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 811-21552
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J.P. Morgan Multi-Strategy Fund, L.L.C.
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(Exact name of registrant as specified in charter)
522 Fifth Avenue, 10th Floor
New York, NY 10036
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(Address of principal executive offices) (Zip code)
Wayne Chan, Esq.
J.P. Morgan Alternative Asset Management, Inc.
522 Fifth Avenue, Floor 10
New York, NY 10036
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(Name and address of agent for service)
Copy to:
Karen H. McMillan, Esq.
Shearman & Sterling LLP
801 Pennsylvania Avenue NW, Suite 900
Washington, D.C. 20004-2604
registrant's telephone number, including area code: 212-837-1432
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Date of fiscal year end: March 31
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Date of reporting period: March 31, 2005
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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, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
FINANCIAL STATEMENTS
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Financial Statements
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
CONTENTS
Report of Independent Registered Public Accounting Firm ................... 1
Schedule of Investments ................................................... 2
Statement of Assets, Liabilities and Members' Capital ..................... 5
Statement of Operations ................................................... 6
Statement of Changes in Members' Capital .................................. 7
Statement of Cash Flows ................................................... 8
Financial Highlights ...................................................... 9
Notes to Financial Statements ............................................. 10
Directors and Officers Biographical Data .................................. 18
[LETTERHEAD OF PRICEWATERHOUSECOOPERS [LOGO]]
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers Center
300 Madison Avenue
New York NY 10017
Telephone (646) 471 4000
Facsimile (813) 286 6000
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
J.P. Morgan Multi-Strategy Fund, L.L.C.
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, of cash flows and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Multi-Strategy Fund, L.L.C. (the "Fund") at March 31, 2005, and the
results of its operations, the changes in its members' capital, its cash flows
and the financial highlights for the period August 1, 2004 (commencement of
operations) through March 31, 2005, 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, which included confirmation
of investments at March 31, 2005 with the investment funds, provides a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
May 27, 2005
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments
March 31, 2005
% OF
MEMBERS'
STRATEGY INVESTMENT FUND COST FAIR VALUE CAPITAL LIQUIDITY
- -------- --------------- ---- ---------- ------- ---------
Distressed Securities King Street Capital LP $ 2,340,000 $ 2,580,610 2.98% Quarterly
Distressed Securities Ore Hill Fund LP 3,095,000 3,444,960 3.98% Semi-Annually
Distressed Securities Satellite Fund II LP 2,590,000 2,750,463 3.18% Annually
Strategic Value Restructuring
Distressed Securities Fund LP 3,200,000 3,379,504 3.90% Annually
----------- ----------- ------
TOTAL 11,225,000 12,155,537 14.04%
=========== =========== ======
Long/Short Equities Black Bear Fund I LP 1,779,000 1,802,819 2.08% Quarterly
Long/Short Equities Eastern Advisor Fund LP 1,900,000 2,058,419 2.38% Monthly
Endeavour Capital Partners II
Long/Short Equities LP 2,000,000 2,050,210 2.37% Quarterly
Long/Short Equities Glenview Inst. Partners LP 3,293,000 4,226,295 4.88% Quarterly
Lansdowne European Strategy
Long/Short Equities Equity Fund LP 2,867,000 3,226,536 3.72% Quarterly
Long/Short Equities LongBow Qualified Partners LP 2,540,000 2,649,701 3.06% Quarterly
Long/Short Equities Narragansett I LP 2,690,000 2,762,094 3.19% Annually
Long/Short Equities Stadia Consumer Fund (QP) LP 2,780,000 2,795,509 3.23% Quarterly
Long/Short Equities Torrey Pines Fund LLC 2,590,000 2,832,937 3.27% Quarterly
Long/Short Equities Whitney New Japan Partners LP 2,379,000 2,406,963 2.78% Quarterly
----------- ----------- ------
TOTAL 24,818,000 26,811,483 30.96%
=========== =========== ======
Merger Arbitrage/Event Driven Deephaven Event Arb Fund LLC 3,000,000 3,161,871 3.66% Monthly
DKR Saturn Event Driven Fund
Merger Arbitrage/Event Driven LP 2,424,000 2,719,326 3.14% Quarterly
Merger Arbitrage/Event Driven M & M Arbitrage LLC 2,135,000 2,235,129 2.58% Quarterly
Merger Arbitrage/Event Driven Special K Capital II LP 1,880,000 2,063,461 2.38% Annually
----------- ----------- ------
TOTAL 9,439,000 10,179,787 11.76%
=========== =========== ======
2
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments
March 31, 2005
AQR Global Asset Allocation
Opportunistic Inst. Fund II LP $ 1,435,000 $ 1,441,293 1.66% Quarterly
Opportunistic Brevan Howard LP 2,900,000 3,044,239 3.52% Monthly
Opportunistic NorOdin Macro RV LP 1,950,000 1,955,252 2.26% Quarterly
Opportunistic OLEA Global Partners LP 1,700,000 1,690,756 1.95% Monthly
Opportunistic Traxis Fund Onshore LP 2,890,000 2,975,466 3.44% Quarterly
Vega Select Opportunities Fund
Opportunistic Ltd. 2,340,000 2,485,421 2.87% Monthly
----------- ----------- ------
TOTAL 13,215,000 13,592,427 15.70%
=========== =========== ======
AIG DKR Sound Shore Oasis Fund
Relative Value LP 2,300,000 2,340,343 2.70% Quarterly
Relative Value Aviator Partners LP 488,000 459,828 0.53% Quarterly
CQS Capital Structure
Relative Value Arbitrage Fund Ltd. 2,404,000 2,494,431 2.88% Quarterly
Relative Value D.E. Shaw Oculus Fund LLC 2,750,000 3,144,124 3.63% Quarterly
Deephaven Market Neutral Fund
Relative Value LLC 1,186,513 1,236,943 1.43% Monthly
Relative Value Precept Domestic Fund II LP 1,607,000 1,496,937 1.73% Quarterly
Relative Value QVT Associates LP 1,330,000 1,384,017 1.60% Quarterly
Severn River Capital Partners
Relative Value LP 1,980,000 1,973,091 2.28% Quarterly
Relative Value The Obsidian Fund LLC 2,340,000 2,429,188 2.80% Quarterly
Relative Value Vega Relative Value Fund Ltd 2,290,000 2,205,294 2.55% Monthly
----------- ----------- ------
TOTAL 18,675,513 19,164,196 22.13%
Short Selling Kingsford Capital Partners LP 1,565,000 1,493,160 1.72% Quarterly
Short Selling Rocker Partners LP 1,640,000 1,859,406 2.15% Annually
----------- ----------- ------
TOTAL 3,205,000 3,352,566 3.87%
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TOTAL INVESTMENTS $80,577,513 85,255,996 98.46%
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Other Assets, less Liabilities 1,337,786 1.54%
----------- ------
MEMBERS' CAPITAL $86,595,782 100.00%
=========== ======
3
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments
March 31, 2005
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Investment Objective as a Percentage of Investments
Distressed Securities 14.26%
Long/Short Equities 31.45%
Merger Arbitrage/Event Driven 11.94%
Opportunistic 15.94%
Relative Value 22.48%
Short Selling 3.93%
THE INVESTMENTS IN INVESTMENT FUNDS SHOWN ABOVE, REPRESENTING 98.46% OF MEMBERS'
CAPITAL, HAVE BEEN VALUED AT FAIR VALUE AS DISCLOSED IN NOTE 2B.
None of the Investment Funds are related parties. The management agreements of
the general partners/managers provide for compensation to such general
partners/managers in the form of fees ranging from 1% to 2% annually of net
assets and incentive fees of 20% to 25% of net profits earned.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Statement of Assets, Liabilities and Members' Capital
March 31, 2005
ASSETS
Investments in investment funds, at fair value (cost $80,577,513) $85,255,996
Cash and cash equivalents 395,719
Investments paid in advance 6,146,234
Deferred initial offering costs 136,599
Prepaid fees 39,136
Interest receivable 4,099
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TOTAL ASSETS 91,977,783
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LIABILITIES
Contributions received in advance 4,237,500
Tender offer proceeds payable 629,414
Due to Investment Manager 262,859
Professional fees payable 104,717
Management fees payable 85,677
Other accrued expenses 61,834
-----------
TOTAL LIABILITIES 5,382,001
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NET ASSETS $86,595,782
===========
MEMBERS' CAPITAL
Represented by:
Net Capital $81,917,299
Net unrealized gain on investments 4,678,483
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MEMBERS' CAPITAL $86,595,782
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Statement of Operations
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
INVESTMENT INCOME
Interest $ 25,478
-----------
EXPENSES
Management Fees and Administrative Services Fees 765,571
Amortization of offering costs 273,198
Professional fees 108,333
Organizational costs 102,449
Administration fees 91,442
Insurance expenses 39,243
Directors fees 23,542
Custodian fees 10,138
Other expenses 1,914
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Total expenses 1,415,830
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Fund expenses waived by Investment Manager (275,000)
Fund expenses paid by Investment Manager (60,418)
Fund expenses waived by Administrator (13,252)
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Total waivers and reimbursements (348,670)
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Net expenses 1,067,160
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NET INVESTMENT LOSS (1,041,682)
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REALIZED AND UNREALIZED GAIN FROM INVESTMENT FUND TRANSACTIONS
Net realized gain from investment fund transactions 66,235
Net unrealized appreciation on investment funds 4,678,483
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Net realized and unrealized gain from investment fund
transactions 4,744,718
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NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS $ 3,703,036
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Statement of Changes in Members' Capital
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
MANAGING SPECIAL OTHER
MEMBER MEMBER MEMBERS TOTAL
FROM INVESTMENT ACTIVITIES
Net investment loss $ (135) $ (657) $ (1,040,890) $ (1,041,682)
Net realized gain from investment fund transactions 9 42 66,184 66,235
Net unrealized appreciation on investment funds 606 2,952 4,674,925 4,678,483
Incentive allocation (23) 181,222 (181,199) --
-----------------------------------------------------
NET INCREASE IN MEMBERS' CAPITAL DERIVED
FROM OPERATIONS 457 183,559 3,519,020 3,703,036
FROM MEMBERS' CAPITAL TRANSACTIONS
Capital contributions 10,000 10,000 83,502,160 83,522,160
Repurchase fee 1 2 7,846 7,849
Capital redemptions -- (114,000) (523,263) (637,263)
-----------------------------------------------------
NET INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS 10,001 (103,998) 82,986,743 82,892,746
-----------------------------------------------------
NET CHANGE IN MEMBERS' CAPITAL 10,458 79,561 86,505,763 86,595,782
MEMBERS' CAPITAL AT BEGINNING OF PERIOD -- -- -- --
-----------------------------------------------------
MEMBERS' CAPITAL AT END OF PERIOD $ 10,458 $ 79,561 $ 86,505,763 $ 86,595,782
=====================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Statement of Cash Flows
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' capital derived from operations $ 3,703,036
Adjustments to reconcile net increase in members' capital derived from
operations to net cash used in operating activities:
Purchases of investment funds (81,981,000)
Proceeds from dispositions of investment funds 1,469,722
Net realized gain from investment fund transactions (66,235)
Net unrealized appreciation on investment funds (4,678,483)
Deferred offering costs (409,797)
Amortization of offering costs 273,198
Prepaid fees (39,136)
Investments paid in advance (6,146,234)
Increase in interest receivable (4,099)
Due to Investment Manager 262,859
Increase in professional fees payable 104,717
Increase in management fees payable 85,677
Increase in other accrued expenses 61,834
------------
NET CASH USED IN OPERATING ACTIVITIES (87,363,941)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 87,759,660
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 87,759,660
------------
NET INCREASE IN CASH 395,719
Cash and cash equivalents at beginning of period --
------------
Cash and cash equivalents at end of period $ 395,719
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
Financial Highlights
For the Period from August 1, 2004 (commencement of operations)
through March 31, 2005
RATIOS AND OTHER FINANCIAL HIGHLIGHTS
The following represents the ratios to average net assets and other financial
highlights information for Members' Capital other than the Managing Member and
the Special Member for the period from August 1, 2004 (commencement of
operations) through March 31, 2005:
TOTAL RETURN BEFORE INCENTIVE ALLOCATION (c) 4.80%
INCENTIVE ALLOCATION (c) (0.24%)
-----------
TOTAL RETURN AFTER INCENTIVE ALLOCATION (c) 4.56%
RATIOS TO AVERAGE NET ASSETS:
Expenses, before waivers (a) (b) 3.05%
Expenses, net of waivers (a) (b) 2.30%
Incentive allocation 0.26%
-----------
Expenses, net of waivers and incentive allocation (a) (b) 2.56%
Net investment loss, before waivers (a) (b) (3.00%)
Net investment loss, net of waivers (a) (b) (2.25%)
Portfolio turnover rate (c) 2.30%
Other Members' Capital, end of period $86,505,763
(a) Annualized.
(b) The Investment Manager and PFPC Inc. waived fees and expenses for the
period ended March 31, 2005.
(c) Not annualized.
THE ABOVE RATIOS AND TOTAL RETURNS ARE CALCULATED FOR OTHER MEMBERS TAKEN AS A
WHOLE. AN INDIVIDUAL INVESTOR'S RETURN MAY VARY FROM THESE RETURNS BASED ON THE
TIMING OF CAPITAL CONTRIBUTIONS AND INCENTIVE ALLOCATION.
THE ABOVE EXPENSE RATIOS DO NOT INCLUDE THE EXPENSES FROM THE UNDERLYING FUND
INVESTMENTS, HOWEVER TOTAL RETURNS TAKE INTO ACCOUNT ALL EXPENSES.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION
J.P. Morgan Multi-Strategy Fund, L.L.C. (the "Fund") was organized as a limited
liability company on April 6, 2004 under the laws of the State of Delaware and
is registered under the Investment Company Act of 1940 (the "1940 Act"), as a
closed-end, non-diversified, management investment company. The Fund's
investment objective is to generate consistent capital appreciation over the
long term, with relatively low volatility and a low correlation with traditional
equity and fixed-income markets. The Fund will seek to accomplish this objective
by allocating its assets primarily among professionally selected investment
funds ("Investment Funds") that are managed by experienced third-party
investment advisers ("Portfolio Managers") who invest in a variety of markets
and employ, as a group, a range of investment techniques and strategies.
J.P. Morgan Alternative Asset Management, Inc. (the "Investment Manager"), a
corporation formed under the laws of the State of Delaware and an affiliate of
J.P. Morgan Chase & Co. ("J.P. Morgan Chase"), is responsible for the allocation
of assets to various Investment Funds, subject to policies adopted by the Board
of Directors (the "Board"). Ehrlich Associates, L.L.C., a limited liability
company formed under the laws of the State of Delaware (the "Managing Member"),
serves as the managing member of the Fund. The Managing Member is registered as
a commodity pool operator with the Commodity Futures Trading Commission ("CFTC")
and is a member of the National Futures Association ("NFA").
CMRCC, Inc., a corporation formed under the laws of the State of New York and an
affiliate of the Investment Manager, is the special member of the Fund (the
"Special Member"). The Special Member is entitled to all performance-based
incentive allocations, if any from Members' accounts.
10
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Investment
Manager to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates.
B. PORTFOLIO VALUATION
The net asset value of the Fund is determined by or at the direction of the
Investment Manager as of the last business day of each month in accordance with
the valuation principles set forth below or as may be determined from time to
time pursuant to policies established by the Board.
The Fund's investments in the Investment Funds are considered to be illiquid and
can only be redeemed periodically. The Board has approved procedures pursuant to
which the Fund values its investments in Investment Funds at fair value. In
accordance with these procedures, fair value as of each month-end ordinarily is
the value determined as of such month-end for each Investment Fund in accordance
with the Investment Fund's valuation policies and reported at the time of the
Fund's valuation.
As a general matter, the fair value of the Fund's interest in an Investment Fund
represents the amount that the Fund could reasonably expect to receive from an
Investment Fund if the Fund's interest were redeemed at the time of the
valuation, based on information reasonably available at the time the valuation
is made and that the Fund believes to be reliable. In the unlikely event that an
Investment Fund does not report a month-end value to the Fund on a timely basis,
the Fund would determine the fair value of such Investment Fund based on the
most recent value reported by the Investment Fund, as well any other relevant
information available at the time the Fund values its portfolio. The values
assigned to these investments are based on available information and do not
necessarily represent amounts that might ultimately be realized, as such amounts
depend on future circumstances and cannot reasonably be determined until the
individual investments are actually liquidated. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the investments
existed, and the differences could be significant.
C. DISTRIBUTIONS FROM INVESTMENT FUNDS
Distributions received, whether in the form of cash or securities, are applied
as a
11
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. DISTRIBUTIONS FROM INVESTMENT FUNDS (CONTINUED)
reduction of the investment's cost when identified by the Investment Fund as a
return of capital. Once the investment's cost is received, any further
distributions are recognized as realized gains.
D. INCOME RECOGNITION AND SECURITY TRANSACTIONS
Interest income is recorded on an accrual basis. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from Investment Fund
transactions are calculated on the identified cost basis. Investments are
recorded on the effective date of the subscription in the Investment Fund.
E. FUND EXPENSES
The Fund bears all expenses incurred in its business other than those that the
Investment Manager assumes. The expenses of the Fund include, but are not
limited to, the following: all costs and expenses related to investment
transactions and positions for the Fund's account; legal fees; accounting and
auditing fees; custodial fees; costs of computing the Fund's net asset value;
costs of insurance; registration expenses; due diligence, including travel and
related expenses; expenses of meetings of the Board and Members; all costs with
respect to communications to Members; and other types of expenses as may be
approved from time to time by the Board.
F. INCOME TAXES
The Fund intends to operate and has elected to be treated as a partnership for
Federal income tax purposes. Accordingly, no provision for the payment of
Federal, state or local income taxes has been provided. Each Member is
individually required to report on its own tax return its distributive share of
the Fund's taxable income or loss.
G. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of monies on deposit at PNC Bank, N.A.
H. INITIAL OFFERING COSTS AND ORGANIZATIONAL EXPENSES
The Fund incurred initial offering costs totaling approximately $409,797
comprised principally of legal costs pertaining to the preparation of the Fund's
offering documents.
12
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. INITIAL OFFERING COSTS AND ORGANIZATIONAL EXPENSES (CONTINUED)
These costs are being amortized over a twelve-month period from the commencement
of operations.
Costs incurred in connection with the organization of the Fund were expensed at
the commencement of operations.
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Investment Manager provides advisory and other services. In consideration
for such management services, the Fund pays the Investment Manager a monthly
management fee equal to 0.125% (1.50% on an annualized basis) and an additional
administrative services fee of 0.0125% per month (0.15% on an annualized basis)
of end of month Members' Capital.
The Fund and the Investment Manager have entered into an Expense Limitation and
Reimbursement Agreement (the "Expense Limitation Agreement"), dated May 26,
2004, under which the Investment Manager will agree to waive its fees and, if
necessary, reimburse expenses in respect of the Fund for each fiscal year that
the Agreement is in place so that the total operating expenses of the Fund
(excluding interest, brokerage commissions, other transaction-related expenses
and any extraordinary expenses of the Fund as well as any Incentive Allocation)
do not exceed 2.30% (comprising the 1.5% Management Fee, the 0.15% Manager
Administrative Services Fee and not more than a further 0.65% for other
operating expenses) on an annualized basis of the Fund's net assets as of the
end of each month. Under the Expense Limitation Agreement, any waivers or
reimbursements made by the Investment Manager will be subject to repayment by
the Fund within three years of the end of the fiscal year in which the waiver or
reimbursement is made, provided that repayment does not result in the Fund's
aggregate operating expenses exceeding the foregoing expense limitations. Total
expenses of the Fund assumed by the Investment Manager for the period from
August 1, 2004 through March 31, 2005 were $60,418. The Investment Manager also
waived fees of $275,000 during the same period.
The Fund has entered into an administration agreement with PFPC Inc. ("PFPC"),
whereby PFPC provides fund accounting, investor services and transfer agency
functions for the Fund. As compensation for services set forth herein that are
rendered by PFPC during the term of this Agreement, the Fund pays PFPC an annual
fee ranging from 0.035% to 0.075% of the Fund's average net assets, with a
minimum monthly fee of $6,250 for administration and accounting, an annual fee
of 0.015% of the Fund's average net assets, with a minimum
13
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
monthly fee of $3,334 for regulatory administration services, and an annual fee
for Member services of $150 per Member, with a minimum monthly fee of $1,000.
PFPC waived $13,252 of its fees for the period from August 1, 2004 through March
31, 2005. Any fees waived by PFPC are recoverable from the Fund if the agreement
with PFPC is terminated within the first three years of the effective date of
the agreement.
The Independent Directors are each paid an annual retainer of $10,000 plus
reasonable out-of-pocket expenses in consideration for their attendance at
meetings of the Board, and any committees thereof, and other services they may
provide to the Fund.
PFPC Trust Company serves as custodian of the Fund's assets and provides
custodial services to the Fund.
4. SECURITY TRANSACTIONS
Aggregate purchases and sales of Investment Funds for the period ended March 31,
2005 amounted to $81,981,000 and $1,469,722, respectively.
At March 31, 2005, the estimated cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes. Accordingly, gross unrealized appreciation on investments was
$4,989,417 and gross unrealized depreciation on investments was $310,934,
resulting in net unrealized appreciation on investments of $4,678,483.
5. CONTRIBUTIONS, REDEMPTIONS, AND INCENTIVE ALLOCATION
Generally, initial and additional subscription for interests by eligible
investors may be accepted at such times as the Fund may determine. The Fund
reserves the right to reject any subscriptions for interests in the Fund. The
initial acceptance for subscriptions for Interests was August 1, 2004 (the
"Initial Closing Date"). After the Initial Closing Date, the Fund intends to
accept subscriptions for interests as of the first day of each month.
The Fund from time to time may offer to repurchase interests pursuant to written
tenders by members. These repurchases will be made at such times, and in such
amounts, and on such terms as may be determined by the Board, in its sole
discretion. The Investment Manager and the Managing Member expect to typically
recommend to the Board that the Fund offer to repurchase Interests from members
of up to 25% of the Fund's net assets
14
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
5. CONTRIBUTIONS, REDEMPTIONS, AND INCENTIVE ALLOCATION (CONTINUED)
quarterly, effective as of the last day of March, June, September, and December.
A 1.5% repurchase fee payable to the Fund will be charged for repurchases of
Members' Interests at any time prior to the day immediately preceding the
one-year anniversary of a Member's purchase of its Interests. For the period
ended March 31, 2005, the Fund charged Members' $7,849 in repurchase fees.
At the end of each Allocation Period of the Fund, any net capital appreciation
or net capital depreciation of the Fund (both realized and unrealized), as the
case may be, is allocated to the capital accounts of all of the Members
(including the Special Member and the Managing Member) in proportion to their
respective opening capital account balances for such Allocation Period. The
initial "Allocation Period" began on the Initial Closing Date, with each
subsequent Allocation Period beginning immediately after the close of the
preceding Allocation Period. Each Allocation Period closes on the first to occur
of (1) the last day of each month, (2) the date immediately prior to the
effective date of (a) the admission of a new Member or (b) an increase in a
Member's capital contribution, (3) the effective date of any repurchase of
Interests, or (4) the date when the Fund dissolves.
At the end of each calendar year, a Member's return on its investment for the
year is determined and a portion of the net capital appreciation allocated to
each Member's capital account during the year, net of such Member's pro rata
share of the Management Fee, is reallocated to the capital account of the
Special Member in the following manner: (1) net capital appreciation up to a 6%
return remains allocated to such Member (the "Preferred Return"); (2) net
capital appreciation in excess of the Preferred Return is reallocated to the
Special Member until it has been allocated the next 0.30% of return (the
"Catch-Up"); and (3) thereafter, 95% of any net capital appreciation in excess
of the Preferred Return plus the Catch-Up remains allocated to such Member, and
the remaining 5% of such net capital appreciation is reallocated to the Special
Member. The amounts reallocated to the Special Member under (2) and (3) above
are referred to as the "Incentive Allocation."
No Incentive Allocation is made, however, with respect to a Member's capital
account until any cumulative net capital depreciation previously allocated to
such Member's capital account plus any Management Fees and Manager
Administrative Service Fees charged to such capital account (the "Loss
Carryforward") have been recovered. Any Loss Carryforward of a Member is reduced
proportionately to reflect the repurchase of any portion of that Member's
Interest. At December 31, 2004, $118,391 was reallocated to the capital account
of the Special Member. Based upon profits for the year ended March 31, 2005, the
additional Incentive Allocation that would be reallocated to the Special Member
is $62,831. This amount is subject to change as Incentive Allocations occur at
the end of each calendar year.
15
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which the Fund invests
trade various financial instruments and enter into various investment activities
with off-balance sheet risk. These include, but are not limited to,
short-selling activities, writing option contracts, contracts for differences,
and interest rate, credit default and total return equity swaps contracts. The
Fund's risk of loss in these Investment Funds is limited to the value of these
investments reported by the Fund.
The Fund invests primarily in Investment Funds that are not registered under the
1940 Act. The Investment Funds invest in actively traded securities and other
financial instruments using different strategies and investment techniques,
including leverage, that may involve significant risks. Although the Fund
attempts to diversify its risk by investing in Investment Funds managed by
different third party managers, the Investment Funds may nonetheless
independently invest a high percentage of their assets in the same or similar
specific sectors of the market in order to achieve a potentially greater
investment return. As a result, the Investment Funds may be more susceptible to
economic, political, and regulatory developments in a particular sector of the
market, positive and negative, and may experience increased volatility of the
Investment Funds' net asset value. The Fund invests in a limited number of
Investment Funds. Such concentration may result in additional risk.
Because of the limitation on rights of redemption and the fact that the Fund's
limited liability company interests will not be traded on any securities
exchange or other market and will be subject to substantial restrictions on
transfer, and because of the fact that the Fund may invest in Investment Funds
that do not permit frequent withdrawals and that may invest in illiquid
securities, an investment in the Fund is a highly illiquid investment and
involves a substantial degree of risk. Illiquid securities owned by Investment
Funds are riskier than liquid securities because the Investment Funds may not be
able to dispose of the illiquid securities if their investment performance
deteriorates, or may be able to dispose of the illiquid securities only at a
greatly reduced price. Similarly, the illiquidity of the Investment Funds may
cause investors to incur losses because of an inability to withdraw their
investments from the Fund during or following periods of negative performance.
Although the Investment Manager and the Managing Member intend to recommend that
quarterly offers be made to repurchase up to 25% of the Fund's net assets, there
can be no assurance that the Fund will make such offers.
16
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005
- --------------------------------------------------------------------------------
7. INDEMNIFICATIONS
In the normal course of business, the Fund enters into contracts that contain a
variety of representations that provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Through May 1, 2005, the Fund received subscriptions from investors of
$6,900,000 of which $4,237,500 was received in advance of March 31, 2005.
17
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
The business of the Fund is managed under the direction of the Board of
Directors. Subject to the provisions of the Operating Agreement and Delaware
law, the Directors have all powers necessary and convenient to carry out this
responsibility. The Directors and officers of the Fund, their addresses, their
ages and descriptions of their principal occupations during the past five years
are listed below.
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
PRINCIPAL IN FUND
POSITION(S) TERM OF OFFICE(i) OCCUPATION(S) COMPLEX
HELD WITH AND LENGTH OF DURING THE PAST OVERSEEN OTHER DIRECTORSHIPS HELD BY
NAME, ADDRESS, AND AGE FUND TIME SERVED 5 YEARS BY DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth H. Beer Director May 26, 2004 Partner, Director None. Board Member, Children's
Johnson Rice & Co. L.L.C. to present of Research and Hospital of New Orleans; Board
DOB: 6-29-1957 Senior Energy Member, J.P. Morgan Corporate
Analyst of Finance Investors; Board Member,
Johnson Rice & J.P. Morgan U.S. Corporate
Co. L.L.C. Finance Investors II; Board
(investment Member, J.P. Morgan Europe
banking firm). Corporate Finance Investors II;
Board Member, J.P. Morgan
Venture Capital Investors; Board
Member, J.P. Morgan Venture
Capital Investors II ; Board
Member
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald A. Okerman Director May 26, 2004 President and CEO None. Chairman of the Board, Aurora
Minnesota Research Fund, to present of Minnesota Building Systems, Inc.; Board
Suite 25 Research Fund Member, Nanocopoeia, Inc.; Board
Heritage Drive (technology); Member, Apprise, Inc.; Board
St. Paul, MN 55108 prior thereto, Member, J.P. Morgan Corporate
DOB: 2-21-1946 Corporate Finance Investors; Board Member,
Development and J.P. Morgan U.S. Corporate
Investment Manager Finance Investors II; Board
in the Corporate Member, J.P. Morgan Europe
Enterprise Corporate Finance Investors II;
Development Board Member, J.P. Morgan
Department, Venture Capital Investors; Board
Minnesota Mining Member, J.P. Morgan Venture
and Manufacturing Capital Investors II
(3M) (a
multinational
manufacturing
company).
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------
(i) Each Director serves for the duration of the Fund, or until his death,
resignation, termination, removal or retirement.
18
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
PRINCIPAL IN FUND
POSITION(S) TERM OF OFFICE(i) OCCUPATION(S) COMPLEX
HELD WITH AND LENGTH OF DURING THE PAST OVERSEEN OTHER DIRECTORSHIPS HELD BY
NAME, ADDRESS, AND AGE FUND TIME SERVED 5 YEARS BY DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
S. Lawrence Director May 26, 2004 Executive Vice None. Board Member, AT&T Investment
Prendergast to present President of Management Corp.; Board Member,
Prendergast Capital Finance of Batterymarch Global Emerging
Management LaBranche & Co. Markets Fund; Board Member,
DOB: 4-20-1941 (specialist firm Cincinnati Incorporated; Private
on the NYSE); Equity Fund Advisory Board
prior thereto Member, E.M. Warburg, Pincus &
Chairman and CEO Co.; Private Equity Fund
of AT&T Investment Advisory Board Member, Lehman
Management Corp. Brothers; International Capital
(money management Markets Advisory Board Member,
company). NYSE; Board Member, Turrell
Fund; Board Member, J.P. Morgan
Corporate Finance Investors;
Board Member, J.P. Morgan U.S.
Corporate Finance Investors II;
Board Member, J.P. Morgan Europe
Corporate Finance Investors II;
Board Member, J.P. Morgan
Venture Capital Investors; Board
Member, J.P. Morgan Venture
Capital Investors ; Board
Member, J.P. Morgan Venture
Capital Investors II
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------
(i) Each Director serves for the duration of the Fund, or until his death,
resignation, termination, removal or retirement.
19
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
PRINCIPAL IN FUND
POSITION(S) TERM OF OFFICE(i) OCCUPATION(S) COMPLEX
HELD WITH AND LENGTH OF DURING THE PAST OVERSEEN OTHER DIRECTORSHIPS HELD BY
NAME, ADDRESS, AND AGE FUND TIME SERVED 5 YEARS BY DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence M. Unrein Director May 26, 2005 Managing Director, None. Board Member, National Surgical
JPMorgan Investment to present JPMorgan Investment Hospitals, Inc.; Board Member,
Management, Inc. Management, Inc. Response Insurance; and Board
522 Fifth Avenue, Floor 15 Member, Performance, Inc.;
New York, NY 10036 Advisory Board Member, Accel
DOB: 2-2-1956 Partners; Advisory Board Member,
Apax US/Patricof & Co.; Advisory
Board Member, Clayton, Dubilier
& Rice; Advisory Board Member,
Exxel Capital Partners; Advisory
Board Member, Fenway Partners;
Advisory Board Member, Great
Hill Equity Partners; Advisory
Board Member, MeriTech Capital
Partners; Advisory Board Member,
New Enterprise Associates;
Advisory Board Member, North
Bridge Venture Partners;
Advisory Board Member, Redpoint
Venture Partners; Advisory Board
Member, TA Associates; and
Advisory Board Member, Welsh,
Carson, Anderson & Stowe.
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------
(i) Each Director serves for the duration of the Fund, or until his death,
resignation, termination, removal or retirement.
20
J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.
DIRECTORS AND OFFICERS BIOGRAPHICAL DATA (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE
POSITION(S) HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING THE PAST
NAME, ADDRESS, AND AGE FUND TIME SERVED 5 YEARS
- ---------------------------------------------------------------------------------------------------------------------
OFFICERS
- ---------------------------------------------------------------------------------------------------------------------
Lawrence M. Unrein Chief Executive Officer May 26, 2005 Managing Director, JPMorgan Investment
JPMorgan Investment to present Management, Inc.
Management, Inc.
522 Fifth Avenue, Floor 15
New York, NY 10036
DOB: 2-2-1956
- ---------------------------------------------------------------------------------------------------------------------
Thomas J. DiVuolo Chief Financial Officer May 26, 2005 Vice President and Chief Financial
J.P. Morgan Alternative Asset to present Officer, J.P. Morgan Alternative Asset
Management, Inc. Management, Inc.; prior thereto Senior
522 Fifth Avenue, Floor 10 Vice President, Kenmar Advisory Corp. (an
New York, NY 10036 asset management firm).
DOB: 7-27-1960
- ---------------------------------------------------------------------------------------------------------------------
The Funds' Forms N-Q are available on the Commission's web site at
HTTP://WWW.SEC.GOV, and may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how the Funds voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, is available (i) without charge,
upon request, by caling 1-212-837-1432, and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
21
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that S. Lawrence Prendergast 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 each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$35,000 for 2005 and not applicable for 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years 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 for 2005 and not applicable for 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $20,000 for 2005 and not
applicable for 2004.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2005 and not applicable for 2004.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
The Fund's Audit Committee approves all non-audit services, as
required by the statutes and regulations administered by the
Securities and Exchange Commission, including the 1940 Act and the
Sarbanes-Oxley Act of 2002.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) N/A
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was 0%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and 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 adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0 for 2005 and not applicable for 2004.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
J.P. MORGAN ALTERNATIVE ASSET MANAGEMENT, INC.
PROXY VOTING POLICIES AND PROCEDURES
OBJECTIVE
J.P. Morgan Alternative Asset Management, Inc. ("JPMAAM"), an investment adviser
registered with the Securities and Exchange Commission and an affiliate of J.P.
Morgan Chase & Co ("JPMC"), is responsible for the allocation of assets on
behalf of its clients to various private investment funds, including hedge funds
and other alternative investment pools that are structured as private limited
partnerships, limited liability companies or offshore corporations
(collectively, "Alternative Investments"). The voting rights of Alternative
Investments generally are contract rights set forth in the organizational
documents (e.g., the limited partnership agreement, limited liability company or
memorandum and articles of association). As privately placed securities,
Alternative Investments generally are not subject to the regulatory scheme
applicable to public companies. Consequently, in most cases, Alternative
Investments do not issue proxies. Instead, they often solicit consents from
their limited partners, members or shareholders.
As an investment manager, JPMAAM in the normal course of business is typically
granted by its clients the authority to vote the solicitations or consents of
Alternative Investments and the proxies of securities directly held by clients
that are not under the management of a sub-adviser (e.g., securities that are
received from in-kind redemptions). In accordance with the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and other applicable fiduciary and
regulatory standards, JPMAAM's objective is to vote the solicitations, consents
and proxies (hereinafter referred to as "proxies") in the best interests of its
clients. To further that objective, JPMAAM has adopted these Proxy Voting
Policies and Procedures.
THE PROXY VOTING PROCESS
1. VOTING IN GENERAL. JPMAAM's Portfolio Management Group ("PMG") as part of its
ongoing analysis of client holdings monitors significant developments relating
to the portfolio of Alternative Investments. BECAUSE IN THE CONTEXT OF
ALTERNATIVE INVESTMENTS EACH SOLICITED VOTE RAISES UNIQUE QUESTIONS AND IS AN
INTEGRAL PART OF JPMAAM'S INVESTMENT PROCESS, EACH PROXY OR OTHER SOLICITATION
WITH RESPECT TO ALTERNATIVE INVESTMENTS WILL BE ANALYZED BY A MEMBER OR MEMBERS
OF THE PMG ON A CASE-BY-CASE BASIS.
For proxies received with respect to any securities other than Alternative
Investments held directly by JPMAAM's clients, for which JPMAAM has voting
responsibility, JPMAAM will defer the vote to a proxy voting service and vote in
accordance with their recommendation.
Situations may arise in which more than one client invests in the same
Alternative Investment or securities. In addition, two or more fund/clients may
be invested in strategies having different investment objectives, investment
styles or portfolio managers. As a result, JPMAAM may cast different votes on
behalf of different clients.
2. RESPONSIBILITY FOR VOTE FOR ALTERNATIVE INVESTMENTS - PRIMARY CONTACT FOR THE
MANAGER OF THE UNDERLYING HEDGE FUND OR OTHER PERSON IDENTIFIED BY COMPLIANCE
OFFICER. Where the proxy being voted is with respect to interests in an
underlying hedge fund ("UHF") owned by a JPMAAM client over which JPMAAM has
discretionary investment authority, it shall be the responsibility of the
Primary Contact in the PMG for the investment manager of the UHF to vote the
proxies in a timely manner and otherwise in accordance with these procedures. In
the absence of the Primary Contact, the Compliance Officer shall assign such
responsibility to another person in the PMG in accordance with the procedures
set forth below in this section.
3. PROCEDURES FOR VOTING PROXIES. JPMAAM has adopted the following procedures in
order to ensure that all proxy materials are processed in a timely fashion:
o All proxies and related materials should be received by, or forwarded
to, the Operations Group (the "OG") and processed by the designated
person or persons within the OG.
o The OG will:
o Forward the materials by e-mail to:
[] the Primary Contact for the manager of that UHF in the PMG;
[] the Secondary Contact for that manager in the PMG; and
[] the Compliance Officer.
o Include in the cover email the following information:
[] name of UHF and manager;
[] name(s) of the JPMAAM client portfolio(s) holding interests
in this UHF; and
[] the date and time by which JPMAAM must submit the proxy (the
"Voting Deadline"). (This is to allow enough time for the
completed proxy to be returned to the issuer prior to the
Voting Deadline.)
o The Compliance Officer will promptly follow up via e-mail to
ensure that if both the Primary Contact and Secondary Contact are
unavailable, the proxy material is assigned to another member of
the PMG. The person assigned responsibility (whether the Primary
Contact, Secondary Contact, or another PMG member) is referred to
herein as the "PMG Designate". If the Compliance Officer is
absent, the Legal Department will perform this follow up.
o The PMG Designate will advise each PMG member who is the
portfolio manager of a client portfolio holding interests in that
UHF of the proxy solicitation, and will analyze the proxy
materials and make a decision on how to vote each proxy,
conferring with the relevant portfolio managers if appropriate
(absent material conflicts of interest - if there are material
conflicts of interest, follow procedures described below in
"Material Conflicts of Interest"). The PMG Designate shall
promptly communicate via email or otherwise in writing the
decision as to how to vote each proxy to the OG (by close of
business on the day before the Voting Deadline, unless otherwise
agreed with the OG), copying the Compliance Officer for purposes
of recordkeeping. Once instructions are received in a timely
manner from the PMG Designate, the OG shall have responsibility
for submitting the proxy prior to the Voting Deadline (and
providing a copy of the proxy, as voted, to the Compliance
Officer).
o In some cases, proxy materials stipulate how a failure to vote
the proxy will be interpreted (for example, proxy materials may
stipulate that no vote will be deemed to be a vote for the
proposal, or that there is no need to submit a proxy if there is
an intention to vote in favor of the proposal). In such a case,
the PMG Designate must still determine how to vote the proxy, and
convey this decision via email or other written communication to
the OG, with copy to the Compliance Officer, as described above.
If the PMG Designate decides that a proxy should not be
submitted, the OG shall email the PMG Designate's decision to the
UHF and keep a copy of that email in its files.
MATERIAL CONFLICTS OF INTEREST
Rule 206(4)-6 under the Advisers Act requires that the proxy voting procedures
adopted and implemented by a registered investment adviser include procedures
that address material conflicts of interest that may arise between the
investment adviser and its clients. Material conflicts of interest may arise
when management of a JPMAAM investment management client or prospective client,
distributor or prospective distributor of its investment management products, or
critical vendor, is soliciting proxies and failure to vote in favor of
management may affect JPMAAM's relationship with such company and materially
impact JPMAAM's business; or when a personal relationship between a JPMAAM
officer and management of a company or other proponents of proxy proposals could
impact the voting decision. JPMAAM is a part of the global financial services
firm JPMC. Material conflicts of interest could also arise between the interests
of JPMC and JPMAAM clients.
2
To address such material conflicts of interest, JPMC and JPMAAM have adopted
policies to safeguard the integrity of JPMAAM's investment processes and
decisions, including proxy voting, and to maintain the integrity and
independence of the investment process and decisions. JPMAAM has established
informational barriers designed to prevent the flow of information from JPMC's
securities, lending, investment banking and other divisions from reaching
JPMAAM's investment professionals.
In addition, JPMAAM has adopted the procedures discussed in the following
section to address material conflicts of interest.
ESCALATION OF CONFLICTS OF INTEREST
The PMG Designate, along with the Compliance Officer, is responsible for
identifying potential material conflicts of interest. When a potential material
conflict of interest has been identified between the interests of JPMAAM and its
clients, it is the responsibility of the investment professional in consultation
with senior management and the Proxy Voting Committee (described below) to
evaluate the matter and determine whether an actual material conflict of
interest exists.
In the event an actual material conflict of interest exists, the final voting
decision will be made by the Proxy Voting Committee.
Depending upon the nature of the material conflict, JPMAAM may elect to take one
or more of the following measures, or other appropriate action:
[] removing certain JPMAAM personnel from the proxy voting process;
[] "walling off" personnel with knowledge of the material conflict to
ensure that such personnel do not influence the relevant proxy vote;
[] deferring the vote to a proxy voting service and vote in accordance
with their recommendation
[] deferring the vote to an independent person or body (e.g., independent
directors)
The resolution of all potential and actual material conflict issues presented to
the senior JPMAAM professionals will be thoroughly documented.
PROXY VOTING COMMITTEE
A Proxy Voting Committee composed of senior individuals from JPMAAM, Legal,
Compliance, Risk Management and Operations Groups provides oversight of the
proxy voting process on an on-going basis. The primary purposes of the Committee
are to: periodically review general proxy voting matters and discuss and come to
conclusions on more controversial proxy voting issues.
RECORDKEEPING
JPMAAM is required to maintain in an easily accessible place for five (5) years
all records relating to the proxy voting process (the first two years at the
office of JPMAAM). Those records will be kept by the OG and will include the
following:
[] a copy of the JPMAAM Proxy Voting Policies and Procedures;
[] a copy of each proxy statement received on behalf of JPMAAM clients;
[] a record of each vote cast on behalf of JPMAAM client holdings;
[] a copy of all documents created by JPMAAM personnel that were material
to making a decision on the voting of client securities or that
memorialize the basis of the decision; and
[] A copy of each written request by a client for information on how
JPMAAM voted proxies on behalf of the client, as well as a copy of any
written response by JPMAAM to any request by a JPMAAM client for
information on how JPMAAM voted proxies on behalf of our client.
Adopted: May 26, 2004
3
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
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.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (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 (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that 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) J.P. Morgan Multi-Strategy Fund, L.L.C.
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By (Signature and Title)* /s/ Lawrence M. Unrein
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Lawrence M. Unrein, Principal Executive Officer
(principal executive officer)
Date June 3, 2005
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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/ Lawrence M. Unrein
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Lawrence M. Unrein, Principal Executive Officer
(principal executive officer)
Date June 3, 2005
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By (Signature and Title)* /s/ Thomas J. DiVuolo
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Thomas J. DiVuolo, Principal Financial Officer
(principal financial officer)
Date June 3, 2005
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* Print the name and title of each signing officer under his or her signature.