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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One Bryant Park, 28th Floor
New York, NY 10036
(Address of principal executive offices) (Zip code)
Michelle Rhee, 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, 2009
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.
BACAP Alternative
Multi-Strategy Fund, LLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2009
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2009
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) ............................................... 19
CAPITALIZED TERMS IN THESE FINANCIAL STATEMENTS THAT ARE NOT DEFINED HAVE THE
MEANINGS GIVEN TO THEM IN THE FUND'S PROSPECTUS.
(PRICEWATERHOUSECOOPERS LOGO)
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers Center
300 Madison Avenue
New York NY 10017
Telephone (646) 471 3000
Facsimile (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, 2009, the
results of its operations and its cash flows for the year then ended, the
changes in its investors' capital for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended, 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, 2009 by correspondence with the custodian and portfolio funds, provide a
reasonable basis for our opinion.
As explained in Note 1 to the financial statements, the investors approved the
reorganization of the Fund into Excelsior Directional Hedge Fund of Funds (TI),
LLC. The reorganization was effective on April 1, 2009.
As explained in Note 2 to the financial statements, the financial statements
include investments held by the Fund valued at $56,613,809 (73.53% of the Fund's
net assets) at March 31, 2009, the values of which have been fair valued by the
Adviser, under the general supervision of the Board of Managers, in the absence
of readily ascertainable market values.
/s/ PricewaterhouseCoopers LLP
May 28, 2009
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF ASSETS, LIABILITIES AND INVESTORS' CAPITAL
MARCH 31, 2009
--------------
ASSETS
Investments in Portfolio Funds, at fair value (cost $ 55,640,822) $56,613,809
Cash 14,355,817
Redemptions receivable from Portfolio Funds 15,031,775
Interest receivable 9,025
-----------
TOTAL ASSETS 86,010,426
-----------
LIABILITIES
Withdrawals payable 8,714,105
Professional fees payable 144,539
Management fee payable 88,866
Administration fee payable 15,882
Accrued expenses 50,677
-----------
TOTAL LIABILITIES 9,014,069
-----------
NET ASSETS $76,996,357
===========
INVESTORS' CAPITAL
Net capital (1) $76,023,370
Net accumulated unrealized appreciation on investments in Portfolio Funds 972,987
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TOTAL INVESTORS' CAPITAL $76,996,357
===========
(1) Net capital includes net capital contributions, cumulative net investment
income/(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
MARCH 31, 2009
-----------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
----------- ----------- -------
INVESTMENTS IN PORTFOLIO FUNDS
EMERGING MARKETS
Henderson Asia Pacific Absolute Return Fund, Ltd.+ $ 5,000,000 $ 5,466,478 7.10%
Rohatyn Group Global Opportunity Partners, L.P. (Class A) 167,351 190,474 0.25
----------- ----------- -----
TOTAL EMERGING MARKETS 5,167,351 5,656,952 7.35
----------- ----------- -----
EQUITY HEDGE
Addison Clark Fund, L.P. 3,000,000 2,516,635 3.27
Alydar Fund, L.P.++ 5,999,169 6,877,385 8.93
Artha Emerging Markets Fund, L.P.+++ 4,754,121 4,220,130 5.48
Royal Capital Value Fund (QP), L.P.++ 4,693,809 4,568,236 5.93
Seligman Tech Spectrum Fund, LLC+ 4,010,303 4,610,345 5.99
Tiedemann/Falconer Partners, L.P.++ 4,250,000 5,301,238 6.89
----------- ----------- -----
TOTAL EQUITY HEDGE 26,707,402 28,093,969 36.49
----------- ----------- -----
EVENT DRIVEN
American Durham, L.P.(b) 651,385 474,043 0.61
Centaurus Alpha Fund, L.P.(c) 2,167,757 1,922,245 2.50
DSC Acquisition LLC 34,744 37,735 0.05
Halcyon Enhanced Fund, L.P. 2,286,706 2,245,737 2.92
JANA Partners, L.P.(b) 326,041 354,455 0.46
Strategic Value Restructuring Fund, L.P.(b) 1,097,178 934,076 1.21
Waterfall Eden Fund, L.P.(b) 3,200,000 2,733,046 3.55
----------- ----------- -----
TOTAL EVENT DRIVEN 9,763,811 8,701,337 11.30
----------- ----------- -----
MACRO
Brevan Howard, L.P.+ 3,086,502 5,714,798 7.42
Drake Global Opportunities Fund, L.P.(c) 515,756 227,911 0.30
----------- ----------- -----
TOTAL MACRO 3,602,258 5,942,709 7.72
----------- ----------- -----
The accompanying notes are an integral part of these financial statements.
3
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2009
-----------------------------------
% OF
FAIR NET
COST VALUE ASSETS*
----------- ----------- -------
INVESTMENTS IN PORTFOLIO FUNDS (CONTINUED)
RELATIVE VALUE
Aristeia Partners, L.P. $ 3,650,000 $ 3,537,502 4.59%
Lydian Partners II, L.P.(a) 3,943,641 1,249,769 1.62
Lydian Partners SPV, Ltd.(b) 56,359 475 0.00
Vicis Capital Fund 2,750,000 3,431,096 4.46
----------- ----------- -----
TOTAL RELATIVE VALUE 10,400,000 8,218,842 10.67
----------- ----------- -----
TOTAL INVESTMENTS IN PORTFOLIO FUNDS $55,640,822 $56,613,809 73.53%
=========== =========== =====
INVESTMENT STRATEGY AS A PERCENTAGE OF TOTAL INVESTMENTS
IN PORTFOLIO FUNDS, AT FAIR VALUE
% of Total
Strategy Investments in Portfolio Funds
- -------- ------------------------------
Equity Hedge 49.62%
Event Driven 15.37%
Relative Value 14.52%
Macro 10.50%
Emerging Markets 9.99%
------
100.00%
* Percentages are based on net assets of $76,996,357.
(a) Portfolio Fund that has suspended redemptions as of the date of this
report.
(b) Portfolio Fund that has imposed limits on the redemptions on or after the
date of this report.
(c) Portfolio Fund that is in process of liquidation as of the date of this
report.
For Portfolio Funds representing greater than 5.00% of the Fund's net assets,
the following are the redemption cycles:
+ Subject to monthly redemption cycle, subject to the Manager's ability to
suspend redemptions at any time.
++ Subject to quarterly redemption cycle, subject to the Manager's ability to
suspend redemptions at any time.
+++ Subject to quarterly redemption cycle, after one year lock-up provision,
subject to the Manager's ability to suspend redemptions at any time.
The aggregate cost of investments for tax purposes was approximately
$64,297,097. Net unrealized depreciation on investments for tax purposes was
$7,683,288 consisting of $1,472,815 of gross unrealized appreciation and
$9,156,103 of gross unrealized depreciation.
The investments in Portfolio Funds shown above, representing 73.53% of
Investors' capital, have been fair valued in accordance with procedures
established by the Board of Managers (See Note 2).
The Fund's investments in Portfolio Funds may be subject to limitations on
redemptions, including the assessment of early redemption fees.
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, 2009
------------------
INVESTMENT INCOME
Interest income $ 82,175
------------
TOTAL INVESTMENT INCOME 82,175
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EXPENSES
Management fees 1,155,666
Administration fees 91,713
Audit and tax service fees 184,758
Legal fees 83,447
Insurance fees 61,746
Board fees 36,500
Registration fees 18,780
Miscellaneous expenses 101,262
------------
TOTAL EXPENSES 1,733,872
------------
NET INVESTMENT LOSS (1,651,697)
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS IN
PORTFOLIO FUNDS
Net realized gain on redemptions from investments in
Portfolio Funds 1,732,461
Change in unrealized appreciation on investments in
Portfolio Funds (12,265,654)
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
IN PORTFOLIO FUNDS (10,533,193)
------------
NET DECREASE IN INVESTORS' CAPITAL RESULTING FROM OPERATIONS $(12,184,890)
============
The accompanying notes are an integral part of these financial statements.
5
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF CHANGES IN INVESTORS' CAPITAL
AFFILIATED
INVESTOR* INVESTORS TOTAL
----------- ------------ ------------
INVESTORS' CAPITAL AT MARCH 31, 2007 $19,798,282 $ 79,952,011 $ 99,750,293
Contributions 3,000,000 13,148,437 16,148,437
Withdrawals -- (12,989,693) (12,989,693)
Allocation of net increase in Investors'
capital resulting from operations 58,886 773,146 832,032
----------- ------------ ------------
INVESTORS' CAPITAL AT MARCH 31, 2008 22,857,168 80,883,901 103,741,069
Contributions -- 3,797,500 3,797,500
Withdrawals -- (18,357,322) (18,357,322)
Allocation of net decrease in Investors'
capital resulting from operations (2,868,426) (9,316,464) (12,184,890)
----------- ------------ ------------
INVESTORS' CAPITAL AT MARCH 31, 2009 $19,988,742 $ 57,007,615 $ 76,996,357
=========== ============ ============
* The affiliated Investor is NB Funding Company, LLC.
The accompanying notes are an integral part of these financial statements.
6
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
MARCH 31, 2009
------------------
Cash flows from operating activities:
Net decrease in Investors' capital resulting from operations $(12,184,890)
Adjustments to reconcile net decrease in Investors' capital
resulting from operations to net cash provided by
operating activities:
Net realized gain on redemptions from investments in
Portfolio Funds (1,732,461)
Net change in unrealized appreciation on investments in
Portfolio Funds 12,265,654
Cost of investments in Portfolio Funds (17,581,138)
Proceeds from sale of investments in Portfolio Funds 37,358,581
(Increase)/decrease in operating assets:
Interest receivable (9,025)
Other assets 44,794
Increase/(decrease) in operating liabilities:
Management fee payable (19,310)
Administration fee payable 8,876
Professional fees payable (3,425)
Accrued expenses 23,163
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,170,819
------------
Cash flows from financing activities:
Capital contributions 3,597,500
Capital withdrawals (10,263,746)
Decrease in restricted cash 620,529
------------
NET CASH USED IN FINANCING ACTIVITIES (6,045,717)
------------
Net increase in cash 12,125,102
Cash at beginning of year 2,230,715
------------
Cash at end of year $ 14,355,817
============
The accompanying notes are an integral part of these financial statements.
7
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FINANCIAL HIGHLIGHTS
The below ratios are calculated by dividing total dollars of income or expenses
as applicable by the average of total annual Investors' capital based on each of
the twelve months ended March 31. Total return amounts are calculated by
geometrically linking returns based on the change in value during each
accounting period for each year ended March 31. An individual investor's return
may vary from these returns based on the timing of capital contributions and
withdrawals.
YEARS ENDED MARCH 31,
-------------------------------------------------------------
2009 2008 2007 2006 2005
------- -------- ------- ------- -------
Ratios to average Investors' capital:
Net investment loss - prior to incentive
allocation (1.77%) (1.67%) (2.02%)(4) (2.49%) (2.56%)
Incentive allocation 0.00%(3) 0.00%(3) 0.00%(3) 0.00%(3) (0.03%)
------- -------- ------- ------- -------
Net investment loss - net of incentive
allocation (1.77%) (1.67%) (2.02%)(4) (2.49%) (2.59%)
======= ======== ======= ======= =======
Expenses (1) (5) 1.86% 1.81% 2.32%(4) 2.74% 2.66%
Incentive allocation (1) (5) 0.00%(3) 0.00%(3) 0.00%(3) 0.00%(3) 0.03%
------- -------- ------- ------- -------
Total expenses and incentive allocation (1) (5) 1.86% 1.81% 2.32%(4) 2.74% 2.69%
======= ======== ======= ======= =======
Total return - prior to incentive allocation (2) (12.55%) 0.66% 7.79% 6.38% 2.61%
Incentive allocation 0.00%(3) 0.00%(3) 0.00%(3) 0.00%(3) (0.02%)
------- -------- ------- ------- -------
Total return - net of incentive allocation (2) (12.55%) 0.66% 7.79% 6.38% 2.59%
======= ======== ======= ======= =======
Portfolio turnover rate 20.87% 26.75% 37.40% 47.84% 61.24%
======= ======== ======= ======= =======
Investors' capital, end of year ($000) $76,996 $103,741 $99,750 $75,257 $71,765
======= ======== ======= ======= =======
(1) 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.
(2) 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.
(3) Effective December 1, 2005, the Fund terminated the incentive fee accrual
retroactively to April 1, 2005.
(4) 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.
(5) The Portfolio Funds expense ratios excluding incentive fee range from 1.62%
to 17.08% (unaudited). The Portfolio Funds incentive fees are generally 20%
of profits generated by the Portfolio Funds.
The accompanying notes are an integral part of these financial statements.
8
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS
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") have been 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" or the "Adviser") serves
as the Fund's investment 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 ("CMA," formerly known as Banc of
America Capital Management, LLC), 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. There can be no assurance that the
investment objective of the Fund will be achieved.
On December 18, 2008, at a special meeting of members of the Fund
("Members"), Members approved the proposed reorganization (the
"Reorganization") of the Fund into Excelsior Directional Hedge Fund of
Funds (TI), LLC (the "Excelsior Fund"), a Delaware limited liability
company that is registered under the 1940 Act as a closed-end,
non-diversified, management investment company and is a feeder fund in a
master/feeder structure. The Excelsior Fund invests substantially all of
its assets in Excelsior Directional Hedge Fund of Funds Master Fund, LLC.
The Reorganization became effective on April 1, 2009 (see also Note 12.)
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:
9
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
"Board"). 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 managers or administrators of the Portfolio Funds, subject to a
determination by the Adviser that such value represents the fair value
of the investment. 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 Fund's share of net earnings from
Portfolio Funds and decreased by withdrawals and the Fund's share of
net losses from Portfolio Funds. The Fund and the Adviser rely upon
audited and unaudited reports and estimates prepared by or for each
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 a 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 Portfolio Funds or their managers or administrators.
Portfolio Funds, or their administrators or 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 manager or administrator. In
such instances, consideration will be given to the financial condition
and operating results of the issuer, the amount that the Portfolio
Fund would reasonably expect to realize upon the sale of the
securities and other factors deemed relevant by the Portfolio Fund or
its manager or administrator.
Some 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 (the "side pockets") 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, the Fund
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. In instances where such a Portfolio Fund
closes its operations, the Fund may receive an 'in kind' distribution
and fully remove its interests from the Portfolio Fund. As of March
31, 2009, the Fund's investments in side pockets represented 3.16% of
the Fund's net assets.
In general, most of the Portfolio Funds in which the Fund invests
provide for periodic withdrawals of capital ranging from monthly to
annually and, in some cases, have lock up provisions under which the
10
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATIONS (CONTINUED)
Fund may not withdraw capital for a specified period after the date of
its contribution, which may be up to three years. The governing
documents of Portfolio Funds generally provide that the Portfolio Fund
may suspend, limit or delay the right of its investors, such as the
Fund, to withdraw capital.
B. INVESTMENTS
The Fund's investments are reported at fair value in accordance with
SFAS 157, which is defined below. The Board and the Valuation
Committee have approved procedures pursuant to which the Fund values
its investment in Portfolio Funds subject to the review and
supervision of the Board and Valuation Committee. In accordance with
these procedures, fair value of investments in the Portfolio Funds
takes into consideration all available information and other factors
that the Board and Valuation Committee deems pertinent. Generally, the
Board and Valuation Committee will use valuations reported to the Fund
by the managers of these Portfolio Funds as an input, and the Fund,
Board or Valuation Committee may reasonably determine that additional
factors should be considered and reflected. The value of the Fund's
investments determined using the Fund's procedures may differ from the
value reported by the Portfolio Fund. Because of the inherent
uncertainty of valuations, however, 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.
In September 2006, the Financial Accounting Financial Standards Board
("FASB") released Statement of Financial Accounting Standards No. 157,
Fair Value Measurements ("SFAS 157"), which provides enhanced guidance
for using fair value to measure assets and liabilities. The Fund
adopted SFAS No. 157 on April 1, 2008. SFAS 157 establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The objective of a fair value measurement
is to determine the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). Accordingly, the
fair value hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy under SFAS
157 are as follows:
- Level 1 - Unadjusted quoted prices in active markets for
identical, unrestricted assets or liabilities that the Fund
has the ability to access at the measurement date;
- Level 2 - Quoted prices which are not considered to be
active, or inputs that are observable (either directly or
indirectly) for substantially the full term of the asset or
liability; and
- Level 3 - Prices, inputs or modeling techniques which are
both significant to the fair value measurement and
unobservable (supported by little or no market activity).
Inputs broadly refer to the assumptions that market participants use
to make valuation decisions, including assumptions about risk. The
Adviser generally uses the value reported by the Portfolio Fund as the
primary input to its valuation; however adjustments to the reported
value may be made based on various factors, including, but not limited
to, the attributes of the interest
11
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. INVESTMENTS (CONTINUED)
held, including the rights and obligations, and any restrictions or
illiquidity on such interests, and the fair value of the fund's
investment portfolio or other assets and liabilities.
An individual fund's level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value
measurement. However, the determination of what constitutes
"observable" requires significant judgment by the Adviser. The Adviser
considers observable data to be that market data which is readily
available, regularly distributed or updated, reliable and verifiable,
not proprietary, provided by multiple, independent sources that are
actively involved in the relevant market. The categorization of a fund
within the hierarchy is based upon the pricing transparency of that
fund and does not necessarily correspond to the Adviser's perceived
risk of that fund.
Substantially all of the Fund's investments in Portfolio Funds have
been classified within level 3, and the Fund generally does not hold
any investments that could be classified as level 1 or level 2, as
observable prices for such investments are typically not available.
Assumptions used by the Fund, Board or Valuation Committee due to the
lack of observable inputs may significantly impact the resulting fair
value and, therefore, the Fund's results of operations.
The following table sets forth information about the level within the
fair value hierarchy at which the Portfolio Fund investments are
measured at March 31, 2009:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------- ----------- -----------
Investments in Portfolio Funds $-- $-- $56,613,809 $56,613,809
--- --- ----------- -----------
TOTAL $-- $-- $56,613,809 $56,613,809
=== === =========== ===========
In addition to the table above, included in cash and cash equivalents
on the Statement of Assets, Liabilities and Investors' Capital, are
overnight deposits in money market mutual funds, which are classified
as a Level 1 asset.
The following table includes a rollforward of the amounts for the year
ended March 31, 2009 for the investments classified within Level 3.
The classification of an investment within Level 3 is based on the
significance of the unobservable inputs to the overall fair value
measurement.
BEGINNING BALANCE AS OF 3/31/08 $ 97,857,627
Realized gain/(loss) 1,732,461
Change in unrealized
appreciation/(depreciation) (12,265,654)
Net purchase/sales (30,710,625)
Net transfers in and/or out of Level 3 --
------------
ENDING BALANCE AS OF 3/31/09 $ 56,613,809
============
12
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. INVESTMENTS (CONTINUED)
The unrealized gains (losses) in the table above are reflected in the
accompanying Statement of Operations. Net unrealized gains (losses)
related to investments held by the Fund at March 31, 2009 are
$(6,046,734).
C. 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.
D. INTEREST AND DIVIDENDS
Interest income is recognized on an accrual basis. Dividend income, if
any, is recognized on the ex-dividend date.
E. FUND EXPENSES
The Fund bears its own expenses including, but not limited to: any
taxes; investment-related expenses incurred by the Fund (e.g., fees
and expenses charged by the Adviser and Portfolio Funds, placement
fees, professional fees, custody and administration fees.)
F. CASH
Cash represents cash and cash equivalents held at SEI Private Trust
Company, the Fund's custodian (the "Custodian"), and includes
overnight deposits in money market mutual funds. At March 31, 2009, a
total of $14,355,817 in cash was held at the Custodian. Of that
amount, $488,064 was held in a segregated account related to the
holdbacks on Members' withdrawals from the Fund.
G. INCOME TAXES
The Fund is treated as a partnership for Federal income tax purposes.
No Federal or state taxes have been provided on profits of the Fund
since Investors are individually required to report on their own tax
return their distributive share of the Fund's taxable income or loss.
Effective April 1, 2007, the Fund adopted the FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48
provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements. FIN 48 requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of
being sustained by the applicable tax authority. Tax positions not
deemed to meet the "more-likely-than-not" threshold
13
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. INCOME TAXES (CONTINUED)
would be recorded as a tax benefit or expense in the current year. The
Fund has evaluated the application of FIN 48 and has determined that
it does not have a material impact on the Fund's financial statements.
There is no tax liability resulting from unrecognized tax benefits
relating to uncertain income tax positions taken or expected to be
taken on the tax return for the year ended March 31, 2009. No income
tax returns are currently under examination. The statute of
limitations on the Fund's U.S. Federal tax returns generally remains
open for returns covering fiscal years ended March 31, 2005 through
March 31, 2009. The statute of limitations on the Fund's state and
local tax returns may remain open for an additional year depending
upon the jurisdiction.
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 aggregate capital in the Fund.
As of the last day of each calendar month, any net profit or net loss for
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. The total sales load charged for the year ended March 31,
2009 was $2,500. In addition, the Fund may compensate selling agents
for selling Interests to their customers.
In light of the Reorganization (see Note 1 for more information),
effective July 1, 2008, the Fund suspended distribution of Interests
and stopped accepting contributions for Interests in the Fund.
B. WITHDRAWALS
The Fund from time to time offered to repurchase Interests pursuant to
written tenders by Investors. Repurchases were made at such times and
on such terms as were determined by the Board, in its sole discretion,
and generally included an offer to repurchase a specified dollar
amount of outstanding Interests. In determining whether and when the
Fund should have repurchased Interests, the Board considered
recommendations from the Adviser. Depending on market conditions and
other factors, the Adviser typically recommended 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, 2009, the Fund purchased $10,131,281 in Interests as a
result of a tender offer effective as of June 30, 2008.
14
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTORS' CAPITAL ACCOUNTS (CONTINUED)
B. WITHDRAWALS (CONTINUED)
The Adviser did not recommend, and the Board did not authorize, a
repurchase of Interests from Investors effective December 31, 2008. In
connection with the Reorganization, the Fund repurchased on March 31,
2009 the Interests of Investors that were not eligible to participate
in the Reorganization. Such repurchases were in the amount of
$8,226,040.
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. Portfolio Funds
generally provide for periodic redemptions ranging from monthly to annually
with lock up provisions of up to two years from initial investment. Most of
the Portfolio Funds have the contractual discretion to restrict or
temporarily suspend redemptions in certain circumstances. Some Portfolio
Funds may charge redemption fees. Such provisions may restrict the Fund's
ability to respond to changing market conditions. None of 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, 2009, amounted to $17,581,138 and $48,291,763, 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.
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, 2009, the Fund paid an administration fee of $91,713.
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.
15
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, 2009, the Fund paid $34,800 to PFPC under this
agreement which is included in Miscellaneous expenses in the Statement of
Operations.
7. INVESTOR SERVICING AGREEMENT
Prior to April 1, 2007, the Fund paid 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. This Investor Servicing fee was terminated effective
April 1, 2007.
8. RELATED PARTY TRANSACTIONS
Each member of the Board 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 related to performance of their duties as managers of the Fund.
The Adviser or its affiliates may have banking, underwriting, lending,
brokerage, or other business relationships with the portfolio companies in
which the Portfolio Funds invest.
NB Funding Company, LLC, an affiliate of Bank of America Corp., owns 25.96%
of the March 31, 2009 Investors' Capital.
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
16
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)
Fund's investments in Portfolio Funds themselves have limited liquidity,
the Fund may not be able to fund significant repurchases. Investors whose
Interests are accepted for repurchase also bear the risk that the Fund's
investors' capital may fluctuate significantly between the time that they
submit their request for repurchase and the date of the repurchase.
There are a number of other risks to the Fund. Three principal types of
risk that can adversely affect the Fund's investment approach are market
risk, strategy risk, and manager risk. The Fund is also subject to multiple
manager risks, possible limitations in investment opportunities, allocation
risks, illiquidity, lack of diversification, and other risks for the Fund
and potentially for each Portfolio Fund. Some Portfolio Funds have
suspended or restricted redemptions, which increases the illiquidity risk
for the Fund.
Liquidity risk is the risk that the Fund will encounter difficulty in
meeting obligations associated with financial liabilities. Among other
things, liquidity could be impaired by an inability to access secured
and/or unsecured sources of financing, an inability to sell assets or
unforeseen outflows of cash. This situation may arise due to circumstances
outside of the Fund's control, such as a general market disruption or an
operational problem affecting the Fund or third parties. Also, the ability
to sell assets may be impaired if other market participants are seeking to
sell similar assets at the same time.
The Fund's investments in Portfolio Funds can be redeemed on a limited
basis. As a result, the Fund may not be able to liquidate quickly some of
its investments in the Portfolio Funds in order to meet liquidity
requirements, or to respond to specific events such as deterioration in the
creditworthiness of any 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.
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 (the "SEC") (the "SEC
Orders") in connection with matters relating to mutual fund trading. Copies
of the SEC Orders are available on the SEC website at http://www.sec.gov.
Copies of the NYAG Settlements are available as part of the Bank of America
Corporation Form 8-K filing of February 10, 2005.
17
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. LITIGATION EVENT (CONTINUED)
In connection with the events that resulted in the NYAG Settlements and SEC
Orders, various parties filed suit against certain Columbia Funds
(including former Nations Funds), the Trustees of the Columbia Funds
(including Trustees of the former Nations 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, were transferred to a
multi-district proceeding in the Federal District Court in Maryland for
consolidated or coordinated pretrial proceedings. The parties have reached
settlements with respect to the claims in the actions concerning the
Columbia Funds. All such settlements are subject to court approval.
12. SUBSEQUENT EVENT
On April 1, 2009, pursuant to Member approval of the Reorganization at the
special meeting of Members held on December 18, 2008, all of the assets of
the Fund were transferred to the Excelsior Fund (except for the Fund's
cash, which will be transferred, net of the Fund's liabilities not assumed
by the Excelsior Fund, on or before May 30, 2009), and the Excelsior Fund
assumed the Fund's identified liabilities in exchange for the Excelsior
Fund's issuance to the Fund of limited liability interests in the Excelsior
Fund with a net asset value equal to the net asset value of the Fund's
assets (net of assumed liabilities) immediately before the Reorganization,
which the Fund has distributed to eligible Members in exchange for their
Interests in the Fund.
NEW ACCOUNTING PRONOUNCEMENT
FASB Staff Position (FSP) FAS 157-4 "Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly", was issued
April 9, 2009 effective for interim and annual reporting periods ending
after June 15, 2009, which is applied prospectively. FSP FAS 157-4 provides
additional guidance in order to estimate fair value when the volume and
level of activity for an asset or liability has significantly decreased.
FSP FAS 157-4 also identifies conditions to consider when assessing when a
transaction is not orderly. FSP 157-4 amends FAS 157 to require entities to
disclose additional information regarding the inputs and valuation
techniques used to measure fair value and require entities to provide
disclosures for major categories of securities in a more disaggregated
basis than previously had been required under FAS 157. The Fund is
reviewing the position along with its impact on the financial statements.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "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.
18
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
NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS
YEAR OF BIRTH THE FUND TIME SERVED THE PAST FIVE YEARS MANAGER HELD BY MANAGER
- ----------------- ----------- -------------- ----------------------------------- ----------- -------------------------
INDEPENDENT MANAGERS
Thomas W. Brock Manager Indefinite Chief Executive Officer, Stone 2 Liberty All-Star Equity
c/o BACAP Alternative term; Director Harbor Investment Partners Fund and Liberty All-Star
Multi-Strategy Fund, since 2004 (investment firm) since April 2006; Growth Fund, Inc.
LLC formerly, Adjunct Professor, (registered investment
One Bryant Park Columbia University Graduate companies)
New York, NY 10036 School of Business from September
(Born 1947) 1998 to April 2006; Chairman,
CEO, Salomon Brothers Asset
Management, Inc. from 1993 to
1998).
Alan Brott Manager Indefinite Consultant, since October 1991; 2 Stone Harbor Investment
c/o BACAP Alternative term; Director Associate Professor, Columbia Funds (registered
Multi-Strategy Fund, since 2004 University Graduate School of investment companies)
LLC Business, since 2000. Formerly,
One Bryant Park Partner with Ernst & Young for
New York, NY 10036 over 20 years.
(Born 1942)
Thomas G. Yellin Manager Indefinite President, The Documentary Group 2 None
c/o BACAP Alternative term; Director since December 2002; Executive
Multi-Strategy Fund, since 2004 Producer, ABC News from August
LLC 1989 to December 2002.
One Bryant Park
New York, NY 10036
(Born 1954)
19
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FUND GOVERNANCE (UNAUDITED) (CONTINUED)
NUMBER OF
FUNDS IN
TERM OF FUND
POSITION OFFICE AND COMPLEX
NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS
YEAR OF BIRTH THE FUND TIME SERVED THE PAST FIVE YEARS MANAGER HELD BY MANAGER
- ----------------- ----------- -------------- ----------------------------------- ----------- -------------------------
OFFICERS
David R. Bailin President 1 year term; Managing Director, Alternative N/A N/A
225 High Ridge Road President Investment Solutions, Bank of
Stamford, CT 06905 since 2007 America, since July 2007;
(Born 1959) Managing Director and Head of
Alternative Investments, United
States Trust Company, N.A., from
September 2006 to June 2007; co-
founder of Martello Investment
Management, a hedge fund-of-
funds specializing in trading
strategies, from February 2002 to
September 2006; Chief Operating
Officer and Partner of Violy,
Byorum and Partners, LLC, an
investment banking firm focusing
on Latin America, from January
2000 to January 2002.
Steven L. Suss Treasurer 1 year term; Managing Director, Alternative N/A N/A
225 High Ridge Road and Senior Treasurer Investment Solutions, Bank of
Stamford, CT 06905 Vice since 2007 America, since July 2007; Director,
(Born 1960) President since April 2007, Senior Vice
President, since July 2007, and
President, from April 2007 to June
2007, of UST Advisers, Inc.;
Senior Vice President, Alternative
Investment Division, United States
Trust Company, N.A., from April
2007 to June 2007; Chief Financial
Officer and Chief Compliance
Officer, Heirloom Capital
Management, L.P., from May 2002
to September 2006; Vice President
and Chief Financial Officer,
Westway Capital LLC, from
September 1997 to January 2002.
Marina Belaya Secretary 1 year term; Assistant General Counsel, Bank of N/A N/A
114 W. 47th Street since 2007 America, since July 2007; Vice
New York, NY 10036 President and Senior Attorney,
(Born 1967) United States Trust Company,
N.A., from February 2006 to June
2007; Vice President, Corporate
Counsel, Prudential Financial, from
April 2005 to January 2006;
Associate, Schulte Roth & Zabel
LLP, from September 2002 to
March 2005.
20
BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC
FUND GOVERNANCE (UNAUDITED) (CONTINUED)
NUMBER OF
FUNDS IN
TERM OF FUND
POSITION OFFICE AND COMPLEX
NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS
YEAR OF BIRTH THE FUND TIME SERVED THE PAST FIVE YEARS MANAGER HELD BY MANAGER
- ----------------- ----------- -------------- ----------------------------------- ----------- -------------------------
OFFICERS
Robert M. Zakem Chief 1 year term; GWIM Risk and Compliance N/A N/A
2 World Financial Center Compliance since 2009 Senior Executive, Bank of
37th Floor Officer and America Corp., since March 2009;
New York, NY 10281 Senior Vice Managing Director, Business Risk
(Born 1958) President Management, Merrill Lynch & Co.,
Inc., from August 2006 to February
2009; Executive Director, Head of
Fund Services - US, UBS Financial
Services, Inc., from December
2004 to July 2006; Senior Vice
President and General Counsel,
AIG SunAmerica Asset
Management Corp., from April
1993 to November 2004.
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.
21
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, 2008
and March 31, 2009 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 $67,000 and $70,350, respectively.
AUDIT-RELATED FEES
(b) The aggregate fees billed for the fiscal years ended March 31, 2008
and March 31, 2009 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 $5,500 and $5,775, 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, 2008 and March 31, 2009, 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, 2008
and March 31, 2009 for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning are
$50,400 and $50,400, respectively.
During the fiscal years ended March 31, 2008 and March 31, 2009, 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, 2008
and March 31, 2009 for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through
(c) of this Item are $0 and $0, respectively.
During the fiscal years ended March 31, 2008 and March 31, 2009, 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, 2008 and March 31, 2009 was zero.
(f) Not applicable.
(g) During the fiscal years ended March 31, 2008 and March 31, 2009,
respectively, aggregate non-audit fees of approximately $71.60 million
and $98.80 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
(a) 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.
(b) Not applicable.
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. With respect to Hedge
Fund Clients, it is BAIA's policy to waive its Clients' voting rights related to
their investments in Underlying Funds by getting a written confirmation from
each Underlying Fund that it concurs to the waiver of voting rights. This
confirmation shall be obtained either at the time of investment, or at a
reasonable time thereafter, by AIS sending a notification of waiver of voting
rights. In no circumstances shall this confirmation be obtained after any
Client, in conjunction with other Clients or affiliates of AIS, holds 5% of the
outstanding interests in such Underlying Fund.
PROCESS
AI Group will vote all Alternative Investment proxies and consents in accordance
with this Policy. AI Group's Investment Committee, which oversees 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
(b) The portfolio management decisions for the registrant (the "Fund") 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.
DAVID R. BAILIN, born in 1959, currently serves as Senior Executive Vice
President of BAIA and as Chairman of a BAIA Investment Committee (2007 to
present). Further, Mr. Bailin holds or has held various positions with Bank of
America and its affiliates: President of Bank of America Capital Advisors, Inc.
(2007 to present), President and Director of BACAP Alternative Advisors, Inc.
(2007 to present), Managing Director of Bank of America's Alternative Investment
Group (2007 to present), Managing Director & Head of the Alternative Investments
Division of United States Trust Company, National Association (2006 - 2007),
Consultant to the Alternative Investment Group, United States Trust Company,
National Association (2006); and Chairman of U.S. Trust Hedge Fund Management,
Inc. (2006 to present). In addition, Mr. Bailin served as Chief Operating
Officer and Co-Founder/Member of Martello Investment Management, LLP (2002 -
2006), as Chief Operating Officer and Partner of Violy, Byorum and Partners, LLC
(2000 - 2002) and as Director of Global Locate LLC (2002 to present). Mr. Bailin
received his B.A. degree from Amherst College and received his M.B.A from
Harvard University.
SPENCER N. BOGGESS, born in 1967, currently serves as Senior Vice President of
BAIA and is a member of a BAIA Investment Committee (2007 to present). Further,
Mr. Boggess holds or has held various positions with Bank of America and its
affiliates: Senior Vice President of Bank of America Capital Advisors, Inc.
(2007 to present); Senior Vice President of BACAP Alternative Advisors, Inc.
(2007 to present); President, Chief Executive Officer and Director of U.S. Trust
Hedge Fund Management, Inc (President: 2004 to present; Chief Executive Officer:
2003 to present; Director 2007 to present); and Senior Vice President and
Director of Research at CTC Consulting, Inc. (2000 - 2003). Mr. Boggess received
his B.A. degree from the University of Virginia.
JAMES D. BOWDEN, born in 1953, currently serves as a member of a BAIA Investment
Committee (2006 to present). Further, Mr. Bowden holds or has held various
positions with the following Bank of America entities: Banc of America
Investment Advisors, Inc. (2005 to present); and Bank of America Capital
Corporation (1998 to 2004). Mr. Bowden received his B.B.A. degree in Accounting
from the University of Michigan in 1975, and his M.B.A. degree in
Finance/Marketing from the University of Michigan in 1977.
STEVEN L. SUSS, born in 1960, currently serves as Senior Vice President of BAIA
and is a member of a BAIA Investment Committee (2007 to present). Further, Mr.
Suss holds or has held various positions with Bank of America and its
affiliates: Senior Vice President of Bank of America Capital Advisors, Inc.
(2007 to present); Director of BACAP Alternative Advisors, Inc. (2007 to
present); Senior Vice President of the Alternative Investments Division of
United States Trust Company, National Association (2007); and Director and
Senior Vice President of UST Advisers, Inc. (2007 to present). In addition, Mr.
Suss served as Chief Financial and Chief Compliance Officer at Heirloom Capital
Management, L.P. (2002 - 2007). Mr. Suss received his Bachelors degree from The
University of Texas at Austin and is a Certified Public Accountant.
JOSEPH P. QUINLAN, born in 1958, currently serves as Senior Vice President and
Chief Market Strategist (2005 to present) for BAIA and as a member of various
BAIA Investment Committees (2006 to present). Further, Mr. Quinlan holds or has
held various positions with the following Bank of America entities: Bank of
America Capital Advisors, LLC (2006); and Bank of America (2003 to present).
Prior to joining Bank of America, he served as Fellow, Center for Transatlantic
Relations for Johns Hopkins University (2002 to 2003), and as Senior Global
Economist for Morgan Stanley (1994 to 2002). Mr. Quinlan received his B.A.
degree in Political Science from Niagara University in 1994, and his M.A. degree
in International Political Economics and Development from Fordham University in
2002.
FRED WOFFORD, born in 1955, currently serves as the GWIM Compliance Executive
supporting the Alternatives Investments Solutions group. Further, Mr. Wofford
has held previous positions with Bank of America and its Affiliates. Previously
he was the GWIM Compliance Executive supporting Columbia Asset Management and
the Columbia Funds (2005-2008) and Vice President of BAIA, (formerly Liberty
Asset Management, Inc.) and Vice President to the Liberty All-Star Funds,
(2003-2005). Mr. Wofford received his B.A. in Economics from the University of
Connecticut in 1978 and M.B.A. from Northeastern University in 1982
Joseph Curtin, Jr., born in 1968, currently serves as Managing Director and Head
of U.S. Trust's Portfolio Analytics and Consulting Team (2007 to present) and
co-chair of U.S. Trust's Asset Allocation Work Team 2009 to present. Mr. Curtin
is a voting member of the Investment Strategy Committee, Fiduciary Investment
Committee (2008 to present) and Bank of America's Hedge Fund Investment
Committee (2009 to present). Mr. Curtin also served on the Bank of America Asset
Allocation Committee (2007 through 2009). Prior to his current responsibilities,
Mr. Curtin worked within the U.S. Trust Planning Infrastructure group (2000
through 2007). Prior to joining U.S. Trust, Mr. Curtin was a Senior Manager
within the Financial Planning Solutions practice of PricewaterhouseCoopers (from
1996 through 2000) and Senior Consultant in the Personal Financial Services
division of Price Waterhouse 1994 - 1996 and a Consultant in the International
Assignment Services division of Price Waterhouse (1992 through 1994). Mr. Curtin
was a tax specialist at KPMG Peat Marwick (1991 through 1992). Mr. Curtin
received his B.B.A in accounting from Pace University in 1991.
The table below provides information regarding accounts (other than the
registrant) managed by the investment committee voting members, as of March 31,
2009, as part of the committee or otherwise:
NUMBER OF ACCOUNTS
NUMBER OF MANAGED FOR WHICH ASSETS MANAGED FOR
ACCOUNTS ADVISORY FEE IS WHICH ADVISORY FEE
TYPE OF ACCOUNT MANAGED TOTAL ASSETS MANAGED* PERFORMANCE-BASED IS PERFORMANCE-BASED*
DAVID R. BAILIN
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
SPENCER N. BOGGESS
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
JAMES D. BOWDEN
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
STEVEN L. SUSS
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
NUMBER OF ACCOUNTS
NUMBER OF MANAGED FOR WHICH ASSETS MANAGED FOR
ACCOUNTS ADVISORY FEE IS WHICH ADVISORY FEE
TYPE OF ACCOUNT MANAGED TOTAL ASSETS MANAGED* PERFORMANCE-BASED IS PERFORMANCE-BASED*
JOSEPH P. QUINLAN
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
FRED WOFFORD
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
JOSEPH CURTIN
Registered Investment 1 $343,863,804 0 N/A
Companies
Other pooled 15 $1,018,474,411 13 $836,364,260
investment vehicles
Other accounts 0 N/A 0 N/A
*For purposes of this column, certain pooled investment vehicles have been
valued as of December 31, 2008 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 of the 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.
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 to ensure that 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.
As of March 31, 2009, 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 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) 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
officer, 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 Investment Company Act
of 1940 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/ David R. Bailin
-----------------------------------
David R. Bailin, President
(Principal Executive Officer)
Date: June 10, 2009
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/ David R. Bailin
-----------------------------------
David R. Bailin, President
(Principal Executive Officer)
Date: June 10, 2009
By (Signature and Title)* /s/ Steven L. Suss
-----------------------------------
Steven L. Suss, Treasurer
and Senior Vice President
(Principal Financial Officer)
Date: June 10, 2009
* Print the name and title of each signing officer under his or her signature.