Anti-Money Laundering Policies and Procedures

On October 26, 2001, the USA PATRIOT Act (the "USA PATRIOT Act")¹ was enacted into law, aimed at giving the government new powers in the war on terrorism. The USA PATRIOT Act also imposed significant new anti-money laundering requirements on all financial institutions. The requirements for financial institutions went into effect on April 24, 2002. [Schulte Roth & Zabel LLP ("SRZ")] has been closely monitoring the impact of this legislation and related proposed Treasury regulations on the private investment fund industry. To date, no definitive guidelines or procedures have been recommended by any governmental body or authority that specifically relate to such funds. However, in light of the USA PATRIOT Act, private investment funds would be well advised to adopt policies and procedures that are reasonably designed to ensure compliance with its provisions.

Set forth below is a summary of our proposed policies and general recommendations:

1. We recommend that funds update Investor representations in domestic and offshore subscription documents, as needed. Several additional representations should be included in the subscription documents by which the Investor represents that: (i) its sources of investment funds are not derived from criminal activities; (ii) it is not a "senior foreign political figure"; (iii) it is not on the OFAC 2 -prohibited lists or prohibited by an OFAC sanctions program; and (iv) it is not a "foreign shell bank" and does not transact with a "foreign shell bank." If a prospective Investor cannot make these representations, a fund would not accept its subscription.

2. For existing Investors in domestic and offshore funds, we have prepared a sample letter to investors, attached hereto as Exhibit A. This letter can be sent to existing investors, with the expectation that such investors will return the requested Certification to the General Partner/Managing Member/Administrator by a specified date. If an existing investor does not respond by the specified date, we advise mailing a second letter (via overnight courier or certified, return receipt requested) and giving the investor an additional period of time to return the Certification. If no response is received by the second date, we believe that the fund's management should promptly determine what actions should be taken with respect to such investor (e.g., mandatory withdrawal of interests or redemption of shares, schedule meeting with investor). In addition, the fund may consider performing its own OFAC due diligence with respect to existing investors.

3. Certain documentation will be requested from all new investors as part of the "Know Your Investor" initiative. Depending upon the type of investor, such documentation might be in the form of a passport or driver's license for an investor that is a natural person, a certificate of good standing for an investor that is an entity, and/or a letter of reference from a reputable banking institution or brokerage firm for investors based in certain countries. With respect to a fund's existing investors, the fund may consider conducting additional "Know Your Investor" due diligence.

You will notice that the materials contemplate gathering different documentation for different categories of investors. Because the categories that we have used are broad, the type of documentation requested will not always be appropriate for a particular investor. For example, a fund of funds investor is expected to provide a representation that it has anti-money laundering procedures in place. However, a family that has organized a "fund of funds" for family members, in all likelihood, will not have such procedures and could not make the representation. As another example, it may be more appropriate to obtain an annual report from an endowment for a major university or pension plan rather than the information regarding the composition of private entities and trusts that the materials request. In these and other situations, the fund should exercise its discretion and obtain such backup information for your records as is sufficient to make you reasonably comfortable regarding the investor and its source of funds.

4. We have had contact with several service companies that are in the business of managing and checking a central database of Investor names against the OFAC-prohibited lists. Most of the larger U.S. financial institutions already subscribe to such services to screen their accountholder names. For an annual fee and a nominal charge per name, such services would alleviate the burden of having to constantly monitor the OFAC website. However, consideration should also be given to investor privacy concerns (e.g., a service company could be subpoenaed to disclose the contents of its database). SRZ is available to discuss these services with you further.

5. Section 352 of the USA PATRIOT Act required that all financial institutions have an anti-money laundering compliance program in place as of April 24, 2002 with the following four elements: (i) the development of internal policies, procedures and controls; (ii) the designation of a compliance officer; (iii) an on-going employee training program; and (iv) an independent audit function to test programs. SRZ has prepared and made available to our clients a model anti-money laundering compliance manual developed for hedge funds. We believe that the proposed manual satisfies any compliance obligations applicable to our hedge fund clients. However, this should not be viewed as a "one size fits all" document. The procedures should be adapted to meet the specific needs and capabilities of your organization.

SRZ believes that these procedures reflect the minimum standards necessary to be consistent with industry practice and the spirit of the USA PATRIOT Act. You may, however, consider implementing certain additional measures (e.g., seeking independent verification of investor identity and source of funds under all circumstances), to provide an additional level of comfort regarding your investor base. As further Congressional discussions are held and more Treasury guidance is released within the next six to 12 months, we may advise that different measures than those set forth in the documents below be used. SRZ will update its clients on developments, including further suggested revisions to offering materials, if necessary.

We recognize that these new policies and procedures may, at first, seem burdensome and difficult to implement. We are available to meet with you and assist you and your organization in putting these policies into effect.

Dear Investor:

In order to comply with recent Federal legislation and executive orders addressing money laundering and anti-terrorist issues, we are asking each of our existing Investors to certify to the attached representations by signing the attached Certification and mailing it back to the [General Partner][Managing Member][Administrator]. The Certification should be received by the Fund by [Give appropriate notice period (e.g., 2-4 weeks)]. If you can not certify to any of the attached representations or have any questions regarding this letter, please contact [Insert name] at [Insert telephone number].

Please note that discussions currently being held in the U.S. Congress and the U.S. Treasury Department may require us to seek additional information from you in the future.

We appreciate your cooperation in this matter.

Very truly yours,

________________

Name:

Title:

I hereby certify that I have read and understand the letter dated [Insert Date] from the Fund and that the attached anti-money laundering/OFAC representations contained therein are true and correct.

If an Individual:

_____________________________

If an Entity:

_____________________________

Print Name

_____________________________

Print Name of Entity

By:_______________________________

Signature

Name:

Title:

Date:_______________, 2002

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ACKNOWLEDGMENT

STATE OF _____________ )

COUNTY OF___________ )

On this ____ day of _________, ___, before me personally appeared _______________________, to me known and known to me to be the individual who executed the foregoing Certification in the capacity therein indicated, who acknowledged that he or she, being authorized to do so, executed the foregoing instrument for the purposes therein contained and in the capacity therein indicated as his or her own free act and deed.

_____________________________________________

Notary Public

My Commission Expires:

_____________________________

(A) Investors should check the OFAC website at http://www.treas.gov/ofac before making the following representations.

The Investor represents that the amounts contributed by it to the Fund were not and are not directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations.

Federal regulations and Executive Orders administered by the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals.¹ The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at . In addition, the programs administered by OFAC ("OFAC Programs") prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists.

The Investor hereby represents and warrants that, to the best of its knowledge, neither of:

(i) the Investor;

(ii) any person controlling or controlled by the Investor;

(iii) if the Investor is a privately held entity, any person having a beneficial interest in the Investor; or

(iv) any person for whom the Investor is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, nor is a person or entity prohibited under the OFAC Programs.

If an existing Investor can not make these representations, the Fund may require the withdrawal of interests or redemption of shares. The Investor agrees promptly to notify the Fund should the Investor become aware of any change in the information set forth in these representations. The Investor is advised that, by law, the Fund may be required to disclose the Investor's identity to OFAC.

(B) The Investor represents and warrants that, to the best of its knowledge, none of:

(i) the Investor;

(ii) any person controlling or controlled by the Investor;

(iii) if the Investor is a privately held entity, any person having a beneficial interest in the Investor; or

(iv) any person for whom the Investor is acting as agent or nominee in connection with this investment is a senior foreign political figure,² any immediate family member³ or close associate⁴ of a senior foreign political figure as such terms are defined in the footnotes below.

(C) If the Investor is a non-U.S. banking institution (a "Foreign Bank") or if the Investor receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Investor represents and warrants to the Fund that:

(1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities;

(2) the Foreign Bank employs one or more individuals on a full-time basis;

(3) the Foreign Bank maintains operating records related to its banking activities;

(4) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and

(5) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.

(D) The Investor understands and agrees that any withdrawal or redemption proceeds paid to it will be paid to the same account from which the Investor's investment in the Fund was originally remitted, unless the [General Partner][Investment Manager], in its sole discretion, agrees otherwise.

Dear Investor:

Reference is made to the letter dated ______________, (Insert Date) a copy of which is attached hereto. We have not heard from you. This letter is a reminder to please sign the Certification and return it to us as soon as possible.

In the event that we do not receive your Certification by ________________, Insert Date we may have to [withdraw][redeem] your [interests][shares] in the Fund pursuant to the terms of the Fund's governing documents.

Please contact __________________ (Insert Name) at ________________ (Insert Telephone No.) if you have any questions. We look forward to hearing from you soon.

Very truly yours,

______________

Name:

Title: