EXHIBIT B
Offer to Purchase
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
101 South Tryon Street
Charlotte, North Carolina 28255
OFFER TO PURCHASE LIMITED LIABILITY COMPANY INTERESTS IN THE FUND
OF UP TO $17,000,000
DATED MAY 21, 2004
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN TIME, FRIDAY, JUNE 18, 2004,
UNLESS THE OFFER IS EXTENDED
To the Investors of
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC:
BACAP Alternative Multi-Strategy Fund, LLC, a closed-end,
non-diversified, management investment company organized as a Delaware limited
liability company (the "Fund"), is offering to purchase for cash on the terms
and conditions set forth in this offer and the related Letter of Transmittal
(which together constitute the "Offer") up to $17,000,000 in limited liability
company interests in the Fund and portions thereof ("Interests") pursuant to
tenders of Interests or portions thereof by investors in the Fund ("Investors")
at a price equal to their value as of June 30, 2004, if the Offer expires on
Friday, June 18, 2004. If the Fund elects to extend the tender period, for the
purpose of determining the purchase price for tendered Interests, the value of
such Interests will be determined at the close of business on a valuation date
adjusted to reflect the extension of the Offer. This Offer is being made to all
Investors and is not conditioned on any minimum amount of Interests being
tendered, but is subject to certain conditions described below. Interests are
not traded on any established trading market and are subject to strict
restrictions on transferability pursuant to the Fund's Amended and Restated
Limited Liability Company Agreement dated as of March 24, 2003 (the "LLC
Agreement").
The value of the Interests tendered in this Offer will likely change
between March 31, 2004 (the last time net asset value of the Fund was
calculated) and June 30, 2004, when the value of the Interests tendered to the
Fund will be determined for purposes of calculating the purchase price of such
Interests (the "Valuation Date"). Investors tendering their Interests should
also note that they will remain Investors with respect to the Interest tendered
and accepted for purchase by the Fund through June 30, 2004. Any tendering
Investors that wish to obtain the estimated value of their Interests should
contact FSS, at the telephone number or address set forth below, Monday through
Friday, except holidays, during normal business hours of 9:00 a.m. to 5:00 p.m.
(Eastern Time).
Investors desiring to tender all or any portion of their Interests in
accordance with the terms of the Offer should complete and sign the attached
Letter of Transmittal and mail or fax it to the Fund in the manner set forth in
Section 4 below.
IMPORTANT
NONE OF THE FUND, ITS ADVISER OR ITS BOARD OF MANAGERS MAKES ANY
RECOMMENDATION TO ANY INVESTOR AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
INTERESTS. INVESTORS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER INTERESTS,
AND, IF THEY CHOOSE TO DO SO, THE PORTION OF THEIR INTERESTS TO TENDER.
BECAUSE EACH INVESTOR'S INVESTMENT DECISION IS A PERSONAL ONE, BASED
ON ITS OWN FINANCIAL CIRCUMSTANCES, NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY
RECOMMENDATION ON BEHALF OF THE FUND AS TO WHETHER INVESTORS SHOULD TENDER
INTERESTS PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE,
SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED
ON AS HAVING BEEN AUTHORIZED BY THE FUND.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION. NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED ON THE FAIRNESS OR
MERITS OF THIS TRANSACTION OR ON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Questions, requests for assistance and requests for additional copies
of the Offer may be directed to the Fund's Sub-Administrator:
Forum Shareholder Services, LLC
Phone: (207) 879-6093
Fax: (207) 879-6206
TABLE OF CONTENTS
1. Background and Purpose of the Offer.......................................2
2. Offer to Purchase and Price...............................................3
3. Amount of Tender..........................................................4
4. Procedure for Tenders.....................................................4
5. Withdrawal Rights.........................................................5
6. Purchases and Payment.....................................................5
7. Certain Conditions of the Offer...........................................6
8. Certain Information About the Fund........................................7
9. Certain Federal Income Tax Consequences...................................8
10. Miscellaneous.............................................................9
Annex A: Financial Statements.................................................1
SUMMARY TERM SHEET
o As stated in the offering documents of BACAP Alternative Multi-Strategy
Fund, LLC (hereinafter "we" or the "Fund"), we will purchase your limited
liability company interests ("Interest" or "Interests" as the context
requires) at their value (that is, the value of the Fund's assets minus its
liabilities, multiplied by the proportionate interest in the Fund you
desire to tender). This offer to purchase Interests (the "Offer") will
remain open until 12:00 midnight, Eastern Time, on Friday, June 18, 2004,
unless the Offer is extended.
o The value of the Interests will be calculated for this purpose on June 30,
2004 (the "Valuation Date"). The Fund reserves the right to adjust the
Valuation Date to correspond with any extension of the Offer. The Fund will
review the value calculation of the Interests during the Fund's audit for
its fiscal year ending March 31, 2005, which the Fund expects will be
completed by the end of May 2005, and the audited value will be used to
determine the final amount paid for tendered Interests.
o You may tender your entire Interest, a portion of your Interest defined as
a specific dollar value or the portion of your Interest above the required
minimum capital account balance subject to the conditions discussed below.
o If you tender your entire Interest, subject to any extension of the Offer,
we will pay you in cash and/or marketable securities (valued in accordance
with the Fund's Amended and Restated Limited Liability Company Agreement
dated as of March 24, 2003 (the "LLC Agreement") and distributed to
tendering investors on a pari passu basis) no later than August 27, 2004,
at least 95% of the estimated unaudited value of your Interest tendered and
accepted by the Fund as of the Valuation Date. We will owe you the balance,
for which we will give you a promissory note (the "Note") that will be held
in the account in which you held your Interest or such other account as you
may designate in writing.
o If you tender only a portion of your Interest, you will be required to
maintain a capital account balance equal to the greater of: (i) $25,000,
net of the amount of the incentive allocation, if any, that is to be
debited from your capital account on the Valuation Date of the Offer (the
"Incentive Allocation") or would be so debited if the Valuation Date were a
day on which an Incentive Allocation, if any, was made (collectively, the
"Tentative Incentive Allocation"); or (ii) the amount of the Tentative
Incentive Allocation, if any. We reserve the right to purchase less than
the amount you tender if the amount you tender would cause your account in
the Fund to have a value less than the required minimum balance. We will
pay you from one or more of the following sources: cash on hand, the
proceeds from the sale of and/or delivery of portfolio securities held by
the Fund, or by borrowings.
o Following this summary is a formal notice of our offer to repurchase your
Interests. Our offer remains open to you until 12:00 midnight, Eastern
Time, on Friday, June 18, 2004, the expected expiration date of the Offer.
Until that time, you have the right to change your mind and withdraw any
tender of your Interest. You will also have the right to withdraw the
tender of your Interest at any time after July 19, 2004, assuming your
Interest has not yet been accepted for repurchase.
o If you would like us to repurchase your Interest or a portion of your
Interest, you should (i) mail the Letter of Transmittal (enclosed with the
Offer), to Forum Shareholder Services, LLC ("FSS") at P.O. Box 446,
Portland, ME 04112-9925 or (ii) fax it to FSS at (207) 879-6206, so that it
is received before 12:00 midnight, Eastern Time, on Friday, June 18, 2004.
If you fax the Letter of Transmittal, you should mail the original Letter
of Transmittal to FSS promptly after you fax it (although the original does
not have to be received before 12:00 midnight, Eastern Time, on Friday,
June 18, 2004).
o The value of your Interests will change between March 31, 2004 (the last
time prior to the date of this filing as of which net asset value of the
Fund has been calculated), and the Valuation Date.
o If you would like to obtain the estimated value of your Interests, which
will be calculated monthly until the expiration date of the Offer, you may
contact FSS at the telephone number or at the address set forth on page 2,
Monday through Friday, except holidays, during normal business hours of
9:00 a.m. to 5:00 p.m. (Eastern Time).
o Please note that just as you have the right to withdraw the tender of an
Interest, we have the right to suspend, amend or postpone this Offer at any
time up to and including the acceptance of tenders pursuant to the Offer.
Although the Offer expires on Friday, June 18, 2004, you will remain an
Investor with respect to the Interest tendered and accepted for purchase by
the Fund through June 30, 2004, when the value of your Interest is
calculated.
1. Background and Purpose of the Offer. The purpose of this Offer is
to provide liquidity to Investors that hold Interests, as contemplated by and in
accordance with the procedures set forth in the Fund's Prospectus dated March
27, 2003, (the "Prospectus"), and the LLC Agreement. The Prospectus and the LLC
Agreement, which were provided to each Investor in advance of subscribing for
Interests, provide that the Board of Managers of the Fund has the discretion to
determine whether the Fund will purchase Interests from Investors from time to
time pursuant to written tenders. The Prospectus also states that Banc of
America Capital Management, LLC (the "Adviser") expects that it will recommend
to the Board of Managers that the Fund purchase Interests from Investors twice
each year, in June and December. Because there is no secondary trading market
for Interests and transfers of Interests are prohibited without prior approval
of the Fund, the Board of Managers has determined, after consideration of
various matters, including but not limited to those set forth in the Prospectus,
that the Offer is in the best interests of Investors in order to provide
liquidity for Interests as contemplated in the Prospectus and the LLC Agreement.
The purchase of Interests pursuant to the Offer will have the effect
of increasing the proportionate interest in the Fund of Investors that do not
tender Interests. Investors that retain their Interests may be subject to
increased risks that may possibly result from the reduction in the Fund's
aggregate assets resulting from payment for the Interests tendered. These risks
include the potential for greater volatility due to decreased diversification. A
reduction in the aggregate assets of the Fund may result in Investors that do
not tender Interests bearing higher costs to the extent that certain expenses
borne by the Fund are relatively fixed and may not decrease if assets decline.
These effects may be reduced or eliminated to the extent that additional
subscriptions for Interests are made by new and existing Investors on January 1,
2004 and thereafter from time to time.
Interests that are tendered to the Fund in connection with this Offer
will be retained. The Fund currently expects that it will accept subscriptions
for Interests on the first day of each month thereafter, but is under no
obligation to do so.
2. Offer to Purchase and Price. Subject to the conditions of the
Offer, the Fund will purchase Interests in the Fund totaling up to $17,000,000
pursuant to tenders from Investors that are not withdrawn (in accordance with
Section 5 below) prior to 12:00 midnight, Eastern Time, on Friday, June 18, 2004
(this time and date is called the "Initial Expiration Date"), or any later date
as corresponds to any extension of the Offer. The later of the Initial
Expiration Date or the latest time and date to which the Offer is extended is
called the "Expiration Date." The Fund reserves the right to extend, amend or
suspend the Offer as described in Sections 3 and 7 below. The purchase price of
an Interest tendered will be its value as of the close of the Valuation Date,
payable as set forth in Section 6. The Fund reserves the right to adjust the
Valuation Date to correspond with any extension of the Offer. As of the close of
business on March 31, 2004, the estimated unaudited value of an Interest (net of
any applicable incentive allocation) corresponding to an initial capital
contribution of $50,000 (after payment of any applicable sales load) on the
following closing dates of the Fund was as follows:
If you invested $50,000* on the Your Estimated Unaudited Value as of
following closing dates: March 31, 2004 would be:
-------------------------------- -------------------------------------
April 1, 2003 $ 53,616.45
May 1, 2003 $ 53,105.99
June 1, 2003 $ 52,633.21
July 1, 2003 $ 52,300.83
August 1, 2003 $ 52,274.84
September 1, 2003 $ 52,057.90
October 1, 2003 $ 51,656.11
November 1, 2003 $ 50,739.33
December 1, 2003 $ 50,363.68
January 1, 2004 $ 49,812.62
February 1, 2004 $ 49,048.76
March 1, 2004 $ 48,497.65
*Assumes a $50,000 investment after payment of any applicable sales load.
As of the close of business on March 31, 2004, there was approximately
$64,155,480 outstanding in capital of the Fund held in Interests (based on the
estimated unaudited value of such Interests). Investors may obtain monthly
estimated value information until the expiration date of the Offer by contacting
FSS at the telephone number or address set forth on page 2, Monday through
Friday, except holidays, during normal business hours of 9:00 a.m. to 5:00 p.m.
(Eastern Time).
3. Amount of Tender. Subject to the limitations set forth below,
Investors may tender their entire Interest, a portion of their Interest defined
as a specific dollar value or the portion of their Interest above the required
minimum capital account balance, as described below. An Investor that tenders
for repurchase only a portion of its Interest will be required to maintain a
capital account balance equal to the greater of: (i) $25,000, net of the amount
of the Incentive Allocation, if any, that is to be debited from the capital
account of the Investor on the Valuation Date of the Offer or would be so
debited if the Valuation Date were a day on which an Incentive Allocation was
made (collectively, the "Tentative Incentive Allocation"); or (ii) the amount of
the Tentative Incentive Allocation, if any. If an Investor tenders an amount
that would cause the Investor's capital account balance to fall below the
required minimum, the Fund reserves the right to reduce the amount to be
purchased from such Investor so that the required minimum balance is maintained.
The Offer is being made to all Investors and is not conditioned on any minimum
amount of Interests being tendered.
If the amount of Interests that are properly tendered pursuant to the
Offer and not withdrawn pursuant to Section 5 below is less than or equal to
$17,000,000 (or such greater amount as the Fund may elect to purchase pursuant
to the Offer), the Fund will, on the terms and subject to the conditions of the
Offer, purchase all of the Interests so tendered unless the Fund elects to
suspend or amend the Offer, or postpone acceptance of tenders made pursuant to
the Offer, as provided in Section 7 below. If tenders from Investors equaling
more than $17,000,000 are duly tendered to the Fund prior to the Expiration Date
and not withdrawn pursuant to Section 5 below, the Fund will accept Interests
tendered on or before the Expiration Date for payment on a pro rata basis based
on the aggregate value of tendered Interests. The Offer may be extended, amended
or suspended in various other circumstances described in Section 7 below.
4. Procedure for Tenders. Investors wishing to tender Interests
pursuant to the Offer should mail or fax a completed and executed Letter of
Transmittal to FSS at the address or to the fax number set forth on page 2. The
completed and executed Letter of Transmittal must be received by FSS, either by
mail or by fax, no later than the Expiration Date.
The Fund recommends that all documents be submitted to FSS in the
enclosed, postage paid envelope or by facsimile transmission. An Investor
choosing to fax a Letter of Transmittal to FSS must also send or deliver the
original completed and executed Letter of Transmittal to FSS promptly
thereafter. Investors wishing to confirm receipt of a Letter of Transmittal may
contact FSS at the address or telephone number set forth on page 2. The method
of delivery of any documents is at the election and complete risk of the
Investor tendering an Interest including, but not limited to, the failure of FSS
to receive any Letter of Transmittal or other document submitted by facsimile
transmission. All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of tenders will be determined by the Fund, in
its sole discretion, and such determination shall be final and binding.
The Fund also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender with respect to any
particular Interest or any particular Investor, and the Fund's interpretation of
the terms and conditions of the Offer will be final and binding. Unless waived,
any defects or irregularities in connection with tenders must be cured within
such time as the Fund shall determine. Tenders will not be deemed to have been
made until the defects or irregularities have been cured or waived. None of the
Fund, the Adviser or the Board of Managers shall be obligated to give notice of
any defects or irregularities in tenders, nor shall any of them incur any
liability for failure to give such notice.
5. Withdrawal Rights. Any Investor tendering an Interest pursuant to
this Offer may withdraw its tender at any time prior to or on the Expiration
Date and at any time after July 19, 2004, assuming such Investor's Interest has
not yet been accepted for purchase by the Fund. To be effective, any notice of
withdrawal of a tender must be timely received by FSS at the address or at the
fax number set forth on page 2. A form to give notice of withdrawal of a tender
is available by calling FSS at the telephone number set forth on page 2. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal of a tender will be determined by the Fund, in its sole discretion,
and such determination will be final and binding. A tender of Interests properly
withdrawn will not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Interests may be tendered again prior to the
Expiration Date by following the procedures described in Section 4.
6. Purchases and Payment. For purposes of the Offer, the Fund will be
deemed to have accepted (and thereby purchased) Interests that are tendered when
it gives written notice to the tendering Investor of its election to purchase
the Investor's Interest.
For an Investor that tenders its entire Interest or a portion thereof,
payment of the purchase price will consist of: (1) cash and/or marketable
securities (valued in accordance with the LLC Agreement and distributed to
tendering investors on a pari passu basis) in an aggregate amount equal to at
least 95% of the estimated unaudited value of Interests tendered and accepted by
the Fund, determined as of the Valuation Date payable within 60 calendar days
after the Valuation Date (the "95% Cash Payment"), in the manner set forth
below; and (2) a Note entitling the holder thereof to a contingent payment equal
to the excess, if any, of (a) the value of the Interests tendered by the
Investor and accepted by the Fund as of the Valuation Date, determined based on
the audited financial statements of the Fund for the fiscal year ending March
31, 2005, over (b) the 95% Cash Payment. The Note will be delivered to the
tendering Investor in the manner set forth below promptly after the Valuation
Date and will not be transferable.
The Note will be payable in cash (in the manner set forth below)
promptly after completion of the audit of the financial statements of the Fund
for the fiscal year ending March 31, 2005. It is anticipated that the audit of
the Fund's financial statements for the fiscal year ending March 31, 2005 will
be completed by no later than 60 days after the end of the fiscal year. Any
amounts payable under the Note will not include interest. Although the Fund has
retained the option to pay all or a portion of the purchase price by
distributing marketable securities, the purchase price will be paid entirely in
cash except in the unlikely event that the Board of Managers of the Fund
determines that the distribution of securities is necessary to avoid or mitigate
any adverse effect of the Offer on the remaining Investors.
An Investor that tenders only a portion of its Interest (subject to
maintenance of the required minimum capital account balance described in Section
3, above) will receive cash and/or marketable securities in an aggregate amount
equal to 100% of the estimated unaudited net asset value of Interests tendered
and accepted for purchase by the Fund, determined as of the Valuation Date (the
"100% Cash Payment") payable within sixty calendar days after the Valuation
Date.
Both the 95% Cash Payment and the 100% Cash Payment (together, the
"Cash Payment") will be made by wire transfer directly to the account in which
the tendering Investor held its Interest or such other account as the tendering
Investor may designate in writing. Cash Payments wired directly to such accounts
will be subject upon withdrawal from the account to any fees that the
institution at which the account is held would customarily assess upon the
withdrawal of cash from the account.
The Note will be deposited directly to the account in which the
tendering Investor held its Interest, or such other account as the Investor may
designate in writing. Any contingent payment due pursuant to the Note will also
be deposited directly to the account in which the tendering Investor held its
interest or such other account as the Investor may designate in writing and will
be subject upon withdrawal from the account to any fees that the institution at
which the account is held would customarily assess upon the withdrawal of cash
from the account.
The Fund expects that the purchase price for Interests acquired
pursuant to the Offer, which will not exceed $17,000,000 (unless the Fund elects
to purchase a greater amount), will be derived from: (a) cash on hand; (b) the
proceeds of the sale or delivery of securities and portfolio assets held by the
Fund; and/or (c) possibly borrowings, as described below. The Fund will
segregate, with its custodian, cash or U.S. government securities or other
liquid securities equal to the value of the amount estimated to be paid under
any Note as described above. Although the Fund is authorized to borrow money to
finance the repurchase of Interests, the Fund believes it has sufficient
liquidity to purchase the Interests tendered pursuant to the Offer without
utilizing such borrowing. However, depending on the dollar amount of Interests
tendered and prevailing general economic and market conditions, the Fund, in its
sole discretion, may decide to borrow money to finance any portion of the
purchase price, subject to compliance with applicable law. No borrowing
facilities have been entered into at this time. The Fund expects that the
repayment of any amounts borrowed will be made from additional funds contributed
to the Fund by existing and/or new Investors, or from the proceeds of the sale
of securities and portfolio assets held by the Fund.
7. Certain Conditions of the Offer. The Fund reserves the right, at
any time and from time to time, to extend the period of time during which the
Offer is pending by notifying Investors of such extension. The purchase price of
an Interest tendered by any Investor will be the value thereof as of the close
of business on the Valuation Date, if the Offer expires on the Initial
Expiration Date, and otherwise the value thereof as of the close of business on
any later date as corresponds to any extension of the Offer. During any such
extension, all Interests previously tendered and not withdrawn will remain
subject to the Offer. The Fund also reserves the right, at any time and from
time to time, up to and including acceptance of tenders pursuant to the Offer:
(a) suspend the Offer in the circumstances set forth in the following paragraph
and in the event of such suspension not to purchase or pay for any Interests
tendered pursuant to the Offer; (b) amend the Offer; and (c) postpone the
acceptance of Interests. If the Fund determines to amend the Offer or to
postpone the acceptance of Interests tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided above and
will promptly notify Investors.
The Fund may suspend the Offer at any time, including but not limited
to: (i) any period during which an emergency exists as a result of which it is
not reasonably practicable for the Fund to dispose of securities it owns or
determine the value of the Fund's net assets; (ii) for any other periods that
the Securities Exchange Act of 1934 permits by order for the protection of
Investors; or (iii) other unusual circumstances as the Board of Managers deems
advisable to the Fund and its Investors.
8. Certain Information About the Fund. The Fund is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as a
closed-end, non-diversified, management investment company, and Interests are
registered under the Securities Act of 1933, as amended. It is organized as a
Delaware limited liability company. The principal office of the Fund is located
at 101 South Tryon Street, Charlotte, North Carolina 28255 and the phone number
is (646) 313-8890. Interests are not traded on any established trading market
and are subject to strict restrictions on transferability pursuant to the LLC
Agreement. On April 1, 2004, Bank of America Corporation, the ultimate parent
corporation of the Adviser, acquired FleetBoston Financial Corporation
("Fleet"). As a result of this acquisition, Columbia Management Advisors, Inc.
("CMA") and Columbia Funds Distributor, Inc. ("CFDI") are now indirect
wholly-owned subsidiaries of Bank of America Corporation. The Securities and
Exchange Commission ("SEC") and Office of the New York State Attorney General
("NYAG") filed proceedings against both CMA and CFDI on February 24, 2004
alleging that they had violated certain provisions of the federal securities
laws in connection with trading activity in mutual funds shares and violated
certain New York anti-fraud statutes. In order to settle these matters, Fleet
entered into an agreement in principle with the NYAG and the SEC. Bank of
America Corporation also entered into this same agreement in principal with
respect to certain matters in connection with trading activity in mutual funds
shares. The agreement in principle is subject to final documentation and
approval by the SEC.
If either CMA or CFDI is ultimately unsuccessful in its defense of, or
efforts to settle, the February 24, 2004 proceedings, CMA, CFDI or any company
that is an affiliated person of CMA and CFDI could be barred from serving as an
investment adviser or distributor for any investment company registered under
the 1940 Act. As a result of the Fleet acquisition, the Adviser and the Fund's
distributor, BACAP Distributors, LLC ("the Distributor") are now affiliated
persons of CMA and CFDI and, therefore, under these circumstances, could be
barred from serving as an investment adviser or distributor for any registered
investment company, including the Fund. If either CMA or CFDI is ultimately
unsuccessful in its defense of, or efforts to settle, the February 24, 2004
proceedings, it is expected that the Adviser and the Distributor would seek
exemptive relief from the SEC to permit them to continue serving as the
investment adviser and distributor of the Fund.
Mr. Edward D. Bedard, the Chief Financial Officer of the Fund, has
submitted resignation as Chief Financial Officer of the Fund effective June 1,
2004. On May 20, 2004, the Board of Managers of the Fund appointed Kevin
Connaughton to be Mr. Bedard's successor as Chief Financial Officer.
The Adviser has stated its intention to change the process by which
the Fund's assets are managed such that an investment committee would assume the
primary responsibility for management of the Fund's assets in place of Mr.
Lawrence Morgenthal, currently the portfolio manager of the Fund. Mr. Morgenthal
would be a member of the committee.
As a result of the acquisition of Fleet by Bank of America
Corporation, it is possible that one or more of the material changes described
below may be proposed and/or effected, as appropriate. Otherwise, none of the
Fund, the Adviser, or the Board of Managers currently has any plans, proposals
or negotiations that relate to or would result in: (a) the acquisition by any
person of additional Interests (other than the Fund's intention to accept
subscriptions for Interests on the first day of each month and from time to time
in the discretion of the Fund) or the disposition of Interests; (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Fund; (c) any material change in the present
distribution policy or indebtedness or capitalization of the Fund; (d) any
change in the identity of the Adviser, or in the management of the Fund,
including, but not limited to, any change any material term of the investment
advisory arrangement with the Adviser; (e) a sale or transfer of a material
amount of assets of the Fund (other than as the Board of Managers determines may
be necessary or appropriate to fund any portion of the purchase price for
Interests acquired pursuant to this Offer or in connection with ordinary
portfolio transactions of the Fund); (f) any other material change in the Fund's
structure or business, including any plans or proposals to make any changes in
its fundamental investment policies, as amended, for which a vote would be
required by Section 13 of the 1940 Act; or (g) any changes in the LLC Agreement
or other actions that may impede the acquisition of control of the Fund by any
person.
There have been no transactions involving the Interests that were
effected during the past 60 business days by the Fund, the Adviser, any member
of the Board of Managers or any person controlling the Fund or the Adviser or
controlling any Manager. As of March 31, 2004, the Distributor, BACAP
Distributors, LLC, owned approximately $165,297 (approximately 0.26%) of the
outstanding Interests and has no plans to tender its Interests in this Offer. As
of March 31, 2004, NB Funding Company, LLC ("NB Funding"), a subsidiary of Bank
of America, N.A., the parent company of the Adviser and Distributor, owned
approximately $26,863,500 (approximately 41.87%) of the outstanding Interests.
The Fund has been informed that NB Funding intends to tender Interests pursuant
to the Offer, but if necessary, it will withdraw a portion of the amount
tendered to allow any other Investor that tenders its Interests to participate
fully in the Offer. In addition, the Adviser, Banc of America Capital
Management, LLC may be entitled under the terms of the LLC Agreement to receive
an incentive allocation (if earned and subject to certain limitations), as
specified in the LLC Agreement and described in the Prospectus.
9. Certain Federal Income Tax Consequences. The following discussion
is a general summary of the federal income tax consequences of the purchase of
Interests by the Fund from Investors pursuant to the Offer. Investors should
consult their own tax advisors for a complete description of the tax
consequences to them of a purchase of their Interests by the Fund pursuant to
the Offer.
In general, an Investor from which an Interest is purchased by the
Fund will be treated as receiving a distribution from the Fund. An Investor
receiving a cash distribution in complete liquidation of the Investor's Interest
generally will recognize capital gain or loss to the extent of the difference
between the cash received by such Investor and such Investor's adjusted tax
basis in such Interest. Such capital gain or loss will be short-term, long-term,
or some combination of both, depending upon the timing of the Investor's
contributions to the Fund. However, an Investor will recognize ordinary income
to the extent the Investor's allocable share of the Fund's "unrealized
receivables" exceeds the Investor's basis in such unrealized receivables. For
these purposes, accrued but untaxed market discount, if any, on securities held
by the Fund will be treated as an unrealized receivable.
An Investor receiving a cash distribution in partial liquidation of
the Investor's Interest generally will recognize income in a similar manner to
the extent that the cash received exceeds such Investor's adjusted tax basis in
such Interest. An Investor receiving a cash distribution in partial liquidation
of the Investor's Interest will not recognize any loss in connection with such
distribution. An Investor's tax basis in the Interest will be reduced (but not
below zero) by the amount of cash received by the Investor from the Fund in
connection with the purchase of such Interest. An Investor's tax basis in the
Interest will be adjusted for income, gain or loss allocated (for tax purposes)
to the Investor for periods prior to the purchase of such Interest.
The Fund may specially allocate items of Fund capital gain, including
short-term capital gain, to an Investor from which an Interest is purchased to
the extent the Investor's liquidating distribution would otherwise exceed the
Investor's adjusted tax basis in such Interest. Such a special allocation may
result in the Investor recognizing capital gain, which may include short-term
gain, in the Investor's last taxable year in the Fund, thereby reducing the
amount of long-term capital gain recognized during the taxable year in which the
Investor receives the liquidating distribution.
Assuming that the Fund qualifies as an "investment partnership" within
the meaning of section 731(c)(3)(C)(i) of the Internal Revenue Code of 1986, as
amended, distributions of securities, whether in complete or partial liquidation
of an Investor's Interest, generally will not result in the recognition of
taxable gain or loss to the Investor, except to the extent such distribution is
treated as made in exchange for such Investor's share of the Fund's unrealized
receivables. If the Fund distributes securities to an Investor in connection
with a complete liquidation of the Investor's Interest, then the Investor's tax
basis in the distributed securities would be equal to the Investor's adjusted
tax basis in such Interest, reduced by the amount of any cash distribution. In
the case of a partial liquidation of an Investor's Interest, the Investor's tax
basis in the distributed securities would be equal to the Fund's tax basis in
the distributed securities (or, if lesser, the Investor's adjusted tax basis in
the Fund Interest), reduced by the amount of any cash distribution. The
Investor's holding period for the distributed securities would include the
Fund's holding period for such securities.
10. Miscellaneous. The Offer is not being made to, nor will tenders be
accepted from, Investors in any jurisdiction in which the Offer or its
acceptance would not comply with the securities or Blue Sky laws of such
jurisdiction. The Fund is not aware of any jurisdiction in which the Offer or
tenders pursuant thereto would not be in compliance with the laws of such
jurisdiction. However, the Fund reserves the right to exclude Investors from the
Offer in any jurisdiction in which it is asserted that the Offer cannot lawfully
be made. The Fund believes such exclusion is permissible under applicable laws
and regulations, provided the Fund makes a good faith effort to comply with any
state law deemed applicable to the Offer.
The Fund has filed an Issuer Tender Offer Statement on Schedule TO
with the Securities and Exchange Commission, which includes certain information
relating to the Offer summarized herein. A free copy of such statement may be
obtained from the Fund by contacting FSS at the address and telephone number set
forth on page 2 or from the Securities and Exchange Commission's internet web
site, http://www.sec.gov. For a fee, a copy may be obtained from the public
reference office of the Securities and Exchange Commission at Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549.
ANNEX A
Financial Statements
The following financial statements of the Fund are incorporated herein
by reference.
Unaudited financial statements for the semi-annual period
ended September 30, 2003, previously filed on EDGAR on Form
N-CSR on December 23, 2003.
03564.0004 #486970