Offer to Purchase
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
40 West 57th Street
Mail Code: NY1-040-040-33-02
New York, NY 100019
OFFER TO PURCHASE LIMITED LIABILITY COMPANY INTERESTS IN THE FUND
OF UP TO $14,000,000
DATED MARCH 23, 2005
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN TIME, APRIL 22, 2005,
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 $14,000,000 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, 2005, if the Offer expires on
April 22, 2005. 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 January 31, 2005 (the last time net asset value of the Fund was
calculated) and June 30, 2005, 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 the Valutaion Date. Any tendering
Investors that wish to obtain the estimated value of their Interests should
contact Forum Shareholder Services, LLC ("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-Transfer Agent:
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......................................................3
4. PROCEDURE FOR TENDERS.................................................4
5. WITHDRAWAL RIGHTS.....................................................4
6. PURCHASES AND PAYMENT.................................................5
7. CERTAIN CONDITIONS OF THE OFFER.......................................6
8. CERTAIN INFORMATION ABOUT THE FUND....................................6
9. CERTAIN FEDERAL INCOME TAX CONSEQUENCES...............................8
10. MISCELLANEOUS.........................................................9
ANNEX A .....................................................................A-1
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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 April 22, 2005, unless
the Offer is extended.
o The value of the Interests will be calculated for this purpose on June 30,
2005 (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, 2006, which the Fund expects will be
completed by the end of May 2006, 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 60 calendar days
after the Valuation Date, 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 (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 April 22, 2005, 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 on or after May 18, 2005, assuming your Interest
has not yet been accepted for repurchase.
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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 April 22, 2005. 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 April 22,
2005).
o The value of your Interests will change between January 31, 2005 (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 set forth on the second page of this
Offer or at the address set forth above, 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 April 22, 2005, you will remain an Investor
with respect to the Interest tendered and accepted for purchase by the Fund
through the Valuation Date, 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 (as updated
and supplemented from time to time 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 July 1,
2005 and thereafter from time to time.
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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 $14,000,000
pursuant to tenders from Investors that are not withdrawn (in accordance with
Section 5 below) prior to 12:00 midnight, Eastern Time, on April 22, 2005 (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 January 31, 2005, there was approximately
$69,832,000 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
$14,000,000 (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 $14,000,000 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.
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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 set forth on page 2 or the telephone number set forth
on the second page of this Offer. 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 on or after May 18, 2005, 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 the second page of this Offer. A form to give notice
of withdrawal of a tender is available by calling FSS at the telephone number
set forth on the second page of this Offer. 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.
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, 2006 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, 2006. It is anticipated that the audit of
the Fund's financial statements for the fiscal year ending March 31, 2006 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.
The 95% 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. The 95% 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.
5
The Fund expects that the purchase price for Interests acquired
pursuant to the Offer, which will not exceed $14,000,000 (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
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 40 West 57th Street, Mail Code: NY1-040-33-03, New York, NY 10019
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.
6
On March 15, 2004, Bank of America Corporation reached agreements
in principle with the NYAG and the SEC over matters related to late trading
and market timing of mutual funds. To settle these matters, on February 9, 2005,
BACAP Distributors, LLC (the "Distributor"), the Adviser and their affiliate,
Banc of America Securities, LLC, entered into an Assurance of Discontinuance
with the NYAG and consented to the entry of a cease-and-desist order by the SEC.
These settlements contain substantially the same terms and conditions outlined
in the agreements in principle.
On April 1, 2004, Bank of America Corporation acquired Fleet Boston
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 SEC and 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 March 2004, Fleet
reached agreements in principle with the NYAG and the SEC relating to these
matters. To settle these matters, on February 9, 2005, CMA and CFDI entered into
an Assurance of Discontinuance with the NYAG and consented to the entry of a
cease-and-desist order by the SEC, each of which contains substantially the same
terms and conditions outlined in the agreements in principle.
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.
Other than the acceptance of subscriptions as of March 1, 2005 and
February 1, 2005, 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 January 31, 2005, the Distributor,
BACAP Distributors, LLC, owned approximately $63,664 (approximately 0.23%) of
the outstanding Interests and has no plans to tender its Interests in this
Offer. As of January 31, 2005, NB Funding Company, LLC ("NB Funding"), a
subsidiary of Bank of America, N.A., the parent company of the Adviser and
7
Distributor, owned approximately $17,224,648 (approximately 24.67%) of the
outstanding Interests. 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
8
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.
9
ANNEX A
Financial Statements
The following financial statements of the Fund are
incorporated herein by reference.
Audited financial statements for the fiscal year ended March 31,
2004, previously filed on EDGAR on Form N-CSR on June 1, 2004.
A-1