UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSRS
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-21252
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
(Exact name of registrant as specified in charter)
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40 West 57th Street, 33rd Floor
New York, NY 10019
(Address of principal executive offices) (Zip code)
David Rozenson, Esq.
Bank of America
One Financial Center
Boston, MA 02111
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-772-3333
DATE OF FISCAL YEAR END: MARCH 31
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
- ------------------------------------- BACAP ALTERNATIVE
MULTI-STRATEGY FUND, LLC
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005
CONTENTS
STATEMENT OF ASSETS, LIABILITIES AND INVESTORS' CAPITAL........................2
SCHEDULE OF INVESTMENTS........................................................3
STATEMENT OF OPERATIONS........................................................5
STATEMENTS OF CHANGES IN INVESTORS' CAPITAL....................................6
STATEMENT OF CASH FLOWS........................................................7
FINANCIAL HIGHLIGHTS...........................................................8
NOTES TO FINANCIAL STATEMENTS..................................................9
SPECIAL MEETING OF INVESTORS..................................................17
CAPITALIZED TERMS IN THESE FINANCIAL STATEMENTS THAT ARE NOT DEFINED HAVE THE
MEANINGS GIVEN TO THEM IN THE FUND'S PROSPECTUS.
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF ASSETS, LIABILITIES AND INVESTORS' CAPITAL (IN THOUSANDS) (UNAUDITED)
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SEPTEMBER 30, 2005
ASSETS
Investments in Portfolio Funds, at fair value (cost $60,115) $69,813
Investments in Portfolio Funds paid in advance 3,100
Cash and cash equivalents 1,665
Redemptions receivable from Portfolio Funds 659
Other assets 115
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TOTAL ASSETS 75,352
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LIABILITIES
Management fee payable 82
Professional fees payable 202
Administration fee payable 61
Investor servicing fee payable 61
Accrued expenses 55
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TOTAL LIABILITIES 461
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NET ASSETS $74,891
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Net capital (1) $65,193
Net unrealized appreciation on investments in Portfolio Funds 9,698
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TOTAL INVESTORS' CAPITAL $74,891
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(1) Net capital includes cumulative net investment gains/(losses) and net
realized gains/(losses) on investments in Portfolio Funds.
The accompanying notes are an integral part of these financial statements.
2
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (UNAUDITED)
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SEPTEMBER 30, 2005
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% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS
EQUITY HEDGE
Alydar Fund, L.P. $ 1,998 $ 2,263 3.02%
Artha Emerging Markets Fund, L.P. 2,000 2,229 2.98
Harvest Opportunity Partners II, L.P. 2,458 2,519 3.36
Japan Pragmatist Fund 1,800 1,854 2.48
Kinetics Partners, L.P. 2,000 2,595 3.46
New Star UK Gemini Hedge Fund, Ltd. 2,000 2,125 2.84
TCS Capital II, L.P. 2,263 3,871 5.17+
Zander Fund, L.P. 2,139 2,202 2.94
-------- -------- --------
TOTAL EQUITY HEDGE 16,658 19,658 26.25
EVENT DRIVEN
Arx Global High Yield Securities Fund I, L.P. 1,684 2,270 3.03
Centaurus Alpha Fund, L.P. 1,975 2,113 2.82
Delaware Street Capital, L.P. 1,298 1,748 2.33
Gracie Capital, L.P. 2,000 2,061 2.75
Halcyon Fund, L.P. 2,500 2,599 3.47
JANA Partners, L.P. 2,000 3,423 4.57
LC Capital Partners, L.P. 1,222 1,907 2.55
Longacre Capital Partners, L.P. 1,841 2,212 2.96
Scout Capital Partners, L.P. 3,000 3,298 4.41
Trafalgar Catalyst Fund 2,000 2,063 2.75
Trafalgar Recovery Fund 1,000 1,027 1.37
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TOTAL EVENT DRIVEN 20,520 24,721 33.01
MACRO
Brevan Howard, L.P. 1,800 2,000 2.67
Denali Partners, L.P. 2,000 2,180 2.91
Graham Global Investment Fund II, Ltd. K4 Portfolio 1,914 1,673 2.23
Julius Baer Diversified Fixed Income Hedge Fund 1,998 2,195 2.93
Spinnaker Global Opportunity Fund, Ltd. 1,817 3,443 4.60
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TOTAL MACRO 9,529 11,491 15.34
The accompanying notes are an integral part of these financial statements.
3
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (UNAUDITED) (CONTINUED)
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SEPTEMBER 30, 2005
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% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS
MULTI-STRATEGY AND OTHER
Golden Tree Capital Solutions Fund $ 1,500 $ 1,542 2.06%
Kayne Anderson Capital Income Partners (QP), L.P. 1,969 2,401 3.21
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TOTAL MULTI-STRATEGY AND OTHER 3,469 3,943 5.27
RELATIVE VALUE
Akela Capital Partners, L.P. 2,000 1,913 2.55
ASI Global Relative Value Fund, L.P. 2,400 2,470 3.30
Marathon Global Convertible Fund, L.P. 1,185 1,105 1.47
Metacapital Fixed Income Relative Value Fund, L.P. 2,000 2,026 2.71
Parmenides Fund, L.P. 2,354 2,486 3.32
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TOTAL RELATIVE VALUE 9,939 10,000 13.35
TOTAL PORTFOLIO FUNDS $ 60,115 $ 69,813 93.22%
======== ======== ========
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INVESTMENT OBJECTIVE AS A PERCENTAGE OF TOTAL INVESTMENTS, AT FAIR VALUE
% of Total
Strategy Investments
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Event Driven 35.41%
Equity Hedge 28.16%
Macro 16.46%
Relative Value 14.32%
Multi-Strategy and Other 5.65%
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*Percentages are based on net assets of $74,891.
+Subject to one year lockup on initial investment with subsequent quarterly
redemption cycle.
The aggregate cost of investments for tax purposes was approximately $63,406.
Net unrealized appreciation on investments for tax purposes was $6,407
consisting of $7,783 of gross unrealized appreciation and $1,376 of gross
unrealized depreciation.
The investments in Portfolio Funds shown above, representing 93.22% of
Investors' capital, have been fair valued in accordance with procedures
established by the Board of Managers (See Note 2).
The accompanying notes are an integral part of these financial statements.
4
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
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FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2005
INVESTMENT INCOME
Interest income $ 58
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TOTAL INVESTMENT INCOME 58
EXPENSES
Management fees 457
Professional fees 206
Administration fees 92
Investor servicing fees 92
Insurance fees 59
Board fees 15
Registration fees 14
Miscellaneous expenses 28
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TOTAL EXPENSES 963
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NET INVESTMENT LOSS (905)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 963
Net change in unrealized appreciation on investments 2,074
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NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS IN PORTFOLIO FUNDS 3,037
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NET INCREASE IN INVESTORS' CAPITAL
DERIVED FROM OPERATIONS $ 2,132
=========
The accompanying notes are an integral part of these financial statements.
5
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENTS OF CHANGES IN INVESTORS' CAPITAL (IN THOUSANDS)
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AFFILIATED
INVESTORS* INVESTORS TOTAL
INVESTORS' CAPITAL AT MARCH 31, 2004 $ 27,240 $ 36,915 $ 64,155
Contributions -- 26,855 26,855
Withdrawals (10,236) (11,422) (21,658)
Allocation of net increase in Investors'
capital resulting from operations before
incentive allocation 472 1,941 2,413
Incentive allocation 21 (21) --
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INVESTORS' CAPITAL AT MARCH 31, 2005 17,497 54,268 71,765
----------- ----------- -----------
Contributions -- 4,811 4,811
Withdrawals -- (3,817) (3,817)
Allocation of net increase in Investors'
capital resulting from operations before
incentive allocation 439 1,693 2,132
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INVESTORS' CAPITAL AT SEPTEMBER 30, 2005 (UNAUDITED) $ 17,936 $ 56,955 $ 74,891
=========== =========== ===========
Capital reallocable to the Affiliated Investors had the
Investors' measurement period for
incentive allocation closed on:
September 30, 2005: $ 7
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*The affiliated Investors are NB Funding Company, LLC and Columbia Management
Distributors, Inc.
The accompanying notes are an integral part of these financial statements.
6
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
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FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2005
Cash flows from operating activities:
Net increase in Investors' capital resulting from operations
before incentive allocation $ 2,132
Adjustments to reconcile net increase in Investors' capital resulting from
operations before incentive allocation to net cash used in operating activities:
Net realized gain on investments (963)
Net change in unrealized appreciation on investments (2,074)
Cost of investments purchased (13,700)
Proceeds from sale of investments 18,520
Increase/decrease in operating assets and liabilities:
Increase in investments paid in advance (2,600)
Increase in redemptions receivable from Portfolio Funds (316)
Increase in other assets (107)
Decrease in management fee payable (66)
Increase in professional fees payable 93
Increase in investor servicing fee payable 31
Increase in administration fee payable 31
Decrease in accrued expenses (10)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 971
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Cash flows from financing activities:
Capital contributions 4,811
Capital withdrawals (3,817)
Decrease in capital contributions received in advance (888)
Decrease in capital withdrawals payable (21)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 85
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Net increase in cash and cash equivalents 1,056
Cash and cash equivalents, beginning of period 609
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Cash and cash equivalents, end of period $ 1,665
========
The accompanying notes are an integral part of these financial statements.
7
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL HIGHLIGHTS
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The below ratios are calculated by dividing total dollars of income or expenses
as applicable by the average of total monthly Investors' capital. Total return
amounts are calculated by geometrically linking returns based on the change in
value during each accounting period. An individual investor's return may vary
from these returns based on the timing of capital contributions and withdrawals.
APRIL 1, 2003
Ratios to average Investors' capital: SIX MONTHS ENDED (COMMENCEMENT OF
SEPTEMBER 30, 2005 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) MARCH 31, 2005 MARCH 31, 2004
--------------------- --------------- -------------------
Net investment loss - prior to incentive allocation (2.48%)(1) (2.56%) (2.36%)(1)(2)
Incentive allocation (0.02%)(7) (0.03%) (0.50%)
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Net investment loss - net of incentive allocation (2.50%)(1) (2.59%) (2.86%)(1)
======= ======= =======
Expenses before organization expenses (3) 2.64% (1) 2.66% 2.72% (1)(4)
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Expenses (3) 2.64% (1) 2.66% 2.87% (1)(2)
Incentive allocation (3) 0.02% (7) 0.03% 0.50%
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Total expenses and incentive allocation (3) 2.66% (1) 2.69% 3.37% (1)(2)
======= ======= =======
Total return - prior to incentive allocation 2.95% (6) 2.61%(5) 10.34%(5)
Incentive allocation (0.01%)(7) (0.02%) (0.46%)
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Total return - net of incentive allocation 2.94% (6) 2.59%(5) 9.88%(5)
======= ======= =======
Portfolio turnover rate 19.78% 61.24% 43.16%
======= ======= =======
Investors' capital, end of period ($000) $74,891 $71,765 $64,155
======= ======= =======
(1) Annualized.
(2) Includes organization expenses of $45,000 incurred prior to commencement
of operations, charged to Investors' Capital Accounts.
(3) Does not include expenses of the Portfolio Funds in which the Fund
invests. The expense ratio (expense and incentive allocation ratio) is
calculated for the Investors taken as a whole. The computation of such
ratios based on the amount of expenses and incentive allocation assessed
to an individual Investor's capital may vary from these ratios based on
the timing of capital transactions.
(4) Does not include organization expenses charged during the year ended March
31, 2004 in the amount of $22,668.
(5) Total return is calculated for all the Investors taken as a whole, net of
all fees, except where noted that performance is prior to incentive fee
allocation. An individual Investor's return may vary from these returns
based on the timing of capital transactions.
(6) Total return is calculated for all the non-affiliated members taken as a
whole, net of all fees, except where noted that performance is prior to
incentive fee allocation. As discussed in Note 9 in the Notes to Financial
Statements, the Fund wrote off aged receivables and specially allocated
the amount allocable to redeemed Investors to an affiliated members'
capital account. Including affiliated members' capital accounts in the
total return calculation results in a total return for the period of 2.92%
prior to incentive allocation and 2.91% net of incentive allocation.
(7) Amounts are based on if the measurement period had closed on September 30,
2005.
The accompanying notes are an integral part of these financial statements.
8
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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1. ORGANIZATION
BACAP Alternative Multi-Strategy Fund, LLC (the "Fund") is a Delaware
limited liability company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a non-diversified, closed-end
management investment company. The Fund's limited liability company
interests ("Interests") are registered under the Securities Act of 1933,
as amended (the "1933 Act"). The Fund commenced investment operations on
April 1, 2003.
Banc of America Investment Advisors, Inc. ("BAIA") serves as the Fund's
investment adviser ("Adviser") and has the responsibility for the
management of the business and affairs of the Fund on a daily basis. BAIA
is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"). Prior to June 13, 2005, Columbia
Management Advisers, LLC (formerly known as Banc of America Capital
Management, LLC) ("CMA"), an advisory affiliate of BAIA, served as the
investment adviser to the Fund. Investors approved the Investment Advisory
Agreement with BAIA at a meeting held on June 13, 2005.
The investment objective of the Fund is to generate consistent long-term
capital appreciation with low volatility and limited risk under a wide
range of market conditions. The Fund attempts to achieve the investment
objective by allocating its assets among at least 15 private investment
funds, discretionary managed accounts or special purpose vehicles created
for the Fund (collectively, "Portfolio Funds"). The Adviser allocates the
assets of the Fund among Portfolio Funds that generally employ one or more
of the following strategies: (i) Event Driven (e.g. Risk (Merger)
Arbitrage, Capital Structure Arbitrage, Distressed Securities and Special
Situations); (ii) Relative Value (e.g. Convertible Arbitrage, Fixed Income
Arbitrage, Statistical Arbitrage, Non-Traditional Convertible Arbitrage
and Volatility Arbitrage); (iii) Equity Hedge; and (iv) Macro.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases
in net assets from operations during the reporting period. Actual results
could differ from those estimates
The following are the significant accounting policies adopted by the Fund:
A. VALUATIONS
The net asset value of the Fund is determined by or at the direction
of the Adviser as of the close of business at the end of any fiscal
period in accordance with accounting principles generally accepted
in the United States of America and the valuation principles set
forth below or as may be determined from time to time pursuant to
policies established by the Board of Managers (the "Board"). The net
asset value of the Fund equals the value of the assets of the Fund,
less all of its liabilities, including accrued fees and expenses.
The Valuation Committee values interests in Portfolio Funds at fair
value in accordance with written policies and procedures (the
"Valuation Procedures") approved by the Board that seek to ensure
that the Fund is able to reliably determine the value of its
investment in Portfolio Funds. The Fund's
9
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATIONS (CONTINUED)
Board, including the Independent Managers, has been advised about
its duties with respect to valuation as described in the Valuation
Procedures. Fair value of interests of Portfolio Funds ordinarily is
the value determined by the Valuation Committee based upon the
valuation reported by the Fund Manager in accordance with the
policies established by the relevant Portfolio Fund. As a general
matter, the fair value of the Fund's interest in a Portfolio Fund
represents the gross amount (gross of applicable fees, if any) that
the Fund could reasonably expect to receive from the Portfolio Fund
if the Fund's interests were redeemed at the time of the valuation,
based upon information reasonably available at the time the
valuation is made and that the Valuation Committee believes to be
reliable. In the event that a Portfolio Fund does not report a value
to the Fund on a timely basis, the Fund determines the fair value of
the Portfolio Fund based on the most recent value reported by the
Portfolio Fund, as well as any other relevant information available
at the time the Fund values its portfolio. Prior to investing in any
Portfolio Fund, the Valuation Committee conducts a due diligence
review of the method used by the Portfolio Fund to value its
portfolio, which as a general matter will use market value when
available, and otherwise use principles of fair value that the
Valuation Committee reasonably believes to be consistent with those
used by the Fund for valuing its own investments. Following the
Valuation Procedures, in the absence of specific transaction
activity in a particular Portfolio Fund, the Valuation Committee
considers whether it is appropriate, in light of all relevant
circumstances, to value such a position at its net asset value as
reported at the time of valuation, or whether to adjust such value
to reflect a premium or discount.
Valuations provided to the Fund by a Portfolio Fund may be based
upon estimated or unaudited reports, and may be subject to later
adjustment or revision by the Fund Manager. Any such adjustment or
revision that either increases or decreases the net asset value of
the Fund at the time that the Fund is provided with information
regarding the adjustment does not result in the Fund restating its
previous net asset values to reflect such adjustment or revision by
a Portfolio Fund. Accordingly, an Investor may have its Interest (or
portion thereof) repurchased at a price that is higher or lower than
a subsequently adjusted amount. For example, any increases in the
net asset value of the Fund resulting from a subsequent adjusted
valuation is entirely for the benefit of the outstanding Interests
of the Fund and to the detriment of Investors who had Interests of
the Fund repurchased at a price lower than the adjusted amount. The
same principles apply to the purchase of Interests, and new
Investors may be affected in a similar way. Although the Valuation
Committee reviews the valuations provided by Fund Managers, the
Valuation Committee cannot confirm the accuracy of valuations
provided by Fund Managers. Situations involving uncertainties as to
the valuation of portfolio positions could have an adverse effect on
the Fund's net assets if the judgments of the Adviser or Fund
Managers regarding appropriate valuations should prove incorrect.
Also, Fund Managers may only provide determinations of the net asset
value of Portfolio Funds on a monthly or quarterly basis, in which
event it may not be possible to determine the net asset value of the
Fund more frequently. If Fund Manager valuations are consistently
delayed, missing or inaccurate, the Adviser generally will consider
whether the Portfolio Fund continues to be an appropriate investment
for the Fund. The Fund may be unable to sell interests in an
Portfolio Fund quickly, and could therefore be obligated to continue
to hold the interests. In such a case, the Valuation Committee would
continue to value the interests without the benefit of the Fund
Manager valuations, and the Valuation Committee may determine to
discount the value of the interests or value them at zero.
10
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. SECURITY TRANSACTIONS
Purchases of investments in Portfolio Funds are recorded as of the
first day of legal ownership of a Portfolio Fund and sales of
Portfolio Funds are recorded as of the last day of legal ownership
or participation. Purchases and sales of other securities are
accounted for on the trade-date basis. Realized gains and losses are
recorded at the time of disposition of the respective investment on
an average cost basis.
C. INCOME ALLOCATION
As of the last day of each fiscal period, any net profit or net loss
for the fiscal period, and any offering costs required by applicable
accounting principles to be charged to capital that are paid or
accrued during the fiscal period, are allocated among and credited
to or debited against the Capital Accounts of the Investors in
accordance with their respective Capital Account balances for such
fiscal period.
D. INTEREST AND DIVIDENDS
Interest income is recognized on an accrual basis. Dividend income
is recognized on the ex-dividend date.
E. FUND EXPENSES
The Fund bears its own expenses including, but not limited to: any
taxes; organizational expenses; offering costs; investment-related
expenses incurred by the Fund (e.g., fees and expenses charged by
the Adviser and Portfolio Funds, placement fees, professional fees,
custody and administration fees).
F. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and liquid
investments with maturities of less than 90 days. As of September
30, 2005, the Fund has $1,665,017 in cash and cash equivalents held
in an interest-bearing sweep account.
G. INCOME TAXES
The Fund is not subject to federal and state income tax.
Accordingly, for federal and state income tax purposes, each
Investor is responsible for the tax liability or benefit related to
his/her share of taxable income or loss.
3. INVESTORS' CAPITAL ACCOUNTS
A separate Capital Account is maintained for each Investor of the Fund.
The increase or decrease in Investors' capital resulting from operations
is allocated to each Investor based on its pro-rata share of aggregated
capital in the Fund.
11
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTORS' CAPITAL ACCOUNTS (CONTINUED)
A. CONTRIBUTIONS
Interests in the Fund are offered through Columbia Management
Distributors, Inc. (the "Distributor") (successor to BACAP
Distributors, LLC), an affiliate of the Adviser, and through Selling
Agents exclusively to "qualified clients" as defined in the
regulations under the Advisers Act.
Investments in the Fund may be subject to a sales load of up to
3.00%. The sales load may be waived by the Fund for certain types of
investors. In addition, the Fund may compensate Selling Agents for
selling Interests to their customers. The Fund may pay Selling
Agents a service fee for investor service and account maintenance
services.
B. WITHDRAWALS
The Fund may from time to time offer to repurchase Interests
pursuant to written tenders by Investors. Repurchases are made at
such times and on such terms as may be determined by the Board, in
its sole discretion, and generally includes an offer to repurchase a
specified dollar amount of outstanding Interests. In determining
whether and when the Fund should repurchase Interests, the Board
considers recommendations from the Adviser. Depending on market
conditions and other factors, the Adviser expects that it will
recommend to the Board that the Fund offer to repurchase Interests
from Investors twice each year, effective as of June 30 and December
31 of each year. For the period ended September 30, 2005, tender
offers were conducted by the Fund as of June 30, 2005 in the amounts
of $3,816,774.
4. INVESTMENTS IN PORTFOLIO FUNDS
The agreements related to investments in Portfolio Funds typically provide
for compensation to the general partners/managers in the form of
management fees of 1% to 2% (per annum) of net assets and
performance/incentive fees or allocations of up to 25% of net profits
earned. The Portfolio Funds generally provide for periodic redemptions
ranging from monthly to annually with lock up provisions of up to two
years from initial investment. Some Portfolio Funds may charge redemption
fees. Such provisions may restrict the Fund's ability to respond to
changing market conditions. None of the Portfolio Funds are expected to
make distributions (e.g., dividend payments to investors).
Aggregate purchases and sales of Portfolio Funds for the six months ended
September 30, 2005, amounted to $13,700,000 and $18,519,633, respectively.
5. MANAGEMENT FEES
In consideration of services provided by the Adviser, the Fund pays the
Adviser a monthly fee (the "Management Fee") computed at an annual rate of
1.25% of the net assets of the Fund as of the last day of each month,
before reduction for any repurchases of Interests or the Incentive
Allocation.
The Adviser has agreed to voluntarily waive fees and/or reimburse expenses
of the Fund until July 31, 2006, to the extent necessary to assure that
the total ordinary operating expenses of the Fund do not exceed an annual
rate of 2.95% of the average monthly net assets of the Fund.
12
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
5. MANAGEMENT FEES (CONTINUED)
Ordinary operating expenses do not include organizational costs, interest,
taxes, the Incentive Allocation and extraordinary expenses. The Adviser is
entitled to recover from the Fund any fees waived or expenses reimbursed
for a three year period following the end of the fiscal year in which such
waiver or reimbursement occurred, if such recovery does not cause the
Fund's expenses to exceed the expense limitation in effect at the time of
recovery. At September 30, 2005, there were no amounts potentially
recoverable by the Adviser.
6. INCENTIVE ALLOCATION
At the end of each fiscal year, an amount equal to 10% of the excess of
the net capital appreciation allocated to the capital account of each
Investor for such fiscal year is reallocated from the capital account of
each Investor to the capital account of the Adviser (the "Incentive
Allocation"), provided; however, that the net capital appreciation upon
which the Incentive Allocation is calculated exceeds the sum of: (i) such
Investor's "Hurdle Amount" (as defined below) and (ii) any unrecovered
balance remaining in the Investor's "Loss Carryforward" (as defined
below).
The "Hurdle Amount" is the amount that an Investor would have earned for
the fiscal year if it had received an annualized rate of return equal to
the applicable Hurdle Rate on its opening capital account balance. The
Hurdle Rate is 6.00% per annum, computed on the basis of a 360-day year.
The Hurdle Rate is not cumulative from year to year.
Under the loss carryforward provision, no Incentive Allocation is made
with respect to a particular Investor for a fiscal year until any net loss
previously allocated to the Capital Account of such Investor has been
offset by subsequent net profits (the "Loss Carryforward"). If an
Investor's Capital Account is reduced (as a result of a Fund repurchase of
an Investor's Interest), the Investor's Loss Carryforward, if any, will be
reduced on a pro rata basis.
7. ADMINISTRATION AND SUB-ADMINISTRATION AGREEMENTS
The Fund has entered into an Administration Agreement with BACAP
Distributors, LLC to perform certain administration services. These
administrative services include, among other things, maintaining the
Fund's books and records and handling Investors' capital transactions.
Effective June 13, 2005, BACAP Distributors, LLC assigned all of its
rights, duties, responsibilities and obligations under the Administration
Agreement to BAIA. BAIA has agreed to assume all such rights, duties,
responsibilities and obligations.
Per the Administration Agreement, the Fund pays BAIA a monthly
Administration Fee computed at the annual rate of 0.25% of the net assets
of the Fund before reduction for any purchases of Interests or the
Incentive Allocation as of the last day of the month.
BACAP Distributors, LLC has contracted with SEI Investments Global Fund
Services as Sub-Administrator to perform these services at no additional
cost to the Fund. Effective June 13, 2005, BACAP Distributors, LLC
assigned all of its rights, duties, responsibilities and obligations under
the Sub-Administration Agreement to BAIA. BAIA has agreed to assume all
such rights, duties, responsibilities and obligations.
13
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
8. INVESTOR SERVICING AGREEMENT
The Fund pays the Distributor and/or Selling Agents a monthly Investor
Servicing Fee calculated at the annual rate of 0.25% of the net assets of
the Fund as of the last day of each month to compensate securities dealers
and other financial intermediaries for account maintenance services under
the Investor Service Plan and Investor Service Agreement. Pursuant to the
Investor Service Plan, intermediaries will handle investor inquiries
regarding investments in the Fund, capital account balances and report and
prepare tax information, assist in the maintenance of Fund records
containing Investor information, and provide other such information and
services as the Distributor or Adviser may reasonably request.
9. RELATED PARTY TRANSACTIONS
During the period ended September 30, 2005, the Adviser determined that
aged receivable balances of $141,186 would not be collected by the Fund.
Accordingly, the Fund included realized capital losses of that amount in
the Statement of Operations during the period. The realized capital loss
was allocated to only those Investors who originally participated in the
revenue that was originally recorded, to the extent that such Investors
were still invested in the Fund. The amount so allocated totaled $118,405.
The remaining realized capital loss of $22,781 was charged solely to the
capital account of NB Funding Company, LLC, an affiliate of the Adviser.
In April 2005, the Adviser reimbursed the Fund $2,598 that had been
expensed to Miscellaneous expense on the Statement of Operations in the
previous fiscal year. The Fund recorded the reimbursement as a credit to
Miscellaneous expense in the Statement of Operations during the current
period. Effective April 1, 2005, Chief Compliance Officer expenses of the
Fund are paid directly by the Adviser.
Each manager who is not an "interested person" of the Fund, as defined by
the 1940 Act, receives an annual retainer of $6,000 plus a fee of $1,000
for each meeting attended. Any manager or officer who is an "interested
person" does not receive any annual fee or other fees from the Fund. All
managers are reimbursed by the Fund for reasonable out-of-pocket expenses.
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CONCENTRATION OF CREDIT
RISK, AND OTHER RISKS
In the normal course of business, the Portfolio Funds in which the Fund
invests trade various financial instruments and enter into various
investment activities with off-balance sheet risk. These include, but are
not limited to, short selling activities, writing option contracts, and
equity swaps. To the extent that the Fund's investment activity is limited
to making investments in investment funds via limited partnership
interests or limited liability company holdings, the Fund's risk of loss
in these investment funds is generally limited to the value of these
investments reported by the Fund. To date, the Fund has only invested in
such limited partnership and limited liability company interests.
Because the Fund is a closed-end investment company, its Interests will
not be redeemable at the option of Investors and will not be exchangeable
for interests of any other fund. Although the Board in its discretion may
cause the Fund to offer from time to time to repurchase Interests at their
members' capital account value, the Interests are considerably less liquid
than shares of funds that trade on a stock exchange or shares of open-end
investment companies. With respect to any tender offer for Interests by
the Fund, the aggregate repurchase amount will be determined by the Board
in its discretion and such repurchase amount may represent only a small
portion of the Fund's outstanding Interests. Because the
14
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CONCENTRATION OF CREDIT
RISK, AND OTHER RISKS (CONTINUED)
Fund's investments in Portfolio Funds themselves have limited liquidity,
the Fund may not be able to fund significant repurchases. Investors whose
Interests are accepted for repurchase also bear the risk that the Fund's
members' capital may fluctuate significantly between the time that they
submit their request for repurchase and the date of the repurchase. There
are a number of other risks to the Fund. Three principal types of risk
that can adversely affect the Fund's investment approach are market risk,
strategy risk, and manager risk. The Fund is also subject to multiple
manager risks, possible limitations in investment opportunities,
allocation risks, illiquidity, lack of diversification, and other risks
for the Fund and potentially for each Portfolio Fund.
11. CONTINGENCIES AND COMMITMENTS
In the normal course of business, the Fund enters into contracts that
contain a variety of representations and warranties and which provide
general indemnifications. The Fund's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be
made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risk of loss to be remote. As of October
1, 2005, the Fund made investments in Alydar Fund, L.P., Denali Partners,
L.P., The Japan Pragmatist Fund, Julius Baer Diversified Fixed Income
Hedge Fund, New Star UK Gemini Hedge Fund, Ltd., and Trafalgar Recovery
Fund for $300,000, $400,000, $750,000, $400,000, $250,000, and $1,000,000,
respectively. Such amounts are reflected as Investments in Portfolio Funds
paid in advance in the Statement of Assets, Liabilities and Investors'
Capital.
12. LITIGATION EVENT
The events described below have not directly impacted the Fund or had any
material adverse effect on its financial position or results of
operations.
On February 9, 2005, the Distributor and certain affiliates, including the
former investment adviser to the Fund (the "Columbia Group"), entered into
Assurances of Discontinuance with the New York Attorney General ("NYAG")
(the "NYAG settlements") and consented to the entry of cease-and desist
orders by the Securities and Exchange Commission ("SEC") (the "SEC
Orders") in connection with matters related to late trading and market
timing of mutual funds advised and distributed by affiliates of BAIA (the
"Columbia Funds"). The SEC Order and the NYAG Settlement contain
substantially the same terms and conditions outlined in the agreements in
principle that Columbia Group entered into with the SEC and NYAG in March
2004. A copy of the SEC Orders is available on the SEC website at
http://www.sec.gov. A copy of the NYAG settlements is available as part of
the Bank of America Corporation Form 8-K filing of February 10, 2005.
In connection with these matters, various parties have filed suit against
certain Columbia Funds, the Trustees of the Columbia Funds, FleetBoston
Financial Corporation (the former parent of BAIA) and its affiliated
entities and/or Bank of America Corporation and its affiliated entities.
More than 300 cases, including those filed against entities unaffiliated
with the Columbia Funds, their Boards, FleetBoston Financial Corporation
and its affiliated entities and/or Bank of America Corporation and its
affiliated entities, have been transferred to the Federal District Court
in Maryland and consolidated in a multi-district proceeding. Other actions
against certain of the Columbia Funds, advisers and affiliated
15
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
12. LITIGATION EVENT (CONTINUED)
entities, alleging among other things excessive fees and inappropriate use
of fund assets for distribution, have been consolidated in the
Massachusetts federal court as In re Columbia Entities Litigation on March
2, 2005. These actions are ongoing.
13. SUBSEQUENT EVENT
Effective December 1, 2005, the Adviser will no longer be entitled to
receive any Incentive Allocation. Any amounts accrued, but not paid to the
Adviser, as Incentive Allocations as of December 1, 2005 will remain in
the relevant Investor's Capital Account and will not be paid to the
Adviser.
Effective on December 1, 2005, the Administration Agreement between the
Fund and the Adviser (in its capacity as the Administrator) has been
amended to reduce the administration fee from 0.25% of the Fund's net
assets to an amount equal to the compensation and any other fees payable
by the Administrator to SEI Investments Global Fund Services, pursuant to
the Sub-Administration Agreement.
Effective October 1, 2005, the Fund received additional capital
contributions of $269,750.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q within sixty days after the end of the period. The Fund's Form N-Q is
available on the Commission's website at HTTP://WWW.SEC.GOV, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, is available (i) without charge,
upon request, by calling (888) 786-9977; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
16
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
SPECIAL MEETING OF INVESTORS (UNAUDITED)
- --------------------------------------------------------------------------------
A Special Meeting of Investors of the Fund was held on June 13, 2005, at 760
Moore Road, King of Prussia, Pennsylvania, 19406, for the purposes of asking
Investors to consider the following proposals:
1. To elect a Manager to the Board of Managers of the Fund. A plurality of
the votes cast at the meeting elected the nominated Directors by the
following votes:
FOR AGAINST
--- -------
Alan Brott 35,393,405.26 1,781,220.95
The terms of office of Thomas W. Brock and Thomas G. Yellin, the other
Managers of the Fund, continued after the meeting.
2. To approve a new Investment Advisory Agreement between the Fund and Banc
of America Investment Advisors, Inc. A majority of the outstanding
Interests in the Fund approved the new Investment Advisory Agreement by
the following votes:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
34,472,697.35 1,272,872.54 1,429,056.32 0
17
ITEM 2. CODE OF ETHICS.
Exhibit B to the Code of Ethics has been modified to add David Hohmann as a
Covered Officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing date of
the report that includes disclosure required by this paragraph, based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under the
1940 Act (17CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))
that occurred during the registrant's last fiscal half-year (the registrant's
second fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal
control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are attached hereto.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) BACAP Alternative Multi-Strategy Fund, LLC
By (Signature and Title)* /s/ Lawrence R. Morgenthal
---------------------------------
Lawrence R. Morgenthal, President
(Principal Executive Officer)
Date: November 29, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Lawrence R. Morgenthal
---------------------------------
Lawrence R. Morgenthal, President
(Principal Executive Officer)
Date: November 29, 2005
By (Signature and Title)* /s/ David Hohmann
------------------------
David Hohmann, Treasurer
(Principal Financial Officer)
Date: November 29, 2005
* Print the name and title of each signing officer under his or her signature.
AMENDMENT TO CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
In connection with the election of David Hohmann as Treasurer of BACAP
Alternative Multi-Strategy Fund, LLC, BACAP Opportunity Strategy, LLC and
Columbia Management Multi-Strategy Hedge Fund, LLC (the "Funds"), Exhibit B to
the Funds' Code of Ethics for Principal Executive and Senior Financial Officers
is deleted and replaced with Schedule 1 attached hereto, effective as of
November 14, 2005.
SCHEDULE 1 TO AMENDMENT
Exhibit B
COVERED OFFICERS
Lawrence R. Morgenthal
David Hohmann