1024-00002 · Driftwood Absolute Return Fund Ltd · Correspondence

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DRIFTWOOD CAPITAL MANAGEMENT LLC 680 Lexington Avenue, 31st Floor New York, NY 10022

July 15, 2024

To All Limited Partners of Driftwood Absolute Return Fund Ltd.

Driftwood Absolute Return Fund Ltd. a Cayman Islands exempted limited partnership (Cayman Registration No. ELP-87234)

Registered Office: 4th Floor, Harbour Place 103 South Church Street George Town, Grand Cayman, KY1-1104 Cayman Islands

Re: Successor Key Person Proposal and Consent Solicitation — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017 (the "Partnership Agreement")

Dear Limited Partners:

Driftwood Capital Management LLC ("DCM" or the "General Partner"), in its capacity as the general partner of Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund"), is writing to you pursuant to Section 8.04(c) and Section 14.01 of the Amended & Restated Limited Partnership Agreement of the Fund, dated as of March 15, 2017 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the "Partnership Agreement"), for the purpose of presenting the General Partner's proposal for the designation of Successor Key Persons (the "Successor Proposal") and soliciting the written consent of the Limited Partners to the First Amendment to the Partnership Agreement (the "Amendment").

As you are aware, the General Partner delivered a Key Person Event notification letter to all Limited Partners, dated June 14, 2024 (the "Key Person Event Notice"), describing in detail the circumstances giving rise to the Key Person Event under Section 8.04(b) of the Partnership Agreement. This letter provides the General Partner's proposed resolution of the Key Person Event and sets forth the terms upon which the General Partner seeks the Limited Partners' consent.

This letter is accompanied by the following documents: (i) the draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd. (attached hereto as Exhibit A), and (ii) the Form of Written Consent of Limited Partners (attached hereto as Exhibit B). Limited Partners are urged to review each of these documents carefully, together with the entirety of this letter, before delivering their consents.

This letter and the accompanying documents have been prepared with the assistance of Calderwood & Harkness LLP, counsel to the General Partner, in connection with the Successor Proposal and the consent solicitation process described herein. Limited Partners are separately encouraged to consult with their own legal counsel regarding the matters described in this letter and the enclosed exhibits.

Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Partnership Agreement.

I. Background — The Key Person Event

A. The Incapacitation of Marcus J. Whitmore

Marcus J. Whitmore is the Founder, Chief Investment Officer, and Managing Member of DCM, holding a ninety percent (90%) membership interest in DCM. Since the Fund's inception in 2017, Mr. Whitmore has served as the sole designated "Key Person" under Section 8.04(a) of the Partnership Agreement. In that capacity, Mr. Whitmore has borne primary responsibility for the formulation and execution of the Fund's investment strategy, the oversight of portfolio risk management, and the direction of all material investment decisions across the Fund's three core strategy verticals: equity long/short, event-driven, and credit relative value.

Mr. Whitmore brings to the Fund twenty-eight (28) years of experience in multi-strategy investing. Prior to founding DCM and the Fund, Mr. Whitmore served as a Managing Director at Veltrano Asset Partners LLC from 2004 to 2016, where he managed a multi-billion-dollar multi-strategy portfolio. Before joining Veltrano, Mr. Whitmore served as a portfolio manager at Fieldstone Capital Advisors LP from 1996 to 2004, where he developed expertise in event-driven and credit strategies. Mr. Whitmore's professional tenure, industry reputation, and demonstrated investment acumen have been central to the Fund's growth and performance since inception.

On June 3, 2024, Mr. Whitmore suffered a severe hemorrhagic stroke at his residence in New York City. He was immediately transported to Lenox Hill Medical Center in New York, where he underwent emergency surgical intervention and has since been undergoing intensive rehabilitation. The General Partner has been in close communication with Mr. Whitmore's medical team and his immediate family regarding his condition and prognosis.

Based on the most recent assessments provided by Mr. Whitmore's attending physicians, his recovery is projected to require a minimum of twelve (12) to eighteen (18) months of intensive rehabilitation, with an uncertain prognosis as to his ability to return to full-time professional duties. At this time, Mr. Whitmore is unable to participate in the management of the Fund in any capacity, and his medical team has advised that engagement in professional activities would be inconsistent with his recovery plan for the foreseeable future.

The General Partner wishes to express its deep appreciation for Mr. Whitmore's extraordinary contributions to the Fund since its founding and extends its sincere wishes for a full and complete recovery. The General Partner is committed to supporting Mr. Whitmore and his family during this difficult period.

B. Trigger of the Key Person Event

Section 8.04(b) of the Partnership Agreement provides, in relevant part, that a "Key Person Event" shall be deemed to have occurred if the Key Person:

"is unable to devote substantially all of his professional time and attention to the affairs of the Partnership for a period of seven (7) consecutive calendar days, unless the Key Person has provided prior written notice to the General Partner of a planned absence (including, without limitation, for purposes of vacation, personal leave, or pre-scheduled medical treatment) that does not exceed thirty (30) calendar days."

Mr. Whitmore has been unable to devote substantially all of his professional time and attention to the affairs of the Fund since June 3, 2024. No prior written notice of a planned absence was provided by Mr. Whitmore, as his incapacitation was sudden and unforeseeable. Accordingly, pursuant to Section 8.04(b), the Key Person Event was deemed to have been triggered on June 10, 2024, being the date that falls seven (7) consecutive calendar days after June 3, 2024 (the date on which Mr. Whitmore first became unable to devote substantially all of his professional time to the affairs of the Fund).

The General Partner formally notified all Limited Partners of the occurrence of the Key Person Event by letter dated June 14, 2024, which was delivered to all Limited Partners of record via overnight courier and electronic mail. Section 8.04(b) of the Partnership Agreement requires such notification within five (5) business days following the occurrence of a Key Person Event. As the Key Person Event was triggered on June 10, 2024, and the notification was delivered on June 14, 2024 (the fourth business day following June 10, 2024), the General Partner confirms that it has complied with all notification requirements under the Partnership Agreement.

C. Consequences of the Key Person Event

Pursuant to Section 8.04(c) of the Partnership Agreement, the occurrence of the Key Person Event triggered the following consequences, each of which took effect automatically upon the date of the Key Person Event (June 10, 2024):

1. Immediate Suspension of the Investment Period. The Investment Period (as defined in Section 1.01(xx) of the Partnership Agreement) was immediately suspended upon the occurrence of the Key Person Event. During the period of suspension, the Fund may not make any new investments, including the acquisition of any new portfolio positions, the entry into any new derivative contracts, or the commitment of capital to any new investment opportunity, regardless of whether such opportunity was under active consideration prior to the Key Person Event.

2. Follow-On Investment Cap. Notwithstanding the suspension of the Investment Period, the Fund may continue to make follow-on investments in existing portfolio positions, provided that the aggregate amount of all such follow-on investments during the suspension period does not exceed one percent (1.0%) of the Fund's net asset value as of the last day of the calendar month immediately preceding the Key Person Event. Based on the Fund's net asset value of $2.87 billion as of May 31, 2024 (the last day of the calendar month preceding the Key Person Event), the cap on follow-on investments during the current suspension period is $28.7 million.

3. Commencement of the Cure Period. A ninety (90) calendar-day cure period (the "Cure Period") commenced on June 10, 2024, the date of the Key Person Event. The Cure Period will expire on September 8, 2024, unless extended as provided below. During the Cure Period, the General Partner may propose one or more Successor Key Persons for approval by the Limited Partners.

4. Limited Partner Consent Requirement. Any Successor Key Person proposed by the General Partner during the Cure Period must be approved by Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners (excluding the capital commitment attributable to the General Partner's co-investment), calculated as of the date of the Key Person Event.

5. Remedies Upon Expiration of the Cure Period Without Cure. If no Successor Key Person is approved by the requisite majority of Limited Partners within the Cure Period, then Limited Partners holding a majority-in-interest (as defined in Section 1.01(yy) of the Partnership Agreement) may elect to either: (i) extend the Cure Period by up to ninety (90) additional calendar days, or (ii) direct the General Partner to commence an orderly wind-down of the Fund in accordance with Article XI of the Partnership Agreement.

The General Partner wishes to emphasize that the consequences described above are intended to protect the interests of the Limited Partners during a period of governance transition and to provide a structured framework for the resolution of the Key Person Event. The General Partner is committed to resolving the Key Person Event well in advance of the expiration of the Cure Period and believes that the Successor Proposal described in this letter provides a comprehensive and well-considered governance framework for the continued management of the Fund.

D. Current Fund Status

As of May 31, 2024, the Fund's net asset value was $2.87 billion, as reported by Pinnacle Fund Services (Cayman) Ltd. (the "Administrator"), the Fund's independent administrator. The Fund's performance and key operating metrics as of such date are summarized below:

Since the occurrence of the Key Person Event, the Fund's investment team has continued to manage the existing portfolio under the day-to-day leadership of Elaine R. Sato, Deputy Chief Investment Officer, and Jonathan K. Huang, Head of Credit Strategies. The investment team has focused on prudent risk management, maintaining the Fund's existing positions, and ensuring the orderly execution of ongoing investment activities within the constraints imposed by the suspension of the Investment Period and the follow-on investment cap described above.

The General Partner is pleased to report that no material portfolio disruptions have occurred since the Key Person Event. The Fund's risk parameters remain within established guidelines, counterparty relationships remain stable, and the Fund's prime brokerage, administration, and custody arrangements continue to operate without interruption. The General Partner has maintained open and regular communication with the Fund's key service providers, including its prime broker, Halcyon Securities International Ltd. (London), its administrator, Pinnacle Fund Services (Cayman) Ltd. (George Town, Grand Cayman), and its auditor, Graystone & Whitfield LLP (George Town, Grand Cayman), throughout this period.

II. The Successor Key Person Proposal

A. Designation of Joint Successor Key Persons

The General Partner hereby proposes that Elaine R. Sato, Deputy Chief Investment Officer and Managing Member of DCM, and Jonathan K. Huang, Head of Credit Strategies at DCM, be designated as joint Successor Key Persons under a revised Section 8.04 of the Partnership Agreement (the "Successor Key Persons" or, individually, a "Successor Key Person").

The "joint" designation of Sato and Huang as Successor Key Persons is a deliberate structural choice that reflects the General Partner's commitment to reducing the single-person concentration risk that existed under the prior Key Person provision. Under the proposed framework, the term "Key Person" shall refer to both Sato and Huang acting together, and a new Key Person Event shall be deemed to occur only if both Successor Key Persons cease to be actively involved in the management of the Fund (whether through death, permanent disability, voluntary departure, termination, or inability to devote substantially all of their professional time for a period of seven (7) or more consecutive calendar days absent prior written notice).

Importantly, the proposed Amendment introduces a new mechanism — the 180-day Replacement Period — to address the scenario in which only one of the two Successor Key Persons ceases active involvement. In such a scenario, the loss of a single Successor Key Person would trigger a 180-day Replacement Period (rather than an immediate suspension of the Investment Period), during which the remaining Successor Key Person would continue to manage the Fund's portfolio without interruption. During the Replacement Period, the General Partner would have the opportunity to propose a replacement Successor Key Person for Limited Partner approval at the 66⅔% consent threshold. This mechanism is designed to provide stability and continuity while preserving the Limited Partners' governance rights.

The General Partner believes that this joint designation structure represents a meaningful improvement over the prior single-person Key Person framework and provides a more resilient governance architecture for the Fund's continued operation.

B. Biography of Elaine R. Sato — Proposed Successor Key Person

Elaine R. Sato Deputy Chief Investment Officer and Managing Member (10%), Driftwood Capital Management LLC

Ms. Sato brings nineteen (19) years of professional experience in multi-strategy investing to her proposed role as a Successor Key Person. She joined DCM at the Fund's inception in 2017 and has served as the Fund's Deputy Chief Investment Officer since its founding. In that capacity, Ms. Sato has overseen the equity long/short and event-driven strategy books, co-managed risk oversight with Mr. Whitmore, and played a central role in the formulation and execution of the Fund's investment strategy across all market cycles experienced since inception.

Prior to joining DCM, Ms. Sato served as a Senior Portfolio Manager at Brindoval Global Investments Ltd. from 2010 to 2017, where she managed equity long/short and event-driven strategies with a particular focus on the asset management and banking sectors. During her tenure at Brindoval, Ms. Sato was responsible for a portfolio that grew from approximately $400 million to over $1.2 billion in assets under management, and she developed a reputation as one of the leading event-driven investors in the financial services space. Before joining Brindoval, Ms. Sato served as an analyst at Broadmark Capital Group LLC from 2005 to 2010, where she gained foundational experience in equity research and portfolio construction.

Ms. Sato holds a ten percent (10%) membership interest in DCM and currently maintains a personal capital commitment to the Fund of $14.35 million, representing approximately 0.5% of the Fund's net asset value. Her significant personal investment in the Fund reflects her conviction in the Fund's investment strategy and her alignment of interest with the Limited Partners.

In her capacity as Deputy CIO, Ms. Sato has been deeply embedded in all aspects of the Fund's investment process, including idea generation, due diligence, position sizing, portfolio construction, and risk management. She has worked closely with Mr. Whitmore on all major investment decisions since the Fund's inception and possesses comprehensive institutional knowledge of the Fund's portfolio, its investment thesis for each significant position, and the broader strategic direction of the Fund.

C. Biography of Jonathan K. Huang — Proposed Successor Key Person

Jonathan K. Huang Head of Credit Strategies, Driftwood Capital Management LLC

Mr. Huang brings sixteen (16) years of professional experience in credit and structured finance investing to his proposed role as a Successor Key Person. He joined DCM in 2019 and has since served as Head of Credit Strategies, where he manages the Fund's credit relative value portfolio, which represents a significant allocation of the Fund's overall capital.

Prior to joining DCM, Mr. Huang served as a Partner at Ashford Credit Partners LP from 2013 to 2019, where he led the firm's credit relative value and distressed debt strategies across a portfolio that at its peak exceeded $800 million in notional exposure. During his tenure at Ashford, Mr. Huang developed deep expertise in the identification and exploitation of relative value opportunities across the corporate credit, structured credit, and sovereign debt markets. Before joining Ashford, Mr. Huang served as a Vice President at Meridian Structured Finance LLC from 2008 to 2013, where he specialized in the structuring and trading of collateralized loan obligations, asset-backed securities, and other structured finance products.

Mr. Huang currently maintains a personal capital commitment to the Fund of $8.61 million, representing approximately 0.3% of the Fund's net asset value. His meaningful personal investment in the Fund underscores his commitment to the Fund's long-term success and his alignment of interest with the Limited Partners.

In his capacity as Head of Credit Strategies, Mr. Huang has been responsible for the management of all credit-related portfolio positions, the monitoring of credit market conditions, and the development and refinement of the Fund's credit relative value investment framework. He has worked collaboratively with Mr. Whitmore and Ms. Sato on cross-strategy risk management and portfolio construction, and he possesses deep familiarity with the Fund's overall investment posture and risk profile.

D. Rationale for the Successor Key Person Selection

The General Partner has carefully considered the qualifications, experience, track records, and institutional roles of potential Successor Key Person candidates and believes that Ms. Sato and Mr. Huang represent the strongest possible leadership team for the continued management of the Fund. The General Partner's rationale for the selection of Ms. Sato and Mr. Huang as joint Successor Key Persons is summarized below:

1. Combined Depth of Experience. Ms. Sato and Mr. Huang bring a combined thirty-five (35) years of professional experience across all three of the Fund's core strategy verticals — equity long/short, event-driven, and credit relative value. Their combined experience spans multiple market cycles, including periods of significant volatility and dislocation, and encompasses a broad range of investment approaches and asset classes.

2. Institutional Continuity. Ms. Sato has been with DCM since the Fund's inception in 2017 (seven years), and Mr. Huang has been with DCM since 2019 (five years), for a combined tenure at Driftwood of twelve (12) years. Both individuals possess deep institutional knowledge of the Fund's investment process, portfolio construction methodology, risk management framework, and operational infrastructure. The designation of Ms. Sato and Mr. Huang as Successor Key Persons provides the most seamless path to continuity of investment management.

3. Demonstrated Track Records. Both Ms. Sato and Mr. Huang have demonstrated strong track records within the Fund's multi-strategy absolute return framework. Ms. Sato's equity long/short and event-driven books have been consistent contributors to the Fund's overall performance, and Mr. Huang's credit relative value portfolio has generated attractive risk-adjusted returns. Their respective strategy-level performance records are available for review by any Limited Partner upon request.

4. Reduced Concentration Risk. The joint designation of two Successor Key Persons, coupled with the 180-day Replacement Period for the loss of a single Successor Key Person, represents a significant structural improvement over the prior single-person Key Person framework. The new structure reduces the risk that the departure or incapacitation of any single individual will trigger an immediate disruption to the Fund's investment activities.

5. Alignment of Interest. Ms. Sato and Mr. Huang maintain combined personal capital commitments to the Fund of $22.96 million ($14.35 million and $8.61 million, respectively), demonstrating meaningful "skin in the game" and alignment of their economic interests with those of the Limited Partners. The proposed carried interest reallocation described in Section III.F below further strengthens this alignment by increasing the Successor Key Persons' participation in the Fund's performance-based compensation.

The General Partner is confident that Ms. Sato and Mr. Huang possess the investment acumen, leadership capabilities, and institutional knowledge necessary to manage the Fund effectively and to protect and grow the capital entrusted to them by the Limited Partners.

III. Summary of the Proposed First Amendment to the Partnership Agreement

The General Partner has prepared a draft First Amendment to the Partnership Agreement (the "Amendment"), a copy of which is attached hereto as Exhibit A. The Amendment would effect the following changes to the Partnership Agreement. The summary set forth below is qualified in its entirety by reference to the full text of the Amendment attached as Exhibit A, and Limited Partners are urged to review the Amendment in its entirety.

A. Redefinition of "Key Person" (Amended Section 8.04(a))

Section 8.04(a) of the Partnership Agreement currently defines "Key Person" as Marcus J. Whitmore. The Amendment would redefine the term "Key Person" to mean Elaine R. Sato and Jonathan K. Huang, jointly. Accordingly, the term "Key Person" would refer to both individuals acting together, rather than to any single individual.

Under the amended provision, a Key Person Event would be deemed to have occurred only if both Successor Key Persons cease to be actively involved in the management of the Fund, whether through death, permanent disability, voluntary departure, termination for cause, or the inability to devote substantially all of their respective professional time and attention to the affairs of the Fund for a period of seven (7) or more consecutive calendar days absent prior written notice. This revised definition ensures that the occurrence of a Key Person Event — and the consequent suspension of the Investment Period — is reserved for circumstances in which the Fund's leadership is fundamentally compromised, rather than circumstances in which only one of two designated leaders becomes unavailable.

B. 180-Day Replacement Period Upon Loss of One Successor Key Person (Amended Section 8.04(b))

The Amendment would introduce a new concept — the "Replacement Period" — to address the scenario in which only one of the two Successor Key Persons ceases to be actively involved in the management of the Fund. Specifically, the amended Section 8.04(b) would provide as follows:

• If only one Successor Key Person ceases active involvement (through death, permanent disability, voluntary departure, termination, or inability to devote substantially all of his or her professional time for seven (7) or more consecutive calendar days absent prior written notice), a one-hundred-eighty (180) calendar-day Replacement Period shall commence on the date of such cessation.

• During the Replacement Period, the remaining Successor Key Person shall continue to manage the Fund's portfolio without any suspension of the Investment Period, and the Fund may continue to make new investments and follow-on investments in the ordinary course.

• During the Replacement Period, the General Partner may propose one or more replacement Successor Key Persons for approval by the Limited Partners, subject to the same consent threshold applicable to the original Successor Key Person designation (i.e., the written consent of Limited Partners holding not less than 66⅔% of aggregate LP capital commitments, excluding the GP's co-investment).

• If no replacement Successor Key Person is approved by the Limited Partners within the 180-day Replacement Period, the Limited Partners holding a majority-in-interest may elect to pursue such further remedies as may be available under the Partnership Agreement, including the extension of the Replacement Period or the commencement of an orderly wind-down of the Fund.

The introduction of the 180-day Replacement Period represents a significant governance enhancement, as it provides a structured pathway for addressing the loss of a single Successor Key Person without the disruption of an immediate Investment Period suspension. The General Partner believes that this mechanism appropriately balances the need for continuity in investment management with the Limited Partners' right to approve the individuals entrusted with the management of their capital.

C. Establishment of the Investment Committee (New Section 8.05)

The Amendment would create a new Section 8.05 of the Partnership Agreement, establishing a three-member Investment Committee (the "Investment Committee") with authority over all material investment decisions, position sizing, and risk management oversight. The composition of the Investment Committee would be as follows:

1. Elaine R. Sato, serving as Chair of the Investment Committee;

2. Jonathan K. Huang; and

3. One independent member, to be designated by the Investor Advisory Committee (the "IAC") pursuant to Section 9.02 of the Partnership Agreement, as amended.

The Investment Committee would be responsible for the review and approval of all new investment positions exceeding a specified materiality threshold (to be set forth in the Amendment), the monitoring and management of portfolio-level risk, and the oversight of the Fund's compliance with its investment guidelines and concentration limits. The creation of the Investment Committee is designed to institutionalize the Fund's investment decision-making process, reduce reliance on any single individual, and provide the Limited Partners with the assurance that an independent voice — designated by their own representatives on the IAC — will participate in the governance of the Fund's investment activities.

The independent member of the Investment Committee shall serve at the pleasure of the IAC and may be removed and replaced by the IAC at any time, with or without cause, in accordance with the procedures set forth in the amended Section 9.02 of the Partnership Agreement. The General Partner believes that this provision ensures that the independent member remains accountable to the Limited Partners through their representatives on the IAC.

D. Reduced Follow-On Investment Cap (Amended Section 8.04(c))

Under the current Partnership Agreement, the cap on follow-on investments during a Key Person Event is set at one percent (1.0%) of the Fund's net asset value as of the last day of the calendar month immediately preceding the Key Person Event. Based on the Fund's current net asset value of $2.87 billion, this cap is $28.7 million.

The Amendment would reduce the follow-on investment cap applicable during any future Key Person Event from 1.0% of the Fund's net asset value to 0.5% of the Fund's net asset value. Based on the Fund's current net asset value of $2.87 billion, this reduced cap would be $14.35 million. The General Partner views this reduction as a meaningful enhancement of Limited Partner protections during any future governance transition and a reflection of the General Partner's commitment to capital preservation during periods of heightened uncertainty.

For the avoidance of doubt, this reduced cap would apply only during any future Key Person Event and would not alter the follow-on investment cap currently in effect during the ongoing Key Person Event (which remains at $28.7 million, or 1.0% of AUM, in accordance with the existing terms of Section 8.04(c)).

E. Designation of Marcus J. Whitmore as Senior Advisor

In recognition of Mr. Whitmore's foundational contributions to the Fund and his ongoing relationship with DCM, the Amendment would formally designate Mr. Whitmore as "Senior Advisor" to the Fund. The Senior Advisor designation is expressly consultative in nature. Mr. Whitmore would have no governance authority, no voting rights (whether within DCM or at the Fund level), and no investment decision-making power. Mr. Whitmore would not have the authority to bind the Fund, the General Partner, or any affiliate thereof in any transaction or matter, and would not participate in the meetings or deliberations of the Investment Committee or any other governing body of the Fund or DCM.

The Senior Advisor designation is intended to preserve Mr. Whitmore's institutional affiliation with the Fund in a manner that is appropriate given his medical circumstances and the governance transition contemplated by the Successor Proposal. The General Partner anticipates that, should Mr. Whitmore's health permit, he may from time to time provide informal guidance or market perspective to the investment team in a consultative capacity. However, such consultation would be entirely at Mr. Whitmore's discretion and would carry no decisional authority whatsoever.

F. Carried Interest Reallocation (Amended Schedule A)

The Amendment would revise the internal allocation of the General Partner's incentive allocation (carried interest) among the principals of DCM. For the avoidance of doubt, the Fund-level economics — i.e., the aggregate management fee of two percent (2%) of net asset value and the aggregate performance allocation of twenty percent (20%) of net new profits above the high-water mark, subject to a six percent (6%) annualized hurdle rate with full catch-up — remain entirely unchanged. The Amendment addresses only the internal division of the twenty percent (20%) performance allocation among the principals of DCM.

The current and proposed allocations are as follows:

The reallocation of carried interest reflects the transition of primary investment management responsibilities from Mr. Whitmore to Ms. Sato and Mr. Huang. Mr. Whitmore's reduced allocation — from 18.0% to 9.0% of the GP's 20% — is consistent with his transition from the role of active Chief Investment Officer to the consultative Senior Advisor role described in Section III.E above. The increased allocations to Ms. Sato (from 1.5% to 7.0%) and Mr. Huang (from 0.5% to 4.0%) are intended to compensate the Successor Key Persons for their expanded responsibilities and to strengthen the alignment of their economic interests with those of the Limited Partners.

In addition, the Amendment addresses the treatment of Mr. Whitmore's accrued but unvested carried interest. Under the existing vesting schedule applicable to DCM principals, Mr. Whitmore has a significant amount of accrued but unvested carried interest attributable to prior performance periods. The Amendment provides that fifty percent (50%) of Mr. Whitmore's accrued but unvested carried interest shall vest immediately upon the effectiveness of the Amendment, and the remaining fifty percent (50%) shall vest ratably over a thirty-six (36) month period commencing on the date of the Key Person Event (June 10, 2024). This modified vesting schedule is intended to balance Mr. Whitmore's legitimate economic interests with the Fund's need for a smooth and orderly governance transition.

G. Amendment of Consent Provisions (Section 14.01)

The Amendment will be adopted pursuant to Section 14.01 of the Partnership Agreement, which provides that the Partnership Agreement may be amended with the consent of the General Partner and Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners, excluding the capital commitment attributable to the General Partner's co-investment. The consent solicitation process is described in detail in Section IV below.

IV. Consent Solicitation Mechanics

A. Required Consent Threshold

Approval of the Amendment and the designation of the Successor Key Persons requires the written consent of Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners, excluding the capital commitment attributable to the General Partner's co-investment (the "Requisite Consent Threshold").

For purposes of calculating the Requisite Consent Threshold, the relevant figures are as follows:

As of the date of this letter, the Fund has forty-seven (47) Limited Partners of record. Each Limited Partner's consent will be weighted in proportion to such Limited Partner's capital commitment to the Fund, as reflected in the books and records of the Administrator.

B. Consent Deadline

Limited Partners are respectfully requested to deliver their written consents on or before August 23, 2024 (the "Consent Deadline"), which is forty (40) calendar days from the date of this letter.

The ninety (90) calendar-day Cure Period under Section 8.04(c) of the Partnership Agreement commenced on June 10, 2024 and expires on September 8, 2024. The August 23, 2024 Consent Deadline has been established to provide the General Partner with adequate time to receive, tabulate, and verify all consents, to execute the Amendment, and to effect the cure of the Key Person Event in advance of the expiration of the Cure Period. The General Partner believes that this timeline provides a reasonable buffer for administrative processing and any follow-up communications that may be necessary, while affording Limited Partners sufficient time to review the enclosed materials and consult with their advisors.

Limited Partners are strongly encouraged to deliver their consents as promptly as possible to ensure that the Requisite Consent Threshold is achieved well in advance of the Consent Deadline.

C. Form and Delivery of Consent

The enclosed Form of Written Consent of Limited Partners (Exhibit B) should be completed in its entirety and executed by an authorized signatory of the Limited Partner. Each Limited Partner should clearly indicate the following information on the Form of Consent:

(a) the full legal name of the Limited Partner;

(b) the name, title, and signature of the authorized signatory;

(c) the capital commitment amount of the Limited Partner, as reflected in the books and records of the Administrator; and

(d) the date of execution.

Completed and executed Forms of Consent should be returned to:

Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036

Attention: Stephen Adler

Forms of Consent may be delivered by any of the following methods:

• Hand Delivery to the address specified above;

• Overnight Courier (such as Severin Partners LLC, Halcyon Partners LLC, or Tarrant & Co.) to the address specified above;

• Facsimile to Calderwood & Harkness LLP at +1 (212) 555-0147, Attention: Stephen Adler; or

• Electronic Mail (in PDF format) to sadler@calderwoodharkness.com.

In each case, the General Partner recommends that the delivering Limited Partner retain a copy of the executed Form of Consent and any delivery confirmation for its records.

D. Revocation. A Limited Partner may revoke its consent at any time prior to the General Partner's formal certification that the Requisite Consent Threshold has been achieved, by delivering a written notice of revocation to Calderwood & Harkness LLP at the address specified above. Any such revocation must clearly identify the Limited Partner and state that the Limited Partner wishes to revoke its previously delivered consent. Revocations delivered after the General Partner's certification that the Requisite Consent Threshold has been achieved shall be of no force or effect.

E. Effectiveness of the Amendment

If the Requisite Consent Threshold is achieved on or before the Consent Deadline of August 23, 2024, the General Partner expects to execute the Amendment and declare it effective within three (3) business days following the achievement of the Requisite Consent Threshold (the "Effective Date"). The General Partner will promptly notify all Limited Partners of the Effective Date by letter or electronic mail.

Upon effectiveness of the Amendment, the suspension of the Investment Period will be lifted, and the Fund will resume its normal investment activities in accordance with the terms of the Partnership Agreement, as amended by the Amendment. The Successor Key Persons will assume their governance roles as described herein and in the Amendment, and the Investment Committee will be constituted in accordance with the procedures set forth in the new Section 8.05 of the Partnership Agreement.

V. Role of the Investor Advisory Committee

The Investor Advisory Committee (the "IAC"), established under Section 9.02 of the Partnership Agreement, consists of five (5) members representing the Fund's largest institutional investors. The current composition of the IAC is as follows:

The IAC has been briefed on the Successor Proposal and the proposed terms of the Amendment in a series of preliminary communications and conference calls with the General Partner and its counsel. A formal meeting of the IAC has been scheduled for July 29, 2024, at which the General Partner will present the Successor Proposal in detail, respond to questions from IAC members and their counsel, and discuss the proposed terms of the Amendment. The General Partner anticipates that the IAC meeting will also address the process by which the IAC will designate the independent member of the Investment Committee contemplated by the proposed new Section 8.05 of the Partnership Agreement.

The IAC is separately represented by Wexford Crane & Albright LLP in connection with its review of and consent to the proposed Amendment. The IAC's legal representation is provided by Helen M. Calloway, Partner, and David Pineda, Senior Associate, at Wexford Crane & Albright LLP, located at 399 Park Avenue, 28th Floor, New York, NY 10022. The fees and expenses of Wexford Crane & Albright LLP incurred in connection with its representation of the IAC shall be borne by the Fund in accordance with Section 9.02(d) of the Partnership Agreement.

Under the proposed Amendment, the IAC will assume the additional responsibility of designating one independent member to the newly created Investment Committee. The General Partner views this additional IAC responsibility as a meaningful enhancement of Limited Partner governance, ensuring that the individuals who oversee the Fund's investment activities include a voice that is independent of the General Partner and accountable to the Limited Partners through their elected representatives on the IAC.

VI. Advisors

The following advisors have been engaged or notified in connection with the Key Person Event, the Successor Proposal, and the consent solicitation process:

Counsel to the General Partner:

Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036

• Graham Sutherland, Responsible Partner, Funds & Asset Management

• Pamela Cross, Billing Partner, Funds & Asset Management

• Stephen Adler, Lead Associate, Funds & Asset Management

• Theresa Kim, Working Associate, Funds & Asset Management

Calderwood & Harkness LLP has advised the General Partner in connection with the preparation of this letter, the drafting of the Amendment, and the structuring of the consent solicitation process.

Counsel to the Investor Advisory Committee:

Wexford Crane & Albright LLP 399 Park Avenue, 28th Floor New York, NY 10022

• Helen M. Calloway, Partner

• David Pineda, Senior Associate

Limited Partners and the IAC are encouraged to consult with their own legal, tax, and financial advisors regarding the Successor Proposal, the Amendment, and the consent solicitation process. Neither the General Partner nor Calderwood & Harkness LLP represents or acts on behalf of any Limited Partner in connection with these matters.

Fund Service Providers:

The following service providers to the Fund have been notified of the Key Person Event and the Successor Proposal and have confirmed the continuation of their respective services without interruption:

• Auditor: Graystone & Whitfield LLP, George Town, Grand Cayman

• Administrator: Pinnacle Fund Services (Cayman) Ltd., George Town, Grand Cayman

• Prime Broker: Halcyon Securities International Ltd., London, United Kingdom

Halcyon Securities International Ltd. has been apprised of the General Partner's continuity plan, including the proposed designation of the Successor Key Persons, and has confirmed that the Fund's prime brokerage arrangements remain in full force and effect. No event of default or termination event has been triggered under the Fund's prime brokerage agreements as a result of the Key Person Event.

VII. Enclosed Documents

The following documents are enclosed with this letter and should be reviewed carefully by each Limited Partner in connection with the Successor Proposal and the consent solicitation:

Exhibit A: Draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017

Exhibit B: Form of Written Consent of Limited Partners — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd.

Each Limited Partner is urged to review both enclosed exhibits in their entirety and to consult with its own legal, tax, and financial advisors before delivering its consent. The summary of the Amendment set forth in Section III of this letter is qualified in its entirety by reference to the full text of the Amendment attached as Exhibit A.

VIII. Contact Information and Questions

Limited Partners with questions regarding the Successor Proposal, the terms of the Amendment, or the consent solicitation process are encouraged to direct their inquiries to either of the following contacts:

Elaine R. Sato Deputy Chief Investment Officer Driftwood Capital Management LLC 680 Lexington Avenue, 31st Floor New York, NY 10022 Telephone: +1 (212) 555-0283

Email: esato@driftwoodcapital.com

Stephen Adler Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036 Telephone: +1 (212) 555-0194

Email: sadler@calderwoodharkness.com

The General Partner and its counsel are committed to making themselves available to all Limited Partners for the purpose of addressing questions and providing additional information as may be reasonably requested in connection with the Successor Proposal and the consent solicitation.

IX. Governing Law

The Partnership Agreement is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflict of laws principles thereof. The proposed Amendment, the consent solicitation, this letter, and all matters arising under or in connection therewith shall likewise be governed by and construed in accordance with the laws of the State of Delaware.

Closing

The General Partner believes that the Successor Proposal represents a strong, well-considered governance framework that will ensure the continuity of the Fund's investment management, align the economic incentives of the Fund's leadership with the interests of the Limited Partners, and provide enhanced protections through the establishment of the Investment Committee, the reduced follow-on investment cap, and the joint Key Person designation. The General Partner is confident that Ms. Sato and Mr. Huang possess the experience, judgment, and institutional knowledge necessary to lead the Fund through this transition and to continue generating attractive risk-adjusted returns for the Limited Partners.

The General Partner urges all Limited Partners to review the enclosed materials carefully, to consult with their own legal, tax, and financial advisors, and to deliver their written consents at the earliest practicable opportunity. Timely action by the Limited Partners is of critical importance to ensure that the Cure Period, which expires on September 8, 2024, is satisfied well in advance of its deadline and that the Fund is able to resume its normal investment activities without further disruption.

The General Partner thanks each of the Limited Partners for their continued confidence in the Fund and for their thoughtful consideration of this Successor Proposal.

DRIFTWOOD CAPITAL MANAGEMENT LLC, as General Partner of Driftwood Absolute Return Fund Ltd.

By: ________

Name: Elaine R. Sato

Title: Deputy Chief Investment Officer and Managing Member

Date: July 15, 2024

Enclosures:

Exhibit A — Draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017

Exhibit B — Form of Written Consent of Limited Partners — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd.

cc:

Investor Advisory Committee Members:

• Diana Cortland, Chief Investment Officer, Northvale Public Employees' Retirement System

• Richard Oshima, Director of Alternative Investments, Sycamore Endowment Partners LP

• Catherine Mercer, Managing Director, Velthorn Institutional Fund of Funds III, L.P.

• Thomas Ashworth, Principal, Bridlewood Family Office Holdings Ltd.

• Nadia Al-Rashid, Senior Portfolio Manager, Atlas Sovereign Wealth Advisory LLC

Wexford Crane & Albright LLP (Helen M. Calloway; David Pineda)

Calderwood & Harkness LLP (Graham Sutherland; Stephen Adler)

Pinnacle Fund Services (Cayman) Ltd.

Metric	Value
Fund NAV (May 31, 2024)	$2,870,000,000
YTD Net Return (after 2/20 fee structure)	+5.4%
YTD Gross Return	+7.2%
Current NAV per Unit	$150.53
High-Water Mark per Unit (set December 31, 2023)	$142.67
Gross Exposure	$5,310,000,000 (1.85× gross leverage)
Net Exposure	$1,720,000,000 (0.60× net)
Number of Limited Partners	47
Principal	Pre-Amendment Allocation (% of GP's 20%)	Post-Amendment Allocation (% of GP's 20%)
Marcus J. Whitmore	18.0% (= 3.6% of fund profits)	9.0% (= 1.8% of fund profits)
Elaine R. Sato	1.5% (= 0.3% of fund profits)	7.0% (= 1.4% of fund profits)
Jonathan K. Huang	0.5% (= 0.1% of fund profits)	4.0% (= 0.8% of fund profits)
Total	20.0%	20.0%
Item	Amount
Total Fund NAV (AUM)	$2,870,000,000
Less: Whitmore co-investment (through GP vehicle)	($57,400,000)
Less: Sato co-investment (through GP vehicle)	($14,350,000)
Aggregate LP Capital Commitments (for voting purposes)	$2,798,250,000
Required Consent Threshold (66⅔% of LP commitments)	$1,865,500,000
Member	Commitment	Representative	Title
Northvale Public Employees' Retirement System	$310,000,000	Diana Cortland (IAC Chair)	Chief Investment Officer
Sycamore Endowment Partners LP	$275,000,000	Richard Oshima	Director of Alternative Investments
Velthorn Institutional Fund of Funds III, L.P.	$220,000,000	Catherine Mercer	Managing Director
Bridlewood Family Office Holdings Ltd.	$185,000,000	Thomas Ashworth	Principal

Atlas Sovereign Wealth Advisory LLC	$150,000,000	Nadia Al-Rashid	Senior Portfolio Manager
Total IAC Commitments	$1,140,000,000

DRIFTWOOD CAPITAL MANAGEMENT LLC 680 Lexington Avenue, 31st Floor New York, NY 10022
July 15, 2024
To All Limited Partners of Driftwood Absolute Return Fund Ltd.
Driftwood Absolute Return Fund Ltd. a Cayman Islands exempted limited partnership (Cayman Registration No. ELP-87234)
Registered Office: 4th Floor, Harbour Place 103 South Church Street George Town, Grand Cayman, KY1-1104 Cayman Islands
Re: Successor Key Person Proposal and Consent Solicitation — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017 (the "Partnership Agreement")
Dear Limited Partners:
Driftwood Capital Management LLC ("DCM" or the "General Partner"), in its capacity as the general partner of Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund"), is writing to you pursuant to Section 8.04(c) and Section 14.01 of the Amended & Restated Limited Partnership Agreement of the Fund, dated as of March 15, 2017 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the "Partnership Agreement"), for the purpose of presenting the General Partner's proposal for the designation of Successor Key Persons (the "Successor Proposal") and soliciting the written consent of the Limited Partners to the First Amendment to the Partnership Agreement (the "Amendment").
As you are aware, the General Partner delivered a Key Person Event notification letter to all Limited Partners, dated June 14, 2024 (the "Key Person Event Notice"), describing in detail the circumstances giving rise to the Key Person Event under Section 8.04(b) of the Partnership Agreement. This letter provides the General Partner's proposed resolution of the Key Person Event and sets forth the terms upon which the General Partner seeks the Limited Partners' consent.
This letter is accompanied by the following documents: (i) the draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd. (attached hereto as Exhibit A), and (ii) the Form of Written Consent of Limited Partners (attached hereto as Exhibit B). Limited Partners are urged to review each of these documents carefully, together with the entirety of this letter, before delivering their consents.
This letter and the accompanying documents have been prepared with the assistance of Calderwood & Harkness LLP, counsel to the General Partner, in connection with the Successor Proposal and the consent solicitation process described herein. Limited Partners are separately encouraged to consult with their own legal counsel regarding the matters described in this letter and the enclosed exhibits.
Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Partnership Agreement.
I. Background — The Key Person Event
A. The Incapacitation of Marcus J. Whitmore
Marcus J. Whitmore is the Founder, Chief Investment Officer, and Managing Member of DCM, holding a ninety percent (90%) membership interest in DCM. Since the Fund's inception in 2017, Mr. Whitmore has served as the sole designated "Key Person" under Section 8.04(a) of the Partnership Agreement. In that capacity, Mr. Whitmore has borne primary responsibility for the formulation and execution of the Fund's investment strategy, the oversight of portfolio risk management, and the direction of all material investment decisions across the Fund's three core strategy verticals: equity long/short, event-driven, and credit relative value.
Mr. Whitmore brings to the Fund twenty-eight (28) years of experience in multi-strategy investing. Prior to founding DCM and the Fund, Mr. Whitmore served as a Managing Director at Veltrano Asset Partners LLC from 2004 to 2016, where he managed a multi-billion-dollar multi-strategy portfolio. Before joining Veltrano, Mr. Whitmore served as a portfolio manager at Fieldstone Capital Advisors LP from 1996 to 2004, where he developed expertise in event-driven and credit strategies. Mr. Whitmore's professional tenure, industry reputation, and demonstrated investment acumen have been central to the Fund's growth and performance since inception.
On June 3, 2024, Mr. Whitmore suffered a severe hemorrhagic stroke at his residence in New York City. He was immediately transported to Lenox Hill Medical Center in New York, where he underwent emergency surgical intervention and has since been undergoing intensive rehabilitation. The General Partner has been in close communication with Mr. Whitmore's medical team and his immediate family regarding his condition and prognosis.
Based on the most recent assessments provided by Mr. Whitmore's attending physicians, his recovery is projected to require a minimum of twelve (12) to eighteen (18) months of intensive rehabilitation, with an uncertain prognosis as to his ability to return to full-time professional duties. At this time, Mr. Whitmore is unable to participate in the management of the Fund in any capacity, and his medical team has advised that engagement in professional activities would be inconsistent with his recovery plan for the foreseeable future.
The General Partner wishes to express its deep appreciation for Mr. Whitmore's extraordinary contributions to the Fund since its founding and extends its sincere wishes for a full and complete recovery. The General Partner is committed to supporting Mr. Whitmore and his family during this difficult period.
B. Trigger of the Key Person Event
Section 8.04(b) of the Partnership Agreement provides, in relevant part, that a "Key Person Event" shall be deemed to have occurred if the Key Person:
"is unable to devote substantially all of his professional time and attention to the affairs of the Partnership for a period of seven (7) consecutive calendar days, unless the Key Person has provided prior written notice to the General Partner of a planned absence (including, without limitation, for purposes of vacation, personal leave, or pre-scheduled medical treatment) that does not exceed thirty (30) calendar days."
Mr. Whitmore has been unable to devote substantially all of his professional time and attention to the affairs of the Fund since June 3, 2024. No prior written notice of a planned absence was provided by Mr. Whitmore, as his incapacitation was sudden and unforeseeable. Accordingly, pursuant to Section 8.04(b), the Key Person Event was deemed to have been triggered on June 10, 2024, being the date that falls seven (7) consecutive calendar days after June 3, 2024 (the date on which Mr. Whitmore first became unable to devote substantially all of his professional time to the affairs of the Fund).
The General Partner formally notified all Limited Partners of the occurrence of the Key Person Event by letter dated June 14, 2024, which was delivered to all Limited Partners of record via overnight courier and electronic mail. Section 8.04(b) of the Partnership Agreement requires such notification within five (5) business days following the occurrence of a Key Person Event. As the Key Person Event was triggered on June 10, 2024, and the notification was delivered on June 14, 2024 (the fourth business day following June 10, 2024), the General Partner confirms that it has complied with all notification requirements under the Partnership Agreement.
C. Consequences of the Key Person Event
Pursuant to Section 8.04(c) of the Partnership Agreement, the occurrence of the Key Person Event triggered the following consequences, each of which took effect automatically upon the date of the Key Person Event (June 10, 2024):
1.  Immediate Suspension of the Investment Period. The Investment Period (as defined in Section 1.01(xx) of the Partnership Agreement) was immediately suspended upon the occurrence of the Key Person Event. During the period of suspension, the Fund may not make any new investments, including the acquisition of any new portfolio positions, the entry into any new derivative contracts, or the commitment of capital to any new investment opportunity, regardless of whether such opportunity was under active consideration prior to the Key Person Event.
2.  Follow-On Investment Cap. Notwithstanding the suspension of the Investment Period, the Fund may continue to make follow-on investments in existing portfolio positions, provided that the aggregate amount of all such follow-on investments during the suspension period does not exceed one percent (1.0%) of the Fund's net asset value as of the last day of the calendar month immediately preceding the Key Person Event. Based on the Fund's net asset value of $2.87 billion as of May 31, 2024 (the last day of the calendar month preceding the Key Person Event), the cap on follow-on investments during the current suspension period is $28.7 million.
3.  Commencement of the Cure Period. A ninety (90) calendar-day cure period (the "Cure Period") commenced on June 10, 2024, the date of the Key Person Event. The Cure Period will expire on September 8, 2024, unless extended as provided below. During the Cure Period, the General Partner may propose one or more Successor Key Persons for approval by the Limited Partners.
4.  Limited Partner Consent Requirement. Any Successor Key Person proposed by the General Partner during the Cure Period must be approved by Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners (excluding the capital commitment attributable to the General Partner's co-investment), calculated as of the date of the Key Person Event.
5.  Remedies Upon Expiration of the Cure Period Without Cure. If no Successor Key Person is approved by the requisite majority of Limited Partners within the Cure Period, then Limited Partners holding a majority-in-interest (as defined in Section 1.01(yy) of the Partnership Agreement) may elect to either: (i) extend the Cure Period by up to ninety (90) additional calendar days, or (ii) direct the General Partner to commence an orderly wind-down of the Fund in accordance with Article XI of the Partnership Agreement.
The General Partner wishes to emphasize that the consequences described above are intended to protect the interests of the Limited Partners during a period of governance transition and to provide a structured framework for the resolution of the Key Person Event. The General Partner is committed to resolving the Key Person Event well in advance of the expiration of the Cure Period and believes that the Successor Proposal described in this letter provides a comprehensive and well-considered governance framework for the continued management of the Fund.
D. Current Fund Status
As of May 31, 2024, the Fund's net asset value was $2.87 billion, as reported by Pinnacle Fund Services (Cayman) Ltd. (the "Administrator"), the Fund's independent administrator. The Fund's performance and key operating metrics as of such date are summarized below:
Since the occurrence of the Key Person Event, the Fund's investment team has continued to manage the existing portfolio under the day-to-day leadership of Elaine R. Sato, Deputy Chief Investment Officer, and Jonathan K. Huang, Head of Credit Strategies. The investment team has focused on prudent risk management, maintaining the Fund's existing positions, and ensuring the orderly execution of ongoing investment activities within the constraints imposed by the suspension of the Investment Period and the follow-on investment cap described above.
The General Partner is pleased to report that no material portfolio disruptions have occurred since the Key Person Event. The Fund's risk parameters remain within established guidelines, counterparty relationships remain stable, and the Fund's prime brokerage, administration, and custody arrangements continue to operate without interruption. The General Partner has maintained open and regular communication with the Fund's key service providers, including its prime broker, Halcyon Securities International Ltd. (London), its administrator, Pinnacle Fund Services (Cayman) Ltd. (George Town, Grand Cayman), and its auditor, Graystone & Whitfield LLP (George Town, Grand Cayman), throughout this period.
II. The Successor Key Person Proposal
A. Designation of Joint Successor Key Persons
The General Partner hereby proposes that Elaine R. Sato, Deputy Chief Investment Officer and Managing Member of DCM, and Jonathan K. Huang, Head of Credit Strategies at DCM, be designated as joint Successor Key Persons under a revised Section 8.04 of the Partnership Agreement (the "Successor Key Persons" or, individually, a "Successor Key Person").
The "joint" designation of Sato and Huang as Successor Key Persons is a deliberate structural choice that reflects the General Partner's commitment to reducing the single-person concentration risk that existed under the prior Key Person provision. Under the proposed framework, the term "Key Person" shall refer to both Sato and Huang acting together, and a new Key Person Event shall be deemed to occur only if both Successor Key Persons cease to be actively involved in the management of the Fund (whether through death, permanent disability, voluntary departure, termination, or inability to devote substantially all of their professional time for a period of seven (7) or more consecutive calendar days absent prior written notice).
Importantly, the proposed Amendment introduces a new mechanism — the 180-day Replacement Period — to address the scenario in which only one of the two Successor Key Persons ceases active involvement. In such a scenario, the loss of a single Successor Key Person would trigger a 180-day Replacement Period (rather than an immediate suspension of the Investment Period), during which the remaining Successor Key Person would continue to manage the Fund's portfolio without interruption. During the Replacement Period, the General Partner would have the opportunity to propose a replacement Successor Key Person for Limited Partner approval at the 66⅔% consent threshold. This mechanism is designed to provide stability and continuity while preserving the Limited Partners' governance rights.
The General Partner believes that this joint designation structure represents a meaningful improvement over the prior single-person Key Person framework and provides a more resilient governance architecture for the Fund's continued operation.
B. Biography of Elaine R. Sato — Proposed Successor Key Person
Elaine R. Sato Deputy Chief Investment Officer and Managing Member (10%), Driftwood Capital Management LLC
Ms. Sato brings nineteen (19) years of professional experience in multi-strategy investing to her proposed role as a Successor Key Person. She joined DCM at the Fund's inception in 2017 and has served as the Fund's Deputy Chief Investment Officer since its founding. In that capacity, Ms. Sato has overseen the equity long/short and event-driven strategy books, co-managed risk oversight with Mr. Whitmore, and played a central role in the formulation and execution of the Fund's investment strategy across all market cycles experienced since inception.
Prior to joining DCM, Ms. Sato served as a Senior Portfolio Manager at Brindoval Global Investments Ltd. from 2010 to 2017, where she managed equity long/short and event-driven strategies with a particular focus on the asset management and banking sectors. During her tenure at Brindoval, Ms. Sato was responsible for a portfolio that grew from approximately $400 million to over $1.2 billion in assets under management, and she developed a reputation as one of the leading event-driven investors in the financial services space. Before joining Brindoval, Ms. Sato served as an analyst at Broadmark Capital Group LLC from 2005 to 2010, where she gained foundational experience in equity research and portfolio construction.
Ms. Sato holds a ten percent (10%) membership interest in DCM and currently maintains a personal capital commitment to the Fund of $14.35 million, representing approximately 0.5% of the Fund's net asset value. Her significant personal investment in the Fund reflects her conviction in the Fund's investment strategy and her alignment of interest with the Limited Partners.
In her capacity as Deputy CIO, Ms. Sato has been deeply embedded in all aspects of the Fund's investment process, including idea generation, due diligence, position sizing, portfolio construction, and risk management. She has worked closely with Mr. Whitmore on all major investment decisions since the Fund's inception and possesses comprehensive institutional knowledge of the Fund's portfolio, its investment thesis for each significant position, and the broader strategic direction of the Fund.
C. Biography of Jonathan K. Huang — Proposed Successor Key Person
Jonathan K. Huang Head of Credit Strategies, Driftwood Capital Management LLC
Mr. Huang brings sixteen (16) years of professional experience in credit and structured finance investing to his proposed role as a Successor Key Person. He joined DCM in 2019 and has since served as Head of Credit Strategies, where he manages the Fund's credit relative value portfolio, which represents a significant allocation of the Fund's overall capital.
Prior to joining DCM, Mr. Huang served as a Partner at Ashford Credit Partners LP from 2013 to 2019, where he led the firm's credit relative value and distressed debt strategies across a portfolio that at its peak exceeded $800 million in notional exposure. During his tenure at Ashford, Mr. Huang developed deep expertise in the identification and exploitation of relative value opportunities across the corporate credit, structured credit, and sovereign debt markets. Before joining Ashford, Mr. Huang served as a Vice President at Meridian Structured Finance LLC from 2008 to 2013, where he specialized in the structuring and trading of collateralized loan obligations, asset-backed securities, and other structured finance products.
Mr. Huang currently maintains a personal capital commitment to the Fund of $8.61 million, representing approximately 0.3% of the Fund's net asset value. His meaningful personal investment in the Fund underscores his commitment to the Fund's long-term success and his alignment of interest with the Limited Partners.
In his capacity as Head of Credit Strategies, Mr. Huang has been responsible for the management of all credit-related portfolio positions, the monitoring of credit market conditions, and the development and refinement of the Fund's credit relative value investment framework. He has worked collaboratively with Mr. Whitmore and Ms. Sato on cross-strategy risk management and portfolio construction, and he possesses deep familiarity with the Fund's overall investment posture and risk profile.
D. Rationale for the Successor Key Person Selection
The General Partner has carefully considered the qualifications, experience, track records, and institutional roles of potential Successor Key Person candidates and believes that Ms. Sato and Mr. Huang represent the strongest possible leadership team for the continued management of the Fund. The General Partner's rationale for the selection of Ms. Sato and Mr. Huang as joint Successor Key Persons is summarized below:
1.  Combined Depth of Experience. Ms. Sato and Mr. Huang bring a combined thirty-five (35) years of professional experience across all three of the Fund's core strategy verticals — equity long/short, event-driven, and credit relative value. Their combined experience spans multiple market cycles, including periods of significant volatility and dislocation, and encompasses a broad range of investment approaches and asset classes.
2.  Institutional Continuity. Ms. Sato has been with DCM since the Fund's inception in 2017 (seven years), and Mr. Huang has been with DCM since 2019 (five years), for a combined tenure at Driftwood of twelve (12) years. Both individuals possess deep institutional knowledge of the Fund's investment process, portfolio construction methodology, risk management framework, and operational infrastructure. The designation of Ms. Sato and Mr. Huang as Successor Key Persons provides the most seamless path to continuity of investment management.
3.  Demonstrated Track Records. Both Ms. Sato and Mr. Huang have demonstrated strong track records within the Fund's multi-strategy absolute return framework. Ms. Sato's equity long/short and event-driven books have been consistent contributors to the Fund's overall performance, and Mr. Huang's credit relative value portfolio has generated attractive risk-adjusted returns. Their respective strategy-level performance records are available for review by any Limited Partner upon request.
4.  Reduced Concentration Risk. The joint designation of two Successor Key Persons, coupled with the 180-day Replacement Period for the loss of a single Successor Key Person, represents a significant structural improvement over the prior single-person Key Person framework. The new structure reduces the risk that the departure or incapacitation of any single individual will trigger an immediate disruption to the Fund's investment activities.
5.  Alignment of Interest. Ms. Sato and Mr. Huang maintain combined personal capital commitments to the Fund of $22.96 million ($14.35 million and $8.61 million, respectively), demonstrating meaningful "skin in the game" and alignment of their economic interests with those of the Limited Partners. The proposed carried interest reallocation described in Section III.F below further strengthens this alignment by increasing the Successor Key Persons' participation in the Fund's performance-based compensation.
The General Partner is confident that Ms. Sato and Mr. Huang possess the investment acumen, leadership capabilities, and institutional knowledge necessary to manage the Fund effectively and to protect and grow the capital entrusted to them by the Limited Partners.
III. Summary of the Proposed First Amendment to the Partnership Agreement
The General Partner has prepared a draft First Amendment to the Partnership Agreement (the "Amendment"), a copy of which is attached hereto as Exhibit A. The Amendment would effect the following changes to the Partnership Agreement. The summary set forth below is qualified in its entirety by reference to the full text of the Amendment attached as Exhibit A, and Limited Partners are urged to review the Amendment in its entirety.
A. Redefinition of "Key Person" (Amended Section 8.04(a))
Section 8.04(a) of the Partnership Agreement currently defines "Key Person" as Marcus J. Whitmore. The Amendment would redefine the term "Key Person" to mean Elaine R. Sato and Jonathan K. Huang, jointly. Accordingly, the term "Key Person" would refer to both individuals acting together, rather than to any single individual.
Under the amended provision, a Key Person Event would be deemed to have occurred only if both Successor Key Persons cease to be actively involved in the management of the Fund, whether through death, permanent disability, voluntary departure, termination for cause, or the inability to devote substantially all of their respective professional time and attention to the affairs of the Fund for a period of seven (7) or more consecutive calendar days absent prior written notice. This revised definition ensures that the occurrence of a Key Person Event — and the consequent suspension of the Investment Period — is reserved for circumstances in which the Fund's leadership is fundamentally compromised, rather than circumstances in which only one of two designated leaders becomes unavailable.
B. 180-Day Replacement Period Upon Loss of One Successor Key Person (Amended Section 8.04(b))
The Amendment would introduce a new concept — the "Replacement Period" — to address the scenario in which only one of the two Successor Key Persons ceases to be actively involved in the management of the Fund. Specifically, the amended Section 8.04(b) would provide as follows:
•  If only one Successor Key Person ceases active involvement (through death, permanent disability, voluntary departure, termination, or inability to devote substantially all of his or her professional time for seven (7) or more consecutive calendar days absent prior written notice), a one-hundred-eighty (180) calendar-day Replacement Period shall commence on the date of such cessation.
•  During the Replacement Period, the remaining Successor Key Person shall continue to manage the Fund's portfolio without any suspension of the Investment Period, and the Fund may continue to make new investments and follow-on investments in the ordinary course.
•  During the Replacement Period, the General Partner may propose one or more replacement Successor Key Persons for approval by the Limited Partners, subject to the same consent threshold applicable to the original Successor Key Person designation (i.e., the written consent of Limited Partners holding not less than 66⅔% of aggregate LP capital commitments, excluding the GP's co-investment).
•  If no replacement Successor Key Person is approved by the Limited Partners within the 180-day Replacement Period, the Limited Partners holding a majority-in-interest may elect to pursue such further remedies as may be available under the Partnership Agreement, including the extension of the Replacement Period or the commencement of an orderly wind-down of the Fund.
The introduction of the 180-day Replacement Period represents a significant governance enhancement, as it provides a structured pathway for addressing the loss of a single Successor Key Person without the disruption of an immediate Investment Period suspension. The General Partner believes that this mechanism appropriately balances the need for continuity in investment management with the Limited Partners' right to approve the individuals entrusted with the management of their capital.
C. Establishment of the Investment Committee (New Section 8.05)
The Amendment would create a new Section 8.05 of the Partnership Agreement, establishing a three-member Investment Committee (the "Investment Committee") with authority over all material investment decisions, position sizing, and risk management oversight. The composition of the Investment Committee would be as follows:
1.  Elaine R. Sato, serving as Chair of the Investment Committee;
2.  Jonathan K. Huang; and
3.  One independent member, to be designated by the Investor Advisory Committee (the "IAC") pursuant to Section 9.02 of the Partnership Agreement, as amended.
The Investment Committee would be responsible for the review and approval of all new investment positions exceeding a specified materiality threshold (to be set forth in the Amendment), the monitoring and management of portfolio-level risk, and the oversight of the Fund's compliance with its investment guidelines and concentration limits. The creation of the Investment Committee is designed to institutionalize the Fund's investment decision-making process, reduce reliance on any single individual, and provide the Limited Partners with the assurance that an independent voice — designated by their own representatives on the IAC — will participate in the governance of the Fund's investment activities.
The independent member of the Investment Committee shall serve at the pleasure of the IAC and may be removed and replaced by the IAC at any time, with or without cause, in accordance with the procedures set forth in the amended Section 9.02 of the Partnership Agreement. The General Partner believes that this provision ensures that the independent member remains accountable to the Limited Partners through their representatives on the IAC.
D. Reduced Follow-On Investment Cap (Amended Section 8.04(c))
Under the current Partnership Agreement, the cap on follow-on investments during a Key Person Event is set at one percent (1.0%) of the Fund's net asset value as of the last day of the calendar month immediately preceding the Key Person Event. Based on the Fund's current net asset value of $2.87 billion, this cap is $28.7 million.
The Amendment would reduce the follow-on investment cap applicable during any future Key Person Event from 1.0% of the Fund's net asset value to 0.5% of the Fund's net asset value. Based on the Fund's current net asset value of $2.87 billion, this reduced cap would be $14.35 million. The General Partner views this reduction as a meaningful enhancement of Limited Partner protections during any future governance transition and a reflection of the General Partner's commitment to capital preservation during periods of heightened uncertainty.
For the avoidance of doubt, this reduced cap would apply only during any future Key Person Event and would not alter the follow-on investment cap currently in effect during the ongoing Key Person Event (which remains at $28.7 million, or 1.0% of AUM, in accordance with the existing terms of Section 8.04(c)).
E. Designation of Marcus J. Whitmore as Senior Advisor
In recognition of Mr. Whitmore's foundational contributions to the Fund and his ongoing relationship with DCM, the Amendment would formally designate Mr. Whitmore as "Senior Advisor" to the Fund. The Senior Advisor designation is expressly consultative in nature. Mr. Whitmore would have no governance authority, no voting rights (whether within DCM or at the Fund level), and no investment decision-making power. Mr. Whitmore would not have the authority to bind the Fund, the General Partner, or any affiliate thereof in any transaction or matter, and would not participate in the meetings or deliberations of the Investment Committee or any other governing body of the Fund or DCM.
The Senior Advisor designation is intended to preserve Mr. Whitmore's institutional affiliation with the Fund in a manner that is appropriate given his medical circumstances and the governance transition contemplated by the Successor Proposal. The General Partner anticipates that, should Mr. Whitmore's health permit, he may from time to time provide informal guidance or market perspective to the investment team in a consultative capacity. However, such consultation would be entirely at Mr. Whitmore's discretion and would carry no decisional authority whatsoever.
F. Carried Interest Reallocation (Amended Schedule A)
The Amendment would revise the internal allocation of the General Partner's incentive allocation (carried interest) among the principals of DCM. For the avoidance of doubt, the Fund-level economics — i.e., the aggregate management fee of two percent (2%) of net asset value and the aggregate performance allocation of twenty percent (20%) of net new profits above the high-water mark, subject to a six percent (6%) annualized hurdle rate with full catch-up — remain entirely unchanged. The Amendment addresses only the internal division of the twenty percent (20%) performance allocation among the principals of DCM.
The current and proposed allocations are as follows:
The reallocation of carried interest reflects the transition of primary investment management responsibilities from Mr. Whitmore to Ms. Sato and Mr. Huang. Mr. Whitmore's reduced allocation — from 18.0% to 9.0% of the GP's 20% — is consistent with his transition from the role of active Chief Investment Officer to the consultative Senior Advisor role described in Section III.E above. The increased allocations to Ms. Sato (from 1.5% to 7.0%) and Mr. Huang (from 0.5% to 4.0%) are intended to compensate the Successor Key Persons for their expanded responsibilities and to strengthen the alignment of their economic interests with those of the Limited Partners.
In addition, the Amendment addresses the treatment of Mr. Whitmore's accrued but unvested carried interest. Under the existing vesting schedule applicable to DCM principals, Mr. Whitmore has a significant amount of accrued but unvested carried interest attributable to prior performance periods. The Amendment provides that fifty percent (50%) of Mr. Whitmore's accrued but unvested carried interest shall vest immediately upon the effectiveness of the Amendment, and the remaining fifty percent (50%) shall vest ratably over a thirty-six (36) month period commencing on the date of the Key Person Event (June 10, 2024). This modified vesting schedule is intended to balance Mr. Whitmore's legitimate economic interests with the Fund's need for a smooth and orderly governance transition.
G. Amendment of Consent Provisions (Section 14.01)
The Amendment will be adopted pursuant to Section 14.01 of the Partnership Agreement, which provides that the Partnership Agreement may be amended with the consent of the General Partner and Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners, excluding the capital commitment attributable to the General Partner's co-investment. The consent solicitation process is described in detail in Section IV below.
IV. Consent Solicitation Mechanics
A. Required Consent Threshold
Approval of the Amendment and the designation of the Successor Key Persons requires the written consent of Limited Partners holding not less than sixty-six and two-thirds percent (66⅔%) of the aggregate capital commitments of all Limited Partners, excluding the capital commitment attributable to the General Partner's co-investment (the "Requisite Consent Threshold").
For purposes of calculating the Requisite Consent Threshold, the relevant figures are as follows:
As of the date of this letter, the Fund has forty-seven (47) Limited Partners of record. Each Limited Partner's consent will be weighted in proportion to such Limited Partner's capital commitment to the Fund, as reflected in the books and records of the Administrator.
B. Consent Deadline
Limited Partners are respectfully requested to deliver their written consents on or before August 23, 2024 (the "Consent Deadline"), which is forty (40) calendar days from the date of this letter.
The ninety (90) calendar-day Cure Period under Section 8.04(c) of the Partnership Agreement commenced on June 10, 2024 and expires on September 8, 2024. The August 23, 2024 Consent Deadline has been established to provide the General Partner with adequate time to receive, tabulate, and verify all consents, to execute the Amendment, and to effect the cure of the Key Person Event in advance of the expiration of the Cure Period. The General Partner believes that this timeline provides a reasonable buffer for administrative processing and any follow-up communications that may be necessary, while affording Limited Partners sufficient time to review the enclosed materials and consult with their advisors.
Limited Partners are strongly encouraged to deliver their consents as promptly as possible to ensure that the Requisite Consent Threshold is achieved well in advance of the Consent Deadline.
C. Form and Delivery of Consent
The enclosed Form of Written Consent of Limited Partners (Exhibit B) should be completed in its entirety and executed by an authorized signatory of the Limited Partner. Each Limited Partner should clearly indicate the following information on the Form of Consent:
(a) the full legal name of the Limited Partner;
(b) the name, title, and signature of the authorized signatory;
(c) the capital commitment amount of the Limited Partner, as reflected in the books and records of the Administrator; and
(d) the date of execution.
Completed and executed Forms of Consent should be returned to:
Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036
Attention: Stephen Adler
Forms of Consent may be delivered by any of the following methods:
•  Hand Delivery to the address specified above;
•  Overnight Courier (such as Severin Partners LLC, Halcyon Partners LLC, or Tarrant & Co.) to the address specified above;
•  Facsimile to Calderwood & Harkness LLP at +1 (212) 555-0147, Attention: Stephen Adler; or
•  Electronic Mail (in PDF format) to sadler@calderwoodharkness.com.
In each case, the General Partner recommends that the delivering Limited Partner retain a copy of the executed Form of Consent and any delivery confirmation for its records.
D. Revocation.  A Limited Partner may revoke its consent at any time prior to the General Partner's formal certification that the Requisite Consent Threshold has been achieved, by delivering a written notice of revocation to Calderwood & Harkness LLP at the address specified above. Any such revocation must clearly identify the Limited Partner and state that the Limited Partner wishes to revoke its previously delivered consent. Revocations delivered after the General Partner's certification that the Requisite Consent Threshold has been achieved shall be of no force or effect.
E. Effectiveness of the Amendment
If the Requisite Consent Threshold is achieved on or before the Consent Deadline of August 23, 2024, the General Partner expects to execute the Amendment and declare it effective within three (3) business days following the achievement of the Requisite Consent Threshold (the "Effective Date"). The General Partner will promptly notify all Limited Partners of the Effective Date by letter or electronic mail.
Upon effectiveness of the Amendment, the suspension of the Investment Period will be lifted, and the Fund will resume its normal investment activities in accordance with the terms of the Partnership Agreement, as amended by the Amendment. The Successor Key Persons will assume their governance roles as described herein and in the Amendment, and the Investment Committee will be constituted in accordance with the procedures set forth in the new Section 8.05 of the Partnership Agreement.
V. Role of the Investor Advisory Committee
The Investor Advisory Committee (the "IAC"), established under Section 9.02 of the Partnership Agreement, consists of five (5) members representing the Fund's largest institutional investors. The current composition of the IAC is as follows:
The IAC has been briefed on the Successor Proposal and the proposed terms of the Amendment in a series of preliminary communications and conference calls with the General Partner and its counsel. A formal meeting of the IAC has been scheduled for July 29, 2024, at which the General Partner will present the Successor Proposal in detail, respond to questions from IAC members and their counsel, and discuss the proposed terms of the Amendment. The General Partner anticipates that the IAC meeting will also address the process by which the IAC will designate the independent member of the Investment Committee contemplated by the proposed new Section 8.05 of the Partnership Agreement.
The IAC is separately represented by Wexford Crane & Albright LLP in connection with its review of and consent to the proposed Amendment. The IAC's legal representation is provided by Helen M. Calloway, Partner, and David Pineda, Senior Associate, at Wexford Crane & Albright LLP, located at 399 Park Avenue, 28th Floor, New York, NY 10022. The fees and expenses of Wexford Crane & Albright LLP incurred in connection with its representation of the IAC shall be borne by the Fund in accordance with Section 9.02(d) of the Partnership Agreement.
Under the proposed Amendment, the IAC will assume the additional responsibility of designating one independent member to the newly created Investment Committee. The General Partner views this additional IAC responsibility as a meaningful enhancement of Limited Partner governance, ensuring that the individuals who oversee the Fund's investment activities include a voice that is independent of the General Partner and accountable to the Limited Partners through their elected representatives on the IAC.
VI. Advisors
The following advisors have been engaged or notified in connection with the Key Person Event, the Successor Proposal, and the consent solicitation process:
Counsel to the General Partner:
Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036
•  Graham Sutherland, Responsible Partner, Funds & Asset Management
•  Pamela Cross, Billing Partner, Funds & Asset Management
•  Stephen Adler, Lead Associate, Funds & Asset Management
•  Theresa Kim, Working Associate, Funds & Asset Management
Calderwood & Harkness LLP has advised the General Partner in connection with the preparation of this letter, the drafting of the Amendment, and the structuring of the consent solicitation process.
Counsel to the Investor Advisory Committee:
Wexford Crane & Albright LLP 399 Park Avenue, 28th Floor New York, NY 10022
•  Helen M. Calloway, Partner
•  David Pineda, Senior Associate
Limited Partners and the IAC are encouraged to consult with their own legal, tax, and financial advisors regarding the Successor Proposal, the Amendment, and the consent solicitation process. Neither the General Partner nor Calderwood & Harkness LLP represents or acts on behalf of any Limited Partner in connection with these matters.
Fund Service Providers:
The following service providers to the Fund have been notified of the Key Person Event and the Successor Proposal and have confirmed the continuation of their respective services without interruption:
•  Auditor: Graystone & Whitfield LLP, George Town, Grand Cayman
•  Administrator: Pinnacle Fund Services (Cayman) Ltd., George Town, Grand Cayman
•  Prime Broker: Halcyon Securities International Ltd., London, United Kingdom
Halcyon Securities International Ltd. has been apprised of the General Partner's continuity plan, including the proposed designation of the Successor Key Persons, and has confirmed that the Fund's prime brokerage arrangements remain in full force and effect. No event of default or termination event has been triggered under the Fund's prime brokerage agreements as a result of the Key Person Event.
VII. Enclosed Documents
The following documents are enclosed with this letter and should be reviewed carefully by each Limited Partner in connection with the Successor Proposal and the consent solicitation:
Exhibit A: Draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017
Exhibit B: Form of Written Consent of Limited Partners — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd.
Each Limited Partner is urged to review both enclosed exhibits in their entirety and to consult with its own legal, tax, and financial advisors before delivering its consent. The summary of the Amendment set forth in Section III of this letter is qualified in its entirety by reference to the full text of the Amendment attached as Exhibit A.
VIII. Contact Information and Questions
Limited Partners with questions regarding the Successor Proposal, the terms of the Amendment, or the consent solicitation process are encouraged to direct their inquiries to either of the following contacts:
Elaine R. Sato Deputy Chief Investment Officer Driftwood Capital Management LLC 680 Lexington Avenue, 31st Floor New York, NY 10022 Telephone: +1 (212) 555-0283
Email: esato@driftwoodcapital.com
Stephen Adler Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036 Telephone: +1 (212) 555-0194
Email: sadler@calderwoodharkness.com
The General Partner and its counsel are committed to making themselves available to all Limited Partners for the purpose of addressing questions and providing additional information as may be reasonably requested in connection with the Successor Proposal and the consent solicitation.
IX. Governing Law
The Partnership Agreement is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflict of laws principles thereof. The proposed Amendment, the consent solicitation, this letter, and all matters arising under or in connection therewith shall likewise be governed by and construed in accordance with the laws of the State of Delaware.
Closing
The General Partner believes that the Successor Proposal represents a strong, well-considered governance framework that will ensure the continuity of the Fund's investment management, align the economic incentives of the Fund's leadership with the interests of the Limited Partners, and provide enhanced protections through the establishment of the Investment Committee, the reduced follow-on investment cap, and the joint Key Person designation. The General Partner is confident that Ms. Sato and Mr. Huang possess the experience, judgment, and institutional knowledge necessary to lead the Fund through this transition and to continue generating attractive risk-adjusted returns for the Limited Partners.
The General Partner urges all Limited Partners to review the enclosed materials carefully, to consult with their own legal, tax, and financial advisors, and to deliver their written consents at the earliest practicable opportunity. Timely action by the Limited Partners is of critical importance to ensure that the Cure Period, which expires on September 8, 2024, is satisfied well in advance of its deadline and that the Fund is able to resume its normal investment activities without further disruption.
The General Partner thanks each of the Limited Partners for their continued confidence in the Fund and for their thoughtful consideration of this Successor Proposal.
DRIFTWOOD CAPITAL MANAGEMENT LLC, as General Partner of Driftwood Absolute Return Fund Ltd.
By: ________
Name: Elaine R. Sato
Title: Deputy Chief Investment Officer and Managing Member
Date: July 15, 2024
Enclosures:
Exhibit A — Draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated as of March 15, 2017
Exhibit B — Form of Written Consent of Limited Partners — First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd.
cc:
Investor Advisory Committee Members:
•  Diana Cortland, Chief Investment Officer, Northvale Public Employees' Retirement System
•  Richard Oshima, Director of Alternative Investments, Sycamore Endowment Partners LP
•  Catherine Mercer, Managing Director, Velthorn Institutional Fund of Funds III, L.P.
•  Thomas Ashworth, Principal, Bridlewood Family Office Holdings Ltd.
•  Nadia Al-Rashid, Senior Portfolio Manager, Atlas Sovereign Wealth Advisory LLC
Wexford Crane & Albright LLP (Helen M. Calloway; David Pineda)
Calderwood & Harkness LLP (Graham Sutherland; Stephen Adler)
Pinnacle Fund Services (Cayman) Ltd.
Metric | Value
Fund NAV (May 31, 2024) | $2,870,000,000
YTD Net Return (after 2/20 fee structure) | +5.4%
YTD Gross Return | +7.2%
Current NAV per Unit | $150.53
High-Water Mark per Unit (set December 31, 2023) | $142.67
Gross Exposure | $5,310,000,000 (1.85× gross leverage)
Net Exposure | $1,720,000,000 (0.60× net)
Number of Limited Partners | 47
Principal | Pre-Amendment Allocation (% of GP's 20%) | Post-Amendment Allocation (% of GP's 20%)
Marcus J. Whitmore | 18.0% (= 3.6% of fund profits) | 9.0% (= 1.8% of fund profits)
Elaine R. Sato | 1.5% (= 0.3% of fund profits) | 7.0% (= 1.4% of fund profits)
Jonathan K. Huang | 0.5% (= 0.1% of fund profits) | 4.0% (= 0.8% of fund profits)
Total | 20.0% | 20.0%
Item | Amount
Total Fund NAV (AUM) | $2,870,000,000
Less: Whitmore co-investment (through GP vehicle) | ($57,400,000)
Less: Sato co-investment (through GP vehicle) | ($14,350,000)
Aggregate LP Capital Commitments (for voting purposes) | $2,798,250,000
Required Consent Threshold (66⅔% of LP commitments) | $1,865,500,000
Member | Commitment | Representative | Title
Northvale Public Employees' Retirement System | $310,000,000 | Diana Cortland (IAC Chair) | Chief Investment Officer
Sycamore Endowment Partners LP | $275,000,000 | Richard Oshima | Director of Alternative Investments
Velthorn Institutional Fund of Funds III, L.P. | $220,000,000 | Catherine Mercer | Managing Director
Bridlewood Family Office Holdings Ltd. | $185,000,000 | Thomas Ashworth | Principal
Atlas Sovereign Wealth Advisory LLC | $150,000,000 | Nadia Al-Rashid | Senior Portfolio Manager
Total IAC Commitments | $1,140,000,000

DRIFTWOOD CAPITAL MANAGEMENT LLC 680 Lexington Avenue, 31st Floor New York, NY 10022

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