Financial Statements of Brigadier Capital LP

EX-99.2 20 dex992.htm FINANCIAL STATEMENTS OF BRIGADIER CAPITAL LP Financial Statements of Brigadier Capital LP

Exhibit 99.2

Report of Independent Auditors

The Partners of

Brigadier Capital LP

We have audited the accompanying statement of financial condition of Brigadier Capital LP (the “Partnership”), as of December 31, 2006 and the related statements of operations, changes in partners’ capital, and cash flows for the period from May 25, 2006 (commencement of operations) to December 31, 2006. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the 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. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brigadier Capital LP at December 31, 2006, and the results of its operations, changes in its partners’ capital, and its cash flows for the period from May 25, 2006 (commencement of operations) to December 31, 2006, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 24, 2007

Brigadier Capital LP

Statement of Financial Condition

December 31, 2006


Assets
Cash and cash equivalents	$	382,355
Investment in Brigadier Capital Master Fund Ltd., at fair value		55,639,136

Total assets	$	56,021,491

Liabilities and partners’ capital
Liabilities:
Management fee payable	$	47,531
Redemption payable to general partner		121,431
Contribution received in advance		375,000
Accrued expenses and other liabilities		30,000

Total liabilities		573,962

Partners’ capital:
General partner		511,178
Limited partners		54,936,351

Total partners’ capital		55,447,529

Total liabilities and partners’ capital	$	56,021,491

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Operations

Period from May 25, 2006 (commencement of operations) to December 31, 2006


Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.
Net realized gain on derivative contracts	$	1,009,669
Net unrealized gain on investments in securities and option contracts		1,338,338
Net unrealized gain on derivative contracts		769,442

Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.		3,117,449

Net investment income allocated from Brigadier Capital Master Fund Ltd.
Interest income and other		3,116,438
Interest expense		1,481,521
Professional fees, organizational costs and other expenses		513,230

Net investment income allocated from Brigadier Capital Master Fund Ltd.		1,121,687

Partnership income
Interest income		3,091

Partnership expenses
Management fee		47,531
Professional expenses		30,000
Other expenses		1,736

Net decrease from partnership income and expenses		76,176

Net income available for distribution to partners	$	4,162,960

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Changes in Partners’ Capital

Period from May 25, 2006 (commencement of operations) to December 31, 2006


	Total			General Partner			Limited Partner
Partners’ capital at May 25, 2006	$	—		$	—		$	—
Capital contributions during the period		51,406,000			500,000			50,906,000
Allocation of net income available for distribution to partners:
Pro rata allocation of net realized and unrealized gain from securities transactions		3,117,449			9,055			3,108,394
Pro rata allocation of net investment income		1,121,687			2,268			1,119,419
Net decrease from partnership income and expenses		(76,176	)		(145	)		(76,031	)
Incentive allocation		—			121,431			(121,431	)
Redemptions		(121,431	)		(121,431	)		—

Partners’ capital at December 31, 2006	$	55,447,529		$	511,178		$	54,936,351

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Cash Flows

Period from May 25, 2006 (commencement of operations) to December 31, 2006


Cash flow from operating activities
Net income available for distribution to partners	$	4,162,960
Adjustments to reconcile net income available for distribution to partners to net cash used in operating activities:
Change in operating assets and liabilities:
Investment in Brigadier Capital Master Fund Ltd.		(55,639,136	)
Management fee payable		47,531
Accrued expenses and other liabilities		30,000

Net cash used in operating activities		(51,398,645	)

Cash flows from financing activities
Capital contributions		51,406,000
Contribution received in advance		375,000

Net cash provided by financing activities		51,781,000

Net change in cash		382,355
Cash at beginning of period		—

Cash at end of period	$	382,355

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Notes to Financial Statementsⁱ

December 31, 2006

1.	Organization

Brigadier Capital LP (the “Partnership”) was organized as a limited partnership under the laws of the State of Delaware on May 17, 2006 and commenced operations on May 25, 2006. The Partnership invests substantially all of its assets in Brigadier Capital Master Fund Ltd. (the “Master Fund”) that was formed as an exempted company under the laws of the Cayman Islands. The Master Fund was formed on May 19, 2006 and commenced operations on May 25, 2006. The Master Fund was created primarily to support the trading and investing activities of the Partnership and Brigadier Capital Offshore Ltd., a Cayman Islands company that operates as the investment vehicle for U.S. tax-exempt and non-U.S. investors. The Master Fund’s investment objectives are to achieve maximum returns and minimize volatility. The Master Fund will seek to achieve its investment objectives by investing in asset-backed securities primarily in a portfolio of debt and equity collateralized debt obligations (“CDO”) and collateralized loan obligations (“CLO”). In addition, some investments in CDO securities may be in synthetic securitizations, where portfolios of credit default swaps are the underlying assets.

Brigadier Capital Management LLC (the “Investment Manager”), a Delaware limited liability company, serves as the investment manager of the Master Fund. Brigadier GP LLC (the “General Partner”), a Delaware limited liability company, serves as the general partner of the Partnership. Cohen Brothers, LLC (d/b/a Cohen and Company) (referred to as “Cohen”) serves as the managing member of the General Partner and the Investment Manager.

Since the operating activities of the Partnership are principally conducted through the Master Fund, the financial statements of the Master Fund are an integral part of these financial statements and should be read in conjunction with those of the Partnership. The financial statements of the Master Fund are attached. The percentage of the Master Fund owned by the Partnership at December 31, 2006 was 65%.

2.	Significant Accounting Policies

Basis of Presentation

The Partnership’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are stated in United States dollars. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term, highly liquid investments that have maturities of three months or less. Cash equivalents are valued at cost plus accrued interest, which approximates fair value.

Valuation of Investment

The investment in the Master Fund is valued based upon the Partnership’s proportionate interest in the net assets of the Master Fund. The Partnership records any change in value in the statement of operations by recording its proportionate share of the Master Fund’s income, expenses, and realized and unrealized gains and losses.

ⁱ	See attached financial statements of Brigadier Capital Master Fund Ltd.

Taxation

The partners are required to report their respective share of the Partnership income (loss) in their individual income tax returns. Accordingly, no income tax provision has been made in the accompanying financial statements.

Fair Value of Financial Instruments

The fair value of the Partnership’s assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards (“SFAS”) No. 107, Disclosures about Fair Value of Financial Instruments, approximates the carrying amounts presented in the statement of financial condition.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the General Partner to make assumptions that affect the amounts reported in the financial statements and accompanying notes. The General Partner believes that the estimates used in preparing the financial statements are reasonable and prudent. Actual results could differ from these estimates.

3.	Related Party Transactions

Cohen serves as the managing member of the General Partner and the Investment Manager. The Master Fund can invest in CDO securities managed by Cohen. At December 31, 2006, the Master Fund had $3,616,870 of net investments, which were managed by Cohen.

During 2006, Cohen, as a limited partner, and the General Partner contributed capital to the Partnership of $29,500,000 and $500,000, respectively. At December 31, 2006, the value of Cohen’s limited partner capital account was $33,041,503 and value of the General Partner’s capital account was $511,178.

4.	Partnership Capital

The Partnership offers limited partnership interests. Limited partners shall not assign in whole or in part, any of their limited partnership interests except with the consent of the General Partner.

Capital contributions may be accepted as of the first business day of each month or at other times at the General Partner’s discretion. The minimal initial investment in the Partnership is $500,000, subject to reduction at the sole discretion of the General Partner.

A limited partner may, upon at least 90 days’ prior notice, redeem some or all of its partnership interests as of the close of business at the end of any quarter after the first anniversary of such limited partner’s investment in the partnership.

5.	Management Fee

The Investment Manager provides management services to the Partnership. For these services, the Investment Manager is paid a quarterly management fee of 0.5% (2.0% annually) of partner’s account as of the last day of each calendar quarter, adjusted for any additional capital contributions and withdrawals during the quarter. The Investment Manager may, in its sole discretion, elect to waive or reduce the management fee charged with respect to any limited partner. For the period from May 25, 2006 (commencement of operations) to December 31, 2006, management fees totaling $47,531 were recorded and payable to the Investment Manager at December 31, 2006.

6.	Incentive Allocation

In relation to the limited partners, the General Partner is entitled to an Incentive Allocation of income equal to 20% multiplied by the amount by which the limited partner’s positive performance change exceeds any positive balance in the limited partner’s carryforward account. This Incentive Allocation is allocated as of the end of the performance period to the capital account of the limited partner and credited to the capital account of the General Partner. The General Partner may, in its sole discretion, elect to waive or reduce the Incentive Allocation charged with respect to any limited partner. For the period from May 25, 2006 (commencement of operations) to December 31, 2006, the Incentive Allocation of $121,431 was reallocated from the limited partner capital accounts to the General Partner capital account. The General Partner withdrew $121,431 at December 31, 2006.

7.	Financial Highlights


Financial Highlights	Period from May 25, 2006 (commencement of operations) to December 31, 2006
Ratios to average limited partners’ capital
Net realized and unrealized gains from trading activity	8.84	%
Net investment income	3.18	%
Partnership income and expenses	(0.22	)%

Total return — before incentive allocation	14.88	%
Total return — after incentive allocation	14.53	%

The above ratios and total returns are calculated for the limited partner class taken as a whole for the period from May 25, 2006 (commencement of operations) to December 31, 2006. The ratios and returns are not annualized. An individual investors’ return and ratios may vary from these returns and ratios based on the timing of capital movements and different management fee and incentive allocation arrangements.

8.	New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board issued 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 requires additional 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. The changes to current US GAAP from the application of SFAS No. 107 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of December 31, 2006, the General Partner does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

9.	Subsequent Events

Subsequent to December 31, 2006, the Partnership received $9,940,000 of capital contributions.

Report of Independent Auditors

The Partners of

Brigadier Capital LP

We have audited the accompanying statement of assets and liabilities of Brigadier Capital LP (the Partnership), as of December 31, 2007 and the related statements of operations, changes in partners’ capital, and cash flows for the year ended December 31, 2007. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brigadier Capital LP at December 31, 2007, and the results of its operations, changes in its partners’ capital, and its cash flows for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 5, 2008

Brigadier Capital LP

Statement of Assets and Liabilities

December 31, 2007


Assets
Investment in Brigadier Capital Master Fund Ltd., at value	$	95,652,409
Receivable from Brigadier Capital Master Fund Ltd.		6,327,019

Total assets		101,979,428

Liabilities and Partners’ Capital
Liabilities:
Management fee payable		761,795
Redemption payable to the General Partner		2,761,840
Redemption payable to limited partner		6,327,019
Accrued expenses and other liabilities		30,000

Total liabilities		9,880,654

Partners’ capital:
General Partner		706,940
Limited partners		91,391,834

Total partners’ capital		92,098,774

Total liabilities and partners’ capital	$	101,979,428

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Operations

Year Ended December 31, 2007


Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.
Net realized gain on derivative contracts	$	9,096,073
Net realized loss on investments in securities and option contracts		(31,635,379	)
Change in net unrealized loss on investments in securities and option contracts		(19,036,412	)
Change in net unrealized gain on derivative contracts		60,061,166

Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.		18,485,448

Net investment income allocated from Brigadier Capital Master Fund Ltd.
Interest income and other		9,807,453
Interest expense		148,923
Professional fees and other expenses		593,937

Net investment income allocated from Brigadier Capital Master Fund Ltd.		9,064,593

Partnership income
Interest income		3,149

Partnership expenses
Management fee		761,795
Professional expenses		46,231
Other expenses		42,060

Net decrease from partnership income and expenses		(846,937	)

Net income available for distribution to partners	$	26,703,104

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Changes in Partners’ Capital

Year Ended December 31, 2007


	Total			General Partner			Limited Partner
Partners’ capital at December 31, 2006	$	55,447,529		$	511,178		$	54,936,351
Capital contributions during the year		19,337,000			—			19,337,000
Allocation of net income available for distribution to partners:
Pro rata allocation of net realized and unrealized gain from securities transactions		18,485,448			128,862			18,356,586
Pro rata allocation of net investment income and expenses		9,064,593			67,515			8,997,078
Net decrease from partnership income and expenses		(846,937	)		(615	)		(846,322	)
Incentive allocation		—			2,761,840			(2,761,840	)
Redemptions		(9,388,859	)		(2,761,840	)		(6,627,019	)

Partners’ capital at December 31, 2007	$	(92,098,774	)	$	706,940		$	91,391,834

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Cash Flows

Year Ended December 31, 2007


Cash flow from operating activities
Net income available for distribution to partners	$	26,703,104
Adjustments to reconcile net income available for distribution to partners to net cash used in operating activities:
Change in operating assets and liabilities:
Investment in Brigadier Capital Master Fund Ltd.		(40,013,273	)
Receivable from Brigadier Capital Master Fund Ltd.		(6,327,019	)
Management fee payable		714,264

Net cash used in operating activities		(18,922,924	)

Cash flows from financing activities
Capital contributions*		18,962,000
Capital withdrawals**		(421,431	)

Net cash provided by financing activities		18,540,569

Net change in cash		(382,355	)
Cash at beginning of year		382,355

Cash at end of year	$	—

*	Excludes $375,000 of contributions received in 2006 that were effective January 1, 2007.

**	Includes $121,431 of redemptions payable at December 31, 2006.

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Notes to Financial Statements

December 31, 2007

1.	Organization

Brigadier Capital LP (the Partnership) was organized as a limited partnership under the laws of the State of Delaware on May 17, 2006 and commenced operations on May 25, 2006. The Partnership invests substantially all of its assets in Brigadier Capital Master Fund Ltd. (the Master Fund) that was formed as an exempted company under the laws of the Cayman Islands. The Master Fund was formed on May 19, 2006 and commenced operations on May 25, 2006. The Master Fund was created primarily to support the trading and investing activities of the Partnership and Brigadier Capital Offshore Ltd., a Cayman Islands company that operates as the investment vehicle for U.S. tax-exempt and non-U.S. investors. The Master Fund’s investment objectives are to achieve maximum returns and minimize volatility. The Master Fund will seek to achieve its investment objectives by investing in asset-backed securities primarily in a portfolio of debt and equity collateralized debt obligations (CDO) and collateralized loan obligations (CLO). In addition, some investments in CDO securities may be in synthetic securitizations, where portfolios of credit default swaps are the underlying assets.

Brigadier Capital Management LLC (the Investment Manager), a Delaware limited liability company, serves as the investment manager of the Master Fund. Brigadier GP LLC (the General Partner), a Delaware limited liability company, serves as the general partner of the Partnership. Cohen Brothers, LLC (d/b/a Cohen and Company) (referred to as Cohen) serves as the managing member of the General Partner and the Investment Manager.

2.	Significant Accounting Policies

Basis of Presentation

The Partnership’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) and are stated in United States dollars. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short term, highly liquid investments that have maturities of three months or less. Cash equivalents are valued at cost plus accrued interest, which approximates fair value. Cash and cash equivalents are not held in federally insured bank accounts.

Valuation of Investment

Taxation

Fair Value of Financial Instruments

The fair value of the Partnership’s assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of Financial Instruments, approximates the carrying amounts presented in the statement of financial condition.

Use of Estimates

3.	Related Party Transactions

Cohen serves as the managing member of the General Partner and the Investment Manager. The Master Fund can invest in CDO securities managed by Cohen. At December 31, 2007, the Master Fund had $2,542,000 of net investments, which were managed by Cohen.

At December 31, 2007, the value of Cohen’s limited partner capital account was $45,695,227 and value of the General Partner’s capital account was $706,940.

4.	Partnership Capital

The Partnership offers limited partnership interests. Limited partners shall not assign in whole or in part, any of their limited partnership interests except with the consent of the General Partner.

5.	Management Fee

The Investment Manager provides management services to the Partnership. For these services, the Investment Manager is paid a quarterly management fee of 0.5% (2.0% annually) of partners’ account as of the last day of each calendar quarter, adjusted for any additional capital contributions and withdrawals during the quarter. The Investment Manager may, in its sole discretion, elect to waive or reduce the management fee charged with respect to any limited partner. For the year ended December 31, 2007, management fees totaling $761,795 were recorded and payable to the Investment Manager at December 31, 2007.

6.	Incentive Allocation

In relation to the limited partners, the General Partner is entitled to an Incentive Allocation of income equal to 20% multiplied by the amount by which the limited partner’s positive performance change exceeds any positive balance in the limited partner’s carryforward account. This Incentive Allocation is allocated as of the end of the performance period to the capital account of the limited partner and credited to the capital account of the General Partner. The General Partner may, in its sole discretion, elect to waive or reduce the Incentive Allocation charged with respect to any limited partner. For the year ended December 31, 2007, the Incentive Allocation of $2,761,840 was reallocated from the limited partner capital accounts to the General Partner capital account, which is payable to the General Partner at December 31, 2007.

7.	Financial Highlights


	Year Ended December 31, 2007
Financial Highlights
Ratios to average limited partners’ capital:
Net investment income	11.57	%
Total partnership income and expenses	(4.59	)%
Total partnership income and expenses and incentive allocation	(1.08	)%
Total return — before incentive allocation	37.96	%
Total return — after incentive allocation	33.55	%

The above ratios and total returns are calculated for the limited partner class taken as a whole for the year ended December 31, 2007. An individual investors’ return and ratios may vary from these returns and ratios based on the timing of capital movements and different management fee and incentive allocation arrangements.

8.	New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board issued 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 requires additional 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. The changes to current US GAAP from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of December 31, 2007, the General Partner does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more likely than not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. On February 1, 2008, the FASB issued FSP FIN 48-2, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises (FSP 48-2), deferring the effective date of FIN 48 for certain nonpublic enterprises (as defined by paragraph 289 of FASB Statement No. 109, Accounting for Income Taxes). FSP 48-2 defers the effective date of FIN 48 for fiscal years beginning after December 31, 2007. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

9.	Subsequent Events

At December 31, 2007, a single investor in both the Onshore and Offshore Funds had undistributed redemptions of $1,327,019 and $62,181,448, respectively. The redemptions are to be distributed as an allocation of the investor’s share of each investment of the Master Fund at December 31, 2007. Effective January 9, 2008, the investments were placed in a new hedge fund managed by Brigadier Capital Management LLC.

Report of Independent Auditors

The Partners of

Brigadier Capital LP

We have audited the accompanying statement of assets and liabilities of Brigadier Capital LP (the Partnership) as of December 31, 2008 and the related statements of operations, changes in partners’ capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

As more fully discussed in Note 8 in the Brigadier Capital Master Fund, Ltd. (the Master Fund) financial statements, the Master Fund previously utilized the services of Lehman Brothers Special Financing, Inc. (Lehman) as counterparty to derivative contracts. On September 15, 2008, Lehman Brothers Holding Inc., the guarantor of the contracts with Lehman, was placed into bankruptcy. Information flow to the Master Fund from Lehman has been limited. Management has recorded in the financial statements its best estimate of the net realizable value of its claims against Lehman, based upon management’s assessment of all available evidence including information supplied by Lehman. Significant uncertainty exists regarding the ultimate timing of any resolution of these claims, as well as the ultimate value to be realized relating to such claims, and the differences between amounts currently recorded and those that may be ultimately realized may be material.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brigadier Capital LP at December 31, 2008, and the results of its operations, changes in its partners’ capital, and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 19, 2009

Brigadier Capital LP

Statement of Assets and Liabilities

December 31, 2008


Assets
Investment in Brigadier Capital Master Fund Ltd., at fair value	$	26,039,565
Receivable from Brigadier Capital Master Fund Ltd.		10,400,000
Due from broker		928

Total assets	$	36,440,493

Liabilities and Partners’ Capital
Liabilities:
Management fee payable	$	107,428
Capital withdrawal payable to the General Partner		1,584,782
Capital withdrawal payable to limited partners		10,400,000

Total liabilities		12,092,210

Partners’ capital:
General Partner		859,865
Limited partners		23,488,418

Total partners’ capital		24,348,283

Total liabilities and partners’ capital	$	36,440,493

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Operations

Year Ended December 31, 2008


Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.
Net realized gain on derivative contracts	$	23,678,503
Net realized gain on investments in securities and option contracts		2,538,673
Lehman Brothers claim provision		(4,272,291	)
Net change in unrealized gain/loss on investments in securities and option contracts		(6,749,531	)
Net change in unrealized gain/loss on derivative contracts		2,136,152
Net realized and unrealized loss on foreign currency		(296,455	)

Net realized and unrealized gain from securities transactions allocated from Brigadier Capital Master Fund Ltd.		17,035,051


Net investment income allocated from Brigadier Capital Master Fund Ltd.
Interest income and other		2,617,416
Professional fees and other expenses		(481,683	)

Net investment income allocated from Brigadier Capital Master Fund Ltd.		2,135,733

Partnership income
Interest income		928

Partnership expenses
Management fee		(666,850	)
Professional expenses		(167,678	)
Other expenses		(128,762	)

Net decrease from partnership income and expenses		(962,362	)

Net income available for distribution to partners	$	18,208,422

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Changes in Partners’ Capital

Year Ended December 31, 2008


	Total			General Partner			Limited Partner
Partners’ capital at December 31, 2007	$	92,098,774		$	706,940		$	91,391,834
Capital contributions		8,220,000			—			8,220,000
Allocation of net income available for distribution to partners:
Pro rata allocation of net realized and unrealized gain from securities transactions		17,035,051			145,943			16,889,108
Pro rata allocation of net investment income and expenses		2,135,733			17,230			2,118,503
Net decrease from partnership income and expenses		(962,362	)		(10,248	)		(952,114	)
Incentive allocation		—			1,584,782			(1,584,782	)
Capital withdrawals		(94,178,913	)		(1,584,782	)		(92,594,131	)

Partners’ capital at December 31, 2008	$	24,348,283		$	859,865		$	23,488,418

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Statement of Cash Flows

Year Ended December 31, 2008


Cash flow from operating activities
Net income available for distribution to partners	$	18,208,422
Adjustments to reconcile net income available for distribution to partners to net cash provided by operating activities:
Change in operating assets and liabilities:
Investment in Brigadier Capital Master Fund Ltd.		69,612,844
Receivable from Brigadier Capital Master Fund Ltd.		(4,866,080	)
Due from broker		(928	)
Management fee payable		(654,367	)
Accrued expenses and other liabilities		(30,000	)

Net cash provided by operating activities		82,269,891

Cash flows from financing activities
Capital contributions		8,220,000
Capital withdrawals		(90,489,891	)

Net cash used in financing activities		(82,269,891	)

Net change in cash		—
Cash at beginning of year		—

Cash at end of year	$	—

Supplemental disclosure of cash flow information
Distributions in-kind (Master Fund Note 7)	$	793,099

See accompanying notes and attached financial statements of Brigadier Capital Master Fund Ltd.

Brigadier Capital LP

Notes to Financial Statements

December 31, 2008

1.	Organization

Brigadier Capital LP (the Partnership) was organized as a limited partnership under the laws of the State of Delaware on May 17, 2006 and commenced operations on May 25, 2006. The Partnership invests substantially all of its assets in Brigadier Capital Master Fund Ltd. (the Master Fund) that was formed as an exempted company under the laws of the Cayman Islands. The Master Fund was formed on May 19, 2006 and commenced operations on May 25, 2006. The Master Fund was created primarily to support the trading and investing activities of the Partnership and Brigadier Capital Offshore Ltd., a Cayman Islands company that operates as the investment vehicle for U.S. tax-exempt and non-U.S. investors. The Master Fund’s investment objectives are to achieve maximum returns and minimize volatility. The Master Fund will seek to achieve its investment objectives by focusing on the structured credit markets. Target assets include long and short exposure in mortgage-backed securities, corporate investment grade and high-yield securities, structured credit and other related securities including debt and equity collateralized debt obligations (CDO) and collateralized loan obligations (CLO). In addition, some investments in CDO securities may be in synthetic securitizations, where portfolios of credit default swaps are the underlying assets.

2.	Significant Accounting Policies

Basis of Presentation

The Partnership’s financial statements have been prepared in accordance with U.S. generally accepted accounting principles (US GAAP) and are stated in United States dollars. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Cash and Cash Equivalents

Fair Value of Financial Instruments

Investment in Master Fund

The Partnership records its investment in the Master Fund at fair value, which represents the Partnership’s proportionate interest in the net assets of the Master Fund. The performance of the Partnership is directly affected by the performance of the Master Fund. Attached are the Audited Financial Statements of the Master Fund, including the Condensed Schedule of Investments, which are an integral part of these financial statements. Valuation of investments held by the Master Fund is discussed in the notes to the Master Fund’s financial statements.

The Master Fund adopted the provisions of SFAS No. 157, Fair Value Measurements, effective January 1, 2008. Under SFAS No. 157, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Refer to the attached audited financial statements of the Master Fund for further details on the Master Fund’s adoption of SFAS No. 157.

Taxation

Use of Estimates

3.	Related-Party Transactions

Cohen serves as the managing member of the General Partner and the Investment Manager. The Master Fund can invest in CDO securities managed by Cohen. At December 31, 2008, the Master Fund had $531 of net investments, which were managed by Cohen.

At December 31, 2008, the value of Cohen’s limited partner capital account was $8,125,799 and value of the General Partner’s capital account was $859,865.

4.	Partnership Capital

The Partnership offers limited partnership interests. Limited partners shall not assign in whole or in part, any of their limited partnership interests except with the consent of the General Partner.

5.	Management Fee

The Investment Manager provides management services to the Partnership. For these services, the Investment Manager is paid a quarterly management fee of 0.5% (2.0% annually) of partners’ account as of the last day of each calendar quarter, adjusted for any additional capital contributions and withdrawals during the quarter. The Investment Manager may, in its sole discretion, elect to waive or reduce the management fee charged with respect to any limited partner. For the year ended December 31, 2008, management fees totaling $666,850 were recorded. As of December 31, 2008, the management fee payable to the Investment Manager was $107,428.

6.	Incentive Allocation

In relation to the limited partners, the General Partner is entitled to an Incentive Allocation of income equal to 20% multiplied by the amount by which the limited partner’s positive performance change exceeds any positive balance in the limited partner’s carryforward account. This Incentive Allocation is allocated as of the end of the performance period to the capital account of the limited partner and credited to the capital account of the General Partner. The General Partner may, in its sole discretion, elect to waive or reduce the Incentive Allocation charged with respect to any limited partner. For the year ended December 31, 2008, the Incentive Allocation of $1,584,782 was reallocated from the limited partner capital accounts to the General Partner capital account, which was withdrawn by to the General Partner at December 31, 2008, and is presented as a capital withdrawal payable on the statement of assets and liabilities.

7.	Financial Highlights


	Year Ended December 31, 2008
Ratios to average limited partners’ capital:
Net investment income	2.81	%
Total expenses before incentive allocation	(1.90	)%
Total expenses after incentive allocation	(4.01	)%
Total return — before incentive allocation	18.32	%
Total return — after incentive allocation	16.77	%

The above ratios and total returns are calculated for the limited partner class taken as a whole for the year ended December 31, 2008. An individual investors’ return and ratios may vary from these returns and ratios based on the timing of capital movements and different management fee and incentive allocation arrangements.

8.	New Accounting Pronouncements

On July 13, 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.

On December 30, 2008, the FASB issued FSP FIN 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises (FSP 48-3), deferring the effective date of FIN 48, for certain nonpublic enterprises (as defined by paragraph 289 of FASB Statement No. 109, Accounting for Income Taxes). FSP 48-3 defers the effective date of FIN 48 for fiscal years beginning after December 15, 2008. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined.

Report of Independent Auditors

The Investors of

Brigadier Capital Master Fund Ltd.

We have audited the accompanying statement of assets and liabilities of Brigadier Capital Master Fund Ltd. (the “Master Fund”), including the condensed schedule of investments, as of December 31, 2006 and the related statements of operations, changes in capital, and cash flows for the period from May 25, 2006 (commencement of operations) to December 31, 2006. These financial statements are the responsibility of the Master Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Master Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master Fund’s internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brigadier Capital Master Fund Ltd. at December 31, 2006, and the results of its operations, changes in its capital, and its cash flows for the period from May 25, 2006 (commencement of operations) to December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 24, 2007

Brigadier Capital Master Fund Ltd.

Statement of Assets and Liabilities

December 31, 2006


Assets
Cash and cash equivalents	$	11,874,101
Due from broker		29,159,343
Investments in securities, at fair value (cost $71,417,703)		73,440,897
Unrealized gain on derivative contracts, at fair value		3,579,496
Interest receivable and other assets		1,470,024

Total assets		119,523,861

Liabilities
Securities purchased payable		9,756,000
Unrealized loss on derivative contracts, at fair value		2,999,588
Written option contracts, at fair value (cost $72,000)		4,000
Securities sold under agreements to repurchase		16,558,453
Note payable to related party		3,531,130
Interest payable		367,993
Other accrued expenses and other liabilities		410,081

Total liabilities		33,627,245

Net assets	$	85,896,616

Net asset value per Class A share (74,654 shares outstanding)	$	1,150.50

Net asset value per Class B share (6 shares outstanding)	$	1,149.66

See accompanying notes.

Brigadier Capital Master Fund Ltd.

Condensed Schedule of Investments

December 31, 2006


	Fair Value			Percent of Net Assets
Investments in securities
Asset-backed securities
North America
Static Residential CDO Ltd. Series 2005-CA Class D	$	15,874,373		18.48	%
Arca Funding Ltd. Series 2006-2A Class 5		10,000,000		11.64	%
Lexington Capital Funding Ltd. Series 2007-3A Class E		10,000,000		11.64	%
Mystic Point CDO Ltd. Series 2006-1I Class Sub		7,700,000		8.96	%
Arca Funding Ltd. Series 2006-1A Class 7		6,965,000		8.11	%
Kefton CDO Ltd. Series 2006-1A Class Sub		5,985,000		6.97	%
Libertas Preferred Funding Ltd.		5,728,000		6.67	%
Arca Funding Ltd. Series 2006-1A Class 6		4,975,000		5.79	%
Others		6,213,524		7.24	%

Total investments in securities (cost $71,417,703)	$	73,440,897		85.50	%

Credit default swap contracts — protection sold
North America
Banking and finance	$	(1,834,719	)	(2.14	)%

Total CDS contracts — protection sold	$	(1,834,719	)	(2.14	)%

Total return swap contracts — protection sold
North America
Banking and finance	$	960,723		1.12	%

Total TRS contracts — protection sold	$	960,723		1.12	%

Option contracts
North America
Banking and finance	$	(4,000	)	—

Total option contracts (proceeds $72,000)	$	(4,000	)	—

Credit default swap contracts — protection purchased
North America
Banking and finance	$	1,453,904		1.69	%

Total CDS contracts — protection purchased	$	1,453,904		1.69	%

See accompanying notes.

Brigadier Capital Master Fund Ltd.

Statement of Operations

Period from May 25, 2006 (commencement of operations) to December 31, 2006


Net realized and unrealized gain from securities transactions
Net realized gain on derivative contracts	$	1,172,241
Net unrealized gain on investments in securities and option contracts		2,091,194
Net unrealized gain on derivative contracts		579,908

Net realized and unrealized gain from securities transactions		3,843,343

Net investment income
Interest income and other		3,890,134

Interest expense		1,837,860
Professional fees		467,359
Organizational costs		56,401
Other		131,241

Total expenses		2,492,861

Net investment income		1,397,273

Net increase in net assets resulting from operations	$	5,240,616

See accompanying notes.

Brigadier Capital Master Fund Ltd.

Statement of Changes in Capital

Period from May 25, 2006 (commencement of operations) to December 31, 2006


Net increase in net assets resulting from operations
Net realized and unrealized gain from securities transactions	$	3,843,343
Net investment income		1,397,273

Net increase in net assets resulting from operations		5,240,616

Net increase in net assets resulting from capital share transactions
Capital shares issued:
Class A		80,650,000
Class B		6,000

Net increase in net assets resulting from capital share transactions		80,656,000

Net increase in net assets		85,896,616
Net assets, beginning of period		—

Net assets, end of period	$	85,896,616

See accompanying notes.

Brigadier Capital Master Fund Ltd.

Statement of Cash Flows

Period from May 25, 2006 (commencement of operations) to December 31, 2006


Cash flows from operating activities
Net increase in net assets resulting from operations	$	5,240,616
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchase of investments in securities		(71,317,209	)
Proceeds from option contracts		72,000
Unrealized gain from securities positions and option contracts		(2,091,194	)
Net unrealized gain on derivative contracts		(579,908	)
Amortization/accretion		(100,494	)
Change in operating assets and liabilities:
Due from broker		(29,159,343	)
Securities purchased payable		9,756,000
Securities sold under agreements to repurchase		16,558,453
Note payable to related party		3,531,130
Interest (receivable) payable, net		(1,102,031	)
Other accrued expenses and other liabilities		410,081

Net cash used in operating activities		(68,781,899	)

Cash flows from financing activities
Proceeds from issuance of shares		80,656,000

Net cash provided by financing activities		80,656,000

Net change in cash		11,874,101
Cash at beginning of period		—

Cash at end of period	$	11,874,101

Supplemental disclosure of cash flow information
Cash paid for interest	$	1,447,414

See accompanying notes.

Brigadier Capital Master Fund Ltd.

Notes to Financial Statements

December 31, 2006

1.	Organization

Brigadier Capital Master Fund Ltd. (the “Master Fund”) was formed as an exempted company under the laws of the Cayman Islands. The Master Fund was formed on May 19, 2006 and commenced operations on May 25, 2006. Brigadier Capital Master Fund Ltd. is a master fund in a “master-feeder” fund structure. The Master Fund was created primarily to support the trading and investing activities of Brigadier Capital LP (the “Onshore Fund”) and Brigadier Capital Offshore Fund Ltd. (the “Offshore Fund”) (collectively, the “Feeder Funds”). The Master Fund’s investment objectives are to achieve maximum returns and minimize volatility. The Master Fund will seek to achieve its investment objectives by investing in asset-backed securities primarily in a portfolio of debt and equity collateralized debt obligations (“CDO”) and collateralized loan obligations (“CLO”). In addition, some investments in CDO securities may be in synthetic securitizations, where portfolios of credit default swaps are the underlying assets.

Brigadier Capital Management LLC (the “Investment Manager”), a Delaware limited liability company, serves as the investment manager of the Master Fund, the Onshore Fund and the Offshore Fund. The general partner of the Onshore Fund is Brigadier GP LLC (the “Onshore GP”), a Delaware limited liability company. Cohen Brothers, LLC (d/b/a Cohen and Company) (referred to as “Cohen”) serves as the managing member of the Onshore GP and the Investment Manager.

2.	Significant Accounting Policies

Basis of Presentation

The Master Fund’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are stated in United States dollars. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Cash and Cash Equivalents

Due from Broker

Due from broker includes cash balances with the Master Fund’s clearing broker and amounts receivable for securities transactions that have not settled at December 31, 2006. Certain deposits at the broker relate to collateral for securities sold, not yet purchased and margin requirements for derivative contracts.

Certain of the Master Fund’s securities and cash balances held by the broker collateralize margin debt balances. The Master Fund is charged interest at variable rates based on the broker call rate. The Master Fund continuously monitors the credit standing of each broker with whom it conducts business.

The Master Fund posted cash collateral of $29,159,343 at December 31, 2006 to cover margin requirements for open derivative contracts.

Investments in Securities

Investments in securities which are traded on a securities exchange are generally valued at the last reported sale or bid price, except for short positions and options written, for which the last purchase or ask price is used.

The resulting change in value is reflected in the statement of operations in change in net unrealized gain on investments in securities. In the absence of readily ascertainable market prices or a formal exchange, securities are valued by the Investment Manager using valuation models. These models may include significant judgments and estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange.

Derivative Contracts

In the normal course of business, the Master Fund enters into derivative contracts (“derivative contracts”) for trading purposes. Derivative contracts include credit default swaps, total return swaps and other derivative instruments. Typically, derivative contracts serve as components of the Master Fund’s investment strategies and are utilized primarily to structure portfolio transactions to economically match the investment objectives of the Master Fund.

The Master Fund recognizes all derivatives on the statement of assets and liabilities at fair value. The Master Fund values derivative contracts at independent market values when readily available from major exchanges; otherwise, valuations are based on pricing models that consider the time value of money, volatility, and the current market and contractual prices of the underlying financial instruments. Alternatively, independent broker quotations are also obtained, when applicable. Changes in the values of derivative contracts are included in the statement of operations in change in net unrealized gain on derivative contracts.

Collateralized Securities Transactions

Transactions involving sales of securities under agreements to repurchase (“repurchase agreements”) are treated as collateralized financing transactions and are recorded at their contracted repurchase amounts plus accrued interest. Resulting interest expense is included in interest expense in the statement of operations. The Master Fund is required to provide the counterparty with securities in excess of the principal amount loaned plus accrued interest to collateralize the agreement.

Investment Transactions and Investment Income and Expense

The Master Fund records its transactions in securities on a trade-date basis. Realized gains and losses from securities transactions are determined on the basis of identified cost. Interest income and expense are accrued as earned or incurred and include the amortization/accretion of premiums and discounts. Dividend income and expense are recorded on the ex-dividend date.

Taxation

There is currently no taxation imposed on income or capital gains by the Government of the Cayman Islands. As a result, no tax liability or expense has been recorded in the financial statements.

Fair Value of Financial Instruments

The fair value of the Master Fund’s assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards (“SFAS”) No. 107, Disclosures about Fair Value of Financial Instruments, approximates the carrying amounts presented in the statement of assets and liabilities.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the Investment Manager to make assumptions that affect the amounts reported in the financial statements and accompanying notes. The Investment Manager believes that the estimates used in preparing the financial statements are reasonable and prudent. Actual results could differ from those estimates.

3.	Financial Instruments with Off-Balance Sheet Risk and Concentration of Credit Risk

In the normal course of business, the Master Fund may enter into transactions involving off-balance sheet risk, including securities sold, not yet purchased, purchased and written options and derivative contracts. Generally, these instruments represent future commitments to purchase or sell other financial instruments at specific terms at specific future dates. Each of these instruments is subject to various risks including market, credit, liquidity, and operational risks. The Master Fund manages these risks on an aggregate basis along with the risks associated with its investing activities as part of its overall risk management policies.

Securities sold, not yet purchased represent obligations of the Master Fund to deliver specified securities at the contracted price and, thereby, create a liability to repurchase such securities in the market at prevailing prices. Accordingly, these transactions result in off-balance sheet risk as the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the statement of assets and liabilities.

Option contracts provide counterparty with the right, but not the obligation, to purchase or sell a financial instrument at a predetermined exercise price before or on an established date. See Note 2 for a description of derivative contracts.

4.	Share Capital and Net Assets

The authorized share capital of the Master Fund consists of 5,000,000 shares with a nominal par value of $0.01 each having the rights and being subject to the restrictions set forth in the Memorandum & Articles of Association of the Master Fund, generally issuable monthly in registered, book-entry form. The Master Fund may issue additional series if needed in connection with additional issuance dates or for other reasons. As described below, the Master Fund’s shares are divided into two classes, Class A Shares (“Class A Shares”) and Class B Shares (“Class B Shares”) (Class A Shares and Class B Shares together, the “Shares”). Except as set forth below, each series and class of Shares have equal dividend, liquidation and voting rights. The Master Fund does not anticipate paying any dividends on its Shares. The Master Fund may, from time to time, by an ordinary resolution, increase the Master Fund’s authorized share capital, consolidate the Shares or any of them into a smaller number of shares, subdivide the Shares or any of them into a larger number of shares, or cancel any Shares not taken or agreed to be taken by any person. The Master Fund may, from time to time, by a special resolution, reduce its share capital in any way permitted by the laws of the Cayman Islands. The Master Fund may, without prior written notice to, or consent from, existing shareholders, issue additional classes of Shares with different offering terms, rights, privileges or portfolios.

Shareholders generally may redeem shares at net asset value as of the last business day of each calendar month by giving a written notice of redemption to the administrator at least 35 days prior to the proposed redemption date.

Share transactions for the period from May 25, 2006 (commencement of operations) to December 31, 2006 were as follows:


	Class A	Class B
Shares issued	74,654	6
Shares redeemed	—	—

Shares at December 31, 2006	74,654	6

5.	Related Party Transactions

Cohen serves as the managing member of the Onshore GP and the Investment Manager. The Master Fund can invest in CDO securities managed and originated by Cohen. At December 31, 2006, the Master Fund had $3,616,870 of net investments in CDO securities, which were managed and originated by Cohen.

On May 25, 2006, the Master Fund entered into a $3,600,000 promissory note agreement with Strategos Capital Management, LLC (“Strategos”) to finance the purchase of the Libertas Preferred Funding Ltd. investment. Strategos is a subsidiary of Cohen. The maturity date of the note is August 5, 2012 and the interest rate is one-month LIBOR plus 2.5% (7.8% at December 31, 2006). At December 31, 2006, the Master Fund owed $3,531,130 to Strategos, which is presented as note payable to related party on the statement of assets and liabilities and incurred interest expense related to the note of $168,333.

6.	Financial Highlights

The following represents per share operating performance, the ratios of total expenses and net investment loss to average net assets of the Master Fund and total return information for the period from May 25, 2006 (commencement of operations) to December 31, 2006:


	Class A			Class B
Per share operating performance
Beginning net asset value	$	1,000.00		$	1,000.00
Net realized and unrealized gain from trading activity		115.62			106.42
Net investment income		34.88			43.24

Net change in net assets resulting from operations		150.50			149.66

Ending net asset value	$	1,150.50		$	1,149.66

Ratios to average net assets
Total expenses		(5.57	)%		(5.42	)%
Net investment income		3.12	%		3.94	%

Total return		15.05	%		14.97	%

The above ratios and returns are calculated for the shareholders taken as a whole. Total return is calculated on a monthly compounded basis. An individual shareholder’s total return and ratios may vary from the above based on the timing of capital transactions. The above ratios and returns have not been annualized.

7.	New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board issued 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 requires additional 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. The changes to current US GAAP from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of December 31, 2006, the Investment Manager does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

8.	Subsequent Events

Subsequent to December 31, 2006, the Master Fund received $28,815,000 of capital contributions.

Subsequent to December 31, 2006, the Master Fund sold five investment positions held at December 31, 2006. The proceeds received approximated the recorded value at December 31, 2006 plus accrued interest.