N-CSRS 1 b54881eqopportunity_ncsrs.txt UBS EQUITY OPPORTUNITY N-CSRS 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 811-10269 --------- UBS Equity Opportunity Fund, L.L.C. ---------------------------------------------------------------- (Exact name of registrant as specified in charter) 51W 52nd Street, 23rd Floor New York, NY 10019 ---------------------------------------------------------------- (Address of principal executive offices) (Zip code) Steven S. Drachman c/o UBS Financial Services Inc. 51W 52nd Street, 23rd Floor New York, NY 10019 ---------------------------------------------------------------- (Name and address of agent for service) registrant's telephone number, including area code: 212-882-5819 ------------ Date of fiscal year end: December 31 ----------- Date of reporting period: June 30, 2009 ------------- 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. UBS EQUITY OPPORTUNITY FUND, L.L.C. FINANCIAL STATEMENTS (UNAUDITED) SEMI-ANNUAL REPORT PERIOD FROM JANUARY 1, 2009 TO JUNE 30, 2009 UBS EQUITY OPPORTUNITY FUND, L.L.C. FINANCIAL STATEMENTS (UNAUDITED) SEMI-ANNUAL REPORT PERIOD FROM JANUARY 1, 2009 TO JUNE 30, 2009 CONTENTS Statement of Assets, Liabilities and Members' Capital.........................1 Statement of Operations ......................................................2 Statements of Changes in Members' Capital.....................................3 Statement of Cash Flows ......................................................4 Financial Highlights .........................................................5 Notes to Financial Statements.................................................6 Schedule of Portfolio Investments.............................................13
UBS EQUITY OPPORTUNITY FUND, L.L.C. STATEMENT OF ASSETS, LIABILITIES AND MEMBERS' CAPITAL (UNAUDITED) ------------------------------------------------------------------------------------------- JUNE 30, 2009 ------------------------------------------------------------------------------------------- ASSETS Investments in Investment Funds, at fair value (cost $54,646,394) $63,896,760 Cash and cash equivalents 29,446,833 Interest receivable 1,220 Other assets 45,178 ------------------------------------------------------------------------------------------- TOTAL ASSETS 93,389,991 ------------------------------------------------------------------------------------------- LIABILITIES Payables: Withdrawals payable 11,316,260 Professional fees 93,637 Management Fee 77,129 Administration fee 15,960 Other liabilities 24,750 ------------------------------------------------------------------------------------------- TOTAL LIABILITIES 11,527,736 ------------------------------------------------------------------------------------------- NET ASSETS $81,862,255 ------------------------------------------------------------------------------------------- MEMBERS' CAPITAL Represented by: Net capital contributions $72,611,889 Accumulated net unrealized appreciation/(depreciation) on investments 9,250,366 ------------------------------------------------------------------------------------------- MEMBERS' CAPITAL $81,862,255 -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 1
UBS EQUITY OPPORTUNITY FUND, L.L.C. STATEMENT OF OPERATIONS (UNAUDITED) ------------------------------------------------------------------------------------------- PERIOD FROM JANUARY 1, 2009 TO JUNE 30, 2009 ------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 7,125 Dividends 2,884 ------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 10,009 ------------------------------------------------------------------------------------------- EXPENSES Management Fee 458,739 Professional fees 127,807 Administration fee 43,388 Other expenses 96,708 ------------------------------------------------------------------------------------------- TOTAL EXPENSES 726,642 ------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (716,633) ------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN/LOSS FROM INVESTMENTS Net realized gain/(loss) from investments (531,857) Net change in unrealized appreciation/depreciation from investments 3,680,328 ------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN/LOSS FROM INVESTMENTS 3,148,471 ------------------------------------------------------------------------------------------- NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS $2,431,838 -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 2
UBS EQUITY OPPORTUNITY FUND, L.L.C. STATEMENTS OF CHANGES IN MEMBERS' CAPITAL ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2008 AND PERIOD FROM JANUARY 1, 2009 TO JUNE 30, 2009 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ UBS FUND ADVISOR, L.L.C. MEMBERS TOTAL ------------------------------------------------------------------------------------------------------------------------------------ MEMBERS' CAPITAL AT JANUARY 1, 2008 $ 1,078,702 $ 176,566,168 $ 177,644,870 INCREASE (DECREASE) FROM OPERATIONS Pro rata allocation: Net investment income/(loss) (92) (1,939,452) (1,939,544) Net realized gain/(loss) from investments 4,707 19,718,035 19,722,742 Net change in unrealized appreciation/depreciation from investments (14,451) (54,709,408) (54,723,859) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS (9,836) (36,930,825) (36,940,661) ------------------------------------------------------------------------------------------------------------------------------------ MEMBERS' CAPITAL TRANSACTIONS Members' subscriptions -- 1,077,500 1,077,500 Members' withdrawals (1,032,275) (50,032,757) (51,065,032) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM CAPITAL TRANSACTIONS (1,032,275) (48,955,257) (49,987,532) ------------------------------------------------------------------------------------------------------------------------------------ MEMBERS' CAPITAL AT DECEMBER 31, 2008 $ 36,591 $ 90,680,086 $ 90,716,677 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) FROM OPERATIONS Pro rata allocation: Net investment income/(loss) (104) (716,529) (716,633) Net realized gain/(loss) from investments (215) (531,642) (531,857) Net change in unrealized appreciation/depreciation from investments 1,487 3,678,841 3,680,328 ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS 1,168 2,430,670 2,431,838 ------------------------------------------------------------------------------------------------------------------------------------ MEMBERS' CAPITAL TRANSACTIONS Members' subscriptions -- 30,000 30,000 Members' withdrawals -- (11,316,260) (11,316,260) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM CAPITAL TRANSACTIONS -- (11,286,260) (11,286,260) ------------------------------------------------------------------------------------------------------------------------------------ MEMBERS' CAPITAL AT JUNE 30, 2009 $ 37,759 $ 81,824,496 $ 81,862,255 ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 3
UBS EQUITY OPPORTUNITY FUND, L.L.C. STATEMENT OF CASH FLOWS (UNAUDITED) ---------------------------------------------------------------------------------------------------------- PERIOD FROM JANUARY 1, 2009 TO JUNE 30, 2009 ---------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net increase in Members' capital derived from operations $ 2,431,838 Adjustments to reconcile net increase in Member's capital derived from operations to net cash provided by operating activities: Purchases of investments (8,000,000) Proceeds from disposition of investments 1,116,809 Net realized (gain)/loss from investments 531,857 Net change in unrealized appreciation/depreciation from investments (3,680,328) Changes in assets and liabilities: (Increase) decrease in assets: Interest receivable 841 Receivables from Investment Funds 60,618,098 Other assets (39,358) Increase (decrease) in payables: Administration fee (6,607) Management Fee (31,729) Professional fees (70,058) Other liabilities 13,013 ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 52,884,376 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Members' subscriptions 30,000 Payments on Members' withdrawals (39,336,186) ---------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (39,306,186) Net increase in cash and cash equivalents 13,578,190 Cash and Cash Equivalents--Beginning of Period 15,868,643 ---------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS--END OF PERIOD $ 29,446,833 ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 4
UBS EQUITY OPPORTUNITY FUND, L.L.C. FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------------------------------------------------------- The following represents the ratios to average net assets and other supplemental information for the periods indicated: PERIOD FROM JANUARY 1, 2009 TO JUNE YEARS ENDED DECEMBER 31, 30, 2009 ------------------------ (UNAUDITED) 2008 2007 2006 2005 2004 ----------- ---- ---- ---- ---- ---- Ratio of net investment loss to average net assets(b,c) (1.57%)(a) (1.23%) (1.41%) (1.19%) (1.33%) (1.22%) Ratio of total expenses to average net assets before Incentive Allocation(b,c) 1.59%(a) 1.28% 1.43% 1.30% 1.36% 1.24% Ratio of total expenses to average net assets after Incentive Allocation(c) 1.59%(a) 1.28% 2.00% 1.84% 1.70% 1.62% Portfolio turnover rate 1.84% 26.32% 2.69% 16.77% 27.86% 26.11% Total return before Incentive Allocation(d) 2.68% (21.99%) 12.25% 11.63% 7.42% 7.83% Total return after Incentive Allocation(e) 2.68% (21.99%) 11.64% 11.04% 7.05% 7.44% Average debt ratio(b) -- 0.50% 1.28% 0.55% 0.99% -- Net asset value at end of period $81,862,255 $90,716,677 $177,644,870 $178,185,119 $190,765,368 $202,489,210 (a) Annualized. (b) The average net assets used in the above ratios are calculated using pre-tender net assets. (c) Ratios of total expenses and net investment loss to average net assets do not include the impact of expenses and incentive allocations or incentive fees related to the underlying Investment Funds. (d) Total return assumes a purchase of an interest in the Fund at the beginning of the period and a sale of the Fund interest on the last day of the period noted, and does not reflect the deduction of placement fees, if any, incurred when subscribing to the Fund. An individual member's ratios and returns may vary from the above based on the timing of capital transactions. (e) Total return assumes a purchase of an interest in the Fund at the beginning of the period and a sale of the Fund interest on the last day of the period noted, after Incentive Allocation to the Adviser, and does not reflect the deduction of placement fees, if any, incurred when subscribing to the Fund. Total returns for a period of less than a full year are not annualized. An individual member's ratios and return may vary from the above based on Incentive Allocation, if applicable and the timing of capital transactions.
The accompanying notes are an integral part of these financial statements. 5 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 1. ORGANIZATION UBS Equity Opportunity Fund, L.L.C. (the "Fund") was organized as a limited liability company under the laws of Delaware on May 3, 2000 and commenced operations on March 1, 2001. 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 investment objective is to maximize capital appreciation over the long-term. The Fund is a multi-manager fund that seeks to achieve its objective by deploying its assets primarily among a select group of portfolio managers who over time have produced attractive returns in the U.S. equity market. Generally, such portfolio managers conduct their investment programs through unregistered investment funds (collectively, the "Investment Funds"), in which the Fund invests as a limited partner, member or shareholder along with other investors. The Fund's Board of Directors (the "Directors") has overall responsibility to manage and control the business affairs of the Fund, including the exclusive authority to oversee and to establish policies regarding the management, conduct and operation of the Fund's business. The Directors have engaged UBS Fund Advisor, L.L.C. ("UBSFA", the "Adviser" and, when providing services under the Administration Agreement, the "Administrator"), a Delaware limited liability company, to provide investment advice regarding the selection of Investment Funds and to be responsible for the day-to-day management of the Fund. The Adviser is a direct wholly-owned subsidiary of UBS Americas, Inc., which is a wholly-owned subsidiary of UBS AG, and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Initial and additional applications for interests by eligible investors may be accepted at such times as the Adviser may determine and are generally accepted monthly. The Fund reserves the right to reject any application for interests in the Fund. The Fund from time to time may offer to repurchase interests pursuant to written tenders to members (the "Members"). These repurchases will be made at such times and on such terms as may be determined by the Directors, in their complete and exclusive discretion. The Adviser expects that it will recommend to the Directors that the Fund offer to repurchase interests twice each year, near mid-year and year-end. Members can only transfer or assign their membership interests or a portion thereof (i) by operation of law pursuant to the death, bankruptcy, insolvency or dissolution of a Member, or (ii) with the written approval of the Directors, which may be withheld in their sole and absolute discretion. Such transfers may be made even if the balance of the capital account to such transferee is equal to or less than the transferor's initial capital contribution. 6 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES A. PORTFOLIO VALUATION The Fund adopted the Statement of Financial Accounting Standards No. 157 FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements. Under FAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Various inputs are used in determining the fair value of the Fund's investments relating to FAS 157. These inputs are summarized in the three broad levels listed below. LEVEL 1--quoted prices in active markets for identical securities. LEVEL 2--other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.) LEVEL 3--significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments.) Financial Accounting Standards Board ("FASB") Staff Position ("FSP") 157-4 was issued on April 9, 2009. It provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased and provides guidance on identifying circumstances that indicate a transaction is not orderly. This FSP also expands the quantitative disclosures required by FAS 157. For assets and liabilities measured at fair value on a recurring basis during the period, this FSP requires quantitative disclosures about the fair value measurements separately for each major category of assets and liabilities, as well as a reconciliation of beginning and ending balances of Level 3 assets and liabilities broken down by major category. "Major category" is defined as major security types as described in FSP FAS 115-2. As a result, the Fund shall now include in its FAS 157 tables the following major security types (noted in FSP FAS 115-2), though additional types may also be necessary: a. Equity securities (segregated by industry type, company size, or investment objective) b. Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies c. Debt securities issued by states of the United States and political subdivisions of the states d. Debt securities issued by foreign governments e. Corporate debt securities f. Residential mortgage-backed securities g. Commercial mortgage-backed securities h. Collateralized debt obligations i. Other debt obligations 7 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. PORTFOLIO VALUATION (CONTINUED) A detailed depiction of the portfolio broken down into the above mentioned FAS 157 levels can be found in the tables following the Schedule of Portfolio Investments. Net asset value of the Fund is determined by or at the direction of the Adviser as of the close of business at the end of any fiscal period in accordance with the valuation principles set forth below or as may be determined from time to time pursuant to policies established by the Directors. The Fund's investments in Investment Funds are subject to the terms and conditions of the respective operating agreements and offering memoranda, as appropriate. The Fund's investments in Investment Funds are carried at fair value. All valuations utilize financial information supplied by each Investment Fund and are net of management and performance incentive fees or allocations payable to the Investment Funds' managers or pursuant to the Investment Funds' agreements. The Fund's valuation procedures require the Adviser to consider all relevant information available at the time the Fund values its portfolio. The Adviser has assessed factors including, but not limited to the individual Investment Funds' compliance with FAS 157, price transparency and valuation procedures in place, subscription and redemption activity, level of illiquid securities held, and the existence or absence of certain redemption restrictions. The Adviser and/or the Directors will consider such information and consider whether it is appropriate, in light of all relevant circumstances, to value such a position at its net asset value as reported or whether to adjust such value. The underlying investments of each Investment Fund are accounted for at fair value as described in each Investment Fund's financial statements. (See Schedule of Portfolio Investments). The fair value of the Fund's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, approximates the carrying amounts presented in the Statement of Assets, Liabilities and Members' Capital. B. INVESTMENT TRANSACTIONS AND INCOME RECOGNITION The Fund accounts for realized gains and losses from Investment Fund transactions based on the pro-rata ratio of the fair value and cost of the underlying investment at the date of redemption. Interest income is recorded on the accrual basis. C. FUND EXPENSES The Fund bears all expenses incurred in its business, including, but not limited to, the following: all costs and expenses related to portfolio 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; offering and organization costs; due diligence, including travel and 8 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. FUND EXPENSES (CONTINUED) related expenses; expenses of meetings of Directors and Members; all costs with respect to communications to Members; and other types of expenses approved by the Directors. D. INCOME TAXES The Fund has reclassified $716,633 and $531,857 from accumulated net investment loss and accumulated net realized loss on investments, respectively, to net capital contributions during the six month period ended June 30, 2009. The reclassification was to reflect, as an adjustment to net contributions, the amount of estimated taxable income or loss that have been allocated to the Fund's Members as of June 30, 2009 and had no effect on net assets. The Fund is subject to the provisions of FASB Interpretation 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES. This standard defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years ended December 31, 2004-2007) and the positions to be taken for the federal income tax return to be filed for the tax year ended December 31, 2008 and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended June 30, 2009, the Fund did not incur any interest or penalties. Each Member is individually required to report on its own tax return its distributive share of the Fund's taxable income or loss. E. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of monies invested in a PNC Bank, NA account which pays money market rates and are accounted for at cost plus accrued interest which is included in interest receivable on the Statement of Assets, Liabilities and Members' Capital. F. REPURCHASE AGREEMENTS From time to time the Fund may enter into repurchase agreements. In connection with such transactions it is the Fund's policy that PFPC Trust Company (an affiliate of PNC Bank, NA), (the "Custodian") take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the 9 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. REPURCHASE AGREEMENTS (CONTINUED) seller defaults, and the fair value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. As of June 30, 2009, there were no outstanding repurchase agreements. G. USE OF ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. 3. RELATED PARTY TRANSACTIONS The Administrator provides certain management and administrative services to the Fund, including, among other things, providing office space and other support services. In consideration for such services, the Fund pays the Administrator a monthly fee (the "Management Fee") at an annual rate of 1% of the Fund's net assets, excluding net assets attributable to the Administrator's capital account, Adviser's capital account and the Special Advisory Account described below. The Management Fee is paid to the Administrator out of the Fund's assets and debited against the Members' capital accounts, excluding net assets attributable to the Administrator's capital account, Adviser's capital account and the Special Advisory Account. A portion of the Management Fee is paid by UBSFA to its affiliates. UBS Financial Services Inc. ("UBS FSI"), a wholly-owned subsidiary of UBS Americas, Inc., acts as a placement agent for the Fund, without special compensation from the Fund, and bears its own costs associated with its activities as placement agent. Placement fees, if any, charged on contributions are debited against the contribution amounts, to arrive at a net subscription amount. The placement fee does not constitute assets of the Fund. The net increase or decrease in Members' capital derived from operations (net income or loss) is allocated to the capital accounts of all Members on a pro-rata basis, other than the Management Fee which is similarly allocated to all Members other than the Adviser, Special Advisory Account or Administrator as described above. The Adviser is entitled to receive, generally at the end of each fiscal year and upon a Member's withdrawal, an incentive allocation (the "Incentive Allocation") of 5% of the net profits (defined as net increase in Members Capital derived from Operations), if any, that would have been credited to the Member's capital account for such period. A Special Advisory Account has been established by 10 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 3. RELATED PARTY TRANSACTIONS (CONTINUED) the Fund for crediting any Incentive Allocation due to the Adviser. The Incentive Allocation is made only with respect to net profits that exceed any net losses previously debited from the account of such Member which have not been offset by any net profits subsequently credited to the account of the Member. There was no Incentive Allocation for the period from January 1, 2009 to June 30, 2009 and for the year ended December 31, 2008. Such amount is not eligible to receive a pro-rata share of the income/expense and gain or loss of the Fund. The Adviser withdrew $0 from their capital account for the period from January 1, 2009 to June 30, 2009 and $1,032,275 in the year ended December 31, 2008. Each Director of the Fund receives an annual retainer of $7,500 plus a fee for each meeting attended. The Chairman of the Board of Directors and the Chairman of the Audit Committee of the Board of Directors each receive an additional annual retainer in the amounts of $10,000 and $15,000, respectively. These additional annual retainer amounts are paid for by the Fund on a pro-rata basis with ten other UBS funds where UBSFA is the investment adviser. All Directors are reimbursed by the Fund for all reasonable out of pocket expenses. Total amounts expensed by the Fund related to Directors for the period from January 1, 2009 to June 30, 2009 were $26,101 which is included in other expenses. Other investment partnerships sponsored by UBS Americas or its affiliates may also maintain investment interests in the Investment Funds owned by the Fund. 4. ADMINISTRATION AND CUSTODIAN FEES PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as Administrative and Accounting Agent to the Fund, and in that capacity provides certain administrative, accounting, record keeping, tax and Member related services. PNC receives a monthly fee primarily based upon (i) the average net assets of the Fund subject to a minimum monthly fee, and (ii) the aggregate net assets of the Fund and certain other investment funds sponsored or advised by UBS Americas, Inc. or its affiliates. Additionally, the Fund reimburses certain out of pocket expenses incurred by PNC. The Custodian of the Fund's assets provides custodial services for the Fund. 5. INVESTMENTS As of June 30, 2009, the Fund had investments in Investment Funds, none of which were related parties. 11 UBS EQUITY OPPORTUNITY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------- 5. INVESTMENTS (CONTINUED) Aggregate purchases and proceeds from sales of Investment Funds for the period from January 1, 2009 to June 30, 2009, amounted to $8,000,000 and $1,116,809, respectively. The cost of investments for Federal income tax purposes is adjusted for items of taxable income allocated to the Fund from the Investment Funds. The allocated taxable income is reported to the Fund by the Investment Funds on Schedule K-1. The tax basis of investments for 2009 will not be finalized by the Fund until after the fiscal year end. The agreements related to investments in Investment Funds provide for compensation to the general partners/managers in the form of management fees of 1.00% to 2.00% (per annum) of net assets and performance incentive fees or allocations ranging from 20.00% to 25.00% of net profits earned. 6. 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 equity swaps. The Fund's risk of loss in these Investment Funds is limited to the value of these investments. 7. INDEMNIFICATION In the ordinary course of business, the Fund may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Fund. Based on its history and experience, management feels that the likelihood of such an event is remote. 8. SUBSEQUENT EVENT As of June 30, 2009, the Fund had $11,316,260 of withdrawals payable. On July 14, 2009 the Fund paid $10,858,789. The remaining amount payable of $457,471 is scheduled to be paid in accordance with the terms of the Fund's June 30, 2009 tender offer. Management has evaluated the impact of all subsequent events on the Fund through August 25, 2009, the date the financial statements were issued, and has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements. 12
UBS EQUITY OPPORTUNITY FUND, L.L.C. SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) -------------------------------------------------------------------------------------------------- JUNE 30, 2009 -------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED % OF GAIN/(LOSS) MEMBERS' FROM INVESTMENT FUND COST FAIR VALUE CAPITAL INVESTMENTS ------------------------------------ ------------- ------------ ----------- --------------- Alydar QP Fund, L.P. $ 6,000,000 $ 6,028,526 7.36 % $ 259,611 Alysheba QP Fund, L.P. 2,000,000 1,867,602 2.28 234,514 Artis Aggressive Growth (Institutional), L.P. 1,500,000 1,694,755 2.07 604,899 Axial Capital (Institutional), L.P. 3,500,000 3,458,342 4.22 51,617 Bonanza Liquidating Trust, Class A (a) 808,505 496,402 0.61 (146,188) Bonanza Partners, L.P. (a) 1,094,189 769,652 0.94 30,187 D. Jabro Partners, L.P. 5,380,283 7,102,264 8.68 114,455 Eminence Partners, L.P. 3,995,682 8,021,981 9.80 584,621 GCore Capital Partners, L.P. 3,500,000 3,497,018 4.27 (2,981) MSG Partners, L.P. 5,850,561 5,817,590 7.11 (431,262) North Run Qualified Partners, L.P. 4,376,363 4,069,005 4.97 956,170 Pennant Onshore Qualified, L.P. 1,262,928 3,698,594 4.52 384,384 Pennant Winward Fund, L.P. 3,012,518 5,740,584 7.01 464,531 Pershing Square, L.P. 835,575 1,653,629 2.02 157,796 Seneca Capital SLV, L.P. (a) 2,064,723 2,024,672 2.47 (52,591) Seneca Capital, L.P. (b) 973,741 61,318 0.07 (171,745) Seneca Capital, L.P. (b) 1,060,631 151,417 0.19 (129,736) Tiedemann Falconer Partners, L.P. 4,500,000 4,577,403 5.59 77,404 Wesley Capital QP, L.P. 2,930,695 3,166,006 3.87 499,905 ----------- ----------- -------- -------------- LONG/SHORT EQUITY SUBTOTAL $54,646,394 $63,896,760 78.05 % $ 3,485,591 Redeemed Investment Funds -- -- -- (337,120) ----------- ----------- -------- -------------- TOTAL $54,646,394 $63,896,760 78.05 % $ 3,148,471 =========== =========== ======== ============== * Available frequency of redemptions after the initial lock-up period, if any. Different tranches may have varying liquidity terms. ** Investment Funds with no dates can be redeemed in full. (a) The Investment Fund is in liquidation. In addition to any redemption proceeds that may have already been received, the Fund will continue to receive proceeds periodically as the Investment Fund liquidates its underlying investments. (b) A portion or all of the Funds' interests in the Investment Fund are held in side pockets which have restricted liquidity. DOLLAR AMOUNT OF FAIR VALUE FOR INITIAL FIRST FIRST ACQUISITION AVAILABLE AVAILABLE INVESTMENT FUND DATE LIQUIDITY* REDEMPTION** REDEMPTION ------------------------------------ --------------- ------------ -------------- ------------------- Alydar QP Fund, L.P. 9/1/2008 Quarterly Alysheba QP Fund, L.P. 9/1/2008 Quarterly Artis Aggressive Growth (Institutional), L.P. 9/1/2008 Quarterly Axial Capital (Institutional), L.P. 12/1/2008 Semi-Annually 12/31/2010 3,458,342 Bonanza Liquidating Trust, Class A (a) 4/1/2004 N/A Bonanza Partners, L.P. (a) 4/1/2004 N/A D. Jabro Partners, L.P. 1/1/2006 Annually Eminence Partners, L.P. 3/1/2001 Quarterly GCore Capital Partners, L.P. 3/1/2009 Quarterly 3/31/2010 3,497,018 MSG Partners, L.P. 1/1/2008 Annually 12/31/2009 5,817,590 North Run Qualified Partners, L.P. 1/1/2008 Annually 6/30/2010 4,069,005 Pennant Onshore Qualified, L.P. 1/1/2003 Quarterly Pennant Winward Fund, L.P. 10/1/2004 Quarterly Pershing Square, L.P. 1/1/2005 Annually Seneca Capital SLV, L.P. (a) 7/1/2004 N/A Seneca Capital, L.P. (b) 7/1/2004 N/A Seneca Capital, L.P. (b) 7/1/2004 N/A Tiedemann Falconer Partners, L.P. 1/1/2009 Quarterly Wesley Capital QP, L.P. 8/1/2005 Quarterly
The preceding notes are an integral part of these financial statements. 13 UBS EQUITY OPPORTUNITY FUND, L.L.C. SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------ JUNE 30, 2009 ------------------------------------------------------------------------------------------------------------------------ The following is a summary of the inputs used in valuing the Fund's investments at fair value. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
------------------------------------------------------------------------------------------------------------------------ LEVEL 2 LEVEL 3 TOTAL FAIR SIGNIFICANT SIGNIFICANT VALUE AT LEVEL 1 OBSERVABLE UNOBSERVABLE DESCRIPTION JUNE 30, 2009 QUOTED PRICES INPUTS INPUTS ------------------------------------------------------------------------------------------------------------------------ Long/Short Equity $ 63,896,760 $ -- $ -- $ 63,896,760 TOTAL ASSETS $ 63,896,760 $ -- $ -- $ 63,896,760 ------------------------------------------------------------------- The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value: ----------------------------------------------------------------------------------------------------------------------------------- Transfers Balance as of Accrued Realized Net in and/or Balance as December 31, discounts gain/ Change in unrealized purchases/ out of of June 30, DESCRIPTION 2008 /premiums (loss) appreciation/depreciation (sales) Level 3 2009 ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS IN INVESTMENT STRATEGIES ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- LONG/SHORT 53,166,541 -- (328,171) 3,687,538 7,370,852 -- 63,896,760 EQUITY ----------------------------------------------------------------------------------------------------------------------------------- TOTAL 53,166,541 -- (328,171) 3,687,538 7,370,852 -- 63,896,760 ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/(depreciation) on Level 3 assets and liabilities still held as of June 30, 2009 is $3,687,538.
The preceding notes are an integral part of these financial statements. 14 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) 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. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a) Not applicable. (b) There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant's most recently filed annual report on Form N-CSR. 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) Not applicable. (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) UBS Equity Opportunity Fund, L.L.C. -------------------------------------------------------------------- By (Signature and Title)* /s/ Craig Goos ------------------------------------------------------- Craig Goos, Principal Executive Officer Date September 3, 2009 ---------------------------------------------------------------------------- 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/ Craig Goos ------------------------------------------------------- Craig Goos, Principal Executive Officer Date September 3, 2009 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Robert Aufenanger ------------------------------------------------------- Robert Aufenanger, Principal Financial Officer Date September 3, 2009 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.