Member
designated as the Tax Matters Partner for the Company under Section 6231(a)(7)
of the Code shall be indemnified and held harmless by the Company from any and
all liabilities and obligations that arise from or by reason of such
designation.
(b) Each person (for purposes of this Section 8.15,
called a "Pass-Thru Partner") that holds or controls an interest as a Member on
behalf of, or the benefit of, another person or persons, or which Pass-Thru
Partner is beneficially owned (directly or indirectly) by another person or
persons, shall, within 30 days following receipt from the Tax Matters Partner
of any notice, demand, request for information or similar document, convey such
notice or other document in writing to all holders of beneficial interests in
the Company holding such interests through such Pass-Thru Partner. In the event
the Company shall be the subject of an income tax audit by any Federal, state
or local authority, to the extent the Company is treated as an entity for
purposes of such audit, including administrative settlement and judicial
review, the Tax Matters Partner shall be authorized to act for, and its
decision shall be final and binding upon, the Company and each Member thereof.
All expenses incurred in connection with any such audit, investigation,
settlement or review shall be borne by the Company.
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8.16 SECTION 754 ELECTION.
In the event of a distribution of Company property to a Member
or an assignment or other transfer (including by reason of death) of all or
part of the interest of a Member in the Company, at the request of a Member,
the Board of Managers, in its discretion, may cause the Company to elect,
pursuant to Section 754 of the Code, or the corresponding provision of
subsequent law, to adjust the basis of the Company property as provided by
Sections 734 and 743 of the Code.
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THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY
BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSE SET FORTH IN
SECTION 8.6 AND THE CONFIDENTIALITY CLAUSE SET FORTH IN SECTION 8.11.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MANAGERS:
--------------------------------------
--------------------------------------
--------------------------------------
ORGANIZATIONAL MEMBER:
--------------------------------------
MEMBERS:
Each person who shall sign a Member
Signature Page and who shall be accepted by
the Board of Managers to the Company as a
Member.
SPECIAL ADVISORY MEMBER:
CIBC OPPENHEIMER ADVISERS, L.L.C.
By: CIBC World Markets Corp.
Managing Member
By: -----------------------------
Name:
Title:
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