UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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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)
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: MARCH 31, 2007
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 YEAR ENDED MARCH 31, 2007
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2007
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.......................1
STATEMENT OF ASSETS, LIABILITIES AND INVESTORS' CAPITAL.......................2
SCHEDULE OF INVESTMENTS.......................................................3
STATEMENT OF OPERATIONS.......................................................5
STATEMENT OF CHANGES IN INVESTORS' CAPITAL....................................6
STATEMENT OF CASH FLOWS.......................................................7
FINANCIAL HIGHLIGHTS..........................................................8
NOTES TO FINANCIAL STATEMENTS.................................................9
FUND GOVERNANCE (UNAUDITED)..................................................17
CHANGE IN INVESTMENT COMMITTEE MEMBERSHIP (UNAUDITED)........................19
CAPITALIZED TERMS IN THESE FINANCIAL STATEMENTS THAT ARE NOT DEFINED HAVE THE
MEANINGS GIVEN TO THEM IN THE FUND'S PROSPECTUS.
[LOGO OMITTED]
PRICEWATERHOUSECOOPERS LLP
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
300 Madison Avenue
New York NY 10017
Telephone (646)471-3000
Direct phone (646) 471-3000
Direct fax (813) 286-6000
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers and Investors of
BACAP Alternative Multi-Strategy Fund, LLC
In our opinion, the accompanying statement of assets, liabilities and investors'
capital, including the schedule of investments, and the related statements of
operations, of changes in investors' capital and of cash flows and the financial
highlights present fairly, in all material respects, the financial position of
BACAP Alternative Multi-Strategy Fund, LLC (the "Fund") at March 31, 2007, and
the results of its operations, the changes in its investors' capital, its cash
flows and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at March 31, 2007 by
correspondence with the custodian and portfolio funds, provide a reasonable
basis for our opinion.
As explained in Note 2, the financial statements include investments held by the
Fund valued at $97,106,455 (97.35% of the Fund's net assets) at March 31, 2007,
the values of which have been fair valued by the Investment Manager based on
estimates provided by each portfolio fund, under the general supervision of the
Board of Managers, in the absence of readily ascertainable market values. These
estimated values may differ significantly from the values that would have been
used had a ready market for the investments existed, and the differences could
be material.
[SIGNATURE OMITTED]
/s/ PRICEWATERHOUSECOOPERS LLP
May 29, 2007
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF ASSETS, LIABILITIES AND INVESTORS' CAPITAL
- --------------------------------------------------------------------------------
MARCH 31, 2007
ASSETS
Investments in Portfolio Funds, at fair value (cost $82,029,323) $ 97,106,455
Cash and cash equivalents 2,067,034
Investments in Portfolio Funds paid in advance 3,750,000
Redemptions receivable from Portfolio Funds 1,976,491
Other assets 45,868
--------------
TOTAL ASSETS 104,945,848
--------------
LIABILITIES
Capital contributions received in advance 4,858,500
Management fee payable 104,015
Investor servicing fee payable 21,202
Administration fee payable 6,878
Professional fees payable 185,407
Accrued expenses 19,553
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TOTAL LIABILITIES 5,195,555
--------------
NET ASSETS $ 99,750,293
==============
Net capital (1) $ 84,673,161
Net unrealized appreciation on investments in Portfolio Funds 15,077,132
--------------
TOTAL INVESTORS' CAPITAL $ 99,750,293
==============
(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
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MARCH 31, 2007
-----------------------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS
EMERGING MARKETS
Henderson Asia Pacific Absolute Return Fund, Ltd. $ 2,500,000 $2,610,335 2.62%
The Rohatyn Group Global Opportunity Fund, L.P. 3,000,000 3,187,600 3.20
Spinnaker Global Opportunity Fund, Ltd. 1,346,017 3,306,812 3.31
-------------- ------------- -------
TOTAL EMERGING MARKETS 6,846,017 9,104,747 9.13
EQUITY HEDGE
Alydar Fund, L.P.+ 5,217,712 5,712,753 5.73
New Star UK Gemini Hedge Fund, Ltd. 2,366,071 2,745,214 2.75
Prism Partners QP, L.P.++ 4,324,033 5,075,550 5.09
Royal Capital Value Fund (QP), L.P. 3,714,173 4,192,883 4.21
Seligman Tech Spectrum Fund, LLC 2,900,000 3,103,251 3.11
TCS Capital II, L.P. 1,575,357 3,752,612 3.76
Tiedemann Falconer Partners, L.P. 4,250,000 4,730,543 4.74
Tiedemann Japan QP, L.P. 2,600,000 2,594,527 2.60
-------------- ------------- -------
TOTAL EQUITY HEDGE 26,947,346 31,907,333 31.99
EVENT DRIVEN
Centaurus Alpha Fund, L.P. 3,475,000 4,229,128 4.24
Delaware Street Capital, L.P. 111,575 98,220 0.10
Golden Tree Capital Solutions Fund 1,500,000 1,856,562 1.86
Gracie Capital, L.P. 2,000,000 2,432,989 2.44
Halcyon Enhanced Fund, L.P. 3,026,335 3,260,707 3.27
JANA Partners, L.P. 2,264,241 3,871,391 3.88
Longacre Capital Partners 3,276,705 4,184,745 4.20
Strategic Value Restructuring Fund, L.P. 3,450,000 4,183,892 4.19
Trafalgar Catalyst Fund 3,256,771 3,831,252 3.84
Trafalgar Recovery Fund 2,000,000 2,414,448 2.42
TT Event Driven Alpha Fund, Ltd. 2,527,511 2,744,095 2.75
Waterfall Eden Fund, L.P. 2,000,000 1,985,000 1.99
-------------- ------------- -------
TOTAL EVENT DRIVEN 28,888,138 35,092,429 35.18
MACRO
Aspect US Fund, LLC "Diversified Class" 2,287,759 2,285,421 2.29
Brevan Howard, L.P. 3,500,000 4,102,686 4.11
-------------- ------------- -------
TOTAL MACRO 5,787,759 6,388,107 6.40
The accompanying notes are an integral part of these financial statements.
3
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
SCHEDULE OF INVESTMENTS (CONTINUED)
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MARCH 31, 2007
-----------------------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
INVESTMENTS IN PORTFOLIO FUNDS (CONTINUED)
RELATIVE VALUE
Aristeia Partners, L.P. $ 2,900,000 $ 3,110,333 3.12 %
DRV Sunrise Fund I, Ltd.+++ 5,137,373 5,469,109 5.48
Lydian Partners II, L.P. 3,250,000 3,476,290 3.49
TQA Arbitrage Fund, L.P. 2,272,690 2,558,107 2.56
-------------- ------------- -------
TOTAL RELATIVE VALUE 13,560,063 14,613,839 14.65
TOTAL INVESTMENTS IN PORTFOLIO FUNDS $82,029,323 $97,106,455 97.35 %
============== ============= =======
---------------------------------------------------------------------
INVESTMENT STRATEGY AS A PERCENTAGE OF TOTAL INVESTMENTS
IN PORTFOLIO FUNDS, AT FAIR VALUE
% of Total
Strategy Investments in Portfolio Funds
----------------------------------------------------------
Event Driven 36.14%
Equity Hedge 32.86%
Relative Value 15.05%
Emerging Markets 9.37%
Macro 6.58%
------------
100.00%
---------------------------------------------------------------------
*Percentages are based on net assets of $99,750,293.
For Portfolio Funds greater than 5.00% of net assets, the following are the
redemption cycles:
+Subject to one year lockup on initial investment with subsequent quarterly
redemption cycle.
++Subject to 13 month soft lockup on initial investment with subsequent
quarterly redemption cycle.
+++Subject to monthly redemption cycle.
The aggregate cost of investments for tax purposes was approximately
$84,690,571. Net unrealized appreciation on investments for tax purposes was
$12,415,884 consisting of $12,873,069 of gross unrealized appreciation and
$457,185 of gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 97.35% 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
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED
MARCH 31, 2007
INVESTMENT INCOME
Interest income $ 276,811
---------------
TOTAL INVESTMENT INCOME 276,811
EXPENSES
Management fees 1,159,511
Investor servicing fees 231,843
Administration fees 78,494
Audit and tax service fees 200,950
Legal fees 180,645
Insurance fees 102,248
Board fees 33,017
Registration fees 44,455
Miscellaneous expenses 111,430
---------------
TOTAL EXPENSES 2,142,593
Reimbursement of fees (see Note 8) (22,500)
---------------
NET EXPENSES 2,120,093
---------------
NET INVESTMENT LOSS (1,843,282)
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS IN PORTFOLIO FUNDS
Net realized gain on investments in Portfolio Funds 1,729,746
Net change in unrealized appreciation on investments in Portfolio Funds 7,425,822
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS IN PORTFOLIO FUNDS 9,155,568
---------------
NET INCREASE IN INVESTORS' CAPITAL RESULTING FROM OPERATIONS $ 7,312,286
===============
The accompanying notes are an integral part of these financial statements.
5
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF CHANGES IN INVESTORS' CAPITAL
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AFFILIATED
INVESTORS* INVESTORS TOTAL
INVESTORS' CAPITAL AT MARCH 31, 2005 $17,496,346 $ 54,269,144 $71,765,490
Contributions -- 14,531,135 14,531,135
Withdrawals (168,875) (15,244,651) (15,413,526)
Allocation of net increase in Investors'
capital resulting from operations 1,040,746 3,333,078 4,373,824
------------- -------------- -------------
INVESTORS' CAPITAL AT MARCH 31, 2006 18,368,217 56,888,706 75,256,923
------------- -------------- -------------
Contributions -- 37,749,292 37,749,292
Withdrawals -- (20,568,208) (20,568,208)
Allocation of net increase in Investors'
capital resulting from operations 1,430,065 5,882,221 7,312,286
------------- -------------- -------------
INVESTORS' CAPITAL AT MARCH 31, 2007 $19,798,282 $ 79,952,011 $99,750,293
============= ============== =============
* 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
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED
MARCH 31, 2007
Cash flows from operating activities:
Net increase in Investors' capital resulting from operations $ 7,312,286
Adjustments to reconcile net increase in Investors' capital resulting from
operations to net cash used in operating activities:
Net realized gain on investments in Portfolio Funds (1,729,746)
Net change in unrealized appreciation on investments in Portfolio Funds (7,425,822)
Cost of investments purchased (62,376,335)
Proceeds from sale of investments 32,631,530
(Increase)/decrease in operating assets:
Investments in Portfolio Funds paid in advance 3,050,000
Redemptions receivable from Portfolio Funds 10,008,255
Other assets 6,636
Increase/(decrease) in operating liabilities:
Management fee payable 25,541
Administration fee payable (222)
Investor servicing fee payable 4,335
Professional fees payable (27,884)
Accrued expenses (9,393)
-------------
NET CASH USED IN OPERATING ACTIVITIES (18,530,819)
-------------
Cash flows from financing activities:
Capital contributions 37,749,292
Capital withdrawals (20,568,208)
Increase in capital contributions received in advance 2,898,550
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,079,634
-------------
Net increase in cash and cash equivalents 1,548,815
Cash and cash equivalents, beginning of year 518,219
-------------
Cash and cash equivalents, end of year $ 2,067,034
=============
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 annual 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.
YEARS ENDED MARCH 31, APRIL 1, (2003)
-------------------------------------------- (COMMENCEMENT
Ratios to average Investors' capital: OF OPERATIONS)
THROUGH MARCH 31,
2007 2006 2005 2004
----------- ------------ ------------ -------------
Net investment loss - prior to incentive allocation (2.02%) (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 (2.02%) (7) (2.49%) (2.59%) (2.86%) (1)
=========== ============ ============ =============
Expenses before organization expenses (3) 2.32% (7) 2.74% 2.66% 2.72% (1)(4)
----------- ------------ ------------ -------------
Expenses (3) 2.32% (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) 2.32% (7) 2.74% 2.69% 3.37% (1)(2)
=========== ============ ============ =============
Total return - prior to incentive allocation(5) 7.79% 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) 7.79% 6.38% 2.59% 9.88%
----------- ------------ ------------ -------------
Portfolio turnover rate 37.40% 47.84% 61.24% 43.16%
=========== ============ ============ =============
Investors' capital, end of period ($000) $99,750 $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
(2.05%) and 2.35%, respectively.
The accompanying notes are an integral part of these financial statements.
8
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS
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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. 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 valued by the Adviser as of the close of
business on the last business day of each month in accordance with
policies and procedures approved by the Fund's Board of Managers. The
Fund's investments in Portfolio Funds may be subject to limitations on
redemptions, including the assessment of early redemption fees. In
addition, market quotations for such interests are not available. As a
result, the Fund's investments in Portfolio Funds are valued at fair
value, which normally will be the value determined by the portfolio
managers or administrators of the Portfolio Funds. Such value of the
Fund's interest in a Portfolio Fund generally represents the Fund's
proportionate share of the net assets of the Portfolio Fund. The value
of the Fund's investments in Portfolio Funds is generally increased by
additional contributions to the Portfolio Funds and the
9
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATIONS (CONTINUED)
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 Fund and the Adviser rely upon audited and unaudited reports
and estimates prepared by or for the Portfolio Fund and any other
information that they may receive from the Portfolio Fund, which may be
subject to adjustment by the Portfolio Fund or its manager or
administrator. The values assigned to the Fund's investments in
Portfolio Funds may not represent amounts that would ultimately be
realized, as such amounts depend on future circumstances and cannot be
determined until the liquidation of the Fund's interest in the
Portfolio Fund. The estimated value of the Fund's interests in
Portfolio Funds may differ significantly from the value received upon
liquidation. Neither the Fund nor the Adviser will be able to confirm
independently the accuracy of the valuations provided by the Portfolio
Funds or their portfolio managers or administrators.
Portfolio Funds, or their administrators or portfolio managers,
generally use an independent pricing source to value the funds'
securities. Securities with no readily available market value are
initially valued at cost, with subsequent adjustments to values, which
reflect either meaningful third-party transactions in the private
market, or fair value deemed appropriate by the Portfolio Fund or its
portfolio manager or administrator. In such instances, consideration
may also be given to the financial condition and operating results of
the issuer, the amount that the Portfolio Funds can reasonably expect
to realize upon the sale of the securities and other factors deemed
relevant by the Portfolio Fund or its portfolio manager or
administrator.
Some of the Portfolio Funds may invest all or a portion of their assets
in illiquid securities and may hold all or a portion of these
investments separately from the rest of their portfolio. These separate
baskets of illiquid securities may be subject to restrictions on
liquidation that are more strict than the liquidity restrictions
applicable to general interests in the Portfolio Fund. If the Fund
liquidates its interests in such a Portfolio Fund, it may be required
to maintain these illiquid securities for an extended period of time.
The value of these baskets of illiquid securities may fluctuate
significantly.
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. INTEREST AND DIVIDENDS
Interest income is recognized on an accrual basis. Dividend income is
recognized on the ex-dividend date.
10
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. 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).
E. 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 March
31, 2007, the Fund has $2,067,034 in cash and cash equivalents held in
an interest-bearing sweep account.
F. 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.
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.
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 include an offer to repurchase a specified
dollar amount of outstanding Interests. In determining whether and when
the Fund should repurchase Interests, the Board
11
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTORS' CAPITAL ACCOUNTS (CONTINUED)
B. WITHDRAWALS (CONTINUED)
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 year ended March 31, 2007, tender offers were
conducted by the Fund as of June 30, 2006 and December 31, 2006 in the
amounts of $6,416,584 and $14,151,624, respectively.
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 year ended March
31, 2007, amounted to $62,376,335 and $32,631,530, 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. Ordinary operating
expenses do not include organizational costs, interest, taxes, and
extraordinary expenses.
6. 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.
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 year
ended March 31, 2007, the Fund paid an administration fee of $78,494.
The Fund and the Adviser 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.
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.
12
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. ADMINISTRATION, SUB-ADMINISTRATION AND REGULATORY ADMINISTRATION
AGREEMENTS (CONTINUED)
For the year ended March 31, 2007, the Fund paid $31,099 to PFPC under
this agreement which is included in Miscellaneous expenses in the
Statement of Operations.
7. 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.
8. 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 year ended March 31, 2007, the Adviser voluntarily reimbursed
the Fund $3,000 for the July 2006 Board meeting.
During the year ended March 31, 2007, the Adviser also voluntarily
reimbursed the Fund $19,500 for tax related services performed by
PricewaterhouseCoopers LLP.
9. 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.
13
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CONCENTRATION OF CREDIT
RISK, AND OTHER RISKS (CONTINUED)
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.
10. 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 April 1,
2007, the Fund made investments in Centaurus Alpha Fund, L.P., JANA
Partners, L.P. and Vicis Capital Fund for $750,000, $1,000,000 and
$2,000,000, respectively. Such amounts are reflected as Investments in
Portfolio Funds paid in advance in the Statement of Assets, Liabilities
and Investors' Capital.
11. 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 relating to mutual fund trading. 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 the events that resulted in the NYAG Settlements and
SEC Orders, 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
for consolidated or coordinated pretrial proceedings. 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. Certain 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 entered final judgment in favor of the
defendants. The plaintiffs appealed to the United States Court of Appeals
for the First Circuit on
14
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
11. LITIGATION EVENT (CONTINUED)
December 30, 2005. A stipulation and settlement agreement dated January
19, 2007 was filed in the First Circuit on February 14, 2007, with a joint
stipulation of dismissal and motion for remand to obtain district court
approval of the settlement. That joint motion was granted and the appeal
was dismissed. On March 6, 2007, the case was remanded to the District
Court. On May 11, 2007, the District Court entered a preliminary approval
order which granted preliminary approval of the settlement. A final
settlement hearing, at which the District Court will determine whether the
proposed settlement should be finally approved and the action dismissed on
the merits with prejudice, is scheduled for September 18, 2007. The terms
of the settlement, if finally approved, will require payments by one or
more affiliates of the Adviser, including payment of the plaintiffs'
attorneys' fees and notice to class members. In the event that the
settlement is not finally approved, the plaintiffs may elect to go forward
with their appeal and no opinion is expressed regarding the likely outcome
or financial impact of such an appeal on any fund.
12. 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 March 31, 2007, 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 March 31, 2007, 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.
15
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
13. SUBSEQUENT EVENTS
Subsequent to March 31, 2007, the Fund received additional capital
contributions of $7,906,000.
Effective April 1, 2007, the Fund terminated the Investor Servicing fee.
However, services will continue to be provided according to the Investor
Servicing Plan.
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
FUND GOVERNANCE (UNAUDITED)
- --------------------------------------------------------------------------------
The identity of the Managers and executive officers of BACAP Alternative
Multi-Strategy Fund, LLC and brief biographical information regarding each
Manager and officer during the past five years is set forth below.
NUMBER OF
FUNDS IN
TERM OF FUND
POSITION OFFICE AND COMPLEX
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS HELD
NAME, ADDRESS AND AGE THE FUND TIME SERVED DURING THE PAST FIVE YEARS BY MANAGER BY MANAGER
- ------------------------------------------------------------------------------------------------------------------------
INDEPENDENT MANAGERS
- ------------------------------------------------------------------------------------------------------------------------
Thomas W. Brock Manager Indefinite Chief Executive Officer, 2 Liberty All-Star Equity
c/o BACAP Alternative term; Stone Harbor Investment Fund and Liberty
Multi-Strategy Fund, LLC Manager Partners (investment firm) All-Star Growth Fund,
40 West 57th Street since 2003 from April 2006; formerly, Inc. (registered
New York, NY 10019 Adjunct Professor, Columbia investment companies)
(Born 1947) University Graduate School
of Business from September
1998 to April 2006;
Chairman, CEO, Salomon
Brothers Asset Management,
Inc. from 1993 to 1998.
Alan Brott Manager Indefinite Consultant, since October 2 None
c/o BACAP Alternative term; 1991; Associate Professor,
Multi-Strategy Fund, LLC Manager Columbia University Graduate
40 West 57th Street since 2003 School of Business, since
New York, NY 10019 2000.
(Born 1942)
Thomas G. Yellin Manager Indefinite President, The Documentary 2 None
c/o BACAP Alternative term; Group since December 2002;
Multi-Strategy Fund, LLC Manager Executive Producer, ABC News
40 West 57th Street since 2003 from 1989 to December 2002.
New York, NY 10019
(Born 1954)
17
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FUND GOVERNANCE (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
POSITION HELD WITH THE TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE
NAME, ADDRESS AND AGE FUND LENGTH OF TIME SERVED YEARS
- ------------------------------------------------------------------------------------------------------------------------
OFFICERS
- ------------------------------------------------------------------------------------------------------------------------
Daniel S. McNamara President 1 year term; Executive Vice President, Banc of America
40 West 57th Street President since 2006 Investment Advisors, Inc. since 2006;
New York, NY 10019 Managing Director, Bank of America
(Born 1966) Investment Advisors, Inc., Alternative
Investment Group since 2005; Managing
Director, Bank of America Investment Advisors,
Inc., Consulting Services Group and Investment
Strategies Group from 2001 to 2005; Director,
First Union Securities, Consulting Services
Group from 2000 to 2001.
James R. Bordewick, Jr. Senior Vice President, 1 year term since Associate General Counsel, Bank of America
One Financial Center Chief Legal Officer and 2006 since April 2005; Senior Vice President and
Boston, MA 02111 Secretary Associate General Counsel, MFS Investment
(Born 1959) Management (investment management) prior to
April 2005.
Alpesh Rathod Senior Vice President 1 year term; since GWIM Compliance Executive, Compliance Risk
40 West 57th Street and Chief Compliance 2007 Management, Bank of America since March
New York, NY 10019 Officer 2005; Vice President, Senior Compliance
(Born 1971) Manager, Compliance Risk Management,
September 2004 to March 2005; Vice
President/Director of Investment Adviser
Compliance, U.S. Trust, July 2002 to
September 2004. Prior to 2002, Principal
Consultant/Senior Manager, Regulatory
Compliance Consulting Group,
PricewaterhouseCoopers.
David Hohmann Senior Vice President 1 year term; Director, Alternative Investment Group
100 Federal Street and Treasurer Treasurer since 2005 Funds' Operations and Administration, Banc
Boston, MA 02110 of America Investment Advisors, Inc. since
(Born 1967) April 2004; Division Controller of
FleetBoston's Principal Investing Group,
March 1999 to March 2004.
Nichole Quinn Vice President 1 year term; Vice Managing Director, Marketing, Product
100 Federal Street President since 2006 Management and Product Development,
Boston, MA 02110 Alternative Investment Group, Bank of
(Born 1971) America since June 2006; Managing Director,
Product Management Consulting Services
Group, Bank of America, January 2002 to June
2006; Prior to January 2002, Director of
Northeast, Consulting Services Group, First
Union Securities
The Statement of Additional Information contains additional information about
the Board of Managers and is available, without charge, upon request, by
contacting the Fund toll-free at (888) 786-9977.
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.
The persons listed below joined the committee during the past fiscal year.
Lawrence Morgenthal resigned from 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.
Joseph P. Quinlan, Managing Director, Chief Market Strategist, Investment
Strategies Group and Senior Vice President, Banc of America Investment Advisors,
Inc. As Managing Director and Chief Market Strategist, Mr. Quinlan oversees the
development and implementation of investment strategies to institutional and
high-net-worth individuals, families and foundations for investment
representatives, financial advisors and portfolio managers within The Private
Bank, Banc of America Investment Services, Inc. (BAI) and GWIM. In this role, he
surveys and evaluates the range of views across the financial marketplace, helps
develop the firm's overall investment strategy and communicates the
organization's point of view. Mr. Quinlan joined Bank of America in June 2003.
With nearly 20 years of financial services experience, Mr. Quinlan most recently
served as a senior global economist/strategist for Morgan Stanley. Mr. Quinlan
started his career with Merrill Lynch.
Mr. Quinlan earned his Master's in Political Economics and International
Development from Fordham University and a BA in Political Science from Niagara
University. Mr. Quinlan lectures on finance at New York University, where he has
been a faculty member since 1992. In 1998 he was nominated as an Eisenhower
Fellow and is currently a Fellow at the Paul H. Nitze School of Advanced
International Studies of Johns Hopkins University and a Senior Fellow at the
German Marshal Fund.
He has published more than 125 articles on economics, trade and finance, with
publications appearing in such venues as Foreign Affairs, The Financial Times,
The Wall Street Journal and Barron's. He is the author, co-author, editor or
contributor to eight books. He regularly appears on CNBC as a guest host on
Squawk Box, as well as Bloomberg television, PBS and other media venues.
Alison Ballard, CFA, Director of Research, Consulting Services Group and Vice
President, Banc of America Investment Advisors, Inc. Ms. Ballard oversees CSG's
mutual fund and separate account manager research efforts and the facilitation
and development of topic papers and other advice-related deliverables for
advisors and their clients. Ms. Ballard manages the analysts on the CSG Research
team. Prior to joining Bank of America in June 2005, Ms. Ballard most recently
served as the director of manager research and chair of the Due Diligence
Committee at New England Pension Consultants ("NEPC"), where she was responsible
for monitoring and assessing all investment managers across NEPC's diverse
client base. Initially employed as a senior research analyst specializing in
fixed income managers, Ms. Ballard was promoted to director of manager research
in January 2002. At the time of her departure, assets under advisement were in
excess of $225 billion. Her prior work experience also
19
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
CHANGE IN INVESTMENT COMMITTEE MEMBERSHIP (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
includes positions at Brown Brothers Harriman, Batterymarch Financial Management
and Mellon Trust. Ms. Ballard is a CFA(R) charter holder and a member of both
the CFA Institute and the Boston Security Analysts Society. She completed her
M.B.A. at Warwick University in Warwickshire, England.
David M. Hohmann, Director of Fund Administration Operations, Alternative
Investment Group and Senior Vice President, Banc of America Investment Advisors,
Inc. Mr. Hohmann has been involved with the alternative investment industry for
the past eight years. He is currently responsible for fund administration and
operations of AI Group. In that capacity he is responsible for the funds'
financial and tax reporting, accounting, audit and cash management functions.
Prior to his current position, which he assumed in November 2005, he served as
the Director of Fund Administration for AI Group's private equity fund of funds
group at Bank of America. Previously to that he served as the Division
Controller of FleetBoston's Principal Investing Group, where he had accounting
responsibility for the group's direct private equity portfolio as well as the
group's Fiduciary business. Mr. Hohmann was a Senior Associate in the Audit and
Assurance practice of PricewaterhouseCoopers, specializing in the investment
management industry. He received his undergraduate degree from the University of
Massachusetts at Boston in 1991. Mr. Hohmann also served in the United States
Naval Reserves until 1994. Mr. Hohmann is a certified public accountant.
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.
20
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Alan Brott is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for the fiscal years ended March 31, 2006 and
March 31, 2007 for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for
those fiscal years are $60,000 and $63,750, respectively.
AUDIT-RELATED FEES
(b) The aggregate fees billed for the fiscal years ended March 31, 2006 and
March 31, 2007 for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item are $4,850 and $0, respectively.
Audit-related fees include certain agreed-upon procedures performed for
semi-annual shareholder reports and technical research on accounting
and disclosure matters.
During the fiscal years ended March 31, 2006 and March 31, 2007, there
were no Audit-Related Fees billed by the Fund's principal accountant to
the Fund's investment adviser (not including a sub-adviser whose role
is primarily portfolio management and is sub-contracted or overseen by
another investment adviser) and any entity controlling, controlled by,
or under common control with the investment adviser that provides
ongoing services to the Fund for an engagement that related directly to
the operations and financial reporting of the Fund.
TAX FEES
(c) The aggregate fees billed for the fiscal years ended March 31, 2006 and
March 31, 2007 for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning are $40,000
and $48,000, respectively.
During the fiscal years ended March 31, 2006 and March 31, 2007, there
were no Tax Fees billed by the Fund's principal accountant to the
Fund's investment adviser (not including a sub-adviser whose role is
primarily portfolio management and is sub-contracted or overseen by
another investment adviser) and any entity controlling, controlled by,
or under common control with the investment adviser that provides
ongoing services to the Fund for an engagement that related directly to
the operations and financial reporting of the Fund.
ALL OTHER FEES
(d) The aggregate fees billed for the fiscal years ended March 31, 2006 and
March 31, 2007 for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through
(c) of this Item are $5,500 and $0, respectively.
During the fiscal years ended March 31, 2006 and March 31, 2007, there
were no All Other Fees billed by the Fund's principal accountant to the
Fund's investment adviser (not including a sub-adviser whose role is
primarily portfolio management and is sub-contracted or overseen by
another investment adviser) and any entity controlling, controlled by,
or under common control with the investment adviser that provides
ongoing services to the Fund for an engagement that relates directly to
the operations and financial reporting of the Fund.
(e)(1) The registrant's Audit Committee is required to pre-approve the
engagement of the registrant's independent accountants to provide audit
and permissible non-audit services to the registrant and non-audit
services to its investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser) or any entity controlling,
controlled by or under common control with such investment adviser that
provides ongoing services to the registrant ("Adviser Affiliates"), if
the engagement relates directly to the operations or financial
reporting of the registrant.
The Audit Committee has adopted a Policy for Engagement of Independent
Accountants for Audit and Non-Audit Services ("Policy"). The Policy
sets forth the understanding of the Audit Committee regarding the
engagement of the registrant's independent accountants to provide (i)
audit and permissible audit-related, tax and other services to the
registrant (collectively "Fund Services"); (ii) non-audit services to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with
or overseen by another investment adviser) and Adviser Affiliates, if
the engagement relates directly to the operations or financial
reporting of a Fund (collectively "Fund-related Adviser Services"); and
(iii) certain other audit and non-audit services to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser) and Adviser Affiliates. Unless a type of
service receives general pre-approval under the Policy, it requires
specific pre-approval by the Audit Committee if it is to be provided by
the independent accountants. Pre-approval of non-audit services to the
registrant, the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and
Adviser Affiliates may be waived provided that the "de minimis"
requirements set forth under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X are met.
Under the Policy, the Audit Committee may delegate pre-approval
authority to any pre-designated member or members who are independent
directors. The member(s) to whom such authority is delegated must
report, for informational purposes only, any pre-approval decisions to
the Audit Committee at its next regular meeting. The Audit Committee's
responsibilities with respect to the pre-approval of services performed
by the independent accountants may not be delegated to management.
The Policy requires the Fund Treasurer or his or her designee to submit
to the Audit Committee, on an annual basis, a schedule of the types of
services that are subject to general pre-approval. The schedule(s)
provide a description of each type of service that is subject to
general pre-approval and, where possible, will provide estimated fee
caps for each instance of providing each service. The Audit Committee
will review and approve the types of services and review the projected
fees for the next fiscal year and may add to, or subtract from, the
list of general pre-approved services from time to time based on
subsequent determinations. That approval acknowledges that the Audit
Committee is in agreement with the specific types of services that the
independent accountants will be permitted to perform. The Fund
Treasurer or his or her designee must update the fee amounts to the
extent necessary at each of the regularly scheduled meetings of the
Audit Committee.
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under
paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X during the fiscal
years ended March 31, 2006 and March 31, 2007 was zero.
(f) Not applicable.
(g) During the fiscal years ended March 31, 2006 and March 31, 2007,
respectively, aggregate non-audit fees of approximately $25.1 million
and $27.3 million were billed by the registrant's principal accountant
to the registrant's investment adviser (not including a sub-adviser
whose role is primarily portfolio management and is sub-contracted or
overseen by another investment adviser) and any entity controlling,
controlled by, or under common control with the investment adviser that
provides ongoing services to the registrant.
(h) The registrant's audit committee considered whether the provision of
non-audit services rendered to the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management
and is sub-contracted or overseen by another investment adviser) and
any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved is compatible with maintaining the principal
accountant's independence.
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.
THE FOLLOWING IS A SUMMARY OF BAIA'S PROXY VOTING POLICY (THE "POLICY") AND
PROXY VOTING GUIDELINES (THE "VOTING GUIDELINES").
Banc of America Investment Advisors, Inc. ("BAIA") generally will vote all
proxies of which it becomes aware, subject to certain exceptions as noted below.
BAIA's clients may invest in securities ("Alternative Investments") issued by
alternative investment vehicles (i.e. hedge funds, private equity funds, and
other alternative investment pools) that are structured as private limited
partnerships ("LPs"), limited liability companies ("LLCs") or offshore
corporations. Generally, Alternative Investment Group ("AI Group") is the
platform through which BAIA provides advisory services relating to Alternative
Investments. In rare cases, BAIA is requested to vote on matters relating to
investments in operating companies.
The voting rights of Alternative Investments generally are rights of contract
set forth in the Limited Liability Company or limited partnership agreement, in
the case of LLCs and LPs, or Memorandum and Articles of
Association or By-laws, in the case of offshore corporations. Also, as privately
placed securities, Alternative Investments generally are not subject to the
regulatory scheme applicable to public companies. Consequently, in most cases,
proxies are not solicited regarding Alternative Investment vehicles. Instead,
consents may be solicited from members, limited partners or shareholders.
PROCESS
AI Group will vote all Alternative Investment proxies and consents in accordance
with this Policy. AI Group's Investment Committee, which approves AI Group
proxies, consists of AI Group senior management, investment and operations
professionals. Conflicts of interest are to be monitored and resolved as set
forth in this Policy.
STANDARD FOR VOTING PROXIES
When BAIA votes proxies, it does so in a manner considered by BAIA to be in the
best interest of its clients without regard to any resulting benefit or
detriment to BAIA or its affiliates. The "best interest" of clients is defined
for this purpose as the interest of enhancing or protecting the economic value
of client accounts, considered as a group rather than individually, as BAIA
determines in its sole and absolute discretion.
CONFLICTS
From time to time, proxy-voting proposals may create or give rise to an actual
or apparent conflict of interest between the interests of BAIA's clients and the
interests of BAIA, its employees, ultimate parent company and/or many
affiliates. BAIA and it's parent have adopted various policies and procedures
designed to address any material conflicts of interest that may arise.
FOR FURTHER INFORMATION
Investors and prospective investors may obtain a copy of BAIA's Proxy Voting
Policy upon request. BAIA's proxy decisions are confidential and are not
available to prospective investors. Current investors who wish to obtain
information concerning BAIA's proxy decisions on behalf of its clients, for the
prior one-year period, may contact their designated Client Service
Representative.
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 Banc of America Investment Advisors, Inc. ("BAIA") and Bank
of America Corporation. Below is a list of the current voting members.
DANIEL S. MCNAMARA, PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS, INC.,
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.
Mr. McNamara earned a BS in Economics from Rutgers University in 1988.
ALLEN CHENG, MANAGING DIRECTOR, PORTFOLIO MANAGEMENT, FUND OF HEDGE FUNDS -
ALTERNATIVE INVESTMENT GROUP AND SENIOR VICE PRESIDENT, BANC OF AMERICA
INVESTMENT ADVISORS, INC. Mr. Cheng joined Bank of America in 2004 as manager of
AI Group's fund-of-hedge funds team. He has significant experience in the
alternative investment industry, particularly in identifying, selecting and
monitoring hedge fund managers across multiple investment disciplines. From 2000
to 2004, Mr. Cheng was managing director and head of research at Optima Fund
Management, an investment advisory firm that specializes in alternative
investments.
Mr. Cheng earned a BA in Finance from the University of Maryland and an MBA
degree from the University of Michigan.
JIM BOWDEN, MANAGING DIRECTOR - PORTFOLIO MANAGEMENT, PRIVATE EQUITY FUND OF
FUNDS - ALTERNATIVE INVESTMENT GROUP AND SENIOR VICE PRESIDENT, BANC OF AMERICA
INVESTMENT ADVISORS, INC. Mr. Bowden has managed AI Group's private equity
fund-of-funds business since its formation in 1998. In that capacity, Mr.
Bowden has acted as the primary investment strategist for various private
placement offerings and client advisory activities associated with the private
equity asset class. He has led private placement capital raising activities,
directed investment origination and has ongoing management and administration
responsibilities for the business.
Mr. Bowden received his MBA and BBA from the University of Michigan in 1977 and
1975, respectively. Mr. Bowden is a Certified Public Accountant.
REED MURPHY, CIMA, DIRECTOR OF CONSULTING SERVICES GROUP AND EXECUTIVE VICE
PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS, INC. As the managing director of
the Consulting Services Group ("CSG") of Bank of America's Global Wealth and
Investment Management ("GWIM") group, Mr. Murphy oversees all aspects of the
group's research, product development, due diligence, program management and
client reporting associated with its advisory and fee based separate account and
mutual fund programs. CSG also encompasses a national accounts team, which is
responsible for managing the firm's non-advisory mutual funds and 529 program
offerings. CSG serves the firm's affluent, mass affluent, ultra high net worth
and institutional clients through Bank of America Premier Banking & Investments,
The Private Bank of Bank of America, and their extensions including
International Private Bank, Family Wealth Advisors, Philanthropic Management
Services, and Retirement Services Group. Mr. Reed joined Bank of America in
March 2002.
Mr. Murphy chairs GWIM's Investment Strategy and Portfolio Management
Committees. The Investment Strategies Committee is responsible for defining and
distributing investment strategies across GWIM, including but not limited to,
economic, market and asset allocation advice. The Portfolio Management Committee
is responsible for the approval and oversight of investment manager offerings,
portfolio construction methodologies and the discretionary management of
separate account, mutual fund and ETF portfolios.
Mr. Murphy graduated summa cum laude from Saint Louis University with a degree
in finance. He was awarded membership to the Beta Gamma Sigma Business Honor
Society. He holds an Investment Strategist Certification and earned the
Certified Investment Management Analyst (CIMA) designation, both from the
Wharton School of Business and the Investment Management Consultants Association
(IMCA). Mr. Murphy is a current member of the Managed Money Institute (MMI)
where is co-chair of the Bank Distribution and Services Committee. He is also a
member of the Investment Management Consultants Association (IMCA) and the
Global Association of Risk Professionals (GARP).
WILLIAM W. MARTIN, SENIOR VICE PRESIDENT, RISK EXECUTIVE, BANK OF AMERICA. Mr.
Martin is the Risk Management Executive for Columbia Management Group and AI
Group at Bank of America. In this role, which he has held since May 2005, he is
responsible for managing market, credit and operational risk across
approximately $400 billion of assets managed in Active Equities, Quantitative
Strategies, Cash Investments, Fixed Income, Funds of Hedge Funds, Private Equity
and Real Estate. Mr. Martin joined BAC in May 2005 from INVESCO, where he was
Global Head of Investment Risk Management, responsible for risk management and
performance measurement across approximately $200 billion of assets managed in
investment centers around the world, covering Equities, Fixed Income, Structures
Products, CDOs/CLOs, Hedge Funds, Private Equity and Real Estate. During his
tenure, INVESCO achieved "global" AIMR GIPS compliant status, covering all
assets under management. Prior to that, he was Global Head of Risk Management at
the Royal Bank of Scotland Group, responsible for strategic, credit, market and
operational risk across the Group's businesses.
In addition, Mr. Martin is Chairman of the Board of Trustees & Executive
Committee for the Global Association of Risk Professionals, a not-for-profit
association of 40,000 risk professionals around the world, offering education in
all areas of risk management. Within GARP, Mr. Martin is also a member of the
Editorial Board of the GARP Digital Library. Mr. Martin earned his bachelor of
business administration degree in Management Science from the Baruch School of
Business Administration of the City University of New York in 1978.
JOSEPH P. QUINLAN, MANAGING DIRECTOR, CHIEF MARKET STRATEGIST - INVESTMENT
STRATEGIES GROUP AND SENIOR VICE PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS,
INC. As Managing Director and Chief Market Strategist, Mr. Quinlan oversees the
development and implementation of investment strategies to institutional and
high-net-worth individuals, families and foundations for investment
representatives, financial advisors and portfolio managers within The Private
Bank, Banc of America Investment Services, Inc. (BAI) and GWIM. In this role, he
surveys and
evaluates the range of views across the financial marketplace, helps develop the
firm's overall investment strategy and communicates the organization's point of
view. Mr. Quinlan joined Bank of America in June 2003.
With nearly 20 years of financial services experience, Mr. Quinlan most recently
served as a senior global economist/strategist for Morgan Stanley. Mr. Quinlan
started his career with Merrill Lynch.
Mr. Quinlan earned his Master's in Political Economics and International
Development from Fordham University and a BA in Political Science from Niagara
University. Mr. Quinlan lectures on finance at New York University, where he has
been a faculty member since 1992. In 1998 he was nominated as an Eisenhower
Fellow and is currently a Fellow at the Paul H. Nitze School of Advanced
International Studies of Johns Hopkins University and a Senior Fellow at the
German Marshal Fund.
He has published more than 125 articles on economics, trade and finance, with
publications appearing in such venues as FOREIGN Affairs, THE FINANCIAL TIMES,
THE WALL STREET JOURNAL and BARRON'S. He is the author, co-author, editor or
contributor to eight books. He regularly appears on CNBC as a guest host on
Squawk Box, as well as Bloomberg television, PBS and other media venues.
ALISON BALLARD, CFA, DIRECTOR OF RESEARCH - CONSULTING SERVICES GROUP AND VICE
PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS, INC. Ms. Ballard oversees CSG's
mutual fund and separate account manager research efforts and the facilitation
and development of topic papers and other advice-related deliverables for
advisors and their clients. Ms. Ballard manages the analysts on the CSG Research
team. Prior to joining Bank of America in June 2005, Ms. Ballard most recently
served as the director of manager research and chair of the Due Diligence
Committee at New England Pension Consultants ("NEPC"), where she was responsible
for monitoring and assessing all investment managers across NEPC's diverse
client base. Initially employed as a senior research analyst specializing in
fixed income managers, Ms. Ballard was promoted to director of manager research
in January 2002. At the time of her departure, assets under advisement were in
excess of $225 billion. Ms. Ballard is a CFA(R) charter holder and a member of
both the CFA Institute and the Boston Security Analysts Society. She completed
her M.B.A. at Warwick University in Warwickshire, England.
DAVID M. HOHMANN, DIRECTOR OF FUND ADMINISTRATION OPERATIONS - ALTERNATIVE
INVESTMENT GROUP AND SENIOR VICE PRESIDENT, BANC OF AMERICA INVESTMENT ADVISORS,
INC. Mr. Hohmann has been involved with the alternative investment industry for
the past eight years. He is currently responsible for fund administration and
operations of AI Group. In that capacity he is responsible for the funds'
financial and tax reporting, accounting, audit and cash management functions.
Prior to his current position, which he assumed in November 2005, he served as
the Director of Fund Administration for AI Group's private equity fund of funds
group at Bank of America. Previously to that he served as the Division
Controller of FleetBoston's Principal Investing Group, where he had accounting
responsibility for the group's direct private equity portfolio as well as the
group's Fiduciary business. Mr. Hohmann was a Senior Associate in the Audit and
Assurance practice of PricewaterhouseCoopers, specializing in the investment
management industry. He received his undergraduate degree from the University of
Massachusetts at Boston in 1991. Mr. Hohmann also served in the United States
Naval Reserves until 1994. Mr. Hohmann is a certified public accountant.
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. 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 (other than the
registrant) managed by the investment committee voting members, as of March 31,
2007, as part of the committee or otherwise:
NUMBER OF
ACCOUNTS
MANAGED FOR ASSETS MANAGED
WHICH ADVISORY FOR WHICH
NUMBER OF FEE IS ADVISORY FEE IS
ACCOUNTS TOTAL ASSETS MANAGED* PERFORMANCE- PERFORMANCE-
MANAGED BASED BASED*
TYPE OF ACCOUNT
DANIEL S. MCNAMARA
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 2 $596,000 0 N/A
ALLEN CHENG
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 0 N/A 0 N/A
JIM BOWDEN
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 4 $1,249,303 0 N/A
REED MURPHY
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 5 $750,000 0 N/A
WILLIAM MARTIN
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 0 N/A 0 N/A
JOSEPH P. QUINLAN
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 0 N/A 0 N/A
ALISON BALLARD
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 0 N/A 0 N/A
DAVID HOHMANN
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 3 $200,000 0 N/A
NICHOLE QUINN
Registered Investment 0 N/A 0 N/A
Companies
Other pooled 38 $2,745,921,338 26 $2,333,943,087
investment vehicles
Other accounts 8 $900,000 0 N/A
*For purposes of this column, certain pooled investment vehicles have been
valued as of December 31, 2006 due to the manner in which valuations are
provided for these vehicle's underlying investments.
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 March 31, 2007, no investment committee voting member 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 officer 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) 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 Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and 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/ Daniel S. McNamara
-----------------------------
Daniel S. McNamara, President
(Principal Executive Officer)
Date: June 7, 2007
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: June 7, 2007
By (Signature and Title)* /s/ David Hohmann
-----------------------------
David Hohmann, Treasurer
and Senior Vice President
(Principal Financial Officer)
Date: June 7, 2007
* Print the name and title of each signing officer under his or her signature.