UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21605
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The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
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(Exact name of registrant as specified in charter)
345 Park Avenue
New York, NY 10154
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(Address of principal executive offices) (Zip code)
John H. Kim, Director & Senior Counsel
Deutsche Asset Management
345 Park Avenue
New York, NY 10154
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(Name and address of agent for service)
registrant's telephone number, including area code: 212-454-6849
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Date of fiscal year end: March 31
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Date of reporting period: March 31, 2007
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
FINANCIAL STATEMENTS
For the Year Ended March 31, 2007
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Financial Statements
For the Year Ended March 31, 2007
CONTENTS
Report of Independent Registered Public Accounting Firm ................. 1
Statement of Assets, Liabilities, and Members' Capital .................. 2
Schedule of Investments.................................................. 3-5
Statement of Operations.................................................. 6
Statement of Changes in Members' Capital................................. 7
Statement of Cash Flows.................................................. 8
Financial Highlights..................................................... 9
Notes to Financial Statements............................................ 10-16
Directors and Officers Biographical Data................................. 17-21
Portfolio Proxy Voting Policies and Procedures; SEC Filings.............. 22
Components of Net Assets by Investment Strategy ......................... 23
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Members of
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
In our opinion, the accompanying statement of assets, liabilities and members'
capital, including the schedule of investments, and the related statements of
operations, of changes in members' capital and of cash flows and the financial
highlights present fairly, in all material respect, the financial position of
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC (the "Master Fund")
at March 31, 2007, the results of its operations and its cash flows for the year
then ended, the changes in its members' capital for each of the two years in the
period then ended and the financial highlights for each of the two years then
ended and for the period October 1, 2004 (commencement of operations) through
March 31, 2005, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments at March 31, 2007 by correspondence with the general
partners/ managing members of the investment funds, provide a reasonable basis
for our opinion.
As more fully described in Note 9 to the financial statements, the Board of
Directors of the Master Fund has approved a reorganization plan subject to
approval of the terms of an acquisition agreement and subsequent approval by the
Members of the Master Fund, whereby substantially all of the assets and
liabilities of the Master Fund will be acquired by a third party.
MAY 29, 2007
1
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Statement of Assets, Liabilities and Members' Capital
MARCH 31, 2007
ASSETS
Investments in investment funds, at fair value (cost $66,182,077) $ 82,291,986
Cash and cash equivalents 3,856,159
Receivable for investment funds sold 909,742
Receivable from Advisor 22,131
Prepaid expenses 13,737
Other assets 14,763
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TOTAL ASSETS $ 87,108,518
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LIABILITIES
Professional fees payable $ 188,399
Taxes payable 61,815
Registration fees payable 23,100
Management fee payable 20,276
Investor services fees payable 15,425
Administration fees payable 13,334
Board preparation fees payable 9,375
Custodian fees payable 4,400
Redemptions payable 2,465
Other fees payable 38,839
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TOTAL LIABILITIES 377,428
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MEMBERS' CAPITAL 86,731,090
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TOTAL LIABILITIES AND MEMBERS' CAPITAL $ 87,108,518
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Schedule of Investments
March 31, 2007
% OF
MEMBERS'
STRATEGY INVESTMENT FUND COST FAIR VALUE LIQUIDITY* CAPITAL
-------- --------------- ---- ---------- --------- --------
Event Driven Avenue Europe Investments, L.P. $ 932,212 $ 1,240,946 Quarterly 1.4%
Gracie Capital L.P. 1,452,431 1,856,755 Annually 2.1%
Harbinger Capital Partners I, L.P. 1,374,965 2,072,417 Quarterly 2.4%
Jana Partners Qualified, L.P. 2,450,000 3,105,980 Quarterly 3.6%
Marathon Special Opportunity Fund,
L.P. 1,500,000 1,869,378 Annually 2.2%
Merced Partners, L.P. 1,550,000 1,980,689 Annually 2.3%
Perry Partners, L.P. 2,600,000 3,209,709 Annually 3.7%
Strategic Value Restructuring Fund, L.P. 870,036 1,402,474 Annually 1.6%
Venor Capital Partners, L.P. 2,000,000 2,356,299 Quarterly 2.7%
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Total Event Driven 14,729,644 19,094,647 22.0%
Global Macro Bear Stearns Emerging Markets Macro
Fund, L.P. 304,387 442,228 Quarterly 0.5%
Bridgewater Pure Alpha Trading Fund I 1,112,167 1,266,758 Monthly 1.5%
Drawbridge Global Macro Fund, L.P. 1,208,209 1,777,132 Quarterly 2.0%
Gondwana Fund, Ltd. 1,150,000 1,133,476 Monthly 1.3%
Grinham Diversified Fund Ltd. 950,000 977,453 Monthly 1.1%
GSA Capital Macro Partners, L.P. 700,000 728,505 Monthly 0.8%
Red Kite Compass Fund, Ltd. 349,545 415,593 Quarterly 0.5%
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Total Global Macro 5,774,308 6,741,145 7.7%
Long/Short Equity Artha Emerging Markets Fund, L.P. 1,050,000 1,744,361 Quarterly 2.0%
Blue Crest Equity Fund, L.P. 1,650,000 1,673,840 Quarterly 1.9%
Bonanza Partners L.P. 999,499 1,304,737 Quarterly 1.5%
Brevan Howard Equity Strategies Fund L.P. 1,600,000 1,735,145 Monthly 2.0%
CPIM Structured Credit Fund 1000 Inc.
AQ1 1,300,000 1,272,453 Quarterly 1.5%
Delta Fund Europe L.P. 1,036,103 1,591,440 Quarterly 1.8%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Schedule of Investments (continued)
March 31, 2007
% OF
MEMBERS'
STRATEGY INVESTMENT FUND COST FAIR VALUE LIQUIDITY* CAPITAL
-------- --------------- ---- ---------- --------- --------
Delta Institutional L.P. $ 1,650,000 $ 1,916,681 Quarterly 2.2%
Hard Assets Partners, L.P. 1,138,421 1,487,707 Monthly 1.7%
Hayground Cove Institutional Partners,
L.P. 662,226 892,980 Quarterly 1.0%
Ivory Flagship Fund, L.P. 1,211,463 1,645,468 Quarterly 1.9%
Kinetics Partners, L.P. 721,513 1,226,486 Quarterly 1.4%
Perceptive Life Sciences Fund 1,400,000 1,547,893 Quarterly 1.8%
Lapp Opportunity Fund, L.P. 900,000 967,573 Monthly 1.1%
Prism Partners QP, L.P. 1,575,000 1,883,028 Quarterly 2.2%
Seligman Tech Spectrum Fund LLC 974,882 1,257,576 Quarterly 1.5%
SR Global, L.P. Asia 1,273,242 1,902,983 Monthly 2.2%
Talaris Fund, L.P. 1,000,000 1,012,456 Quarterly 1.2%
TCS Capital II, L.P. 1,283,017 2,167,067 Annually 2.5%
Third Coast Capital QP, L.P. 1,400,000 1,588,248 Quarterly 1.8%
Torrey Pines Fund, L.L.C. 899,024 1,142,295 Quarterly 1.3%
Tracer Capital Partners QP, LP 1,606,000 2,018,157 Quarterly 2.3%
UC Financials Fund Limited 962,044 1,421,812 Monthly 1.7%
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Total Long/Short Equity 26,292,434 33,400,386 38.5%
Relative Value All Blue Limited 797,637 857,840 Monthly 1.0%
Amaranth Capital Partners, LLC 393,922 186,446 Annually 0.2%
Black River Global Multi-Strategy Leveraged
Fund, L.L.C. 2,900,000 3,272,633 Annually 3.8%
Blue Crest Capital, L.P. 750,000 752,712 Quarterly 0.9%
Bogle World Fund, L.P. 2,400,000 2,947,545 Quarterly 3.4%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Schedule of Investments (continued)
March 31, 2007
% OF
MEMBERS'
STRATEGY INVESTMENT FUND COST FAIR VALUE LIQUIDITY* CAPITAL
-------- --------------- ---- ---------- --------- --------
Citadel Wellington Partners, L.L.C. $ 3,019,132 $ 4,659,936 Quarterly 5.4%
D.B. Zwirn Special Opportunities, L.P. 1,250,000 1,464,146 Annually 1.7%
HBK Offshore Fund Ltd. 3,775,000 4,375,023 Quarterly 5.0%
Highbridge Asia Opportunities Fund, Ltd. 1,150,000 1,272,401 Quarterly 1.4%
Linden International Ltd. 1,950,000 2,149,846 Quarterly 2.5%
Marathon Fund L.P. 1,000,000 1,117,280 Quarterly 1.3%
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Total Relative Value 19,385,691 23,055,808 26.6%
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Total $ 66,182,077 $ 82,291,986 94.8%
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Other Assets in Excess of Liabilities 4,439,104 5.2%
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Members' Capital $ 86,731,090 100.0%
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* Investment Funds may also be subject to initial lock-up periods, gates and/or
other limitations or redemptions.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Statement of Operations
For the Year Ended March 31, 2007
INVESTMENT INCOME
Interest income $ 245,724
EXPENSES
Management fees $ 858,146
Professional fees 358,304
Board of Directors fees and expenses 133,762
Administration fees 176,090
Investor services fees 84,112
Insurance fees 59,067
Registration fees 19,385
Custodian fees 15,029
Printing fees 10,000
Other expenses 1,277
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Total expenses 1,715,172
Management fees waived by Adviser (213,692)
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Net expenses 1,501,480
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NET INVESTMENT LOSS (1,255,756)
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GAINS FROM INVESTMENT FUND TRANSACTIONS
Net realized gain from investment funds redeemed 1,709,003
Net change in unrealized appreciation on investment funds 5,920,329
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NET GAINS FROM INVESTMENT FUNDS TRANSACTIONS 7,629,332
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NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS $ 6,373,576
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Statements of Changes in Members' Capital
YEAR ENDED YEAR ENDED
MARCH 31, 2007 MARCH 31, 2006
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FROM INVESTMENT ACTIVITIES
Net investment loss $ (1,255,756) $ (1,084,665)
Net realized gains of investment funds
redeemed 1,709,003 998,415
Net change in unrealized appreciation
on investment funds 5,920,329 7,700,870
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NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS 6,373,576 7,614,620
FROM MEMBERS' CAPITAL TRANSACTIONS
Subscriptions 28,318,125 36,559,361
Redemptions (19,574,444) (27,011,363)
Distributions (397,489) (165,055)
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NET CHANGE IN MEMBERS' CAPITAL FROM CAPITAL
TRANSACTIONS 8,346,192 9,382,943
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NET CHANGE IN MEMBERS' CAPITAL 14,719,768 16,997,563
Members' Capital at beginning of year 72,011,322 55,013,759
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Members' Capital at end of year $ 86,731,090 $ 72,011,322
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Statement of Cash Flows
For the Year Ended March 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in Members' Capital from operations $ 6,373,576
Adjustments to reconcile net increase in Members' Capital from operations to net
cash used in operating activities:
Purchases of investment funds (26,400,000)
Sales of investment funds 20,174,505
Net realized gains from investment funds redeemed (1,709,003)
Net change in unrealized appreciation on investment funds (5,920,329)
Decrease in investment in investment funds made in advance 4,950,000
Decrease in receivable for investment funds sold 1,151,129
Decrease in receivable from Advisor 6,366
Increase in prepaid expenses (1,204)
Increase in other assets (8,880)
Increase in professional fees payable 387
Increase in taxes payable 30,967
Decrease in registration fees payable (6,501)
Decrease in management fee payable (86,627)
Increase in investor services fees payable 3,915
Decrease in board preparation fees payable (40,625)
Increase in custodian fees payable 2,200
Increase in other fees payable 28,552
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NET CASH USED IN OPERATING ACTIVITIES (1,451,572)
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CASH FLOWS FROM FINANCING ACTIVITIES
Subscriptions 25,094,968
Redemptions (19,571,979)
Distributions (397,489)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 5,125,500
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NET INCREASE IN CASH AND CASH EQUIVALENTS 3,673,928
Cash and cash equivalents at beginning of year 182,231
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Cash and cash equivalents at end of year $ 3,856,159
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY
Taxes paid $ 366,522
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
Financial Highlights
PERIOD FROM
THE FOLLOWING REPRESENTS THE OCTOBER 1, 2004
RATIOS TO AVERAGE MEMBERS' (COMMENCEMENT
CAPITAL AND OTHER FINANCIAL OF OPERATIONS)
HIGHLIGHTS INFORMATION FOR THE YEAR ENDED YEAR ENDED THROUGH MARCH
PERIOD/YEAR: MARCH 31, 2007 MARCH 31, 2006 31, 2005
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Ratios to average Members'
capital:
Net investment loss (b) (1.46%) (1.60%) (1.67%)(a)
Net expenses (b)(c) 1.75% 1.75% 1.75% (a)
Total return 7.37% 11.27% 5.04% (d)
Portfolio turnover rate 26% 39% 3%
Members' Capital, end of
period (thousands) $ 86,731 $ 72,011 $ 55,014
(a) Annualized for periods of less than one year.
(b) The Adviser waived $213,692 of fees for the year ended March 31, 2007. The
net investment loss ratio would have been 0.25% greater and the total
expenses ratio would have been 0.25% greater had these fees and expenses
not been waived and reimbursed by the Adviser. The Adviser waived and
reimbursed $113,973 and $265,284 of fees and expenses for the periods ended
March 31, 2006 and 2005, respectively. The net investment loss ratio would
have been 0.17% and 1.17% greater and the total expenses ratio would have
been 0.17% and 1.17% greater had these fees and expenses not been waived
and reimbursed by the Adviser.
(c) Expense ratios for the underlying Investment Funds are not included in the
Fund's expense ratio.
(d) Not annualized.
The above ratios and total returns are calculated for all Members taken as
a whole. An individual investor's return may vary from these returns based
on the timing of capital transactions.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS
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1. ORGANIZATION
The Topiary Master Fund for Benefit Plan Investors (BPI) LLC (the "Fund") was
organized as a Delaware limited liability company on July 16, 2004. The Fund is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a closed-end, non-diversified, management investment company. The
Fund's interests (the "Interests") are registered under the Securities Act of
1933, as amended (the "1933 Act"), but are subject to substantial limits on
transferability and resale.
The Fund's investment objective is to generate long-term capital appreciation
through a diversified portfolio with volatility that is lower than that of the
equity markets and returns that demonstrate little to no correlation with either
equity or bond markets. The Fund acts as a "Master Fund" utilizing capital
generated by investments by The Topiary Offshore Fund for Benefit Plan Investors
(BPI) LDC (the "Offshore Fund") and through direct investments by other Members.
The Offshore Fund's capital is generated by investments by The Topiary Fund for
Benefit Plan Investors (BPI) LLC (the "Onshore Fund"). At March 31, 2007, the
investment by the Offshore Fund constitutes 98.6% of the investment capital of
the Master Fund, and the Onshore Fund constitutes 100% of the investment capital
of the Offshore Fund. The balance of the Fund's capital, approximately 1.4%,
comprises a direct investment by DBAH Capital LLC, an affiliate of DB Investment
Managers, Inc. The Fund will attempt to achieve its investment objective by
investing in the securities of approximately 50 to 100 Investment Funds (the
"Investment Funds") to be managed pursuant to various alternatives or
non-traditional investment strategies, which may be viewed as encompassing four
broadly defined primary categories; Relative Value; Event Driven; Long/Short
Equity; and Global Macro. The Fund commenced operations on October 1, 2004.
The Fund's Board of Directors (the "Board") has overall responsibility to manage
and control the business operations of the Fund on behalf of the members (the
"Members"). All of the Board are and will be persons who are not "interested
persons" (as defined in the 1940 Act) with respect to the Fund.
DB Investment Managers, Inc., performing services as Topiary Fund Management,
(the "Adviser") serves as the investment adviser of the Fund subject to the
ultimate supervision of and subject to any policies established by the Board,
pursuant to the terms of an investment management agreement with the Fund (the
"Investment Management Agreement"). Pursuant to the Investment Management
Agreement, the Adviser provides the Fund with ongoing investment guidance,
policy direction, and monitoring of the Fund. The Adviser is an indirect wholly
owned subsidiary of Deutsche Bank AG ("Deutsche Bank"), an international
commercial and investment banking group, and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act").
Generally, initial and additional applications for interests by eligible
investors may be accepted at such times as the Fund may determine. The Fund
reserves the right to reject
10
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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1. ORGANIZATION (CONTINUED)
any applications for interests in the Fund. The Fund from time to time may offer
to repurchase Interests. These repurchases will be made at such times and on
such terms as may be determined by the Board, in its complete and absolute
discretion. On behalf of non-U.S. Members the Fund withholds and pays taxes on
U.S. source income allocated from Investment Funds.
2. SIGNIFICANT ACCOUNTING POLICIES
A. PORTFOLIO VALUATION
The net asset value of the Fund is determined by or at the direction of the
Adviser as of the last business day of each month in accordance with the
valuation principles set forth below or as may be determined from time to time
pursuant to policies established by the Board.
The net asset value of the Fund equals the value of the Fund's assets less the
Fund's liabilities, including accrued fees and expenses. The Fund's investments
in the Investment Funds are considered to be illiquid and can only be redeemed
periodically. The Board has approved procedures pursuant to which the Fund
values its investments in Investment Funds at fair value. In accordance with
these procedures, fair value as of each month-end ordinarily is the value
determined as of such month-end for each Investment Fund in accordance with the
Investment Fund's valuation policies and reported at the time of the Fund's
valuation. As a general matter, the fair value of the Fund's interest in an
Investment Fund represents the amount that the Fund could reasonably expect to
receive from an Investment Fund if the Fund's interest were redeemed at the time
of the valuation, based on information reasonably available at the time the
valuation is made and that the Fund believes to be reliable. In the event that
an Investment Fund does not report a month-end value to the Fund on a timely
basis, the Fund would determine the fair value of such Investment Fund based on
the most recent value reported by the Investment Fund, as well any other
relevant information available at the time the Fund values its portfolio. The
values assigned to these investments are based on available information and do
not necessarily represent amounts that might ultimately be realized, as such
amounts depend on future circumstances and cannot reasonably be determined until
the individual investments are actually liquidated.
B. INCOME RECOGNITION AND SECURITY TRANSACTIONS
Interest income is recorded on an accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from investment fund
transactions are calculated on the identified cost basis. Investments are
recorded on the effective date of the subscription in the Investment Fund.
11
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FUND COSTS
The Fund bears all expenses incurred in its business other than those that the
Adviser assumes. The expenses of the Fund include, but are not limited to, the
following: all costs and expenses related to investment transactions and
positions for the Fund's account; legal fees; accounting and auditing fees;
custodial fees; costs of computing the Fund's net asset value; costs of
insurance; registration expenses; due diligence, including travel and related
expenses; expenses of meetings of the Board and Members; all costs with respect
to communications to Members; and other types of expenses as may be approved
from time to time by the Board.
D. INCOME TAXES
The Fund intends to operate and has elected to be treated as a partnership for
Federal income tax purposes. Accordingly, no provision for the payment of
Federal, state or local income taxes has been provided. Each Member is
individually required to report on its own tax return its distributive share of
the Fund's taxable income or loss. On behalf of the Fund's foreign members', the
Fund withholds and pays taxes on U.S. source income and U.S. effectively
connected income, if any, allocated from underlying Investment Funds to the
extent such income is not exempted from withholdings under the Internal Revenue
Code and Regulations there under. Such amounts recorded as distributions are
treated by the Members as withholding tax credits for federal income tax
purposes. The actual amount of such taxes is not known until all K-1s from
underlying funds are received, usually in the following tax year. Prior to the
final determination, the amount of the tax is estimated based on information
available. The final tax could be different from the estimated tax and the
difference could be significant.
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of monies on deposit at PNC Bank, N.A. The
Fund treats all financial instruments that mature within three months as cash
equivalents.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Adviser to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The Adviser believes that the estimates
utilized in preparing the Fund's financial statements are reasonable and
prudent; however, actual results could differ from these estimates.
12
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. EXPENSE LIMITATION
Pursuant to the Expense Limitation Agreement, the Adviser has contractually
agreed to waive fees and/or reimburse the Fund's expenses to the extent
necessary to ensure that the Fund's annualized expenses (excluding the Incentive
Allocation, if any) will not exceed 1.75%. The initial term of the Expense
Limitation Agreement is the first fiscal year of the Fund's operations, and will
be automatically renewed for each fiscal year thereafter unless the Adviser
provides written notice to the Fund and the Master Fund of the termination of
the Expense Limitation Agreement at least 30 days prior to the end of the
then-current term.
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Adviser provides certain management and administration services to the Fund,
including, among other things, providing office space and other support
services. In consideration for such management services, the Fund pays the
Adviser a monthly management fee (the "Management Fee") at an annual rate of
1.00% of the Fund's month end net assets, including assets attributable to the
Adviser (or its affiliates) and before giving effect to any repurchases by the
Fund. The Management Fee accrues monthly and is payable at the end of each
quarter. Management fee for the year ended March 31, 2007 was $858,146 of which
$20,276 was payable at period end.
The Adviser has contractually agreed to a waiver of its fees and/or
reimbursement of the Fund's expenses to the extent necessary so that the Fund's
annualized expenses do not exceed 1.75% ("Expense Limitation Agreement") during
the year through March 31, 2007. For the year ended March 31, 2007, the Adviser
waived management fees of $213,692.
In accordance with the terms of the administration agreement (the
"Administration Agreement") and with the approval of the Fund's Board, PFPC,
Inc. (an affiliate of PNC Bank, N.A.) ("PFPC") serves as the Fund's
administrator pursuant to the administration agreement between PFPC and the
Fund. Under the Administration Agreement, PFPC provides administrative and
accounting services to the Fund. As compensation for services set forth herein
that are rendered by PFPC during the term of this Agreement, the Fund pays PFPC
a fee for services rendered.
The Fund has entered into an investor services agreement with PFPC, whereby PFPC
provides investor services and transfer agency functions for the Fund. As
compensation for services set forth herein that are rendered by PFPC during the
term of this Agreement, the Fund pays PFPC a fee for services rendered.
The Adviser has also retained one of its affiliates, Deutsche Investment
Management Americas, Inc. ("DIMA"), to provide sub-administration services
pursuant to the Board services agreement.
13
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
Under this agreement, DIMA, among other things: drafts Board agendas and
resolutions; prepares Board materials; communicates with the Directors; and
drafts Board-meeting minutes. As compensation for services set forth herein that
are rendered by DIMA during the term of this Agreement, the Funds pays DIMA a
fee for services rendered.
Each Board member who is not an employee of the Adviser, or one of its
affiliates, receives an annual retainer of $16,000 plus a fee for each meeting
attended. The chairman of the audit committee also receives an additional annual
fee of $2,000. These Board members are also reimbursed by the Fund for all
reasonable out of pocket expenses.
PFPC Trust Company (also an affiliate of PNC Bank, N.A.) serves as custodian of
the Fund's assets and provides custodial services to the Fund.
Under the terms of an investor servicing agreement (the " Underwriting
Agreement") between the Fund and Scudder Distributors, Inc. (the "Distributor"),
the Distributor is authorized to retain brokers, dealers and certain financial
advisers ("Investor Service Providers") to provide ongoing investor services and
account maintenance services to Members that are their customers. The
Distributor bears all of its expenses of providing distribution services as
described under the Underwriting Agreement.
4. SECURITY TRANSACTIONS
As of March 31, 2007, the Fund had investments in Investment Funds, none of
which were related parties. Aggregate purchases of Investment Funds amounted to
$26,400,000 and aggregate sales of Investment Funds amounted to $20,174,505 for
the year ended March 31, 2007.
At March 31, 2007, the estimated cost of investments for Federal income tax
purposes was $66,182,077. As of that date, net unrealized appreciation on
investments was estimated to be $16,109,909, made up of gross unrealized
appreciation on investments of $16,361,456 and gross unrealized depreciation on
investments of $251,547.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which the Fund invests
trade various financial instruments and enter into various investment activities
with off-balance sheet risk. These include, but are not limited to, short
selling activities, writing option contracts, contracts for differences, and
interest rate, credit default and total return equity swaps contracts. The
Fund's risk of loss in these Investment Funds is limited to the value of these
investments reported by the Fund. The Fund itself does not invest in securities
with off-balance sheet risk.
14
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
6. CONCENTRATION OF RISK
The Master Fund invests primarily in Investment Funds that are not registered
under the 1940 Act and invest in and actively trade securities and other
financial instruments using different strategies and investment techniques,
including leverage, that may involve significant risks. These Investment Funds
may invest a high percentage of their assets in specific sectors of the market
in order to achieve a potentially greater investment return. As a result, the
Investment Funds may be more susceptible to economic, political, and regulatory
developments in a particular sector of the market, positive or negative, and may
experience increased volatility of the Investment Funds' net asset value.
Various risks are also associated with an investment in the Fund, including
risks relating to the multi-manager structure of the Fund, risks relating to
compensation arrangements and risks relating to limited liquidity.
7. GUARANTOR OBLIGATIONS AND INDEMNIFICATIONS
In the normal course of business, the Fund enters into contracts that contain a
variety of warranties and representations that provide general indemnifications.
The Fund's maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund's management expects the risk of loss to be remote.
8. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
March 31, 2007, the Manager has evaluated the implications of FIN 48 and does
not currently anticipate a material impact to the Fund's financial statements.
Management will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 157, Fair Value Measurements. This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and expands disclosures about fair value measurements. SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards. SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years.
15
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT (CONTINUED)
As of March 31, 2007, management does not believe the adoption of SFAS No. 157
will materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
9. SUBSEQUENT EVENT
At a meeting of the Board of Directors (the "Board") of the Fund held on May 29,
2007, the Board approved a proposed transaction (the "Reorganization") whereby
(i) the Hatteras Multi-Strategy TEI Fund, L.P. (the "Hatteras Fund"), a
closed-end management investment company whose investment adviser is Hatteras
Investment Partners LLC, would acquire substantially all of the assets and
liabilities of the Fund in exchange for interests in the Hatteras Fund, (ii) the
Fund would distribute interests received from the Hatteras Fund to its members
and (iii) the Fund would subsequently be dissolved. The Board's approval of the
Reorganization is subject to the Board's subsequent approval of the terms of an
acquisition agreement (the "Acquisition Agreement") relating to the
Reorganization. Approval of the Reorganization also requires the vote of a
majority of the outstanding interests of the Fund. If the Board approves the
Acquisition Agreement, it will seek approval from members of the Fund at a
special meeting of members to be held at a later date.
16
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (UNAUDITED)
--------------------------------------------------------------------------------
The business of the Fund is managed under the direction of the Board. Subject to
the provisions of the Operating Agreement and Delaware law, the Directors have
all powers necessary and convenient to carry out the responsibility. The
Directors and Officers of the Fund, their addresses, their ages and descriptions
of their principal occupations during the past five years are listed below.
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
TERM OF PRINCIPAL IN FUND OTHER
POSITION(S) OFFICE(i) & OCCUPATION(S) COMPLEX DIRECTORSHIPS
HELD WITH LENGTH OF DURING THE PAST OVERSEEN BY HELD
NAME, ADDRESS AND AGE FUND TIME SERVED 5 YEARS DIRECTOR BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Nolan T. Altman (ii) Director Since President, NTA 3 Directorships: State
c/o The Topiary Master Fund for inception Consulting (financial University of New York at
Benefit Plan Investors (BPI) LLC services consulting) Albany Foundation (1998
25 DeForest Ave. (2001 to present). to present); Tiger Asia
Summit, NJ 07901-2154 Formerly, Chief Overseas Fund, Ltd.
(9/18/55) Financial Officer, Offshore Fund; Tiger
Tiger Management Global, Ltd., TS I
(Investment adviser Offshore Limited (2004 to
to hedge funds) (1993 present); Tiger Consumer
to 2001). Partners Offshore Fund,
Ltd (2006 to present); K2
Alternative Strategies
(Offshore), Ltd. (2007 to
present).
------------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------
(i) Each Director serves for the duration of the Fund, or until his
death, resignation, termination, removal or retirement.
(ii) Since March 2003, Messrs. Altman and Citron have served as
members of the Conflicts Advisory Board of certain private
investment funds managed by DBIM or its affiliates. This
Conflicts Advisory Board meets on an intermittent basis to
evaluate whether specific transactions involving the private
investment funds raise conflicts of interest with DBIM, its
affiliates, or accounts managed by DBIM or its affiliates.
17
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (CONTINUED)(UNAUDITED)
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
TERM OF PRINCIPAL IN FUND OTHER
POSITION(S) OFFICE(i) & OCCUPATION(S) COMPLEX DIRECTORSHIPS
HELD WITH LENGTH OF DURING THE PAST OVERSEEN BY HELD
NAME, ADDRESS AND AGE FUND TIME SERVED 5 YEARS DIRECTOR BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
Louis S. Citron (ii) Director Since Partner and General 3 None
c/o The Topiary Master Fund for Inception Counsel, New
Benefit Plan Investors (BPI) LLC Enterprise Associates
25 DeForest Ave. (venture capital
Summit, NJ 07901-2154 firm) (2001 to
(1/31/65) present).
------------------------------------------------------------------------------------------------------------------------------------
18
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (CONTINUED)(UNAUDITED)
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
TERM OF PRINCIPAL IN FUND OTHER
POSITION(S) OFFICE(i) & OCCUPATION(S) COMPLEX DIRECTORSHIPS
HELD WITH LENGTH OF DURING THE PAST OVERSEEN BY HELD
NAME, ADDRESS AND AGE FUND TIME SERVED 5 YEARS DIRECTOR BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
Edward T. Tokar Director Since Sr. Managing 3 Directorships:
c/o The Topiary Master Fund for Inception Director of Gabelli Dividend &
Benefit Plan Investors (BPI) LLC Investments, Beacon Income Trust (2003 to
25 DeForest Ave. Trust Co. (2004 to present); Gabelli
Summit, NJ 07901-2154 present); Chief Global Deal Fund
(6/12/47) Executive Officer, (2007 to present);
Allied Capital Mgmt. Trustee, Levco Series
LLC (registered Trust Mutual Funds
investment adviser - (2 portfolios) (2001
wholly owned to 2005); Allied
subsidiary of Capital Management
Honeywell) (1998 to LLC (1998 to 2004).
2004); and Vice Formerly, Trustee,
President - Scudder MG Investment
Investments, Trust (formerly
Honeywell Morgan Grenfell
International, Inc. Investment Trust (11
(advanced technology portfolios) (1994
and manufacturer) to 2002).
(1977to 2004).
------------------------------------------------------------------------------------------------------------------------------------
19
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (CONTINUED)(UNAUDITED)
--------------------------------------------------------------------------------
OFFICERS
---------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH FUND PRINCIPAL OCCUPATION(S) DURING THE
LAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------
Pamela Kiernan(iii) President Chief Operating Officer, DB Absolute Return
DB Absolute Return Strategies Strategies (2005 to present). Formerly, Chief
345 Park Avenue, 24Th Floor Operating Officer - Americas, DB Advisors LLC
New York, NY 10154 (2004); Chief Operations Officer - America, Deutsche
(9/16/68) Bank Global Equities (2002 to 2004); Business
Management - Trading, Deutsche Bank Global Equities
(1997 to 2002).
---------------------------------------------------------------------------------------------------------------------
Joshua Kestler(iii) Vice President Head of Product Structuring, DB Absolute
Return Deutsche Asset Management Strategies (2004 to present); Associate,
25 DeForest Ave., 2nd Floor Schulte Roth & Zabel LLP (law firm) (2001-2004).
Summit, NJ 07901-2154
(04/27/75)
---------------------------------------------------------------------------------------------------------------------
Marielena Glassman(iii) Treasurer, Chief Administration Officer, DB Absolute Return
Deutsche Asset Management Principal Strategies (2002 to present). Formerly Global Head
25 DeForest Ave., 2nd Floor Financial & Accounting of Business Management, Deutsche Asset Management
Summit, NJ 07901-2154 Officer (1990 to 2002).
(06/06/63)
---------------------------------------------------------------------------------------------------------------------
Neil Novembre(iii) Assistant Treasurer Head of Fund Accounting, DB Absolute Return
Deutsche Asset Management Strategies (2002 to present). Formerly,
25 DeForest Ave., 2nd Floor Assurance/Business Advisory Services,
Summit, NJ 07901-2154 PricewaterhouseCoopers, New York (2000-2002).
(06/18/73)
---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------
(iii) All Officers also serve in similar capacities as Officers for
other funds advised by the Investment Manager or its affiliates.
20
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (CONTINUED)(UNAUDITED)
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Anthony Conte(iii) Chief Compliance Head of Alternative Assets Compliance (06/2005 to
Deutsche Asset Management Officer present); Head of Compliance, DB Absolute Return
345 Park Avenue, 16th Floor Strategies (2003 to present); Head of Business Risk, DB
New York, NY 10154 Absolute Return Strategies (2001 to 2003).
(3/28/69)
------------------------------------------------------------------------------------------------------------------------------------
John H. Kim(iii) Secretary Director and Senior Counsel, Deutsche Asset Management
Deutsche Asset Management (asset management division of Deutsche Bank) (2001 to
345 Park Avenue, 16th Floor present).
New York, NY 10154
(1/9/71)
------------------------------------------------------------------------------------------------------------------------------------
David Goldman Assistant Vice President, Deutsche Asset Management (2006 to
Deutsche Asset Management Secretary present); Assistant Vice President, Deutsche Asset
345 Park Avenue, 27th Floor Management (2002 to 2005).
New York, NY 10154
(12/24/73)
------------------------------------------------------------------------------------------------------------------------------------
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available without
charge upon request. Contact your financial representative for a free prospectus
or SAI.
-----------------------------------------------------------------------
(iii) All Officers also serve in similar capacities as Officers for
other funds advised by the Investment Manager or its affiliates.
21
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; SEC FILINGS (UNAUDITED)
--------------------------------------------------------------------------------
The Fund invests substantially all of its assets in the securities of Investment
Funds, which are privately placed investment vehicles, typically referred to as
"hedge funds." These securities do not typically convey traditional voting
rights to the holder and the occurrence of corporate governance or other notices
for this type of investment is substantially less than that encountered in
connection with registered equity securities. However, to the extent the Fund
receives notices or proxies from Investment Funds (or receives proxy statements
or similar notices in connection with any other portfolio securities); the Fund
has delegated proxy voting responsibilities to the Adviser. The Adviser has
adopted its own Proxy Voting Policies and Procedures ("Policies"). The Policies
address, among other things, conflicts of interest that may arise between the
interests of the Fund, and the interests of the Adviser and its affiliates,
including the Fund's principal underwriter.
A description of the Adviser's Policies is available (i) without charge, upon
request, by calling the Fund toll-free at 1-888-262-0695, and (ii) on the SEC's
website at WWW.SEC.GOV.
In addition, the Fund is required to file new Form N-PX with its complete proxy
voting record for the 12 months ended June 30th, no later than August 31st of
each year. The funds Form N-PX is available (i) without charge, upon request, by
calling the Fund toll free at 1-888-262-0695 and (ii) on the SEC's website at
WWW.SEC.GOV.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's
Form N-Q filings are available on the SEC's website at WWW.SEC.GOV. Those forms
may be reviewed and copied at the SEC's Public Reference Room in Washington D.C.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
22
THE TOPIARY MASTER FUND FOR BENEFIT PLAN INVESTORS (BPI) LLC
COMPONENTS OF NET ASSETS BY INVESTMENT STRATEGY (UNAUDITED)
--------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS BY
INVESTMENT STRATEGY
[PIE CHART OMITTED] [EDGAR REPRESENTATION OF DATA FOLLOWS]
OTHER ASSETS 5.2%
EVENT DRIVEN 22.0%
GLOBAL MACRO 7.7%
LONG/SHORT EQUITY 38.5%
RELATIVE VALUE 26.6%
23
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Nolan Altman is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$71,000 for 2007 and 68,700 for 2006.
Audit-Related Fees
------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $19,422
for 2007 and $0 for 2006. These services relate to consents for
repurchase of shares and semi-annual reviews.
Tax Fees
--------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $76,750 for 2007 and
$55,450 for 2006.
All Other Fees
--------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2007 and $0 for 2006.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Fund's Audit Committee approves all non-audit services, as required
by the statutes and regulations administered by the Securities and
Exchange Commission (the "Commission"), including the 1940 Act and the
Sarbanes-Oxley Act of 2002.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 100%
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was 0%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
PROXY VOTING POLICIES AND PROCEDURES
The Fund invests substantially all of its assets in the securities of Investment
Funds, which are privately placed investment vehicles, typically referred to as
"hedge funds." These securities do not typically convey traditional voting
rights to the holder and the occurrence of corporate governance or other notices
for this type of investment is substantially less than that encountered in
connection with registered equity securities. On occasion, however, the Adviser
and/or the Fund may receive notices from the Investment Funds seeking the
consent of holders in order to materially change certain rights within the
structure of the security itself or change material terms of the Investment
Fund's limited partnership agreement, limited liability company operating
agreement or similar agreement with investors. To the extent that the Fund
receives notices or proxies from Investment Funds (or receives proxy statements
or similar notices in connection with any other portfolio securities), the Fund
has delegated proxy voting responsibilities with respect to the Fund's portfolio
securities to the Adviser, subject to the Board's general oversight and with the
direction that proxies should be voted consistent with the Fund's best economic
interests. The Adviser has adopted its own Proxy Voting Policies and Procedures
("Policies") for this purpose. The Policies address, among other things,
conflicts of interest that may arise between the interests of the Fund, and the
interests of the Adviser and its affiliates, including the Fund's principal
underwriter.
The Policies describe the way in which the Adviser resolves conflicts of
interest. To resolve conflicts, the Adviser, under normal circumstances, votes
proxies in accordance with its guidelines. If the Adviser departs from the
Policies with respect to a particular proxy or if the Policies do not
specifically address a certain proxy proposal, a committee established by the
Adviser will vote the proxy. Before voting any such proxy, however, the
committee will exclude from the voting discussions and determinations any member
who is involved in or aware of a material conflict of interest. If, after
excluding any and all such members, there are fewer than three voting members
remaining, the Adviser will engage an independent third party to vote the proxy
or follow the proxy voting recommendations of an independent third party.
Under certain circumstances, the Adviser may not be able to vote proxies or may
find that the expected economic costs from voting outweigh the benefits
associated with voting. For example, the Adviser may not vote proxies on certain
foreign securities due to local restrictions or customs. The Adviser generally
does not vote proxies on securities subject to share blocking restrictions.
The Fund will be required to file new Form N-PX, with its complete proxy voting
record for the twelve months ended June 30, no later than August 31 of each
year. Once filed, the Fund's Form N-PX filing
will be available: (i) without charge, upon request, by calling the Fund at
1-888-262-0965, or (ii) by visiting the SEC's website at www.sec.gov.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
SECTION (A)(1)
The DB Absolute Return Strategies Fund of Funds team ("DB ARS-FOF") is primarily
responsible for the investment management of the Master Fund with respect to the
Adviser. The DB ARS-FOF team is comprised of a group of dedicated analysts with
responsibility for performing due diligence and analysis on Investment Fund
investments and for the portfolio management of the Master Fund. A senior
analyst is responsible for the day-to-day investment management of the Master
Fund and is supported by a back-up analyst. Mr. Steven L. Bossi, who had been
Deputy Head of the DB ARS-FOF team and a portfolio manager thereon, has been
promoted to Global Head of Fund-of-Funds for DB Absolute Return Strategies and
is primarily responsible for management of the DB ARS-FOF team and the
investment management and development of the Adviser's multi-manager hedge fund
products. Mr. Bossi also manages a DB Absolute Return Strategies multi-strategy
fund of funds and is lead analyst for several relative value and event-driven
strategies. Mr. Bossi joined the Adviser in 2001 after nine years of experience
as president and chief operating officer of AI International Corporation, an
investment advisory firm, where he actively managed global investments in
traditional and alternative markets, including equity, fixed income, emerging
markets, distressed securities, merger arbitrage, convertible arbitrage, and
private equity securities. Prior to that, Mr. Bossi was a fixed income portfolio
manager at Aetna Life & Casualty. Mr. Bossi received a B.S. from the University
of Connecticut and an M.B.A. from the University of Chicago. The information
above is provided as of the date of this filing.
SECTION (A)(2)
In addition to managing the assets of the Fund, the Fund's portfolio managers
may have responsibility for managing other client accounts of the Adviser. The
tables below show, for each portfolio manager, the number and asset size of (i)
SEC-registered investment companies (or series thereof) other than the Fund,
(ii) pooled investment vehicles that are not registered investment companies,
and (iii) other accounts (E.G., accounts managed for individuals or
organizations) managed by each portfolio manager. The tables also show the
number of performance-based fee accounts, as well as the total assets of the
accounts for which the advisory fee is based on the performance of the account.
This information is provided as of March 31, 2007.
OTHER SEC-REGISTERED INVESTMENT COMPANIES MANAGED
------------------------- ------------------------- -------------------------- ------------------------- -----------------------
TOTAL ASSETS OF NUMBER OF INVESTMENT TOTAL ASSETS OF
NAME OF PORTFOLIO NUMBER OF REGISTERED REGISTERED INVESTMENT COMPANY ACCOUNTS WITH PERFORMANCE-BASED FEE
MANAGER INVESTMENT COMPANIES COMPANIES PERFORMANCE-BASED FEES ACCOUNTS
------------------------- ------------------------- -------------------------- ------------------------- -----------------------
Steven L. Bossi 0 $0 0 $0
------------------------- ------------------------- -------------------------- ------------------------- -----------------------
OTHER POOLED INVESTMENT VEHICLES MANAGED
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
NUMBER OF POOLED
INVESTMENT VEHICLES TOTAL ASSETS OF
NAME OF PORTFOLIO NUMBER OF POOLED TOTAL ASSETS OF POOLED WITH PERFORMANCE-BASED PERFORMANCE-BASED
MANAGER INVESTMENT VEHICLES INVESTMENT VEHICLES FEES FEE ACCOUNTS
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
Steven L. Bossi 24 $5,640,168,426.52 23 $5,599,819,991.69
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
OTHER ACCOUNTS MANAGED
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
NAME OF PORTFOLIO NUMBER OF OTHER ACCOUNTS TOTAL ASSETS OF OTHER NUMBER OF OTHER TOTAL ASSETS OF
MANAGER ACCOUNTS ACCOUNTS WITH PERFORMANCE-BASED
PERFORMANCE-BASED FEES FEE ACCOUNTS
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
Steven L. Bossi 6 $621,673,524.47 6 $621,673,524.47
------------------------- ------------------------- --------------------------- ------------------------- ----------------------
The Adviser is owned by Deutsche Bank AG, a multi-national financial
services company. Therefore, the Adviser is affiliated with a variety
of entities that provide and/or engage in commercial banking,
insurance, brokerage, investment banking, financial advisory,
broker-dealer activities (including sales and trading), hedge funds,
real estate, and private equity investing, in addition to the provision
of investment management services to institutional and individual
investors. Since Deutsche Bank AG, its affiliates, directors, officers,
and employees (the "Firm") are engaged in businesses and have interests
other than managing asset management accounts, such other activities
involve real, potential, or apparent conflicts of interest. These
interests and activities include potential advisory, transactional, and
financial activities and other interests in securities and companies
that may be directly or indirectly purchased or sold by the Firm for
its clients' advisory accounts. These are considerations of which
advisory clients should be aware and which may cause conflicts that
could be to the disadvantage of the Adviser's advisory clients.
In addition, real, potential, or apparent conflicts of interests may
arise when a portfolio manager has day-to-day portfolio management
responsibilities with respect to more than one fund or account,
including the following:
o Certain investments may be appropriate for the Fund and also for
other clients advised by the Adviser, including other client
accounts managed by the Fund's portfolio management team.
Investment decisions for the Fund and other clients are made with
a view to achieving their respective investment objectives and
after consideration of such factors as their current holdings,
availability of cash for investment, and the size of their
investments generally. Frequently, a particular security may be
bought or sold for only one client or in different amounts and at
different times for more than one but less than all clients.
Likewise, because clients of the Adviser may have differing
investment strategies, a particular security may be bought for one
or more clients when one or more other clients are selling the
security. The investment results for the Fund may differ from the
results achieved by the Firm and other clients of the Firm and
results among clients may differ. In addition, purchases or sales
of the same security may be made for two or more clients on the
same day. In such event, such transactions will be allocated among
the clients in a manner believed by the Adviser to be equitable to
each. The Adviser will not determine allocations based on whether
it receives a performance-based fee from the client. In some
cases, the allocation procedure could have an adverse effect on
the price or amount of the securities purchased or sold by the
Fund. Purchase and sale orders for the Fund may be combined with
those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.
o To the extent that the Fund's portfolio management team has
responsibilities for managing accounts in addition to the Fund, a
portfolio manager will need to divide his time and attention among
relevant accounts.
o In some cases, a real, potential, or apparent conflict may arise
where the Adviser may have an incentive, such as a
performance-based fee, in managing one account and not with
respect to other accounts it manages.
This information is provided as of March 31, 2007.
SECTION (A)(3)
The Adviser seeks to offer its investment professionals competitive
short-term and long-term compensation. Portfolio managers and research
professionals are paid (i) base salary, which is linked to job
function, responsibilities, and financial services industry peer
compensation, and (ii) variable components, which are linked to
investment performance, individual contributions to the team, and DB
ARS's and Deutsche Bank's financial results. Variable compensation may
include a cash and/or stock bonus incentive and participation in a
variety of long-term equity programs (usually in the form of Deutsche
Bank equity).
Bonus and long-term incentives comprise a greater proportion of
compensation as seniority and compensation levels increase. Top
performing investment professionals earn a total compensation package
that is highly competitive and may earn a bonus that is a multiple of
their base salary. The amount of equity awarded is generally based on
the individual's total compensation package and may comprise from 0% to
40% of the total compensation award. As incentive compensation
increases, the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be
subject to a mandatory deferral of a portion of their equity
compensation into proprietary mutual funds that they manage.
To evaluate its investment professionals, the Adviser uses a
Performance Management Process. Objectives are related to investment
performance and generally take into account appropriate peer group and
benchmark-related data. The ultimate goal of this process is to link
the performance of investment professionals with client investment
objectives and to deliver investment performance that meets or exceeds
clients' risk and return objectives. When determining total
compensation, the Adviser considers a number of quantitative and
qualitative factors such as:
o DB ARS's performance and the performance of Deutsche Asset
Management;
o Quantitative measures which include actual pre-tax performance,
looking first against benchmarks over different time periods with
a focus on trailing one-, three-, and five-year performance. The
Adviser reviews performance for both alpha (a measure of
risk-adjusted performance) and risk versus pre-determined
benchmarks and fund peer groups. Additionally, the portfolio
manager's retail/institutional asset mix is weighted, as
appropriate, for evaluation purposes;
o Qualitative measures include adherence to the investment process
and individual contributions to the process, among other things.
In addition, the Adviser assesses compliance, risk management, and
teamwork skills.
o Other factors, including contributions made to the investment team
as well as adherence to compliance, risk management, and "living
the values" of the Adviser, are part of a discretionary component
which gives management the ability to reward these behaviors on a
subjective basis through bonus incentives.
For certain investment professionals, total compensation is determined
with regard to revenues generated by the funds they manage and not with
regard to the foregoing quantitative and qualitative factors.
In addition, the Adviser analyzes competitive compensation levels
through the use of extensive market data surveys. Portfolio manager
compensation is reviewed and may be modified each year as appropriate
to reflect changes in the market, as well as to adjust the factors used
to determine overall compensation to promote good sustained investment
performance.
This information is provided as of March 31, 2007.
SECTION (A)(4)
The following table shows the dollar range of shares owned beneficially and of
record by each member of the Fund's portfolio management team in the Fund as
well as in all funds in the Fund Complex, including investments by their
immediate family members and amounts invested through retirement and deferred
compensation plans. This information is provided as of March 31, 2007.
---------------------------------------- ---------------------------------- -------------------------------
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY DOLLAR RANGE OF ALL FUND
SECURITIES IN THE FUND COMPLEX SHARES OWNED
---------------------------------------- ---------------------------------- -------------------------------
Steven L. Bossi None None
---------------------------------------- ---------------------------------- -------------------------------
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Topiary Master Fund for Benefit Plan Investors (BPI) LLC
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By (Signature and Title)* /s/ Pamela Kiernan
-------------------------------------------------------
Pamela Kiernan, President
(principal executive officer)
Date June 11, 2007
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Pamela Kiernan
-------------------------------------------------------
Pamela Kiernan, President
(principal executive officer)
Date June 11, 2007
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By (Signature and Title)* /s/ Marie Glassman
-------------------------------------------------------
Marie Glassman, Treasurer, Principal
Financial Officer and Accounting Officer
(principal financial officer)
Date June 11, 2007
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* Print the name and title of each signing officer under his or her signature.