Washington, D.C. 20549
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Registrant’s annual report transmitted to unit holders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1) is as follows:
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
1. Organization
Ironwood Multi-Strategy Fund LLC (“the Fund”) was organized under the laws of the state of Delaware as a limited liability company on August 25, 2010. The Fund commenced operations on January 1, 2011 and operates pursuant to the terms and conditions of the amended and restated limited liability company agreement (“the LLC Agreement”). While non-diversified for the Investment Company Act of 1940 (“the 1940 Act”) purposes, the Fund intends to comply with the diversification requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (“the Code”), as such requirements are described in more detail below.
The Fund’s investment objective is capital appreciation with limited variability of returns. The Fund attempts to achieve this objective by investing substantially all of its assets in Ironwood Institutional Multi-Strategy Fund LLC (“the Master Fund”).
Ironwood Capital Management Corporation serves as the Fund’s investment adviser (“the Adviser”) and is responsible for providing day-to-day investment management services to the Fund, subject to the supervision of the Fund’s Board of Directors (“the Board”). The Adviser is registered as an investment adviser under the U.S. Investment Advisers Act of 1940 (“the Advisers Act”). The Fund has no fixed termination date and will continue unless the Fund is otherwise terminated under the terms of the LLC Agreement or unless and until required by law. The Board has overall responsibility for monitoring and overseeing the Fund’s investment program, management and operations. A majority of the members of the Board are not “interested persons” (as defined by the 1940 Act) of the Fund or the Adviser.
The Fund is a “Feeder fund” in a “Master-Feeder” structure whereby the Fund invests substantially all of its assets in the Master Fund. The Master Fund has the same investment objective as the Fund. At October 31, 2013, the Fund’s investment in the Master Fund represented 56.51% of the Master Fund’s net assets. The consolidated financial statements of the Master Fund including the consolidated schedule of investments are attached to this report and should be read with the Fund’s financial statements.
Foreside Fund Services, LLC acts as the distributor (the “Distributor”) of the Units on a best-efforts basis, subject to various conditions. Units were offered at a price equal to $1,000 per Unit on the initial date on which Units were sold and, thereafter, at the current net asset value per Unit on the first business day of each month, plus any applicable sales charge. The Distributor has entered into, and may continue to enter into selected dealer agreements with various brokers and dealers (“Selling Agents”) that have agreed to participate in the distribution of the Fund’s Units.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
1. Organization (continued)
Each prospective investor (and Members who subscribe for additional Units) is required to certify that the Units purchased are being acquired directly or indirectly for the account of either a natural person who is an “accredited investor”, as defined in Rule 501 of the Securities and Exchange Commission Regulation D, or a non-natural person that is a “qualified client”, as defined in Rule 205-3 of the Advisers Act, as amended. The Fund and/or the Selling Agent may impose additional eligibility requirements for Members who purchase Units. The minimum initial investment is $50,000, subject to waiver by the Adviser to an amount not less than $25,000. The minimum subsequent investment is $10,000, subject to waiver by the Adviser. Members may purchase their Units only through a Selling Agent or directly from the Fund.
Investments may be subject to a sales charge (a “Sales Charge”) of up to 3.00%, subject to waiver or adjustment (i) for investment in Units by affiliates of the Adviser; (ii) for certain institutional investors who have previously invested in private investment vehicles managed by the Adviser; (iii) where a prospective Member is purchasing Units through a broker-dealer participating in the offering that has agreed to waive all or a portion of such Sales Charge for all investors purchasing Units through such broker-dealer; or (iv) where a broker-dealer has agreed to waive all or a portion of such Sales Charge for particular sub-sets of investors purchasing Units through such broker-dealer (i.e. where a particular broker-dealer has certain established “breakpoints” for investors making an investment above a certain threshold). The Sales Charge is in addition to the subscription price for Units and does not form a part of an investor’s investment in the Fund. All or a portion of the Sales Charge relating to Units is paid directly to the Selling Agent that assisted in the placement of such Units.
The Board, in its sole and absolute discretion, may determine to cause the Fund to offer to repurchase Members’ Units (each, an “Offer”) at net asset value per Unit on a repurchase date pursuant to an Offer. Any offer to repurchase Members’ Units will only be made to Members at the same time as, and in parallel with, each repurchase offer made by the Master Fund to its investors, including the Fund. In determining whether the Fund should make an Offer to repurchase Units from Members in response to repurchase requests, the Board will consider, among other things, the recommendation of the Adviser.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
1. Organization (continued)
Each such repurchase offer will generally apply to up to 10% of the net assets of the Fund. In an Offer, the Board may determine to cause the Fund to repurchase less than the full amount of Units that Members requested to be repurchased. The Adviser expects that it will recommend to the Board that the Fund make an Offer to repurchase Units from Members semi-annually on each June 30 and December 31 (a “Repurchase date”) (or if such date is not a business day, on the immediately preceding business day). A Member who tenders for repurchase of such Member’s Units during the first year following such Member’s initial or any subsequent capital contribution will be subject to a fee of 5% of the value of the Units repurchased by the Fund, payable to the Fund. If a Member makes an additional subscription, a separate lock-up period also shall be deemed to run from the date of such subscription for additional Units, but that separate lock-up period shall apply only to those additional Units. The Board may, in certain limited instances where the Board has determined that the remaining Members will not be materially and adversely affected or prejudiced, waive the imposition of the early repurchase fee. Any such waiver does not imply that the early repurchase fee will be waived at any time in the future. Members who tender a portion of their Units, up to 95% of such Member’s Units (defined as a specific dollar value in their Offer Acceptances (“Offer Acceptances”)), and which portion is repurchased by the Fund, will receive the specified dollar amount equal to the net asset value of such Units repurchased by the Fund. Promptly after the Repurchase Date, each Member whose Units or portion thereof have been repurchased will be given a non-interest bearing, non-transferable promissory note issued by the Fund entitling such Member to be paid an amount equal to 100% of the unaudited net asset value of such Member’s repurchased Units, determined as of the Repurchase Date (after giving effect to all allocations to be made as of that date to such Member, including any Advisory Fee allocable to such Units via the Fund’s investment in the Master Fund). The note will entitle the Member to be paid within 90 calendar days after the Repurchase Date (a “Payment Date”).
If a Member has tendered for repurchase 95% or more of the Units held by such Member in an Offer Acceptance and 95% or more of such Member’s Units are repurchased by the Fund, such Member shall receive cash or a non-interest bearing, non-transferable promissory note issued by the Fund in an amount equal to 95% of the estimated unaudited net asset value of such Member’s Units being repurchased, determined as of the Repurchase Date (after giving effect to all allocations to be made as of that date to such Member’s Units, including any Advisory Fee allocable to such Units via the Fund’s investment in the Master Fund), which will be paid on or prior to the Payment Date (an “Initial Payment”); and a non-interest bearing, non-transferable promissory note issued by the Fund entitling such Member to up to the remaining 5% of the estimated unaudited net asset value of such Member’s Units being repurchased, determined as of the Repurchase Date (the “Subsequent Payment”).
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
1. Organization (continued)
Following the later of the completion of the Fund’s annual audit or such longer period as the Board in its discretion deems necessary to protect the interests of the remaining Members, the amount of the Subsequent Payment will be adjusted so that the sum of the Initial Payment and the Subsequent Payment is equal to 100% of the final audited net asset value of such Member’s Units being repurchased, determined as of the Repurchase Date and the as adjusted Subsequent Payment will be paid to such Member.
2. Significant Accounting Policies
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Such policies are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including the estimated fair value of investments. Actual results could differ from those estimates.
Cash
In the normal course of business, the Fund maintains its cash balances in financial institutions, which at times may exceed federally insurable limits. The Fund is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. The Adviser monitors the financial condition of such financial institutions and does not anticipate any losses from these counterparties. As of October 31, 2013, the Fund holds cash accounts with entities that are affiliated with the Fund’s administrator.
Investment in the Master Fund
The Fund records its investment in the Master Fund at fair value which is represented by the Fund’s Units held in the Master Fund valued at their per Unit net asset value. Valuation of Investment Funds and other investments held by the Master Fund is discussed in the notes to the Master Fund’s consolidated financial statements. The performance of the Fund is directly affected by the performance of the Master Fund. The consolidated financial statements of the Master Fund, which are attached, are an integral part of these financial statements. Please refer to the accounting policies disclosed in the consolidated financial statements of the Master Fund for additional information regarding significant accounting policies that affect the Fund.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
2. Significant Accounting Policies (continued)
Investment in the Master Fund (continued)
As of October 31, 2013, the Fund held $12,700,836 of subscriptions received in advance which were invested in the Master Fund effective November 1, 2013.
Income Recognition and Expenses
The Fund recognizes income and records expenses on an accrual basis. Income, expenses and realized and unrealized gains and losses are recorded monthly. The change in the Master Fund’s net asset value is included in net change in unrealized appreciation/depreciation in the statement of operations. Realized gain (loss) from investment in the Master Fund is calculated using the specific identification methodology.
Income dividends and capital gains distributions received by the Fund from the Master Fund are automatically reinvested in additional Units of the Master Fund, to the extent that the Fund’s investors have elected to reinvest dividends in accordance with the Master Fund’s dividend reinvestment plan.
Income Taxes
The Fund intends to continue to comply with the requirements of Subchapter M of the Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its Members. Therefore, no provision for federal income taxes is required. The Fund files tax returns with the U.S. Internal Revenue Service and various states. Such taxes are generally based on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The Fund has concluded there are no significant uncertain tax positions that would require recognition in the financial statements as of October 31, 2013. If applicable, the Fund recognizes interest accrued related to liabilities for unrecognized tax benefits in interest expense and penalties in other expenses in the statement of operations. Generally, tax authorities can examine all tax returns filed for the last three years.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
2. Significant Accounting Policies (continued)
Income Taxes (continued)
The Fund has a tax year that ends on December 31.
The Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”) modernizes several tax provisions related to Regulated Investment Companies (“RICs”) and their shareholders. One key change made by the Modernization Act is that capital losses will generally retain their character as short-term or long-term and may be carried forward indefinitely to offset future gains. These losses are utilized before other capital loss carry forwards that expire.
At December 31, 2012, the Fund did not have any available unused short-term capital losses or unused long-term capital losses for federal income tax purposes.
As of October 31, 2013, the cost and related gross unrealized appreciation and depreciation for tax purposes were as follows:
| Cost of investments for tax purposes | | $ | 338,249,331 | |
| | | | | |
| Gross tax unrealized appreciation | | | 19,453,995 | |
| Gross tax unrealized depreciation | | | – | |
| Net tax unrealized appreciation/depreciation on investments | | $ | 19,453,995 | |
Permanent differences, primarily due to the tax character of distribution, resulted in the following reclassifications among the Fund’s components of net assets at December 31, 2012:
| Accumulated net investment (loss) | | $ | 5,200 | |
| Accumulated undistributed net realized gain from investments | | $ | (5,200 | ) |
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
2. Significant Accounting Policies (continued)
Distribution of Income and Gains
The Fund declares and pays dividends annually from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes.
In order to satisfy the diversification requirements under Subchapter M of the Code, the Master Fund generally invests its assets in Investment Funds organized outside the United States that are treated as corporations for U.S. tax purposes and are expected to be classified as passive foreign investment companies (PFICs). As such, the Fund expects that distributions generally will be taxable as ordinary income to the Members.
As of December 31, 2012, the components of distributable earnings on a tax basis were as follows:
| Undistributed long-term capital gains | | $ | 748 | |
Dividend Reinvestment Plan
Each Member whose Units are registered in its own name will have all income, dividends and capital gains distributions automatically reinvested in additional Units unless such Member specifically elects to receive all income, dividends and capital gain distributions in cash.
3. Fair Value of Financial Instruments
The fair value of the Fund’s assets and liabilities that qualify as financial instruments approximates the carrying amounts presented in the statement of assets and liabilities.
The units of account that are valued by the Fund are its Units in the Master Fund and not the underlying holdings of the Master Fund. Thus, the inputs used by the Fund to value its investment in the Master Fund may differ from the inputs used to value the underlying holdings of the Master Fund.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
4. Advisory Fee, Related Party Transactions and Other
State Street Bank and Trust Company (“State Street”) provides accounting and administrative services to the Fund under an administrative services agreement.
The Fund incurs all ongoing ordinary administrative and operational costs of the Fund and certain expenses indirectly via its investment in the Master Fund, including accounting and administrative, custodian and advisory expenses. The Adviser has entered into an agreement with the Fund (the “Expense Limitation Agreement”) and the Master Fund whereby it has contractually agreed to waive its fees and/or reimburse certain of the Fund’s and Master Fund’s monthly expenses (excluding taxes, brokerage commissions, interest expenses incurred in connection with any credit facility, other transaction related expenses, custody fees, any extraordinary expenses of the Fund, any acquired fund fees and expenses, the Advisory Fee paid by the Master Fund, and the Account Servicing Fee paid by the Fund) to the extent necessary to ensure that the monthly expenses of the Fund will not exceed 0.020833% (0.25% per annum) of the Fund’s net assets as of each month end during the term of the Expense Limitation Agreement. The Fund will carry forward, for a period not to exceed 3 years from the date on which a waiver or reimbursement is made by the Adviser, any expenses in excess of the Expense Limitation and repay the Adviser such amounts; provided that the Fund is able to effect such reimbursement and remain in compliance with the Expense Limitation disclosed in the Prospectus that was in effect at the time of the original waiver. Expenses in excess of the Expense Limitation, as waived and/or reimbursed by the Adviser for the six months ended October 31, 2013, were $742,880 and are subject to recoupment by the Adviser from the Fund for future years as described above. An additional $884,974 from prior periods is also subject to recoupment.
The Fund pays to the Adviser an account servicing fee (the “Account Servicing Fee”). The Account Servicing Fee will accrue monthly at a rate equal to 0.0625% (a 0.75% annual rate) of the net asset value of each Member’s Units as of the close of business on the last calendar day of each month. The Account Servicing Fee is payable in arrears as of the last calendar day of the applicable quarter. The Adviser may, in its sole discretion, pay up to the entire amount of the Account Servicing Fee relating to Units to a Selling Agent that assisted in the servicing of accounts. For the six months ended October 31, 2013, the Fund incurred Account Servicing Fees of $1,046,337, of which $608,874 was payable to the Adviser at October 31, 2013. As of October 31, 2013, the Fund was entitled to reimbursement of $551,483 from the Adviser under the Expense Limitation Agreement. Such amount was offset against the account servicing fees payable to the Adviser.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Ironwood Multi-Strategy Fund LLC
Notes to Financial Statements
As of October 31, 2013
(Unaudited)
4. Advisory Fee, Related Party Transactions and Other (continued)
Compensation to the Board of the Fund during the six months ended October 31, 2013 was $25,000.
As of October 31, 2013, a Director of the Fund held 0.03% of the Units in the Fund.
5. Subsequent Events
For the period November 1, 2013 to December 30, 2013, the Fund received subscriptions of approximately $63,193,000 and tenders of approximately $1,909,000.
See attached consolidated financial statements of Ironwood Institutional Multi-Strategy Fund LLC.
Fund Management
The Fund’s officers are appointed by the Directors and oversee the management of the day-to-day operations of the Fund under the supervision of the Board of Directors. One of the Directors and all of the officers of the Fund are officers or employees of the Ironwood Capital Management (the “Adviser” or “Ironwood”). The other Directors are not affiliated with the Adviser and are not “interested persons” as defined under Section 2(a)(19) of the 1940 Act (the “Independent Directors”). A list of the Directors and officers of the Fund and a brief statement of their present positions and principal occupations during the past five years are set out below.
Directors (unaudited)
| Name and Age | Position(s)
Held with
Fund | Term of
Office and
Length of
Time Served | Principal
Occupation(s)
During the
Past 5 Years | Number of
Portfolios in
Fund
Complex
Overseen by
Director | Other Public
Company
Directorships |
| |
| Independent Directors |
Richard W. Meadows Age: 63 | Independent Director | Term – indefinite Length – Since inception | Executive Vice President of mutual fund administration firm | 2 | 0 |
M. Kelley Price Age: 63 | Independent Director | Term – indefinite Length – Since inception | Executive Vice President of mutual fund administration firm | 2 | 0 |
Interested Directors* |
Jonathan Gans Age: 42 | President, Director, Chairman of the Board | Term – indefinite Length – Since inception | Chief Executive Officer and President of Ironwood | 2 | 0 |
* Mr. Gans is deemed to be an “interested person,” as defined in the 1940 Act, of the Fund (“Interested Director”) because of the affiliation with the Fund and Ironwood.
Officers (unaudited)
Set forth below is the name, age, position with the Fund, length of term of office, and the principal occupation for the last five years, as of October 31, 2013. The business address of each officer is care of Ironwood Capital Management, One Market Plaza, Steuart Tower, Suite 2500, San Francisco, California 94105.
| Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During the Past 5 Years |
Jonathan Gans Age: 42 | Chief Executive Officer, President | Term - indefinite Length - Since inception | Chief Executive Officer and President of Ironwood Capital Management |
Laurie Chatoff Age: 46 | Secretary | Term – indefinite Length – Since 3/15/2013 | Director of Finance of Ironwood Capital Management as of 10/3/2011 Previous: Consultant to Alternative Investment Clients |
Alison Sanger Age: 42 | Chief Compliance Officer | Term - indefinite Length - Since inception | Chief Operating Officer/ Chief Compliance Officer of Ironwood Capital Management |
Martha Boero Age: 30 | Treasurer | Term - indefinite Length – Since 3/15/2013 | Controller of Ironwood Capital Management as of 7/1/2009 Previous: Fund Accountant of Ironwood Capital Management |
Investment Advisory Agreement (unaudited)
The Investment Advisory Agreement (the “Agreement”) provides that the Adviser is responsible, subject to the supervision of the Board of Directors (the “Board”), for providing investment supervisory services to the Fund. As the Fund’s investment adviser, Ironwood makes the Fund’s investment decisions. The Adviser buys and sells securities for the Fund and conducts the research that leads to the purchase and sale decisions. As necessary, the Adviser is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges or other transaction costs.
Subject to the general supervision of the Board and in accordance with the investment objective, policies and restrictions of the Fund, the Adviser provides the Fund with ongoing investment guidance, policy direction and monitoring of the Fund pursuant to the Agreement. The Agreement may be terminated at any time by the Board, by a majority vote of the Members or by the Adviser.
The Agreement was approved for an initial two-year term on December 23, 2010. Thereafter, the Agreement continues in effect from year to year subject to the annual approval by the Board of Directors (including a majority of the Independent Directors), or by the vote of a majority vote of the Members of the Fund.
The Agreement provides that the Adviser shall not be liable for any error of judgment or for any loss suffered by the Fund in connection with the subject matter of the Agreement unless such loss arises from willful misfeasance, bad faith or gross negligence on the Adviser’s part in the performance of its duties under the Agreement or by reason of its reckless disregard of its obligations and duties under the Agreement.
The Agreement also provides that the Fund shall indemnify the Adviser and its affiliates and their respective partners, members, managers, directors, officers employees, and controlling persons (“Indemnified Parties”) against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with the Fund, so long as the liability or expense is not incurred by reason of the Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of its duties under the Agreement or resulted from reckless disregard of its obligations and duties under the Agreement.
The Board most recently approved the Agreement on September 26, 2013. In approving the Agreement, the Board considered the Fund’s existing relationship with the Adviser, as well as the ongoing commitment of the Adviser to the Fund. The Board reviewed a presentation on the Fund’s investment performance to date. The Board evaluated the resources and experience of the Adviser and the individuals dedicated to the Fund’s investment program. They evaluated these factors in light of the nature, extent and quality of the services provided by the Adviser, the total compensation received by the Adviser from the Fund and the total cost to the Fund of using the Adviser’s services, taking into account expenses borne by the Adviser, those that are passed on to the Fund by the Adviser, and the Expense Limitation Agreement, whereby the Adviser agrees to limit certain of the Fund’s expenses to 0.25% of the Fund’s net assets.
Investment Advisory Agreement (unaudited) (continued)
In addition, the Board reviewed fee information and expense ratios for a variety of investment funds similar in structure to the Fund. The Board determined that the Adviser’s fee is competitive to those charged by investment advisers of similar funds and the Fund’s expense ratio was reasonable given the Fund’s net assets, particularly after taking into account the Expense Limitation Agreement. The Board noted that Fund performance had been strong, especially compared to benchmarks and similar funds. The Board also noted that estimated profitability appeared reasonable, again noting the Adviser’s significant effort to minimize the Fund’s expenses through the Expense Limitation Agreement. The Board will consider breakpoints in the future should economies of scale for the Adviser be achieved. The Board determined that the Adviser has made a substantial commitment to the recruitment and retention of high quality personnel. The Board also acknowledged that the Adviser continues to provide a high level of monitoring, investment decision-making, and investor service. The Board agreed that the Adviser has demonstrated that it is committed to maintaining and expanding operational resources reasonably necessary to manage the Fund in a professional manner that is in accordance with the best interests of the Fund. The Board also took into account the Adviser’s compliance policies and procedures, including the procedures used to determine the value of each of the Fund’s investments. Accordingly, they concluded that continuing the Agreement served the interests of the Fund and the Members.
Subsequent Events – Amendments to the Fund’s Limited Liability Company Agreement
The Fund is governed by its Limited Liability Company Agreement, which was amended by the Board at a meeting held on December 6, 2013. The amendments include (listed in the order in which they appear in the agreement):
| | · | clarification that the “Lock-Up Period” and related “Early Repurchase Fee” applies to all purchases of Units on a rolling basis*; |
| | · | modification of the definition of “Business Day” to align with the prospectus; |
| | · | clarification of the Fund’s stated purpose to align with the prospectus, which allows limited investments in U.S.-organized entities; |
| | · | terms allowing the Board to accept transfers in an amount less than $25,000; |
| | · | terms under which Members may remove a Director to permit removal by a Member vote of less than the stated two-thirds-threshold, to the extent a lower threshold may be required by applicable law; |
| | · | deletion of language allowing the Board to allocate certain expenses of the Fund to some, but not all Members; |
| | · | deletion of language providing that sales charge waivers or adjustments are at the sole discretion of the Board; |
| | · | deletion of the section on “Additional or Replacement Managers,” which was deemed to be inapplicable to the Fund’s Board-led governance model; |
| | · | clarification of the terms under which the section on repurchases of Units by the Fund may be modified from time to time; |
| | · | terms adding alternatives available to the Board to address over-subscribed tenders to provide for more flexibility and align with the prospectus; |
| | · | modification of the minimum account balance required to be maintained by Members making partial tenders; |
| | · | modification of the Fund’s available methods of valuation to confirm that GAAP valuations will take precedent absent potential changes in law; |
| | · | clarification of when annual distributions are made to align with the Fund’s prospectus; |
Subsequent Events – Amendments to the Fund’s Limited Liability Company Agreement (continued)
| | · | clarification that annual distributions (if elected by a Member not to be reinvested in additional Units) are made in cash absent Board determination to make annual distributions in cash and Units*; |
| | · | modification of the indemnification provisions to eliminate terms that could delay payment to the indemnified parties in the event of certain securities law-related claims that might be made against the indemnified parties; and |
| | · | modification of the ERISA provisions to reflect the operation of ERISA as it relates to SEC-registered funds. |
Each of these amendments was found by the Board to be in the best interests of the Fund and not to be materially adverse to the Members. Several of the provisions set out above were amended previously and are listed here as a matter of convenience (those are identified by *). The remaining provisions generally take effect 60 days following the date of mailing of this Semi-Annual Report and then will, to the maximum extent practicable, be given retroactive effect to the date of the Fund’s organization. A copy of the Fund’s Limited Liability Company Agreement is maintained on the Securities and Exchange Commission’s website and is available on request.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Item 6. Investments.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
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 Fund’s board of directors, where those changes were implemented after the Fund 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 Fund’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Fund’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the Fund’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 Fund’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) are attached hereto.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) are attached hereto.
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.
