ASGI Mesirow Insight Fund, LLC
(formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Financial Statements for the
Year Ended January 31, 2012 with
Report of Independent Registered Public Accounting Firm
ASGI Mesirow Insight Fund, LLC
(formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Table of Contents
Page
| Report of Independent Registered Public Accounting Firm | 1 |
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| Schedule of Investments | 2 |
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| Statement of Assets, Liabilities and Members’ Capital | 3 |
| | |
| Statement of Operations | 4 |
| | |
| Statements of Changes in Members’ Capital | 5 |
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| Statement of Cash Flows | 6 |
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| Financial Highlights | 7 |
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| Notes to Financial Statements | 9 |
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| Supplemental Information | 21 |
 | KPMG LLP Two Financial Center 60 South Street Boston, MA 02111 | |
Report of Independent Registered Public Accounting Firm
The Unitholders and Board of Managers
ASGI Mesirow Insight Fund, LLC:
We have audited the accompanying statement of assets, liabilities and members’ capital, including the schedule of investments, of ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC) (the Fund) as of January 31, 2012, and the related statements of operations and cash flows for the year then ended, the statements of changes in members’ capital for each of the years in the two-year period then ended, and the financial highlights for each of the periods in the four-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of the securities owned as of January 31, 2012, by correspondence with the custodian or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of ASGI Mesirow Insight Fund, LLC as of January 31, 2012, the results of its operations and its cash flows for the year then ended, the changes in members’ capital for each of the years in the two-year period then ended, and the financial highlights for each of the periods in the four-year period then ended, in conformity with U.S. generally accepted accounting principles.
March 28, 2012
| | KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. | |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Schedule of Investments As of January 31, 2012 |
| Strategy | Investments | Cost | | Fair Value | |
| Credit - 5.5% | |
| | HFR RVA Feingold O'Keeffe Fund | $ | 10,616,010 | | $ | 9,969,646 | |
| |
| | | | | | | 9,969,646 | |
| Hedged Equity - 26.3% | |
| | dbX Global Long/Short Equity 7 Fund (Tiger Veda) | | 7,203,652 | | | 7,294,100 | |
| | dbX US Long/Short Equity 9 Fund (Ascend II) | | 7,203,652 | | | 7,211,994 | |
| | HFR HE Ajia Lighthorse China Growth Fund | | 6,681,718 | | | 6,719,273 | |
| | HFR HE Courage Opportunity Fund | | 7,765,868 | | | 8,068,728 | |
| | HFR HE Jade Fund | | 57,540 | | | 30,425 | |
| | HFR HE Victoire Latam Fund | | 9,326,014 | | | 8,475,340 | |
| | HFR RVA Kayne MLP 1.25x Fund | | 3,120,242 | | | 4,380,392 | |
| | HFR RVA Salient MLP 1.25x Fund | | 4,423,485 | | | 5,386,368 | |
| | | | | | | 47,566,620 | |
| Event Driven - 14.3% | |
| | HFR ED Global Fund | | 8,644,090 | | | 9,263,811 | |
| | HFR ED Jana Fund | | 8,671,557 | | | 8,870,353 | |
| | HFR ED York Fund | | 7,554,761 | | | 7,837,066 | |
| | | | | | | 25,971,230 | |
| Macro and Commodity - 23.0% | |
| | dbX Emerging Markets Macro 3 Fund (Brevan Howard EM) | | 7,203,652 | | | 7,421,361 | |
| | dbX Global Macro 8 Fund (MKP) | | 8,554,336 | | | 8,584,857 | |
| | HFR Macro Galtere Commodity Fund | | 10,184,788 | | | 9,395,418 | |
| | HFR MF Beach Fund | | 6,903,497 | | | 6,695,212 | |
| | HFR MF Diversified Select Fund | | 9,180,122 | | | 9,502,035 | |
| | | | | | | 41,598,883 | |
| Relative Value - 20.9% | |
| | dbX Convertible Arbitrage 13 Fund (Waterstone) | | 5,852,967 | | | 5,947,543 | |
| | HFR CA Lazard Rathmore Fund | | 6,405,846 | | | 8,311,110 | |
| | HFR RVA Advent Global Opportunity Fund | | 9,860,330 | | | 10,059,409 | |
| | HFR RVA Marathon Asia Fund | | 4,382,796 | | | 4,395,495 | |
| | HFR RVA Whitebox Fund | | 8,070,651 | | | 9,067,283 | |
| | | | | | | 37,780,840 | |
| Total Investments* (Cost - $157,867,574) - 90.0% | | | 162,887,219 | |
| Other Assets Less Liabilities - 10.0% | | | 18,072,120 | |
| Members' Capital - 100.0% | | $ | 180,959,339 | |
| | Percentages shown are stated as a percentage of Members' Capital as of January 31, 2012. | |
| | |
| * | Non-income producing securities. | |
| Investments by Strategy (as a percentage of total investments) |
| Hedged Equity | 29.2 | % |
| Macro and Commodity | 25.5 | |
| Relative Value | 23.2 | |
| Event Driven | 16.0 | |
| Credit | 6.1 | |
| | 100.0 | % |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Statement of Assets, Liabilities and Members’ Capital As of January 31, 2012 |
| |
| | | | | |
| Investments in Investment Funds, at fair value (cost - $157,867,574) | | $ | 162,887,219 | |
| Cash and cash equivalents | | | 17,910,512 | |
| Receivable for Investment Funds sold | | | 12,345,390 | |
| Investments in Investment Funds paid in advance | | | 5,394,000 | |
| Rebate receivable | | | 40,141 | |
| Other assets | | | 213,305 | |
| Total assets | | | 198,790,567 | |
| | |
| |
| | | | | |
| Payable for units tendered | | | 16,240,175 | |
| Subscriptions received in advance | | | 924,000 | |
| Management fee payable | | | 188,696 | |
| Directors' fees payable | | | 1,200 | |
| Accrued expenses and other liabilities | | | 477,157 | |
| Total liabilities | | | 17,831,228 | |
| | |
| |
| | | | | |
| Total members' capital | | $ | 180,959,339 | |
| | |
Members' Capital per Unit | |
| | | | | |
| ASGI Mesirow Insight Fund I, LLC (139,031.4724 units outstanding) | | $ | 912.2780 | |
| ASGI Mesirow Insight TEI Fund I, LLC (48,074.4603 units outstanding) | | $ | 908.6655 | |
| ASGI Mesirow Insight Fund A, LLC (5,210.9301 units outstanding) | | $ | 974.6034 | |
| ASGI Mesirow Insight TEI Fund A, LLC (5,510.6635 units outstanding) | | $ | 972.9839 | |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Statement of Operations For the Year Ended January 31, 2012 |
| | |
| |
| | | | | |
| Interest | | | 1,320 | |
| Rebate | | | 603,663 | |
| Total investment income | | | 604,983 | |
| | |
| |
| | | | | |
| Management fee | | | 2,231,358 | |
| Professional fees | | | 657,294 | |
| Accounting and administration services fees | | | 164,022 | |
| Registration fees | | | 79,630 | |
| Withholding tax - TEI | | | 76,948 | |
| Custody fees | | | 20,477 | |
| Directors' fees | | | 10,854 | |
| Interest expense | | | 21,665 | |
| Other operating expenses | | | 208,861 | |
| Total expenses | | | 3,471,109 | |
| Net investment loss | | | (2,866,126 | ) |
| | |
Net Realized and Unrealized Gain/(Loss) on Investments | |
| | | | | |
| Net realized loss from investments in Investment Funds | | | (1,302,383 | ) |
| Net change in unrealized appreciation/depreciation from investments in Investment Funds | | | (14,897,702 | ) |
| Total net realized and unrealized loss from investments in Investment Funds | | | (16,200,085 | ) |
| | |
| Net decrease in members' capital resulting from operations | | $ | (19,066,211 | ) |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Statements of Changes in Members’ Capital |
| | | | For the Year Ended January 31, 2012 | | | | For the Year Ended January 31, 2011 | |
| | |
| (Decrease)/Increase in Members' Capital | |
| |
| | |
| Net investment loss | | $ | (2,866,126 | ) | | $ | (1,886,062 | ) |
| Net realized (loss) gain from investments in Investment Funds | | | (1,302,383 | ) | | | 328,826 | |
| Net change in unrealized (depreciation) appreciation on investments in Investment Funds | | | (14,897,702 | ) | | | 15,363,055 | |
| Net (decrease) increase in members' capital resulting from operations | | | (19,066,211 | ) | | | 13,805,819 | |
| | |
| |
| | |
| Issuance of units | | | 51,885,884 | | | | 61,994,000 | |
| Units tendered | | | (32,826,272 | ) | | | (14,592,094 | ) |
| Increase in members' capital derived from capital transactions | | | 19,059,612 | | | | 47,401,906 | |
| | |
| |
| | |
| Total (decrease) increase in members' capital | | | (6,599 | ) | | | 61,207,725 | |
| Beginning of year | | | 180,965,938 | | | | 119,758,213 | |
| End of year | | $ | 180,959,339 | | | $ | 180,965,938 | |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Statement of Cash Flows For the Year Ended January 31, 2012 |
Cash Used in Operating Activities | |
| | |
| Net decrease in members' capital resulting from operations | | $ | (19,066,211 | ) |
Adjustments to reconcile net decrease in members' capital resulting from operations to net cash used in operating activities: | | | | |
| Decrease in investments in Investment Funds paid in advance | | | 11,429,400 | |
| Decrease in rebate receivable | | | 12,980 | |
| Increase in receivable for Investment Funds sold | | | (12,345,390 | ) |
| Increase in other assets | | | (190,167 | ) |
| Decrease in directors' fees payable | | | (1,150 | ) |
| Decrease in management fee payable | | | (7 | ) |
| Increase in accrued expenses and other liabilities | | | 245,717 | |
| Net realized loss from investments in Investment Funds | | | 1,302,383 | |
| Net change in unrealized appreciation/depreciation on investments | | | 14,897,702 | |
| Purchases of Investment Funds | | | (137,248,312 | ) |
| Sales of Investment Funds | | | 125,041,651 | |
| Net cash used in operating activities | | | (15,921,404 | ) |
| | |
Cash Provided by Financing Activities | |
| | |
| Proceeds from issuance of units (net of change in subscriptions received in advance of $(1,639,300)) | | | 50,246,584 | |
| Payments on tender of units (net of change in payable for units tendered of $10,641,043) | | | (22,185,229 | ) |
| Net cash provided by financing activities | | | 28,061,355 | |
| | |
Cash and Cash Equivalents | |
| | |
| Net increase in cash and cash equivalents | | | 12,139,951 | |
| Cash and cash equivalents at beginning of year | | | 5,770,561 | |
| Cash and cash equivalents at end of year | | $ | 17,910,512 | |
| | | | | |
Supplemental disclosure of cash flow information | |
| Cash paid during the year for interest | | $ | 21,665 | |
| | |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
|
| | | ASGI Mesirow Insight Fund I, LLC | |
| | | | For the Year Ended January 31, 2012 | | | | For the Year Ended January 31, 2011 | | | | For the Year Ended January 31, 2010 | | | | For the Period from August 1, 2008 (a) to January 31, 2009 | |
| Per unit operating performance: (For unit outstanding throughout the period) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Members' capital per unit at beginning of period | | $ | 1,013.8471 | | | $ | 932.6283 | | | $ | 875.1644 | | | $ | 1,000.0000 | |
| | | | | | | | | | | | | |
| Income from investment operations: | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net investment loss(b) | | | (14.9160 | ) | | | (11.8110 | ) | | | (13.3449 | ) | | | (7.8778 | ) |
| Net realized and unrealized gain/(loss) from investments | | | (86.6531 | ) | | | 93.0298 | | | | 70.8088 | | | | (116.9578 | ) |
| Total from investment operations | | | (101.5691 | ) | | | 81.2188 | | | | 57.4639 | | | | (124.8356 | ) |
| Members' capital per unit at end of period | | $ | 912.2780 | | | $ | 1,013.8471 | | | $ | 932.6283 | | | $ | 875.1644 | |
| Total return | | | (10.02 | %) | | | 8.71 | % | | | 6.57 | % | | | (12.48 | %) |
| |
| Ratios to average members' capital: | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Expenses(c) (d) | | | 1.89 | % | | | 1.61 | % | | | 1.82 | % | | | 2.07 | % |
Net investment loss(c) (d) | | | (1.55 | %) | | | (1.24 | %) | | | (1.48 | %) | | | (1.71 | %) |
| Members' capital, end of year (in thousands) | | $ | 126,835 | | | $ | 126,148 | | | $ | 85,418 | | | $ | 60,584 | |
| |
| Portfolio turnover | | | 72 | % | | | 73 | % | | | 89 | % | | | 30 | % |
| |
| | |
| | | ASGI Mesirow Insight TEI Fund I, LLC | |
| | | | For the Year Ended January 31, 2012 | | | | For the Year Ended January 31, 2011 | | | | For the Year Ended January 31, 2010 | | | | For the Period from August 1, 2008 (a) to January 31, 2009 | |
Per unit operating performance: (For unit outstanding throughout the period) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Members' capital per unit at beginning of period | | $ | 1,011.4442 | | | $ | 930.9349 | | | $ | 875.1644 | | | $ | 1,000.0000 | |
| | | | | | | | | | | | | |
| Income from investment operations: | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net investment loss(b) | | | (16.3986 | ) | | | (12.3149 | ) | | | (14.9640 | ) | | | (7.8778 | ) |
| Net realized and unrealized gain/(loss) from investments | | | (86.3801 | ) | | | 92.8242 | | | | 70.7345 | | | | (116.9578 | ) |
| Total from investment operations | | | (102.7787 | ) | | | 80.5093 | | | | 55.7705 | | | | (124.8356 | ) |
| Members' capital per unit at end of period | | $ | 908.6655 | | | $ | 1,011.4442 | | | $ | 930.9349 | | | $ | 875.1644 | |
| Total return | | | (10.16 | %) | | | 8.65 | % | | | 6.37 | % | | | (12.48 | %) |
| |
| Ratios to average members' capital: | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Expenses(c) (d) | | | 2.04 | % | | | 1.67 | % | | | 2.01 | % | | | 2.07 | % |
Net investment loss(c) (d) | | | (1.71 | %) | | | (1.30 | %) | | | (1.67 | %) | | | (1.71 | %) |
| Members' capital, end of year (in thousands) | | $ | 43,684 | | | $ | 45,165 | | | $ | 34,340 | | | $ | 30,927 | |
| Portfolio turnover | | | 72 | % | | | 73 | % | | | 89 | % | | | 30 | % |
| |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Financial Highlights (continued) |
| | ASGI Mesirow Insight Fund A, LLC | |
| | | For the Year Ended January 31, 2012 | | | For the Period from September 1, 2010 (a) to January 31, 2011 | |
Per unit operating performance: (For unit outstanding throughout the period) | | | | | | | | |
| | | | | | | | | |
| Members' capital per unit at beginning of period | | $ | 1,083.1116 | | | $ | 1,000.0000 | |
| | | | | |
| Income from investment operations: | | | | |
| | | | | | | | | |
Net investment income/(loss)(b) | | | (15.9350 | ) | | | (5.3363 | ) |
| Net realized and unrealized gain/(loss) from investments | | | (92.5732 | ) | | | 88.4479 | |
| Total from investment operations | | | (108.5082 | ) | | | 83.1116 | |
| Members' capital per unit at end of period | | $ | 974.6034 | | | $ | 1,083.1116 | |
| Total return | | | (10.02 | %) | | | 8.31 | % |
| |
| Ratios to average members' capital: | | | | |
| | | | | | | | | |
Expenses(c) (d) | | | 1.92 | % | | | 1.61 | % |
Net investment income/(loss)(c) (d) | | | (1.59 | %) | | | (1.23 | %) |
| Members' capital, end of year (in thousands) | | $ | 5,079 | | | $ | 4,255 | |
| Portfolio turnover | | | 72 | % | | | 73 | % |
|
| | | ASGI Mesirow Insight TEI Fund A, LLC | |
| | | | For the Year Ended January 31, 2012 | | | | For the Period from September 1, 2010 (a) to January 31, 2011 | |
Per unit operating performance: (For unit outstanding throughout the period) | | | | | | | | |
| | | | | | | | | |
| Members' capital per unit at beginning of period | | $ | 1,082.8959 | | | $ | 1,000.0000 | |
| | | | | |
| Income from investment operations: | | | | |
| | | | | | | | | |
Net investment income/(loss)(b) | | | (17.4161 | ) | | | (5.5458 | ) |
| Net realized and unrealized gain/(loss) from investments | | | (92.4959 | ) | | | 88.4417 | |
| Total from investment operations | | | (109.9120 | ) | | | 82.8959 | |
| Members' capital per unit at end of period | | $ | 972.9839 | | | $ | 1,082.8959 | |
| Total return | | | (10.15 | %) | | | 8.29 | % |
| |
| Ratios to average members' capital: | | | | |
| | | | | | | | | |
Expenses(c) (d) | | | 2.03 | % | | | 1.66 | % |
Net investment income/(loss)(c) (d) | | | (1.69 | %) | | | (1.28 | %) |
| Members' capital, end of year (in thousands) | | $ | 5,362 | | | $ | 5,397 | |
| Portfolio turnover | | | 72 | % | | | 73 | % |
| (a) | Inception date. |
| (b) | Based on average units outstanding. |
| (c) | The expenses and net investment income/(loss) ratios do not include expenses of the Investment Funds in which the Master Fund invests. |
| (d) | Annualized based on number of days during the period. |
See Notes to Financial Statements.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements |
1. Organization and Description of Business
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC) (the “Master Fund”), a Delaware limited liability company, has been registered as an investment company under the Investment Company Act of 1940 (the “1940 Act”) since August 1, 2008. The Master Fund is a closed-end management investment company. Alternative Strategies Group, Inc. (the “Adviser” or “ASGI”), a North Carolina corporation, is the investment adviser to the Master Fund.
Effective December 1, 2011 (the “Effective Date”), the name of the Master Fund changed from Wells Fargo Multi-Strategy 100 Master Fund I, LLC to ASGI Mesirow Insight Fund, LLC. As of the Effective Date, Wells Fargo Alternative Asset Management, LLC (“WFAAM”) resigned as adviser to the Master Fund, and its affiliate, ASGI, was appointed as the new adviser. On the Effective Date, ASGI and the Master Fund engaged Mesirow Advanced Strategies, Inc. (the "Sub-adviser"), a registered investment adviser under the Investment Advisers Act of 1940, to formulate and implement the Master Fund's investment program.
The Master Fund operates under a “master fund/feeder fund” structure whereby an individual feeder fund’s shareholders indirectly invest substantially all of their investable assets in the Master Fund. The Master Fund’s shareholders are collectively referred to as the “Feeder-Funds”. Effective December 1, 2011, Wells Fargo Multi- Strategy 100 Fund I, LLC changed its name to ASGI Mesirow Insight Fund I, LLC; Wells Fargo Multi-Strategy 100 TEI Fund I, LLC changed its name to ASGI Mesirow Insight TEI Fund I, LLC; Wells Fargo Multi-Strategy 100 Fund A, LLC changed its name to ASGI Mesirow Insight Fund A, LLC; and Wells Fargo Multi-Strategy 100 TEI Fund A, LLC changed its name to ASGI Mesirow Insight TEI Fund A, LLC. At January 31, 2012, ASGI Mesirow Insight Fund I, LLC (the “Taxable Investor Fund”), ASGI Mesirow Insight TEI Fund I, LLC (the “TEI Fund”), ASGI Mesirow Insight Fund A, LLC (the “Taxable Investor Fund A”) and ASGI Mesirow Insight TEI Fund A, LLC (the “TEI Fund A”) were the only shareholders invested in the Master Fund. The TEI Fund invests in the Master Fund through Wells Fargo Multi-Strategy 100 TEI Fund I, LDC (the “Offshore Feeder Fund”) and the TEI Fund A invests in the Master Fund through Wells Fargo Multi-Strategy 100 TEI Fund A, LDC (the “Offshore Feeder Fund A”). The Taxable Investor Fund, TEI Fund, Taxable Investor Fund A and TEI Fund A together are referred to as the “Feeder Funds”. The Master Fund and the Feeder Funds together are referred to as the “Funds”.
The investment objective of the Master Fund is to provide attractive risk-adjusted returns with moderate volatility and moderate correlation to the broad equity and debt markets. Generally, the Master Fund pursues its investment objective principally by allocating its capital among various collective investment vehicles, commonly referred to as “hedge funds” (the “Investment Funds”), selected by the Sub-adviser in consultation with the Adviser. The Sub-adviser recommends the Investment Funds in which the Master Fund invests and the relative allocations to each Investment Fund to the Adviser and the Master Fund. The Master Fund may, in addition to investing in Investment Funds, also make investments directly, including, without limitation, for purposes of hedging certain exposures. The Sub-adviser may cause the Master Fund to maintain such cash holdings as the Sub-adviser may from time to time deem to be appropriate, and those holdings may at times comprise a material portion of the Master Fund’s assets. There can be no assurance that the Master Fund’s investment objective will be achieved or that the Master Fund will not incur losses.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
Under the Master Fund's organizational documents, its officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Master Fund. In addition, in the normal course of business, the Master Fund may enter into contracts with service providers that contain a variety of indemnification clauses. The Master Fund's maximum exposure under these arrangements is dependent on future claims that may be made against the Master Fund and, therefore, cannot be estimated.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Master Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).
(a) Valuation of Investments in Investment Funds – The Fund values its investments in Investment Funds at fair value in accordance with procedures established in good faith by the Master Fund’s Board of Managers (the “Master Fund Board”). The value ordinarily will be the value of an interest in a Investment Fund determined by the investment manager of the Investment Fund in accordance with the policies established by the Investment Fund, absent information indicating that such value does not represent the fair value of the interest. The Fund could reasonably expect to receive this amount from the Investment Fund if the Master Fund’s interest were redeemed at the time of valuation, based on information reasonably available at the time the valuation is made and that the Fund believes to be reliable. Due to the nature of the investments held by the Investment Funds, changes in market conditions and the economic environment may significantly impact the value of the Investment Funds and the fair value of the Master Fund’s interests in the Investment Funds. Furthermore, changes to the liquidity provisions of the Investment Funds may significantly impact the fair value of the Master Fund’s interests in the Investment Funds. Under some circumstances, the Master Fund or the Adviser may determine, based on other information available to the Master Fund or the Adviser, that an Investment Fund’s reported valuation does not represent fair value. If it is determined that the Investment Fund’s reported valuation does not represent fair value, the Adviser may choose to make adjustments to reflect the fair value. As of January 31, 2012, no such adjustments were deemed necessary by the Adviser. The Master Fund Board has also established procedures for the valuation of investment securities, if any, held directly by the Master Fund.
Accounting Standards Update ("ASU") 2009-12 permits a reporting entity to measure the fair value of an investment that does not have a readily determinable fair value, based on the net asset value per share (the “NAV”) of the investment as a practical expedient, without further adjustment, unless it is probable that the investment will be sold at a value significantly different than the NAV. If the practical expedient NAV is not as of the reporting entity’s measurement date, then the NAV should be adjusted to reflect any significant events that may change the valuation. In using the NAV as a practical expedient, certain attributes of the investment, that may impact the fair value of the investment, are not considered in measuring fair value. Attributes of those investments include the investment strategies of the investees and may also include, but are not limited to, restrictions on the investor’s ability to redeem its investments at the measurement date and any unfunded commitments. The Master Fund is permitted to invest in alternative investments that do not have a readily determinable fair value, and as such, has elected to use the NAV as calculated on the reporting entity’s measurement date as the fair value of the investment. A detailed description of each investment in the Master Fund by strategy can be found in the tables within the Schedule of Investments.
(b) Income taxes – The Master Fund, as a limited liability company, is classified as a partnership for U.S. federal income tax purposes; accordingly, no provision for federal income taxes is required.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
In accounting for income taxes, the Master Fund follows the guidance in Financial Accounting Standards Board (“FASB”) ASC 740 (formerly FASB Interpretation No. 48), as amended by ASU 2009-06, Accounting for Uncertainty in Income Taxes. ASC 740 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. There were no uncertain tax positions as of January 31, 2012 or January 31, 2011. The Master Fund filed federal income tax returns from 2008 through 2010 and it remains subject to examination by the Internal Revenue Service. The Master Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. For the year ended January 31, 2012, the Master Fund did not incur any interest or penalties.
(c) Security transactions and investment income – The Master Fund’s transactions are recorded on the effective dates of the transactions. Realized gains and losses on the Master Fund transactions are determined on the average cost basis. Interest income is recognized on the accrual basis. The Master Fund will indirectly bear a portion of the Investment Funds’ income and expenses, including management fees and incentive fees charged by the Investment Funds. That income and those expenses are recorded in the Master Fund’s financial statements as unrealized appreciation/depreciation and not as income or expense on the statement of operations or in the financial highlights.
(d) Cash and Cash Equivalents – The Master Fund maintains cash in an interest-bearing money market account of a bank, which, at times, may exceed federally insured limits. The Master Fund has not experienced any losses in such account and does not currently believe it is exposed to any significant credit risk on such bank deposits. All interest income earned will be paid to the Master Fund.
(e) Rebate Income – A portion of the management fees charged by the investment managers of the Investment Funds that the Master Fund invests in is rebated to the Master Fund and is recognized on the accrual basis.
(f) Distributions – The Master Fund presently does not intend to make periodic distributions of its net income or gains, if any, to investors (the “Members”). The amount and times of distributions, if any, will be determined in the sole and absolute discretion of the Master Fund Board.
(g) Use of estimates – The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statement. Actual results could differ from those estimates.
(h) Operating Expenses – The Master Fund bears all expenses incurred in its business and operations. Expenses include, but are not limited to, fund accounting and administrative expenses, extraordinary expenses, legal, tax, audit, escrow and printing expenses. Operating costs also include, by way of example: (1) investment related expenses, including, but not limited to, brokerage commissions, research fees, and other transactions costs; (2) interest and commitment expense on any borrowings; and (3) all costs and expenses associated with the registration of the Master Fund under, and compliance with, any applicable federal and state laws. Such expenses are allocated pro rata among all Members.
(i) Third party service providers – BNY Mellon Investment Servicing (US) Inc. (the “Administrator”) serves as the Administrator to the Master Fund. Under an agreement made between the Administrator and the Master
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
Fund, the following annual fee will be calculated upon the Master Fund’s beginning of the month’s net assets and paid monthly:
0.075% of the first $200 million of aggregate beginning of month net assets;
0.060% of the next $200 million of aggregate beginning of month net assets; and
0.040% of aggregate beginning of month net assets in excess of $400 million.
Asset-based fees will not be charged to the Feeder Funds; provided that 100% of the assets of the Feeder Fund invest into the Master Fund.
The Master Fund also pays the Administrator certain fixed fees for tax preparation and other services.
The Bank of New York Mellon (the “Custodian”) serves as the Custodian to the Master Fund. Under an agreement made between the Custodian and the Master Fund, a monthly fee is paid to the Custodian based on gross ending assets at the end of each month.
(j) Recent accounting pronouncements – In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS". This ASU amends FASB ASC Topic 820, "Fair Value Measurement", to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. At this time, management is evaluating implications of adopting ASU No. 2011-04 and its impact on the Fund’s financial statements.
3. Investment Advisory Agreement
The Adviser is registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (“Advisers Act”). The Adviser also serves as investment adviser to other investment funds, some of which utilize a multi-manager, multi-strategy investment approach. Although the Adviser is registered with the CFTC as a “commodity trading adviser,” it operates the Master Fund as if it was exempt from registration under CFTC Rule 4.14(a)(8). The Fund is not required to register as a “commodity pool operator” pursuant to CFTC Rule 4.5. However, recently adopted amendments to Rule 4.5 alter the criteria required for the Adviser to rely on the exemption from registration as a “commodity pool operator” with respect to the Master Fund. Certain aspects of the amended rule are yet to be determined, and such determinations may dictate the appropriate course of action for the Master Fund with respect to its CFTC compliance obligations.
Subject to policies adopted by the Master Fund Board and applicable law, the Adviser is responsible for appointing the Sub-adviser to manage the Fund’s investments, monitoring the Sub-adviser’s management of the Master Fund, and implementing the Master Fund’s compliance program.
Pursuant to an agreement with the Adviser and the Fund, the Sub-adviser is responsible for the selection and monitoring of Investment Funds as well as direct investments of the Master Fund, and for day-to-day management of the Master Fund’s investment activities and holdings.
The Master Fund pays the Adviser each month a fee (“Management Fee”) equal to one-twelfth of 1.25% of the aggregate net asset value of outstanding units of the Master Fund determined as of the last business day of that
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
month (before any repurchases of units). The management fee payable at January 31, 2012 was $188,696. The Adviser pays the Sub-adviser a portion of the Management Fee as described in the sub-advisory agreement among the Adviser, Sub-adviser and the Master Fund.
4. Investment Transactions
Purchases of Investment Funds for the year ended January 31, 2012 were $137,248,312 and proceeds from sales of Investment Funds for the year ended January 31, 2012 were $125,041,651.
5. Investments in Investment Funds
The Adviser and Sub-adviser monitor the performance of Investment Funds. Such monitoring procedures include, but are not limited to, monitoring market movements in the Investment Funds’ portfolio investments, comparing performance to industry benchmarks, in depth conference calls and site visits with the Investment Fund’s investment manager.
The Sub-adviser actively allocates, and from time to time reallocates, the Master Fund’s assets among certain of the various Investment Funds. While redemptions are permitted as noted in the table below for the Investment Funds, such redemptions may be suspended at any time upon the election of the management of the Investment Funds.
The investment managers of the Investment Funds are not affiliated with the Adviser or the Sub-Adviser.
The following table lists the Master Fund’s investments in the Investment Funds for the year ended January 31, 2012, none of which was a related party. The Master Fund indirectly bears fees and expenses as an investor in the Investment Funds. Each Investment Fund will pay the investment manager of the Investment Fund a management fee. The fee rate will vary and is expected to range from 1.10% to 2.60% per annum of the net asset value of that Investment Fund. Additionally, the investment manager of an Investment Fund will generally receive an incentive allocation from each investment ranging from 0% to 20% of any net new appreciation of that series as of the end of each performance period for which an incentive allocation is determined.
Information about the underlying investments held by the Investment Funds is not readily available, so it is unknown whether the Investment Funds hold any single investment whereby the Master Fund’s proportionate share equals 5% of each Investment Fund's net assets at January 31, 2012.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
| Investments in Investment Funds | | % of Master Fund's Total Fair Value | | | Fair Value | | | Net Change in Unrealized Appreciation (Depreciation) | | | Realized Gain (Loss) | | Redemptions Permitted |
| dbX Convertible Arbitrage 13 Fund (Waterstone) | | | 3.6 | | | $ | 5,947,543 | | | $ | 94,576 | | | $ | — | | Monthly |
| dbX Emerging Markets Macro 3 Fund (Brevan Howard EM) | | | 4.6 | | | | 7,421,361 | | | | 217,709 | | | | — | | Weekly |
| dbX Global Long/Short Equity 7 Fund (Tiger Veda) | | | 4.5 | | | | 7,294,100 | | | | 90,448 | | | | — | | Monthly |
| dbX Global Macro 8 Fund (MKP) | | | 5.3 | | | | 8,584,857 | | | | 30,521 | | | | — | | Monthly |
| dbX US Long/Short Equity 9 Fund (Ascend II) | | | 4.4 | | | | 7,211,994 | | | | 8,342 | | | | — | | Weekly |
| HFR CA Lazard Rathmore Fund | | | 5.1 | | | | 8,311,110 | | | | (583,636 | ) | | | 197,670 | | Monthly |
| HFR DS Feingold O'Keeffe Fund | | | — | | | | — | | | | (568,482 | ) | | | 195,447 | | Monthly |
| HFR DS Tiedemann Fund | | | — | | | | — | | | | (104,412 | ) | | | (3,935 | ) | Monthly |
| HFR ED Courage Special Situations Fund | | | — | | | | — | | | | 408,318 | | | | (297,622 | ) | Monthly |
| HFR ED Global Fund | | | 5.7 | | | | 9,263,811 | | | | 111,524 | | | | 195,227 | | Monthly |
| HFR ED Jana Fund | | | 5.4 | | | | 8,870,353 | | | | 198,797 | | | | (99,144 | ) | Monthly |
| HFR ED York Fund | | | 4.8 | | | | 7,837,066 | | | | (187,964 | ) | | | 29,077 | | Monthly |
| HFR EM Advantage Fund | | | — | | | | — | | | | — | | | | 31,626 | | Closed |
| HFR EM Outrider Fund | | | — | | | | — | | | | (1,094,115 | ) | | | 1,593,806 | | Monthly |
| HFR HE 360 Fund | | | — | | | | — | | | | 348,950 | | | | (1,728,842 | ) | Monthly |
| HFR HE Ajia Lighthorse China Growth Fund | | | 4.1 | | | | 6,719,273 | | | | (2,341,077 | ) | | | 892,427 | | Monthly |
| HFR HE Ardsley Renewable Energy Fund | | | — | | | | — | | | | — | | | | (563,160 | ) | Monthly |
| HFR HE CastleRock Fund* | | | — | | | | — | | | | (835,723 | ) | | | (1,219,512 | ) | Monthly |
| HFR HE Courage Opportunity Fund | | | 5.0 | | | | 8,068,728 | | | | 302,860 | | | | (3,726 | ) | Monthly |
| HFR HE Jade Fund | | | — | ** | | | 30,425 | | | | (6,301,623 | ) | | | (908,418 | ) | Closed |
| HFR HE Martin Currie Performance Fund | | | — | | | | — | | | | — | | | | (425,562 | ) | Monthly |
| HFR HE Turner Select Opportunities Fund | | | — | | | | — | | | | — | | | | (95,767 | ) | Monthly |
| HFR HE Victoire Latam Fund | | | 5.2 | | | | 8,475,340 | | | | (850,673 | ) | | | (103,286 | ) | Monthly |
| HFR MA Select Opportunity Fund | | | — | | | | — | | | | (318,067 | ) | | | 574,548 | | Monthly |
| HFR MA Shorewater Fund | | | — | | | | — | | | | (126,082 | ) | | | 145,366 | | Monthly |
| HFR MA Strategic Fund | | | — | | | | — | | | | (395,742 | ) | | | (238,766 | ) | Monthly |
| HFR Macro Galtere Commodity Fund | | | 5.8 | | | | 9,395,418 | | | | (920,270 | ) | | | (2,812 | ) | Monthly |
| HFR Macro GAM Global Rates Fund | | | — | | | | — | | | | (387,986 | ) | | | (14,664 | ) | Monthly |
| HFR MF Beach Fund | | | 4.1 | | | | 6,695,212 | | | | (407,156 | ) | | | 13,399 | | Monthly |
| HFR MF Diversified Select Fund | | | 5.8 | | | | 9,502,035 | | | | 281,335 | | | | 11,875 | | Monthly |
| HFR MN Sabre Style Arbitrage Fund | | | — | | | | — | | | | 88,445 | | | | (326,336 | ) | Monthly |
| HFR RVA Advent Global Opportunity Fund | | | 6.2 | | | | 10,059,409 | | | | (960,159 | ) | | | 218,435 | | Monthly |
| HFR RVA Constellation Fund | | | — | | | | — | | | | (47,218 | ) | | | 155,949 | | Monthly |
| HFR RVA Feingold O'Keeffe Fund | | | 6.1 | | | | 9,969,646 | | | | (1,376,104 | ) | | | 18,875 | | Monthly |
| HFR RVA Kayne MLP 1.25x Fund | | | 2.7 | | | | 4,380,392 | | | | 114,646 | | | | 278,156 | | Monthly |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
| Investments in Investment Funds | | % of Master Fund's Total Fair Value | | Fair Value | | Net Change in Unrealized Appreciation (Depreciation) | | Realized Gain (Loss) | | Redemptions Permitted |
| HFR RVA Marathon Asia Fund | | | 2.7 | | | $ | 4,395,495 | | | $ | 12,699 | | | $ | — | | Monthly |
| HFR RVA Salient MLP 1.25x Fund | | | 3.3 | | | | 5,386,368 | | | | 570,736 | | | | 92,885 | | Monthly |
| HFR RVA Whitebox Fund | | | 5.6 | | | | 9,067,283 | | | | 28,881 | | | | 84,401 | | Monthly |
| Total Investments in Trusts | | | 100.0 | % | | $ | 162,887,219 | | | $ | (14,897,702 | ) | | $ | (1,302,383 | ) | |
* HFR HE CastleRock Fund was formerly known as the HFR HE Systematic Fund.
** Amount rounds to less than 0.1%.
The following is a summary of the investment strategies of the investments in the Investment Funds held in the Master Fund as of January 31, 2012.
Relative Value Strategies. Relative value strategies encompass a wide range of investment techniques that are intended to profit from pricing inefficiencies. Relative value strategies generally involve taking a position in one instrument and simultaneously taking an offsetting position in a related instrument in an attempt to profit from incremental changes in the price differential. Relative value strategies are implemented in a manner intended to substantially limit, if not entirely remove, the impact of market direction on performance. Examples of relative value strategies are (a) convertible bond arbitrage, in which an Investment Fund is long a convertible bond and short the issuer’s common stock in an attempt to profit from the mispricing between the two securities, (b) volatility arbitrage, in which an Investment Fund invests in long and short volatility positions, typically through options, (c) capital structure arbitrage, in which an Investment Fund is long an issuer's security that is senior or junior to securities elsewhere in the issuer's capital structure that the Investment Fund takes a short position in, with an expectation that the relative prices of the issuer’s two securities will converge, and (d) strict market neutral, which is typically a quantitative strategy in which long and short positions are taken in equal weight, with the aim of removing market bias.
Event Driven Strategies. Event driven strategies generally seek to profit from anticipated outcomes of company-specific or transaction-specific events. Company events that serve as investment catalysts for event managers include mergers, acquisitions, transfers of assets, tender offers, exchange offers, recapitalizations, liquidations, divestitures, spin-offs, equity restructurings, and reorganizations. Event driven strategies rely upon the accurate forecasting of the outcome of particular events in addition to high quality valuation analyses. Investment Funds employing event strategies may invest long, short, or both, and generally do not rely on market direction for results. Examples of event driven strategies include merger arbitrage, in which an Investment Fund will be long the stock of a merger target while shorting the stock of the acquiring company, and event equity, in which an Investment Fund invests in a spin-off, recapitalization, or similar event that (unlike merger arbitrage) does not have a defined time frame or announced target price.
Hedged Equity Strategies. Hedged equity Investment Funds primarily invest in stocks of companies of varying market capitalizations. Such companies are primarily listed in the U.S., European, and developed Asian equities markets, although Investment Funds may invest in equity instruments in other regions, and may also invest a portion of assets in certain non-equity related securities. Hedged equity Investment Funds generally take both long and short positions or utilize other hedged investment approaches designed to control (but not eliminate) market exposure. Hedged equity Investment Funds tend to have a defined, fundamental investment philosophy, much like that of a traditional equity fund, and they generally implement that philosophy on both
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
the long and short sides of the market. The hedged equity strategies to which the Fund may have exposure include opportunistic, loose neutral, long-biased, and short-biased. Opportunistic Investment Funds take both long and short positions in equity securities and derivatives at levels of exposure that vary depending on their investment outlook. Opportunistic strategies are typically expected to profit from stock picking skills, as well as portfolio risk management, and may use fundamental, bottom-up, and top-down sector and macro analysis. Opportunistic Investment Funds may have net short exposure to equity markets at points in time, but typically are expected to have a long bias over a market cycle and many will have net exposures in the 20% to 50% range. Loose neutral strategies generally involve being simultaneously long and short equity portfolios of the same size within a geographic region or sector and are typically intended to profit from market inefficiencies. Loose neutral managers typically maintain net exposure between 20% short and 20% long. Long-biased Investment Funds typically invest both long and short, but have a net long exposure to the equity markets (generally greater than 50% to 70% net long, although the Sub-adviser may invest with Investment Funds that have 100% long exposure), such that their strategies can be expected to perform better in rising markets. Investment Funds may utilize niche strategies, focusing on growth or value stocks, small or large capitalization companies, particular industries, or a particular geographical region or sector. Short-biased Investment Funds are a sub-set of hedged equity strategies that typically maintain net short exposure to equity markets by taking short positions in companies whose equities they expect to decline in price. The Sub-adviser generally invests in short-biased managers in order to offer greater diversification of short selling exposure. The Sub-adviser may utilize short-biased Investment Funds to decrease or hedge long equity exposure resulting from long positioning of other Investment Funds. Short exposure may be taken through the use of short-selling, or through exchange traded or over-the-counter derivative instruments such as futures, options, and swaps.
Credit Strategies. Credit strategies commonly invest long and short in debt obligations of public and private companies to provide exposure to credit and/or volatility risks associated with those asset classes. For example, credit funds may invest long and short in debt obligations of companies that are in a period of stress due to, for instance, operational difficulties, financial duress, or bankruptcy proceedings. Long-biased credit funds typically have a net long exposure greater than 50%. Long/short credit funds generally maintain net exposure between 50% short and 50% long. Short-biased credit funds generally maintain a net short exposure greater than 50% net short. Multi-strategy credit funds invest across multiple credit strategies. An Investment Fund may make opportunistic allocations of capital across various structured product assets. Structured product transactions typically involve securities that entitle an Investment Fund to receive payments based primarily on the cash flows or market value of a specified pool of financial assets. Examples of structured product investments include collateralized bond, loan, and debt obligations as well as synthetic positions replicating such obligations, residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities.
Macro and Commodity Strategies. Macro and commodity strategies typically engage in an analysis of economic, political, and financial market conditions incorporating a variety of macro and micro considerations including, but not limited to, the business cycle, central bank policy, the regulatory and political environment, demographics, and fiscal policy in an effort to identify investment opportunities across a wide range of investment instruments. The macro and commodity investment approach is wide ranging, attempting to identify potential market opportunities irrespective of market sector, instrument or asset traded, or geography. Investment Funds may use a number of trading strategies in an attempt to achieve their investment objectives including, but not limited to, futures investing, equity long/short strategies, and credit-related strategies. The various techniques that Investment Funds employ may be used as independent profit opportunities, as well as to hedge existing positions. To implement macro and commodity strategies, Investment Funds may trade securities of all kinds, derivative instruments (including, but not limited to, forwards, swaps, swaptions, collars,
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
caps, floors, and other types of over-the-counter derivatives, as well as exchange-traded derivatives, including options, futures, and options on futures) on currencies, interest rates, commodities, and other types of financial and non-financial underlyings, or other transactions with similar substantive or economic effect, and other investments of all types and kinds.
While redemptions are permitted as noted in the table above for the Investment Funds, such redemptions may be deferred or suspended at any time upon the election of the investment manager of the Investment Fund. Moreover, certain funds may amend their liquidity provisions or otherwise further restrict the Master Fund's ability to make withdrawals from those funds. The Master Fund had no unfunded commitments as of January 31, 2012.
The investments in Investment Funds paid in advance of $5,394,000 on the Statement of Assets, Liabilities and Members' Capital relates to cash paid prior to the year ended January 31, 2012 for investments in Investment Funds effective February 1, 2012.
6. Fair Value Measurements
The Master Fund measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of the fair value hierarchy are:
| | ● | Level 1 – Unadjusted quoted prices for identical securities in an active market. Since valuations are based on quoted prices that are readily-accessible at the measurement date, valuation of these securities does not entail a significant degree of judgment. |
| | | |
| | ● | Level 2 – Quoted prices in non-active markets for which all significant inputs are observable either directly or indirectly. Level 2 inputs may also include pricing models whose inputs are observable or derived principally from or corroborated by observable market data. |
| | | |
| | ● | Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value and unobservable. Little if any market activity exists for Level 3 securities. |
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to fair value.
The Adviser considers subscriptions and redemption rights, including any restrictions on the disposition of the interest, in its determination of fair value. Investments in the Investment Funds are included in Level 2 of the fair value hierarchy if the Fund has the ability to redeem its investment within 90 days of fiscal year end by providing redemption notice within 90 days of fiscal year end. All other investments in Investment Funds are classified as Level 3.
The Fund recognizes transfers into and out of the levels indicated above at the end of the reporting period. There was a transfer from Level 2 to Level 3 for the year ended January 31, 2012 due to an Investment Fund held by the Master Fund being liquidated. The Investment Fund has frozen all pending redemption orders and is no longer accepting new subscriptions or redemption requests. The Master Fund’s units in the Investment Fund will be redeemed on a pro-rata basis as the Investment Fund is liquidated.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Master Fund's members' capital as of January 31, 2012 is as follows:
| Description | | Total Fair Value at January 31, 2012 | | | Level 1 Quoted Prices | | | Level 2 Other Significant Observable Inputs | | | Level 3 Significant Unobservable Inputs | |
| Credit | | $ | 9,969,646 | | | $ | — | | | $ | 9,969,646 | | | $ | — | |
| Hedged Equity | | | 47,566,620 | | | | — | | | | 47,536,195 | | | | 30,425 | |
| Event Driven | | | 25,971,230 | | | | — | | | | 25,971,230 | | | | — | |
| Macro and Commodity | | | 41,598,883 | | | | — | | | | 41,598,883 | | | | — | |
| Relative Value | | | 37,780,840 | | | | — | | | | 37,780,840 | | | | — | |
| Total Investments | | $ | 162,887,219 | | | $ | — | | | $ | 162,856,794 | | | $ | 30,425 | |
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:
| | | Investments in Investment Funds - Hedged Equity | |
| | | | |
| Balance, as of February 1, 2011 | | $ | - | |
| Realized gain (loss) | | | - | |
| Change in unrealized appreciation/(depreciation) | | | - | |
| Purchases | | | - | |
| Sales | | | - | |
| Transfers into Level 3 | | | 30,425 | |
| Transfers out of Level 3 | | | - | |
| Balance, as of January 31, 2012 | | $ | 30,425 | |
The net change in unrealized appreciation/(depreciation) on Level 3 investments in Investment Funds still held as of January 31, 2012 is $0.
7. Capital Share Transactions
The Master Fund intends to accept initial and additional subscriptions for units made after the closing date and the commencement of the Master Fund’s investment operations only once each month, effective as of the opening of business on the first business day in that month at the relevant net asset value per unit of the Master Fund as of the close of business on the last business day of the prior month. The Master Fund Board may discontinue accepting subscriptions at any time.
To provide a limited degree of liquidity to Members, the Master Fund may from time to time offer to repurchase units pursuant to written tenders by Members. Repurchases will be made at such times, in such amounts and on such terms as may be determined by the Master Fund Board in its sole discretion.
The Feeder Funds' assets consist primarily of interests in the Master Fund. With respect to the TEI Fund and the TEI Fund A, these interests are held through the Offshore Feeder Fund and the Offshore Feeder Fund A,
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
respectively. The Master Fund Board expects that the Master Fund will conduct repurchase offers on a quarterly basis in order to permit the Feeder Funds to meet their obligations under their repurchase offers.
For the year ended January 31, 2012, transactions in the Master Fund's interest were as follows:
| | | Issuance (in units) | | | Issuance | | | Tender (in units) | | | Tender | |
| | | | | | | | | | | | | |
| Taxable Investor Fund | | | 39,350 | | | $ | 37,299,120 | | | | (24,744 | ) | | $ | (23,198,471 | ) |
| | | | | | | | | | | | | | | | | |
| Taxable Investor Fund A | | | 1,511 | | | | 1,523,100 | | | | (229 | ) | | | (222,794 | ) |
| | | | | | | | | | | | | | | | | |
| TEI Fund | | | 13,525 | | | | 12,370,064 | | | | (10,105 | ) | | | (9,270,678 | ) |
| | | | | | | | | | | | | | | | | |
| TEI Fund A | | | 663 | | | | 693,600 | | | | (137 | ) | | | (134,329 | ) |
| | | | 55,049 | | | $ | 51,885,884 | | | | (35,215 | ) | | $ | (32,826,272 | ) |
8. Risk Factors
An investment in the Master Fund involves various risks. The Master Fund allocates assets to Investment Funds that invest in and actively trade securities and other financial instruments using a variety of strategies and investment techniques with significant risk characteristics, including the risks arising from the volatility of the equity, fixed income, commodity and currency markets, the risks of borrowings and short sales, the risks arising from leverage associated with trading in the equities, currencies and over-the-counter derivatives markets, the illiquidity of derivative instruments and the risk of loss from counterparty defaults. No guarantee or representation is made that the investment program will be successful.
9. Line of Credit Arrangements
On December 28, 2011, the Fund entered into an agreement with Deutsche Bank for a committed, secured line of credit. The facility had the following terms: (a) interest rate of applicable LIBOR rate plus 1.00% per annum, (b) a commitment fee of 0.65% per annum of the maximum principal amount, and (c) a committed amount of $40,000,000.
Through January 31, 2012, the Fund had weighted average borrowings of $19,079,796. The interest rate on borrowings for the period ended January 31, 2012 was 1.58%. As of January 31, 2012, there was no outstanding balance under the line of credit facility.
The Fund is required to meet certain financial covenants, such as maintaining a target collateralization rate of 0.25 as defined in the line of credit facility, to be the sum of the aggregate principal amount outstanding on the last business day of each month plus the accrued but unpaid interest amounts (as of such date) divided by the gross portfolio values as of the last business day of each month.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Notes to Financial Statements (continued) |
10. Subsequent Events
In connection with the preparation of the accompanying financial statements as of January 31, 2012, management has evaluated the impact of all subsequent events on the Fund through March 28, 2012, the date the financial statements were issued.
Effective March 31, 2012 (the “Reorganization Date”) the Adviser has determined that it would be in the best interests of investors in the Funds to reorganize all of the Feeder Funds into the Master Fund as follows:
| | | |
| | 1. | The Master Fund will elect to be classified as a corporation and to qualify as a “regulated investment company” (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended. |
| | | |
| | 2. | The interests in the Master Fund held by each Feeder Fund will be converted to Master Fund shares and the Master Fund will issue two separate share classes. |
| | | |
| | 3. | ASGI Mesirow Insight Fund I, LLC and ASGI Mesirow Insight Fund A, LLC will liquidate and distribute their Master Fund shares to their investors. |
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| | 4. | Wells Fargo Multi-Strategy 100 TEI Fund I, LDC and Wells Fargo Multi-Strategy 100 TEI Fund A, LDC will liquidate and distribute their Master Fund shares to ASGI Mesirow Insight TEI Fund I, LLC and ASGI Mesirow Insight TEI Fund A, LLC, respectively. |
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| | 5. | ASGI Mesirow Insight TEI Fund I, LLC and ASGI Mesirow Insight TEI Fund A, LLC will liquidate and distribute their Master Fund shares to their investors. |
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| | 6. | Investors in the Taxable Investor Fund and TEI Fund will receive Class I Shares in the Master Fund. |
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| | 7. | Investors in the Taxable Investor Fund A and TEI Fund A will receive Class A Shares in the Master Fund. |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) |
The Boards of Managers of the Funds and the Master Fund
The Feeder Fund Boards and the Master Fund Board provide broad oversight over the operations and affairs of the Funds, and have overall responsibility to manage and control the business affairs of the Funds, including the complete and exclusive authority to establish policies regarding the management, conduct, and operation of the Funds’ business. The Feeder Fund Boards and the Master Fund Board exercise the same powers, authority and responsibilities on behalf of the Funds, as are customarily exercised by the board of directors of a registered investment company organized as a corporation or trust. Each of the Offshore Feeder Fund and Offshore Feeder Fund A has two members: the TEI Fund or TEI Fund A, as appropriate (which serves as the managing member) and the Adviser (which holds only a nominal, non-voting, non-participating interest). The Offshore Feeder Fund and Offshore Feeder Fund A do not have a board of directors. The Members of the Offshore Feeder Fund and Offshore Feeder Fund A have delegated the day-to-day management, as well as general oversight responsibilities of the Offshore Feeder Fund and Offshore Feeder Fund A, to the TEI Fund and TEI Fund A, respectively. The Board of the TEI Fund and TEI Fund A therefore effectively makes all decisions on behalf of the Offshore Feeder Fund and Offshore Feeder Fund A.
The managers of the Feeder Fund Boards and the Master Fund Board are not required to contribute to the capital of the Funds or to hold interests of the Funds. A majority of the managers of the Feeder Fund Boards and the Master Fund Board are persons who are not “interested persons” (as defined in the 1940 Act) of the Funds (collectively, the “Independent Managers”). The Independent Managers perform the same functions for the Funds as are customarily exercised by the non-interested directors or trustees of a registered investment company organized, respectively, as a corporation or a trust.
The identity of the Independent Managers and officers of the Funds and brief biographical information regarding each such person during the past five years is set forth below. Each Independent Manager who is deemed to be an “interested person” of the Funds, as defined in the 1940 Act (an “Interested Manager”), is indicated by an asterisk. The business address of each person listed below is 401 South Tryon Street, Charlotte, NC 28202.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
Managers
Name and Age(1) | Position(s) With the Fund | Term of Office and Length(2) of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex(3) Overseen by Managers | Other Directorships Held by Trustee During the Last 5 Years |
Adam Taback* Age: 40 | Manager, President | Since 2011 | President, Alternative Strategies Group, Inc., since 2001; President, Wells Fargo Alternative Asset Management, LLC, since 2011; President, Alternative Strategies Brokerage Services, Inc., since 2010. | 4 | Chairman of the Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Chairman of the Board of Trustees, ASGI Agility Income Fund, since 2010; Chairman of the Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010. |
James Dean Age: 55 | Manager | Since 2011 | Dean, Associate Dean, Kenan-Flagler Business School, UNC Chapel Hill, since 1998. | 4 | Trustee, ASGI Agility Income Fund, since 2010; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010. |
James Dunn Age: 38 | Manager | Since 2011 | Vice President, Chief Investment Officer, Wake Forest University, since 2009; Managing Director, Chief Investment Officer, Wilshire Associates, 2005-2009. | 4 | Trustee, ASGI Agility Income Fund, since 2010; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010. |
Stephen Golding Age: 62 | Manager | Since 2011 | Chief Financial Officer, Vice President Finance and Administration, Ohio University, since 2010. | 4 | Trustee, Washington College, since 2003; Trustee, ASGI Agility Income Fund, since 2010; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010. |
James Hille Age: 49 | Manager | Since 2011 | Chief Investment Officer, Texas Christian University, since 2006; Chief Investment Officer, Texas Teachers, 1995-2006. | 4 | Trustee, Employees Retirement System of Fort Worth, since 2007; Board Member, Texas Comptroller’s Investment Advisory Board, since 2007; Trustee, Trinity Valley School, since 2009; Trustee, ASGI Agility Income Fund, since 2010; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010; Board Member, Investment Advisory Committee of Employee Retirement System of Texas, since 2011. |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
Name and Age(1) | Position(s) With the Fund | Term of Office and Length(2) of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex(3) Overseen by Managers | Other Directorships Held by Trustee During the Last 5 Years |
| Jonathan Hook Age: 53 | Manager | Since 2011 | Vice President, Chief Investment Officer, The Ohio State University, since 2008; Chief Investment Officer, Baylor University, 2001-2008. | 4 | Trustee, ASGI Agility Income Fund, since 2010; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2010; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2010; Member of the Board of Directors, Research Corporation for Science Advancement (RCSA), since 2011. |
Dennis Schmal Age: 64 | Manager | Since 2008 | Self-employed; Board Director and Consultant. | 4 | Trustee, ASGI Agility Income Fund, LLC, since 2011; Member of Board of Managers, ASGI Aurora Opportunities Fund, LLC, since 2011; Member of Board of Managers, ASGI Corbin Multi-Strategy Fund, LLC, since 2011; Director of Grail Advisors ETF Trust (5 Funds) 2009-2011; Director of the Gemworth Financial GuideMark mutual funds (9 Funds), since 2007; Chairman of the Board of Directors of Pacific Metrics Corporation, since 2005; Director of Varian Semiconductor Equipment Associates, since 2004; Director of Merriman Holdings, Inc., since 2003; Director of North Bay Bancorp from 2006 to 2007. |
| | * | Indicates an Interested Manager. |
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| | (1) | As of January 31, 2012. |
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| | (2) | Each Manager serves until death, retirement, resignation or removal from the Board. Any Manager may be removed either (a) with or without cause by the vote or written consent of at least two thirds (2/3) of the Managers not subject to the removal vote (but only if there are at least three Managers serving on the Board at the time of such vote or written consent) or (b) with or without cause by, if at a meeting, a vote of the Members holding a majority of the total number of votes present at such meeting or, if by written consent, a vote of Members holding at least two-thirds (2/3) of the total number of votes eligible to be cast by all Members. |
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| | (3) | The “Fund Complex” is currently comprised of four closed-end registered investment companies. |
Principal Officers who are not Managers:
Name and Age(1) | Position(s) With the Fund | Length of Time Served(2) | Principal Occupation During Past Five Years |
Michael Roman Age: 31 | Treasurer | Since 2011 | Treasurer, Wells Fargo Alternative Asset Management, LLC, since 2011; Fund Reporting Manager, Alternative Strategies Group, Inc., since 2007; Senior Analyst, Alternative Strategies Group, Inc., 2006; Senior Financial Analyst, Turbine, Inc; 2003-2006. |
Britta Patterson Age: 38 | Secretary | Since 2011 | Director, Chief Administrative Officer, and Senior Vice President Alternative Strategies Group, Inc., since 2005. |
Lloyd Lipsett Age: 46 | Assistant Secretary | Since 2011 | Vice President, Senior Counsel, Wells Fargo & Company, since 2009; Senior Vice President, Counsel, Wachovia Corporation (predecessor to Wells Fargo & Company), 2004-2009. |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
Name and Age(1) | Position(s) With the Fund | Length of Time Served(2) | Principal Occupation During Past Five Years |
Ankit Patel Age: 31 | Assistant Treasurer | Since 2011 | Senior Fund Reporting Analyst, Alternative Strategies Group, Inc., since 2008; Account Manager, State Street Corporation, 2006-2007; Senior Fund Accountant, State Street Corporation, 2005-2006. |
Doretta Dunegan Age: 54 | Chief Compliance Officer | Since 2008 | Chief Compliance Officer of Alternative Strategies Group, Inc., since 2011;Vice President and Compliance Manager, Wells Fargo Wealth Management since 2004; Chief Compliance Officer of Wells Fargo Alternative Asset Management, LLC, from 2005 to 2012; Chief Compliance Officer of Nelson Capital Management, LLC from 2005 to 2009. |
Yukari Nakano Age: 59 | Chief Operating Officer | Since 2011 | Chief Operating Officer, Wells Fargo Alternative Asset Management, LLC, since 2011; Senior Vice President (since 2003) and Chief Operating Officer (since 2010), Alternative Strategies Group, Inc. |
| | (1) | As of January 31, 2012. |
| | (2) | Each officer of the Fund serves for an indefinite term until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified. |
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
Form N-Q Filings
The Master Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Forms N-Q will be available on the SEC's website at www.sec.gov and may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Proxy Voting Policies
Information on how the Master Fund voted proxies relating to portfolio securities during the prior twelve month period ending June 30 of each year and a description of the policies and procedures that the Master Fund uses to determine how to vote proxies relating to portfolio securities will be available without charge, by request, by calling (415) 371-4000 and on the SEC’s web site at www.sec.gov.
ASGI
The Master Fund’s Board of Managers (the “Board”) at an in-person meeting held on September 20, 2011 approved the advisory agreement with ASGI. The Board reviewed the nature, quality and scope of the services to be provided to the Master Fund pursuant to the proposed advisory agreement between the Master Fund and ASGI (the “Advisory Agreement”). The Board also considered the proposed fees to be charged under the Advisory Agreement, and reviewed comparative fee and performance data provided by ASGI. The Board also considered that ASGI would pay for the fees of any sub-adviser to the Master Fund.
Nature, extent and quality of services to be provided by ASGI. The Board reviewed and considered the nature and extent of the investment advisory services to be provided by ASGI to the Master Fund under the Advisory Agreement, including the supervision and monitoring of the sub-adviser and the sub-adviser’s selection of underlying funds, evaluation of risk exposure of underlying funds and reputation, and experience of underlying funds’ managers, management of short-term cash and operations of underlying funds, and day-to-day portfolio management and general due diligence examination of underlying funds before and after committing assets of the Master Fund for investment. The Board also reviewed and considered the nature and extent of the non-advisory and administrative services to be provided by ASGI, including, among other things, providing to the Master Fund office facilities, equipment, and personnel. The Board also reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of ASGI who would provide the investment advisory and administrative services to the Master Fund. The Board determined that ASGI’s portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board also took into account ASGI’s compliance policies and procedures, including the procedures used to determine the fair value of the Master Fund’s assets. The Board concluded that the overall quality of the proposed advisory and administrative services was satisfactory.
The Board reviewed the proposed investment advisory fee (the “Advisory Fee”) and anticipated total expense ratio of the Master Fund. The Board compared the proposed Advisory Fee and total expense ratio for the Master Fund with various comparative data, including a report prepared by ASGI comparing the proposed fees payable by the Master Fund to those payable by other comparable funds. The Board noted that the proposed fees payable to ASGI were comparable to the fees payable to the advisers of other similarly situated funds. The Board concluded that the Advisory Fee and total expense ratio of the Master Fund were reasonable and satisfactory in light of the anticipated services to be provided.
Investment performance of the Master Fund and ASGI. In connection with the evaluation of the services to be provided by ASGI, the Board generally reviewed the performance of ASGI with respect to other funds and
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
accounts managed by it, including comparisons of such performance to that of the Master Fund and that of other registered funds employing similar investment strategies. The Board found that ASGI’s performance compared favorably to that of the Master Fund and other comparable registered funds, recognizing though that ASGI’s performance was primarily for unregistered funds with strategies somewhat different from those of the Master Fund or with respect to sub-advised funds.
Economies of scale. The Board considered the Advisory Fee of 1.25% and concluded that the fee was reasonable and satisfactory in light of the services to be provided and the anticipated size of the Master Fund. The Board also determined that, given the relative size of the Master Fund, and the fact that the Master Fund is not registered for public sale, economies of scale were not likely to be present or were not anticipated to be a significant factor at this time or during the renewal period.
Anticipated profitability of ASGI and its affiliates. The Board considered that as the Advisory Agreement was a new contract, ASGI’s profitability could not be determined. The Board considered and reviewed information concerning the projected costs to be incurred and projected profits to be realized by ASGI and its affiliates based on its relationship with the Master Fund. The Board also considered that any sub-advisory fee would be paid by ASGI and not by the Master Fund. Based on the review of the information it received, the Board concluded that the anticipated profits to be earned, if any, by ASGI and its affiliates, were reasonable.
Fees charged to other clients. The Board reviewed ASGI’s fees charged to all of its other clients and considered the Advisory Fee to be reasonable.
Anticipated portfolio turnover. WFAAM had invested the Master Fund’s assets in varying funds that are sub-trust portfolios of a Bermuda unit trust (the “Umbrella Trust”). As part of the Reorganization, the Master Fund’s assets will be withdrawn in part or wholly from funds that are part of the Umbrella Trust and reinvested in additional and new underlying funds, which can be expected to cause the Master Fund to realize tax gains and losses. However, the Board concluded that allowing ASGI and a sub-adviser, if approved (see discussion below), to select from investments in addition to those offered by the Umbrella Trust would expand investment flexibility and would better serve portfolio management of the Master Fund on behalf of Members in the long run.
Mesirow
The proposed sub-advisory agreement among the Fund, ASGI and Mesirow (the “Sub-Advisory Agreement”) was considered by the Board at an in-person meeting held on September 20, 2011. The Board reviewed the nature, quality and scope of the services to be provided to the Master Fund pursuant to the Sub-Advisory Agreement. The Board also considered the proposed fees to be paid by ASGI to Mesirow under the Sub-Advisory Agreement, and reviewed comparative fee and performance data provided by Mesirow.
Nature, extent and quality of services to be provided by Mesirow. The Board reviewed and considered the nature and extent of the investment advisory services to be provided by Mesirow to the Master Fund under the Sub-Advisory Agreement, including the Sub-Adviser’s selection of underlying funds, evaluation of operations risk exposure of underlying funds and reputation and experience of underlying funds’ managers, management of short-term cash, and day-to-day portfolio management and general due diligence examination of underlying funds before and after committing assets of the Master Fund for investment. The Board also reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of Mesirow who would provide the portfolio management services to the Master Fund. The Board determined that Mesirow’s portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board also took into account Mesirow’s compliance policies and procedures, including the procedures used to help determine the fair value of the Master Fund’s assets. The Board concluded that the overall quality of the proposed sub-advisory services was satisfactory.
ASGI Mesirow Insight Fund, LLC (formerly known as Wells Fargo Multi-Strategy 100 Master Fund I, LLC)
Supplemental Information (unaudited) (continued) |
The Board reviewed the performance of other similarly situated funds based on information provided by Mesirow. The Board reviewed the proposed advisory fee rates (out of which the proposed sub-advisory fee (the “Sub-Advisory Fee”) would be paid) and anticipated total expense ratio of the Master Fund. The Board compared the Sub-Advisory Fee and total expense ratio for the Master Fund with various comparative data, including a report prepared by Mesirow comparing the proposed fees payable by the Master Fund to those payable by other comparable funds. The Board noted that the Sub-Advisory Fee was comparable or lower to the fees payable to the sub-advisers of other similarly situated funds. The Board concluded that the Sub-Advisory Fee and total expense ratio of the Master Fund were reasonable and satisfactory in light of the anticipated services to be provided. The Board also took note of the fact that the Sub-Advisory Fee was the product of negotiations between ASGI and Mesirow on an arm’s length basis. The Board noted that ASGI considered other sub-advisers in addition to Mesirow, discussed such options with the Board, and that Mesirow was proposed through a competitive process.
Investment performance of Mesirow. In connection with the evaluation of the services to be provided by Mesirow, the Board generally reviewed the performance of Mesirow with respect to other funds and accounts managed by it, including comparisons of such performance to that of the Master Fund and that of other registered funds employing similar investment strategies. The Board found that Mesirow’s performance compared favorably to that of the Master Fund and other comparable registered funds, recognizing though that Mesirow’s performance was exclusively for unregistered funds and accounts with strategies somewhat different from those of the Master Fund.
Economies of scale. The Board considered the Sub-Advisory Fee of 0.625% and concluded that the fee was reasonable and satisfactory in light of the services to be provided and the anticipated size of the Master Fund. The Board also determined that, given the relative size of the Master Fund, economies of scale were not likely to be present or were not anticipated to be a significant factor at this time.
Anticipated profitability of Mesirow. The Board considered that as the Sub-Advisory Agreement was a new contract, Mesirow’s profitability could not be determined. However, the Board considered that the Sub-Advisory Fee would be paid by ASGI from the Advisory Fee, and was the product of arm’s length bargaining.
Anticipated portfolio turnover. Due to the anticipated change with respect to the tax treatment of the Master Fund in connection with the Reorganization, the Sub-Adviser intends to withdraw part or all of the Master Fund’s assets from portfolio funds in the Umbrella Trust and invest the Master Fund’s assets in different underlying funds that may be passive foreign investment companies (sometimes referred to as “PFICs”) as well as domestic partnership funds. A high degree of portfolio turnover may result in tax realizations. The Board also considered that the appointment of Mesirow would also likely lead to the withdrawal of part or all the Master Fund’s assets from portfolio funds that are part of the Umbrella Trust as Mesirow anticipates using a wider array of investment opportunities than solely those funds that are part of the Umbrella Trust.
27
