UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM N-CSRS
--------
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)
--------
40 West 57th Street, 33rd Floor
New York, NY 10019
(Address of principal executive offices) (Zip code)
James R. Bordewick, Esq.
Banc of America Investment Advisors, Inc.
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, 2006
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, 2006
(UNAUDITED)
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006
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
INVESTMENT CONTRACT RENEWAL DISCLOSURE........................................16
CHANGE IN INVESTMENT COMMITTEE MEMBERSHIP.....................................19
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)
- -------------------------------------------------------------------------------------
SEPTEMBER 30, 2006
ASSETS
Investments in Portfolio Funds, at fair value (cost $81,252) $ 89,978
Redemptions receivable from Portfolio Funds 6,358
Investments in Portfolio Funds paid in advance 1,250
Cash and cash equivalents 354
Other assets 18
--------------------
TOTAL ASSETS 97,958
--------------------
LIABILITIES
Capital contributions received in advance 1,014
Management fee payable 101
Professional fees payable 98
Investor servicing fee payable 20
Administration fee payable 7
Accrued expenses 3
--------------------
TOTAL LIABILITIES 1,243
--------------------
NET ASSETS $ 96,715
====================
Net capital (1) $ 87,989
Net unrealized appreciation on investments in Portfolio Funds 8,726
--------------------
TOTAL INVESTORS' CAPITAL $ 96,715
====================
(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)
- ------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 2006
------------------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS
EQUITY HEDGE
Alydar Fund, L.P.+ $ 5,047 $ 5,806 6.00 %
New Star UK Gemini Hedge Fund, Ltd. 3,474 3,878 4.01
Prism Partners QP, L.P. 3,750 3,792 3.92
Royal Capital Value Fund (QP), L.P. 4,600 4,753 4.92
TCS Capital II, L.P. 1,575 3,017 3.12
Tiedemann Falconer Partners, L.P. 4,250 4,547 4.70
Tiedemann Japan QP, L.P. 2,400 2,392 2.47
------- ------- -------
TOTAL EQUITY HEDGE 25,096 28,185 29.14
EVENT DRIVEN
Centaurus Alpha Fund, L.P. 3,475 3,899 4.03
Delaware Street Capital, L.P. 241 270 0.28
Gracie Capital, L.P. 2,000 2,134 2.21
Halcyon Enhanced, L.P. 3,026 3,010 3.11
JANA Partners, L.P. 2,578 3,826 3.95
Longacre Capital Partners, L.P. 2,180 2,715 2.81
Strategic Value Restructuring Fund, L.P. 3,450 3,620 3.74
Trafalgar Catalyst Fund 3,710 3,932 4.07
Trafalgar Recovery Fund 2,000 2,273 2.35
TT Event Driven Alpha Fund, Ltd. 3,000 2,930 3.03
------- ------- -------
TOTAL EVENT DRIVEN 25,660 28,609 29.58
MACRO
Aspect US Fund, LLC "Diversified Class" 3,000 2,880 2.98
Brevan Howard, L.P. 3,500 3,887 4.02
Denali Partners, L.P. 2,400 2,612 2.70
------- ------- -------
TOTAL MACRO 8,900 9,379 9.70
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)
- ------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 2006
------------------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS (CONTINUED)
MULTI-STRATEGY AND OTHER
Golden Tree Capital Solutions Fund $ 1,500 $ 1,752 1.81 %
The Rohatyn Group Global Opportunity Partners, L.P. 3,000 2,803 2.90
Spinnaker Global Opportunity Fund, Ltd. 1,346 2,911 3.01
------- ------- -------
TOTAL MULTI-STRATEGY AND OTHER 5,846 7,466 7.72
RELATIVE VALUE
Aristeia Partners, L.P. 1,500 1,542 1.59
ASI Global Relative Value Fund, L.P. 4,400 4,588 4.74
DRV Sunrise Fund I, Ltd. 4,600 4,770 4.93
Lydian Partners II, L.P. 2,750 2,801 2.90
TQA Arbitrage Fund, L.P. 2,500 2,638 2.73
------- ------- -------
TOTAL RELATIVE VALUE 15,750 16,339 16.89
TOTAL INVESTMENT IN PORTFOLIO FUNDS $81,252 $89,978 93.03 %
======= ======= =======
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AS A PERCENTAGE OF TOTAL INVESTMENTS
IN PORTFOLIO FUNDS, AT FAIR VALUE
% of Total
Strategy Investments in Portfolio Funds
---------------------------------------------------------------
Event Driven 31.80%
Equity Hedge 31.32%
Relative Value 18.16%
Macro 10.42%
Multi-Strategy and Other 8.30%
- --------------------------------------------------------------------------------
*Percentages are based on net assets of approximately $96,715.
+Subject to one year lockup on initial investment with subsequent quarterly
redemption cycle.
The aggregate cost of investments for tax purposes was approximately $85,920.
Net unrealized appreciation on investments for tax purposes was approximately
$4,058 consisting of approximately $5,832 of gross unrealized appreciation and
approximately $1,774 of gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 93.03% 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)
- ------------------------------------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 2006
INVESTMENT INCOME
Interest income $ 140
------------
TOTAL INVESTMENT INCOME 140
EXPENSES
Management fees 543
Investor servicing fees 109
Administration fees 38
Legal fees 75
Audit and tax service fees 73
Insurance fees 67
Registration fees 21
Board fees 18
Miscellaneous expenses 40
------------
TOTAL EXPENSES 984
------------
Reimbursement of fees (see Note 9) (23)
------------
NET EXPENSES 961
------------
NET INVESTMENT LOSS (821)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS IN PORTFOLIO FUNDS
Net realized loss on investments in Portfolio Funds (60)
Net change in unrealized appreciation on investments in Portfolio Funds 1,075
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS IN PORTFOLIO FUNDS 1,015
------------
NET INCREASE IN INVESTORS' CAPITAL DERIVED FROM OPERATIONS $ 194
============
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)
- ------------------------------------------------------------------------------------------------------------------
AFFILIATED
INVESTORS* INVESTORS TOTAL
INVESTORS' CAPITAL AT MARCH 31, 2005 $ 17,497 $ 54,268 $ 71,765
Contributions - 14,532 14,532
Withdrawals (169) (15,245) (15,414)
Allocation of net increase in Investors'
capital resulting from operations before
incentive allocation 1,040 3,334 4,374
--------- --------- ---------
INVESTORS' CAPITAL AT MARCH 31, 2006 18,368 56,889 75,257
--------- --------- ---------
Contributions - 27,681 27,681
Withdrawals - (6,417) (6,417)
Allocation of net increase in Investors'
capital resulting from operations 34 160 194
--------- --------- ---------
INVESTORS' CAPITAL AT SEPTEMBER 30, 2006 (UNAUDITED) $ 18,402 $ 78,313 $ 96,715
========= ========= =========
* The affiliated Investor is NB Funding Company, LLC.
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)
- ------------------------------------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 2006
Cash flows from operating activities:
Net increase in Investors' capital resulting from operations $ 194
Adjustments to reconcile net increase in Investors' capital resulting from
operations to net cash used in operating activities:
Net realized loss on investments in Portfolio Funds 60
Net change in unrealized appreciation on investments in Portfolio Funds (1,075)
Cost of investments purchased (46,426)
Proceeds from sale of investments 15,669
Increase/decrease in operating assets and liabilities:
Decrease in investments in Portfolio Funds paid in advance 5,550
Decrease in redemptions receivable from Portfolio Funds 5,627
Decrease in other assets 35
Increase in management fee payable 22
Decrease in professional fees payable (115)
Increase in investor servicing fee payable 3
Decrease in accrued expenses (26)
------------
NET CASH USED IN OPERATING ACTIVITIES (20,482)
------------
Cash flows from financing activities:
Capital contributions 27,681
Capital withdrawals (6,417)
Decrease in capital contributions received in advance (946)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,318
------------
Net decrease in cash and cash equivalents (164)
Cash and cash equivalents, beginning of period 518
------------
Cash and cash equivalents, end of period $ 354
============
The accompanying notes are an integral part of these financial statements.
7
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------
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)
SIX YEARS ENDED MARCH 31, (COMMENCEMENT
Ratios to average Investors' capital: MONTHS ENDED ----------------------- OF OPERATIONS)
SEPTEMBER 30, 2006 THROUGH MARCH 31,
(UNAUDITED) 2006 2005 2004
----------- ---------- --------- -----------
Net investment loss - prior to incentive allocation (1.95%) (1)(7) (2.49%) (2.56%) (2.36%) (1)(2)
Incentive allocation 0.00% (6) 0.00% (6) (0.03%) (0.50%)
----------- ---------- --------- -----------
Net investment loss - net of incentive allocation (1.95%) (1)(7) (2.49%) (2.59%) (2.86%) (1)
----------- ---------- --------- -----------
Expenses before organization expenses (3) 2.28% (1)(7) 2.74% 2.66% 2.72% (1)(4)
----------- ---------- --------- -----------
Expenses (3) 2.28% (1)(7) 2.74% 2.66% 2.87% (1)(2)
Incentive allocation (3) 0.00% (6) 0.00% (6) 0.03% 0.50%
----------- ---------- --------- -----------
Total expenses and incentive allocation (3) 2.28% (1)(7) 2.74% 2.69% 3.37% (1)(2)
----------- ---------- --------- -----------
Total return - prior to incentive allocation(5) 0.18% 6.38% 2.61% 10.34%
Incentive allocation 0.00% (6) 0.00% (6) (0.02%) (0.46%)
----------- ---------- --------- -----------
Total return - net of incentive allocation(5) 0.18% 6.38% 2.59% 9.88%
----------- ---------- --------- -----------
Portfolio turnover rate 19.56% 47.84% 61.24% 43.16%
----------- ---------- --------- -----------
Investors' capital, end of period ($000) $96,715 $75,257 $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) Effective December 1, 2005, the Fund terminated the incentive fee accrual
retroactively to April 1, 2005.
(7) If expenses had not been voluntarily reimbursed by the Adviser, the ratios
of net investment loss and expenses to average Investors' Capital would be
(2.00%) and 2.33%, respectively.
The accompanying notes are an integral part of these financial statements.
8
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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. The
Adviser 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 Advisors, LLC (formerly known as Banc of America
Capital Management, LLC) ("CMA"), an advisory affiliate of the Adviser,
served as the investment adviser to the Fund. Investors approved the
Investment Advisory Agreement with the Adviser 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, High Yield Securities, Distressed Securities and Special
Situations); (ii) Relative Value (e.g. Convertible Arbitrage, Fixed Income
Arbitrage, Statistical Arbitrage and Capital Structure Arbitrage); (iii)
Equity Hedge; (iv) Macro; and (v) Other.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 Fund's investments are fair valued by the Adviser in accordance
with policies and procedures that seek to ensure that the Fund is able
to reliably determine the value of its investments in the Portfolio
Funds. Investments in Portfolio Funds are generally valued at net asset
value, which approximates fair value, as reported by the administrators
or investment managers of the Portfolio Funds. Such values generally
represent the Fund's proportionate share of the net assets of the
Portfolio Funds. Accordingly, the value of investments in Portfolio
Funds is generally increased by additional contributions to the
Portfolio Funds and the Fund's share of net earnings from the Portfolio
Funds and decreased by withdrawals and the Fund's share of net losses
from the Portfolio Funds. The Portfolio Funds' administrators or
investment managers generally value their investments at fair value.
9
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATIONS (CONTINUED)
Listed investment securities are generally valued by an independent
pricing source. Securities with no readily available market value are
initially valued at cost, with subsequent adjustments to values, which
reflect either the basis of meaningful third-party transactions in the
private market, or fair value deemed appropriate by Portfolio Funds'
management. In such instances, consideration is also given to the
financial condition and operating results of the issuer, the amount
that the Portfolio Funds can reasonably expect to realize upon sale of
the securities and other factors deemed relevant.
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 calendar month, any net profit or net loss
for the calendar month, and any offering costs required by applicable
accounting principles to be charged to capital that are paid or accrued
during the calendar month, 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 calendar month.
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 original maturities of less than 90 days. As of
September 30, 2006, the Fund has $353,762 in cash and cash equivalents
held in an interest-bearing sweep account.
10
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 at the end of each calendar month, based on
its pro-rata share of aggregated capital in the Fund.
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, 2006, tender offers were conducted by the
Fund as of June 30, 2006 in the amount of $6,416,584.
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, 2006, amounted to $46,426,335 and $15,669,186, respectively.
11
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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. Ordinary operating
expenses do not include organizational costs, interest, taxes, and
extraordinary expenses.
6. INCENTIVE ALLOCATION
Effective December 1, 2005, the Adviser is no longer entitled to receive
any Incentive Allocation. Any amounts accrued, but not paid to the
Adviser, as of December 1, 2005 remained in the relevant Investor's
Capital Account and were not paid to the Adviser.
7. ADMINISTRATION, SUB-ADMINISTRATION AND REGULATORY ADMINISTRATION
AGREEMENTS
The Fund has entered into an administration agreement with the Adviser to
perform certain administration services. Under the administration
agreement, the Adviser provides, or arranges to provide certain
accounting, administrative, and transfer agency services to the Fund.
Effective June 13, 2005, the Distributor assigned all of its rights,
duties, responsibilities and obligations under the Administration
Agreement to the Adviser. The Adviser has agreed to assume all such
rights, duties, responsibilities and obligations.
Per the administration agreement, the Fund pays the Adviser a monthly
administration fee computed at the annual rate of 0.07% of the net assets
of the Fund before reduction for any repurchases of Interests, as well as
other expenses set forth in the administration agreement. For the six
months ended September 30, 2006, the Fund paid an administration fee of
$37,553.
The Fund and the Distributor have contracted with SEI Investments Global
Fund Services ("SEI") as Sub-Administrator to perform administration
services. The Adviser pays SEI a fee at the annual rate of 0.07% of the
Fund's net asset value. Effective June 13, 2005, the Distributor assigned
all of its rights, duties, responsibilities and obligations under the
Sub-Administration Agreement to the Adviser. The Adviser has agreed to
assume all such rights, duties, responsibilities and obligations.
Effective January 1, 2005, the Fund has entered into an agreement with
PFPC Inc. ("PFPC") to perform regulatory administration services. The Fund
pays PFPC 0.015% per year on average net assets subject to a $30,000
minimum fee. For the six months ended September 30, 2006, the Fund paid
$15,099 to PFPC under this agreement which is included in Miscellaneous
expenses in the Statement of Operations.
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
12
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
8. INVESTOR SERVICING AGREEMENT (CONTINUED)
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
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.
During the six months ended September 30, 2006, the Adviser reimbursed the
Fund $3,000 for the July 2006 Board meeting.
During the six months ended September 30, 2006, the Adviser also
reimbursed the Fund $19,500 for tax related services.
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 are not
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
investors' 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
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
investors' 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.
13
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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, 2006, the Fund made investments in Alydar Fund, L.P. and Prism Partners
QP, L.P. for $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
known material adverse effect on its financial position or results of
operations.
On February 9, 2005, the Distributor and certain other affiliates of the
Adviser, including the former investment adviser to the Fund, 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 the
Adviser. The SEC Orders and the NYAG Settlements contain substantially the
same terms and conditions outlined in the agreements in principle that
affiliates of the Adviser 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 (including former Nations Funds), the Trustees of
the Columbia Funds, FleetBoston Financial Corporation (the former parent
of the Adviser) and certain of its affiliated entities and/or Bank of
America Corporation and certain of 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 a multi-district proceeding in the
Federal District Court in Maryland. The parties have reached settlements
or settlements in principle with respect to the claims in the proceeding
concerning the Columbia Funds. All such settlements are subject to court
approval. Other actions against certain Columbia Funds, the Trustees of
the Columbia Funds, advisers and affiliated entities, alleging among other
things excessive fees and inappropriate use of fund assets for
distribution and other improper purposes, have been consolidated in the
Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION on March
2, 2005. On November 30, 2005, the judge dismissed all claims by
plaintiffs and ordered that the case be closed. The plaintiffs filed a
notice of appeal to the United States Court of Appeals for the First
Circuit on December 30, 2005; this appeal is currently pending. The
parties have advised the appellate court that they are engaged in
settlement discussions and the court has, accordingly, deferred the
briefing schedule for the appeal. The settlement has not yet been
finalized. Any settlement ultimately agreed by the parties will be subject
to court approval. These actions are ongoing.
14
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
13. NEW ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued
FASB interpretation 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes". This standard defines the threshold for recognizing the benefits
of tax-return positions in the financial statements as
"more-likely-than-not" to be sustained by the taxing authority and
requires measurement of a tax position meeting the more-likely-than-not
criterion, based on the largest benefit that is more than 50 percent
likely to be realized. FIN 48 is effective as of the beginning of the
first fiscal year beginning after December 15, 2006. At adoption,
companies must adjust their financial statements to reflect only those tax
positions that are more-likely-than-not to be sustained as of the adoption
date. As of September 30, 2006, the Fund does not expect the impact of the
adoption of FIN 48 will be material to the financial statements.
In September 2006, the FASB issued STATEMENT ON FINANCIAL ACCOUNTING
STANDARDS (SFAS) NO. 157, "FAIR VALUE MEASUREMENTS." This standard
establishes a single authoritative definition of fair value, sets out a
framework for measuring fair value and requires additional disclosures
about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No.
157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal
years. The changes to current generally accepted accounting principles
from the application of this Statement relate to the definition of fair
value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. As of September 30, 2006, the
Fund does not believe the adoption of SFAS No. 157 will impact the amounts
reported in the financial statements, however, additional disclosures may
be required about the inputs used to develop the measurements and the
effect of certain of the measurements reported on the Statement of Changes
in Investors' Capital for a fiscal period.
14. SUBSEQUENT EVENTS
Subsequent to September 30, 2006, the Fund received additional capital
contributions of $1,414,440.
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.
15
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
INVESTMENT CONTRACT RENEWAL DISCLOSURE (UNAUDITED)
- --------------------------------------------------------------------------------
BOARD ACTION WITH RESPECT TO INVESTMENT ADVISORY AGREEMENT
- ----------------------------------------------------------
At a meeting held on September 20, 2006, the Board of Managers of BACAP
Alternative Multi-Strategy Fund, LLC (the "Fund"), which consists only of
Managers who are not "interested persons" of the Fund (as defined in the
Investment Company Act of 1940), approved the continuation of the Fund's
investment advisory agreement with Banc of America Investment Advisors, Inc.
("BAIA") for an additional one-year period ending on October 31, 2007. At that
meeting, the Board considered information and factors that it believed were
relevant to the interests of the Fund's investors, and during its deliberations
consulted with its independent legal counsel and with Fund counsel. In addition,
at most of its other meetings throughout the year, the Board considers matters
bearing on the investment advisory agreement.
The Managers received and reviewed all materials that they or their legal
counsel believed to be reasonably necessary to evaluate the investment advisory
agreement and determine whether to approve its continuation. Those materials
included, among other items, (i) information on the Fund's investment
performance relative to the performance of a universe of registered funds of
hedge funds compiled by BAIA, including funds managed by third parties and
another registered fund managed by BAIA (the "BAIA-Identified Peer Group"), as
well as unregistered funds of hedge funds managed by BAIA ("BAIA Unregistered
Funds"), and the Fund's performance benchmark; (ii) information on the Fund's
advisory fees and other expenses, including information comparing the Fund's
expenses to those of the BAIA-Identified Peer Group and the BAIA Unregistered
Funds and information compiled by an independent third party comparing the
Fund's expenses to a peer group of registered funds of hedge funds identified by
the third party (the "Third Party-Identified Peer Group" and, together with the
BAIA-Identified Peer Group, the "Peer Groups"); (iii) information about the
profitability of the investment advisory agreement to BAIA and potential
"fall-out" or ancillary benefits that BAIA and its affiliates may receive as a
result of their relationships with the Fund; and (iv) information obtained
through BAIA's response to a letter prepared at the request of the Managers by
their counsel requesting certain information in connection with the renewal of
the Fund's investment advisory agreement. The Board also considered other
information such as (v) BAIA's financial results and financial condition, and
(vi) BAIA's resources devoted to, and its record of compliance with, the Fund's
investment policies and restrictions, policies on personal securities
transactions and other compliance policies. Throughout the process, the Managers
had the opportunity to ask questions of, and request additional materials from,
BAIA and to consult with their legal counsel. The Board also referred to
information about the Fund's investment process that it received from BAIA's
investment professionals at previous meetings throughout the year.
In considering whether to approve the continuation of the investment advisory
agreement, the Managers did not identify any single factor as determinative, and
each weighed various factors as he deemed appropriate. The Managers considered
the following matters in connection with their approval of the continuation of
the investment advisory agreement:
NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED. The Board considered the
nature, quality and extent of the advisory services provided by BAIA under the
investment advisory agreement. It considered the investment approach BAIA
employs, BAIA's research capabilities, the nature of BAIA's experience and
resources, the experience of relevant BAIA personnel, and BAIA's resources,
practices and procedures designed to address regulatory compliance matters. The
Board discussed with BAIA its plans to enhance the depth of investment expertise
and the ongoing improvements that BAIA was making to its research and analysis
capabilities.
16
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
INVESTMENT CONTRACT RENEWAL DISCLOSURE (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE. The Board reviewed the Fund's investment performance and
the performance of funds in the BAIA-Identified Peer Group and the BAIA
Unregistered Funds, noting that, for some periods, the Fund had underperformed
its benchmark and that its performance was below median compared to its peers.
The Board also reviewed the factors that BAIA identified as contributing to
performance. The Managers also considered BAIA's historical responsiveness in
addressing the Board's concerns about performance relative to its peer group and
benchmark and BAIA's willingness to take steps intended to improve performance.
The Board concluded that there were factors relevant to performance that were
sufficient, in light of other considerations, to warrant continuation of the
Fund's advisory agreement. However, the Board advised BAIA that it expected to
see significant improvement in the Fund's performance during the next twelve
months. Performance, of course, depends on a number of factors and BAIA made no
promises of future performance to the Board.
EXPENSE INFORMATION, PROFITABILITY AND ECONOMIES OF SCALE. The Board gave
substantial consideration to the fees payable under the Fund's investment
advisory agreement. The Board reviewed the Fund's fees and expenses and the fees
and expenses of other comparable registered funds of hedge funds, including
funds in the Peer Groups and the BAIA Unregistered Funds. The Board also
considered information regarding the advisory fees paid by a similar registered
fund of hedge funds managed by BAIA that was included in the Peer Groups. The
Board noted BAIA's stated justification for the advisory fees charged to the
Fund, which included information about performance and services.
The Board reviewed the actual dollar amount of fees paid to BAIA under the
investment advisory agreement and BAIA's expenses in providing its services and,
in this context, considered the fact that BAIA or its affiliates provide other
services to the Fund and its investors and receive payment for these services.
The Board also considered so-called "fall-out benefits" to BAIA, such as any
incremental increase to its reputation derived from serving as investment
adviser to the Fund.
In addition, the Board considered possible economies of scale with respect to
the management of the Fund that might be realized at different Fund asset
levels. In this regard, the Board considered the Fund's existing and reasonably
foreseeable asset levels and information related to BAIA's estimated costs. The
Board also considered the possible positive impact on net investment returns
from BAIA's December 2005 elimination of its incentive allocation and reduction
of its fee for administrative services.
OTHER CONSIDERATIONS. The Board also considered the terms of the investment
advisory agreement, including the applicable standard of care, and the structure
of, and the method used to determine, the compensation of BAIA's portfolio
managers. In addition, the Board considered the extent to which the Fund
operated in accordance with its investment objective and its record of
compliance with its investment restrictions, and the compliance programs of the
Fund and BAIA.
Based on these considerations and following deliberation and discussion, in open
sessions with representatives of BAIA and in executive sessions with independent
counsel, the Managers concluded that (i) BAIA had the capabilities, resources
and personnel necessary to fulfill its duties under the investment advisory
agreement; (ii) the scope and quality of services provided under the investment
advisory agreement are consistent with the Fund's operational requirements;
(iii) the advisory fees paid to BAIA under the investment advisory agreement
were reasonable in light of the services that BAIA provides and the costs that
BAIA incurs; (iv) BAIA's profitability in providing advisory services to the
Fund was reasonable; and (v) there was no potential for economies of scale to be
realized by BAIA in managing the Fund given the current and foreseeable asset
size
17
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
INVESTMENT CONTRACT RENEWAL DISCLOSURE (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
of the Fund. Based on their evaluation of all factors that they deemed to be
material, including those factors described above, and assisted by the advice of
independent counsel, the Managers approved the continuance of the investment
advisory agreement.
18
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
CHANGE IN INVESTMENT COMMITTEE MEMBERSHIP (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund's portfolio management decisions are made by an investment committee.
Following the resignation of Lawrence Morgenthal, Daniel McNamara was appointed
to the committee.
Daniel S. McNamara, President, BAIA, Managing Director, Investment Products
Group, Acting Managing Director, Alternative Investment Group ("AI Group"). Mr.
McNamara has served as BAIA's President since January 2006. In December 2005 he
was named the Managing Director of Bank of America's Investment Products Group,
in which the AI Group line of business is organized. From 2001 to 2006, Mr.
McNamara was Managing Director of the Consulting Services Group and Investment
Strategies Group. Prior to joining Bank of America Corporation in 2001, he
served as the Director of the Consulting Services Group for First Union
Securities from 2000 to 2001.
Mr. McNamara earned a BS in Economics from Rutgers University in 1988.
19
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual report.
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.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
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.
(a)(1) The Fund's portfolio management decisions are made by an investment
committee with representatives from portfolio management, operations, risk and
other groups within the Adviser and Bank of America Corporation. During the six
months ended September 30, 2006, Lawrence Morgenthal resigned and the following
two voting members joined the committee:
DANIEL S. MCNAMARA, PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS, INC.
("BAIA"), MANAGING DIRECTOR, INVESTMENT PRODUCTS GROUP, ACTING MANAGING
DIRECTOR, ALTERNATIVE INVESTMENT GROUP ("AI GROUP"). Mr. McNamara has served as
BAIA's President since January 2006. In December 2005 he was named the Managing
Director of Bank of America's Investment Products Group, in which the AI Group
line of business is organized. From 2001 to 2006, Mr. McNamara was Managing
Director of the Consulting Services Group and Investment Strategies Group, two
other lines of business within the Investment Products Group. Prior to joining
Bank of America Corporation in 2001, he served as the Director of the Consulting
Services Group for First Union Securities from 2000 to 2001. Mr. McNamara earned
a BS in Economics from Rutgers University in 1988.
NICHOLE QUINN, CIMA, MANAGING DIRECTOR, PRODUCT MANAGEMENT, DEVELOPMENT AND
MARKETING - ALTERNATIVE INVESTMENT GROUP AND SENIOR VICE PRESIDENT, BANC OF
AMERICA INVESTMENT ADVISORS, INC. As Managing Director, Ms. Quinn is responsible
for overseeing all aspects of AI Group's marketing, product management and
product development efforts. Prior to assuming this role in July 2006, Ms. Quinn
was Managing Director, Product Management for the Consulting Services Group at
Bank of America. In that role, her primary responsibilities included overseeing
product management, communication, marketing, and a supporting sales desk for
the fee-based platform. Prior to joining Bank of America in January 2002, Ms.
Quinn was Director of the Northeast in a sales role at Wachovia Securities
(formerly First Union Securities). Prior to that role, Ms. Quinn helped to build
the fee-based platform at First Albany Inc., a regional investment firm
in upstate New York. Ms. Quinn completed the Certified Financial Planner
Education Program and holds a Certified Investment Management Analyst
designation. Ms. Quinn is a member of the Investment Management Consultants
Association. Ms. Quinn earned a BS in Business from State University of Albany
in 1993.
(2) The table below provides information regarding accounts managed by
Mr. McNamara and Ms. Quinn, as of September 30, 2006, as part of the committee
or otherwise:
NUMBER OF
ACCOUNTS
MANAGED FOR ASSETS MANAGED
NUMBER OF WHICH ADVISORY FOR WHICH ADVISORY
ACCOUNTS FEE IS FEE IS
MANAGED TOTAL ASSETS MANAGED PERFORMANCE- PERFORMANCE-
TYPE OF ACCOUNT BASED BASED
DANIEL S.
MCNAMARA
Registered 1 $96,477,838 0 N/A
Investment
Companies
Other pooled 18 $2,586,799,136 15 $2,262,480,591
investment
vehicles
Other accounts 0 N/A 0 N/A
NICHOLE QUINN
Registered 1 $96,477,838 0 N/A
Investment
Companies
Other pooled 18 $2,586,799,136 15 $2,262,480,591
investment
vehicles
Other accounts 0 N/A 0 N/A
BAIA and its affiliates and their partners, officers and employees, including
those involved in the investment activities and business operations of the Fund
(collectively, for the purposes of this section "BAIA Affiliates"), are active
participants in the global currency, equity, commodity, fixed-income and other
markets in which the Fund directly or indirectly invests. As such, BAIA
Affiliates are actively engaged in transactions in the same securities and other
instruments in which the underlying funds selected by BAIA may invest. The
proprietary activities or portfolio strategies of BAIA Affiliates and managers
of underlying funds ("Fund Managers"), or the activities or strategies used for
accounts managed by BAIA Affiliates or Fund Managers for other customer
accounts, could conflict with the transactions and strategies employed by BAIA
for the Fund or the Fund Managers for the underlying funds and could affect the
prices and availability of the securities and instruments in which the Fund
invests directly or indirectly through its investments in underlying funds. BAIA
Affiliates' and the Fund Managers' trading activities are carried out without
reference to positions held directly or indirectly by the Fund and may have an
effect on the value of the positions so held or may result in their having an
interest in an issuer that is adverse to that of the Fund. Neither BAIA
Affiliates nor the Fund Managers are under any obligation to share any
investment opportunity, idea or strategy with the Fund. As a result, BAIA
Affiliates and the Fund Managers may directly or indirectly compete with the
Fund for appropriate investment opportunities.
BAIA Affiliates may create, write or issue derivative instruments where the
counterparty is an underlying fund in which the Fund has invested or the
performance of which is based on the performance of the Fund. BAIA Affiliates
may keep any profits, commissions and fees accruing to them in connection with
their activities for themselves and other clients, and the fees or allocations
from the Fund to BAIA Affiliates are not reduced thereby.
Conflicts also may arise because the BAIA Affiliates and the Fund Managers and
their respective affiliates serve as investment managers to numerous other
accounts, some of which may have investment programs similar to that Fund or the
underlying funds, as the case may be. Although BAIA manages investments on
behalf of a number of other investment funds and customer accounts, investment
decisions and allocations are not necessarily made in parallel among the Fund's
account and the other investment funds and customer accounts. Investments made
by the Fund do not, and are not intended to, replicate the investments, or the
investment methods and strategies, of other accounts managed by BAIA Affiliates.
Nevertheless, the BAIA Affiliates at times, and from time to time, may elect to
make, on behalf of other accounts that they manage, the same investments that
the Fund makes; however, these investments may not be made in parallel and the
size of these investments may not be based on the capital in each account.
Rather, such investments may be allocated among accounts based on perception of
the appropriate risk and reward ratio for each account, the liquidity of the
account at the time of the investment and on an on-going basis, and the overall
portfolio composition and performance of the account. Moreover, other accounts
managed by BAIA Affiliates may make investments and utilize investment
strategies that may not be made or utilized by the Fund. Accordingly, the other
accounts managed by BAIA or BAIA affiliates may produce results that are
materially different from those experienced by the Fund. There may be similar
conflicts of interest between Fund Managers and underlying funds, which could
indirectly disadvantage the Fund by virtue of its investments in underlying
funds.
BAIA Affiliates from time to time may invest proprietary or client capital with
portfolio managers, including Fund Managers selected for the Fund, and may also
invest in the same underlying funds that may be purchased for the Fund or in the
Fund directly. BAIA Affiliates may have other business relationships with such
Fund Managers and/or underlying funds, including without limitation prime
brokerage relationships.
BAIA provides investment management services to other clients, including other
multi-manager funds and managed accounts that follow investment programs
substantially similar to that of the Fund. As a result, where a limited
investment opportunity would be appropriate for the Fund and also for one or
more of its other clients, BAIA is required to choose among the Fund and such
other clients in allocating such opportunity, or to allocate less of such
opportunity to the Fund than it would ideally allocate if it did not provide
investment management services to other clients. In addition, BAIA may determine
that an investment opportunity is appropriate for a particular client, or for
itself or an affiliate, but not for the Fund. Situations may arise in which
other client accounts managed by BAIA or its affiliates have made investments
that would have been suitable for the Fund but, for various reasons, were not
pursued by, or available to, the Fund. BAIA attempts to allocate limited
investment opportunities among the Fund and its other client accounts in a
manner it believes to be reasonable and equitable.
Subject to applicable law, BAIA may allocate assets of the Fund to Fund Managers
affiliated with it or with which BAIA Affiliates have a business relationship,
but not on terms more favorable to such Fund Managers than could be obtained
through arm's length negotiation. Such business relationships could include
agreements pursuant to which a BAIA Affiliate provides services to a Fund
Manager and is compensated by receiving a share of such Fund Manager's revenue,
including revenue based on a percentage of the Fund Manager's assets under
management. BAIA Affiliates may enter into placement agent agreements with a
Fund Manager, pursuant to which such Fund Manager may compensate BAIA Affiliates
for referring investors (other than the Fund) to the Fund Manager.
The Fund Managers may manage other accounts and may have financial incentives to
favor certain of such accounts over the Fund or the underlying funds. Any of
their proprietary accounts and other customer accounts may compete with the Fund
or the underlying funds for specific trades, or may hold positions opposite to
positions maintained on behalf of the Fund or the underlying Funds. The Fund
Managers may give advice and recommend securities to, or buy or sell securities
for, their respective portfolio or managed accounts in which the Fund's assets
are invested, which advice or securities may differ from advice given to, or
securities recommended or bought or sold for, other accounts and customers even
though their investment objectives may be the same as, or similar to, those of
the Fund.
If a Fund Manager seeks to purchase or sell the same financial instruments for
an underlying fund and other accounts managed by such Fund Manager (including
managed accounts of employees and other related accounts), it is authorized to
bunch orders for the underlying fund with orders of other clients and to
allocate the aggregate
amount of the investment purchased or sold among such accounts. When executions
occur at different prices during the day, a Fund Manager generally will give
participating clients the average price in that security during the day. If the
amount that a Fund Manager has been able to execute in the desired price range
is not sufficient to fill all of its orders, the total amount executed will be
allocated to its accounts in a manner determined in the discretion of such Fund
Manager to be equitable. In some cases, this system may adversely affect the
size or the price of the assets purchased or sold by the Fund Manager on behalf
of an underlying fund.
The management of accounts with different advisory fee rates and/or
fee structures, including accounts that pay advisory fees based on account
performance ("performance fee accounts"), may raise potential conflicts of
interest by creating an incentive to favor higher-fee accounts. These potential
conflicts may include, among others:
o The most attractive investments could be allocated to higher-fee
accounts or performance fee accounts.
o The trading of higher-fee accounts could be favored as to timing
and/or execution price. For example, higher-fee accounts could be
permitted to sell securities earlier than other accounts when a
prompt sale is desirable or to buy securities at an earlier and more
opportune time.
o The trading of other accounts could be used to benefit higher-fee
accounts (front- running).
o The investment management team could focus their time and efforts
primarily on higher-fee accounts due to a personal stake in
compensation.
Potential conflicts of interest may also arise when the portfolio
managers have personal investments in other accounts that may create an
incentive to favor those accounts.
Other present and future activities of BAIA Affiliates, the Fund Managers and/or
their affiliates may give rise to additional conflicts of interest.
(3) Each committee member is a senior executive from business units within Bank
of America's Global Wealth and Investment Management business. As such, the
compensation packages for the members on the Fund's investment committee are
composed of the same components used with all Bank of America senior executives:
base salary, annual incentive performance bonus and equity awards. There is no
direct link between any member's specific compensation with the Fund's
investment performance.
In determining the base salaries, Bank of America intends to be competitive in
the marketplace and ensure salaries are commensurate with each member's
experience and ultimate responsibilities within each member's respective
business unit. Bank of America regularly evaluates base salary levels with
external industry studies and analysis of industry trends.
Each committee member's annual bonus and equity awards are discretionary awards
distributed after measuring each member's contributions against quantitative and
qualitative goals relative to their individual business responsibilities.
Quantitative goals are relative to the individual's business unit, and are not
directly related to the performance of the Fund or any other portfolio relative
to any benchmark, or to the size of the Fund. An example of a quantitative
measure is associate turnover ratio. Qualitative measures may include staff
management and development, process management (ex: adherence to internal and
external policies), business management and strategic business input to the
business platform.
There are no pre-set allocations regarding the split between salary and
performance incentives resulting in the total compensation for the individual
member.
(4) As of November 30, 2006, neither Mr. McNamara nor Ms. Quinn owned any
interests in the Fund.
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, based
on their evaluation of the registrant's disclosure controls and procedures as of
a date within 90 days of the filing of this report, have concluded that such
controls and procedures are adequately designed to ensure that information
required to be disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal executive
officer and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
(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 second fiscal quarter of the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEMS 12. EXHIBITS.
(a)(1) Not applicable for semi-annual report.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 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/ Daniel S. McNamara
----------------------------------
Daniel S. McNamara, President
(Principal Executive Officer)
Date: November 29, 2006
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/ Daniel S. McNamara
----------------------------------
Daniel S. McNamara, President
(Principal Executive Officer)
Date: November 29, 2006
By (Signature and Title)* /s/ David Hohmann
----------------------------------
David Hohmann, Treasurer
and Senior Vice President
(Principal Financial Officer)
Date: November 29, 2006
* Print the name and title of each signing officer under his or her signature.