UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-22352
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Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
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(Exact name of registrant as specified in charter)
One Financial Center
Boston, MA 02111
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(Address of principal executive offices) (Zip code)
Michelle Rhee, Esq.
c/o Bank of America Investment Advisors, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
registrant's telephone number, including area code: 617-772-3672
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Date of fiscal year end: March 31
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Date of reporting period: March 31, 2010
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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, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
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FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE PERIOD JANUARY 1, 2010 (COMMENCEMENT OF OPERATIONS) THROUGH MARCH 31, 2010
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Financial Statements
For the Period January 1, 2010 (commencement of operations) through March 31, 2010
CONTENTS
Report of Independent Registered Public Accounting Firm ...............................................................1
Statement of Assets, Liabilities and Members' Capital .................................................................2
Statement of Operations ...............................................................................................3
Statements of Changes in Members' Capital .............................................................................4
Statement of Cash Flows ...............................................................................................5
Financial Highlights ..................................................................................................6
Notes to Financial Statements .........................................................................................7
The Registrant 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. The Registrant's Forms N-Q are 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. Information on Form N-Q is available without charge, upon request, by calling (866) 921-7951.
A description of the policies and procedures that the Registrant uses to determine how to vote proxies relating to
portfolio securities is available without charge, upon request, by calling (866) 921-7951 and on the Commission's
website at http://www.sec.gov.
Information regarding how the Registrant voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge, upon request, by calling (866) 921-7951, and on the
Commission's website at http://www.sec.gov.
(PRICEWATERHOUSECOOPERS LOGO)
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|
| 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 Directors and Members of
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC:
In our opinion, the accompanying statement of assets, liabilities and members' capital, and the related statements of
operations, of changes in members' capital and of cash flows and the financial highlights present fairly, in all
material respects, the financial position of Grosvenor Registered Multi-Strategy Fund (TI 1), LLC (the "Fund") at March
31, 2010, the results of its operations, the changes in members' capital, its cash flows and the financial highlights
for the period January 1, 2010 (commencement of operations) through March 31, 2010, 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 audit. We conducted our audit 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 audit provides a
reasonable basis for our opinion.
(PRICEWATERHOUSECOOPERS LLP)
June 1, 2010
1
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Statement of Assets, Liabilities and Members' Capital
March 31, 2010
ASSETS
Investment in Grosvenor Registered Multi-Strategy Master Fund, LLC, at fair value $ 487,507,490
Cash and cash equivalents (see Note 2e) 5,121,263
Due from Adviser 179,917
Other assets 160
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TOTAL ASSETS 492,808,830
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LIABILITIES
Repurchase of Members' interests payable 3,082,970
Members' interests received in advance 1,750,000
Professional fees payable 140,440
Management fee payable 24,708
Administration fee payable 1,500
Other liabilities 27,347
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TOTAL LIABILITIES 5,026,965
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NET ASSETS $ 487,781,865
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MEMBERS' CAPITAL
MEMBERS' CAPITAL* $ 487,781,865
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* Members' Capital includes net subscriptions, cumulative net investment income/(loss), cumulative net realized
gain/(loss), and accumulated unrealized appreciation from investments in Grosvenor Registered Multi-Strategy Master
Fund, LLC.
The accompanying notes and attached audited financial statements of Grosvenor Registered Multi-Strategy Master Fund, LLC
are an integral part of these financial statements.
2
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Statement of Operations
For the period January 1, 2010 (commencement of operations) through March 31, 2010
NET INVESTMENT LOSS ALLOCATED FROM GROSVENOR
REGISTERED MULTI-STRATEGY MASTER FUND, LLC
Interest $ 2,430
Expenses (1,424,499)
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NET INVESTMENT LOSS ALLOCATED FROM GROSVENOR REGISTERED MULTI-STRATEGY
MASTER FUND, LLC (1,422,069)
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FUND INCOME
Interest 425
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FUND EXPENSES
Professional fees 216,740
Management fee 70,889
Administration fees 28,416
Registration fees 23,082
Directors' fees 5,000
Other expenses 11,840
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TOTAL FUND EXPENSES 355,967
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NET INVESTMENT LOSS BEFORE EXPENSE LIMITATION REIMBURSEMENT (1,777,611)
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Expense Limitation reimbursement 179,917
NET INVESTMENT LOSS (1,597,694)
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REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
ALLOCATED FROM GROSVENOR REGISTERED MULTI-STRATEGY
MASTER FUND, LLC
Net realized loss on investment (844,002)
Net change in unrealized appreciation on investment 14,431,218
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM GROSVENOR
REGISTERED MULTI-STRATEGY MASTER FUND, LLC 13,587,216
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NET INCREASE IN MEMBERS' CAPITAL RESULTING FROM
OPERATIONS $ 11,989,522
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The accompanying notes and attached audited financial statements of Grosvenor Registered Multi-Strategy Master Fund, LLC
are an integral part of these financial statements.
3
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Statements of Changes in Members' Capital
MEMBERS' CAPITAL, JANUARY 1, 2010 (COMMENCEMENT OF
OPERATIONS) $ -
Members' subscriptions 6,075,000
Transfer of Members' interests* 469,717,343
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Net increase in Members' Capital resulting from capital
transactions 475,792,343
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Net investment loss (1,597,694)
Net realized loss from investments (844,002)
Net increase in unrealized appreciation on investments 14,431,218
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Net increase in Members' Capital resulting from operations 11,989,522
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MEMBERS' CAPITAL, MARCH 31, 2010 $ 487,781,865
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* On January 1, 2010, Members of Grosvenor Registered Multi-Strategy Master Fund, LLC contributed their interests in
Grosvenor Registered Multi-Strategy Master Fund, LLC to Grosvenor Registered Multi-Strategy Fund (TI 1), LLC (the
"TI 1 Fund") in exchange for interests in the TI 1 Fund.
The accompanying notes and attached audited financial statements of Grosvenor Registered Multi-Strategy Master Fund, LLC
are an integral part of these financial statements.
4
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Statement of Cash Flows
For the period January 1, 2010 (commencement of operations) through March 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in Members' Capital resulting from operations $ 11,989,522
Adjustments to reconcile net increase in Members' Capital resulting from operations
to net cash used in operating activities:
Net increase in unrealized appreciation allocated from Grosvenor Registered Multi-
Strategy Master Fund, LLC (14,431,218)
Net investment loss allocated from Grosvenor Registered Multi-Strategy Master Fund,
LLC 1,422,069
Net realized loss allocated from Grosvenor Registered Multi-Strategy Master Fund, LLC 844,002
Purchases of investment in Grosvenor Registered Multi-Strategy Master Fund, LLC (5,625,000)
(Increase)/Decrease in operating assets:
Due from Adviser (179,917)
Other assets (160)
Increase/(Decrease) in operating liabilities:
Management fee payable 24,708
Professional fees payable 140,440
Administration fee payable 1,500
Other liabilities 27,347
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NET CASH USED IN OPERATING ACTIVITIES (5,786,707)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Member subscriptions 7,825,000
Proceeds received from Grosvenor Registered Multi-Strategy Master Fund, LLC for
distribution to former Members for interests repurchased 32,010,696
Proceeds distributed to former Members in Grosvenor Registered Multi-Strategy Master
Fund, LLC for interests repurchased (28,927,726)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 10,907,970
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Net increase in cash and cash equivalents 5,121,263
Cash and cash equivalents at beginning of year -
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,121,263
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Transfer of Members' interest from Grosvenor Registered Multi-Strategy Master Fund,
LLC $ 469,717,343
=================
The accompanying notes and attached audited financial statements of Grosvenor Registered Multi-Strategy Master Fund, LLC
are an integral part of these financial statements.
5
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Financial Highlights
The following represents certain ratios to average members' capital, total return, and other supplemental information
for the period indicated:
PERIOD
JANUARY 1, 2010
(COMMENCEMENT OF
OPERATIONS) THROUGH
YEAR ENDED MARCH
31, 2010*
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Ratios to average Members' Capital:(a)
Net investment loss -net of expense reimbursement(b) (1.33%)
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Expenses - gross of expense reimbursement(c)(d) 1.49%
Expenses - net of expense reimbursement(c) 1.34%
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Total return(e) 2.52%
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MEMBERS' CAPITAL, END OF YEAR ($000) $ 487,782
* The ratios for this period have been annualized. For the periods prior to the formation of the TI 1 Fund (see Note
1 "Organization"), refer to the financial highlights of Grosvenor Registered Multi-Strategy Master Fund, LLC in the
attached financial statements.
(a) Average Members' Capital is determined by using the net assets at the end of each month during the period and net
assets at the beginning of the period.
(b) The ratio reflects the income and expenses including the TI 1 Fund's proportionate share of income and expenses of
Grosvenor Registered Multi-Strategy Master Fund, LLC.
(c) The ratio reflects the expenses including the TI 1 Fund's proportionate share of the expenses of Grosvenor
Registered Multi-Strategy Master Fund, LLC.
(d) The ratio is before any expense limitation or reimbursement per the Expense Limitation Agreement.
(e) Total return assumes a purchase of an interest in the TI 1 Fund on the first day and the sale of an interest on the
last day of the period and is calculated using geometrically linked monthly returns. An individual Member's return
may vary from these returns based on the timing of Member subscriptions and repurchases, and management fee terms
(see Note 4 "Management Fee").
The accompanying notes and attached audited financial statements of Grosvenor Registered Multi-Strategy Master Fund, LLC
are an integral part of these financial statements.
6
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements
March 31, 2010
1. ORGANIZATION
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC (the "TI 1 Fund") is a Delaware limited liability company
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end management investment
company and is operating as a diversified investment company. The TI 1 Fund was formed as of October 26, 2009 and
commenced operations on January 1, 2010. The TI 1 Fund has many of the features of a private investment fund. The TI 1
Fund's interests ("Interests") are offered only in private placements to persons (i) who are both "accredited investors"
under the Securities Act of 1933, as amended, and "qualified clients" under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and (ii) who meet other investor eligibility criteria established by the TI 1 Fund. The
primary investment objectives of the TI 1 Fund are to provide investors (i) an attractive, long-term rate of return, on
an absolute as well as a risk-adjusted basis, (ii) low performance volatility and (iii) minimal correlation with the
equity and fixed income markets. The TI 1 Fund seeks to achieve these objectives by investing substantially all of its
assets in Grosvenor Registered Multi-Strategy Master Fund, LLC, previously known as Columbia Management Multi-Strategy
Hedge Fund, LLC (the "Company"), also a Delaware limited liability company registered under the 1940 Act. The Company
employs a multi-strategy, multi-manager investment strategy as detailed in its financial statements which are attached
herein. There can be no assurance that the investment objectives of the TI 1 Fund or the Company will be achieved. The
investment managers of the investment funds in which the Company invests generally conduct their investment programs
through these investment funds (collectively, the "Portfolio Funds"). The Company invests in the Portfolio Funds as a
limited partner along with other investors.
The financial statements of the Company, including the Schedule of Investments, are attached to this report and should
be read in conjunction with the TI 1 Fund's financial statements. As of March 31, 2010, the TI 1 Fund's beneficial
ownership of the Company's Members' Capital was 99.9%.
The TI 1 Fund was formed as part of reorganization of the Company into a "master/feeder" investment structure (the
"Reorganization"). As part of the Reorganization, members of the Company became members ("Members") of the TI 1 Fund.
The TI 1 Fund had no assets, liabilities, or operations prior to the Reorganization.
Until March 31, 2010 (see Note 9 "Subsequent Events"), Banc of America Investment Advisors, Inc. (the "Adviser") served
as the investment adviser to the Company and the management services provider to the TI 1 Fund. The Adviser is
registered as an investment adviser under the Advisers Act and is an indirect wholly owned subsidiary of Bank of America
Corporation ("BAC"). BAC is a bank holding and a financial holding company which has its principal executive offices at
101 North Tryon Street, Charlotte, North Carolina. The Adviser is responsible for developing, implementing and
supervising the investment program and providing day-to-day management services. The Adviser provides various management
and administrative services to the Company and the TI 1 Fund.
The Adviser has retained Grosvenor Capital Management, L.P. ("Grosvenor" or the "Subadviser") as subadviser to the
Company. The Subadviser is registered as an investment adviser under the Advisers Act and is responsible for
implementing the Company's investment strategy and managing the
7
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
1. ORGANIZATION (CONTINUED)
Company's investment portfolio on a day-to-day basis, in accordance with the investment objective described in the
Company's registration statement and subject to oversight by the Adviser and the board of directors of the Company.
The Board of Directors of the Company (the "Board") has overall responsibility to manage and supervise the operations of
the TI 1 Fund, including the exclusive authority to oversee and to establish policies regarding the management, conduct
and operation of the TI 1 Fund's business. The Board has engaged the Adviser to manage the day-to-day operations of the
TI 1 Fund.
Member subscriptions for Interests in the TI 1 Fund by eligible investors may be accepted as of the first day of each
month, or at such times as the Board may determine. The TI 1 Fund may, from time to time, offer to repurchase Interests
from its Members pursuant to written tenders by Members. These repurchase offers will be made at such times and on such
terms as may be determined by the Board, in its sole discretion, subject to the liquidity of the TI 1 Fund's assets and
other factors considered by the Board. The Adviser expects that it will recommend to the Board that the TI 1 Fund offer
to repurchase Interests from Members four times each year, effective as of the last day of each calendar quarter.
Members can only transfer or assign Interests under certain limited circumstances. Member repurchases are recognized as
liabilities when the amount becomes fixed. This generally will occur on the last day of a fiscal period.
As of the last day of each calendar month, the TI 1 Fund allocates net profits or losses for that month to the capital
accounts of all Members, in proportion to their respective opening capital account balances for such period (after
taking into account any Member subscriptions deemed to be made as of the first day of such period).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the estimates utilized in preparing the TI 1 Fund's
financial statements are reasonable and prudent; however, the actual results could differ from these estimates.
B. CODIFICATION
In July 2009, the Financial Accounting Standards Board ("FASB") implemented the FASB Accounting Standards Codification
(the "Codification") as the single source of GAAP. While the Codification did not change GAAP, it introduced a new
structure to the accounting literature and changed references to accounting standards and other authoritative accounting
guidance. The Codification was effective for the TI 1 Fund in 2010 and did not affect the TI 1 Fund's Statement of
Assets, Liabilities and Members' Capital, Statement of Operations, Statement of Changes in Members' Capital or Statement
of Cash Flows.
8
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. EXPENSES
The TI 1 Fund bears its own expenses and, indirectly, bears a pro rata portion of the Company's expenses incurred in its
business, including, but not limited to, the following: fees paid directly or indirectly to the investment managers of
the Portfolio Funds; all costs and expenses directly related to the portfolio transactions and positions for the
Company's account; legal fees; accounting and auditing fees; custodial and escrow fees; fees paid to the TI 1 Fund's and
the Company's administrator; costs of insurance; management fees and advisory fees; the fees and travel expenses and
other expenses of the TI 1 Fund's and the Company's Boards; all costs with respect to communications regarding the TI 1
Fund's and the Company's transactions among the Adviser and any custodian or other agent engaged by the TI 1 Fund; and
other types of expenses approved by the TI 1 Fund's and the Company's Boards. The expenses of the Portfolio Funds are
not included in the TI 1 Fund's Statement of Operations or the Financial Highlights.
The Adviser, Subadviser and the TI 1 Fund have entered into an expense limitation and reimbursement agreement (the
"Expense Limitation Agreement") under which the Adviser and Subadviser will, subject to possible reimbursement by the TI
1 Fund as described below, waive fees or pay or absorb expenses of the TI 1 Fund (including the TI 1 Fund's share of the
ordinary operating expenses of the Company, but excluding any fees, expenses and incentive allocations of the Portfolio
Funds), to the extent necessary to limit the ordinary operating expenses of the TI 1 Fund (including the TI 1 Fund's
share of the ordinary operating expenses of the Company, but excluding taxes, interest and related costs of borrowing,
brokerage commissions, management fee and the TI 1 Fund's pro rata portion of the Company's advisory fee, and any
extraordinary expenses of the TI 1 Fund and the Company) to 0.28% per annum of the greater of the TI 1 Fund's average
monthly net assets or the net asset level of the Company at December 31, 2009 (the "Expense Limitation"). In
consideration of the Adviser's and Subadviser's agreement to limit the TI 1 Fund's expenses, the TI 1 Fund will carry
forward the amount of fees waived and expenses paid or absorbed by the Adviser and Subadviser in excess of the Expense
Limitation, for a period not to exceed three years from the end of the fiscal year in which the fee was waived or the
expense was paid or absorbed, and will reimburse the Adviser and Subadviser such amounts. Reimbursement will be made as
promptly as possible, but only to the extent it does not cause the TI 1 Fund's annualized ordinary operating expenses to
exceed the Expense Limitation in effect at the time that the fee was waived or the expense was paid or absorbed. The
Expense Limitation Agreement will remain in effect until March 31, 2011 and will automatically continue in effect from
year to year thereafter unless terminated by the Adviser, Subadviser or the TI 1 Fund. The TI 1 Fund will carry forward
$179,917 of previously reimbursed expenses for the period from January 1, 2010 (commencement of operations) to March 31,
2010 for up to three years.
D. INCOME TAXES
As a limited liability company, no provision for the payment of Federal, state or local income taxes has been provided
by the TI 1 Fund. Each Member is individually required to report on its own tax return its share of the TI 1 Fund's
taxable income or loss. The TI 1 Fund has a tax year end of December 31.
9
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. INCOME TAXES (CONTINUED)
Net investment income or loss and net realized and unrealized gain or loss from investments of the TI 1 Fund for each
fiscal period are allocated among, and credited to or debited against, the capital accounts of all Members as of the
last day of each fiscal period in accordance with each Member's respective investment percentage for the fiscal period,
as defined in the TI 1 Fund's Limited Liability Company Agreement.
The cost of the TI 1 Fund's investment in the Company for Federal income tax purposes is based on amounts reported to
the TI 1 Fund by the Company on a Schedule K-1. Based on the amounts reported to the TI 1 Fund by the Company on
Schedule K-1 as of December 31, 2009, and after adjustment for purchases and redemptions between December 31, 2009 and
March 31, 2010, the estimated cost of the investment at March 31, 2010 for federal tax purposes is $409,864,751. The
resulting estimated net unrealized appreciation for tax purposes on the investment at March 31, 2010 is $30,726,573.
The authoritative guidance on accounting for and disclosure of uncertainty in tax positions requires management to
determine whether a tax position of the TI 1 Fund is more likely than not to be sustained upon examination, including
resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax
positions meeting the "more likely than not" threshold, the tax amount recognized in the financial statements is reduced
by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with
the relevant taxing authority. Management has determined that the adoption of this authoritative guidance did not have a
material effect on the results of operations or financial position of the TI 1 Fund. Additionally, the TI 1 Fund has
determined that there are no unrecognized tax benefits or liabilities relating to uncertain income tax positions
expected to be taken on the tax return for the year ended December 31, 2009.
In connection with the Reorganization discussed in Note 1, the Investment Adviser expects that Members of the Company
immediately prior to the Reorganization will not be subject to any tax as a result of the Reorganization. For financial
reporting purposes, assets received and interests issued by the TI 1 Fund were recorded at fair value. The cost basis of
the investments received by the TI 1 Fund was carried forward to align ongoing reporting of the TI 1 Fund's realized
gains and losses with amounts distributable to its members for tax purposes.
E. OTHER
The TI 1 Fund records its proportionate share of the Company's income, expenses, realized and unrealized gains and
losses. In addition, the TI 1 Fund records its own income and expenses on the accrual basis.
Cash and cash equivalents consist of amounts maintained in a PFPC Trust Company interest-bearing account and include
overnight deposits in BlackRock Liquidity Funds, Temp Fund, an affiliate of BAC. Interest income is recorded on the
accrual basis.
10
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION
The TI 1 Fund records its investment in the Company at fair value, which represents the TI 1 Fund's proportionate
interest in the Company. The performance of the TI 1 Fund is directly affected by the performance of the Company.
Valuation of investments held by the Company is discussed in the notes to the Company's financial statements attached to
this report.
4. MANAGEMENT FEE
Pursuant to a management agreement between the TI 1 Fund and the Adviser, the Adviser is entitled to a management fee
(the "Management Fee"), paid monthly in arrears, equal to an annual rate of 0.50% of the Members' ending monthly capital
of the TI 1 Fund before taking into consideration the Management Fee, prior to any repurchases or distribution of
capital during the month. However, with respect to the capital accounts of any Members who became Members in connection
with the Reorganization of the Company and who, at the time of the Reorganization, had positive loss carryforwards in
the Company (a "Loss Carryforward Amount"), the Management Fee payable by the TI 1 Fund with respect to the capital
account of such a Member shall, until such time as the Member's Loss Carryforward Amount is first reduced to zero, be
reduced so that the aggregate of the portion of the Management Fee attributable to such capital account plus the capital
account's PRO RATA share of the advisory fee of the Company borne by the TI 1 Fund as an investor in the Company does
not exceed the management fee of the Company that the Member would have borne as an investor in the Company prior to the
Reorganization. The portion of the Management Fee attributable to a Member's capital account is specially allocated to
such Member.
5. RELATED PARTY TRANSACTIONS AND OTHER
Affiliates of the Adviser may have banking, underwriting, lending, brokerage, or other business relationships with the
Portfolio Funds in which the Company invests and with the companies in which the Portfolio Funds invest.
Effective November 19, 2009, the Board is made up of five Board members who are not "interested persons", as defined by
the 1940 Act, (the "Disinterested Directors"). Each Independent Director receives per-meeting fees of: $500 for
attendance at quarterly meetings of the Board; and $500 for telephonic participation at a quarterly Board meeting or for
participation at a telephonic special meeting of the Board. All Disinterested Directors may be reimbursed for
out-of-pocket expenses of attendance at each regular or special meeting of the Board or of any committee thereof and for
their expenses, if any, in connection with any other service or activity they perform or engage in as Disinterested
Directors.
PFPC Trust Company (an affiliate of The PNC Financial Services Group) serves as custodian of the TI 1 Fund's assets and
provides custodial services for the TI 1 Fund. PNC Global Investment Services (U.S.), Inc. serves as administrator and
accounting agent to the TI 1 Fund and in that capacity provides certain accounting, record keeping, investor related
services, and regulatory administrative services. The TI 1 Fund pays a monthly fee to the custodian and the
administrator based primarily upon month-end Members' Capital.
11
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
5. RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
Merrill Lynch, Pierce, Fenner & Smith Incorporated serves as the placement agent of the TI 1 Fund (the "Placement
Agent"). Investors are charged a placement fee (sales load) (the "Placement Fee") on Interests placed by the Placement
Agent of 1.25% of the investment amount if such amount is less than $500,000 (subject to the minimum investment). There
is no Placement Fee on investments of $500,000 or more. The Placement Fee was paid to the Placement Agent. The Placement
Fee is waived for certain investors.
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF CREDIT RISK OR LIQUIDITY RISKS
In the normal course of business, the Portfolio Funds in which the Company invests trade various financial instruments
and enter into various investment activities with off-balance sheet risk. These may include, but are not limited to,
short selling activities, writing option contracts, contracts for differences and equity swaps. However, as a result of
the investments by the Company as a limited partner or member, the Company's liability with respect to its investments
in the Portfolio Funds is generally limited to the net asset value of its interest in each Portfolio Fund.
Liquidity risk is the risk that the Company 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 to withdraw capital from the Portfolio Funds, or unforeseen outflows of
cash. This situation may arise due to circumstances outside of the Company's control, such as a general market
disruption or an operational problem affecting the Company or third parties, including the Portfolio Funds. Also, the
ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time.
The Company's capital investment in the Portfolio Funds can be withdrawn on a limited basis. This may limit the ability
of the company to provide liquidity to the TI 1 Fund, and the TI 1 Fund may not be able to liquidate quickly some of its
investment in the Company in order to meet liquidity requirements.
7. GUARANTEES
In the normal course of business, the TI 1 Fund enters into contracts that contain a variety of representations and
warranties and which provide general indemnities. The TI 1 Fund's maximum exposure under these arrangements is unknown,
as this would involve future claims against the TI 1 Fund that have not yet occurred. However, based on experience, the
TI 1 Fund expects the risk of loss due to these warranties and indemnities to be remote.
8. LITIGATION EVENT
The events described below have not directly impacted the TI 1 Fund or had any known material adverse effect on its
financial position or results of operations.
12
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
Notes to Financial Statements (continued)
March 31, 2010
8. LITIGATION EVENT (CONTINUED)
On February 9, 2005, certain affiliates of the Adviser, including the former investment adviser to the Company, 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.
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.
9. SUBSEQUENT EVENTS
The TI 1 Fund has evaluated all subsequent events through the date these financial statements were issued, and has noted
the following:
Subsequent to March 31, 2010, the TI 1 Fund received additional capital subscriptions of $4,796,754.
On March 30, 2010, the TI 1 Fund announced a tender offer to purchase up to $50,000,000 of outstanding Interests from
Members. The net asset value of Interests will be calculated for this purpose on June 30, 2010. The tender offer expired
on April 26, 2010.
As of April 1, 2010, the Adviser transferred all of its investment advisory services to its affiliate, Banc of America
Capital Advisors LLC ("BACA") (the "Transfer"). As a result of the Transfer, BACA has assumed all responsibilities for
serving as the investment adviser to the Company and as the management services provider to the TI 1 Fund under the
terms of the investment advisory agreement between the Adviser and the Company and the management agreement between the
Adviser and the TI 1 Fund, respectively. The personnel of the Adviser who will provide services to the Company and the
TI 1 Fund are the same personnel who previously provided such services to the Company and the TI 1 Fund. Additionally,
no changes in the management of the Company and the TI 1 Fund are expected as a result of the Transfer.
BACA is registered as an investment adviser under the Advisers Act and is an indirect wholly owned subsidiary of BAC.
13
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
FUND MANAGEMENT (UNAUDITED)
MARCH 31, 2010
Information pertaining to the Board and officers of the TI 1 Fund is set forth below:
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OVERSEEN BY
NAME, ADDRESS AND AGE COMPANY TIME SERVED AND OTHER DIRECTORSHIPS HELD MANAGER
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
Alan Brott Director Term Consultant (since October 1991); Associate Professor, 9
c/o Grosvenor Registered Indefinite; Columbia University Graduate School of Business (since
Multi-Strategy Fund (TI 1), Length- since 2000); Former Partner of Ernst & Young. Mr. Brott serves
LLC 2004 as a manager of Excelsior Multi-Strategy Hedge Fund of
225 High Ridge Road Funds Master Fund, LLC, Excelsior Multi-Strategy Hedge
Stamford, CT 06905 Fund of Funds (TI), LLC, Excelsior Multi-Strategy Hedge
(Born 1942) Fund of Funds (TE), LLC, Excelsior Multi-Strategy Hedge
Fund of Funds (TI 2), LLC, Excelsior Multi-Strategy Hedge
Fund of Funds (TE 2), LLC, Grosvenor Registered
Multi-Strategy Master Fund, LLC, Grosvenor Registered
Multi-Strategy Fund (TI 2), LLC and Grosvenor Registered
Multi-Strategy Fund (TE), LLC, and a director of Stone
Harbor Investment Funds.
John C. Hover II Director Term Former Executive Vice President of U.S. Trust Company 10
c/o Grosvenor Registered Indefinite; (retired since 2000). Mr. Hover serves as a manager of
Multi-Strategy Fund (TI 1), Length- since Excelsior Multi-Strategy Hedge Fund of Funds Master Fund,
LLC November LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TI),
225 High Ridge Road 2009 LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TE),
Stamford, CT 06905 LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TI 2),
(Born 1943) LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TE 2),
LLC, Grosvenor Registered Multi-Strategy Master Fund, LLC,
Grosvenor Registered Multi-Strategy Fund (TI 2), LLC,
Grosvenor Registered Multi-Strategy Fund (TE), LLC and
Excelsior Venture Partners III, LLC, and a director of
Tweedy, Browne Fund, Inc.
Victor F. Imbimbo, Jr. Director Term- President and CEO of Caring Today, LLC, the publisher of 10
c/o Grosvenor Registered Indefinite; Caring Today Magazine, the leading information resource
Multi-Strategy Fund (TI 1), Length- since within the family caregivers market; Former Executive Vice
LLC November President of TBWA\New York and Former President for North
225 High Ridge Road 2009 America with TBWA/WorldHealth, a division of TBWA
Stamford, CT 06905 Worldwide, where he directed consumer marketing program
(Born 1952) development for healthcare companies primarily within the
pharmaceutical industry. Mr. Imbimbo serves as a manager of
Excelsior Multi-Strategy Hedge Fund of Funds Master Fund,
LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TI),
LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TE),
LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TI 2),
LLC, Excelsior Multi-Strategy Hedge Fund of Funds (TE 2),
LLC, Grosvenor Registered Multi-Strategy Master Fund, LLC,
Grosvenor Registered Multi-Strategy Fund (TI 2), LLC,
Grosvenor Registered Multi-Strategy Fund (TE), LLC and
Excelsior Venture Partners III, LLC, and a director of
Vertical Branding, Inc.
Stephen V. Murphy Director Term- President of S.V. Murphy & Co, Inc., an investment banking 10
c/o Grosvenor Registered Indefinite; firm. Mr. Murphy serves as a manager of Excelsior
Multi-Strategy Fund (TI 1), Length- Multi-Strategy Hedge Fund of Funds Master Fund, LLC,
LLC November Excelsior Multi-Strategy Hedge Fund of Funds (TI), LLC,
225 High Ridge Road 2009 Excelsior Multi-Strategy Hedge Fund of Funds (TE), LLC,
Stamford, CT 06905 Excelsior Multi-Strategy Hedge Fund of Funds (TI 2), LLC,
(Born 1945) Excelsior Multi-Strategy Hedge Fund of Funds (TE 2), LLC,
Grosvenor Registered Multi-Strategy Master Fund, LLC,
Grosvenor Registered Multi-Strategy Fund (TI 2), LLC,
Grosvenor Registered Multi-Strategy Fund (TE), LLC and
Excelsior Venture Partners III, LLC, and a director of The
First of Long Island Corporation, The First National Bank
of Long Island and Bowne & Co., Inc.
Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
FUND MANAGEMENT (UNAUDITED) (CONTINUED)
MARCH 31, 2010
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OVERSEEN BY
NAME, ADDRESS AND AGE COMPANY TIME SERVED AND OTHER DIRECTORSHIPS HELD MANAGER
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS (CONTINUED)
Thomas G. Yellin Director Term President of The Documentary Group (since June 2006); 9
c/o Grosvenor Registered Indefinite; Former President of PJ Productions (from August 2002 to
Multi-Strategy Fund (TI 1), Length- since June 2006); Former Executive Producer of ABC News (from
LLC 2004 August 1989 to December 2002). Mr. Yellin serves as a
225 High Ridge Road manager of Excelsior Multi-Strategy Hedge Fund of Funds
Stamford, CT 06905 Master Fund, LLC, Excelsior Multi-Strategy Hedge Fund of
(Born 1954) Funds (TI), LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TE), LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TI 2), LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TE 2), LLC, Grosvenor Registered Multi-Strategy
Master Fund, LLC, Grosvenor Registered Multi-Strategy Fund
(TI 2), LLC and Grosvenor Registered Multi-Strategy Fund
(TE), LLC.
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF OVERSEEN BY
NAME, ADDRESS AND AGE COMPANY TIME SERVED PRINCIPAL OCCUPATION DURING PAST FIVE YEARS MANAGER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT DISINTERESTED DIRECTORS
Steven L. Suss President and Term - Managing Director, Alternative Investment Asset N/A
225 High Ridge Road Treasurer Indefinite; Management, Bank of America (7/07 to present); Senior Vice
Stamford, CT 06905 Length - President of Bank of America Capital Advisors LLC (7/07 to
(Born 1960) since April present); Director, Chief Financial Officer and Treasurer
2007 (10/07 to 3/10) and Senior Vice President (6/07 to 3/10)
of U.S. Trust Hedge Fund Management, Inc.; Director (4/07
to 5/08), Senior Vice President (7/07 to 5/08), and
President (4/07 to 6/07) of UST Advisers, Inc.; Senior
Vice President of U.S. Trust's Alternative Investment
Division (4/07 to 6/07); Chief Financial Officer and Chief
Compliance Officer, Heirloom Capital Management, L.P.
(5/02 to 9/06).
Marina Belaya Secretary Term - Assistant General Counsel, Bank of America (7/07 to N/A
114 W. 47th Street Indefinite; present); Vice President and Senior Attorney of U.S. Trust
New York, NY 10036 Length - (2/06 to 6/07); Vice President, Corporate Counsel,
(Born 1967) since April Prudential Financial (4/05 to 01/06); Associate, Schulte
2007 Roth & Zabel LLP (09/02 to 03/05).
Robert M. Zakem Chief Term -- GWIM Risk and Compliance Senior Executive, Bank of America N/A
One Bryant Park Compliance Indefinite; Corp. (3/09 to present); Managing Director, Business Risk
New York, NY 10036 Officer Length -- Management, Merrill Lynch & Co., Inc. (8/06 to 2/09);
(Born 1958) since June Executive Director, Head of Fund Services -- US, UBS
2009 Financial Services, Inc. (12/04 to 07/06).
All officers of the TI 1 Fund are employees and/or officers of the Adviser.
GROSVENOR REGISTERED MULTI-STRATEGY MASTER FUND, LLC
- ----------------------------------------------------
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
YEAR ENDED MARCH 31, 2010
Grosvenor Registered Multi-Strategy Master Fund, LLC
Financial Statements
Year Ended March 31, 2010
CONTENTS
Report of Independent Registered Public Accounting Firm ...............................................................1
Statement of Assets, Liabilities and Members' Capital .................................................................2
Schedule of Investments ...............................................................................................3
Statement of Operations ...............................................................................................7
Statements of Changes in Members' Capital .............................................................................8
Statement of Cash Flows ...............................................................................................9
Financial Highlights .................................................................................................10
Notes to Financial Statements ........................................................................................11
The Registrant 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. The Registrant's Forms N-Q are 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. Information on Form N-Q is available without charge, upon request, by calling (866) 921-7951.
A description of the policies and procedures that the Registrant uses to determine how to vote proxies relating to
portfolio securities is available without charge, upon request, by calling (866) 921-7951 and on the Commission's
website at http://www.sec.gov.
Information regarding how the Registrant voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge, upon request, by calling (866) 921-7951, and on the
Commission's website at http://www.sec.gov.
(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 Directors and Members of
Grosvenor Registered Multi-Strategy Master Fund, LLC:
In our opinion, the accompanying statement of assets, liabilities and members' capital, including the schedule
of investments, and the related statements of operations, of changes in members' capital and of cash flows and
the financial highlights present fairly, in all material respects, the financial position of Grosvenor
Registered Multi-Strategy Master Fund, LLC (the "Company", formerly Columbia Management Multi-Strategy Hedge
Fund, LLC) at March 31, 2010, the results of its operations and its cash flows for the year then ended, the
changes in its members' 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 Company'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, 2010 by correspondence with the custodian and underlying portfolio
funds, provide a reasonable basis for our opinion.
(PRICEWATERHOUSECOOPERS LLP)
June 1, 2010
1
Grosvenor Registered Multi-Strategy Master Fund, LLC
Statement of Assets, Liabilities and Members' Capital
March 31, 2010
ASSETS
Investments in Portfolio Funds, at fair value (cost $397,142,132) $ 440,600,594
Cash and cash equivalents (see Note 2f) 4,488,580
Redemptions receivable from investments in Portfolio Funds 31,932,760
Investments in Portfolio Funds paid in advance 11,000,000
Prepaid Insurance 107,476
Other assets 5,832
----------------
TOTAL ASSETS 488,135,242
----------------
LIABILITIES
Advisory fee payable 406,604
Professional fees payable 150,153
Administration fee payable 32,818
Subadviser out-of-pocket expenses payable 6,250
Other liabilities 21,671
----------------
TOTAL LIABILITIES 617,496
----------------
NET ASSETS $ 487,517,746
================
MEMBERS' CAPITAL
Net Capital* $ 444,059,284
Net accumulated unrealized appreciation on investments in Portfolio Funds 43,458,462
----------------
MEMBERS' CAPITAL $ 487,517,746
================
* Net capital includes net subscriptions, cumulative net investment income/(loss) and cumulative net realized
gain/(loss) from investments in the Portfolio Funds.
The accompanying notes are an integral part of these financial statements.
2
Grosvenor Registered Multi-Strategy Master Fund, LLC
Schedule of Investments
March 31, 2010
FIRST
FIRST % OF % OWNERSHIP AVAILABLE
ACQUISITION FAIR MEMBERS' OF PORTFOLIO REDEMPTION
PORTFOLIO FUNDS* DATE COST VALUE** CAPITAL FUND*** DATE **** LIQUIDITY*****
- --------------------------------------------------------------------------------------------------------------------------------
DISTRESSED
Anchorage Capital Partners, Annually -
L.P. (a) 8/1/2006 $ 15,615,000 $ 20,905,767 4.29% 0.91% N/A Bi-annually
Anchorage Short Credit Fund, L.P. 7/1/2007 2,768,079 1,571,328 0.32% 0.94% N/A Monthly
Blackstone Real Estate Special
Situations Fund, L.P. (a) 9/1/2008 2,091,369 2,544,330 0.52% 13.98% (1) Semi-annually
Blue Mountain Credit Alternatives
Fund, L.P. 8/1/2007 7,202,849 9,579,731 1.96% 5.18% N/A Quarterly
Fortress Value Recovery Fund,
L.P. (b) 1/1/2006 4,300,000 877,948 0.18% 0.35% N/A (2)
GCP II SPV II 4/1/2009 30,109 39,219 0.01% 2.11% N/A (3)
Greywolf Capital Partners II,
L.P. (a) 9/1/2007 123,050 128,026 0.03% 0.04% N/A (4)
GSO Liquidity Partners, L.P. 3/1/2008 3,253,947 2,841,303 0.58% 1.30% N/A (5)
Harbinger Capital Partners Special
Situations Fund, L.P. (a) 7/1/2007 10,745,000 7,838,552 1.61% 0.33% N/A (6)
Highland Crusader Fund, L.P.
Liquidating 12/1/2008 3,465,641 3,592,978 0.74% 1.75% N/A (2)
King Street Capital, L.P. (a) 1/1/2003 13,005,100 18,350,455 3.76% 0.33% N/A Quarterly
Marathon Distressed Subprime Fund,
L.P. 1/1/2008 6,315,952 6,794,054 1.39% 3.07% N/A Every 18 months
Redwood Domestic Fund, L.P. (a) 1/1/2003 13,575,000 20,706,651 4.25% 1.86% N/A Bi-annually
Silver Point Capital Fund,
L.P. (a) 1/1/2003 14,200,000 17,217,000 3.53% 0.84% (7) Annually
TCW Special Mortgage Credit
Fund II, L.P. 10/1/2008 8,446,402 10,859,298 2.23% 1.60% N/A (5)
-------------- -------------- ---------
TOTAL DISTRESSED 105,137,498 123,846,640 25.40%
-------------- -------------- ---------
EVENT DRIVEN
Elliott Associates, L.P. 1/1/2003 13,900,000 20,891,298 4.29% 0.33% (8) Semi-annually
Level Global L.P. 7/1/2009 11,900,000 11,132,395 2.28% 1.20% N/A Quarterly
Magnetar Capital II Fund, L.P. 1/1/2010 12,379,990 11,022,465 2.26% 3.52% 9/30/2010 Quarterly
Magnetar Capital, L.P. (a) 7/1/2007 1,245,010 1,099,201 0.23% 0.80% N/A (4)
Perry Partners, L.P. (a) 1/1/2003 14,429,091 17,396,021 3.57% 1.08% (9) Quarterly
Seneca Capital, L.P. (a) 1/1/2003 13,384,682 13,180,456 2.70% 4.45% 12/31/2010 Quarterly(10)
-------------- -------------- ---------
TOTAL EVENT DRIVEN 67,238,773 74,721,836 15.33%
-------------- -------------- ---------
LONG AND/OR SHORT EQUITY
Adelphi Europe Partners, L.P. 12/1/2005 8,682,366 9,834,555 2.02% 14.49% N/A Quarterly
Black Bear Fund I, L.P. 1/1/2003 67,788 143,782 0.03% 1.42% N/A (3)
Broad Peak Fund, L.P. (a) 7/1/2007 12,178,331 12,565,977 2.58% 6.40% N/A Quarterly
Brookside Capital Partners
Fund, L.P. 10/1/2009 6,300,000 6,494,339 1.33% 0.10% 10/31/2011 Quarterly
Cavalry Technology, L.P. 5/1/2003 6,533,606 7,833,987 1.61% 7.75% N/A Quarterly
Citadel Wellington, LLC 7/1/2008 1,541,779 1,136,122 0.23% 0.04% N/A (11)
The accompanying notes are an integral part of these financial statements
3
Grosvenor Registered Multi-Strategy Master Fund, LLC
Schedule of Investments (continued)
March 31, 2010
FIRST
FIRST % OF % OWNERSHIP AVAILABLE
ACQUISITION FAIR MEMBERS' OF PORTFOLIO REDEMPTION
PORTFOLIO FUNDS* (CONTINUED) DATE COST VALUE** CAPITAL FUND*** DATE **** LIQUIDITY*****
- --------------------------------------------------------------------------------------------------------------------------------
LONG AND/OR SHORT EQUITY (CONTINUED)
Conatus Capital Partners, L.P. 1/1/2008 $ 7,900,000 $ 7,902,073 1.62% 0.72% N/A Quarterly
Egerton Capital Partners, L.P. 7/1/2008 11,687,150 12,109,277 2.48% 2.80% N/A Quarterly
Elm Ridge Capital Partners, L.P. 4/1/2003 6,965,225 10,046,017 2.06% 1.79% N/A Quarterly
Empire Capital Partners Enhanced
Fund, L.P. 1/1/2008 13,087,024 15,423,833 3.16% 17.50% N/A Quarterly
Galante Partners, L.P. 10/1/2006 7,470,555 5,391,657 1.11% 10.57% N/A Quarterly
Greenlight Capital Qualified, L.P. 1/1/2003 1,900,000 3,086,317 0.63% 0.14% (12) Annually
Impala Fund, L.P. 1/1/2007 4,765,392 5,693,952 1.17% 1.58% N/A Quarterly
Impala Transportation Fund, L.P. 1/1/2008 2,475,000 2,702,121 0.56% 2.20% N/A Quarterly
Kingsford Capital Partners, L.P. 1/1/2003 5,791,628 5,140,858 1.06% 5.36% N/A Quarterly
Montrica Global Opportunities
Fund, L.P. (a) 8/1/2007 3,378,573 2,786,955 0.57% 0.89% N/A Monthly
Passport Global Strategies III,
Ltd. 1/1/2010 535,321 505,922 0.10% 0.07% N/A (3)
Passport II, L.P. 7/1/2008 12,835,240 9,204,156 1.89% 1.27% (13) Quarterly
Scout Capital Partners II L.P. 9/1/2004 8,887,705 12,159,306 2.49% 4.68% N/A Quarterly
Seasons Aggressive Fund, L.P. 6/1/2008 15,823,626 12,985,403 2.66% 15.70% N/A Quarterly
Spring Point Contra Partners, L.P. 1/1/2004 4,706,213 4,571,687 0.94% 3.66% N/A Quarterly
Tremblant Partners, L.P. 1/1/2003 9,705,773 11,111,761 2.28% 3.42% N/A Annually
Trian Partners, L.P. 4/1/2006 11,000,000 12,024,194 2.47% 2.33% (14) Annually
Viking Global Equities, L.P. 12/1/2007 3,600,000 4,435,383 0.91% 0.11% N/A Monthly
-------------- -------------- ---------
TOTAL LONG AND/OR SHORT EQUITY 167,818,295 175,289,634 35.96%
-------------- -------------- ---------
MULTI-ARBITRAGE
Canyon Value Realization Fund,
L.P. (a) 1/1/2003 12,488,089 16,570,095 3.40% 0.73% N/A Quarterly -
Annually
HBK II Fund, L.P. (a) 11/1/2009 5,310,073 5,596,588 1.15% 1.04% 6/30/2010 Quarterly
OZ Domestic Partners, L.P. (a) 1/1/2003 16,244,820 20,259,238 4.15% 1.27% (15) Annually
Sandelman Partners Multi-Strategy
Fund, L.P. (a) 7/1/2007 390,675 195,608 0.04% 0.58% N/A (3)
Stark Investments, L.P. (a) 1/1/2003 9,879,541 9,623,583 1.97% 0.87% N/A Annually
Stark Select Asset Fund LLC 1/1/2010 558,670 566,944 0.12% 0.17% N/A (3)
The accompanying notes are an integral part of these financial statements
4
Grosvenor Registered Multi-Strategy Master Fund, LLC
Schedule of Investments (continued)
March 31, 2010
FIRST
FIRST % OF % OWNERSHIP AVAILABLE
ACQUISITION FAIR MEMBERS' OF PORTFOLIO REDEMPTION
PORTFOLIO FUNDS* (CONTINUED) DATE COST VALUE** CAPITAL FUND*** DATE **** LIQUIDITY*****
- --------------------------------------------------------------------------------------------------------------------------------
MULTI-ARBITRAGE (CONTINUED)
SuttonBrook Capital Partners, L.P. 12/1/2003 $ 12,075,698 $ 13,930,428 2.86% 7.24% N/A Monthly
-------------- -------------- ---------
TOTAL MULTI-ARBITRAGE 56,947,566 66,742,484 13.69%
-------------- -------------- ---------
TOTAL INVESTMENTS IN PORTFOLIO FUNDS $ 397,142,132 $ 440,600,594 90.38%
-------------- -------------- ---------
Other Assets, Less Liabilities $ 46,917,152 9.62%
-------------- ---------
MEMBERS' CAPITAL $ 487,517,746 100.00%
============== =========
The investments in the Portfolio Funds shown above, representing 90.38% of Members' Capital, have been fair valued in accordance
with procedures established by the Board of Directors.
The Company's (as defined in Note 1) investments on March 31, 2010 are summarized below based on the investment strategy of each
specific Portfolio Fund.
% OF TOTAL INVESTMENTS IN
INVESTMENT STRATEGY PORTFOLIO FUNDS
-------------------------
Long and/or Short Equity 39.78%
Distressed 28.11
Event Driven 16.96
Multi-Arbitrage 15.15
-------------------------
TOTAL 100.00%
=========================
* Non-income producing investments. The Company's investments in Portfolio Funds are considered to be illiquid and may be
subject to limitations on redemptions, including the assessment of early redemption fees.
** See definition in Note 3.
*** Based on the most recently available information provided by each Portfolio Fund.
**** From original investment date.
***** Available frequency of redemptions after initial lock-up period.
N/A Initial lock-up period that has either expired prior to 3/31/2010 or the Portfolio Fund did not have an initial lock-up
period. However, specific redemption restrictions may apply.
The accompanying notes are an integral part of these financial statements
5
Grosvenor Registered Multi-Strategy Master Fund, LLC
Schedule of Investments (continued)
March 31, 2010
(a) A portion or all of the Company's interests in the Portfolio Fund are held in side pockets which have restricted liquidity.
(b) Formerly known as D.B. Zwirn Special Opportunities Fund, L.P.
(1) Approximately 18% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
4/30/2010.
(2) The Portfolio Fund is liquidating its assets and is in the process of returning capital to its limited partners. Due to the
liquidation, the Portfolio Fund has suspended redemptions. The full liquidation is expected to take from two to four years.
(3) The Portfolio Fund has limited redemption rights by creating a liquidating vehicle with the intention of liquidating its
assets in a reasonable manner. The Company expects to receive the majority of its interest in the Portfolio Fund by the end of
2010.
(4) All of the Company's remaining interests in the Portfolio Fund are held in side-pockets.
(5) Redemption not permitted during the life of the Portfolio Fund. Cash proceeds are distributed to limited partners as the
Portfolio Fund's investments are realized.
(6) The Portfolio Fund suspended redemptions in October 2008 after establishing a Lehman Brothers International ("Lehman")
holdback reserve for potential liabilities related to Lehman's insolvency. In March 2010, the Portfolio Fund announced a
restructuring plan which included an option to continue participation in the Portfolio Fund and a liquidating option. The
Company selected the liquidating option. Under the terms of the liquidating option, the Company expects to receive approximately
25% of its non-side-pocketed capital in each of the next four quarters, with the first distribution to be effective 6/30/10.
Approximately 10% of the Company's interest in the Portfolio Fund is in side-pockets.
(7) Approximately 18% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
3/31/2011.
(8) Approximately 12% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
6/30/2011.
(9) Approximately 25% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
5/31/2010.
(10) Approximately 20% of the fair value of the Company's interests in the Portfolio Fund is held in a special liquidating
vehicle ("SLV") which is not available for redemption. The term of the full liquidation of the SLV is unknown.
(11) Portfolio Fund invoked 1/16th investor- level gate as per its offering documents. Under the "1/16th" gate provision,
limited partners can only redeem up to 1/16th of their capital balance in each redemption period in the case the Portfolio Fund
receives redemption requests exceeding 3% of firm-wide capital. The Company expects to receive the majority of its interest in
the Portfolio Fund at the next available redemption date of 6/30/10.
(12) Approximately 39% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
1/31/2012.
(13) Approximately 31% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
12/31/2010.
(14) Approximately 27% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
2/28/2011, 30% has a lock-up period that expires on 4/30/2011, and 11% has a lock-up period that expires on 5/31/2011.
(15) Approximately 18% of the fair value of the Company's interests in the Portfolio Fund has a lock-up period that expires on
4/30/2010, approximately 6% has a lock-up period that expires on 5/31/2010, and approximately 27% has a lock-up period that
expires on 7/31/2011.
The accompanying notes are an integral part of these financial statements
6
Grosvenor Registered Multi-Strategy Master Fund, LLC
Statement of Operations
Year Ended March 31, 2010
INVESTMENT INCOME
Interest $ 63,779
Other income 1,621
----------------
TOTAL INVESTMENT INCOME 65,400
----------------
EXPENSES
Advisory fee 4,788,589
Administration fees 453,219
Professional fees 324,666
Insurance fees 153,822
Directors' fees 53,500
Custodian fees 28,528
Subadviser out-of-pocket expenses 25,000
Other expenses 86,597
----------------
TOTAL EXPENSES 5,913,921
----------------
NET INVESTMENT LOSS (5,848,521)
----------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss from investments in Portfolio Funds (8,688,921)
Net change in unrealized appreciation on investments in Portfolio Funds 91,778,180
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 83,089,259
----------------
NET INCREASE IN MEMBERS' CAPITAL RESULTING FROM
OPERATIONS $ 77,240,738
================
The accompanying notes are an integral part of these financial statements.
7
Grosvenor Registered Multi-Strategy Master Fund, LLC
Statements of Changes in Members' Capital
SPECIAL
MEMBERS MEMBERS TOTAL
------------- ----------------- -----------------
MEMBERS' CAPITAL, MARCH 31, 2008 $ - $ 289,450,849 $ 289,450,849
Members' subscriptions - 288,434,541 288,434,541
Members' interests repurchased - (23,643,067) (23,643,067)
------------- ----------------- -----------------
Net increase/decrease in Members' Capital resulting from
capital transactions - 264,791,474 264,791,474
------------- ----------------- -----------------
Net investment loss - (4,892,228) (4,892,228)
Net realized loss from investments - (6,530,850) (6,530,850)
Net change in unrealized depreciation on investments - (91,424,410) (91,424,410)
------------- ----------------- -----------------
Net decrease in Members' Capital resulting from operations - (102,847,488) (102,847,488)
------------- ----------------- -----------------
MEMBERS' CAPITAL, MARCH 31, 2009 - 451,394,835 451,394,835
Members' subscriptions - 18,555,000 18,555,000
Members' interests repurchased (372,677) (59,300,150) (59,672,827)
------------- ----------------- -----------------
Net increase/decrease in Members' Capital resulting from
capital transactions (372,677) (40,745,150) (41,117,827)
------------- ----------------- -----------------
Net investment loss - (5,848,521) (5,848,521)
Net realized loss from investments - (8,688,921) (8,688,921)
Net increase in unrealized appreciation on investments - 91,778,180 91,778,180
------------- ----------------- -----------------
Net increase in Members' Capital resulting from operations - 77,240,738 77,240,738
------------- ----------------- -----------------
Reallocation of incentive allocation 372,677 (372,677) -
------------- ----------------- -----------------
MEMBERS' CAPITAL, MARCH 31, 2010 $ - $ 487,517,746 $ 487,517,746
============= ================= =================
Capital reallocable to the Special Members had the
Members' measurement period for incentive
allocation closed on:
March 31, 2009 $ 1,982 Measurement period: January 1, 2009 through March 31, 2009
The accompanying notes are an integral part of these financial statements.
8
Grosvenor Registered Multi-Strategy Master Fund, LLC
Statement of Cash Flows
Year Ended March 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in Members' Capital derived from operations $ 77,240,738
Adjustments to reconcile net increase in Members' Capital resulting from operations to net
cash used in operating activities:
Net increase in accumulated unrealized appreciation on investments (91,778,180)
Net realized loss from Portfolio Fund redemptions 8,688,921
Purchases of Portfolio Funds (100,587,642)
Proceeds from Portfolio Funds 86,306,719
(Increase)/Decrease in operating assets:
Prepaid insurance (32,967)
Interest receivable 20,050
Other assets (1,332)
Increase/(Decrease) in operating liabilities:
Advisory fee payable 30,128
Professional fees payable 52,734
Administration fee payable (31,377)
Other liabilities (15,611)
------------------
NET CASH USED IN OPERATING ACTIVITIES (20,107,819)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Member subscriptions 15,680,000
Payments for Member interests repurchased (61,090,743)
------------------
NET CASH USED IN FINANCING ACTIVITIES (45,410,743)
------------------
Net decrease in cash and cash equivalents (65,518,562)
Cash and cash equivalents at beginning of year 70,007,142
------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,488,580
==================
The accompanying notes are an integral part of these financial statements.
9
Grosvenor Registered Multi-Strategy Master Fund, LLC
Financial Highlights
The following represents certain ratios to average Members' Capital, total return, and other supplemental information
for the periods indicated:
YEARS ENDED MARCH 31,
---------------------
2010* 2009 2008 2007 2006
----- ---- ---- ---- ----
Ratios to average Members'
Capital:(a)
Net investment loss - prior to
incentive allocation, net of
waivers(b) (1.23%) (1.11%) (1.09%) (1.21%) (1.19%)
Incentive Allocation (0.08%)(c) 0.00%(d) (0.37%)(d) (0.47%)(d) (0.55%)(d)
------------- ------------ ------------- ------------- ------------
Net investment loss - net of
incentive allocation, net of
waivers(b) (1.31%) (1.11%) (1.46%) (1.68%) (1.74%)
============ ============ ============ ============ ============
Expenses(b) 1.24% 1.28% 1.36% 1.42% 1.29%
Incentive allocation 0.08%(c) 0.00%(d) 0.37%(d) 0.47%(d) 0.55%(d)
------------- ------------ ------------- ------------- ------------
Total expenses and incentive
allocation 1.32% 1.28% 1.73% 1.89% 1.84%
============ ============ ============ ============ ============
Total return - prior to incentive
allocation(e) 17.71% (18.64%) 2.43% 10.22% 9.94%
Incentive allocation (0.08%)(c) 0.00%(d) (0.22%)(d) (0.49%)(d) (0.60%)(d)
------------- ------------ ------------- ------------- ------------
Total return - net of incentive
allocation(e) 17.63% (18.64%) 2.21% 9.73% 9.34%
============ ============ ============ ============ ============
Portfolio turnover rate(f) 20.41% 16.36% 14.01% 17.15% 12.86%
============ ============ ============ ============ ============
Members' Capital, end of year
($000) $ 487,518 $ 451,395 $ 289,451 $ 177,476 $ 181,042
* The Company reorganized into a "master/feeder" structure during this period. See Note 2c and Note 7 for further
explanation of the change in expense structure for fiscal year ended March 31, 2010, as compared to prior years.
(a) Average Members' Capital is determined by using the net assets at the end of each month during the period and net
assets at the beginning of the period.
(b) Ratio does not reflect the Company's proportionate share of the net income (loss) and expenses, including incentive
fees or allocations, of the Portfolio Funds. The Portfolio Funds' expense ratios, excluding incentive fees or
allocations, range from 0.51% to 11.22% (unaudited). The Portfolio Funds' incentive fees or allocations can be up
to 20% of profits earned (unaudited).
(c) Calculated based on the amount reallocated to the Special Members for the period April 1, 2009 through December 31,
2009.
(d) Calculated based on the amount reallocable to the Special Members for the period indicated, had the measurement
period for incentive allocation closed on the dates indicated (not annualized).
(e) Total return assumes a purchase of an interest in the Company on the first day and a sale of an interest on the
last day of the period and is calculated by using geometrically linked monthly returns. An individual Member's
return may vary from these returns based on the timing of Member subscriptions and redemptions.
(f) The ratio excludes in-kind transactions.
The accompanying notes are an integral part of these financial statements.
10
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements
March 31, 2010
1. ORGANIZATION
Grosvenor Registered Multi-Strategy Master Fund, LLC, formerly known as Columbia Management Multi-Strategy Hedge Fund,
LLC (the "Company"), is a Delaware limited liability company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end management investment company and is operating as a diversified investment
company. The primary investment objectives of the Company are to provide investors: (i) an attractive, long-term rate of
return, on an absolute basis as well as a risk-adjusted basis; (ii) low performance volatility; and (iii) minimal
correlation with the equity and fixed income markets. The Company employs a multi-strategy, multi-manager investment
strategy premised on the risk control benefits of diversification and the value of a hedged investment approach. The
Company seeks diversification by investing in partnerships and other investment vehicles (the "Portfolio Funds") that
(i) pursue non-traditional investment strategies and (ii) are expected to exhibit a low degree of performance
correlation, not only with broad market indices but also with each other. These Portfolio Funds are managed by selected
investment managers ("Investment Managers") who specialize in the chosen strategies. There can be no assurance that the
investment objective of the Company will be achieved.
On January 1, 2010, pursuant to member approval, the Company was reorganized into a "master/feeder" investment structure
(the "Reorganization"). Effective as of the close of business on that date, the Company became a master fund, and
members of the Company contributed their interests to a new entity, Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
(the "TI 1 Fund"), in exchange for interests in the TI 1 Fund. The TI 1 Fund in turn invested substantially all of its
assets into the Company. The TI 1 Fund had no assets, liabilities, or operations prior to the Reorganization. The TI 1
Fund is a Delaware limited liability company that is registered under the 1940 Act as a closed-end, diversified,
management investment company.
The TI 1 Fund pursues its investment objective by investing substantially all of its assets in the Company. The TI 1
Fund has the same investment objective and substantially the same investment policies as the Company (except that the TI
1 Fund pursues its investment objective by investing in the Company).
Until March 31, 2010 (see Note 11 "Subsequent Events"), Banc of America Investment Advisors, Inc. (the "Adviser") was
the investment adviser to the Company. The Adviser is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"). The Adviser is an indirect wholly-owned subsidiary of Bank of America
Corporation ("BAC"). BAC is a bank holding and a financial holding company which has its principal executive offices at
101 North Tryon Street, Charlotte, North Carolina.
The Adviser has retained Grosvenor Capital Management, L.P. ("Grosvenor" or the "Subadviser") as subadviser to the
Company, which is also registered as an investment adviser under the Advisers Act. The Subadviser is responsible for
implementing the Company's investment strategy and managing the Company's investment portfolio on a day-to-day basis, in
accordance with the investment objective, philosophy and strategy described in the Company's registration statement and
subject to oversight by the Adviser and the Board of Directors (the "Board") of the Company.
11
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
1. ORGANIZATION (CONTINUED)
The Board has overall responsibility to manage and supervise the operations of the Company, including the exclusive
authority to oversee and to establish policies regarding the management, conduct and operation of the Company's
business. The Board has engaged the Adviser to manage the day-to-day operations of the Company.
As of March 31, 2010, the TI 1 Fund's ownership of the Company's Members' Capital was 99.9%. The remaining 0.1% was held
by BACAP Alternative Advisors, Inc., an affiliate of the Adviser ("BACAP" and together with the TI 1 Fund, the
"Members").
Member subscriptions for interests in the Company ("Interests") by eligible investors may be accepted as of the first
day of each month. The Board may authorize the Adviser to offer Interests more or less frequently. The Company may, from
time to time, offer to repurchase Interests from its Members pursuant to written tenders by Members. These repurchase
offers will be made at such times and on such terms as may be determined by the Board, in its sole discretion, subject
to the liquidity of the Company's assets and other factors considered by the Board. The Adviser expects that generally
it will recommend to the Board that the Company offer to repurchase Interests from Members four times each year,
effective as of the last day of each calendar quarter. Members can only transfer or assign Interests under certain
limited circumstances.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the estimates utilized in preparing the Company's financial
statements are reasonable and prudent; however, the actual results could differ from these estimates.
B. CODIFICATION
In July 2009, the Financial Accounting Standards Board ("FASB") implemented the FASB Accounting Standards Codification
(the "Codification") as the single source of GAAP. While the Codification did not change GAAP, it introduced a new
structure to the accounting literature and changed references to accounting standards and other authoritative accounting
guidance. The Codification was effective for the Company in 2009 and did not affect the Company's Statement of Assets,
Liabilities and Members' Capital, Statement of Operations, Statement of Changes in Members' Capital or Statement of Cash
Flows.
12
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. COMPANY EXPENSES
The Company bears certain expenses incurred in its business, including, but not limited to, the following: fees paid
directly or indirectly to the investment managers of the Portfolio Funds; all costs and expenses directly related to
portfolio transactions and positions for the Company's account; legal fees; accounting and auditing fees; custodial
fees; fees paid to the Company's administrator; costs of insurance; advisory fees; subadvisory out-of-pocket fees; the
fees and travel expenses and other expenses of the Board; all costs with respect to communications regarding the
Company's transactions between the Adviser and any custodian or other agent engaged by the Company; and other types of
expenses approved by the Board. Expenses, including incentive fees or allocations, of the underlying Portfolio Funds are
not included in the Statement of Operations.
D. INCOME TAXES
As a limited liability company, no provision for the payment of Federal, state or local income taxes has been provided
by the Company. Each Member is individually required to report on its own tax return its share of the Company's taxable
income or loss. The Company has a tax year end of December 31.
The cost of the Company's investments in Portfolio Funds for Federal income tax purposes is based on amounts reported to
the Company by the Portfolio Funds on a Schedule K-1. As of March 31, 2010, the Company has not received information to
determine the tax cost of the Portfolio Funds as of March 31, 2010. Based on the amounts reported to the Company on
Schedule K-1 as of December 31, 2009, and after adjustment for purchases and redemptions between December 31, 2009 and
March 31, 2010, the estimated cost of the Portfolio Funds at March 31, 2010 for federal tax purposes is $409,873,373.
The resulting estimated net unrealized appreciation for tax purposes on the Portfolio Funds at March 31, 2010 is
$30,727,219.
The authoritative guidance on accounting for and disclosure of uncertainty in tax positions requires management to
determine whether a tax position of the Company is "more likely than not" to be sustained upon examination, including
resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax
positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced
by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with
the relevant taxing authority. Management analyzed all open tax years, as defined by the statute of limitations, for all
major jurisdictions and has determined that the adoption of this authoritative guidance did not have a material effect
on the results of operations or financial position of the Company. The Company has determined that there are no
unrecognized tax benefits or liabilities relating to uncertain income tax positions taken on prior years' returns or
expected to be taken on the tax return for the year ended December 31, 2009.
In connection with the Reorganization discussed in Note 1, the Investment Adviser expects that Members of the Company
immediately prior to the Reorganization will not be subject to any tax as a result of the Reorganization. For financial
reporting purposes, assets received and interests issued by the
13
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. INCOME TAXES (CONTINUED)
TI 1 Fund were recorded at fair value. The cost basis of the investments received by the TI 1 Fund was carried forward
to align ongoing reporting of the TI 1 Fund's realized gains and losses with amounts distributable to its members for
tax purposes.
E. SECURITY TRANSACTIONS
Purchases of investments in the Portfolio Funds are recorded as of the first day of legal ownership of a Portfolio Fund
and redemptions of Portfolio Funds are recorded as of the last day of legal ownership. Redemptions received from
Portfolio Funds, whether in the form of cash or securities, are applied first as a reduction of the investment's cost,
and any excess is treated as realized gain from investments in Portfolio Funds. Realized gains or losses on investments
in Portfolio Funds are recorded at the time of the disposition of the respective investment on an average cost basis.
F. OTHER
Net investment income or loss and net realized and unrealized gain or loss from investments of the Company for each
fiscal period are allocated among, and credited to or debited against, the capital accounts of all Members as of the
last day of the fiscal period in accordance with each Member's respective investment percentage for the fiscal period,
as defined in the Company's Limited Liability Company Agreement (the "Operating Agreement").
Cash and cash equivalents consist of amounts maintained in a PFPC Trust Company interest-bearing account and include
overnight deposits in BlackRock Liquidity Funds, Temp Fund, an affiliate of BAC. Interest income is recorded on the
accrual basis.
G. FUTURES
From time to time, the Company may use futures primarily for tactical hedging purposes. Initial margin deposits of cash
and securities are made upon entering into futures contracts. The contracts are marked to market monthly and the
resulting changes in value are accounted for as unrealized gains and losses. Variation margin payments are paid or
received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Company
records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction
and the amount invested in the contract. Risks of entering into futures contracts include the possibility that there
will be an imperfect price correlation between the futures and the underlying securities. Second, it is possible that a
lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a
position prior to its maturity date. Third, the futures contract involves risk that the Company could lose more than the
original margin deposit required to initiate a futures transaction.
The risk exists that losses could exceed amounts disclosed on the schedule of investments or statement of assets and
liabilities. For the year ended March 31, 2010, the Company did not enter into any futures contracts.
14
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. OPTIONS CONTRACTS
An option gives the owner the right, but not the obligation, to buy or sell a specified item at a fixed price during a
specified period for a nonrefundable fee (the "premium"). The maximum loss to the buyer is limited to the premium
originally paid. The premiums paid for the purchase of these options are included in the statement of assets,
liabilities and members' capital as an investment and subsequently marked-to-market to reflect the value of the options,
with unrealized appreciation and depreciation included in the statement of operations.
If the Company were to purchase or write options, it would receive a premium and bear the risk of unfavorable changes in
the prices of the securities or index instruments underlying the options. Premiums received from writing put and call
options which have not expired are presented in the liabilities section of the statement of assets, liabilities and
members' capital and subsequently adjusted to the current market value of the options written, but not less than zero.
If the current market value of an option exceeds the premium received, the excess is recorded as an unrealized loss and,
conversely, if the premium exceeds the current market value, the excess, to the extent of premium received, is recorded
as an unrealized gain. The risk exists that losses could exceed amounts disclosed on the schedule of investments or
statement of assets and liabilities. For the year ended March 31, 2010, the Company did not purchase or write any
options contracts.
3. PORTFOLIO VALUATION
The net asset value (the "NAV") of the Company is determined by, or at the direction of, the Adviser as of the close of
business at the end of each fiscal period (as defined in the Company's Operating Agreement), in accordance with the
valuation principles set forth below, or as may be determined from time to time, pursuant to valuation procedures
established by the Board. Pursuant to the valuation procedures, the Board has delegated to the Adviser the general
responsibility for valuation of the investments in the Portfolio Funds subject to the oversight by the Board.
The investments in the Portfolio Funds are recorded at fair value, generally at an amount equal to the NAV of the
Company's investment in the Portfolio Funds as determined by the Portfolio Fund's general partner or investment manager.
If no such information is available or if such information is deemed to be not reflective of fair value, an estimated
fair value is determined in good faith by the Adviser pursuant to the valuation procedures. Generally, the NAVs of the
investments in the Portfolio Funds are determined whereby the Company records the investment and subsequent
subscriptions at its acquisition cost which represents its fair value. The investment is adjusted to reflect the
Company's share of net investment income or loss and unrealized and realized gain or loss that reflects the changes in
the fair value of the investment for the period.
The Portfolio Funds record their investments at fair value in accordance with GAAP or International Financial Reporting
Standards. The Portfolio Funds generally hold positions in readily marketable securities and derivatives that are valued
at quoted market values and/or less liquid nonmarketable securities and derivatives that are valued at estimated fair
value. Accordingly, valuations do not necessarily represent the amounts that might be realized from sales or other
dispositions of investments, nor do they reflect other
15
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION (CONTINUED)
expenses or fees that might be incurred upon disposition. The mix and concentration of more readily marketable
securities and less liquid nonmarketable securities varies across the Portfolio Funds based on various factors,
including the nature of their investment strategy and market forces.
Because of the inherent uncertainty of valuations of the investments in the Portfolio Funds, their estimated values may
differ significantly from the values that would have been used had a ready market for the Portfolio Funds existed, and
the differences could be material. Net change in accumulated unrealized appreciation on investments in the statement of
operations is net of fees and performance-based compensation paid to the investment managers of the Portfolio Funds.
Some of the Portfolio Funds may invest all or a portion of their assets in illiquid securities and may hold a portion or
all of these investments independently from the main portfolio. These separate baskets of illiquid securities (the "side
pockets") may be subject to additional restrictions of liquidity than the main portfolio of the Portfolio Fund. If the
Company withdraws its interest from such a Portfolio Fund, it may be required to maintain its holding in the side pocket
investments for an extended period of time and retain this remaining interest in the Portfolio Fund. In instances, where
such a Portfolio Fund closes its operations, the Company may receive an "in-kind" distribution of a side pocket's
holdings in liquidation of its entire interest in the Portfolio Fund. The value of side pockets may fluctuate
significantly. As of March 31, 2010, the Company's investments in side pockets represented 2.66% of the Company's net
assets. Additionally, the governing documents of the Portfolio Funds generally provide that the Portfolio Funds may
suspend, limit or delay the right of their investors, such as the Company, to withdraw capital. Restrictions applicable
to individual Portfolio Funds are described in detail on the Company's Schedule of Investments.
The Company uses 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 are as follows:
- Level 1 -- Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that
the Company 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).
The Company has adopted the authoritative guidance under GAAP for estimating the fair value of investments in the
Portfolio Funds that have calculated the NAV per share in accordance with the specialized accounting guidance for
investment companies. Accordingly, the Company estimates the
16
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION (CONTINUED)
fair value of an investment in a Portfolio Fund using the NAV of the investment (or its equivalent) without further
adjustment unless the Adviser determines that the NAV is deemed to be not reflective of the fair value. The adoption of
this guidance does not have a material effect on the financial statements.
Investments may be classified as Level 2 when market information (observable NAVs) is available, yet the investment is
not traded in an active market and/or the investment is subject to transfer restrictions, or the valuation is adjusted
to reflect illiquidity and/or non-transferability. Market information, including observable NAVs, subscription and
redemption activity at the underlying Portfolio Fund, and the length of time until the investment will become redeemable
is considered when determining the proper categorization of the investment's fair value measurement within the
fair valuation hierarchy. Portfolio Fund investment lots that have observable market inputs (published NAVs) and
that the Company has the ability to redeem from within three months of the balance sheet date are classified in the
fair value hierarchy as Level 2.
The Company's investments in the Portfolio Funds that have unobservable inputs and/or from which the Company does
not have the ability to redeem within three months are classified in the fair value hierarchy as Level 3. When
observable prices are not available for these securities, the Company uses the market approach, as defined in the
authoritative guidance on fair value measurements, to evaluate the fair value of such Level 3 instruments.
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, 2010:
- ------------------------------------------------------------------------------------------
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- ------------------------------------------------------------------------------------------
Portfolio Funds
Distressed $ -- $ 29,501,514 $ 94,345,126 $ 123,846,640
Event Driven -- 28,528,416 46,193,420 74,721,836
Long and/or Short
Equity -- 116,230,109 59,059,525 175,289,634
Multi-Arbitrage -- 13,930,428 52,812,056 66,742,484
- ------------------------------------------------------------------------------------------
Total $ -- $ 188,190,467 $ 252,410,127 $ 440,600,594
- ------------------------------------------------------------------------------------------
The level classifications in the table above are not indicative of the risk associated with the investment in each
Portfolio Fund.
17
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION (CONTINUED)
The following table includes a roll-forward of the amounts for the year ended March 31, 2010 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.
NET CHANGE IN
BALANCE AS OF UNREALIZED BALANCE AS OF
INVESTMENT MARCH 31, TRANSFERS OUT NET REALIZED APPRECIATION / NET PURCHASES MARCH 31,
STRATEGY 2009 OF LEVEL 3* GAIN / (LOSS) DEPRECIATION / (SALES) 2010
- -----------------------------------------------------------------------------------------------------------------
Distressed $ 91,006,064 $ (28,887,719) $ 66,680 $ 30,885,450 $ 1,274,651 $ 94,345,126
Event Driven 37,515,661 (11,344,781) -- 8,722,540 11,300,000 46,193,420
Long and/or
Short Equity 191,276,407 (117,540,274) (14,388,840) 24,087,148 (24,374,916) 59,059,525
Multi-Arbitrage 51,846,435 (11,050,474) (17,015) 12,812,460 (779,350) 52,812,056
- -----------------------------------------------------------------------------------------------------------------
Total $ 371,644,567 $ (168,823,248) $ (14,339,175) $ 76,507,598 $ (12,579,615) $ 252,410,127
- -----------------------------------------------------------------------------------------------------------------
* Transfers represent investments in Portfolio Funds that were previously categorized as Level 3 investments for the
year ended March 31, 2009. In accordance with recently issued authoritative guidance, these investments are being
re-categorized as Level 2 as of April 1, 2009.
The net realized and unrealized gains (losses) in the table above are reflected in the accompanying Statement of
Operations. Net unrealized appreciation for the year ended March 31, 2010 for Level 3 investments held by the Company as
of March 31, 2010 was an increase of $74,123,522 as shown in the table below:
Investments in Net change in
Portfolio Funds unrealized appreciation
--------------------------------------------------
Distressed $ 30,885,452
--------------------------------------------------
Event Driven 8,722,540
--------------------------------------------------
Long and/or Short Equity 17,159,694
--------------------------------------------------
Multi-Arbitrage 17,355,836
--------------------------------------------------
Total $ 74,123,522
--------------------------------------------------
The Company adopted authoritative guidance that permits a reporting entity to measure the fair value of an investment
that does not have a readily determinable fair value, based on the NAV per share for the investment. In using the NAV,
certain attributes of the investment that may impact the fair value of the investment are not considered in measuring
fair value. Attributes of those investments include the investment strategies of the investees and may also include, but
are not limited to, restrictions on the investor's ability to redeem its investments at the measurement date and any
unfunded commitments. The Company is permitted to invest in alternative investments that do not have a readily
determinable fair value, and as such, has determined that the NAV, as calculated by the reporting entity, represents the
fair value of the investments. A listing of the investments held by the Company and their attributes as of March 31,
2010, that may qualify for these valuations are shown in the table below.
18
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION (CONTINUED)
INVESTMENT REDEMPTION NOTICE
CATEGORY FAIR VALUE FREQUENCY PERIOD REDEMPTION RESTRICTIONS AND TERMS*
- -----------------------------------------------------------------------------------------------------------------
0-4 years.
Distressed (a) $123,846,640 Monthly - 30 - 180 Side pocket & liquidating vehicle
Bi-annually Days arrangements exist for 7%** of the Portfolio Funds.
0-1 years.
Event Driven (b) $74,721,836 Quarterly - 60 - 90 Side pocket & liquidating vehicle
Semi-annually Days arrangements exist for 5%** of the Portfolio Funds.
0-2 years.
Long and/or Short Quarterly - 30 - 90 Side pocket & liquidating vehicle
Equity (c) $175,289,634 Annually Days arrangements exist for 1%** of the Portfolio Funds.
0-2 years.
Multi-Arbitrage Quarterly - 30 - 90 Side pocket & liquidating vehicle
(d) $66,742,484 Annually Days arrangements exist for 11%** of the Portfolio Funds.
* The information summarized in the table above represents the general terms of the specific asset class.
Individual Portfolio Funds may have terms that are more or less restrictive that those terms indicated for the
asset class as a whole. In addition, most Portfolio Funds have the flexibility, as provided for in constituent
documents, to modify and waive such terms.
** Reflects fair value of investments in each respective investment category.
The Company's investments reflect their estimated fair value, which for marketable securities would generally be the
last sales price on the primary exchange for such security, and for the Portfolio Funds, would generally be the NAV as
provided by the Portfolio Fund or its administrator. For each of the categories below, the fair value of the Portfolio
Funds has been estimated using the net asset value of the Portfolio Funds.
(A) DISTRESSED SECURITIES This category includes the Portfolio Funds that invest in debt and equity securities of
companies in financial difficulty, reorganization or bankruptcy, nonperforming and subperforming bank loans, and
emerging market debt. As of March 31, 2010, the Portfolio Funds within this strategy had unfunded commitments of
$508,631.
(B) EVENT DRIVEN This category includes the Portfolio Funds that take significant positions in companies with special
situations, including distressed stocks, mergers and takeovers. As of March 31, 2010, there were no unfunded
commitments.
(C) LONG AND/OR SHORT EQUITIES This category includes the Portfolio Funds that make long and short investments in equity
securities that are deemed by the Investment Managers to be under or overvalued. The Investment Managers typically do
not attempt to neutralize the amount of long and short positions. As of March 31, 2010, there were no unfunded
commitments.
19
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
3. PORTFOLIO VALUATION (CONTINUED)
(D) MULTI-ARBITRAGE This category includes the Portfolio Funds that seek to exploit price differences of identical or
similar financial instruments, on different markets or in different forms by simultaneously purchasing and selling an
asset in order to profit from the difference. As of March 31, 2010, there were no unfunded commitments.
As of March 31, 2010, the Company had investments in 52 Portfolio Funds. The Company, as an investor in these Portfolio
Funds is charged management fees of up to 3% (per annum) of the NAV of its ownership interests in the Portfolio Funds,
as well as incentive fees or allocations of up to 20% of net profits earned that are attributable to the Company's
ownership interests in such Portfolio Funds. The Company also generally bears a pro rata share of the other expenses of
each Portfolio Fund in which it invests. Total expenses, including incentive fees or allocations, for the fiscal year
ended March 31, 2010, ranged from approximately 0.51% to 12.38% of the Company's average invested capital in each
Portfolio Fund. Incentive fees or allocations for the same fiscal year ranged from approximately 0.00% to 8.27% of the
Company's average invested capital in each Portfolio Fund. These ratios may vary over time depending on the allocation
of the Company's assets among the Portfolio Funds and the actual expenses and investment performance of the Portfolio
Funds. Although the foregoing ranges of Portfolio Fund expense ratios are based on audited financial data received from
the Portfolio Funds, the ranges were not audited by the Company's independent registered public accounting firm.
For the year ended March 31, 2010, aggregate purchases and sales of the Portfolio Funds amounted to $89,587,642 and
$103,720,874, respectively.
4. CAPITAL COMMITMENTS OF THE COMPANY TO THE PORTFOLIO FUNDS
As of March 31, 2010, the Company had an unfunded investment commitment to Blackstone Real Estate Special Situations
Fund, LP in the amount of $508,631.
5. ADVISORY FEE
Pursuant to the terms of the advisory agreement between the Company and the Adviser, the Company pays the Adviser a
monthly fee at an annual rate of 1.00% (the "Advisory Fee") based on the Company's net assets determined as of the last
business day before taking into consideration the Advisory Fee. For the year ended March 31, 2010, the Advisory Fee was
$4,788,589. Pursuant to the terms of a subadvisory agreement between the Adviser and the Subadviser, the Adviser pays
75% of the Advisory Fee it receives from the Company to the Subadviser. The Subadviser is also reimbursed by the Company
for out-of-pocket expenses incurred by the Subadviser related to the Company, up to an annual limit of $25,000.
6. INCENTIVE ALLOCATION
As part of the Reorganization, the incentive allocation has been eliminated as of January 1, 2010. Prior to the
Reorganization, an incentive allocation was calculated with respect to each Member on the last business day of a
calendar year and upon repurchase of all or any portion of such Investor's Interest (an
20
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
6. INCENTIVE ALLOCATION (CONTINUED)
"Incentive Period"). An Incentive Period for each Member's Interest started immediately following the preceding
Incentive Period and ended on the first to occur of: (i) the next occurring last business day of a calendar year; (ii)
the next repurchase of all or any portion of such Member's Interest; (iii) the withdrawal of the Adviser or Subadviser
(collectively the "Special Members") in connection with such party ceasing to serve as Adviser or Subadviser to the
Company; or (iv) the dissolution of the Company. The aggregate incentive allocation (to the Special Members) for an
Incentive Period equaled 10% of the amount, if any, in excess of (a) profit net of losses (after taking into account
expenses, including the management fee paid by the Company) allocated to each Member's capital account for such
Incentive Period over (b) the greater of (i) the Member's Hurdle Rate Amount for that Incentive Period and (ii) the
balance in the Member's Loss Carryforward as of the end of the prior Incentive Period.
A Member's "Loss Carryforward" for the initial Incentive Period was zero and for each Incentive Period thereafter was
equal to the Member's Loss Carryforward as of the end of the immediately preceding Incentive Period, increased or
decreased, but not below zero, by the positive or negative difference between the net losses over net profits allocated
to the Member for the current Incentive Period.
The "Hurdle Rate Amount" is the return a Member would receive if its Interest as of the beginning of that Incentive
Period (adjusted appropriately for any additional subscriptions) earned a rate of return equal to the one-year U.S.
Treasury note, as determined on the first day of each calendar quarter and reset on the first day of each calendar
quarter. The Hurdle Rate Amount is not cumulative from Incentive Period to Incentive Period. The one-year U.S. Treasury
note rates for June 30, 2009, September 30, 2009 and December 31, 2009 were 0.5394%, 0.5482% and 0.3469% per annum,
respectively. On June 30, 2009 and December 31, 2009, incentive allocations of $651 and $372,026 were realized.
In the case of a repurchase of only a portion of an Interest other than on the last business day of the calendar year,
the Member was treated as having two independent Interests in the Company, one of which was being repurchased in its
entirety. Allocations to the Investor and subscriptions made by the Member during the Incentive Period prior to such
repurchase, and the Member's opening capital account balance and Loss Carryforward as of the beginning of such Incentive
Period, were allocated between the two Interests in proportion to the portion of the Member's Interest that was
repurchased.
7. RELATED PARTY TRANSACTIONS AND OTHER
Affiliates of the Adviser may have banking, underwriting, lending, brokerage, or other business relationships with the
Portfolio Funds in which the Company invests and with companies in which the Portfolio Funds invest.
Effective November 19, 2009, the Board is made up of five Directors who are not "interested persons," as defined by
Section 2(a)(19) of the 1940 Act, of the Company (the "Disinterested Directors"). The Disinterested Directors receive an
annual retainer of $10,000 and per-meeting fees of: $2,000 for in-person attendance at quarterly meetings of the Board;
$1,000 for telephonic participation at a quarterly Board meeting or for participation at a telephonic special meeting of
the Board; and $1,000 for each
21
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
7. RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
audit committee meeting (whether held in-person or by telephone). All Disinterested Directors may be reimbursed for
expenses of attendance at each regular or special meeting of the Board or of any committee thereof and for their
expenses, if any, in connection with any other service or activity they perform or engage in as Directors. The Company
incurred $53,500 of retainer and per meeting fees for the year ended March 31, 2010, $7,000 of which is payable as of
March 31, 2010.
PFPC Trust Company, an affiliate of The PNC Financial Services Group ("PNC"), serves as custodian of the Company's
assets and provides custodial services for the Company. PNC Global Investment Services (U.S.), Inc. serves as
administrator and accounting agent to the Company and in that capacity provides certain accounting, record keeping,
investor related services, and regulatory administrative services. The Company pays a monthly fee to the custodian and
the administrator based primarily upon month-end Members' Capital.
Effective October 23, 2009, Merrill Lynch, Pierce, Fenner & Smith Incorporated replaced Banc of America Investment
Services, Inc. as the placement agent of the Company (the "Placement Agent"). Investors were charged a placement fee
(sales load) (the "Placement Fee") on Interests placed by the Placement Agent of 1.25% of the investment amount if such
amount was less than $500,000 (subject to the minimum investment). There was no Placement Fee on investments of $500,000
or more. The Placement Fee was paid to the Placement Agent. The Placement Fee was waived for certain investors.
Subsequently, at the time of the Reorganization, the agreement between the Company and the Placement Agent was
terminated.
The Company's costs in connection with the Reorganization were borne by the Adviser.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF CREDIT RISK OR LIQUIDITY RISKS
In the normal course of business, the Portfolio Funds in which the Company invests trade various financial instruments
and may enter into various investment activities with off-balance sheet risk. These include, but are not limited to,
short selling, writing option contracts, and equity swaps. However, as a result of the investments by the Company as a
limited partner or member, the Company's liability with respect to its investments in the Portfolio Funds is generally
limited to the NAV of its interest in each Portfolio Fund.
Because the Company is a closed-end investment company, Interests are not redeemable at the option of Members and are
not exchangeable for interests of any other fund. Although the Board in its discretion may cause the Company to offer
from time to time to repurchase Interests at the Members' capital account value, 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
offer to repurchase Interests by the Company, the aggregate repurchase amount will be determined by the Board in its
discretion and such repurchase amount may represent only a small portion of outstanding Interests. Because the Company's
investments in Portfolio Funds themselves have limited liquidity, the Company may not be able to fund significant
repurchases. Members whose Interests are accepted for repurchase also bear the risk that the
22
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF CREDIT RISK OR LIQUIDITY RISKS (CONTINUED)
Company's members' capital account value may fluctuate significantly between the time that they submit their request for
repurchase and the date as of which Interests are valued for the purpose of repurchase.
As described in the footnotes of the Company's Schedule of Investments and in Note 3, some Portfolio Funds have
suspended or restricted withdrawals of capital, which increases the liquidity risk for the Company. Liquidity risk is
the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Liquidity could be impaired by an inability to access secured and/or unsecured sources of financing, an inability to
sell assets or to withdraw assets from Portfolio Funds, or unforeseen outflows of cash to meet tender demands. This
situation may arise due to circumstances outside of the Company's control, such as a general market disruption or an
operational issue affecting the Company or third parties, including the Portfolio Funds. Also, the ability to sell
assets may be impaired if other market participants are seeking to sell similar assets at the same time.
The Company's capital invested in the Portfolio Funds can be redeemed on a limited basis. As a result, the Company may
not be able to liquidate quickly some of its investments in the Portfolio Funds in order to meet liquidity requirements.
There are a number of other risks to the Company. Three principal types of risk that can adversely affect the Company's
investment approach are market risk, strategy risk, and manager risk. The Company also is subject to multiple manager
risks, possible limitations in investment opportunities, allocation risks, lack of diversification, and other risks for
the Company and potentially for each Portfolio Fund.
9. GUARANTEES
In the normal course of business, the Company enters into contracts that contain a variety of representations and
warranties and which provide general indemnities. The Company's maximum exposure under these arrangements is unknown, as
this would involve future claims against the Company that have not yet occurred. However, based on experience, the
Company expects the risk of loss due to these warranties and indemnities to be remote.
10. LITIGATION EVENT
The events described below have not directly impacted the Company or had any known material adverse effect on its
financial position or results of operations.
On February 9, 2005, certain affiliates of the Adviser, including the former investment adviser to the Company, 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.
23
Grosvenor Registered Multi-Strategy Master Fund, LLC
Notes to Financial Statements (continued)
March 31, 2010
10. 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.
11. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date these financial statements were issued, and has noted
the following:
Subsequent to March 31, 2010, the Company received additional capital subscriptions of $4,750,000.
On March 30, 2010, the Company announced a tender offer to purchase up to $50,000,000 of outstanding Interests from
Members. The net asset value of Interests will be calculated for this purpose on June 30, 2010. The tender offer expired
on April 26, 2010.
As of April 1, 2010, the Adviser transferred all of its investment advisory services to its affiliate, Banc of America
Capital Advisors LLC ("BACA") (the "Transfer"). As a result of the Transfer, BACA has assumed all responsibilities for
serving as the investment adviser to the Company and as the management services provider to the TI 1 Fund under the
terms of the investment advisory agreement between the Adviser and the Company and the management agreement between the
Adviser and the TI 1 Fund, respectively. The personnel of the Adviser who will provide services to the Company and the
TI 1 Fund are the same personnel who previously provided such services to the Company and the TI 1 Fund. Additionally,
no changes in the management of the Company and the TI 1 Fund are expected as a result of the Transfer.
BACA is registered as an investment adviser under the Advisers Act and is an indirect wholly owned subsidiary of BAC.
24
Grosvenor Registered Multi-Strategy Master Fund, LLC
COMPANY MANAGEMENT (UNAUDITED)
MARCH 31, 2010
Information pertaining to the Board and officers of the Company is set forth below:
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OVERSEEN BY
NAME , ADDRESS AND AGE COMPANY TIME SERVED AND OTHER DIRECTORSHIPS HELD MANAGER
- ----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
Alan Brott Director Term Consultant (since October 1991); Associate 9
c/o Grosvenor Registered Indefinite; Professor, Columbia University Graduate
Multi-Strategy Master Length- since School of Business (since 2000); Former
Fund, LLC 2004 Partner of Ernst & Young. Mr. Brott serves
225 High Ridge Road as a manager of Excelsior Multi-Strategy
Stamford, CT 06905 Hedge Fund of Funds Master Fund, LLC,
(Born 1942) Excelsior Multi-Strategy Hedge Fund of
Funds (TI), LLC, Excelsior Multi-Strategy
Hedge Fund of Funds (TE), LLC, Excelsior
Multi-Strategy Hedge Fund of Funds (TI 2),
LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TE 2), LLC, Grosvenor Registered
Multi-Strategy Fund (TI 1), LLC, Grosvenor
Registered Multi-Strategy Fund (TI 2), LLC
and Grosvenor Registered Multi-Strategy
Fund (TE), LLC, and a director of Stone
Harbor Investment Funds.
John C. Hover II Director Term Former Executive Vice President of U.S. 10
c/o Grosvenor Registered Indefinite; Trust Company (retired since 2000). Mr.
Multi-Strategy Master Length- since Hover serves as a manager of Excelsior
Fund, LLC November Multi-Strategy Hedge Fund of Funds Master
225 High Ridge Road 2009 Fund, LLC, Excelsior Multi-Strategy Hedge
Stamford, CT 06905 Fund of Funds (TI), LLC, Excelsior
(Born 1943) Multi-Strategy Hedge Fund of Funds (TE),
LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TI 2), LLC, Excelsior Multi-Strategy
Hedge Fund of Funds (TE 2), LLC, Grosvenor
Registered Multi-Strategy Fund (TI 1), LLC,
Grosvenor Registered Multi-Strategy Fund
(TI 2), LLC, Grosvenor Registered
Multi-Strategy Fund (TE), LLC and Excelsior
Venture Partners III, LLC, and a director
of Tweedy, Browne Fund, Inc.
Victor F. Imbimbo, Jr. Director Term- President and CEO of Caring Today, LLC, the 10
c/o Grosvenor Registered Indefinite; publisher of Caring Today Magazine, the
Multi-Strategy Master November leading information resource within the
Fund, LLC 2009 family caregivers market; Former Executive
225 High Ridge Road Vice President of TBWA\New York and Former
Stamford, CT 06905 President for North America with
(Born 1952) TBWA/WorldHealth, a division of TBWA
Worldwide, where he directed consumer
marketing program development for
healthcare companies primarily within the
pharmaceutical industry.. Mr. Imbimbo serves
as a manager of Excelsior Multi-Strategy
Hedge Fund of Funds Master Fund, LLC,
Excelsior Multi-Strategy Hedge Fund of
Funds (TI), LLC, Excelsior Multi-Strategy
Hedge Fund of Funds (TE), LLC, Excelsior
Multi-Strategy Hedge Fund of Funds (TI 2),
LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TE 2), LLC, Grosvenor Registered
Multi-Strategy Fund (TI 1), LLC, Grosvenor
Registered Multi-Strategy Fund (TI 2), LLC,
Grosvenor Registered Multi-Strategy Fund
(TE), LLC and Excelsior Venture Partners
III, LLC, and a director of Vertical
Branding, Inc.
Stephen V. Murphy Director Term- President of S.V. Murphy & Co, Inc., an 10
c/o Grosvenor Registered Indefinite; investment banking firm. Mr. Murphy serves
Multi-Strategy Master Length- as a manager of Excelsior Multi-Strategy
Fund, LLC November Hedge Fund of Funds Master Fund, LLC,
225 High Ridge Road 2009 Excelsior Multi-Strategy Hedge Fund of
Stamford, CT 06905 Funds (TI), LLC, Excelsior Multi-Strategy
(Born 1945) Hedge Fund of Funds (TE), LLC, Excelsior
Multi-Strategy Hedge Fund of Funds (TI 2),
LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TE 2), LLC, Grosvenor Registered
Multi-Strategy Fund (TI 1), LLC, Grosvenor
Registered Multi-Strategy Fund (TI 2), LLC,
Grosvenor Registered Multi-Strategy Fund
(TE), LLC and Excelsior Venture Partners
III, LLC, and a director of The First of
Long Island Corporation, The First National
Bank of Long Island and Bowne & Co., Inc.
25
Grosvenor Registered Multi-Strategy Master Fund, LLC
COMPANY MANAGEMENT (UNAUDITED) (CONTINUED)
MARCH 31, 2010
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OVERSEEN BY
NAME, ADDRESS AND AGE COMPANY TIME SERVED AND OTHER DIRECTORSHIPS HELD MANAGER
- ----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS (CONTINUED)
Thomas G. Yellin Director Term President of The Documentary Group (since 9
c/o Grosvenor Registered Indefinite; June 2006); Former President of PJ
Multi-Strategy Master Length- since Productions (from August 2002 to June
Fund, LLC 2004 2006); Former Executive Producer of ABC
225 High Ridge Road News (from August 1989 to December 2002).
Stamford, CT 06905 Mr. Yellin serves as a manager of Excelsior
(Born 1954) Multi-Strategy Hedge Fund of Funds Master
Fund, LLC, Excelsior Multi-Strategy Hedge
Fund of Funds (TI), LLC, Excelsior
Multi-Strategy Hedge Fund of Funds (TE),
LLC, Excelsior Multi-Strategy Hedge Fund of
Funds (TI 2), LLC, Excelsior Multi-Strategy
Hedge Fund of Funds (TE 2), LLC, Grosvenor
Registered Multi-Strategy Fund (TI 1), LLC,
Grosvenor Registered Multi-Strategy Fund
(TI 2), LLC and Grosvenor Registered
Multi-Strategy Fund (TE), LLC.
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
HELD WITH THE LENGTH OF OVERSEEN BY
NAME, ADDRESS AND AGE COMPANY TIME SERVED PRINCIPAL OCCUPATION DURING PAST FIVE YEARS MANAGER
- ----------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT DISINTERESTED DIRECTORS
Steven L. Suss President and Term - Managing Director, Alternative Investment N/A
225 High Ridge Road Treasurer Indefinite; Asset Management, Bank of America (7/07 to
Stamford, CT 06905 Length - present); Senior Vice President of Bank of
(Born 1960) since April America Capital Advisors LLC (7/07 to
2007 present); Director, Chief Financial Officer
and Treasurer (10/07 to 3/10) and Senior
Vice President (6/07 to 3/10) of U.S. Trust
Hedge Fund Management, Inc.; Director (4/07
to 5/08), Senior Vice President (7/07 to
5/08), and President (4/07 to 6/07) of UST
Advisers, Inc.; Senior Vice President of
U.S. Trust's Alternative Investment
Division (4/07 to 6/07); Chief Financial
Officer and Chief Compliance Officer,
Heirloom Capital Management, L.P. (5/02 to
9/06).
Marina Belaya Secretary Term - Assistant General Counsel, Bank of America N/A
114 W. 47th Street Indefinite; (7/07 to present); Vice President and
New York, NY 10036 Length - Senior Attorney of U.S. Trust (2/06 to
(Born 1967) since April 6/07); Vice President, Corporate Counsel,
2007 Prudential Financial (4/05 to 01/06);
Associate, Schulte Roth & Zabel LLP (09/02
to 03/05).
Robert M. Zakem Chief Term -- GWIM Risk and Compliance Senior Executive, N/A
One Bryant Park Compliance Indefinite; Bank of America Corp. (3/09 to present);
New York, NY 10036 Officer Length -- Managing Director, Business Risk
(Born 1958) since June Management, Merrill Lynch & Co., Inc. (8/06
2009 to 2/09); Executive Director, Head of Fund
Services -- US, UBS Financial Services,
Inc. (12/04 to 07/06).
All officers of the Company are employees and/or officers of the Adviser.
26
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 year ended March 31, 2010 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 are $32,000.
AUDIT-RELATED FEES
(b) The aggregate fees billed for the fiscal year ended March 31, 2010 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 $0.
TAX FEES
(c) The aggregate fees billed for the fiscal year ended March 31, 2010 for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $24,503, in connection
with the review of the Registrant's tax returns for the tax year ended
December 31, 2009.
ALL OTHER FEES
(d) The aggregate fees billed for the fiscal year ended March 31, 2010 for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are
$0.
(e)(1) During its regulatory scheduled periodic meetings, the Registrant's
audit committee will pre-approve all audit, audit-related, tax and
other services to be provided by the principal accountants of the
Registrant. The audit committee has delegated pre-approval authority
to its Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any such pre-approved
fees are presented to the audit committee at its next regularly
scheduled meeting.
(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
period ended March 31, 2010 was zero.
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal period that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than fifty percent.
(g) The amount of non-audit fees that were billed by the registrant's
principal accountant for services rendered to : (i) the registrant,
and (ii) the registrant's investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
for the fiscal year ended March 31, 2010, were $24,503 and $387,000,
respectively.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered 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 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 pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. 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 registrant has delegated to Grosvenor Capital Management, L.P.
("Grosvenor"), the sub-adviser, the responsibility to vote proxies related to
portfolio securities.
Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended, requires an
SEC-registered investment adviser like Grosvenor Capital Management, L.P.
("GROSVENOR" or the "FIRM") to implement proxy voting policies and procedures
reasonably designed to ensure that they vote proxies in the best interests of
their clients. Pursuant to that rule, Grosvenor has adopted Proxy Voting
Policies and Procedures (the "PROXY POLICIES") that have been designed to ensure
that Grosvenor votes proxies in the best interests of the various investment
management accounts that Grosvenor manages (each, a "GROSVENOR-MANAGED
ACCOUNT").
WHEN GROSVENOR IS REQUESTED TO RESPOND TO PROXY REQUESTS
Each Grosvenor-Managed Account is either: (i) a "fund of funds" that invests in
underlying investment funds ("PORTFOLIO FUNDS") but does not invest directly in
securities of operating companies, except on a limited basis or (ii) a "feeder"
fund that invests in such a "fund of funds."
As a result, the most common scenario in which Grosvenor is requested to respond
to proxy requests relating to securities held by one or more Grosvenor-Managed
Accounts is where Grosvenor is requested to vote limited partnership interests,
limited liability company interests, shares or similar equity interests in
Portfolio Funds in which one or more Grosvenor-Managed Accounts invest. In rare
cases, Grosvenor is requested to vote on matters relating to investments in
operating companies.
For purposes of convenience, each request to vote a security held by a
Grosvenor-Managed Account is referred to as a "PROXY REQUEST."
MATERIAL PROPOSALS AND IMMATERIAL PROPOSALS
Grosvenor divides Proxy Requests into two general categories, those relating to
"Immaterial Proposals" and those relating to "Material Proposals."
An "IMMATERIAL PROPOSAL" is a proposal that, if adopted, WOULD NOT, in the
reasonable judgment of the relevant Grosvenor Compliance Officer, either: (a) be
reasonably likely to have a material adverse effect on the relevant
Grosvenor-Managed Account(s) (E.G., a proposal to approve a change in the name
of a Portfolio Fund, to approve a Portfolio Fund's previous year's audited
financial statements, to approve a Portfolio Fund's appointment of independent
auditors, to elect new directors of a Portfolio Fund, ETC.); or (b) materially
adversely change the terms on which future investments may be made by one or
more Grosvenor-Managed Accounts. In other words, a proposal that, if adopted,
would change any one or more terms in a manner that is favorable, or not
materially adverse, to existing or future investors, is an "Immaterial
Proposal."
A "MATERIAL PROPOSAL" is a proposal that is not an Immaterial Proposal (I.E., a
Material Proposal is a proposal that, if adopted, WOULD, in the reasonable
judgment of such Compliance Officer, either: (a) be reasonably likely to
have a material adverse effect on the relevant Grosvenor-Managed Account(s); or
(b) materially adversely change the terms on which future investments may be
made by one or more Grosvenor-Managed Accounts).
DETERMINING WHAT ACTION SHOULD BE TAKEN WITH RESPECT TO A PROXY REQUEST
It is Grosvenor's policy to ACT on each Immaterial Proposal, unless Grosvenor's
Operations Committee determines otherwise.
It is Grosvenor's policy to CONSENT to each Immaterial Proposal, unless:
- - the Primary Investment Principal (defined below) or a member of Grosvenor's
Operations Committee objects to such Immaterial Proposal; or
- - Grosvenor's Operations Committee determines, based on information provided
to it by certain persons within the Firm, that consent to such Immaterial
Proposal would not be consistent with the investment objective(s), policies
and restrictions of the relevant Grosvenor-Managed Account(s). (Grosvenor's
Operations Committee, however, after due consideration, may authorize
Grosvenor to act favorably on an Immaterial Proposal in this situation,
upon such terms and subject to such conditions as the Operations Committee
may determine to be appropriate under the circumstances.)
Except as discussed below under "MANAGING CONFLICTS OF INTEREST," it is
Grosvenor's general policy to ACT on each Proxy Request relating to a Material
Proposal in accordance with the recommendation of the Grosvenor employee who has
been designated by Grosvenor's Investment Committee as the primary investment
principal with respect to the investment manager or securities in question (the
"PRIMARY INVESTMENT PRINCIPAL"); provided, however, that:
- any member of Grosvenor's Investment Committee may object to the
recommendation of a Primary Investment Principal in response to a
Proxy Request. In the case of any such objection, the matter
shall be referred to Grosvenor's Investment Committee, whose
decision shall be final and conclusive; provided, however, that
Grosvenor's Chief Executive Officer or Grosvenor's Operations
Committee may veto any action proposed to be taken by a Primary
Investment Principal or by Grosvenor's Investment Committee in
response to a Proxy Request; and
- Grosvenor's Operations Committee may object to the recommendation
of a Primary Investment Principal in response to a Proxy Request
if it determines, based on information provided to it by certain
persons within the Firm, that consent to such Proxy Request would
not be consistent with the investment objective(s), policies and
restrictions of the relevant Grosvenor-Managed Account(s).
(Grosvenor's Operations Committee, however, after due
consideration, may authorize Grosvenor to act favorably on a
Proxy Request relating to a Material Proposal in this situation,
upon such terms and subject to such conditions as the Operations
Committee may determine to be appropriate under the
circumstances.)
FACTORS CONSIDERED IN DETERMINING WHAT ACTION SHOULD BE TAKEN IN RESPONSE TO A
PROXY REQUEST
Grosvenor expects that Proxy Requests frequently will request Grosvenor to
approve measures that reduce the rights, powers and authority, and/or increase
the duties and obligations, associated with the security in question ("ADVERSE
MEASURES"). For example, it is anticipated that Proxy Requests frequently will
request Grosvenor to approve increased fees and/or less favorable liquidity
provisions relating to Portfolio Funds in which one or more Grosvenor-Managed
Accounts invest.
Nevertheless, it is expected that a Primary Investment Principal ordinarily will
recommend favorable action on Proxy Requests that propose Adverse Measures as
long as such Primary Investment Principal reasonably believes, based on the
totality of the facts and circumstances, that continuing to hold the relevant
security has a reasonable probability of conferring benefits on the relevant
Grosvenor-Managed Account(s) (E.G., continued access to a high-quality
investment manager) that outweigh the adverse affect(s) of such Adverse Measure,
considered over the anticipated holding period of such security in the hands of
the relevant Grosvenor-Managed Account(s).
MANAGING CONFLICTS OF INTEREST
In furtherance of Grosvenor's goal to take action on all Proxy Requests in a
manner that best serves the interests of the affected Grosvenor-Managed
Accounts, Grosvenor will not implement any decision to respond to a Proxy
Request in a particular manner unless and until a Grosvenor Compliance Officer
has implemented certain procedures to: (i) identify whether Grosvenor is subject
to a conflict of interest in taking action in response to such Proxy Request;
(ii) assess the materiality of such a conflict; and (iii) address a material
conflict in a manner designed to serve the best interests of the affected
Grosvenor-Managed Account(s). A conflict of interest ordinarily will be
considered material if it can reasonably be argued that Grosvenor (or certain of
its related persons) has an incentive or otherwise may be influenced to respond
to the Proxy Request in a manner designed to benefit Grosvenor (or any such
related person) rather than the affected Grosvenor-Managed Account(s) (even if
there is no ostensible detriment to the affected Grosvenor-Managed Account(s)
from responding to such request in that manner). (In addition, a conflict of
interest may be considered material if it can reasonably be argued that
Grosvenor has an incentive or otherwise may be influenced to respond to a Proxy
Request in a manner designed to favor one or more Grosvenor-Managed Accounts
over one or more other Grosvenor-Managed Accounts.) All materiality
determinations are based on an assessment of the particular facts and
circumstances.
If the Grosvenor Compliance Officer determines that Grosvenor (or a related
person) is subject to a conflict of interest in taking action in response to a
Proxy Request but that such conflict is not material, he or she shall issue an
instruction to take action in response to such Proxy Request as provided above
under "DETERMINING WHAT ACTION SHOULD BE TAKEN WITH RESPECT TO A PROXY REQUEST."
If the Grosvenor Compliance Officer determines that Grosvenor (or a related
person) is subject to a material conflict of interest in taking action in
response to a Proxy Request, he or she shall, in consultation with such other
Grosvenor personnel as he or she determines to be appropriate under the
circumstances, determine how to address such conflict. In determining how to
address a material conflict of interest, the Compliance Officer may consider the
following potential solutions, as well as any other solutions he or she wishes
to consider:
- in the case of a non-discretionary Grosvenor-Managed Account,
disclosing the conflict of interest to the appropriate parties;
- in the case of a discretionary Grosvenor-Managed Account, disclosing
the conflict of interest to the investor(s)/participant(s) in such
Account and obtaining their consent (in accordance with the governing
documents of such Account) to act on the Proxy Request in accordance
with the decision reached by Grosvenor with respect to such Proxy
Request; and
- in the case of any Grosvenor-Managed Account, engaging an independent
third party to recommend a response to the Proxy Request.
In cases where the Compliance Officer determines that Grosvenor (or a related
person) is subject to a conflict of interest in responding to a Proxy Request
and that such conflict is material, he or she shall not issue an instruction to
take action in response to such Proxy Request in accordance with the decision
reached by Grosvenor, or communicate the decision reached by Grosvenor to a
non-discretionary Grosvenor-Managed Account, without first determining that such
action is in the best interests of the affected Grosvenor-Managed Account(s).
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
GROSVENOR CAPITAL MANAGEMENT, L.P. ("GROSVENOR" OR THE "FIRM")
Substantially all of the assets of the Registrant are invested in Grosvenor
Registered Multi-Strategy Master Fund, LLC (the "Master Fund"). The portfolio
management team of the Master Fund is described below.
The Master Fund's assets are managed pursuant to a Sub-Advisory Agreement
by Grosvenor. Grosvenor maintains an Investment Committee that is responsible
for, among other things:
- establishing internal portfolio management guidelines ("Investment
Guidelines") for each investment fund or account that is managed or
advised by Grosvenor (each, a "Grosvenor-Managed Account"). In the
case of the Master Fund, these investment objectives and constraints
are subject to approval by the Master Fund's Board of Directors.
- identifying, evaluating and approving (or disapproving) the investment
strategies in which the Grosvenor-Managed Accounts, including the
Master Fund, may invest.
- identifying, evaluating and approving (or disapproving) third-party
investment management firms ("Investment Managers") that employ
investment strategies that have been approved by the Investment
Committee.
- monitoring investment strategies and Investment Managers.
Grosvenor's Chief Executive Officer is responsible for assigning one or
more senior level investment professionals (each, a "Grosvenor Portfolio
Manager") to each Grosvenor-Managed Account, including the Master Fund, whose
function is to construct a portfolio for such Grosvenor-Managed Account by using
investment strategies and Investment Managers that have been approved by the
Investment Committee (subject to the Investment Guidelines of such
Grosvenor-Managed Account).
Grosvenor's Investment Committee is currently comprised of David B. Small,
David S. Richter, and Brian A. Wolf. All three members of the Investment
Committee are Managing Directors of Grosvenor. Michael J. Sacks, Grosvenor's
Chief Executive Officer, is not a member of the Investment Committee, but has
veto power over all decisions made by the Investment Committee.
Grosvenor's Chief Executive Officer has assigned Michael J. Sacks, David B.
Small, David S. Richter and Brian A. Wolf as the Grosvenor Portfolio Managers
for the Master Fund.
MICHAEL J. SACKS, MANAGING DIRECTOR, CHIEF EXECUTIVE OFFICER
Mr. Sacks, born 1962, joined Grosvenor in 1990 and serves as its Chief Executive
Officer. From 1988 through 1990, Mr. Sacks was associated with Harris
Associates, L.P. Mr. Sacks received a B.A. in Economics from Tulane University
in 1984 and two degrees from Northwestern University in 1988: an M.B.A. from the
J.L. Kellogg Graduate School of Management and a J.D. from the School of Law.
Mr. Sacks is a trustee of Northwestern University. He is a member of the
Illinois Bar.
DAVID B. SMALL, MANAGING DIRECTOR, INVESTMENTS
Mr. Small, born 1956, joined Grosvenor in 1994. Mr. Small serves as the Chair of
Grosvenor's Investment Committee and shares responsibility for portfolio
management as well as for the evaluation, selection and monitoring of various
investment strategies and managers. Prior to joining Grosvenor, Mr. Small was a
consultant to Grosvenor and the founder and, from 1987 through 1993, Chief
Executive Officer and
Chief Financial Engineer of David Bruce & Co., a software firm specializing in
the development of risk management systems for derivatives trading firms. From
1979 to 1982, Mr. Small was associated with Philadelphia Insurance Research
Group. He received a B.S. in Economics from the Wharton School of the University
of Pennsylvania in 1978 and an M.B.A. in Finance/Econometrics from the
University of Chicago's Graduate School of Business in 1985.
BRIAN A. WOLF, CFA, MANAGING DIRECTOR, INVESTMENTS
Mr. Wolf, born 1970, joined Grosvenor in 1995. Mr. Wolf is a member of
Grosvenor's Investment Committee and shares responsibility for portfolio
management as well as for the evaluation, selection and monitoring of various
investment strategies and managers. From 1993 to 1995, he was an analyst and
trader for M&M Financial, a Chicago-based money management firm. He received a
B.S. SUMMA CUM LAUDE in Finance from Bradley University in 1992 and an M.B.A.
MAGNA CUM LAUDE from the University of Notre Dame in 1993. Mr. Wolf is a
Chartered Financial Analyst and a member of The CFA Society of Chicago. Mr. Wolf
is the author of a chapter on hedged equity funds contained in Kenneth S.
Phillips and Ronald J. Surz. eds., HEDGE FUNDS: DEFINITIVE STRATEGIES AND
TECHNIQUES (New York: John Wiley & Sons, Inc., 2003).
DAVID S. RICHTER, MANAGING DIRECTOR, INVESTMENTS
Mr. Richter, born 1961, has been associated with Grosvenor since 1994 and joined
Grosvenor on a full-time basis in 2003. Mr. Richter is a member of Grosvenor's
Investment Committee and shares responsibility for portfolio management as well
as for the evaluation, selection and monitoring of various investment strategies
and managers. From 1994 to 2002, he was the founder and Managing Partner of a
Chicago-based U.S. long-short equity hedge fund. Previously, Mr. Richter was a
vice-president of JMB Realty Corporation from 1988 to 1994 in the corporate
acquisitions group. Prior to 1988, Mr. Richter was a manager at KPMG Peat
Marwick. Mr. Richter graduated with a B.S. degree SUMMA CUM LAUDE in Accounting
from the University of Illinois in 1983. Mr. Richter is a Certified Public
Accountant and received a national Elijah Watt Sells award from the American
Institute of Certified Public Accountants for his scores on the Uniform CPA
Examination.
OTHER ACCOUNTS. The table below provides information regarding the other
accounts managed by Grosvenor's Investment Principals as of March 31, 2010:
NUMBER OF
ACCOUNTS MANAGED ASSETS MANAGED FOR
NUMBER OF FOR WHICH ADVISORY WHICH ADVISORY FEE
ACCOUNTS TOTAL ASSETS FEE IS PERFORMANCE- IS PERFORMANCE-
TYPE OF ACCOUNT MANAGED(1) MANAGED* BASED(2) BASED(3)*
- --------------- ---------- -------------- ------------------- ------------------
DAVID B. SMALL
Registered Investment Companies 1 $489.5 million 0 N/A
Other pooled investment
vehicles 33 $ 20.1 billion 22 $4.9 billion
Other accounts 1 $514.7 million 0 N/A
BRIAN A. WOLF
Registered Investment Companies 1 $489.5 million 0 N/A
Other pooled investment
vehicles 37 $ 21.8 billion 22 $5.2 billion
Other accounts 1 $514.7 million 0 N/A
DAVID S. RICHTER
Registered Investment Companies 1 $489.5 million 0 N/A
Other pooled investment
vehicles 41 $ 22.3 billion 25 $5.6 billion
Other accounts 1 $514.7 million 0 N/A
MICHAEL J. SACKS
Registered Investment Companies 1 $489.5 million 0 N/A
Other pooled investment
vehicles 41 $ 21.9 billion 24 $5.1 billion
Other accounts 1 $514.7 million 0 N/A
(1) For purposes of this column, "master-feeder" structures, which may include
multiple "feeder" funds, are counted as one account.
(2) For purposes of this column, "feeders" into a "master fund" are counted as
individual accounts where they have performance-based fees.
(3) Total AUM for each account is included. Note, however, that in some
accounts, some investors may not be subject to performance-based fees.
- ---------------------------------------------------------------------------
NOTE: FOR PURPOSES OF THIS BREAKDOWN, LEVERAGE AND INVESTMENTS IN GROSVENOR
SUB-FUNDS ARE NOT INCLUDED.
* ASSETS UNDER MANAGEMENT AS OF THE END OF A PARTICULAR PERIOD INCLUDE ALL
SUBSCRIPTIONS TO, AND ARE REDUCED BY ALL WITHDRAWALS FROM, GROSVENOR FUNDS
EFFECTED IN CONJUNCTION WITH THE CLOSE OF BUSINESS THE LAST DAY OF SUCH
PERIOD. DATA FOR 2009 AND 2010 ARE ESTIMATED AND UNAUDITED.
COMPENSATION STRUCTURE. Mr. Sacks and the members of the Investment
Committee each receive a fixed base salary as well as an annual bonus based upon
the success of the Firm. In addition, each holds an equity participation, which
entitles him to distributions. Compensation is not based upon the performance or
net asset value of the Master Fund or any other accounts managed by the
Investment Committee.
OWNERSHIP BY PORTFOLIO MANAGERS. As of the date of this Form, none of the
individuals at Grosvenor responsible for the day-to-day investment management of
the Master Fund owns any interests in the Master Fund.
CONFLICTS OF INTEREST. Grosvenor is subject to significant conflicts of
interest in managing the business and affairs of the Master Fund and in making
investment decisions for the Master Fund. Such conflicts could affect
Grosvenor's objectivity and the performance of the Master Fund. Certain of these
conflicts are described below.
GENERAL
Grosvenor and its related persons (which, for purposes of this section,
include persons who are either currently or formerly related to Grosvenor) will
not devote their full business time to the business and affairs of the Master
Fund. Grosvenor and its related persons are free to engage in any other business
or act as investment adviser to or investment manager of any other person or
entity, whether or not having investment objectives similar to those of the
Master Fund, on terms (including terms relating to fees and liquidity) that are
the same as or different from those available to the investors in the Master
Fund. Nothing in the governing documents of the Master Fund limits or restricts
the right of Grosvenor and its related persons to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
Grosvenor and its related persons are currently involved in, and may in the
future become involved in, other business ventures, including: (i) investing in,
entering into fee-, revenue- and/or profit-sharing agreements ("Fee Sharing
Agreements") with, operating and/or managing other investment management or
investment advisory firms ("Related Investment Management Firms"); and (ii)
managing and/or administering other investment funds and accounts. The Master
Fund will not share in the risks or rewards of such other ventures. Further,
such other ventures will both compete with the Master Fund for the time and
attention of Grosvenor and its related persons and potentially create additional
conflicts of interest or raise other special considerations, as described more
fully below. In addition, Grosvenor and its related persons, in investing and
trading for accounts (including their proprietary accounts) other than the
Master Fund, may make use of information obtained by them in the course of
investing for the Master Fund. Grosvenor and its related persons will have no
obligation to compensate the Master Fund in any respect for their receipt of
such information or to account to the Master Fund for any profits earned from
their use of such information.
Grosvenor personnel may discuss investment ideas with portfolio managers at
firms other than Grosvenor. Such discussions may be mutually beneficial, but may
under certain circumstances benefit third-parties with information developed in
connection with operating the Master Fund (and for which the Master Fund has
paid to develop). It is also possible that such discussions could ultimately
prove to be detrimental to the Master Fund, although Grosvenor considers that
possibility to be unlikely.
DIFFERENCES IN GROSVENOR-MANAGED ACCOUNTS
Grosvenor and its related persons currently manage or advise numerous
Grosvenor-Managed Accounts in addition to the Master Fund, and expect to manage
or advise additional Grosvenor-Managed Accounts in the future. Certain of the
Grosvenor-Managed Accounts have or will have investment objectives that are
identical or substantially similar to those of the Master Fund. It is not
anticipated, however, that the Master Fund and other Grosvenor-Managed Accounts
having identical or substantially similar investment objectives will have
identical or substantially similar investment portfolios. Differing investment
portfolios can be expected to result from several factors, including, without
limitation, the following:
- different investment decisions made by the different Grosvenor
Portfolio Managers assigned to the different Grosvenor-Managed
Accounts;
- regulatory and/or tax restrictions that apply to certain
Grosvenor-Managed Accounts but not to others;
- investment constraints imposed by Investment Managers on certain
Grosvenor-Managed Accounts but not on others;
- the availability of particular Investment Funds for investment by
Grosvenor-Managed Accounts at certain times but not at others;
- different risk/return characteristics (notwithstanding that such
Grosvenor-Managed Accounts generally have similar investment
objectives);
- client-imposed portfolio management restrictions and/or other client
instructions; and
- the amount of cash available for investment by different
Grosvenor-Managed Accounts at certain times.
As a result of factors such as these, the Master Fund may have a different
investment portfolio (and, as a result, different performance results) from
other Grosvenor-Managed Accounts even though the Master Fund and such other
Grosvenor-Managed Accounts may have identical or substantially similar
investment objectives.
The Master Fund and other Grosvenor-Managed Accounts may be managed by
different Grosvenor Portfolio Managers even though the Master Fund and such
other Grosvenor-Managed Accounts may have identical or substantially similar
investment objectives. Grosvenor Portfolio Managers are authorized to invest the
assets of the Grosvenor-Managed Accounts for which they have investment
responsibility in a wide range of Investment Funds. As a result, it is expected
that the Master Fund and other Grosvenor-Managed Accounts will have different
investment portfolios resulting from different investment decisions made by
their respective Grosvenor Portfolio Managers, even if they have identical or
substantially similar investment objectives. Further, the factors described
above are likely to result in different portfolios for Grosvenor-Managed
Accounts that are managed by the same Grosvenor Portfolio Managers, even though
such Grosvenor-Managed Accounts have identical or substantially similar
investment objectives.
Regulatory and/or tax restrictions may prohibit the Master Fund from
participating in investment opportunities that are available to one or more
other Grosvenor-Managed Accounts. For example, certain Grosvenor Parties or
their advisory clients (including other Grosvenor-Managed Accounts) have Fee
Sharing Agreements with certain "early-stage" or "start-up" investment
management firms ("Emerging Managers") pursuant to which they share in the fees,
revenues and/or profits of such Emerging Managers in exchange for "seeding" the
Emerging Managers' operations. Also, as discussed above, Grosvenor Parties or
their advisory clients (including other Grosvenor-Managed Accounts) have
invested or may invest in, have entered into or may enter into Fee Sharing
Agreements with, may operate and/or may manage Related Investment Management
Firms. In certain cases, arrangements with Emerging Managers or Related
Investment Management Firms enable Grosvenor Parties and their advisory clients
to invest in Investment Funds sponsored by such Emerging Managers or Related
Investment Management Firms on terms that are more favorable than those
otherwise available to clients of such Emerging Managers or Related Investment
Management Firms. Grosvenor does not intend to cause the Master Fund to enter
into Fee Sharing Agreements with Emerging Managers or Related Investment
Management Firms. Grosvenor does not intend to allocate the Master Fund's assets
to any Emerging Manager or Related Investment Management Firm in which any of
the Grosvenor Parties has an investment or with whom any of Grosvenor Parties
has a Fee Sharing Agreement.
Similarly, the Investment Managers of the Investment Funds in which the
Master Fund wishes to invest may impose investment restrictions on the Master
Fund but not on other Grosvenor-Managed Accounts. Such restrictions could render
the Master Fund ineligible to invest, in whole or in part, in an Investment Fund
in which one or more other Grosvenor-Managed Accounts are free to invest, to the
possible detriment of the Master Fund.
MULTIPLE GROSVENOR-MANAGED ACCOUNTS INVESTING IN THE SAME INVESTMENT FUND
A number of different Grosvenor-Managed Accounts (and persons associated
with Grosvenor) may invest or be invested in the same Investment Fund at the
same time (although such parties may have made their respective investments in
such Investment Fund at different times and, accordingly, may experience
different investment results in connection with such investments). The ability
of these different Grosvenor-Managed Accounts (and persons associated with
Grosvenor) to withdraw/redeem from such Investment Fund may differ materially
due to the timing of their respective investments in such Investment Fund, the
different classes of interests in such Investment Fund in which they invest,
special arrangements negotiated with the Investment Manager of such Investment
Fund and/or other factors. The reasons why the various different
Grosvenor-Managed Accounts (or persons associated with Grosvenor) may wish or be
compelled to withdraw/redeem from a particular Investment Fund also may differ
materially, and could be the result of a withdrawal/redemption request from a
participant in a Grosvenor-Managed Account that received information relating to
such Investment Fund in a report that is not provided to all participants in the
Grosvenor-Managed Accounts (see "Different Reporting Packages" below).
Similarly, the ability of the Grosvenor-Managed Accounts (or persons associated
with Grosvenor) to invest in a particular Investment Fund also may differ
materially.
Withdrawals/redemptions or subscriptions by one or more Grosvenor-Managed
Accounts (and/or by persons associated with Grosvenor) from or to a particular
Investment Fund could in certain cases adversely affect other Grosvenor-Managed
Accounts that are invested in such Investment Fund. Significant
withdrawals/redemptions or subscriptions could, for example, cause portfolio
damage, portfolio dilution, depletion of liquidity, costly portfolio
rebalancings, imposition of withdrawal "gates" and under-allocation to certain
positions. In cases such as these, Grosvenor would have a conflict of interest
in making withdrawals/redemptions or subscriptions for the Grosvenor-Managed
Accounts. This conflict of interest could be exacerbated in situations where one
or more Grosvenor-Managed Accounts may withdraw/redeem from a particular
Investment Fund as of a date as of which one or more other Grosvenor-Managed
Accounts are not able to do so. For example, certain Grosvenor-Managed Accounts
may have invested in a particular Investment Fund pursuant to a "lock-up" that
has expired, whereas one or more other Grosvenor-Managed Accounts may still be
subject to "lock-ups" in connection with their
investments in such Investment Fund because they either (i) purchased their
interests in such Investment Fund subsequent to the time that such other
Grosvenor-Managed Accounts purchased their interests in such Fund or (ii) opted
for liquidity classes in such Investment Fund that are different from the
liquidity classes owned by such Grosvenor-Managed Accounts. In addition, certain
withdrawal/redemption "gates" are, for example, calculated based on
withdrawals/redemptions during an entire quarter or other period, so that one or
more Grosvenor-Managed Accounts' withdrawals/redemptions (and/or those of
persons associated with Grosvenor) during a quarter could cause the gate to
prevent one or more other Grosvenor-Managed Accounts withdrawing/redeeming at
quarter-end, whereas the earlier withdrawals/redemptions are unaffected.
Alternatively, certain Grosvenor-Managed Accounts may not be in a position to
invest in an Investment Fund - due to lack of available cash, position
concentration limits or other reasons - at the same time that other
Grosvenor-Managed Accounts (and/or persons associated with Grosvenor) are able
to do so, perhaps at a net asset value that Grosvenor believes is attractive
from an investment standpoint. Grosvenor's management of one or more
Grosvenor-Managed Accounts' investments in a particular Investment Fund could be
adversely affected by Grosvenor's decision-making with respect to one or more
other Grosvenor-Managed Accounts that are also invested in such Investment Fund.
"AGGREGATION" OF GROSVENOR-MANAGED ACCOUNTS
In certain cases, Investment Funds may permit Grosvenor to "aggregate" some
or all of the Grosvenor-Managed Accounts invested in such Investment Fund--
I.E., all investments made by such Grosvenor-Managed Accounts will be treated as
if they had been made by the same investor. Under arrangements such as these,
certain Grosvenor-Managed Accounts could make complete withdrawals/redemptions
under an individual investor "gate" provided that other Grosvenor-Managed
Accounts did not withdraw/redeem, as the former Grosvenor-Managed Accounts could
make use of the withdrawal/redemption capacity allocable to the entire
"aggregation group." Grosvenor thus has a conflict of interest in allocating
"gate" capacity and other investment attributes among the Grosvenor-Managed
Accounts included in the same "aggregation group." For example, if a
Grosvenor-Managed Account that is part of an "aggregation group" were to receive
significant withdrawal/redemption requests, require liquidity for other reasons
or rebalance its portfolio, it could withdraw/redeem from an aggregate
investment and reduce withdrawal/redemption capacity for other members of the
"aggregate group."
In the case of certain Investment Funds, Grosvenor is able to negotiate
favorable business terms with their Investment Managers, but often on the
condition that the Grosvenor-Managed Accounts, collectively, maintain an
aggregate minimum level of invested capital (I.E., capital invested by all
Grosvenor-Managed Accounts) in a given Investment Fund or group of Investment
Funds managed by the same Investment Manager. The need to maintain an aggregate
minimum investment by all Grosvenor-Managed Accounts in a particular Investment
Fund or group of Investment Funds managed by the same Investment Manager in
order to retain favorable business terms for all Grosvenor-Managed Accounts that
invest in such Investment Fund(s) creates a conflict of interest in that it
creates an incentive for Grosvenor to cause a Grosvenor-Managed Account to
invest in or not to withdraw/redeem from a given Investment Fund (or instead of
withdrawing/redeeming, to transfer an interest in such Investment Fund to
another Grosvenor-Managed Account, which might not otherwise have invested in
such Investment Fund) in order to maintain the minimum threshold investment.
Grosvenor proprietary capital - whether invested directly in an Investment Fund
or through a Grosvenor-Managed Account - may be among the capital which benefits
from the minimum investment threshold being maintained, creating an additional
conflict of interest.
TRANSFERS OF INTERESTS IN INVESTMENT FUNDS
The Grosvenor Portfolio Managers for one or more Grosvenor-Managed Accounts
(each, a "Divesting Account") may determine that it is appropriate for such
Divesting Accounts to dispose of (or decrease) their investments in a particular
Investment Fund as of a particular date, while the Grosvenor Portfolio Managers
for one or more other Grosvenor-Managed Accounts (each, an "Investing Account")
may determine that it is appropriate for such Investing Accounts to invest (or
increase their investments) in such Investment Fund as of the same date. In
certain cases, Grosvenor will implement decisions such as these by causing a
Divesting Account to withdraw/redeem its interest from an Investment Fund at the
net asset value thereof (as calculated and reported by the Investment Manager of
such Investment Fund), and simultaneously causing an Investing Account to invest
in an interest in such Investment Fund at the net asset value thereof. In other
cases, Grosvenor will implement such decisions by causing a Divesting Account to
assign its interest in an Investment Fund to an Investing Account in exchange
for a cash payment from the Investing Account equal to the reported net asset
value of the interest being assigned to the Investing Account (as calculated and
reported by the Investment Manager of such Investment Fund).
For purposes of convenience:
- Grosvenor refers to transactions of the types described above as
"transfers" (even though the first types of transactions described
above do not involve any transfer between the affected
Grosvenor-Managed Accounts, but only a divestment from an Investment
Fund by one or more Grosvenor-Managed Accounts and a substantially
simultaneous investment in such Investment Fund by one or more other
Grosvenor-Managed Accounts);
- Grosvenor refers to a transaction in which a Divesting Account
withdraws/redeems its interest from an Investment Fund (in whole or in
part) at the net asset value thereof, while an Investing Account
substantially simultaneously invests (or increases its investment) in
such Investment Fund, as a "cash transfer;" and
- Grosvenor refers to a transaction in which a Divesting Account assigns
its interest in an Investment Fund (in whole or in part) at the net
asset value thereof to an Investing Account, as a "book entry
transfer."
In no instance does any party, including Grosvenor or the Investment Manager of
any affected Investment Fund, receive any additional compensation specifically
as a result of any cash transfer or book entry transfer. However, the practice
of engaging in cash transfers or book entry transfers could create certain risks
for investors/participants in affected Grosvenor-Managed Accounts.
For example, in certain cases, Grosvenor is able to negotiate arrangements
with Investment Managers - either at the inception of Grosvenor's relationship
with an Investment Manager or on a case-by-case basis after Grosvenor has
established such a relationship - that permit a Grosvenor-Managed Account that
is the "cash transferee" or "book entry transferee" of an interest in such
Investment Manager's Investment Fund to "stand in the shoes" of the transferor
Grosvenor-Managed Account for purposes of determining such business terms as the
duration of any "lock-up period," the continuation of any performance/incentive
fee or other performance/incentive compensation "loss carryforwards," the
applicability of withdrawal charges, ETC. Grosvenor generally intends to take
advantage, to the fullest extent permitted by law, of the ability of transferee
Grosvenor-Managed Accounts to receive "carryover" business terms. In certain
cases, however, regulatory considerations may prohibit Grosvenor from effecting
transactions in which business terms are carried over from the transferor
Grosvenor-Managed Account to the transferee Grosvenor-Managed Account. For
example, ERISA (defined below) does not permit any such "carryover" business
terms to apply in the case of transfers of interests in Investment Funds by
Grosvenor-Managed Accounts that are subject to ERISA to any other
Grosvenor-Managed
Accounts, regardless of whether the transferee Grosvenor-Managed Accounts are
subject to ERISA. ERISA, however, does not appear to prohibit "carryover"
business terms applying in the case of transfers from Grosvenor-Managed Accounts
that are not subject to ERISA to Grosvenor-Managed Accounts that are subject to
ERISA.
Further, in cases where there is "limited capacity" in a particular
Investment Fund that Grosvenor determines to be an attractive investment
opportunity and if Grosvenor has any reason to favor a particular
Grosvenor-Managed Account over another Grosvenor-Managed Account, there is an
incentive for Grosvenor to cause the "unfavored" Grosvenor-Managed Account to
transfer its interest in such Investment Fund to the "favored" Grosvenor-Managed
Account.
Similarly (and regardless of whether there is "limited capacity" in a
particular Investment Fund), if the fee structure of a particular
Grosvenor-Managed Account is more favorable to Grosvenor than the fee structure
of another Grosvenor-Managed Account, the ability to cause such
Grosvenor-Managed Accounts to participate in "carryover" transfers of interests
in such Investment Fund creates an incentive for Grosvenor to cause the account
having an "unfavorable" fee structure to transfer a "winning" position to the
account having a "favorable" fee structure, or to cause the account having a
"favorable" fee structure to transfer a "losing" position to the account having
an unfavorable fee structure.
INVESTMENTS BY GROSVENOR, ITS RELATED PERSONS AND GROSVENOR-MANAGED ACCOUNTS
Grosvenor and its related persons may invest in Grosvenor-Managed Accounts.
In addition, Grosvenor, its related persons and one or more Grosvenor-Managed
Accounts may place assets under the management of, or otherwise procure
investment advisory or investment management services from, any Investment
Manager directly or indirectly used by one or more other Grosvenor-Managed
Accounts, including the Master Fund. Without limiting the generality of the
foregoing, Grosvenor, its related persons and one or more Grosvenor-Managed
Accounts may invest in, or withdraw/redeem investments from, an Investment Fund
in which the Master Fund and/or one or more other Grosvenor-Managed Accounts are
invested, from which they are withdrawing/redeeming their investments or in
which they are not invested.
In certain instances, Grosvenor may be required to allocate limited
investment opportunities in Investment Funds among Grosvenor, its related
persons, the Master Fund and other Grosvenor-Managed Accounts. Grosvenor has
developed policies and procedures for allocating limited investment
opportunities in a manner that it believes to be equitable to Grosvenor, its
related persons and the Grosvenor-Managed Accounts (including the Master Fund).
Under these policies and procedures, to the extent that Grosvenor, its related
persons and one or more Grosvenor-Managed Accounts (each of the foregoing, a
"Participating Account") wish to invest in a particular Investment Fund (and
have funds available to make such investment) but such Investment Fund has
"limited capacity" and is willing to accept only a portion of the aggregate
investment that Grosvenor, its related persons and such Grosvenor-Managed
Account(s) wish to make, the aggregate capacity made available by such
Investment Fund to the Participating Accounts generally is allocated to each
Participating Account in the proportion that the amount such Participating
Account wishes to invest bears to the aggregate amount that all Participating
Accounts wish to invest, subject to certain exceptions set forth in such
policies and procedures. (Similarly, if interests in an Investment Fund are
available in the "secondary market" but such interests are not available in an
amount sufficient to satisfy the aggregate amount that Participating Accounts
wish to invest in such interests, such interests generally are allocated to each
Participating Account that has funds available to make such investment in the
proportion that the amount such Participating Account wishes to invest bears to
the aggregate amount that all Participating Accounts wish to invest, subject to
certain exceptions set forth in such policies and procedures.) Grosvenor and its
related persons also may participate in limited investment opportunities through
their investments in Grosvenor-Managed
Accounts that participate in such opportunities. In certain cases, Grosvenor may
determine that it and/or its related persons shall not directly participate in
an Investment Fund that has "limited capacity" unless and until all
Grosvenor-Managed Accounts that wish to invest in such Investment Fund
(including, for this purpose, Grosvenor-Managed Accounts in which Grosvenor
and/or its related persons participate) have invested the full amount of capital
they wish to invest in such Investment Fund.
Grosvenor, its related persons and one or more Grosvenor-Managed Accounts
that place assets under the management of, or otherwise procure investment
advisory or investment management services from, any Investment Manager directly
or indirectly used by the Master Fund and/or one or more other Grosvenor-Managed
Accounts may do so on terms (including terms relating to fees and liquidity)
that are more advantageous than those applicable to the investments that may be
made by the Master Fund and/or such other Grosvenor-Managed Account(s) with such
Investment Manager. To the extent that Grosvenor or its related persons invest
with a given Investment Manager on terms that are more advantageous than those
on which the Master Fund and/or one or more other Grosvenor-Managed Accounts may
invest with such Investment Manager, Grosvenor and its related persons may have
an incentive to maintain or increase the investment by the Master Fund and such
other Grosvenor-Managed Accounts with such Investment Manager in order to obtain
and/or maintain such advantageous terms for the benefit of Grosvenor and its
related persons.
Grosvenor and its related persons may from time to time invest, for their
respective proprietary accounts, in early-stage Investment Funds (including
Non-Advised Funds (as defined below)), at times when investments in such
Investment Funds would not be appropriate for the Master Fund or other
Grosvenor-Managed Accounts. If Grosvenor should subsequently determine, in
accordance with its then-current criteria applicable to the selection of
Investment Funds for the Grosvenor-Managed Accounts, that such an Investment
Fund is an appropriate investment for the Grosvenor-Managed Accounts, Grosvenor
and its related persons will not be required to restructure the terms on which
they invest in such Investment Fund in order to make investments in such
Investment Fund available to the Master Fund if, for regulatory or other
reasons, the Master Fund would be (or, in Grosvenor's reasonable determination,
may be) precluded from investing in such Investment Fund in the absence of such
restructuring.
Grosvenor and its related persons may from time to time invest, for their
respective proprietary accounts, in certain investment funds that are
administered, but not advised, by Grosvenor (the "Non-Advised Funds") and from
which they receive administrative or similar fees. In many cases, such
investments may be made at times when investments in the Non-Advised Funds are
not appropriate for Grosvenor-Managed Accounts. If Grosvenor should subsequently
determine, in accordance with its then-current criteria applicable to the
selection of Investment Funds for the Grosvenor-Managed Accounts, that such a
Non-Advised Fund is an appropriate investment for the Grosvenor-Managed
Accounts, Grosvenor may cause the Master Fund and/or one or more other
Grosvenor-Managed Accounts to invest in such Non-Advised Fund even though
Grosvenor continues to receive administrative or similar fees from such
Non-Advised Fund. Moreover, Grosvenor will not be required to reduce, eliminate
or restructure the administrative or similar fees it receives from such
Non-Advised Fund in order to make investments in such Non-Advised Fund available
to the Master Fund if, for regulatory or other reasons, the Master Fund would be
(or, in Grosvenor's reasonable determination, may be) precluded from investing
in such Non-Advised Fund in the absence of such fee reduction, elimination or
restructuring.
POSSIBLE INCENTIVE TO FAVOR ONE OR MORE GROSVENOR-MANAGED ACCOUNTS OVER THE
MASTER FUND
A Grosvenor Portfolio Manager might have an incentive to favor one or more
Grosvenor-Managed Accounts over the Master Fund (for example, with regard to the
selection of Investment Funds for those Grosvenor-Managed Accounts or the
allocation of investment opportunities in Investment Funds that have limited
investment capacity), because the "favored" Grosvenor-Managed Accounts might pay
Grosvenor more for its services than the Master Fund. Similarly, a Grosvenor
Portfolio Manager may have an incentive to favor one or more Grosvenor-Managed
Accounts over the Master Fund if such Grosvenor Portfolio Manager has a personal
investment in such "favored" Grosvenor-Managed Accounts. No assurance can be
given that (i) the Master Fund will participate in all investment opportunities
in which other client or proprietary accounts of Grosvenor and its related
persons participate, (ii) particular investment opportunities allocated to
client or proprietary accounts of Grosvenor and its related persons other than
the Master Fund will not outperform investment opportunities allocated to the
Master Fund, or (iii) the Master Fund, on the one hand, and other
similarly-situated client and proprietary accounts of Grosvenor and its related
persons, on the other hand, will receive equal or similar treatment.
DIFFERENT REPORTING PACKAGES
Different participants in the Grosvenor-Managed Accounts, as well as
certain other persons (including persons who currently have, or who previously
have had, a direct or indirect interest in Grosvenor or who otherwise currently
are, or who previously have been, associated with Grosvenor), receive oral
and/or written reports from Grosvenor that differ in form, substance, level of
detail, timing and/or frequency, based on factors such as: (i) the size of their
investments in the Grosvenor-Managed Accounts; (ii) requests for specific types
of information made by such participants or persons acting on their behalf;
(iii) negotiations between Grosvenor and such participants or other persons
acting on their behalf; and/or (iv) Grosvenor's internal assessment of the
likely reporting needs of such participants or of persons acting on their
behalf.
In particular, certain reports may include information relating to
Investment Funds in which the Grosvenor-Managed Accounts, including the Master
Fund, invest (or in which they are contemplating an investment).
While Grosvenor provides information to investors/recipients in the
Grosvenor-Managed Accounts to enable them to monitor their investments in such
Grosvenor-Managed Accounts, it cannot effectively prevent any such
investor/recipient who has received information that has not been provided to
other recipients to use such information to determine whether to:
- withdraw/redeem from a Grosvenor-Managed Account or increase its
investment in a Grosvenor-Managed Account;
- invest directly in Investment Funds in which the Grosvenor-Managed
Accounts, including the Master Fund, are invested (or in which they
are contemplating investments), potentially in competition with the
Grosvenor-Managed Accounts, including the Master Fund; or
- withdraw/redeem from Investment Funds in which the Grosvenor-Managed
Accounts, including the Master Fund, are invested (or from which they
are contemplating withdrawing/redeeming their investments),
potentially to the detriment of the Grosvenor-Managed Accounts,
including the Master Fund.
RECEIPT OF SENSITIVE INFORMATION
Grosvenor may from time to time receive, from Investment Managers of the
Investment Funds in which the Grosvenor-Managed Accounts invest, information
that is not generally known to other investors in such Investment Funds. In
these cases, legal or regulatory constraints could prevent Grosvenor from acting
in the manner in which it otherwise would act on behalf of one or more
Grosvenor-Managed Accounts, including the Master Fund.
PROXY VOTING
Grosvenor has developed certain policies and procedures to manage the
conflicts of interest that may arise in connection with voting proxies on behalf
of the Master Fund and the other Grosvenor-Managed Accounts. In accordance with
these policies and procedures, Grosvenor endeavors to vote proxies in a manner
that best serves the interests of the Master Fund and the other
Grosvenor-Managed Accounts.
TRADE AND CLERICAL ERRORS
Subject to the considerations set forth below, Grosvenor is under no
obligation to reimburse the Master Fund for any errors or mistakes made by
Grosvenor, its employees or agents with respect to Grosvenor's placing or
executing trades for the Master Fund or for any other administrative or clerical
errors or mistakes made by the foregoing (collectively, "Trade or Clerical
Errors"), as Grosvenor considers such errors and mistakes to be a cost of doing
business. However, pursuant to the standard of care provisions of the governing
documents of the Master Fund, Grosvenor will be obligated to reimburse the
Master Fund for losses sustained by the Master Fund as a result of any Trade or
Clerical Error that is caused by Grosvenor's failure to adhere to the standard
of care set forth in such provisions. Grosvenor, subject to its fiduciary
obligations, will determine: (i) whether or not any Trade or Clerical Error is
required to be reimbursed in accordance with such standard of care provisions;
and (ii) if so, the extent of the loss that has been incurred by the Master
Fund. Grosvenor has an inherent conflict of interest with respect to determining
whether or not a Trade or Clerical Error is required to be reimbursed in
accordance with the applicable standard of care provisions and with respect to
determining the extent of the loss that has been incurred by the Master Fund. If
a Trade or Clerical Error occurs other than as a result of Grosvenor's failure
to adhere to the applicable standard of care, Grosvenor, in its sole discretion,
reserves the right to reimburse the Master Fund for any losses sustained by the
Master Fund as a result of such Trade or Clerical Error. Grosvenor's
reimbursement of the Master Fund for a Trade or Clerical Error in such a
situation will not constitute a waiver of Grosvenor's general policy to cause
the Master Fund to bear the losses associated with other Trade or Clerical
Errors that occur other than as a result of Grosvenor's failure to adhere to the
applicable standard of care. Any net gain resulting from Trade or Clerical
Errors will be for the benefit of the Master Fund and will not be retained by
Grosvenor.
OTHER CONSIDERATIONS
Grosvenor ordinarily will not cause the Master Fund to incur brokerage
commissions in connection with its investments in Investment Funds (which are,
and are expected to continue to be, the primary focus of the Master Fund's
investment activities). However, Grosvenor may from time to time cause the
Master Fund to: (i) engage in limited hedging transactions; (ii) make Direct
Investments; and/or (iii) invest in bank demand deposit accounts and/or
high-quality, short-term instruments that earn interest at competitive rates
(and/or in commingled investment products (E.G., "money market" funds) that
invest in such instruments). In these cases, Grosvenor will have the authority
to determine the financial intermediaries to be used in connection with such
transactions and to negotiate the amount of commission or other compensation to
be paid to such intermediaries in connection with such transactions. Grosvenor
will negotiate such compensation on a case-by-case basis and will not seek to
obtain products, research or services other than transactional services from
such intermediaries.
Certain of the Investment Funds in which the Master Fund invests may hold
notes or other securities issued from time to time by Grosvenor, and Grosvenor
may be aware that such Investment Funds do so. The fact that certain Investment
Funds may hold notes or other securities issued by Grosvenor could, under
certain facts and circumstances, potentially alter Grosvenor's objectivity in
determining whether or not to invest in such Investment Funds and/or whether or
not to withdraw/redeem
from such Investment Funds. Grosvenor, however, does not expect that it would
ever make portfolio management decisions for the Master Fund that would be
different from the decisions it would make for the Master Fund if such potential
conflict did not exist.
Grosvenor and its principals, and the Investment Managers and their
principals, may engage in philanthropic activities through contributions of
their time and/or financial resources to charitable organizations. Grosvenor and
its principals, on the one hand, and the Investment Managers and their
principals, on the other hand, may from time to time ask each other to
participate in their respective philanthropic activities. Grosvenor and its
principals, and the Investment Managers and their principals, are free to
participate in philanthropic opportunities brought to their attention by one
another. Under no circumstances will such participation or lack thereof be a
factor in Grosvenor's investment management process.
Similarly, Grosvenor and its principals, and investors in Grosvenor-Managed
Accounts and their principals, may engage in philanthropic activities through
contributions of their time and/or financial resources to charitable
organizations. Grosvenor and its principals, on the one hand, and investors in
Grosvenor-Managed Accounts and their principals, on the other hand, may from
time to time ask each other to participate in their respective philanthropic
activities. Grosvenor and its principals, and investors in Grosvenor-Managed
Accounts and their principals, are free to participate in philanthropic
opportunities brought to their attention by one another. Under no circumstances
will such participation or lack thereof be a factor in Grosvenor's investment
management process.
Grosvenor has frequent interaction with consultants and financial advisors
who represent prospective and existing investors in the Grosvenor-Managed
Accounts, including investors that are subject to ERISA. Grosvenor does not pay
these consultants or financial advisors to recommend any Grosvenor-Managed
Account to their clients. However, consultants and financial advisors have from
time to time invited Grosvenor and its principals to participate in particular
philanthropic activities, and can be expected to continue to do so in the
future. Grosvenor has participated in such philanthropic activities in the past
and can be expected to continue to do so in the future. Under no circumstances
will such participation or lack thereof be a factor in Grosvenor's investment
management process.
Grosvenor from time to time provides meals and entertainment to persons
associated with consultants, financial advisors, clients and prospective
clients. In certain cases, Grosvenor may provide such meals and entertainment to
clients or prospective clients at the request of consultants, financial planners
or other third-parties.
Grosvenor may from time to time compensate unaffiliated third-parties in
connection with Grosvenor's participation in investor introduction conferences
sponsored by such third-parties in which Grosvenor meets with prospective
investors introduced to Grosvenor by such third-parties.
Grosvenor may from time to time enter into arrangements with consulting
firms that represent existing and prospective clients, pursuant to which such
consulting firms provide Grosvenor certain performance or other data on the
"fund of funds" industry. Grosvenor may compensate such a consulting firm for
such services on an annual flat-fee or other basis. In no event will Grosvenor
enter into any such arrangement unless it first determines to its reasonable
satisfaction that the firm that provides services to Grosvenor for compensation
from Grosvenor discloses that fact to all clients to whom it recommends
Grosvenor.
Persons associated with Grosvenor may be related by blood or marriage to,
or otherwise have personal relationships with, persons associated with
consulting firms. In certain cases, such persons associated with consulting
firms may be responsible for: (i) analyzing and/or monitoring "fund of funds"
investment managers on behalf of such consulting firms; (ii) recommending "fund
of funds"
investment managers to the investment committees or similar governing committees
of such consulting firms; (iii) selecting the "funds of funds" investment
managers that such consulting firms will present to their clients as potential
managers of such clients' assets; (iv) recommending particular "fund of funds"
investment managers to clients of such consulting firms; (v) recommending that
clients of such consulting firms continue to retain the services of, or
discharge, "fund of funds" investment managers; and/or (vi) otherwise playing an
instrumental role in the process whereby clients of such consulting firms
select, and/or retain or discharge, "fund of funds" investment managers. In
cases where persons associated with consulting firms have one or more
responsibilities of the types described above and are related by blood or
marriage to, or otherwise have personal relationships with, persons associated
with Grosvenor, such persons may have an incentive to select Grosvenor as a
potential manager of the assets of clients of such consulting firms, to
recommend Grosvenor to clients of such consulting firms and/or to recommend that
clients of such consulting firms continue to utilize Grosvenor's services.
Grosvenor believes that is the responsibility of consulting firms to recuse
interested individuals or take other appropriate steps to protect the integrity
of their decision-making processes, and to make appropriate disclosures of
potential conflicts of interest to their clients. Grosvenor urges prospective
investors who utilize the services of consulting firms to inquire of such
consulting firms whether they are subject to such a conflict of interest.
Persons associated with Grosvenor may be related by blood or marriage to,
or otherwise have personal relationships with, persons associated with the
Investment Managers of existing or prospective Investment Funds or with other
third-parties that provide or contemplate providing services to Grosvenor and/or
the Grosvenor-Managed Accounts. In certain cases, such persons associated with
Grosvenor may be responsible for: (i) analyzing and/or monitoring existing or
prospective Investment Funds managed by such Investment Managers, or analyzing
and/or monitoring other third-parties that provide or contemplate providing
services to Grosvenor and/or one or more Grosvenor-Managed Accounts; (ii)
recommending that Grosvenor approve Investment Funds managed by such Investment
Managers as eligible investments for the Grosvenor-Managed Accounts; (iii)
recommending that one or more Grosvenor-Managed Accounts add capital to, or
withdraw their capital (in whole or in part) from, Investment Funds managed by
such Investment Managers; (iv) making the final decision to approve Investment
Funds managed by such Investment Managers as eligible investments for the
Grosvenor-Managed Accounts; (v) making the final decision to cause one or more
Grosvenor-Managed Accounts to add capital to, or withdraw their capital (in
whole or in part) from, Investment Funds managed by such Investment Managers;
(vi) recommending that Grosvenor retain other third-parties that wish to provide
services to Grosvenor and/or one or more Grosvenor-Managed Accounts; and/or
(vii) recommending that Grosvenor discharge third-parties that provide services
to one or more Grosvenor-Managed Accounts. In cases where persons associated
with Grosvenor have one or more responsibilities of the types described above
and are related by blood or marriage to, or otherwise have personal
relationships with, persons associated with Investment Managers of existing or
prospective Investment Funds or other third-parties that provide or contemplate
providing services to Grosvenor and/or one or more Grosvenor-Managed Accounts,
such persons may have an incentive to base their decisions on personal
considerations rather than on the best interests of the affected
Grosvenor-Managed Accounts. Grosvenor, however, monitors relationships of this
type with a view to determining whether there is a reasonable likelihood that
such persons will base their decisions on personal considerations rather than on
the best interests of the affected Grosvenor-Managed Accounts, and will take
appropriate action if it determines such a reasonable likelihood exists.
GROSVENOR'S FIDUCIARY DUTIES
Grosvenor has fiduciary duties to the Master Fund to act in good faith and
with fairness in all its dealings with the Master Fund. Grosvenor will take such
duties into account in dealing with all actual and potential conflicts of
interest.
THE INVESTMENT MANAGERS
The Investment Managers are likely to be subject to many of the same types
of conflicts of interest to which Grosvenor is subject. For example, the
Investment Managers may be involved in other business ventures, including the
management and/or administration of other investment funds and accounts whose
investment objectives are identical or substantially similar to those of the
Investment Funds. The Master Fund will not share in the risks or rewards of such
other ventures. In addition, such other ventures will compete with the relevant
Investment Funds for the time and attention of the relevant Investment Managers,
and might create additional conflicts of interest or raise other special
considerations.
The Investment Managers have responsibility for investing the capital
allocated to them. The Investment Managers also manage other accounts (including
other accounts in which they may have an interest) and may have financial and
other incentives to favor such accounts over the Investment Funds in which the
Master Fund invests. In investing on behalf of other clients, as well as the
Investment Funds in which the Master Fund invests, the Investment Managers must
allocate their resources, as well as limited market opportunities. Doing so
could increase the level of competition for the same trades that otherwise might
be made for the Investment Funds in which the Master Fund invests, including the
priorities of order entry, as well as make it difficult or impossible to take or
liquidate a particular position at a price indicated by an Investment Manager's
strategy.
In addition, in connection with investing and trading for other accounts,
including their proprietary accounts, the Investment Managers may make use of
information obtained by them in the course of investing and trading for the
Investment Funds. They will have no obligation to compensate the Investment
Funds in any respect for their receipt of such information or to account to any
such Investment Fund for any profits earned from their use of such information.
The Investment Managers and their principals, in managing investment
accounts other than the Investment Funds, may employ trading methods, policies
and strategies which differ from those which they employ on behalf of such
Investment Funds. Therefore, the results of the Master Fund's investments in
such Investment Funds may differ from the results of other accounts managed by
such Investment Managers.
The Investment Managers value the illiquid, longer-term investments held by
their Investment Funds in a variety of different ways, and have considerable
discretion in doing so. The Investment Managers have a conflict of interest in
arriving at such valuations, which affect both the performance of their
Investment Funds and the advisory compensation received by the Investment
Managers.
The Investment Managers have a conflict of interest in allocating capital
to longer-term and/or illiquid investments. While such positions may hold
significant profit potential (and, therefore, the potential to generate
substantial performance/incentive fees or other performance/incentive
compensation), they can create material valuation and illiquidity risks for
investors. In addition, performance/incentive fees or other
performance/incentive compensation may be calculated separately in respect of
certain longer-term and/or illiquid investments irrespective of the overall
performance of an Investment Fund.
The Investment Managers select the brokers and dealers that execute
transactions for their respective Investment Funds and negotiate the related
brokerage commissions and other transaction costs. In selecting brokers and
dealers and/or in negotiating commissions and other compensation, Investment
Managers (subject to their overall duty to obtain "best execution" of all
transactions for the Investment Funds they manage):
- have authority to and may consider the full range and quality of the
services and products provided by various brokers and dealers
(including factors such as the ability of the brokers and dealers to
execute transactions efficiently, their responsiveness to
instructions, their facilities, reliability and financial
responsibility, and the value of any research or other services or
products they provide); and
- do not necessarily select brokers and dealers that charge the lowest
transaction costs.
An Investment Manager may cause an Investment Fund to pay transaction costs
to a broker or dealer even though such Investment Manager and/or clients of such
Investment Manager other than such Investment Fund are the exclusive
beneficiaries of non-execution related products and services provided by such
broker or dealer.
These activities and conflicts of interest are explicitly acknowledged and
consented to by each Member as a necessary condition to the Member's admission
to the Master Fund.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
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 was no change 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 has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 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) Not applicable.
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) Grosvenor Registered Multi-Strategy Fund (TI 1), LLC
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By (Signature and Title)* /s/ Steven L. Suss
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Steven L. Suss,
President, Treasurer and Senior Vice President
(principal executive officer and
principal financial officer)
Date June 10, 2010
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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/ Steven L. Suss
-----------------------------------------------
Steven L. Suss,
President, Treasurer and Senior Vice President
(principal executive officer and
principal financial officer)
Date June 10, 2010
------------------------------------------------------
* Print the name and title of each signing officer under his or her
signature.