Form 486BPOS SKYBRIDGE OPPORTUNITY

 

 

 

 

 

 

 

 

 

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

 

 

 

 

 

It is proposed that this filing will become effective (check appropriate box):

 

 

 

 

 

If appropriate, check the following box:

 

 

 

 

Check each box that appropriately characterizes the Registrant:

 

 

 

 

 

 

 

 

 

 

 

The information required to be included in this Registration Statement by Part A and Part B of Form is contained in the combined prospectus and statement of additional information (“”) that follows. The information required to be in this Registration Statement by Part C of Form follows the Prospectus.

 

 

 

 

SkyBridge Opportunity Fund LLC (the “”) is a Delaware limited liability company registered under the Investment Company Act of 1940, as amended (“”), as a management investment company. The investment objective of the Company is to seek capital appreciation. The Company seeks to implement this objective through employing a variety of alternative investment strategies, including, in part, by investing in investment funds managed by third-party investment managers. See the discussion of risks under the headings “” and “.”

This combined prospectus and statement of additional information (“”) applies to the offering of shares of limited liability company interests in the Company (“”). The Company previously registered $1,807,569,453 in Shares for sale under the registration statement to which this Prospectus relates, with approximately $1,807,170,453 remaining available for sale as of June 30, 2024. The Company also previously registered additional Shares under earlier registration statements.

Neither the Securities and Exchange Commission (the “”), the Commodity Futures Trading Commission (the “”) nor any other U.S. federal or state governmental agency or regulatory authority has approved or disapproved the merits of an investment in these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

Investing in the Shares (defined below) may be considered speculative and involves risk, including the risk of loss of the investment. See “” below.

 

 

 

 

The Shares are not deposits in, obligations of or guaranteed by any bank, are not government guaranteed or insured and are subject to investment risks, including the possible loss of the principal amount invested.

This Prospectus sets forth concisely information about the Company that a prospective investor should know before investing, and should be retained for future reference. It includes the information required to be included in a prospectus and statement of additional information. Additional information about the Company has been filed with the SEC and is available either on the SEC’s website at or upon written or oral request and without charge.

 

 

Shares will be sold only to investors qualifying as “” as described in this Prospectus. One or more Placement Agents (defined below), who may be affiliated with SkyBridge Capital II, LLC (“” or the “”), may be appointed from time to time and will serve in that capacity on a reasonable best efforts basis, subject to various conditions. Sales loads to compensate the Placement Agents are paid by the investor in addition to the investor’s subscription amount. Because it is retained by the Placement Agent, a sales load will not constitute a capital contribution made by the investor to the Company and will not be part of the assets of the Company. Hastings Capital Group, LLC, a broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority, Inc. (“”), and an affiliate of the Adviser, has been appointed to serve as the Company’s principal underwriter (the “”) with authority to sell Shares directly and to appoint third-party placement agents or other intermediaries (the “”) to assist the Principal Underwriter in selling Shares, generally on a reasonable best efforts basis. The offices of the Principal Underwriter are located at 527 Madison Avenue, 4th Floor, New York, New York 10022. The Principal Underwriter may, in those circumstances, retain all or part of the sales load itself. The Company has agreed to indemnify the Principal Underwriter, its directors, officers, and each person, if any, who controls the Principal Underwriter, against liability which the Principal Underwriter, its directors, officers or any such controlling person may incur under the Securities Act, or under common law or otherwise, arising out of any untrue statement of material fact contained in, or omission of material fact required to be contained in, the Company’s registration statement and other disclosure materials, as described in Section 8 of the agreement between the Company and the Principal Underwriter, unless it is determined that the liability resulted from willful misfeasance, bad faith or gross negligence of the person seeking indemnification, or from the reckless disregard of such person’s obligations and duties.

The Company pays the Principal Underwriter a monthly service fee for the sales and distribution of Shares, including the distribution of Shares through Placement Agents. The Adviser or its affiliates, including the Principal Underwriter, also may pay from their legitimate profits additional compensation to the Placement Agents in connection with placement of Shares or servicing of investors. The current (to date) recipients of such payments are:

 

Placement Agents may be added or removed from time to time. As to each investor referred by a Placement Agent or the Principal Underwriter to date, such Placement Agent or the Principal Underwriter, as applicable, may receive compensation of up to 0.85% of the value of the Shares held by the investor per annum (but in the aggregate across all investors will not exceed 1% of the Company’s net assets per annum). All or a portion of this additional compensation is offset by the Account Servicing Fee (defined below) paid by the Company to the Principal Underwriter and to the Placement Agents. The Principal Underwriter will retain a portion of the Account Servicing Fee for services provided to Shares that were not distributed through Placement Agents. In some instances, these arrangements may result in receipt by the Placement Agents and their personnel (who themselves may receive all or a substantial part of the relevant payments) of compensation in excess of that which otherwise would have been paid in connection with their placement of shares of a different investment fund. A prospective investor with questions regarding these arrangements may obtain additional detail by contacting his or her Placement Agent directly. Prospective investors also should be aware that these payments could create incentives on the part of the Placement Agents to more positively consider the Company relative to investment funds not making payments of this nature or making smaller such payments.

This Prospectus will not constitute an offer to sell or the solicitation of an offer to buy nor will any sale of Shares be made in any jurisdiction in which the offer, solicitation or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation or sale. No person has been authorized to make any representations concerning the Company that are inconsistent with those contained in this Prospectus. Prospective investors should not rely on any information not contained in this Prospectus. Prospective investors should not construe the contents of this Prospectus as legal, tax or financial advice. Each prospective investor should consult his, her or its own professional advisers as to the legal, tax, financial or other matters relevant to the suitability of an investment in the Company for the investor. The Shares are subject to substantial restrictions on transferability and resale and may not be transferred or resold except as permitted under the Seventh Amended and Restated Limited Liability Company Agreement of the Company, as may be amended from time to time (the “”).

The Company and the Adviser collect personal information about investors from information received on subscription documents and other forms and information required in connection with a subscription for Shares and information concerning Shareholders’ transactions with the Company. The Company and the Adviser will not disclose any personal information relating to current or former investors except in connection with the administration, processing and servicing of repurchases and subscriptions or to the Company’s Administrators (as defined below), accountants and attorneys, in each such case subject to customary undertakings of confidentiality. The Company and the Adviser restrict access to personal information relating to investors to personnel of the Company and the Adviser and other personnel who need to know that information in connection with the operation of the Company. The Company maintains physical, electronic and procedural controls in keeping with U.S. federal standards to safeguard the Company’s personal information relating to investors.

 

 

 

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In making an investment decision, an investor must rely upon his, her or its own examination of the Company and the terms of the offering, including the merits and risks involved, of acquiring Shares. This is only a synopsis of information to consider before investing. More detailed information follows in the body of this Prospectus.

 

 

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SUMMARY OF FEES AND EXPENSES

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The table below sets forth selected financial information that has been derived from and should be read in conjunction with the financial statements in the Company’s annual reports and the notes thereto, which are incorporated by reference into this Prospectus. For the fiscal years ended March 31, 2024, March 31, 2023, March 31, 2022, March 31, 2021, March 31, 2020, March 31, 2019, March 31, 2018, March 31, 2017, March 31, 2016 and March 31, 2015, the information in the tables below has been derived from the Company’s financial statements, which were audited by KPMG LLP (“”), the Company’s independent registered public accounting firm. KPMG’s most recent report is contained in the Company’s March 31, 2024 annual report. A copy of that annual report may be obtained without charge by contacting the Company at 527 Madison Avenue, 4th Floor, New York, New York 10022, or by calling (212) 485-3100.

 

 

The above ratios may vary for individual investors based on the timing of share transactions during the period.

 

 

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The above ratios may vary for individual investors based on the timing of share transactions during the period.

 

 

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The Company, which is registered under the Investment Company Act as a closed-end, non-diversified, management investment company, was organized as a limited liability company under the laws of Delaware on August 16, 2002. The Company’s principal office is located at 527 Madison Avenue, 4th Floor, New York, New York 10022, and its telephone number is (212) 485-3100. Under the LLC Agreement, the Company may issue one or more Series of Shares. The LLC Agreement provides that a series shall possess such relative rights and preferences as may be established by the LLC Agreement and the Board of Directors, and, in accordance with Delaware law, that liabilities incurred with respect to such series shall be enforceable only against the assets of such series and not against the assets of any other series or of the Company generally. As of the date of this Prospectus, the Board of Directors has established a single series of Shares, designated as the Company. This Prospectus refers to the offer and sale of Shares of the Company. References in this Prospectus to “Shares” should be understood as referring to Shares of the Company. The Company will seek exemptive relief with the SEC to the extent that it wishes to establish any additional series. If the Company establishes any additional series, various references in this Prospectus to the Company as a whole (, with respect to investment objectives and restrictions and tax treatment) will need to be replaced with references to individual series.

Investment advisory services are provided by the Adviser, SkyBridge Capital II, LLC, a limited liability company organized under Delaware law, pursuant to the Investment Advisory Agreement. Responsibility for monitoring and overseeing the Company’s investment program and its management and operation is vested in the individuals who serve on the Board of Directors. See “.” Prior to June 30, 2010, the investment adviser of the Company was Citigroup Alternative Investments LLC, and the name of the Company was Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC. From June 30, 2010 through July 28, 2024, the name of the Company was SkyBridge Multi-Adviser Hedge Fund Portfolios LLC.

 

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The proceeds from the sale of Shares, net of fees and expenses, will be invested by the Company to pursue its investment program and objectives as soon as practicable, consistent with market conditions and the availability of suitable investments, after receipt of such proceeds by the Company, depending on the availability of attractive opportunities, market conditions and the amount raised. Pending the investment of the proceeds of any offering in Investment Funds pursuant to the Company’s investment objective and principal strategies, the Company may invest a portion of the proceeds of the offering, which may be a substantial portion, in short-term, high quality debt securities, money market securities, cash, or cash equivalents. In addition, the Company may maintain a portion of the proceeds in cash to meet operational needs. No assurance can be given that the Company will invest the proceeds in a timely manner, or if it does, that it will do so successfully. The Company may be prevented from achieving its objective during any time in which the Company’s assets are not substantially invested in accordance with its principal investment strategies.

The Company is a specialized investment vehicle that combines many of the features of an investment fund not registered under the Investment Company Act, often referred to as a “private investment fund,” with those of a registered closed-end investment company. Private investment funds, such as hedge funds, are commingled asset pools that are often aggressively managed and that offer their securities privately without registration under securities laws in large minimum denominations to a limited number of high net worth individual and institutional investors. The general partners or investment advisers of these funds, which are typically structured as limited partnerships, are usually compensated through asset-based fees and performance-based compensation. Registered closed-end investment companies are typically organized as corporations, business trusts, limited partnerships or limited liability companies. These registered investment companies impose relatively modest minimum investment requirements and publicly offer their shares to a broad range of investors. The advisers to registered closed-end investment companies are typically compensated through asset-based (but often not performance-based) fees.

The Company is similar to a private investment fund in that the Company will be actively managed and Shares will be sold in specified minimum denominations solely to high net worth individual and institutional investors. In addition, the Investment Managers of the Investment Funds typically will be entitled to receive performance-based compensation. Unlike a private investment fund, however, the Company, as a registered closed-end investment company, can offer Shares without limiting the number of Eligible Investors that can participate in the investment program of the Company. The Company is designed to permit sophisticated 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 and without being subject to the limitations on the number of Eligible Investors faced by many of those funds.

While this Prospectus describes pertinent information about the Company, this Prospectus does not represent a contract between the Company and any Shareholder or any other party.

 

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Conventional registered investment companies, such as mutual funds, generally are subject to significant regulatory restrictions in designing their own investment strategies relating to the use of leverage and the ability to sell securities short. Private, unregistered investment funds, however, are not subject to many of these limitations. The Adviser believes that the Company’s strategy of investing in these types of investment funds creates opportunities to participate in alternative methods of investing that may earn attractive risk-adjusted returns.

The Adviser believes a portfolio can be assembled that capitalizes on both the potential lack of correlation among many Investment Funds and the lack of correlation of some alternative investment strategies with conventional long-only equity and fixed income strategies. A portfolio of alternative investment strategies may therefore produce capital appreciation more consistently and with less volatility than would most individual conventional or alternative investment strategies.

The Company invests in certain alternative strategies that may be risky. The Company typically invests in such strategies through Investment Funds organized as limited partnerships or other limited liability investment vehicles, though may also pursue any such strategies directly and not through investment in Investment Funds. This structure limits the effect that losses incurred by any one Investment Fund or strategy will have on the assets of the Company by limiting the amount at risk to the amount invested in that Investment Fund or strategy. In certain circumstances, however, the Adviser believes that it may be appropriate to gain investment exposure to certain strategies, Investment Funds or Investment Managers by entering into derivative transactions, such as total return swaps, options and forwards. See “” and “.”

The Adviser intends to invest the assets of the Company by employing a variety of alternative investment strategies, including by investing in Investment Funds. The Adviser seeks to employ a combination of a “top-

 

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down” and a “bottom-up” investment approach, with the goal of identifying attractive opportunities, including in Investment Funds, that fit into one or more investment “themes” identified by the Adviser. This opportunistic, theme-based approach will establish the focus of the Company’s investments, which is expected to change over time based on the Adviser’s research and market sentiment. The Company may also invest directly in investments that provide exposure to a specific company, such as, for example, investments in securities issued by private companies (, venture capital and growth equity investments). The Company may also purchase and hold public equities.

Some or all of the Investment Funds may make margin purchases of securities and, in connection with these purchases, borrow money from brokers and banks (, through credit facilities, lines of credit or other margin or borrowing arrangements) for investment purposes. Trading equity securities on margin involves an initial cash requirement representing at least a percentage of the underlying security’s value. 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. 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 but also may increase losses.

The Company may borrow money in connection with its investment activities, for cash management purposes, to fund the repurchase of Shares or for temporary or emergency purposes. The Investment Company Act requires the Company, as a registered investment company, to satisfy an asset coverage requirement of 300% of its indebtedness, including amounts borrowed, measured at the time the Company incurs the indebtedness (the “”). This Asset Coverage Requirement means that the value of the Company’s total indebtedness may not exceed one-third the value of its total assets (including the indebtedness). This limit applies to the Company and not to the Investment Funds.

The Company may also invest in Investment Funds that make use of “alternative data” and certain machine-assisted and / or artificial intelligence trading strategies. The potential for substantial direct and indirect legal and technical costs relating to responding to risks that may occur when invested in Investment Funds deploying these strategies are further discussed in “” below.

The Company also seeks exposure to digital assets (as defined herein) by investing in Investment Funds, derivatives or vehicles that provide exposure to digital assets. Investments by the Company and/or Investment Funds may also be made in companies providing technologies related to digital assets, including digital asset miners, payment technologies, digital security or crypto trading platforms, or other emerging technologies. Although the Company has invested principally in unregistered Investment Funds to date, it also may invest in registered funds and other publicly offered investment vehicles including ETFs, and directly in investments that provide exposure to a specific company. Examples of the primary investment strategies that might be followed by the Adviser or Investment Managers that the Adviser intends to consider with respect to the Company are described below:

. Event driven strategies involve investing in opportunities created by significant transactional events such as spin-offs, mergers and acquisitions, bankruptcies, recapitalizations and share buybacks. Strategies include: “Corporate Credit Event Driven,” “Credit Sensitive Mortgage Backed Securities,” “Diversified Structured Credit,” “Distressed Securities,” “Merger Arbitrage/Special Situations” and “Event Driven Equity.” Some Investment Managers classified as multi-strategy event driven use a combination of these strategies. Investment Managers may look for investment opportunities in the United States, international and global or emerging markets.

Corporate Credit Event Driven strategy encompasses a combination of investment processes targeting securities which experience a change in valuation due to corporate transactions including bankruptcy, emergence from bankruptcy, mergers, acquisitions, divestitures, stock buybacks, dividend issuance, major shifts in corporate strategy and other atypical events. Corporate Credit

 

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Event Driven strategies involve investing in an array of credit oriented instruments including: investment-grade corporate bonds, high-yield debt, bank debt and credit default swaps. Investors that trade credit can be long or short depending on their fundamental analysis. All credit instruments are susceptible to default, interest rate and liquidity risks.

Credit Sensitive Mortgage Backed Securities strategy encompasses an investment process that primarily targets investments in securities collateralized by commercial and residential mortgages. Managers seek to generate superior risk-adjusted returns by selectively sourcing assets that are expected to benefit from current trends and have risk-mitigation qualities. These portfolios are generally actively traded and dynamically hedged, and seek to capture option-adjusted spread while staying relatively duration-neutral. It is expected that managers will utilize a loan-level collateral analysis, meaning a manager generally will assess the merits of investing in a particular instrument by directly analyzing the underlying mortgages and the properties that collateralize them. The manager’s approach may be based on their forecast of multiple home price and default and prepayment behavior paths.

Diversified Structured Credit strategy consists mainly of making researched investments in a diversified mix of structured credit instruments (, residential and commercial mortgage-backed securities, as well as other asset-backed securities, collateralized loan obligations and collateralized debt obligations) and can consist of taking long and short positions in such structured credit instruments. The manager utilizes this long/short approach to try to minimize the volatility of returns and preserve investment capital by investing among various product categories (e.g., the structured credit instruments discussed above). Managers employing these strategies will generally aim to hedge interest rates and focus on extracting value from mispriced credit risk.

Distressed securities strategies involve investments in obligations of companies experiencing financial difficulties, including companies which may be subject to or threatened with bankruptcy, reorganization or liquidity proceedings, companies in default on outstanding obligations to creditors and companies experiencing decreasing revenues or earnings and investments in securities that are priced at a higher premium over their counterparts that are perceived to be safer. Distressed securities strategies are not limited to a particular asset class; they are active in bonds, stocks, bank debt, trade claims, private placements, warrants, etc. Additionally, they may include asset-backed securities backed by other credit sensitive collateral such as credit cards receivables or manufactured housing or auto loans where managers pursue strategies focused on buying distressed or stressed tranches and at times hedging their exposures.

Merger Arbitrage strategies involve the purchase and sale of securities of companies involved in corporate reorganizations and business combinations, such as mergers, exchange offers, cash tender offers, spin-offs, leveraged buy-outs, restructurings and liquidations. The Investment Manager will also consider other investment techniques designed to maximize profits and/or hedge against losses presented by the transaction. These techniques include short selling, options trading, trading in securities convertible into or exchangeable for the securities involved in the reorganization and investing in financial futures or other futures markets that the Investment Manager deems to be a potentially profitable investment strategy or hedge.

. Event Driven Equity strategies opportunistically target companies undergoing a significant corporate transition in the form of a substantive reorganization (distressed or non-distressed), spin-off, merger, take-out, recapitalization, asset sale, change of control, dividend change or share buyback. Event Driven Equity strategies can be passive, “politely” activist, or, at times, hostile in nature. One of the key definitional points is that the strategy primarily focuses on the equity portion of the capital structure. Investment Managers may look for investment opportunities in the United States, international and global or emerging markets.

 

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Event Driven Multi-Strategy managers use a combination of above-mentioned event driven strategies to diversify their sources of return.

Relative value arbitrage strategies seek to take advantage of specific relative pricing anomalies, while also seeking to maintain minimal exposure to systematic market risk. This may, for example, be achieved by purchasing one security perceived by the Investment Manager to be undervalued, while selling short another security perceived by the Investment Manager to be overvalued. Relative value arbitrage strategies include: “Equity Market Neutral,” “Statistical Arbitrage,” “Relative Value Credit,” “Convertible Arbitrage,” “Fixed Income Arbitrage,” “Prepayment Sensitive MBS” and “Relative Value Multi-Strategies.” Some Investment Managers classified as multi-strategy relative value arbitrage use a combination of the strategies. Investment Managers may look for investment opportunities in the United States, international and global or emerging markets.

Equity market neutral strategies seek to generate profits through the successful selection of equity securities while reducing the effects of market-wide or, in some cases, industry sector-wide price movements by simultaneously taking long and short positions in “matched” equities in approximately equal volumes.

Statistical arbitrage is a relative value, “systematic” (meaning largely automated) trading strategy that seeks to exploit short-term and long-term relationships among stock prices and volatility.

Relative Value Credit strategies seek to generate profits through the successful selection of credit securities with relative pricing discrepancies between securities within an issuer’s capital structure or between related instruments referencing an issuer or issuers where historical relationships are mis-priced and there is a catalyst for those to converge or diverge. This strategy also encompasses managers who trade credit on a fundamental basis using alpha generating long and short positions, while reducing the effects of market-wide or, in some cases, industry sector-wide price movements. The strategy also includes managers who are focused on the relative price discrepancies of trust preferred securities (“”) and TruPS collateralized debt obligations (“”) versus intrinsic value.

TruPS are hybrid junior debt securities of regulated bank holding companies that can pay either a fixed or floating rate of interest. They are considered hybrid securities because they have historically been treated as debt securities that can be considered as Tier I capital depending upon the particular financial institution’s complexity, scale, and the evolving regulatory landscape. Additionally, their coupon payments can be turned off for up to 5 years in order to improve the credit quality of the issuer. TruPS CDOs are collateralized debt obligations consisting of TruPS of regional and community banks.

Convertible Arbitrage strategies generally involve the simultaneous purchase and short sale of issues of the same issuer. Often, the arbitrage involves the purchase of a convertible bond issued by the issuer and the short sale of that issuer’s common stock. Convertible bonds are vulnerable to systematic risk, and, as to the issuers of the bonds selected for investment, there is risk of bankruptcy or significant credit risk. Investment Managers may also seek to either hedge out or take on additional credit risk and interest rate risk.

. Investment Managers using fixed income arbitrage strategies analyze a variety of fixed income securities across several markets. These Investment Managers seek to exploit pricing inefficiencies between related fixed income securities, while neutralizing exposure to interest rate risk. Losses may be incurred from spread positioning due to price differentials. Fixed income arbitrage managers tend to utilize significant amounts of leverage, take both long and short positions, and employ options, futures and other derivative strategies. Investment Managers also may trade various mortgage securities which are primarily sensitive to prepayment behavior (prepayment sensitive mortgage-backed securities) and typically include securities backed by agency (, “Fannie Mae,” “Freddie Mac” or “Ginnie Mae”) and

 

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jumbo prime collateral. “Jumbo prime collateral” refers to loans which are generally viewed as high quality but which are too large to be securitized through governmental-supervised programs like Fannie Mae, and thus tend to carry increased credit risk. Investment Managers also may trade various mortgage securities. These securities and their derivatives may further increase the leverage in the Investment Funds.

Investment Managers may extract relative value through constructing their portfolios primarily from mortgage-backed securities which are sensitive to prepayment behavior (prepayment sensitive mortgage-backed securities). These typically include securities backed by agency (i.e., “Fannie Mae,” “Freddie Mac” or “Ginnie Mae”) and jumbo prime collateral.

Relative Value Multi-Strategy managers use a combination of Relative Value strategies described above to diversify their sources of return.

Investment Managers using a directional or long/short equity strategy use their stock selection skills to identify companies that have the potential to perform well (the long portfolio) and those that are expected to do poorly (the short portfolio). Investment Managers seek to actively manage market exposure by shifting the allocation between long and short investments over time depending on stock selection opportunities and the Investment Manager’s outlook for the equity markets. Because the combined long/short portfolio generally will have long equity market exposure, it has the potential to generate attractive returns during rising equity markets, while the portion of the portfolio that is sold short could reduce losses during falling equity markets. Investment Managers may look for investment opportunities in the United States, international and global or emerging markets.

Directional Macro strategies include “Discretionary Trading” and “Systematic Trading.” Successfully implementing a directional macro strategy requires well-developed risk management procedures, because directional macro Investment Managers often employ significant leverage. Investment Managers using such strategies may include commodity trading advisors that trade primarily futures, options on futures contracts and foreign exchange contracts. These Investment Managers may trade in diversified markets or focus on one market sector.

Investment Managers using this strategy seek to dynamically allocate capital to relatively short-term trading opportunities around the world. These Investment Managers implement both directional strategies (e.g., seeking to participate in rising and declining markets when the trend appears strong and justified by fundamentals) and relative value approaches (e.g., establishing long positions in undervalued instruments and short positions in related instruments believed to be overvalued) or in “spread” positions in an attempt to capture changes in the relationships between instruments.

. Systematic trading strategies generally rely on computerized trading systems or models to identify and capitalize on trends in financial and commodity markets. Their systematic approach is designed to allow Investment Managers to seek to take advantage of price patterns in a very large number of markets. The trading models may be focused on technical or fundamental factors or a combination of factors.

. Investment Managers may pursue a variety of investment strategies in managing digital assets of an Investment Fund, and the Company may invest in Investment Funds that provide access to a particular digital asset or assets without a discretionary investment strategy. The Company may also invest in Investment Funds whose Investment Managers have discretion to manage a diversified portfolio of digital assets. Investment Funds may hold long and short positions in digital assets. The Company and Investment Funds may also invest in securities of companies related, in whole or in part, to digital assets or digital asset technologies (including digital asset miners, payment technologies, digital security, or crypto trading platforms), or that otherwise have direct or indirect exposure to emerging technologies. Investment Funds may invest in derivative contracts on digital assets, including digital asset swap agreements, for hedging purposes and non-hedging purposes. See “”

 

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The Adviser is responsible for the allocation of the Company’s assets, including to various Investment Funds, subject to policies adopted by the Board of Directors. The Adviser may also select certain investments on behalf of the Company as set forth herein.

The Adviser selects opportunistically from a wide range of investments, including Investment Funds, in order to create a broad-based portfolio while seeking to invest in compelling investment strategies and with promising Investment Managers. The Adviser does not intend to invest the assets of the Company according to predetermined allocations.

The Adviser has access to a number of hedge fund databases as well as market information sources. In addition, the Adviser has an active research program with internal analysts who specialize in various strategies. Specific sources for new managers include: industry contacts, referrals from existing Investment Managers, third-party information sources, including industry publications, direct solicitations by Investment Managers and third-party marketing firms, introductions from prime brokers and industry conferences.

The Adviser receives information from a large number of Investment Funds each year. The Adviser meets with a diversified cross-section of these Investment Funds each year, but allocates assets to only a fraction of them. The Adviser continually looks to add to the pool of eligible Investment Funds that meet the Adviser’s due diligence requirements. This allows the Adviser to better rank and compare fund peers, which helps to facilitate the replacement of under-performing Investment Managers as well as identify attractive alternatives and new strategies.

The Adviser evaluates Investment Managers based on qualitative and quantitative factors to seek to identify active Investment Managers that have generally shown the ability to generate consistent skill-based returns (alpha) over time, while showing the ability to preserve capital by controlling drawdowns.

The Adviser initially assesses an Investment Manager through a combination of discussions, reviews of materials provided by the Investment Manager and on-site visits to the Investment Manager’s place of business. Once an Investment Manager has successfully passed the initial assessment, the Adviser conducts a comprehensive due diligence review of the Investment Manager, which includes the following components:

 

 

Subject to the “Asset Coverage Requirements” of the Investment Company Act, the Adviser may cause the Company to employ leverage in order to fund repurchases of Shares or for other purposes. This is in addition to the leverage used by individual Investment Funds. Leverage, whether employed by the Company or its underlying Investment Funds, has the effect of increasing returns or losses, as well as volatility and borrowing costs. The Adviser may increase or decrease the degree of leverage employed by the Company at any time, but

 

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will have no control over leverage employed by an Investment Fund other than with respect to any predetermined leverage limits that may have been agreed to by the Investment Fund. See “.”

The Adviser may allocate assets to Investment Funds following a wide variety of investment strategies, resulting in an asset mix held by the Investment Funds that may from time to time include, without limitation, currencies, commodity futures and options (subject to limitations described elsewhere in this Prospectus), non-U.S. dollar denominated instruments, short-term instruments (including U.S. Treasury securities and certificates of deposit), sovereign debt, public and privately placed (unlisted) equity, equity-related and debt securities of U.S. and non-U.S. corporations, digital assets and investments in other investment funds.

The Adviser’s personnel have evaluated numerous Investment Funds representing many categories of alternative investments, utilizing various investment strategies. They also have experience in directly managing alternative investment strategies. The Adviser believes that this combination of evaluation expertise and direct investment experience enables it to understand the opportunities and risks associated with the Company’s investment program, including investing in the Investment Funds. For a more complete description of the experience of the personnel of the Adviser who are principally responsible for the management of the Company, see “.”

The Adviser allocates assets among investments, including Investment Funds, that, in its view, represent attractive investment opportunities in relation to the Company’s investment objective. The Adviser, however, will consider rebalancing the portfolio periodically to maintain what it considers to be the appropriate mix of trading styles and investment strategies given its prevailing market views. There is no guarantee that any given Investment Fund will accept additional allocations of capital at the time the Adviser wishes to make such an additional allocation or at any time thereafter. Furthermore, any Investment Fund may return capital in whole or in part without the Company’s consent (as a result of the Investment Fund’s liquidation or other compulsory redemption).

The Adviser employs an opportunistic, theme-focused investment program under which, at times, a substantial majority of the Company’s assets will be exposed to one or a limited number of investment themes. There is no guarantee that the Company will be able to avoid substantial losses due to poor returns by one or more investments, including Investment Funds.

The Company often elects to invest in an Investment Fund’s non-voting securities and/or waive voting rights associated with the investment in their entirety. Such a limitation on voting rights is intended to ensure that an underlying Investment Fund not be deemed an “affiliated person” of the Company for purposes of the Investment Company Act, which may impose limits on the Company’s dealings with the Investment Fund. There are, however, other statutory tests of affiliation, and an Investment Fund may be deemed an “affiliated person” of the Company notwithstanding these limitations and/or these limitations may not achieve their purpose. Other investment funds or accounts managed by the Adviser also may forego or waive voting rights in a particular Investment Fund. In addition, prospective investors should understand that as the size of the Company’s net assets increases, these requirements can limit the Company’s ability to make investments in investment funds that are smaller in size. See also “.”

As a general matter, the private Investment Funds in which the Company will invest, unlike public corporations or SEC-registered mutual funds, do not provide their shareholders with an ability to vote (except under quite limited circumstances). The Company’s practices regarding investment in non-voting securities or waivers of voting rights are, therefore, not expected to adversely affect the Company’s operations. Nonetheless, it is possible these practices will prevent the Company from participating in voting on a particular issue to the

 

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maximum extent available to other shareholders. The Adviser, which makes any day-to-day decisions regarding these matters, considers this risk small relative to the flexibility realized by the Company and its shareholders in limiting Investment Company Act “affiliated person” concerns. The Company has not established specific written procedures relating to this process.

The trading and investment activity of Investment Funds in which the Company invests are not subject to the Company’s investment restrictions and, unless registered under the Investment Company Act, generally are not subject to any investment limitations under the Investment Company Act other than those applicable to private funds. The Company may invest temporarily in high-quality fixed income securities, money market instruments and money market funds or may hold cash or other cash equivalents pending the investment of assets in Investment Funds or to maintain the liquidity necessary to effect repurchases of Shares or for other purposes.

As noted above, unregistered investment funds typically have greater flexibility than conventional registered investment companies as to the types of securities unregistered funds may hold, the types of trading strategies they may use, and, in some cases, the extent to which they utilize leverage. The Investment Managers to the Investment Funds in which the Company invests will have full discretion, without the Company’s input, 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 of the Investment Funds.

The Investment Funds generally are not limited in the markets in which they invest, either by geographic location or type, such as U.S. or non-U.S. (including emerging markets), large capitalization or small capitalization, or the investment discipline that they may employ, such as value or growth or bottom-up or top-down analysis. These Investment Funds may invest and trade in a wide range of securities and other financial instruments and may pursue various investment strategies and techniques for both hedging and non-hedging purposes. The Investment Funds may also sell securities short, purchase and sell option and futures contracts and engage in other derivative transactions, subject to certain limitations described elsewhere in this Prospectus. The use of one or more of these techniques may be an integral part of the investment program of an Investment Fund and involves certain risks. See “.”

The Adviser employs an ongoing risk management process. Risk management with respect to portfolio construction will seek to achieve diversification across trading styles and investment strategies, asset classes and markets. The Adviser’s regular risk management review typically includes: (i) at a minimum, a monthly review of profit and loss reports and risk profiles for each Investment Manager; (ii) ongoing quantitative and qualitative monitoring of Investment Managers; and (iii) monitoring of drawdown (loss) levels, especially with respect to predetermined “trigger” points.

No risk-management process is fail-safe, and no assurance can be given that the Adviser’s risk management process will achieve its objective. From time to time, the Adviser may modify or change its risk management system.

The Adviser seeks to monitor the operations and performance of an Investment Fund as frequently as the Adviser believes is appropriate in light of the investment strategy followed by the Investment Manager and prevailing market conditions. Although independently verifiable information about an Investment Funds’ operations and performance may not be available on more than an annual basis, the Adviser regularly intends to solicit such information from the Investment Managers and other sources as the Adviser deems necessary to properly assess the relative success or failure of each Investment Fund; there can be no assurance that the Adviser will be successful in obtaining any such information. In this regard, the Adviser in many cases seeks to negotiate arrangements that provide for regular reporting of performance and portfolio data by the Investment Funds. (The inability to negotiate any such arrangement with a specific Investment Fund will not, however,

 

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prevent the Adviser from considering that Investment Fund for investment.) Changes in leverage, personnel, market behavior, expenses, litigation, capital resources, economic conditions and other factors may be monitored, as appropriate and to the extent the information is available to the Adviser.

Based on the Adviser’s assessment of factors such as (i) the degree to which the Investment Manager is pursuing an investment strategy consistent with its stated policy; (ii) whether and to what degree the focus, incentives and investment strategy of the Investment Manager have changed; and (iii) whether the investment strategy employed remains consistent with the objective of the Company in light of changing market conditions or otherwise, the Adviser periodically will adjust allocations of the Company’s assets among Investment Funds. Rebalancing of the Company’s portfolio of Investment Funds generally will be considered on a periodic basis. The Company may, however, reduce its investment in an Investment Fund only as permitted by the governing documents of the Investment Fund (or in such negotiated “side letter” or similar arrangements as the Adviser may be able to enter into with the Investment Fund on behalf of the Company), which may limit significantly the timing or size of permitted withdrawals or redemptions.

The investment program of the Company is speculative and entails substantial risks. No assurance can be given that the investment objective of the Company will be achieved or that substantial losses will not be incurred. In fact, certain investment practices to be employed by the Company and/or the Investment Managers can, in some circumstances, substantially increase any adverse impact on the Company’s investment portfolio. See “.”

 

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The above discussions of the various risks associated with the Company and the Shares are not, and are not intended to be, a complete explanation of the risks involved in an investment in the Company. Those discussions do, however, summarize the principal risks that should be considered before investing. Prospective investors should read this entire Prospectus and the LLC Agreement and consult with their own advisors before deciding whether to invest. In addition, as the investment program of the Company changes or develops over time, it may be subject to risk factors not described in this Prospectus.

 

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The investment objective of the Company is to seek capital appreciation, and is classified as a “fundamental policy” meaning it can only be changed by a vote of a majority of the Company’s outstanding voting securities. The Company has also adopted certain fundamental investment restrictions, which cannot be changed without the vote of a majority of the Company’s outstanding voting securities, as defined in the Investment Company Act. Under the Investment Company Act, the vote of a majority of the outstanding voting securities means the vote, at an annual or a special meeting of security holders, of 67% or more of the voting securities present at the meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or of more than 50% of the outstanding voting securities, whichever is less.

In applying the investment restrictions and other policies described in this Prospectus, the Company will not aggregate its investments and transactions with those of the underlying Investment Funds. Therefore, the Company will not “look through” to the investments and trading activity of the Investment Funds; however, in applying the Company’s 25% limitation on investment in a single industry, the Company will consider the investment policies of the Investment Funds with respect to specific industry concentrations or industry-oriented investment strategies. The Company will not, however, and does not expect to have sufficient portfolio holdings information with respect to each Investment Fund’s underlying portfolio positions to, apply or monitor an industry concentration policy on a look-through basis. In addition, if a percentage restriction or policy is met 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 in this Prospectus, will not constitute a deviation from the restriction or policy. The Company’s fundamental investment restrictions are as follows:

 

 

 

 

 

 

 

 

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The Adviser will not cause the Company to make loans to or receive loans from the Adviser or its affiliates, except to the extent permitted by the Investment Company Act, an exemption from the Investment Company Act, or as otherwise permitted by applicable law. The Company and the Investment Funds in which the Company invests may effect brokerage transactions through affiliates of the Adviser, subject to compliance with the Investment Company Act and other applicable laws. None of the foregoing investment restrictions will be interpreted to prevent the Company from operating as either a “feeder fund” or a “master fund” in a master-feeder arrangement with other investment companies.

With respect to the investment restriction relating to the concentration of investments set forth in (1) above, the Investment Company Act does not define what constitutes “concentration” in an industry. The SEC staff has taken the position that investment of 25% or more of a fund’s total assets in one or more issuers conducting their principal activities in the same industry or group of industries constitutes concentration. It is possible that interpretations of concentration could change in the future. The policy set forth in (1) above will be interpreted to refer to concentration as that term may be interpreted from time to time. The policy will be interpreted to permit investment without limit in the following: securities of the U.S. government and its agencies or instrumentalities (including, for the avoidance of doubt, U.S. agency mortgage-backed securities); securities of state, territory, possession or municipal governments and their authorities, agencies, instrumentalities or political subdivisions; securities of foreign governments; and repurchase agreements collateralized by any such obligations. Accordingly, issuers of the foregoing securities will not be considered to be members of any industry. There also will be no limit on investment in issuers domiciled in a single jurisdiction or country. The policy also will be interpreted to give broad authority to the Company as to how to classify issuers within or among industries or groups of industries. For purposes of this policy, digital assets are considered a type of investment and not an industry. As of the date of this Prospectus, the Company is not aware of a commonly used set of industry classifications for digital assets. For purposes of its concentration policy, the Company considers the following digital asset segments to be separate industries: (i) Peer-to-Peer Digital Payment, (ii) Blockchain for Applications, (iii) Financial Services, (iv) Information Technology and (v) Social and Medias.

 

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The Company’s Board of Directors has overall responsibility for monitoring and overseeing the Company’s investment program, management and operation and has approved the investment program of the Company. As used herein, the term “Director” is synonymous with the term “manager” within the meaning of the Delaware Limited Liability Company Act. The Board of Directors will monitor and oversee the business affairs of the Company, including the complete and exclusive authority to oversee and establish policies regarding the management, conduct and operation of the Company’s business. The Board exercises the same powers, authority and responsibilities on behalf of the Company as are customarily exercised by the directors of an investment company registered under the Investment Company Act organized as a corporation and has complete and exclusive authority to oversee and establish policies regarding the management, conduct and operation of the Company’s business.

Although the Directors review policies regarding the management of the Company and review information regarding the investment program of the Company in connection with quarterly meetings of the Board, they do not have an active role in supervising the Company’s ongoing operations. This means, for example, that the Directors do not select or approve the Investment Managers or the Investment Funds.

The Directors, in their capacity as such, are not Shareholders of the Company and, accordingly, each Director in his capacity as such has no liability as a Shareholder. Directors will not contribute to the investment capital of the Company in their capacity as Directors, but may subscribe for Shares, subject to the eligibility requirements described in this Prospectus.

Directors may be removed in accordance with the LLC Agreement with or without cause by the vote or written consent of at least two-thirds (2/3) of the Directors not subject to the removal vote or, if at a meeting of the Shareholders, a vote of a majority of the outstanding voting securities or, if by written consent of the Shareholders, a vote of Shareholders holding at least two-thirds (2/3) of the total number of votes eligible to be cast by all Shareholders. Under the Investment Company Act, the vote of a majority of the outstanding voting securities means the vote, at an annual or a special meeting of security holders, of 67% or more of the voting securities present at the meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or of more than 50% of the outstanding voting securities, whichever is less.

The Company’s officers are appointed by the Directors and oversee the management of the day-to-day operations of the Company under the supervision of the Board of Directors. One of the Directors and all of the officers of the Company are directors, officers or employees of the Adviser or its subsidiaries. The other Directors are not affiliated with the Adviser or its subsidiaries and are not “interested persons” as defined under Section 2(a)(19) of the Investment Company Act (the “”). A list of the Directors and officers of the Company and a brief statement of their present positions, principal occupations and directorships during the past five years are set out below. To the fullest extent allowed by applicable law, including the Investment Company Act, pursuant to the LLC Agreement the Company indemnifies the Directors and officers for all costs, liabilities and expenses that they may experience as a result of their service as such.

Compensation and benefits of the Company’s officers are paid by the Adviser or an affiliate of the Adviser, except that the Company bears an allocated portion of the Adviser’s compensation and benefits expense in respect of the Chief Compliance Officer.

Certain of the Directors and officers of the Company are also directors and/or officers of other investment companies that are advised by the Adviser, including SkyBridge G II Fund, LLC. (The Company and such other investment companies, if also registered under the Investment Company Act, are referred to collectively in this section of the Prospectus as the “.”) The address for each Director and officer in his or her capacity as such is 527 Madison Avenue, 4th Floor, New York, New York 10022.

 

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To date, Mr. Raymond Nolte and Mr. Brett Messing own 587.624 shares and 91.085 shares, respectively, of limited liability company interest in the Company. To date, to the knowledge of the Company, no other Director owns Shares of, or maintains any direct or indirect interest in, the Company or of other investment companies in the Fund Complex, including SkyBridge G II Fund, LLC. As of the same date and also to the knowledge of the Company, the Directors and officers, as a group, own beneficially less than 1% of the outstanding Shares of the Company. As of the same date and also to the knowledge of the Company, no shareholder owned 5% or more of the Company. Mr. Anthony Scaramucci, a founder of the Adviser, is neither an officer nor Director of the Company, so his ownership of the Company’s Shares is not shown here. Information about Mr. Scaramucci’s ownership of the Company’s Shares is available on the SEC’s website.

 

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As of December 31, 2023, Mr. James G. Jackson beneficially owns limited partner interests with a value of (i) $33,920 in SkyBridge Plaid LP and (ii) $26,891 in SkyBridge Genesis LP, in each case constituting less than 1% of the total limited partner interests outstanding. Each of SkyBridge Plaid LP and SkyBridge Genesis LP may be deemed to be controlled by or under common control with the Company’s Investment Adviser.

Other than as described above, none of the Independent Directors has held any other position with (i) the Company, (ii) an investment company having the same adviser or principal underwriter as the Company or an adviser or principal underwriter that controls, is controlled by or is under common control with the Adviser, (iii) the Adviser or other affiliate of the Company or (iv) any person controlling, controlled by or under common control with the Adviser. The Independent Directors are represented by legal counsel that is independent from counsel to the Company and the Adviser.

The Chair of the Board of Directors is Mr. Raymond Nolte, a member of management of the Adviser responsible for the Company. Mr. Nolte is not an Independent Director. The standing committees of the Board are described below.

The organization of the Board of Directors in this manner reflects the judgment of the Directors that it is in the interests of the Company and its shareholders to both have a “majority independent” Board and have a senior representative of the Adviser preside at Board meetings, supervise the Board agenda and oversee the business of the Company between meetings. The Directors believe that Mr. Nolte’s serving as Chair allows the Board to best leverage his familiarity with the day-to-day operations of the Company and his leadership role within the Adviser, with no undue limitation on the role of the Independent Directors in proposing matters for discussion or guiding Board-level deliberations. The overall small size of the Board (with only five members) assures significant participation by every Board member, so that no separate role for a “lead” Independent Director has been judged necessary. It is also the judgment of the Directors that aspects of the Board’s business and that certain types of responsibilities are especially appropriate to be handled by committees of the Board that are comprised solely of the Independent Directors, namely the Nominating and Compensation Committee and Audit Committee.

In reaching these judgments, the Directors considered the Board’s working experience and committee structures, legal requirements under applicable law, including the Investment Company Act, the perceived expectations of shareholders, information available on industry practice generally, the nature of underlying investment programs, and the relationship between the Company and its principal service providers. The Board may consider different leadership structures in the future and make changes to these arrangements over time.

While the Board generally considers day-to-day risk oversight a function of the Company’s officers and personnel of the Adviser, the Board carefully considers risk management matters and requests and receives reports on a variety of matters relevant to that function. By way of example:

 

 

 

 

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The Board does not maintain a specific committee devoted to risk management responsibilities, in part because the small size of the Board does not require streamlining by committees. The Board also does not maintain any specific Board reporting protocols for the Adviser’s risk management personnel and has not specified that risk management or reporting should be centralized in any one person or separate body.

All Directors are expected to demonstrate various personal characteristics appropriate to their position, such as the exercise of professional care and business judgment, working cohesively with others while still advocating competing viewpoints, critical analysis and the like. All Directors also are expected to meet the necessary time commitments for service on the Board. The Board then generally views each Director appointment or nomination in the context of the Board’s overall composition and considers each Director’s individual professional experience and service on other boards of directors, as well as his or her current and prior roles (such as committee service) on the Board. With respect to the qualifications and contributions of particular Directors, the Board has considered the following:

Mr. Nolte:

 

 

 

 

Mr. Hale:

 

 

Mr. Jackson:

 

 

 

 

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Mr. Messing:

 

 

Ms. Smith:

 

 

 

Each Independent Director also was nominated based in part on his status as a person who is not an “interested person” of the Company as defined in the Investment Company Act. Descriptions of Director experience should not be taken to suggest that any Director is an expert in a particular subject.

The following table shows information regarding the compensation received by the Independent Directors of the Company from all registered investment companies for which the Adviser or their affiliates serve as an investment adviser or general partner for the fiscal year ended March 31, 2024. No compensation is paid by the Company to Directors who are “interested persons” of the Company or the Adviser.

 

 

 

 

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The Independent Directors will each be paid, for their service as Directors of the Company and SkyBridge G II Fund, LLC, an annual retainer of $90,000, a fee per telephonic meeting of the Board of Directors of $500 and a fee per in-person meeting of the Board of Directors of $1,000 plus reasonable out-of-pocket expenses. The Chair of the Audit Committee will receive a $10,000 per year supplemental retainer. Directors will be reimbursed by the Company for their travel expenses related to Board meetings. A portion of such fees and costs will be allocated to each fund according to its relative net assets and a portion will be split equally between each fund.

The Board of Directors has formed an Audit Committee currently composed of each of the Independent Directors, the functions of which are: (1) to oversee the Company’s accounting and financial reporting policies and practices, its internal controls and, as the Audit Committee may deem necessary or appropriate, the internal controls of certain of the Company’s service providers; (2) to oversee the quality and objectivity of the Company’s financial statements and the independent audit of those statements; (3) to assist the Board of Directors in selecting the Company’s independent registered public accounting firm, to directly supervise the compensation and performance of such independent registered public accountants and generally to act as a liaison between the independent registered public accountants and the Board of Directors; and (4) to review and, as appropriate, approve in advance all professional services provided by such independent registered public accountants to the Company, the Adviser and, in certain cases, other affiliates of the Company. During the fiscal year ended March 31, 2024 the Audit Committee met four times.

The Board of Directors has formed a Nominating and Compensation Committee currently composed of each of the Independent Directors, the functions of which are: (1) to select and nominate to the Board of Directors each Independent Director and (2) to recommend to the Board of Directors any appropriate changes in compensation for each Independent Director. After the initial election of Directors, no Independent Director will be elected by the Board of Directors unless nominated by the Nominating and Compensation Committee. The Nominating and Compensation Committee does not consider proposals from Shareholders in connection with proxy solicitations. During the fiscal year ended March 31, 2024 the Nominating and Compensation Committee met one time.

The Board of Directors has formed a Valuation Committee, currently composed of three Independent Directors, whose function, subject to the oversight of the Board of Directors, is to review the Company’s valuation methodologies, valuation determinations and any relevant information provided to the Valuation Committee by the Adviser. The Valuation Committee will act in accordance with the Company’s valuation procedures. During the fiscal year ended March 31, 2024 the Valuation Committee met four times.

In connection with the Adviser’s appointment as investment adviser to the Company, the Board of Directors has delegated to the Adviser the authority to vote proxies received by the Company from the Investment Funds and other portfolio investments (for this purpose, the “”). While the Company often holds non-voting securities (or waives its vote ahead of time in certain circumstances) so that actual voting of proxies is rare, the Adviser has adopted policies and procedures (the “”) regarding the voting of such proxies, which Policies have been reviewed and approved by the Board of Directors. The Policies provide that the Adviser will vote client proxies in a manner that serves the best interest of the client, as determined by the Adviser in its discretion, taking into account relevant factors, including: (i) the impact on returns to be earned by the client; (ii) alignment of the interests of management of the portfolio position with that of the client, including establishing appropriate incentives for management; (iii) the ongoing relationship between the client and the portfolio positions in which it is invested, including the continued or increased availability of information regarding such position; and (iv) industry and business practices. The Policies also establish guidelines under which the Adviser generally will vote with management of a portfolio position on various routine matters (such

 

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as the election of directors, the appointment of independent public accountants, and establishing the date and place of an annual meeting, among others) but will evaluate non-routine matters (such as compensation plans, changes in investment policies and changes in voting rights, among others) on a case by case basis. Finally, the Policies provide procedures that address conflicts of interest between the Adviser and a client with respect to voting proxies, which may involve review of a proposed vote by the Adviser’s compliance personnel and, in certain circumstances, will require consultation with the client or its representative (the Board of Directors, in the case of the Company). The Adviser also may abstain from voting from time to time.

Information regarding the Adviser’s proxy-voting record on behalf of the Company for the twelve-month period ended June 30, 2023 is available for review. Please call the Company collect at (212) 485-3100 to request this information, which is also available on the SEC’s website at .

None of the Company, the Shareholders or the Adviser will have the ability to direct or influence the voting of proxies by the Investment Funds. It is expected that Investment Managers will vote proxies received by the Investment Funds from their portfolio investments in accordance with each Investment Manager’s proxy voting policies and procedures.

 

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SkyBridge Capital II, LLC serves as investment adviser to the Company. The Adviser has the responsibility to implement the investment program of the Company, subject to the ultimate supervision of, and any policies established by, the Board of Directors. Under the terms of the Investment Advisory Agreement, the Adviser allocates the Company’s assets and monitors regularly each Investment Fund to determine whether its investment program is consistent with the Company’s investment objective and whether its investment performance and other criteria are satisfactory. The Adviser may reallocate assets among investments, including Investment Funds, terminate relationships with Investment Funds and select additional Investment Funds, subject in each case to the ultimate supervision of, and any policies established by, the Board of Directors.

The Adviser is organized as a limited liability company under the laws of the State of Delaware and is a registered investment adviser under the Advisers Act. Personnel of the Adviser serve as portfolio managers to certain clients and registered and unregistered investment funds (including SkyBridge G II Fund, LLC), which utilize an investment program that is substantially similar to that of the Company. The Adviser currently serves, and may in the future serve, as an investment adviser to other investment funds (including SkyBridge G II Fund, LLC). The offices of the Adviser are located at 527 Madison Avenue, 4th Floor, New York, New York 10022, and its telephone number is (212) 485-3100.

The personnel of the Adviser principally responsible for management of the Company are experienced and educated investment professionals with a long performance record in alternative investments. They have identified, evaluated, structured, managed and monitored a wide range of alternative investments globally and maintain a strong network within the alternative investment community as a result of their prior and ongoing experience. The Adviser and its personnel maintain relationships with a large number of managers. The Adviser believes that, as a result of these contacts, the Company should have access to a large number of Investment Funds from which to select.

Effective as of June 30, 2010, the Adviser began operating, managing or advising certain former businesses of CAI. As of May 31, 2024, the Adviser’s capital under management or advisement, including the Company, was approximately $2.2 billion (capital under management may include assets that are committed, even if not funded). The Adviser serves many interests in addition to the Company, which creates certain risks and possibilities of adverse effects on investors in the Company. See “.”

Please refer to “” on page 22 for a discussion on the Investment Advisory Agreement.

 

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Raymond Nolte and Brett Messing are currently the portfolio managers of the Company and as such have primary responsibility for the day-to-day management of the Company. In that capacity, they receive significant input and support from a team of analysts also employed by the Adviser.

The professional background of Messrs. Nolte and Messing is described above in the table headed “.”

The following table provides information as of March 31, 2024 relating to Mr. Nolte’s and Mr. Messing’s other investment activities with the Adviser, as well as their investments in the Company.

 

With respect to the accounts identified in the table above, Mr. Nolte and Mr. Messing manage twelve pooled investment vehicles, with assets totaling $503 million, for which the advisory fees are based in part on performance of the accounts.

Each of Mr. Nolte’s and Mr. Messing’s compensation is a combination of salary and discretionary bonus, including deferred compensation. The value of the discretionary bonus is affected by the financial results and profitability of SkyBridge as a whole. The discretionary bonus is not linked to the performance of any specific benchmark or that of any SkyBridge investment fund or account; nor are specific asset size targets considered. Each of Mr. Nolte and Mr. Messing has a minority equity stake in the Adviser.

As shown in the table above, Mr. Nolte and Mr. Messing are responsible for managing other accounts (“”) in addition to the Company. In certain instances, conflicts may arise in their management of the Company and such Other Accounts.

Situations where a conflict may arise between the Company and an Other Account include allocation of investment opportunities among the Company and the Other Account and/or negotiation of special terms with an Investment Fund or Investment Manager. For example, the Adviser may determine that there is an opportunity that is suitable for the Company as well as for Other Accounts of the Adviser, but the opportunity may be limited in size so that not all accounts can participate in full. Likewise, the negotiation of special terms presents the risk that a particular line of negotiation may not equally benefit all accounts. As a related matter, a particular Investment Fund interest or other security may be bought for one or more clients when one or more other clients are selling that same security, which may adversely affect the Company. The Company and the Adviser have adopted policies and procedures regarding investment opportunity allocations, which generally require that investment opportunities be allocated among the Company and Other Accounts in a manner that is fair, equitable and consistent with their fiduciary obligations to each.

 

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Mr. Nolte’s and Mr. Messing’s management of the Company and Other Accounts may result in their devoting a disproportionate amount of time and attention to the management of a particular account as against another. This particularly may be the case when accounts have different objectives, benchmarks, time horizons, asset levels and fees.

The management of personal accounts by Mr. Nolte and Mr. Messing may give rise to potential conflicts of interest. While the Adviser’s Code of Ethics (defined below) will impose limits on the ability of Mr. Nolte and Mr. Messing to trade for their personal accounts, there is no assurance that the Adviser’s Code of Ethics will eliminate such conflicts.

Other than the conflicts described above, the Company is not aware of any material conflicts that may arise in connection with the Adviser’s management of the Company’s investments and such Other Accounts.

 

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The Investment Advisory Agreement provides that the Adviser is responsible, subject to the supervision of the Board of Directors, for formulating a continuing investment program for the Company. The Adviser makes all decisions as to the Company’s purchases and withdrawals of interests in Investment Funds. The Investment Advisory Agreement is terminable without penalty upon 60 days’ prior written notice by the Board of Directors to the Adviser and to the Shareholders, by vote of a majority, as defined by the Investment Company Act, of the outstanding voting securities of the Company, or by the Adviser upon 60 days’ prior written notice. The Investment Advisory Agreement continues in effect from year to year if the continuance is approved annually by the Board of Directors (including a majority of the Independent Directors) by vote cast in person at a meeting called for the purpose of voting on such continuance. A discussion regarding the basis of the Board of Directors’ approval of the Investment Advisory Agreement is available in the semi-annual report to Shareholders for financial reporting periods that include any such approval. The Investment Advisory Agreement provides that it will terminate automatically in the event of its “assignment,” as defined by the Investment Company Act and the rules promulgated 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 partner, director, officer or employee of the Adviser, or any of their affiliates, executors, heirs, assigns, successors or other legal representatives, will not be liable to the Company for any error of judgment, for any mistake of law or for any act or omission by the 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, the Adviser or any partner, director, officer or employee of the Adviser, and any of their affiliates, executors, heirs, assigns, successors or other legal representatives, against any liability or expense to which the person may be liable that arises in connection with the performance of services to the Company, so long as the liability or expense is not incurred by reason of the person’s willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

– The Adviser, its affiliates and their directors, officers and employees may buy and sell securities or other investments for their own accounts, including interests in Investment Funds, and may have 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 the Adviser or its affiliates that are the same, different from or made at different times from positions taken for the Company. To lessen the possibility that the Company will be adversely affected by this personal trading, the Company and the Adviser have adopted a code of ethics (the “”) in compliance with Section 17(j) of the Investment Company 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 Code of Ethics is also available on the EDGAR Database on the SEC’s Internet site at , and copies may be obtained, after paying a duplicating fee, by .

The Adviser and its affiliates will not purchase securities or other property from, or sell securities or other property to, the Company except that the Company may, in accordance with rules under the Investment Company Act, engage in transactions with accounts that are affiliated with the Company as a result of common officers, directors, advisers or managing general partners. These transactions would be effected in circumstances in which the Adviser determined that it would be appropriate for the Company to purchase and another client to sell, or the Company to sell and another client to purchase, the same security or instrument on the same day.

Personnel of the Adviser (including Mr. Nolte and Mr. Messing, the portfolio managers for the Company) serve as portfolio managers to certain clients and registered and unregistered investment companies (including SkyBridge G II Fund, LLC) that may utilize an investment program that is substantively similar to that of the Company. In addition, the Adviser currently serves, or may in the future serve, as investment adviser to other

 

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registered investment companies (including SkyBridge G II Fund, LLC), unregistered investment companies or accounts (including proprietary accounts), some of which provide for incentive compensation (such as performance fees). Consequently, the Adviser’s investment management activities may present conflicts between the interests of the Company and those of the Adviser and, potentially, among the interests of various accounts managed by the Adviser, principally with respect to allocation of investment opportunities among similar strategies. The Adviser has adopted a policy pursuant to which it is required to allocate investment opportunities in a manner that is fair and equitable to all of its clients. Certain conflicts specific to Mr. Nolte and Mr. Messing as portfolio managers of the Company are described above under the heading “.”

Future investment activities of the Adviser and its affiliates and their principals, partners, directors, officers or employees may give rise to conflicts of interest other than those described above.

 

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A meeting of Shareholders may be called by the Board of Directors or by Shareholders of the Company holding at least a majority of the total number of votes eligible to be cast. Shareholders will be entitled to vote on any matters that require the approval of the holders of voting securities under the Investment Company Act or as otherwise required in the Delaware Limited Liability Company Act including certain elections of Directors, approval of the Investment Advisory Agreement, and on certain other matters. Each Share of the Company is entitled to one vote for each dollar of net asset value represented by the Share and a proportionate fraction of a vote for each fraction of a dollar of net asset value. Shareholders shall not be entitled to cumulative voting in the election of Directors or any other matter. Notwithstanding their ability to exercise their voting privileges, Shareholders, in their capacity as such, are not entitled to participate in the management or control of the Company’s business and may not act for or bind the Company.

 

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Although the Adviser anticipates that Investment Managers will follow practices similar to those described herein, the Adviser does not control the Investment Managers and no guarantee or assurances can be made that such practices will be followed, that the Investment Manager will manage its Investment Fund in a manner consistent with the Company’s investment objectives or that an Investment Manager will adhere to, and comply with, its stated practices. If the Adviser becomes aware that an Investment Manager is no longer managing its Investment Fund consistent with the Company’s investment objectives and/or such Investment Manager’s stated practices, the Adviser may reassess the Company’s position in the Investment Fund and consider the options available to the Company (including to redeem).

The Adviser anticipates that each Investment Manager will consider participation by the Company, or an Investment Fund in which the Company has invested, in all appropriate investment opportunities that are also under consideration for investment by the Investment Manager for other accounts managed by the Investment Manager, other than the Company or such Investment Fund (collectively, the “,” which includes SkyBridge G II Fund, LLC), that pursue investment programs similar to that of the Company. Circumstances may arise, however, under which an Investment Manager will cause its Other Accounts to commit a larger (or smaller) percentage of their assets to an investment opportunity than to which the Investment Manager will commit assets of the Company or an Investment Fund in which the Company has invested. Circumstances may also arise under which an Investment Manager will consider participation by its Other Accounts in investment opportunities in which the Investment Manager intends not to invest on behalf of the Company or an Investment Fund in which the Company has invested, or vice versa.

Situations may occur in which the Company could be disadvantaged by investment activities conducted by the Investment Manager for the Other Accounts. These situations may arise as a result of, among other things: (1) legal restrictions on the combined size of positions that may be taken for the Company, or an Investment Fund in which the Company has invested, and/or the Investment Manager’s Other Accounts (collectively, “,” and, individually, a “”), which could limit the size of the Company’s or an Investment Fund’s position in an otherwise desirable investment; (2) legal prohibitions on the Co-Investors’ participating in the same instruments; (3) the difficulty of liquidating an investment for a Co-Investor when the market cannot absorb the sale of the combined positions; and (4) the determination that a particular investment is warranted only if hedged with an option or other instrument and the availability of those options or other instruments is limited.

In general, each Investment Manager, and its principals, officers, employees and affiliates, may buy and sell securities or other investments for their own accounts and may face conflicts of interest with respect to investments made on behalf of an Investment Fund in which the Company invests. 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 as, different from or made at different times than positions taken for an Investment Fund.

Investment Managers or their affiliates may from time to time provide investment advisory or other services to private investment funds and other entities or accounts managed by the Adviser or its affiliates. In addition, Investment Managers or their affiliates may from time to time receive research products and services in connection with the brokerage services that affiliates of the Adviser may provide to one or more Other Accounts or the Company.

– An Investment Manager may from time to time cause an Investment Fund to effect certain principal or agency cross transactions in securities with one or more Other Accounts or the Company, subject to certain conditions. Future investment activities of the Investment Managers, or their affiliates, and the principals, partners, directors, officers or employees of the foregoing, may give rise to additional conflicts of interest.

 

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 Each Investment Manager is responsible for placing orders for the execution of portfolio transactions and the allocation of brokerage for any Investment Fund it manages. Transactions on U.S. stock exchanges and on some non-U.S. stock exchanges involve the payment of negotiated brokerage commissions. On non-U.S. stock exchanges commissions often are fixed. No stated commission is generally applicable to securities traded in over-the-counter markets, but the prices of those securities include undisclosed commissions or mark-ups.

The Adviser expects that each Investment Manager will generally select brokers and dealers to effect transactions on behalf of its Investment Fund substantially as described below, although the Adviser can give no assurance that an Investment Manager will adhere to, and comply with, the described practices. The Adviser generally expects that, in selecting brokers and dealers to effect transactions on behalf of an Investment Fund, an Investment Manager will seek to obtain the best price and execution for the transactions, taking into account such factors as price, size of order, difficulty of execution and operational facilities of a brokerage firm and the firm’s risk in positioning a block of securities. Subject to appropriate disclosure, however, Investment Managers of Investment Funds that are not investment companies registered under the Investment Company Act may select brokers on a basis other than that outlined above and may receive benefits other than research or that benefit the Investment Manager rather than its Investment Fund. The Adviser may consider the adequacy of the broker selection process employed by an Investment Manager, as well as the above principles, as a factor in determining whether to invest in its Investment Fund. Each Investment Manager generally will seek reasonably competitive commission rates, but will not necessarily pay the lowest commission available on each transaction.

Consistent with seeking best price and execution, an Investment Manager may place brokerage orders with brokers (including affiliates of the Adviser) that may provide the Investment Manager 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 an Investment Manager are not necessarily reduced as a result of the receipt of this supplemental information, which may be useful to the Investment Manager or its affiliates in providing services to clients other than an Investment Fund. In addition, not all of the supplemental information is used by the Investment Manager in connection with an Investment Fund in which the Company invests. Conversely, the information provided to the Investment Manager by brokers and dealers through which other clients of the Investment Manager and its affiliates effect securities transactions may be useful to the Investment Manager in providing services to an Investment Fund. Section 28(e) of the Securities Exchange Act of 1934, as amended, (the “”) specifically permits the use of research-related soft dollar items in the manner described above. Soft dollar items that are not research-related are, however, outside the Section 28(e) “safe harbor.” Soft dollars not generated through agency transactions in securities (for example, those generated with respect to certain types of derivatives transaction) are also outside the Section 28(e) safe harbor. The Investment Managers may receive soft dollar items outside the safe harbor.

No guarantee or assurance can be made that an Investment Manager’s brokerage transaction practices will be transparent or that the Investment Manager will establish, adhere to, or comply with its stated practices. Investment Managers may select brokers on a basis other than that outlined above and may receive benefits other than research or that benefit the Investment Manager or its affiliates rather than the Company or the Investment Fund in which the Company invests.

– The Adviser has a fiduciary duty to seek best execution (i.e., seeking to obtain not necessarily the lowest commission but the best overall qualitative execution in the particular circumstances) for the Company’s transactions with respect to the Company’s purchase of direct investments, including publicly-traded or privately-placed equities.

 

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Furthermore, in accordance with provisions of the Investment Company Act, an affiliate of the Adviser may effect brokerage transactions for an Investment Fund.

The Board of Directors has adopted procedures designed to ensure that commission rates paid to affiliates of the Adviser by the Company (there have been no such payments to date other than underwriter/placement agent fees) will be fair and reasonable within the meaning of the Investment Company Act. These procedures do not, however, govern payments by Investment Funds.

– The Adviser has adopted procedures (the “”) that include (a) a definition of “trade errors” in the context of funds of hedge funds, (b) the processes to be followed in the event that such errors occur and the responsibilities of the parties involved, (c) the requirement to maintain certain records, (d) a description of the approvals required and (e) the escalation mechanisms in the event of significant losses and/or unresolved issues. Pursuant to the Trade Error Procedures, following an error by (i) the Adviser’s investment team or (ii) the Administrators or their affiliates in the execution of a subscription or withdrawal/redemption decision or instruction (each such error, a “”), (A) in the event that such Trade Error has resulted in a gain to the Company, the Company will generally retain the amount of such gain and (B) in the event that such Trade Error has resulted in a loss to the Company, the Adviser will generally (I) make the Company whole for the amount of such loss and (II) pay interest at a rate equal to the rate that would have been earned in the Company’s interest-bearing account in respect of such amount for the period from the effective date of the erroneous subscription or withdrawal/redemption decision or instruction through the date of payment, in each case within two to five business days of the date of determination of the final amount of the loss.

 

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The Company has retained two Administrators, SkyBridge, whose principal business address is 527 Madison Avenue, 4th Floor, New York, New York 10022, and BNY Mellon Investment Servicing (US), Inc. (“”), whose principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809, to provide certain administrative and investor services to the Company. Under the terms of the administrative and investor services agreement entered into between the Company and SkyBridge, SkyBridge is responsible, directly or through its agents, for, among other things, certain compliance, board administration, regulatory, general business and operational matters. Under the terms of the administration, accounting and transfer agent services agreement entered into between the Company and BNYM, BNYM is responsible, directly or through it agents, for, among other things: (1) maintaining a list of Shareholders and generally performing any actions related to the redemption and transfer of Shares; (2) computing and disseminating the net asset value of the Company in accordance with the LLC Agreement; (3) preparing the Company’s annual, semi-annual and quarterly reports; and (4) performing additional services, as agreed upon, necessary in connection with the administration of the Company.

BNYM is paid a monthly administrative fee calculated as a percentage of the Company’s net assets, which fee provides for “breakpoints” (or fee reductions) at increasing asset levels. The administrative fee with BNYM is equal to approximately 0.075% of the Company’s first $200 million of average net assets; 0.05% of the Company’s next $150 million of average net assets; and 0.03% of the Company’s average net assets in excess of $350 million. Effective August 1, 2024, SkyBridge is paid an annual administrative fee calculated as a percentage of the Company’s net assets, which fee provides for “breakpoints” (or fee reductions) at increasing asset levels. The annual administrative fee is equal to approximately 0.25% of the Company’s first $5 billion of average net assets, subject to a cap of $6.5 million per annum, 0.08% of the Company’s next $1.5 billion of average net assets in excess of $5 billion, 0.07% of the Company’s next $1.5 billion in average net assets in excess of $6.5 billion, and 0.06% of the Company’s average net assets in excess of $8 billion. Each Administrator is reimbursed by the Company for out-of-pocket expenses (including out-of-pocket expenses of any third-party retained to assist an Administrator) relating to services provided to the Company. BNYM also is paid certain per-account charges, tax compliance fees, and is reimbursed for certain out-of-pocket expenses. The administrative fees with BNYM and SkyBridge may be renegotiated from time to time between the parties. The administration, accounting and transfer agent services agreement with BNYM may be terminated at any time by the Company upon not less than 60 days’ written notice to BNYM or by BNYM upon not less than 120 days’ written notice to the Company. The administrative and investor services agreement with SkyBridge may be terminated at any time by either party upon not less than 60 days’ written notice.

For the fiscal years ended March 31, 2022, 2023, and 2024, BNYM was paid $2,383,760, $1,605,357, and $1,494,257 respectively for its administration, accounting and transfer agent services. For the same periods, SkyBridge was paid $2,571,022, $2,146,106, and $2,486,364 respectively for its administration services.

The agreements entered into between the Company and each of the Administrators (the “”) provide that each of the Administrators, subject to certain limitations, will not be liable to the Company or to Shareholders for any and all liabilities or expenses except those arising out of the fraud, gross negligence or willful default or misconduct of such Administrator or its agents. In addition, under the Administration Agreements, the Company agrees to indemnify each Administrator from and against any and all liabilities and expenses whatsoever arising out of the Administrator’s actions under the respective Administration Agreement, other than liability and expense arising out of an Administrator’s fraud, gross negligence or willful default or misconduct.

Each Administrator has been authorized by the Board of Directors, on behalf of the Company, in the Administration Agreements, to make various determinations on behalf of the Company, regarding subscription

 

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for, and the transfer and repurchase of, Shares, as well as with respect to certain matters relating to the allocation of Company expenses. Among other matters, these or other designated agents of the Company may:

 

 

 

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The Bank of New York Mellon (“”), a corporation incorporated under the laws of the State of Delaware, serves as the Custodian of the assets of the Company, and may maintain custody of such assets with U.S. subcustodians and foreign custody managers (which may be banks, trust companies, securities depositories and clearing agencies), subject to policies and procedures approved by the Board of Directors. Assets of the Company are not held by the Adviser or commingled with the assets of other accounts, except to the extent that securities may be held in the name of the Custodian, subcustodian or foreign custody manager in a securities depository, clearing agency or omnibus customer account. The Custodian also serves as custodian to the Sub-Fund. The Custodian’s principal business address is 8800 Tinicum Boulevard, 3rd Floor, Suite 200, Philadelphia, Pennsylvania 19153.

BNYM serves as Escrow Agent with respect to subscription monies received from prospective investors in advance of dates when Shares may be subscribed for and monies may be transmitted to the Company. The Escrow Agent’s principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809.

Fees payable to the Custodian and the Escrow Agent for these services, and reimbursement for the Custodian’s and the Escrow Agent’s out of pocket expenses, are paid by the Company.

 

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The Adviser bears all of its own costs incurred in providing investment advisory services to the Company. The Company generally is not responsible for travel and other expenses related to the Adviser’s selection and monitoring of Investment Managers.

In consideration of the administrative services provided by the Administrators to the Company, the Company pays the Administrators their respective administrative fees and also reimburses each Administrator for its out-of-pocket expenses related to services provided to the Company. Reimbursed expenses vary as between the two Administrators but include telecommunication charges, terminals, transmission lines, connectivity and related outsourced IT service and support, travel, printing, costs of third-party compliance and regulatory consultants, costs related to net asset value validation, accounting reconciliation, tax and similar software and out-of-pocket expenses of sub-vendors. BNYM is also paid certain per-account charges, tax compliance fees, and is reimbursed for certain out-of-pocket expenses. These fees paid to the two Administrators and the reimbursement of out-of-pocket expenses are expenses out of the Company’s assets and are reflected in reductions to the net asset value attributable to each Shareholder’s Shares (including Shares held by the Adviser and any of its respective affiliates).

Expenses borne by the Company (unless voluntarily assumed by the Adviser) include, without limitation:

 

 

 

 

 

 

 

 

 

 

 

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The Adviser is reimbursed by the Company for any of the above expenses that it pays on behalf of the Company, except as otherwise provided above. When certain Company expenses are incurred in common with other clients of the Adviser, the Adviser attempts to allocate such expenses among clients in a fair and equitable manner. Typically, such expenses are allocated equally among accounts benefiting from an expense item and at times the allocation decision will reflect judgments on the part of the Adviser. Certain common expenses may be absorbed by the Adviser depending on the client’s agreement with the Adviser or at the Adviser’s discretion. While an allocation can have the effect of reducing expenses that a client might otherwise be required to pay in full, it may also result in differences in the relative cost and benefits across accounts.

Investment Funds bear various expenses in connection with their operations similar to those incurred by the Company. Investment Managers generally will assess asset-based fees to and receive performance-based compensation from the Investment Funds (or their investors), which effectively will reduce the investment returns of the Investment Funds. These expenses, fees and allocations will be in addition to those incurred by the Company itself. As an investor in the Investment Funds, the Company will bear its proportionate share of the expenses and fees of the Investment Funds and will also be subject to performance allocations to the Investment Managers.

 

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In consideration of the advisory services provided by the Adviser to the Company, the Company pays the Adviser a monthly Advisory Fee equal to 0.10% (1.20% on an annualized basis) of its net assets. The Advisory Fee is paid out of and reduces the Company’s net assets. Net assets for these purposes means the total value of all assets of the Company, less an amount equal to all accrued debts, liabilities and obligations of the Company. The Advisory Fee is computed based on the net assets of the Company as of the end of business on the last business day of each month, after adjustment for any subscriptions made at the beginning of that month, and will be due and payable in arrears as soon as reasonably practicable after the calculation of the Company’s net assets for the previous month. The Adviser uses a portion of its profits generated to make ongoing payments to Placement Agents. For the fiscal years ended March 31, 2022, 2023, and 2024, SkyBridge was paid $33,495,380, $17,547,392, and $15,473,024 respectively for its advisory services.

 

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The Company expects to make distributions necessary to maintain its qualification as a regulated investment company under the Code and to avoid corporate-level federal income tax. The Company also expects to make distributions at such times and in such amounts as to avoid the imposition of federal excise tax. However, it is possible that some excise tax will be incurred and, although not currently anticipated, there are circumstances in which the Company may not have the necessary information, or may, for other reasons, elect not to make the distributions necessary to avoid this tax. The Company intends to distribute all of its net investment income and realized net capital gains, if any, at least annually. However, the Company may not make a distribution under certain circumstances that would violate the Delaware Limited Liability Company Act or other applicable law. BNYM also serves as the dividend disbursing agent for the Company. To date the Company has not paid a dividend that represents a return of capital and no such return of capital is contemplated.

Pursuant to the Company’s Automatic Dividend Reinvestment Plan (a “”), unless a Shareholder is ineligible or otherwise elects, all distributions of dividends and capital gains will be automatically reinvested by the Company in additional Shares of the Company. Election not to participate in the Plan and to receive all dividends and capital gain distributions in cash may be made by notice to a Shareholder’s broker or dealer (who should be directed to so inform the Company).

After the Company declares a dividend or determines to make a capital gain distribution, participants will be issued additional Shares at their then net asset value. Notice of each such Share transaction will be furnished as soon as practicable but not later than sixty (60) days after the date thereof, together with information relevant for personal and tax records.

In the case of persons, such as banks, brokers or nominees, which hold Shares for others who are the beneficial owners, the Plan will be administered on the basis of the number of Shares certified from time to time by the record holders as representing the total amount registered in the record holder’s name and held for the account of beneficial owners who are participants in the Plan. Shareholders who intend to hold their shares through a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan.

The automatic reinvestment of dividends and distributions will not relieve participants of any U.S. federal income tax that may be payable on such dividends or distributions. See “.”

There is no charge to participants for reinvesting dividends or capital gain distributions through the Plan. Any fees associated with the handling of the reinvestment of dividends and distributions will be paid by the Company. The Company reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all affected Shareholders at least 90 days before the record date for the dividend or distribution.

 

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The Company computes its net asset value as of the last business day of each month. In determining its net asset value, the Company values the investments of the Company as of such month-end utilizing the net asset values of the Investment Funds and other private investments as a practical expedient.

The net asset value of the Company equals the value of the assets of the Company, less all of its liabilities, including accrued fees and expenses. The net asset value per Share of the Company equals its net asset value divided by the number of its outstanding Shares. The Board of Directors has established procedures pursuant to which the Company’s investments in Investment Funds and other private investments are valued at fair value. The Board of Directors has designated the Adviser to perform fair valuation determinations relating to the value of the Company’s investments, in accordance with the Company’s valuation procedures and Rule 2a-5 under the Investment Company Act. In accordance with the Company’s valuation procedures, fair value as of each month-end ordinarily is the value determined as of such month-end for each Investment Fund or other private investment in accordance with the Investment Fund’s or other private investment’s valuation policies and reported at the time of the Company’s valuation, and calculated as the Company’s interest in the net assets of each Investment Fund or other private investment using reported net asset value as a practical expedient, but may be subject to certain adjustments. As a general matter, the fair value of the Company’s interest in an Investment Fund or other private investment represents the amount that the Company could reasonably expect to receive from an Investment Fund or other private investment if the Company’s interest were redeemed or otherwise disposed of at the time of valuation, based on information reasonably available at the time the valuation is made and that the Company believes to be reliable. In the event that an Investment Fund or other private investment does not report a month-end value to the Company on a timely basis, the Company would determine the fair value of such Investment Fund or other private investment based on the most recent value reported by the Investment Fund or other private investment, as well as any other relevant information available at the time the Company values its portfolio. Any values reported as “estimated” or “final” values will reasonably reflect market values of securities for which market quotations are available or fair value as of the Company’s valuation date.

Prior to investing in any Investment Fund, the Adviser will conduct a due diligence review of the valuation methodology utilized by the Investment Fund, which as a general matter will utilize market values when available, and otherwise utilize principles of fair value that the Adviser believes to be reasonably appropriate and otherwise consistent with industry standards. Although procedures approved by the Board of Directors provide that the Adviser will review the valuations provided by the Investment Managers to the Investment Funds, typically neither the Adviser nor the Board of Directors will be able to confirm independently the accuracy of valuations provided by such Investment Managers (which are unaudited).

The Company’s valuation procedures require the Adviser to consider all relevant information available at the time the Company values its portfolio. The Adviser will consider such information, and may conclude in certain circumstances that the information provided by the Investment Manager of an Investment Fund or by the portfolio company does not represent the fair value of the Company’s interests in the Investment Fund or portfolio company. Although redemptions of interests in Investment Funds that offer investor liquidity are subject to advance notice requirements, Investment Funds typically will make available net asset value information to holders representing the price at which, even in the absence of redemption activity, the Investment Fund would have effected a redemption if any such requests had been timely made or if, in accordance with the terms of the Investment Fund’s governing documents, it would be necessary to effect a mandatory redemption. Following procedures adopted by the Board of Directors, in the absence of specific transaction activity in interests in a particular Investment Fund or other private investment, the Company would consider whether it was appropriate, in light of all relevant circumstances, to value such a position at its net asset value as reported at the time of valuation, or whether to adjust such value to reflect a premium or discount to net asset value. For example, when an Investment Fund that offers investor liquidity imposes extraordinary restrictions on redemptions, or when there have been no recent transactions in interests of the issuer, the Company may

 

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determine that it is appropriate to apply a discount. Any such decision would be made in good faith, and subject to the review and supervision of the Board of Directors in accordance with its responsibilities under Rule 2a-5.

The Adviser assesses the accuracy of each issuer’s most recently reported net asset value using various means. These include correlating a reported valuation with one or more strategy-specific benchmarks that the Adviser believes correlate with the strategy of the Investment Fund or characteristics of other private investments; discussing at least monthly the performance of an Investment Fund with the Investment Manager’s personnel; and reviewing and analyzing, on an annual basis, the Investment Fund’s or other private investment’s audited financial statements.

The valuations reported by the Investment Funds or other private investments, upon which the Company calculates its month-end net asset value and net asset value per Share, may be subject to later adjustment, based on information reasonably available at that later time. For example, fiscal year-end net asset value calculations of the Investment Funds or other private investments are audited by those issuer’s independent auditors and may be revised as a result of such audits. Other adjustments may occur from time to time.

The Company’s net asset valuation in turn may be subject to certain adjustments pursuant to procedures adopted by the Board of Directors. Under those procedures, adjustments generally will not be made more than 90 days after the relevant month-end date of valuation. Any such later adjustments will be reported to the Company’s Valuation Committee and to affected Shareholders.

In circumstances where no adjustment is made to the net asset valuation of the Company, Shares purchased or sold by Shareholders will not be adjusted. Under such circumstances, and by way of example, if an adjustment would have reduced the Company’s net asset value, the outstanding Shares of the Company will be adversely affected by the Company’s prior repurchases of Shares at a higher net asset value per Share than had the adjustment been made. Conversely, if an adjustment would have increased the Company’s net asset value, the outstanding Shares of the Company will benefit, to the detriment of Shareholders who previously had their Shares repurchased at a lower net asset value than had the adjustment been made.

The procedures approved by the Board of Directors provide that, where deemed appropriate by the Adviser and consistent with the Investment Company Act, investments in Investment Funds may be valued at cost. Cost would be used only when cost is determined to best approximate the fair value of the particular security under consideration. For example, cost may not be appropriate when the Company is aware of sales of similar securities to third parties at materially different prices or in other circumstances where cost may not approximate fair value (which could include situations where there are no sales to third parties). In such a situation, the Company’s investment will be revalued in a manner that the Adviser, in accordance with procedures approved by the Board of Directors, determines in good faith best reflects approximate fair value. The Board of Directors will be responsible for ensuring that the valuation policies utilized by the Adviser are fair to the Company and consistent with applicable regulatory guidelines.

The Company will generally value the portfolio securities held by the Company other than interests in Investment Funds or other private investments as follows:

 

 

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Expenses of the Company, including the Advisory Fee and the costs of any borrowings, are accrued on a monthly basis on the day net asset value is calculated and taken into account for the purpose of determining net asset value.

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 Adviser’s judgments regarding appropriate valuations should prove incorrect. Also, Investment Managers to the Investment Funds generally will provide determinations of the net asset value of Investment Funds only on a weekly or monthly basis, in which event it typically will not be practical to determine the net asset value of the Company more frequently. Because the values assigned to one or more Investment Funds or other private investments may be subject to later adjustment based on information not reasonably available at the time of the Company’s fair valuation, the Company’s issuance or repurchase of Shares of the Company at net asset value based on the fair value of its assets may have the effect of diluting or increasing the economic interest of existing Shareholders, as well as those Shareholders who purchased and/or had their Shares repurchased.

The Board of Directors may cause appropriate reserves for the Company to be created, accrued and charged against net assets (and, therefore, the Company’s net asset value). Reserves will be in such amounts (subject to increase or reduction) that the Board of Directors may deem necessary or appropriate.

 

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SkyBridge (including, for purposes of this discussion, its subsidiaries and other affiliates) engages in a broad spectrum of activities, including asset management activities, sponsoring and managing private investment funds, engaging in broker-dealer transactions and other activities. SkyBridge’s business also has included in the past providing seed capital to hedge fund managers and hedge funds. Thus, references to “affiliates,” as used in this section, may include such managers and funds. In the ordinary course of business, SkyBridge engages in activities in which SkyBridge’s interests or the interests of its clients may conflict with the interests of the Company or the Shareholders. The discussion below sets out such conflicts of interest that may arise; conflicts of interest not described below may also exist. The Adviser can give no assurance that any conflicts of interest will be resolved in favor of the Company or the Shareholders. In acquiring Shares, a Shareholder will be deemed to have acknowledged the existence of potential conflicts of interest relating to SkyBridge and to the Company’s operating in the face of those conflicts.

—SkyBridge acts for the Company both as Adviser and Administrator under separate contracts. While the investment advisory fee may not be increased without a vote of Shareholders, SkyBridge may ask the Board of Directors to approve changes to SkyBridge’s administrative and investor services fee from time to time based on SkyBridge’s representation that the fees are fair and reasonable. SkyBridge will provide information and data with respect to its request and the Board will be asked to approve the fees following due consideration of the materials and based on appropriate factors. SkyBridge and its personnel are fiduciaries to the Company when determining the need for and proposed cost of various services under the contracts. Nonetheless, in reviewing its various service and fee terms with the Board of Directors under these different arrangements, SkyBridge has a conflict between its fiduciary interests in seeing the Company’s service needs properly provided and realizing compensation and profits for itself. In addition, whether acting as Adviser or Administrator, SkyBridge designates certain third-party costs as expenses of the Company. SkyBridge has a similar conflict when evaluating these costs and considering their allocation as between itself, the Company and other SkyBridge clients.

—SkyBridge may pursue acquisitions of assets and businesses and identification of an investment opportunity in connection with its existing businesses or a new line of business without first offering the opportunity to the Company. Such an opportunity could include a business or a fund manager that competes with the Company or an Investment Fund in which the Company has invested or proposes to invest.

—SkyBridge and its affiliates conduct a variety of asset management activities, including sponsoring unregistered investment funds and managers. SkyBridge’s investment management activities may present conflicts if the Company and these other investment funds either compete for the same investment opportunity or pursue investment strategies counter to each other. Under existing applicable legal requirements, the Adviser is prohibited from investing the assets of the Company in an Investment Fund that is advised by SkyBridge or an affiliate.

—From time to time, sponsors of Investment Funds may seek the approval or consent of the investors in the Investment Funds in connection with certain matters. In such a case, assuming the Company holds voting securities of an Investment Fund, which it often does not, the Adviser will have the right to vote in its discretion the interest in the Investment Fund held by the Company, on behalf of the Company. The Adviser will consider only those matters it considers appropriate in taking action with respect to the approval or consent. Business relationships may exist between the Adviser and its affiliates, on the one hand, and the Investment Managers and affiliates of the Investment Funds, on the other hand, other than as a result of theCompany’s investment in the Investment Funds. As a result of these existing business relationships, the Adviser may face conflicts of interest acting on behalf of the Company and its Shareholders.

The Company may, for regulatory reasons such as to avoid potential affiliation issues, limit the amount of voting securities it holds in any particular Investment Fund, and may as a result hold all or a substantial portion

 

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of its interests in non-voting form. This may entail the Company subscribing for a class of securities that is not entitled to vote or contractually waiving voting rights. It also is expected that other clients of the Adviser may have voting interests in an Investment Fund in which the Company is invested, in which case the Adviser may have discretion to vote those interests and would do so on behalf of the other clients and generally without regard for the interests of the Company.

—The Shareholders are expected to include entities organized under U.S. law and in various jurisdictions that may have conflicting investment, tax and other interests with respect to their investments in the Company. The conflicting interests of individual Shareholders may relate to or arise from, among other things, the nature of investments made by the Company, the structuring of the acquisition of investments of the Company, and the timing of disposition of investments. This structuringof the Company’s investments and other factors may result in different returns being realized by different Shareholders. Conflicts of interest may arise in connection with decisions made by the Adviser, including decisions with respect to the nature or structuring of investments that may be more beneficial for one Shareholder than for another, especially with respect to Shareholders’ individual tax situations. In selecting Investment Funds for the Company, the Adviser will consider the investment and tax objectives of the Company as a whole, not the investment, tax or other objectives of any Shareholder individually.

—The Adviser or its affiliates, including the Principal Underwriter, make certain ongoing payments to Placement Agents from its or their own resources. Thus, the Placement Agents and their registered representatives may have a conflict, when advising investors and prospective investors, between their interest in advising such persons for the benefit of such investors and their interest in receiving or continuing to receive such compensation. Pursuant to the prohibition on affiliated transactions under the Investment Company Act, the Adviser may not be able to select affiliates of a Placement Agent or sub-Placement Agent as Investment Funds for the Company. Further, the Adviser, its personnel and the Principal Underwriter have entered into, and may in the future enter into, agreements with certain third-party investment managers pursuant to which the Adviser, its personnel and Principal Underwriter are eligible to receive compensation for referring investors to such investment managers. Thus, the Adviser and the Principal Underwriter may have a conflict between their interest in advising such persons for the benefit of such investors and their interest in receiving or continuing to receive such compensation.

—The personnel of the Adviser and its affiliates provide advisory services to various other funds, such as SkyBridge G II Fund, LLC. Conflicts of interest may arise for the Adviser in connection with certain transactions involving investments by the Company in Investment Funds and investments by other funds advised by the Adviser or its affiliates, or sponsored or managed by the Adviser, in the same Investment Funds. Conflicts of interest may also arise in connection with investments in the Company by other funds advised or managed by the Adviser. Such conflicts could arise, for example, with respect to the timing, structuring and terms of such investments and the disposition of them. The Adviser or an affiliate may determine that an investment in an Investment Fund is appropriate for a particular client or for itself or its officers, directors, shareholders or employees, but that the investment is not appropriate for the Company. Situations also may arise in which the Adviser, or an affiliate or their clients, has made investments that 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, shareholders or employees may disadvantage the Company in certain situations, if, among other reasons, the investment activities limit the Company’s ability to invest in a particular Investment Fund.

—The Adviser or its affiliates provide investment management services to other clients, and may do so regardless of whether the investment policies of those clients are similar to, or differ from,those of the Company. In addition, the Adviser or its affiliates may give advice and take action in the performance of their duties to clients that may differ from advice given, or the timing and nature of action taken, with respect to the Company. Accordingly, the Company may be seeking to obtain limited capacity from Investment Funds at the same time as the Adviser’s other clients. Similarly, to the extent that an Investment Fund

 

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imposes withdrawal limitations, actions taken by other clients may be adverse to the Company. Neither the Adviser nor its affiliates will have any obligation to purchase or sell, or recommend for purchase or sale, for the account of the Company any investment or other property that the Adviser or its affiliates may purchase or sell, or recommend for purchase or sale, for its own account or the account of any other client. By reason of investment and other activities, SkyBridge or its affiliates may from time to time acquire privileged and/or confidential information about corporations or other entities and their securities and, as applicable, SkyBridge or its affiliates will not be free to divulge such information to, as applicable, the Adviser or to the Company or to otherwise act upon it. Additionally, clients may from time to time have access to or have the right to obtain information about investment decisions made for the Company or other clients. Based on such information, clients may take actions that are adverse to the Company.

When acting as investment adviser for other investment vehicles and clients, the Adviser will not necessarily allocate capital of the Company to the same Investment Managers that it engages for such other investment vehicles and clients. The Adviser has an allocation policy which is designed to treat all clients fairly with regard to the allocation of investment opportunities. In allocating investment opportunities, the Adviser often considers a variety of factors in determining the fairness of any allocation among its clients. The Adviser will typically consider whether the underlying fund investment opportunity is scarce or not and, if so, will seek to allocate the opportunity appropriately. The Adviser also considers whether the underlying fund investment opportunity is itself an investment fund managed by a third party investment manager (which is the typical investment of the Adviser’s fund of funds business). The Adviser then considers whether the investment opportunity includes (i) an investment fund that is closed to “new investors” by the underlying fund manager or (ii) a privately issued security of an operating company (which is the typical investment of certain of the Adviser’s direct trading funds and, to a lesser extent, the Adviser’s fund of funds business). SkyBridge will also consider any other restrictions imposed by an underlying fund or other issuer. The Adviser also considers the type of client ( Investment Company Act registered fund, private fund or managed account), client target allocations and inception dates (and potentially different underlying fund lock-up periods), cash flows and available cash, liquidity, investment objectives and restrictions (which may include manager and strategy investment limits), risk tolerances and past allocation decisions. As a result of the foregoing, the Adviser does not generally allocate investment opportunities on a basis and instead employs a fair treatment policy in which investment opportunities are allocated to clients based on the totality of factors discussed in this paragraph and any other factors the Adviser may deem relevant, including based on investment strategy, capacity constraints and other portfolio management and regulatory considerations. The Adviser’s primary goal is to allocate such investment opportunities, as and when they are available, in a fair and equitable manner to account for the diverse and varied circumstances of each client. Notwithstanding efforts on the part of the Adviser to assure equitable treatment, individual allocation decisions can be expected to have varying outcomes.

—Personnel of the Adviser and its affiliates will devote such time as the Adviser and its affiliates, in their discretion, deem necessary to carry out the operations of the Company effectively. Officers and employees of the Adviser and its affiliates will also work on other projects for SkyBridge, its other affiliates and other clients served by the Adviser and its affiliates, and certain other third parties. Conflicts of interest may arise in allocating management time, services or functions among the affiliates and third parties. These activities for other third parties include providing consulting and marketing services for which SkyBridge and/or its affiliates receive compensation. These services, and the compensation related thereto, are separate and independent business lines in which SkyBridge and its affiliates engage and are separate from, and unrelated to, the Adviser’s investment advisory services provided to the Company. Situations may exist or arise where the Company has or makes an investment in a company (or an affiliate of a company) to which such consulting and/or marketing services are provided, or in an Investment Fund to which such consulting and/or marketing services are provided to the Investment Fund’s Investment Manager or an affiliate thereof. Any such investment is or would be the result of the Adviser’s independent evaluation of the merits of such an investment, taking into account the Company’s investment objective and strategy and portfolio positioning, and without regard to the separate services provided by SkyBridge or its affiliates or the compensation received by SkyBridge

 

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or its affiliates in connection therewith. To the extent the Adviser determines appropriate, conflict mitigation strategies may be put in place with respect to a particular circumstance.

—The Company’s Directors and officers (including an Advisory Director), the Adviser, the Principal Underwriter, the Administrators, the Placement Agents, the Investment Managers and Investment Funds and certain of the affiliates of each of these often are entitled to indemnities from the Company for certain liabilities, costs and expenses they incur in respect of the Company. Indemnification is typically part of a package of protections for the indemnified party that include agreed standards of care in which the person disclaims liability to the Company unless the person’s conduct rises to a particular standard such as gross negligence, willful misconduct, reckless disregard of duty or the like. Indemnification often provides for advancement of expenses to the indemnified party even in advance of any determination of liability.

—In determining the fair value of its assets not traded on regulated exchanges, subject to procedures adopted by the Board of Directors, the Company will typically rely on values provided by the Adviser and the Investment Managers. The Adviser and the Investment Managers generally will face a conflict of interest in valuing such securities because these values will affect their compensation.

—Mr. Scaramucci, Founder of the Adviser and other personnel of the Adviser, regularly appear as knowledgeable market participants on various television programs. Thoseappearances could create potential or perceived conflicts of interest. For example, SkyBridge personnel may discuss individual equity positions while discussing the financial markets and investors may or may not have indirect exposure to these positions through the Investment Funds. Other potential conflicts are also possible.

SkyBridge Alternatives (“”), a company affiliated with the Adviser, hosts a large investment conference biannually in the U.S. and abroad. The conference has grown to include participation by over 1,800 thought leaders, public policy officials, business professionals, investors and money managers from around the world. The Company expects to have a relationship with SALT on a go-forward basis. This relationship with SALT raises potential for actual or perceived conflicts of interest, including when the Company’s underlying managers or prospective managers participate in SALT conferences as paying guests, speakers or event sponsors.

 

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The Company’s portfolio holdings are made public, as required by law, in the Company’s annual and semi-annual reports. These reports are filed with the SEC and mailed to Shareholders approximately 60 days after the last day of the relevant period. (In addition, these reports are available upon request.) Also as required by law, the Company’s portfolio holdings are reported to the SEC approximately 60 days after the last day of the Company’s relevant first or third fiscal quarterly period. Selected holdings, as well as certain statistical information relating to portfolio holdings, such as strategy breakdowns or strategy performance, is made available to Shareholders in their monthly letter from the Company, which is generally sent approximately 40 days following the end of the relevant month. As should be clear, because the Company considers current portfolio holding information proprietary, such information is typically withheld for some time before being made public.

In addition, recent performance and statistical data, including mid-month and month-end preliminary performance estimates and portfolio positions, are available on or by emailing . The Company may provide additional information to Shareholders and their representatives upon request. In connection with requests for additional information, the Company may require information from the recipient and the execution of an agreement to retain the confidentiality of the information provided.

When authorized by appropriate executive officers of the Company, portfolio holdings information may be given more frequently than as just described to third-party service providers and certain affiliated persons of the Company. To date, these persons are limited to the Custodian (full portfolio daily, no lag), in addition to the Adviser and its personnel, internal and external accounting personnel (full portfolio daily, no lag) and the Company’s independent registered public accounting firm. Finally, on occasion the Company may disclose one or more individual holdings to pricing or valuation services for assistance in considering the valuation of the relevant holdings. In such cases, the information provided is subject to limitations on use intended to prohibit the recipient from trading on or inappropriately further disseminating it. As part of the internal policies and procedures, conflicts between the interests of the investors and those parties receiving portfolio information will be considered. In addition to the Company’s policies and procedures in this area, a number of fund service providers maintain their own written procedures limiting use and further transmission of portfolio holdings information disclosed to them. Neither the Company nor the Adviser (nor its affiliates) receives any compensation in connection with the disclosure of information to these parties, and all such arrangements are pursuant to policies approved by the Board of Directors, which has determined that they are appropriate and in the best interest of Shareholders. These Company policies and procedures will be reviewed by the Directors on an annual basis, for adequacy and effectiveness, in connection with the Company’s compliance program under Rule 38a-1 under the Investment Company Act; and related issues will be brought to the attention of the Directors on an as appropriate basis.

Additionally, the Adviser or its personnel from time to time may comment to the press, Shareholders, prospective investors or investor fiduciaries or agents (orally or in writing) on the Company’s portfolio securities or may state that the Company recently acquired or disposed of interests in an Investment Fund or other security. This commentary also may include such statistical information as industry, country or strategy exposure, credit quality information, specialized financial characteristics (alpha, beta, maturity, Sharpe ratio, standard deviation, default rate, etc.), price comparisons to various measures, portfolio turnover and the like. No comments may be made, however, if likely to permit, in the sole judgment of the Adviser, inappropriate trading of Shares or of portfolio securities of the Company.

 

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The Company accepts initial and additional subscriptions for Shares as of the first business day of each calendar month, except that the Company may offer Shares more frequently as determined by the Company or its designated agents. Any amounts received in advance of the initial or subsequent closings will be placed in a non-interest-bearing escrow account with the Escrow Agent pending closing. The investor must also submit a completed subscription agreement and any other required documentation before the applicable subscription date, which must be received by the Company at least seven calendar days prior to the proposed subscription date (or, if any such date is not a business day, the immediately preceding business day). The Company reserves the right to reject any subscription for Shares, and the Company or its designated agents may, in its or their sole discretion, suspend subscriptions for Shares at any time and from time to time. To assist the Company in meeting its “know your customer” obligations, subscriptions generally will be accepted only from investors having brokerage accounts with an approved Placement Agent (or with the Principal Underwriter) (the “”), and are subject to the receipt of cleared funds from such account, prior to the applicable subscription date and in the full amount of the subscription. Cleared funds must be available in such account no later than five calendar days prior to the particular subscription date (or, if any such date is not a business day, the immediately preceding business day). Although the Company or its designated agents, including the Principal Underwriter, may accept, in its or their sole discretion, a subscription prior to receipt of cleared funds or subject to different timing than noted above, an investor may not become a Shareholder until cleared funds have been received.

Shares are offered at their net asset value per Share, and each Share subscribed for represents a capital investment in the Company in that amount. The minimum initial investment from each investor is $25,000 (not including sales loads, which are paid separately as described below), and the minimum additional investment is $10,000. The minimum initial and additional investments may be reduced by the Company or its designated agents with respect to individual investors or classes of investors (for example, with respect to certain key employees, officers or directors of the Company, the Adviser or their affiliates). Financial intermediaries may require a higher initial or subsequent investment amount than described above. The Board of Directors may, in its discretion, cause the Company to repurchase a Shareholder’s entire interest in the Company (, all Shares of the Company held by the Shareholder) if the Shareholder’s investment balance in the Company, as a result of repurchase or transfer requests by the Shareholder, is less than $25,000.

Initial and any additional purchases of Shares will be payable in one installment and will be debited directly by any approved Placement Agent, on behalf of the Company (or the Principal Underwriter in the case of Placement Agents appointed by the Principal Underwriter), from each investor’s brokerage account (unless other arrangements are permitted by the Company or its designated agents). Although the Company may accept contributions of securities, the Company has no intention at present of doing so. If the Company chooses to accept a contribution of securities, the securities would be valued in the same manner as the Company values its other assets.

Each new Shareholder must agree to be bound by all of the terms of the LLC Agreement. Each potential investor must also represent and warrant in a subscription agreement, among other things, that the investor is an “” as described below and is purchasing Shares for his, her or its own account, and not with a view to the distribution, assignment, transfer or other disposition of the Shares.

Each prospective investor in the Company will be required to certify to the Company that the Shares subscribed for are being acquired for the account of an “accredited investor” as defined in Regulation D under the 1933 Act. Investors who are “accredited investors” as defined in Regulation D (generally, individuals having a net worth of at least $1 million (not including the value of the primary residence as an asset nor indebtedness, up to such primary residence’s fair market value, secured by such primary residence as a liability), or earning at

 

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least $200,000 in each of the past two years, or entities having total assets of at least $5 million, entities all of whose beneficial owners are themselves accredited investors, banks or savings and loan associations, etc.) are referred to in this Prospectus as “.” In addition, to assist the Company in meeting its “know your customer” obligations, an Eligible Investor generally must have a brokerage account with an approved Placement Agent (or with the Principal Underwriter). Existing Shareholders subscribing for additional Shares must be Eligible Investors at the time of each additional subscription. Qualifications that must be met in becoming a Shareholder are summarized in the subscription agreement that must be completed by each prospective investor and are described in detail in Appendix A to the Prospectus.

Placement Agents assist in the placement of Shares. A Placement Agent will generally be entitled to receive a fee from each investor in the Company whose Shares the Placement Agent places. The specific amount of the sales load paid with respect to a Shareholder is generally dependent on the size of the investment in the Company resulting in what are often referred to as sales “breakpoints,” but will not exceed 3% of the subscription amount. (Subject to that limit, however, the applicable schedule of sales loads may vary among Placement Agents.)

The sales load will be paid in addition to the investor’s subscription, and, because it is retained by the Placement Agent, it will not constitute a capital contribution made by the investor to the Company and will not be part of the assets of the Company. The sales load may be adjusted or waived at the sole discretion of the Placement Agent and is expected to be waived for (1) employees of the Placement Agents and certain of their affiliates; (2) investment vehicles whose investment objectives and restrictions require that they invest exclusively or primarily in the Company; and (3) investors investing through certain programs relating to mutual fund “wrap,” asset allocation or other managed asset programs. The Placement Agent may, in its sole discretion, aggregate investments made through certain related accounts (including family trusts or other similar investment vehicles) in determining the applicable rate for the calculation of sales loads. It is the responsibility of any investor seeking to benefit the Placement Agent from a particular sales load level to identify any such related account to the personnel handling the investor’s subscription. Hastings Capital Group, LLC, an affiliate of the Adviser, has been appointed to serve as the Company’s Principal Underwriter with authority to sell Shares directly and to appoint Placement Agents to assist the Principal Underwriter in selling Shares. The Principal Underwriter may, in those circumstances, retain all or part of these sales loads itself, though generally a significant portion of the load will be “reallowed” to the relevant Placement Agent.

The Adviser or its affiliates, including the Principal Underwriter, also may pay from their own resources additional compensation to the Placement Agents in connection with placement of Shares or servicing of investors. As to each investor referred by a Placement Agent to date, such additional compensation (together with payments by the Company of the Account Servicing Fee for the placement of Shares or servicing of investors) approximates up to 0.85% of the value of the Shares held by the investor per annum (but in the aggregate across all investors will not exceed 1% of the Company’s net assets per annum). All of this additional compensation is offset by the Account Servicing Fee of 0.85% per annum that is paid by the Company to the Principal Underwriter and to the Placement Agents. In some instances, these arrangements may result in receipt by the Placement Agents and their personnel (who themselves may receive all or a substantial part of the relevant payments) of compensation in excess of that which otherwise would have been paid in connection with their placement of units of a different investment fund. A prospective investor with questions regarding these arrangements may obtain additional detail by contacting his or her Placement Agent directly. Prospective investors also should be aware that these payments could create incentives on the part of the Placement Agents to more positively consider the Company relative to investment funds not making payments of this nature or making smaller such payments. When the Principal Underwriter makes “direct sales” not through a Placement Agent, it generally is eligible to receive compensation from the Adviser and its affiliates that approximates 0.85% of the value of Shares held by an investor per annum (a portion of which will be offset by the Account Servicing Fee).

 

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The “Account Servicing Fee” of 0.85% per annum consists of compensation for services provided to Shareholders (including sub-accounting and other administrative services, as well as shareholder liaison services such as responding to inquiries from Shareholders and providing Shareholders with information about their investments in the Company) and for distribution support and related services. Up to 0.25% per annum of the Account Servicing Fee may qualify as a “service fee” under FINRA rules and therefore will not be limited by FINRA rules which limit distribution fees as a percentage of total new gross sales. “Service fees” are defined to mean fees paid for providing shareholder services or the maintenance of shareholder accounts. FINRA rules limit service fees to 0.25% of a fund’s average annual net assets. A portion of the Account Servicing Fee may also be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to a Service Fee under FINRA rules. The remainder is for distribution support and related services.

Furthermore, the Adviser or its affiliates may also offer other incentives such as sponsorship of or payment of speaking fees for educational or client seminars relating to current products and issues, assistance in training and educating Placement Agents’ and other intermediaries’ personnel, payments or reimbursements for travel and related expenses associated with due diligence trips that a Placement Agent or other intermediary may undertake in order to explore possible business relationships with the Adviser or affiliates of the Adviser, and/or payments of costs and expenses associated with attendance at seminars, including travel, lodging, entertainment and meals. As permitted by applicable laws and regulations, the Adviser or an affiliate may pay or allow other incentives or payments to the Placement Agents and other intermediaries.

 

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No Shareholder or other person holding Shares acquired from a Shareholder will have the right to require the Company to redeem the Shares. No public market for Shares exists, and none is expected to develop in the future. Consequently, Shareholders may not be able to liquidate their investment other than as a result of repurchases of Shares by the Company, as described below.

The Company may from time to time repurchase Shares from Shareholders in accordance with written tenders by Shareholders at those times, in those amounts, and on terms and conditions as the Board of Directors may determine in its sole discretion. Each such repurchase offer generally will apply to 5-25% of the net assets of the Company. In determining whether the Company should offer to repurchase Shares from Shareholders, the Board of Directors will consider the recommendation of the Adviser. The Adviser expects that it typically will recommend to the Board of Directors that the Company offer to repurchase Shares from Shareholders semi-annually (with Valuation Dates of March 31 and September 30 of a calendar year). In determining whether to accept such a recommendation, the Board of Directors will consider the following factors, among others:

 

 

 

 

 

 

 

 

 

As described in more detail under the heading “” above, the Board of Directors also will consider, when recommended by the Adviser, the percentage of the Company’s assets placed in “side pockets” established by the underlying Investment Funds and whether that percentage warrants limiting, or even halting, repurchases of the Company’s Shares.

The LLC Agreement provides that the Company will be dissolved if any Shareholder that has submitted a written request, in accordance with the terms of the LLC Agreement, to tender all Shares in the Company held by the Shareholder for repurchase by the Company has not been given the opportunity to so tender within a period of two years after the request (whether in a single repurchase offer or multiple consecutive offers within the two-year period). A Shareholder who intends to cause the Company to be dissolved must so indicate in a separate written request submitted within the applicable two-year period.

The Company will repurchase Shares from Shareholders at net asset value pursuant to written tenders on terms and conditions that the Board of Directors determines to be fair to the Company and to all Shareholders or persons holding Shares acquired from Shareholders, or to one or more classes of Shareholders, as applicable. The

 

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value of a Shareholder’s Shares that are being repurchased will be the value of the Shares as of the date of their repurchase (, as of the relevant Valuation Date described below). When the Board of Directors determines that the Company will repurchase Shares, notice will be provided to Shareholders describing the terms of the offer, containing information Shareholders should consider in deciding whether to participate in the repurchase opportunity and containing information on how to participate. Such notice may be transmitted by alternative means, such as pursuant to publication in an appropriate periodical and such other processes as may be consistent with regulatory requirements imposed by SEC rules. Shareholders deciding whether to tender Shares during the period that a repurchase offer is open may obtain the net asset value of their Shares by contacting BNYM during the period at the contact number provided in the Shareholder’s repurchase materials.

Repurchases of Shares from Shareholders by the Company may be paid, in the discretion of the Company or its designated agents, in cash, or by the distribution of securities in kind, or partly in cash and partly in kind. The Company, however, expects not 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 Shareholders not tendering Shares for repurchase. Repurchases will be effective after receipt and acceptance by the Company of all eligible written tenders of Shares from Shareholders. Any in kind distribution of securities will be valued in accordance with the LLC Agreement and will be distributed to all tendering Shareholders on a proportional basis. The Company does not impose any charges in connection with repurchases of Shares.

In light of liquidity constraints associated with investments in Investment Funds and that the Company may have to effect withdrawals from those Investment Funds to pay for Shares being repurchased, the Company expects to employ the following repurchase procedures:

 

 

 

 

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If modification of the Company’s repurchase procedures as described above is deemed necessary to comply with regulatory requirements, or for other reasons, the Board of Directors will adopt revised procedures reasonably designed to provide Shareholders substantially the same liquidity for Shares as would be available under the procedures described above.

Payment for repurchased Shares may require the Company to liquidate portfolio holdings earlier than the Adviser would otherwise have caused these holdings to be liquidated, potentially resulting in losses, and may increase the Company’s investment-related expenses as a result of higher portfolio turnover rates. Liquidation of portfolio holdings to fund repurchases of Shares also may result in the Company incurring redemption, withdrawal or similar fees charged by one or more Investment Funds. The Adviser intends to take measures, subject to such policies as may be established by the Board of Directors, to attempt to avoid or minimize potential losses and expenses resulting from the repurchase of Shares.

A Shareholder tendering for repurchase only a portion of its Shares in the Company will be required to maintain an investment balance of at least $25,000 with respect to the Company after giving effect to the repurchase. If a Shareholder tenders an amount that would cause its investment balance to fall below the required minimum, the amount to be repurchased from the Shareholder may be reduced so that the required minimum balance is maintained or the Company may repurchase the Shareholder’s entire interest in the Company.

The Company may repurchase the Shares, or a portion of them, of a Shareholder or any person acquiring Shares from or through a Shareholder, without consent or other action by the Shareholder or other person, if the Company or its designated agents in its or their sole discretion determines that:

 

 

 

 

 

 

In the event that the Adviser or any of its affiliates holds Shares in the capacity of a Shareholder, the Shares may be tendered for repurchase in connection with any repurchase offer made by the Company.

Except as otherwise described below, no person may become a substituted Shareholder without the written consent of the Company or its designated agents, which consent may be withheld for any reason in their sole discretion. Shares held by a Shareholder may be transferred only:

 

 

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Notice to the Company of any proposed transfer of Shares must include satisfactory evidence that the proposed transferee meets any 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 million (not including the value of the primary residence as an asset nor indebtedness, up to such primary residence’s fair market value, secured by such primary residence as a liability), meets certain annual income requirements, or is a bank or savings and loan association, etc. Notice of a proposed transfer of Shares must also be accompanied by a properly completed subscription agreement in respect of the proposed transferee, unless such requirement is waived by the Company in its discretion. Consent to a transfer of Shares by a Shareholder generally will not be granted unless the transfer is to a single transferee or, after the transfer of the Shares, the Share balance of each of the transferee and transferor is not less than $25,000 with respect to the Company. A Shareholder transferring Shares may be charged reasonable expenses, including attorneys’ and accountants’ fees, incurred by the Company in connection with the transfer. In connection with any request to transfer Shares, the Company may require the Shareholder requesting the transfer to obtain, at the Shareholder’s expense, an opinion of counsel selected by the Company or its agents as to such matters as may be reasonably requested.

Any transferee acquiring Shares by operation of law as the result of the death, divorce, bankruptcy, insolvency or dissolution of a Shareholder or otherwise will be entitled to the allocations and distributions allocable to the Shares so acquired, to transfer the Shares in accordance with the terms of the LLC Agreement and to tender the Shares for repurchase by the Company, but will not be entitled to the other rights of a Shareholder unless and until the transferee becomes a substituted Shareholder as specified in the LLC Agreement. If a Shareholder transfers Shares with the required approvals, the Company will promptly take all necessary actions so that each transferee or successor to whom the Shares are transferred is admitted to the Company as a Shareholder.

In subscribing for Shares, a Shareholder agrees to indemnify and hold harmless the Company, the Board of Directors, the Adviser, each other Shareholder and any of their affiliates 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 those persons may become subject by reason of or arising from any transfer made by that Shareholder in violation of these provisions or any misrepresentation made by that Shareholder or a substituted Shareholder in connection with any such transfer.

 

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The following is a summary of certain aspects of the income taxation of the Company and its Shareholders that should be considered by a prospective Shareholder. The Company has not sought a ruling from the Internal Revenue Service (the “”) or any other U.S. federal, state or local agency with respect to any tax matters affecting the Company and its Shareholders, nor has it obtained an opinion of counsel with respect to any of those matters. References in this summary to the tax consequences of the Company’s investments, activities, income, gain and loss include the direct investments, activities, income, gain and loss of the Company and those indirectly attributable to the Company as a result of investing in the Investment Funds.

The summary of the U.S. federal income tax treatment of the Company and its Shareholders set out below is based upon the Code, judicial decisions, Treasury regulations (proposed and final) and administrative rulings in existence to date, all of which are subject to change, possibly with retroactive effect. The summary does not discuss the effect, if any, of various proposals to amend the Code that could change certain of the tax consequences of an investment in the Company; nor does the summary discuss all of the tax consequences that may be relevant to a particular investor or to certain investors subject to special treatment under the U.S. federal income tax laws, such as foreign persons, tax-exempt entities, insurance companies, financial institutions, partnerships and other pass-through entities, persons whose “functional currency” is not the U.S. dollar, traders and dealers in securities, and persons that will hold Shares as a position in a “straddle,” “hedge” or as part of a “constructive sale” for U.S. federal income tax purposes. In addition, the summary does not address the application of the Medicare tax on net investment income or any U.S. federal alternative minimum tax. Except where explicitly noted, the summary applies only to Shareholders that hold their Shares as capital assets for U.S. federal income tax purposes (generally, for investment) and are “United States persons” within the meaning of the Code. Each prospective Shareholder should consult with his, her or its own tax advisor in order to fully understand the U.S. federal, state, local and non-U.S. income tax consequences of an investment in the Company.

Entities generally exempt from U.S. federal income tax, including employee benefit plans, IRAs and Keogh plans, should, in addition to reviewing the discussion below, focus on those sections of this Prospectus regarding liquidity and other financial matters to determine whether the investment objectives of the Company are consistent with their overall investment plans. Each prospective tax-exempt Shareholder is urged to consult its own counsel regarding the acquisition, ownership and disposition of Shares.

 

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. The Company qualifies and intends to continue to qualify for the special tax treatment afforded to regulated investment companies (“”) under the Code. As long as the Company so qualifies and meets certain annual distribution requirements discussed below, the Company (but not its Shareholders) will not be subject to U.S. federal income tax on the part of its net ordinary income and net realized capital gains that it distributes to Shareholders. The Company intends to distribute all of such income and gains each year.

To qualify for the favorable tax treatment of a RIC, the Company generally must distribute at least 90% of its investment company taxable income (as defined in the Code, but without regard to the dividends paid deduction) for the taxable year. The Company must also satisfy certain other requirements of the Code, some of which are described below. Distributions by the Company made during the taxable year or, under specified circumstances, within a period up to twelve months after the close of the taxable year, will be considered distributions of income and gains for the taxable year and will therefore count toward satisfaction of the above-mentioned requirement.

Generally, to qualify as a RIC, the Company must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, net income derived from an interest in a “qualified” publicly traded partnership and certain other income. For these purposes, the character to the Company of income that is allocated to it by an Investment Fund that is treated as a partnership for U.S. federal income tax purposes generally will be determined as if the Company realized such income directly. In addition, the Company’s inclusions of the Sub-Fund’s “subpart F income” (as discussed below) will, under current Treasury regulations, generally be treated as qualifying income for purposes of this 90% test.

In addition to satisfying the requirements described above required for qualification as a RIC, the Company must satisfy an asset diversification test. The asset diversification test generally is applied, with respect to the Company’s investments in Investment Funds treated as partnerships for U.S. federal income tax purposes, at the level of the holdings of the Investment Funds. Under that test, at the close of each quarter of the Company’s taxable year, at least 50% of the value of the Company’s assets must generally consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies and securities of other issuers. As to each of those other issuers, the Company’s investment in the securities of each such issuer must not represent more than 5% of the value of the Company’s total assets and the Company must not hold more than 10% of the outstanding voting securities of each such issuer. In addition, no more than 25% of the value of the Company’s total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies) or in two or more issuers which the Company controls and which are engaged in the same or similar trades or businesses or related trades or businesses or in “qualified” publicly traded partnerships. Thus, the Company will limit its investment in the Sub-Fund to ensure that it remains in compliance with this 25% limitation. For purposes of the asset diversification test, obligations issued or guaranteed by certain agencies or instrumentalities of the U.S. Government are treated as U.S. Government securities. The ongoing requirements for qualification as a RIC require that the Company obtain information from the Investment Funds in which the Company is invested. To facilitate the information-gathering process and compliance with certain asset diversification requirements, the Company retains an independent third-party service provider to mediate, in certain respects, the interaction with the Investment Funds and to perform the asset diversification test quarterly. The Adviser also has established internal policies and procedures for monitoring the compliance process, but nonetheless will rely in substantial part on the service provider referenced in the prior sentence. As discussed in “” should the Company fail the asset diversification test for a given quarter, there are ways such failure can be cured. However, there can be no assurance that, if the Company fails to satisfy the Subchapter M asset diversification test, it will be able to avail itself of these remedies.

 

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. If, in any taxable year, the Company fails to qualify as a RIC under the Code, the Company would be taxed in the same manner as an ordinary corporation and all distributions out of current or accumulated earnings and profits (including distributions of capital gains) to its Shareholders would generally be taxable to them as dividends. Such distributions generally would be eligible (i) to be treated as “qualified dividend income” in the case of individual and other non-corporate Shareholders and (ii) for the dividends received deduction in the case of corporate Shareholders. In addition, the Company could be required to recognize unrealized gains, pay taxes and make distributions (which could be subject to interest charges) before requalifying for taxation as a RIC.

. The Code requires a RIC to pay a nondeductible 4% excise tax to the extent the RIC does not distribute, during each calendar year, the sum of (i) 98% of its ordinary income, determined on a calendar year basis, and (ii) 98.2% of its capital gain net income, determined, in general, on an October 31 year end, plus certain undistributed amounts from the previous years. For these purposes, a RIC will be deemed to have distributed any income or gains on which it paid U.S. federal income tax. While the Company intends to distribute its income and capital gain net income in the manner necessary to avoid imposition of the 4% excise tax, it is possible that some excise tax will be incurred and, although not currently anticipated, there are circumstances in which the Company may not have the necessary information, or may, for other reasons, elect not to make the distributions necessary to avoid this tax. In such event, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirements.

Dividends paid by the Company from its ordinary income or from its excess of net short-term capital gains over net long-term capital losses (together referred to as “”) are taxable to Shareholders as ordinary income. Distributions made from the Company’s excess of net long-term capital gains over net short-term capital losses that are properly reported as such (“”) are taxable to Shareholders as long-term capital gains, regardless of the length of time the Shareholder has owned Shares. Distributions in excess of the Company’s current and accumulated earnings and profits will first reduce the adjusted tax basis of a Shareholder’s Shares and, after such adjusted tax basis is reduced to zero, will constitute capital gain to such Shareholder. The Company will provide its Shareholders with a written notice designating the amount of dividends paid during the year that qualify as capital gain dividends, as qualified dividend income or qualified REIT dividends (discussed below) and as ordinary income dividends.

Dividends are taxable to Shareholders even if they are reinvested in additional Shares of the Company. A portion of the Company’s ordinary income dividends attributable to the dividends received from domestic corporations (other than REITs), and designated as such, may be eligible for the dividends received deduction allowed to corporations under the Code. In addition, distributions of investment company taxable income that are designated by the Company as derived from “qualified dividend income” are taxed to individual and other non-corporate Shareholders at the rates applicable to long-term capital gain. Qualified dividend income generally includes dividends from domestic corporations and dividends from foreign corporations that meet certain specified criteria, although dividends paid by REITs generally will not be eligible to be treated as qualified dividend income. Certain holding period and other requirements must be met by both the Shareholder and the Company for distributions to be eligible for the corporate dividends received deduction or the preferential individual tax rates that apply to qualified dividend income, as the case may be.

If the Company receives a dividend (other than a capital gain dividend) in respect of shares of REIT stock in which the Company satisfies certain holding period requirements, then dividends to Shareholders attributable to that REIT dividend income (as reduced by certain expenses) may be reported by the Company as eligible for the 20% deduction for “qualified REIT dividends” generally available to non-corporate shareholders under the Code. In order to qualify for this deduction, non-corporate shareholders must meet certain holding period requirements with respect to their investment in the Company.

 

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Non-corporate taxpayers generally are eligible for a deduction of up to 20% of “qualified publicly traded partnership income.” The Company will not be able to claim such a deduction in respect of income allocated to it by any master limited partnerships or other publicly traded partnerships in which it invests, and absent any additional guidance, the law does not allow non-corporate shareholders to claim a deduction in respect of Company dividends attributable to any such income.

If the Company pays a dividend in January that was declared in the previous October, November or December to Shareholders of record on a specified date in one of such months, then such dividend will be treated for tax purposes as being paid by the Company and received by its Shareholders on December 31 of the year in which the dividend was declared.

The Company may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it may designate the retained amount as undistributed capital gains in a notice to its Shareholders, who will be treated as if each received a distribution of its share of such gain, with the result that each Shareholder will (i) be required to report its share of such gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its share of tax paid by the Company on the gain and (iii) increase the tax basis for its Shares by an amount equal to the deemed distribution less the tax credit.

If an investor buys Shares just before the record date of a dividend declared by the Company, the investor will receive that dividend. While the receipt of dividends shortly after a purchase of Shares by an investor may seem like a windfall to an investor, such dividends generally will have the effect of reducing the per share net asset value of the investor’s Shares by the per share amount of the dividends, subject to other market fluctuations. Such dividends, although in effect a return of capital, are subject to ordinary income or capital gain taxes. Accordingly, the timing of the purchase of the Shares may result in a return of a portion of the investment as taxable income. Therefore, prior to purchasing Shares, an investor should carefully consider the impact of ordinary income or capital gains dividends that are expected to be or have been announced.

Upon the sale, exchange or other disposition of Shares (except pursuant to a repurchase by the Company, as described below), a Shareholder will generally realize a capital gain or loss in an amount equal to the difference between the amount realized and the Shareholder’s adjusted tax basis in the Shares. Such gain or loss will be long-term or short-term, depending upon the Shareholder’s holding period for the Shares. Generally, a Shareholder’s gain or loss will be a long-term capital gain or loss if the Shares have been held for more than one year. For non-corporate taxpayers, long-term capital gains are currently eligible for reduced rates of taxation. A loss realized on a sale, exchange or other disposition of Shares will be disallowed if the Shareholder acquires (whether through the automatic reinvestment of dividends or otherwise) or enters into a contract or option to acquire securities that are substantially identical to such Shares within a 61-day period beginning 30 days before and ending 30 days after the date on which the Shares are disposed of. In such case, the basis of the securities acquired will be adjusted to reflect the disallowed loss. Losses realized by a Shareholder on the sale, exchange or other disposition of Shares held for six months or less are treated as long-term capital losses to the extent of any capital gain dividends received (or amounts designated as undistributed capital gains) with respect to such Shares.

From time to time, the Company may offer to repurchase its outstanding Shares. Shareholders who tender all Shares held, or considered to be held, by them will be treated as having sold their Shares and generally will realize a capital gain or loss as described above. If a Shareholder tenders fewer than all of its Shares or fewer than all Shares tendered are repurchased, the proceeds of the repurchase offer may be treated as a dividend paid to that Shareholder, rather than as amounts received in exchange for the tendered Shares. In such a case, there is a risk that non-tendering Shareholders, and Shareholders who tender some but not all of their Shares or fewer than all of whose Shares are repurchased, in each case whose percentage interests in the Company increase as a result

 

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of the repurchase offer, will be treated as having received a taxable dividend from the Company. The extent of such risk will vary depending upon the particular circumstances of the repurchase offer, and in particular whether such offer is part of a plan for periodically redeeming Shares of the Company.

Upon the repurchase of a Shareholder’s Shares, the Company will report the gross proceeds and, for Shares acquired on or after January 1, 2012 and disposed of after that date, cost basis to such Shareholder and the IRS. For each repurchase, the cost basis will be calculated using the Company’s default method of average cost, unless such Shareholder instructs the Company in writing to use a different calculation method permitted by the IRS, including first-in, first-out or specific Share lot identification. The cost basis method elected by the Shareholder (or the cost basis method applied by default) for each repurchase of Shares may not be changed after the settlement date of each such repurchase of Shares. If a Shareholder holds its Shares through a broker (or other nominee), such Shareholder should contact that broker (or nominee) with respect to reporting of cost basis and available elections for its account. Shareholders should consult with their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how the cost basis reporting requirements apply to them.

Dividends and interest received by the Company may give rise to withholding and other taxes imposed by foreign countries. Tax treaties between certain foreign countries and the United States may reduce or eliminate such taxes. The Company will not be eligible to “pass through” to its Shareholders the amount of foreign taxes paid by the Company for foreign tax credit purposes.

Ordinary income dividends paid to Shareholders that are not “United States persons” within the meaning of the Code (including non-resident aliens) (“ will generally be subject to a 30% U.S. withholding tax under existing provisions of the Code applicable to foreign individuals and entities unless a reduced rate of withholding is provided under an applicable tax treaty. However, dividends paid by the Company that are “interest-related dividends” or “short-term capital gain dividends” will generally be exempt from such withholding, in each case to the extent the Company properly reports such dividends to Shareholders. For these purposes, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gains that would not have been subject to U.S. federal withholding tax at the source if received directly by a non-U.S. Shareholder, and that satisfy certain other requirements. Non-U.S. Shareholders should consult their own tax advisors concerning the applicability of any U.S. withholding tax.

A non-U.S. Shareholder would generally be exempt from U.S. federal income tax on capital gain dividends, any amounts retained by the Company that are designated as undistributed capital gains and any gains realized upon the sale or other disposition of Shares of the Company.

Special tax rules would apply to non-U.S. Shareholders if the Company is either a “United States real property holding corporation” (“”) or would be a USRPHC but for the operation of certain exceptions to the definition thereof. Very generally, a USRPHC is a domestic corporation that holds “United States real property interests” (“”) the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation’s USRPIs, interests in real property located outside the United States, and other trade or business assets. Under the special tax rules, distributions by the Company to a non-U.S. Shareholder that are attributable to (i) gains realized on the disposition of USPRIs by the Company and (ii) distributions received by the Company (directly or indirectly) from a lower-tier RIC or REIT that the Company is required to treat as USRPI gain in its hands would retain their character as gains realized from USRPIs in the hands of non-U.S. Shareholders and would be subject to U.S. federal withholding tax. In addition, such distributions could result in the non-U.S. Shareholder being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. If the Company is a present or former USRPHC that is not “domestically controlled,”

 

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U.S. federal withholding tax may also apply to the repurchase of Shares from a non-U.S. Shareholder, which could also result in the non-U.S. Shareholder being required to file a U.S. tax return and pay tax on any gain at regular U.S. federal income tax rates. The Company will be treated as “domestically controlled” if at all times during a certain testing period less than 50% of the value of its stock is held directly or indirectly by foreign persons.

Special rules would apply to a non-U.S. Shareholder whose investment in its Shares is effectively connected with the conduct of a U.S. trade or business, and the foregoing discussion does not address any consequences to such investors. In addition, the tax consequences to a non-U.S. Shareholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Non-U.S. Shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Company.

Under U.S. legislation commonly known as the “Foreign Account Tax Compliance Act” (“”), a 30% withholding tax on certain distributions of income generally applies if paid to a foreign entity unless: (i) if the foreign entity is a “foreign financial institution” as defined under FATCA, the foreign entity undertakes certain due diligence, reporting, withholding and certification obligations, (ii) if the foreign entity is not a “foreign financial institution,” it identifies certain of its U.S. investors or (iii) the foreign entity is otherwise excepted under FATCA. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. If withholding is required under FATCA on a payment related to any Company distribution, investors that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) on such payment generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction. The Company will not pay any additional amounts in respect of amounts withheld under FATCA. Each investor should consult its tax advisor regarding the effect of FATCA based on its individual circumstances.

Under certain provisions of the Code, some Shareholders may be subject to a withholding tax on ordinary income dividends, capital gain dividends and redemption payments (“”). Generally, Shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Company or who, to the Company’s knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding. A non-U.S. Shareholder can generally establish an exemption from backup withholding by certifying as to its foreign status under penalties of perjury. Any amounts withheld as backup withholding may be refunded or credited against a Shareholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

References to investments and transactions discussed below include investments and transactions of both the Company and the various Investment Funds in which it invests.

. The hedging and derivative transactions of the Company are subject to special tax rules of the Code that may, among other things, (a) affect the character of gains and losses realized (with long-term capital gains of non-corporate taxpayers generally subject to tax at lower rates than ordinary income), (b) disallow, suspend or otherwise limit the allowance of certain losses or deductions and (c) accelerate the recognition of income without a corresponding receipt of cash (with which to make the necessary distributions to satisfy distribution requirements applicable to RICs). Operation of these rules could, therefore, affect the character, amount and timing of distributions to Shareholders. Special tax rules also will require the Company to mark to market certain types of positions in its portfolio (., treat them as sold on the last day of the

 

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taxable year), and may result in the recognition of income without a corresponding receipt of cash. If the Company engages in transactions affected by these provisions, it intends to monitor its transactions, make appropriate tax elections and make appropriate entries in its books and records to mitigate, to the extent reasonably feasible, the effect of these tax rules and avoid any possible disqualification for the special treatment afforded RICs under the Code.

. The Company may invest in zero coupon bonds and other debt securities that are issued at a discount or provide for deferred interest. Such securities may be treated as issued with original issue discount (“”) in an amount equal to the excess of the face value of the securities over their issue price. The Company generally will accrue the original issue discount over the term of the securities (as ordinary income), on a constant yield basis, even though the Company may not receive current interest payments attributable to such income. Since the original issue discount income earned by the Company in a taxable year may not be represented by cash income, it may have to dispose of securities, which it might otherwise have continued to hold, or borrow to generate cash in order to satisfy its distribution requirements. In addition, the Company’s investment in foreign currencies or foreign currency denominated or referenced debt securities, certain asset-backed securities and contingent payment and inflation-indexed debt instruments also may increase or accelerate the Company’s recognition of income, including the recognition of taxable income in excess of cash generated by such investments.

. The Code generally applies a “mark-to-market” system of taxing unrealized gains and losses on, and otherwise provides for special rules of taxation with respect to, Section 1256 Contracts. In general, subject to certain exceptions, a Section 1256 Contract includes certain regulated futures contracts, certain non-U.S. currency forward contracts, and certain listed non-equity options. Section 1256 Contracts held by the Company at the end of a taxable year of the Company will be treated for U.S. federal income tax purposes as if they were sold by the Company at their fair market value on the last business day of the taxable year. The net gain or loss, if any, resulting from these deemed sales (known as “”), together with any gain or loss resulting from any actual sales of Section 1256 Contracts (or other termination of the Company’s obligations under such contract), must be taken into account by the Company in computing its taxable income for the year. Gains and losses from Section 1256 Contracts generally are characterized as short-term capital gains or losses to the extent of 40% of the gains or losses and as long-term capital gains or losses to the extent of 60% of the gains or losses.

. To the extent that its investments are made in securities denominated in a non-U.S. currency, gain or loss realized by the Company frequently will be affected by the fluctuation in the value of such non-U.S. currencies relative to the value of the dollar. Gains or losses with respect to the Company’s investments in common stock of non-U.S. issuers will generally be taxed as capital gains or losses at the time of the disposition of the stock, subject to certain exceptions specified in the Code. Gains and losses of the Company on the acquisition and disposition of non-U.S. currency will be treated as ordinary income or loss. In addition, gains or losses on disposition of debt securities denominated in a non-U.S. currency to the extent attributable to fluctuation in the value of the non-U.S. currency between the date of acquisition of the debt security and the date of disposition will be treated as ordinary income or loss. Gains or losses attributable to fluctuations in exchange rates that occur between the time the Company accrues interest or other receivables or accrues expenses or other liabilities denominated in a non-U.S. currency and the time the Company collects the receivables or pays the liabilities may be treated as ordinary income or loss.

The Company may acquire foreign currency forward contracts, enter into foreign currency futures contracts and acquire put and call options on foreign currencies. Generally, foreign currency regulated futures contracts and option contracts that qualify as “Section 1256 Contracts” (see “” above), will not be subject to ordinary income or loss treatment under Section 988 of the Code. However, if the Company acquires any foreign currency futures contracts, option contracts or forward contracts that are not Section 1256 Contracts, any gain or loss realized by the Company with respect to such instruments will generally be ordinary, unless

 

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(i) the contract is a capital asset in the hands of the Company and is not a part of a straddle transaction and (ii) an election is made (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.

. The Sub-Fund will be a controlled foreign corporation for U.S. federal income tax purposes. The Company will generally be required to include in gross income for U.S. federal income tax purposes all of the Sub-Fund’s “subpart F income,” which will be treated as ordinary income, whether or not such income is actually distributed by the Sub-Fund to the Company. Subpart F income generally includes net gains from the disposition of stocks or securities, net gains from transactions (including futures, forward and similar transactions) in commodities and income received with respect to certain swaps and derivatives. Previously taxed subpart F income will not, however, be included in the Company’s income again when such income is distributed by the Sub-Fund to the Company. Any net losses incurred by the Sub-Fund during a tax year will not flow through to the Company and thus will not be available to offset income or capital gain generated from the Company’s other investments. To the extent the Company recognizes subpart F income in excess of actual cash distributions from the Sub-Fund, the Company may have to dispose of securities, which it might otherwise have continued to hold, or borrow to generate cash in order to satisfy its distribution requirements.

Generally, a tax-exempt organization (including an individual retirement account) is exempt from U.S. federal income tax on its passive investment income, such as dividends, interest and capital gains. This general exemption from tax does not apply to the “” (“”) of a tax-exempt organization. Generally, income and gain derived by a tax-exempt organization from the ownership and sale of debt-financed property is UBTI and, thus, taxable in the proportion to which such property is financed by “acquisition indebtedness” during the relevant period of time. However, a tax-exempt U.S. person investing in the Company will not realize UBTI with respect to an investment in Shares if the person does not borrow to make the investment. Tax-exempt U.S. persons are urged to consult their own tax advisors concerning the U.S. federal tax consequences of an investment in the Company.

Under Treasury regulations, if a Shareholder recognizes a loss with respect to Shares in any single tax year of $2 million or more (or $4 million in a combination of years) for an individual Shareholder or $10 million or more in a single year (or $20 million in a combination of years) for a corporate Shareholder, the Shareholder will likely have to file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

If the Company directly or indirectly purchases shares or other equity interests (which are collectively referred to as “shares” for purposes of this paragraph) in an Investment Fund (or similar investment entity) organized under foreign law and treated as a corporation for U.S. federal income tax purposes, the Company will generally be treated as owning shares in a passive foreign investment company (“”) for U.S. federal income tax purposes. The Company may be subject to U.S. federal income tax and an interest charge (at the rate applicable to tax underpayments) on tax liability treated as having been deferred with respect to certain distributions from such a company and on gain from the disposition of the shares of such a company (collectively referred to as “”), even if such excess distributions are paid by the Company as a dividend to its Shareholders. The Company or, in the case of an investment in a PFIC by an Investment Fund that is a

 

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domestic partnership for U.S. federal income tax purposes, such Investment Fund, may be eligible to make an election with respect to certain PFICs in which it owns shares to treat such PFIC as a qualified electing fund (a “”), which election will allow the Company to avoid the general rules that would otherwise apply to excess distribution, including the imposition of the interest charge. However, a QEF election would require the Company to include in income each year a portion of the ordinary earnings and net capital gain of the PFIC, even if such amounts are not distributed to the Company. Any such distributions may be in the discretion of the PFIC and not in the control of the Company. The Company or the relevant Investment Fund may not be able to make a QEF election with respect to many PFICs because of certain requirements that the PFICs would have to satisfy. Alternatively, the Company could elect to “mark to market” at the end of each taxable year all shares that it holds in PFICs because it will publish its net asset value at least annually. If it made this election, the Company would recognize as ordinary income any increase in the value of such shares as of the close of the taxable year over their adjusted basis and as ordinary loss any decrease in such value, but only to the extent of previously recognized “mark-to-market” gains. By making the mark-to-market election, the Company could avoid the general rules that would otherwise apply to excess distribution, including the imposition of the interest charge, but, in any particular year, the Company might be required to recognize income (which generally must be distributed to Shareholders) in excess of the distributions it received from PFICs and proceeds from the disposition of PFIC stock. Dividends paid by PFICs will not be treated as qualified dividend income.

Ordinary income and capital gain dividends may also be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by RICs that are derived from interest on U.S. Government obligations, although state law varies on this point.

THE FOREGOING IS A BRIEF SUMMARY OF CERTAIN INCOME TAX MATTERS THAT ARE PERTINENT TO PROSPECTIVE INVESTORS. THE SUMMARY IS NOT, AND IS NOT INTENDED TO BE, A COMPLETE ANALYSIS OF ALL PROVISIONS OF THE U.S. FEDERAL INCOME TAX LAW WHICH MAY HAVE AN EFFECT ON AN INVESTMENT IN THE COMPANY. THIS ANALYSIS IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN RESPECTIVE TAX ADVISORS WITH RESPECT TO THEIR OWN RESPECTIVE TAX SITUATIONS AND THE EFFECTS THEREON OF AN INVESTMENT IN THE COMPANY.

 

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The following is a summary of certain considerations associated with the purchase of Shares by (i) “employee benefit plans” (within the meaning of Section 3(3) of ERISA) that are subject to Title I of ERISA, (ii) “plans” within the meaning of Section 4975(e)(1) of the Code to which Section 4975 of the Code applies, (iii) plans, accounts and other arrangements that are subject to provisions under any other U.S. or non-U.S. federal, state, local or other laws or regulations that are similar to the provisions of Title I of ERISA or Section 4975 of the Code (collectively, “”) and (iv) entities whose underlying assets are considered to include the assets of any of the foregoing described in clauses (i), (ii) or (iii), pursuant to ERISA or other applicable law (each of the foregoing described in clauses (i), (ii), (iii) and (iv) referred to herein as a “”).

ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan which is a Benefit Plan Investor (defined below) and prohibit certain transactions involving the assets of a Benefit Plan Investor and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of a Benefit Plan Investor or the management or disposition of the assets of a Benefit Plan Investor, or who renders investment advice for a fee or other compensation to a Benefit Plan Investor, is generally considered to be a fiduciary of the Benefit Plan Investor. The term “benefit plan investor” (“”) is defined under ERISA to include any (a) “employee benefit plan” (as defined in Section 3(3) of ERISA) which is subject to the fiduciary responsibility provisions of Title I of ERISA, (b) “plan” as defined in Section 4975(e)(1) of the Code to which Section 4975 of the Code applies and (c) entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in the entity (e.g., an entity of which 25% or more of the total value of any class of equity interests is held by Benefit Plan Investors and which does not satisfy another exception under ERISA).

Persons who are fiduciaries with respect to a Plan should consider, among other things: (1) the role that the investment plays in the Plan’s portfolio, taking into account whether the investment is designed reasonably to further the Plan’s purposes; (2) the risk and return factors associated with the investment; (3) the portfolio’s composition with regard to diversification, as well as the liquidity and current return of the total portfolio relative to the anticipated cash flow needs of the Plan; and (4) the projected return of the total portfolio relative to the Plan’s funding objectives. The fiduciary should, for example, consider whether an investment in the Company may be too illiquid or too speculative for the Plan, and whether the assets of the Plan would be sufficiently diversified if the investment is made. In addition, the fiduciary should consider the fact that none of the Company, the Adviser, any Investment Manager or any of their respective affiliates are undertaking to provide individualized investment advice or any recommendation to any Plan or Plan fiduciary as to the advisability of acquiring, holding or disposing of Shares in connection with their decision to invest in Shares of the Company. If a fiduciary of a Plan breaches his, her or its responsibilities with regard to selecting an investment or an investment course of action for the Plan, the fiduciary may be held personally liable for losses incurred by the Plan as a result of the breach.

ERISA and the DOL Regulations generally provide that when a Benefit Plan Investor acquires an equity interest in an entity that is neither a “publicly-offered security” (within the meaning of the DOL Regulations) nor a security issued by an investment company registered under the Investment Company Act, the Benefit Plan Investor’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity unless it is established either that less than 25% of the total value of each class of equity interest in the entity is held by Benefit Plan Investors or that the entity is an “operating company,” as defined in the DOL Regulations. Because the Company has registered as an investment company under the Investment Company Act, the underlying assets of the Company are not considered to be “plan assets” of any Benefit Plan Investor

 

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investing in the Company for purposes of ERISA’s fiduciary responsibility rules and the prohibited transaction rules of ERISA and the Code. For that reason, neither the Adviser nor any of the Investment Managers will be fiduciaries with respect to Benefit Plan Investors within the meaning of the DOL Regulations solely as a result of an investment in the Company by a Benefit Plan Investor.

Whether or not the underlying assets of the Company were deemed to constitute “plan assets” of a Benefit Plan Investor as described above, the acquisition and/or holding of Shares by a Benefit Plan Investor with respect to which the Company, the Adviser or an Investment Manager is considered a “party in interest,” within the meaning of ERISA, or a “disqualified person” within the meaning of the Code, may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the Benefit Plan Investor that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code.

Certain prospective investors who are Benefit Plan Investors may currently maintain relationships with the Adviser or the Investment Managers, or with other entities that are affiliated with the Adviser or the Investment Managers. Each of the Adviser, the Investment Managers and their affiliates may be deemed to be a “party in interest” or “disqualified person” to a Plan and/or a fiduciary of any Benefit Plan Investor to which it provides investment management, investment advisory or other services. ERISA and the Code prohibit the assets of a Benefit Plan Investor from being used for the benefit of a party in interest and also prohibit a fiduciary Benefit Plan Investor from using its position to cause the Benefit Plan Investor to make an investment from which it or certain third parties in which the fiduciary has an interest would receive a fee or other consideration. Benefit Plan Investors should consult with their legal advisors to determine if participation in the Company is a transaction that is prohibited by ERISA or the Code and whether an exemption, all of the conditions of which will be satisfied, is available.

Plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and non-U.S. plans (as described in Section 4(b)(4) of ERISA) may not be subject to the fiduciary responsibility or prohibited transaction rules of Title I of ERISA or Section 4975 of the Code, but may be subject to Other Plan Laws which may affect their investment in our Shares. Fiduciaries of any such Plans should consult with their legal advisors in connection with an investment in any Shares.

A fiduciary of a Plan investing in the Company will be deemed to represent that it has not relied on any individualized advice or recommendation of the Company, the Adviser, any Investment Manager or any of their respective affiliates as to the advisability of acquiring, holding or disposing of Shares, and that its investment in the Company will not result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code or a violation of any applicable Other Plan Law. In addition, fiduciaries of Plans will be deemed to represent that they are an independent fiduciary with financial expertise.

Under ERISA’s general reporting and disclosure rules, certain Benefit Plan Investors subject to Title I of ERISA are required to file annual reports (Form 5500) with the U.S. Department of Labor regarding their assets, liabilities and expenses. To facilitate compliance with these requirements it is noted that the descriptions

 

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contained in this Prospectus of fees and compensation, including the Advisory Fee payable to the Adviser, are intended to satisfy the disclosure requirements for “eligible indirect compensation” for which the alternative reporting option on Schedule C of Form 5500 may be available.

The provisions of ERISA are subject to extensive and continuing administrative and judicial interpretation and review. The discussion of ERISA contained in this Prospectus is, of necessity, general and may be affected by future publication of DOL regulations and rulings. Potential investors should consult with their legal advisors regarding the consequences under ERISA and the Code of the acquisition and ownership of Shares.

The foregoing discussion is general in nature and is not intended to be all-inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the Shares on behalf of, or with the assets of, any Plan, consult with their legal advisors regarding the potential applicability of ERISA, Section 4975 of the Code and Other Plan Law to such investment and whether an exemption would be applicable to the purchase of the Shares. Neither this discussion nor anything provided in this Prospectus is, or is intended to be, investment advice directed at any potential Plan purchasers, or at Plan purchasers generally, and such purchasers of Shares should consult and rely on their own legal advisors as to whether an investment in Shares is suitable for the Plan. The sale of any Shares in any Plan is in no respect a representation by the Company, the Adviser, the Investment Managers or any of their respective affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that such investment is prudent or appropriate for Plans generally or any particular Plan.

 

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The LLC Agreement may generally be amended, in whole or in part, with the approval of a majority of the Board of Directors (including a majority of the Independent Directors, if required by the Investment Company Act) and without the approval of the Shareholders unless the approval of Shareholders is required by the Investment Company Act. Certain amendments to the LLC Agreement involving Share balances (generally those reducing a Shareholder’s claim on the assets of the Company) may not be made without the written consent of any Shareholder adversely affected by the amendments or unless each Shareholder has received written notice of the amendment and any Shareholder objecting to the amendment has been allowed a reasonable opportunity (pursuant to any procedures as may be prescribed by the Board of Directors) to tender all of his, her or its Shares for repurchase by the Company. In addition, amendments that would modify the provisions of the LLC Agreement regarding amendment procedures (if material) or the Company’s indemnification obligations may be made only with the unanimous consent of the Shareholders and, to the extent required by the Investment Company Act, approval of a majority of the Directors (and, if so required, a majority of the Independent Directors).

The Company is authorized to issue an unlimited number of Shares, including fractional Shares, all at $0.00001 par value per Share. The Company may suspend offering Shares (temporarily or otherwise) at any time in the discretion of the Board of Directors.

While the Company may merge with or into other business entities pursuant to a merger agreement approved in accordance with the Delaware Limited Liability Company Act, the organization, operation or dissolution of a subsidiary “master fund” (including any transactions incidental thereto) are not deemed to constitute a merger.

In subscribing for Shares, an investor will appoint each of the Administrators as his, her or its 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 LLC Agreement and conveyances and other instruments deemed necessary to effect the dissolution or termination of the Company. This power of attorney, which will be contained in an investors’ subscription agreement, is a special power of attorney and is coupled with an interest in favor of the Administrators and as such will be irrevocable and will continue in full force and effect, notwithstanding the subsequent death or incapacity of any Shareholder granting the power of attorney. In addition, the power of attorney will survive the delivery of a transfer by a Shareholder of all or part of the Shareholder’s Shares, except that when the transferee of such Shares has been approved by the Company or its designated agents for admission to the Company as a substitute Shareholder, or upon the withdrawal of a Shareholder from the Company pursuant to a periodic tender or otherwise, the power of attorney given by the transferor will terminate.