================================================================================
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
J.P. Morgan Access Multi-Strategy Fund, L.L.C.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
270 Park Avenue, Floor 6
New York, NY 10017
---------------------------------------------------
(Address of principal executive offices) (Zip code)
Frank J. Nasta, Esq.
J.P. Morgan Investment Management Inc.
270 Park Avenue, Floor 9
New York, NY 10017
---------------------------------------
(Name and address of agent for service)
Copy to:
Richard Horowitz, Esq.
Dechert LLP
1095 Avenue of the Americas
New York, NY 10036
Registrant's telephone number, including area code: (800) 480-4111
Date of fiscal year end: March 31
Date of reporting period: March 31, 2011
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. Sec. 3507.
================================================================================
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
(FORMERLY J.P. MORGAN MULTI-STRATEGY FUND, L.L.C.)
FINANCIAL STATEMENTS
For the year ended March 31, 2011
This report is open and authorized for distribution only to qualified and
accredited investors or financial intermediaries who have received a copy of the
Fund's Private Placement Memorandum. This document, although required to be
filed with the SEC, may not be copied, faxed or otherwise distributed to the
general public.
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Financial Statements
For the year ended March 31, 2011
CONTENTS
Report of Independent Auditors 1
Schedule of Investments 2
Statement of Assets, Liabilities and Members' Capital 5
Statement of Operations 6
Statements of Changes in Members' Capital 7
Statement of Cash Flows 8
Financial Highlights 9
Notes to Financial Statements 10
Directors and Officers Biographical Data 23
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Market volatility can
significantly impact short-term performance. Results of an investment made today
may differ substantially from the Fund's historical performance. Investment
return and principal value will fluctuate so that an investor's interests, when
redeemed, may be worth more or less than original cost.
(PWC LOGO)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
J.P. Morgan Access Multi-Strategy Fund, L.L.C. (formerly known as 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 and of cash flows and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Access Multi-Strategy Fund, L.L.C (the "Fund") at March 31, 2011,
the results of its operations and its cash flows for the year then ended, the
changes in its members' capital for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments at March
31, 2011 by correspondence with the underlying investment funds, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
May 27, 2011
PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue
New York, NY 10017 T: (646) 471 3000, F: (813) 286 6000, www.pwc.com/us
1
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments
March 31, 2011
% OF
MEMBERS'
INVESTMENT FUND COST ($) FAIR VALUE ($) CAPITAL LIQUIDITY
------------------------------------------ ------------ -------------- -------- -----------------
DIVERSIFIED
Chestnut Fund Ltd. (a) 27,357 28,352 0.01 In Liquidation**
D.E. Shaw Composite Fund, LLC (a) 18,197,521 18,923,323 3.77 Quarterly*
DKR Sound Shore Oasis Fund, L.P. (a) 17,229 164,369 0.03 In Liquidation**
Evolution M Fund, L.P. (a) 23,069 329,559 0.07 In Liquidation**
Hudson Bay Fund L.P. (a) 37,308,734 40,382,568 8.03 Quarterly
Och-Ziff Domestic Partners II, L.P. 48,100,000 50,763,908 10.10 Quarterly
QVT Associates II Holdings Ltd. (a) 420,474 506,962 0.10 In Liquidation**
QVT Associates II, L.P. (a) 850,534 604,184 0.12 Side Pocket
QVT Associates II, L.P. (a) 4,922,966 5,438,477 1.08 Quarterly
------------ -------------- --------
TOTAL 109,867,884 117,141,702 23.31
------------ -------------- --------
EVENT DRIVEN - CORE
Apollo Asia Opportunity Fund, L.P. (b) 675,870 965,200 0.19 Side Pocket
Deephaven Event Fund LLC (b) 329,783 70,365 0.01 In Liquidation**
Paulson Partners Enhanced, L.P. (b) 3,888,093 5,455,138 1.09 Semi-Annual
Perry Partners L.P. 24,600,000 25,315,165 5.04 Quarterly
Taconic Opportunity Fund, L.P. (b) 1,397,427 1,611,395 0.32 Quarterly*
Third Point Partners Qualified L.P. (f) 23,350,000 25,866,530 5.15 Quarterly
Tyrus Capital Event Fund, L.P. (b) 3,600,000 4,340,995 0.86 Quarterly
ValueAct Capital Partners, L.P. (c) 879,774 1,029,969 0.20 Side Pocket
------------ -------------- --------
TOTAL 58,720,947 64,654,757 12.86
------------ -------------- --------
EVENT DRIVEN - DISTRESSED
Aurelius Capital Partners Fund, L.P. (d) 4,800,000 5,849,239 1.16 Semi-Annual
Caspian Capital Partners, L.P. (d) 12,900,000 14,881,742 2.96 Quarterly
Senator Global Opportunity Fund, L.P. (b) 1,386,649 1,823,088 0.36 Quarterly
Senator Global Opportunity Fund, L.P. (b) 95,044 279,839 0.06 Side Pocket
Strategic Value Restructuring Fund, L.P. (d) 1,943,982 865,955 0.16 Side Pocket
SVRF (Onshore) Holdings LLC (d) 751,187 676,137 0.14 Annual
York Credit Opportunities Fund, L.P. (f) 19,050,000 20,407,245 4.07 Quarterly
------------ -------------- --------
TOTAL 40,926,862 44,783,245 8.91
------------ -------------- --------
LONG/SHORT EQUITIES
Black Bear Fund I, L.P. 90,769 114,132 0.02 In Liquidation**
Copper River Partners, L.P. (e) 319,237 82,951 0.02 In Liquidation**
Deerfield Partners, L.P. 5,329,880 8,061,340 1.60 Semi-Annual
Eastern Advisor, L.P. -- 15,003 0.00 Side Pocket
Glenview Institutional Partners, L.P. (f) 14,322,799 14,876,769 2.96 Quarterly*
Maverick Fund USA Ltd. (f) 24,550,000 25,245,012 5.02 Monthly
PMA Prospect US Feeder Fund, LLC 2,893 80,518 0.02 Side Pocket
Standard Global Equity Partners SA, L.P. 24,000,000 25,196,477 5.01 Quarterly
TPG-Axon Partners, L.P. 24,950,000 25,711,281 5.13 Quarterly
------------ -------------- --------
TOTAL 93,565,578 99,383,483 19.78
------------ -------------- --------
The accompanying notes are an integral part of these financial statements.
2
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments (continued)
March 31, 2011
% OF
MEMBERS'
INVESTMENT FUND COST ($) FAIR VALUE ($) CAPITAL LIQUIDITY
------------------------------------------------- ------------ -------------- -------- -----------------
OPPORTUNISTIC/MACRO
Black River Commodity Multi-Strategy Fund, LLC (a) 797,644 862,424 0.17 Side-Pocket
Brevan Howard, L.P. (f) 17,756,207 19,798,350 3.94 Monthly
Caxton Global Investments USA, LLC (f) 27,500,000 27,567,449 5.49 Quarterly
D.E. Shaw Oculus Fund LLC (f),(a) 22,342,961 25,490,910 5.07 Quarterly
------------ -------------- --------
TOTAL 68,396,812 73,719,133 14.67
------------ -------------- --------
RELATIVE VALUE
BAM Opportunity Fund SPV, LLC 312,511 274,892 0.05 Side Pocket
BAM Opportunity Fund, L.P. 823,137 658,759 0.13 Quarterly
Centar Select, L.P. (d) 860,121 1,061,028 0.21 In Liquidation**
Golden Tree Partners, L.P. Class C (f) 21,800,000 23,221,827 4.63 Quarterly*
Good Hill SPV, Ltd. (d) 213,659 210,628 0.04 In Liquidation**
Horizon Portfolio L.P. 18,200,000 18,324,210 3.65 Quarterly
Knighthead Domestic Fund, L.P. (d) 2,874,429 3,730,126 0.74 Quarterly
Magnetar Capital Fund, L.P. 768,431 647,448 0.13 Side-Pocket
Magnetar Risk Linked Fund (US) Ltd. 2,274,484 2,214,071 0.44 Side-Pocket
Magnetar SPV LLC 289,869 354,844 0.07 In Liquidation**
Magnetar Structured Credit Fund, L.P. 3,666,053 4,573,011 0.91 Semi-Annual
Marathon Credit Opportunity Fund, L.P. (d) 14,906,882 14,989,529 2.98 Semi-Annual
Orchard Centar, L.P. (d) 1,060,654 1,363,018 0.27 Quarterly
Plainfield 2009 Liquidating LLC (d) 1,435,192 777,355 0.16 In Liquidation**
Waterfall Eden Fund, L.P. (d) 971,622 1,057,436 0.21 Quarterly
Waterfall Eden Fund, L.P. (d) 1,624,140 818,691 0.16 In Liquidation**
Waterfall Victoria Fund, L.P. (d) 1,146,748 1,417,765 0.28 Semi-Annual*
------------ -------------- --------
TOTAL 73,227,932 75,694,638 15.06
------------ -------------- --------
TOTAL INVESTMENTS 444,706,015 475,376,958 94.59
==============
Other Assets, less Other Liabilities 27,167,613 5.41
-------------- --------
MEMBERS' CAPITAL 502,544,571 100.00
============== ========
---------------
(a) Security was reclassified from "Relative Value" strategy during the
reporting period.
(b) Security was reclassified from "Merger Arbitrage/Event Driven" strategy
during the reporting period.
(c) Security was reclassified from "Long/Short Equities" strategy during the
reporting period.
(d) Security was reclassified from "Credit" strategy during the reporting
period.
(e) Security was reclassified from "Short Selling" strategy during the
reporting period.
(f) Partially or wholly held in a pledged account by the Custodian as
collateral for existing line of credit.
* An amount less than 5% of this investment is currently in a side pocket. A
side pocket is an account within the Investment Fund that has additional
restrictions on liquidity.
** The Investment Fund is in the process of ceasing its operations or has
otherwise segregated a portion of its assets to effect their orderly
disposition.
The accompanying notes are an integral part of these financial statements.
3
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Schedule of Investments (continued)
March 31, 2011
INVESTMENT STRATEGY AS A PERCENTAGE OF TOTAL INVESTMENTS
[PIE CHART]
None of the Investment Funds are related to the Advisor and/or its affiliates.
The management agreements of the general partners/managers provide for
compensation to such general partners/managers in the form of management fees
ranging from 1% to 3% annually of net assets and incentives of 15% to 30% of net
profits earned.
The accompanying notes are an integral part of these financial statements.
4
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Statement of Assets, Liabilities and Members' Capital
March 31, 2011
ASSETS
Investments in investment funds, at fair value (cost $444,706,015) $475,376,958
Cash and cash equivalents 11,101,060
Investments paid in advance (see Note 2c) 87,400,000
Receivable for investment funds sold 20,470,467
Prepaid expenses 51,594
Interest receivable 871
------------
TOTAL ASSETS 594,400,950
------------
LIABILITIES
Subscriptions received in advance (see Note 6) 70,521,131
Loan payable 15,000,000
Tender offer proceeds payable 5,190,066
Management Fee payable 527,198
Professional fees payable 449,995
Administration Fee payable 63,243
Interest payable 14,270
Other accrued expenses 90,476
------------
TOTAL LIABILITIES 91,856,379
------------
MEMBERS' CAPITAL $502,544,571
============
The accompanying notes are an integral part of these financial statements.
5
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Statement of Operations
For the year ended March 31, 2011
INVESTMENT INCOME
Interest $ 5,220
Other income 2,396
------------
Total investment income 7,616
------------
EXPENSES
Management Fee (see Note 3) 3,288,020
Professional fees 452,475
Administration Fee (see Note 3) 298,558
Investor servicing fees 156,613
Fund accounting fees 156,270
Custodian fees 102,799
Manager Administrative fee (see Note 3) 95,882
Credit facility fees 89,902
Insurance 66,760
Interest 66,047
Directors fees 18,934
Other expenses 86,104
------------
Total expenses 4,878,364
------------
Less: Waivers and/or expense reimbursements (see Note 3) (34,218)
------------
Net expenses 4,844,146
------------
NET INVESTMENT LOSS (4,836,530)
------------
REALIZED AND UNREALIZED GAIN/(LOSS)
Net realized gain from investment fund transactions 8,277,958
Net change in unrealized appreciation/depreciation on investment funds 16,058,444
------------
Net realized and unrealized gain 24,336,402
------------
NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS $19,499,872
============
The accompanying notes are an integral part of these financial statements.
6
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Statements of Changes in Members' Capital
For the year ended March 31, 2011
MANAGING SPECIAL OTHER
MEMBER MEMBERS MEMBERS TOTAL
--------- ----------- ------------ ------------
FROM INVESTMENT ACTIVITIES
Net investment loss $ (219) $ (3,594) $ (4,832,717) $ (4,836,530)
Net realized gain from investment
fund transactions 350 2,620 8,274,988 8,277,958
Net change in unrealized appreciation/depreciation
on investment funds 554 19,819 16,038,071 16,058,444
Performance allocation -- 1,357,688 (1,357,688) --
-------------------------------------------------------
NET INCREASE/(DECREASE) IN MEMBERS' CAPITAL DERIVED
FROM OPERATIONS 685 1,376,533 18,122,654 19,499,872
FROM MEMBERS' CAPITAL TRANSACTIONS
Capital contributions -- -- 363,914,889 363,914,889
Capital redemptions -- (33,696) (49,855,572) (49,889,268)
-------------------------------------------------------
NET INCREASE/(DECREASE) IN MEMBERS' CAPITAL DERIVED
FROM CAPITAL TRANSACTIONS -- (33,696) 314,059,317 314,025,621
-------------------------------------------------------
NET CHANGE IN MEMBERS' CAPITAL 685 1,342,837 332,181,971 333,525,493
MEMBERS' CAPITAL AT APRIL 1, 2010 11,434 90,361 168,917,283 169,019,078
-------------------------------------------------------
MEMBERS' CAPITAL AT MARCH 31, 2011 $ 12,119 $1,433,198 $501,099,254 $502,544,571
======================================================
For the year ended March 31, 2010
MANAGING SPECIAL OTHER
MEMBER MEMBERS MEMBERS TOTAL
--------- ----------- ------------ ------------
FROM INVESTMENT ACTIVITIES
Net investment loss $ (213) $ (1,464) $ (3,581,714) $ (3,583,391)
Net realized gain/(loss) from
investment fund transactions (72) 1,926 (1,633,660) (1,631,806)
Net change in unrealized appreciation/depreciation
on investment funds 1,260 5,915 21,800,583 21,807,758
Performance allocation -- 158,575 (158,575) --
-------------------------------------------------------
NET INCREASE/(DECREASE) IN MEMBERS'
CAPITAL DERIVED FROM OPERATIONS 975 164,952 16,426,634 16,592,561
FROM MEMBERS' CAPITAL TRANSACTIONS
Capital contributions -- -- 11,331,000 11,331,000
Repurchase fee 2 9 31,377 31,388
Capital redemptions -- (117,765) (39,258,255) (39,376,020)
-------------------------------------------------------
NET INCREASE/(DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS 2 (117,756) (27,895,878) (28,013,632)
-------------------------------------------------------
NET CHANGE IN MEMBERS' CAPITAL 977 47,196 (11,469,244) (11,421,071)
MEMBERS' CAPITAL AT APRIL 1, 2009 10,457 43,165 180,386,527 180,440,149
-------------------------------------------------------
MEMBERS' CAPITAL AT MARCH 31, 2010 $ 11,434 $ 90,361 $168,917,283 $169,019,078
======================================================
The accompanying notes are an integral part of these financial statements.
7
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Statement of Cash Flows
For the year ended March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' capital derived from operations $ 19,499,872
Adjustments to reconcile net increase in members' capital
derived from operations to net cash used in operating activities:
Purchases of investment funds (375,417,924)
Proceeds from disposition of investment funds 94,768,043
Net realized gain on investment fund transactions (8,277,958)
Net change in unrealized appreciation/depreciation
on investment funds (16,058,444)
Increase in interest receivable (644)
Increase in investments paid in advance (87,400,000)
Increase in prepaid expenses (3,702)
Increase in receivable for investment funds sold (11,296,911)
Decrease in Administration Fee payable (21,158)
Increase in interest payable 14,270
Increase in Management Fee payable 114,781
Increase in professional fees payable 100,516
Increase in other accrued expenses 77,905
--------------
NET CASH USED IN OPERATING ACTIVITIES (383,901,354)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions, including change in subscriptions
received in advance 434,436,020
Capital redemptions, including change in tender offer
proceeds payable (55,177,629)
Proceeds from loan 43,500,000
Principal payment on loan (30,350,000)
--------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 392,408,391
--------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,507,037
Cash and cash equivalents at beginning of year 2,594,023
--------------
Cash and cash equivalents at end of year $ 11,101,060
==============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for interest $ 55,194
==============
The accompanying notes are an integral part of these financial statements.
8
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Financial Highlights
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 YEARS ENDED MARCH 31
-------------------------------------------------------------------------------------
2011 2010 2009 2008 2007
------------- --------------- ------------ ----------- -------------
TOTAL RETURN BEFORE PERFORMANCE
ALLOCATION 5.99% 9.32% (17.36%) 5.18% 6.33%
PERFORMANCE ALLOCATION (0.36%) (0.09%) 0.00% (0.23%) (0.18%)
------------- --------------- ------------ ----------- --------------
TOTAL RETURN AFTER PERFORMANCE
ALLOCATION 5.63% 9.23% (17.36%) 4.95% 6.15%
RATIOS TO AVERAGE NET ASSETS:
Expenses, before waivers 1.91%(a) 1.94% 1.87% 1.82% 1.85%
Expenses, net of waivers 1.90%(a) 1.94% 1.87% 1.82% 1.85%
Performance allocation 0.53% 0.09% 0.00% 0.24% 0.20%
------------- --------------- ------------ ----------- -------------
Expenses, net of performance
allocation and net of
waivers 2.43% 2.03% 1.87% 2.06% 2.05%
Net investment loss, before
waivers (1.91%)(a) (1.94%) (1.82%) (1.68%) (1.61%)
Net investment loss, net of
waivers (1.90%)(a) (1.94%) (1.82%) (1.68%) (1.61%)
Portfolio turnover rate 37.88% 44.97% 23.76% 20.89% 34.88%
Members' Capital applicable to
Other Members $501,099,254 $ 168,917,283 $ 180,386,527 $ 148,750,929 $ 156,904,281
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 performance allocation.
The above expense ratios do not include the expenses from the underlying fund
investments. However, total returns take into account all expenses.
(a) The Investment Manager waived and/or reimbursed a portion of its fees for
the period pursuant to the agreement between the Fund and the Investment
Manager.
The accompanying notes are an integral part of these financial statements.
9
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011
1. ORGANIZATION
J.P. Morgan Access Multi-Strategy Fund, L.L.C. (the "Fund"), formerly the J.P.
Morgan Multi-Strategy Fund, L.L.C., 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. There can be no
assurance that the Fund will achieve its investment objective.
J.P. Morgan Investment Management, Inc. ("JPMIM" or the "Investment Manager"), a
corporation formed under the laws of the State of Delaware and a wholly-owned
subsidiary of JPMorgan Chase & Co. ("JPMorgan Chase"), is responsible for the
day-to-day management of the Fund, subject to policies adopted by the Board of
Directors (the "Board"). The Investment Manager has in turn delegated
substantially all investment authority and the allocation of the Fund's assets
among the Investment Funds and other instruments to J.P. Morgan Private
Investments Inc. (the "Sub-Advisor" or "JPMPI"), a corporation formed under the
laws of the State of Delaware and a wholly-owned subsidiary of JPMorgan Chase.
The Sub-Advisor will allocate Fund assets among the Investment Funds and other
investments that, in its view, represent attractive investment opportunities.
The Investment Manager also serves as the Managing Member of the Fund (the
"Managing Member").
Both the Investment Manager and the Sub-Advisor are registered as investment
advisers under the Investment Advisers Act of 1940, as amended (the "Advisers
Act").
2. SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES
The following is a summary of significant accounting policies followed by the
Fund in preparation of its financial statements. The policies are in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in conformity with GAAP
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. VALUATION OF INVESTMENTS
The net asset value of the Fund is determined as of the last 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 net asset 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.
10
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. VALUATION OF INVESTMENTS (CONTINUED)
The Fund uses the Net Asset Value (the "NAV"), to determine the fair value of
all underlying investments which (a) do not have readily determinable fair
values and (b) either have the attributes of an investment company or prepare
their financial statements consistent with measurement principles of an
investment company. As a general matter, the fair value of the Fund's interest
in an Investment Fund will represent 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.
Considerable judgment is required to interpret the factors used to develop
estimates at fair value. These factors include, but are not limited to, a
review of the underlying securities of the Investment Fund when available,
ongoing due diligence of the style, strategy and valuation methodology employed
by each Investment Fund, and a review of market inputs that may be expected to
impact the performance of a particular Investment Fund. The use of different
factors and estimation methodologies could have a significant effect on the
estimated fair value and could be material to the financial statements. 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 as any other relevant information available at such time. Some of the
Investment Funds may invest all or a portion of their assets in investments
which may be illiquid. Some of these investments are held in "side pockets", sub
funds within the Investment Funds, which provide for their separate liquidation
potentially over a much longer period than the liquidity an investment in the
Investment Funds may provide. Should the Fund seek to liquidate its investment
in an Investment Fund which maintains investments in a side pocket arrangement
or which holds substantially all of its assets in illiquid securities, the Fund
might not be able to fully liquidate its investment without delay, which could
be considerable. In such cases, during the period until the Fund is permitted to
fully liquidate its interest in the Investment Funds, the value of its
investment could fluctuate.
The Fund discloses the fair value of its investments in a hierarchy that
prioritizes the inputs to valuation techniques used to measure the fair value.
Fair value is defined as the price that the Fund would receive to sell an
investment or pay to transfer a liability in an orderly transaction with an
independent buyer in the principal market, or in the absence of a principal
market, the most advantageous market for the investment or liability.
Valuations reflected in this report are as of the report date. As a result,
changes in valuation due to market events and/or issuer related events after the
report date and prior to issuance of the report are not reflected herein.
The various inputs that are used in determining the fair value of the Fund's
investments are summarized into the three broad levels listed below
- Level 1 inputs are quoted prices in active markets for identical
securities;
- Level 2 inputs are other significant observable inputs (including the
Investment Fund's ability to be redeemed at fair value at the
reporting date);
- Level 3 inputs are significant unobservable inputs and include
restrictions on redemptions of the Investment Funds due to terms of
the investment or gates, suspensions, etc. imposed by the Investment
Fund.
11
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. VALUATION OF INVESTMENTS (CONTINUED)
A financial instrument's level within the fair value hierarchy is based on the
lowest of any input both individually and in aggregate that is significant to
the fair value measurement. The inputs or methodologies used for valuing
securities are not necessarily an indication of the risk associated with
investing in those securities.
The following table represents each valuation input, by strategy, as presented
on the Schedule of Investments:
TOTAL FAIR
VALUE AT
INVESTMENTS IN INVESTMENT FUNDS 03/31/2011 LEVEL 1 LEVEL 2 LEVEL 3
---------------------------------------------------------------------------------------------
Diversified $117,141,702 $ -- $ 115,034,039 $ 2,107,663
Event Driven - Core 64,654,757 -- 62,556,473 2,098,284
Event Driven - Distressed 44,783,245 -- 42,961,314 1,821,931
Long/Short Equities 99,383,483 -- 99,068,443 315,040
Opportunistic/Macro 73,719,133 -- 72,856,709 862,424
Relative Value 75,694,638 -- 69,280,466 6,414,172
---------------------------------------------------------------------------------------------
Total Investments $475,376,958 $ -- $ 461,757,444 $ 13,619,514
---------------------------------------------------------------------------------------------
The following is a summary for which significant unobservable inputs (Level 3)
were used in determining fair value:
NET TRANSFERS NET CHANGE IN
BALANCE AS OF INTO AND/OR UNREALIZED NET BALANCE AS OF
MARCH 31, STRATEGY (OUT OF) NET REALIZED APPRECIATION / PURCHASES / MARCH 31,
INVESTMENT STRATEGY 2010 RECLASSIFICATION * LEVEL 3 (A) GAIN / (LOSS) (DEPRECIATION) (SALES) 2011
-----------------------------------------------------------------------------------------------------------------------------------
Credit $ 31,136,369 $ (31,136,369) $ -- $ -- $ -- $ -- $ --
Diversified -- 15,504,880 (11,613,248) (442,967) 487,743 (1,828,745) 2,107,663
Event Driven - Core -- 1,413,107 4,492,997 1,123,649 142,025 (5,073,494) 2,098,284
Event Driven -
Distressed -- 14,226,610 (11,718,553) (9,940) (247,572) (428,614) 1,821,931
Long/Short Equities 10,903,525 114,049 (8,568,377) (2,372) 194,285 (2,326,070) 315,040
Merger Arbitrage/
Event 1,413,107 (1,413,107) -- -- -- -- --
Opportunistic/Macro 6,475,124 6,513,863 (12,098,942) 1,788 (2,379) (27,030) 862,424
Relative Value 34,428,498 (5,108,984) (18,726,332) (389,392) (933,028) (2,856,590) 6,414,172
Short Selling 114,049 (114,049) -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total $ 84,470,672 $ -- $ (58,232,455) $ 280,766 $ (358,926) $(12,540,543) $ 13,619,514
-----------------------------------------------------------------------------------------------------------------------------------
----------
* The strategy reclassification reflects a change in the classifications of
investments as determined by the Sub-advisor.
(a) The Fund recognizes transfers into and out of the levels indicated above at
the beginning of the reporting period. Transfers from Level 2 to Level 3 were
primarily related to the change in liquidity terms of the underlying Investment
Funds during the reporting period. Transfers from Level 3 to Level 2 were
primarily related to the expiration of lock-up periods imposed by the underlying
Investment Funds and due to liquidity provisions considered by the Fund. There
were no transfers between Level 1 and Level 2 during the year ended March 31,
2011.
The Fund had no unfunded capital commitments as of March 31, 2011.
12
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. VALUATION OF INVESTMENTS (CONTINUED)
The change in unrealized appreciation (depreciation) attributable to securities
owned at March 31, 2011, which were valued using significant unobservable inputs
(Level 3), is as follows:
NET CHANGE IN
UNREALIZED
INVESTMENTS IN APPRECIATION/
INVESTMENT FUNDS (DEPRECIATION)
------------------------- --------------
Diversified $ 487,743
Event Driven - Core 417,605
Event Driven - Distressed (247,572)
Long / Short Equities (276,039)
Opportunistic / Macro (2,379)
Relative Value (933,028)
Total $ (553,670)
DIVERSIFIED
Portfolio Managers utilizing this strategy use two or more of the below
strategies. Investment Funds within this strategy are generally subject to 30 -
65 day redemption notice periods. Approximately 1.8 percent of the fair value of
the investments in Investment Funds in this strategy are in side pockets or
liquidating trusts. The remaining approximately 98.2 percent of the Investment
Funds have either initial redemption dates commencing in the future or they can
be redeemed with no restrictions as of the measurement date. During the year
ended March 31, 2011, the Fund had two transfers out of Level 3 with a fair
market value of $11,613,248. Also, during the year ended March 31, 2011, Level
3 purchases and sales for this strategy totaled $124,066 and $1,952,811
respectively.
EVENT DRIVEN - CORE
Portfolio Managers utilizing this strategy invest in securities of companies
involved in mergers, acquisitions, restructurings, liquidations, spin-offs, or
other special situations that alter a company's financial structure or operating
strategy. Risk management and hedging techniques are typically employed by the
Portfolio Managers to seek to protect the portfolio from deals that fail to
materialize. In addition, accurately forecasting the timing of a transaction is
an important element affecting the realized return. The use of leverage varies.
Investment Funds within this strategy are generally subject to 60 - 93 day
redemption notice periods. Approximately 3.2 percent of the fair value of the
investments in Investment Funds in this strategy are in side pockets or
liquidating trusts. The remaining approximately 96.8 percent of the Investment
Funds have either initial redemption dates commencing in the future or they can
be redeemed with no restrictions as of the measurement date. During the year
ended March 31, 2011, the Fund had one transfer into Level 3 with a fair market
value of $4,492,997. Also, during the year ended March 31, 2011, Level 3 sales
for this strategy $5,703,494.
13
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. VALUATION OF INVESTMENTS (CONTINUED)
EVENT DRIVEN - DISTRESSED
Portfolio Managers utilizing this strategy invest in debt and equity securities
of companies in financial difficulty, reorganization or bankruptcy,
nonperforming and sub-performing bank loans, and emerging market debt.
Portfolios are usually concentrated in debt instruments. The Portfolio Managers
differ in their preference for actively participating in the workout and
restructuring process and the extent to which they use leverage. Investment
Funds within this strategy are generally subject to 60 - 95 day redemption
notice periods. Approximately 2.5 percent of the fair value of the investments
in Investment Funds in this strategy are in side pockets or liquidating trusts.
The remaining approximately 97.5 percent of the Investment Funds have either
initial redemption dates commencing in the future or they can be redeemed with
no restrictions as of the measurement date. During the year ended March 31,
2011, the Fund had two transfers out of Level 3 with a fair market value
$11,718,553. Also, during the year ended March 31, 2011, Level 3 purchases and
sales for this strategy totaled $95,043 and $523,657, respectively.
LONG/SHORT EQUITIES
Portfolio Managers utilizing this strategy make long and short investments in
equity securities that are deemed by the Portfolio Managers to be under or
overvalued. The Portfolio Managers typically do not attempt to neutralize the
amount of long and short positions (i.e., they will be net long or net short).
The Portfolio Managers may specialize in a particular industry or may allocate
holdings across industries. Although the strategy is more commonly focused on
U.S. markets, a growing number of Portfolio Managers invest globally. Portfolio
Managers in this strategy usually employ a low to moderate degree of leverage.
Investment Funds within this strategy are generally subject to 30 - 90 day
redemption notice periods. Approximately 0.3 percent of the fair value of the
investments in Investment Funds in this strategy are in side pockets or
liquidating trusts. The remaining approximately 99.7 percent of the Investment
Funds have either initial redemption dates commencing in the future or they can
be redeemed with no restrictions as of the measurement date. During the year
ended March 31, 2011, the Fund had four transfers in and one transfer out of
Level 3 with fair market values of $1,377,027 and $9,945,404, respectively.
Also, during the year ended March 31, 2011, Level 3 sales for this strategy
totaled $2,326,070.
OPPORTUNISTIC/MACRO
Portfolio Managers utilizing this strategy invest in a wide variety of
instruments using a broad range of strategies, often assuming an aggressive risk
posture. Most Portfolio Managers utilizing this strategy rely on a combination
of macro-economic models and fundamental research to invest across countries,
markets, sectors and companies, and have the flexibility to invest in numerous
financial instruments. Futures and options are often used for hedging and
speculation in order to quickly position a portfolio to profit from changing
markets. The use of leverage varies considerably. Investment Funds within this
strategy are generally subject to 45 - 95 day redemption notice periods.
Approximately 1.2 percent of the fair value of the investments in Investment
Funds in this strategy are in side pockets or liquidating trusts. The remaining
approximately 98.8 percent of the Investment Funds have either initial
redemption dates commencing in the future or they can be redeemed with
14
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. VALUATION OF INVESTMENTS (CONTINUED)
no restrictions as of the measurement date. During the year ended March 31,
2011, the Fund had two transfers out of Level 3 with a fair market value of
$12,098,941. Also, during the year ended March 31, 2011, Level 3 sales for this
strategy totaled $27,030.
RELATIVE VALUE
Portfolio Managers utilizing this strategy make simultaneous purchases and sales
of similar securities to exploit pricing differentials or have long exposure in
non-equity oriented beta opportunities (such as credit). The Portfolio Managers
attempt to neutralize long and short positions to minimize the impact of general
market movements. Different relative value strategies include convertible bond
arbitrage, statistical arbitrage, pairs trading, yield curve arbitrage and basis
trading. The types of instruments traded vary considerably depending on the
Portfolio Manager's relative value strategy. Because the strategy attempts to
capture relatively small mis-pricings between two related securities, moderate
to substantial leverage is often employed to produce attractive rates of return.
Investment Funds within this strategy are generally subject to 45 - 180 day
redemption notice periods. Approximately 8.7 percent of the fair value of the
investments in Investment Funds in this strategy are in side pockets or
liquidating trusts. The remaining approximately 91.3 percent of the Investment
Funds have either initial redemption dates commencing in the future or they can
be redeemed with no restrictions as of the measurement date. During the year
ended March 31, 2011, the Fund had seven transfers out of Level 3 with a fair
market value of $18,726,332. Also, during the year ended March 31, 2011, Level 3
purchases and sales for this strategy totaled $1,167,066 and $4,023,656,
respectively.
Any restriction noted above was imposed at various points throughout the year,
at the discretion of the underlying Investment Funds and the time at which the
restriction might lapse cannot be estimated.
C. INVESTMENTS PAID IN ADVANCE
Investments paid in advance represent funds which have been sent to Investment
Funds prior to the Fund's fiscal year-end but are not effective until the first
day of the Fund's next fiscal year.
D. DISTRIBUTIONS FROM INVESTMENT FUNDS
Distributions received, whether in the form of cash or securities, are applied
as a 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.
E. INCOME RECOGNITION AND SECURITY TRANSACTIONS
Interest income is recorded on an accrual basis. 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. All changes in the value of the Investment Funds are included
as unrealized appreciation or depreciation in the Statement of Operations.
15
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. 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; 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.
G. 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.
The Investment Manager evaluates tax positions taken or expected to be taken in
the course of preparing the Fund's financial statements to determine whether the
tax positions are "more-likely-than-not" of being sustained by the applicable
tax authority. Tax positions with respect to tax at the Fund level not deemed to
meet the "more-likely-than-not" threshold would be recorded as a tax benefit or
expense in the current year. The Investment Manager is not aware of any tax
positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits or expense will significantly change in the next
twelve months. The Investment Manager's conclusions regarding tax positions will
be subject to review and may be adjusted at a later date based on factors
including, but not limited to, on-going analyses of tax laws, regulations and
interpretations thereof.
The Fund's federal tax returns for the prior three fiscal years remains subject
to examination by the Internal Revenue Service. The Fund recognizes interest and
penalties, if any, related to unrecognized tax benefits as income tax expense in
the Statement of Operations. During the year ended March 31, 2011, the Fund did
not incur any interest or penalties.
H. CASH AND CASH EQUIVALENTS
Cash represents deposits of $8,759,212 held in an interest bearing account at
PNC Bank, N.A. ("PNC") and $2,341,848 held in a money market fund managed by
BlackRock. Amounts, with the exception of the money market fund managed by
Blackrock, in excess of the insurance limit of the Federal Deposit Insurance
Corporation ("FDIC") are subject to counterparty credit risk should PNC be
unable to fulfill its obligations. The money market fund managed by BlackRock
is considered a Level 1 Security.
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER
The Fund has entered into an investment management agreement (the "Investment
Management Agreement") with the Investment Manager, effective August 25, 2010.
In consideration of the advisory services provided by the
16
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
Investment Manager to the Fund, the Fund pays the Investment Manager a
management fee of 1.25% per year (the "Management Fee"), payable monthly at the
rate of 1/12 of 1.25% of the month-end capital account balance of each Member,
before giving effect to repurchases, Repurchase Fees (if any, as defined below)
or the Performance Allocation (as defined below), but after giving effect to the
Fund's other expenses. The Management Fee is an expense paid out of the Fund's
assets. The Management Fee is paid monthly in arrears within 20 days after the
end of each month. For the period August 25, 2010 through March 31, 2011, the
Management Fee paid to JPMIM totaled $2,488,738, of which $34,218 was waived.
The Investment Manager, on behalf of the Fund, has entered into an investment
sub-advisory agreement, dated August 25, 2010, with JPMPI. For its services as
sub-advisor, the Investment Manager pays JPMPI a monthly sub-advisory fee of
1.10% of the month end capital balance of each Member of the Fund.
The Sub-Advisor is the special member of the Fund (the "Special Member"). The
Special Member is entitled to all incentive-based performance allocations, if
any, from Members' accounts.
Prior to August 25, 2010, the Fund's investment manager was J.P. Morgan
Alternative Asset Management, Inc. (the "Prior Investment Manager"), a
corporation formed under the laws of the State of Delaware and an affiliate of
JPMorgan Chase. The Prior Investment Manager provided advisory and other
services. In consideration for such management services, the Fund paid the
Investment Manager a monthly management fee equal to 0.1042% (approximately
1.25% 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. On August 18, 2010, the Members approved various changes to the
management of the Fund, including authorizing JPMIM to serve as the Investment
Manager and JPMPI to serve as the Sub-Advisor. For the period April 1, 2010
through August 24, 2010, the Management Fee and Manager Administrative Fee paid
to the Prior Investment Manager totaled $799,282 and $95,882 respectively, none
of which was waived.
Pursuant to an Administration Agreement dated August 25, 2010, JPMorgan Funds
Management, Inc. ("JPMFM" or the "Administrator"), an indirect, wholly-owned
subsidiary of JPMorgan Chase, provides certain administration services to the
Fund. In consideration of these services, the Administrator receives a fee (the
"Administration Fee") monthly at the annual rate of 0.15% of the Fund's average
daily net assets. For the period August 25, 2010 through March 31, 2011, the
Administration Fee paid to JPMFM totaled $298,558, none of which was waived.
Effective August 25, 2010, BNY Mellon Investment Servicing (US) Inc. ("BNY
Mellon") serves as the Fund's Sub-administrator (the "Sub-administrator"). For
its services as Sub-administrator, BNY Mellon receives a portion of the fees
payable to the Administrator.
Prior to August 25, 2010, the Fund had an administration agreement with BNY
Mellon, whereby BNY Mellon provided fund accounting, investor services and
transfer agency functions for the Fund. As compensation for services set forth
herein that were rendered by BNY Mellon during the term of this Agreement, the
Fund paid BNY Mellon
17
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
an annual fee ranging from 0.035% to 0.075% of the Fund's average net assets,
with a minimum monthly fee of $5,250 for administration and accounting, an
annual fee of 0.015% of the Fund's average net assets, with a minimum 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.
On July 1, 2010, The PNC Financial Services Group, Inc. sold the outstanding
stock of PNC Global Investment Servicing Inc. to The Bank of New York Mellon
Corporation. At the closing of the sale, PNC Global Investment Servicing (U.S.)
Inc. changed its name to BNY Mellon Investment Servicing (US) Inc.
PFPC Trust Company ("PFPC Trust"), which will be renamed BNY Mellon Investment
Servicing Trust Company effective July 1, 2011, serves as custodian of the
Fund's assets and provides custodial services to the Fund. As compensation for
services, the Fund pays PFPC Trust a monthly fee of 0.005% of the Fund's average
gross assets, with a minimum monthly fee of $795.
The Investment Manager, or an affiliate of the Investment Manager, has
contractually agreed to waive fees and/or reimburse the Fund to the extent that
total annual operating expenses (excluding acquired fund fees and expenses,
interest, brokerage commissions, other transaction-related expenses and any
extraordinary expenses as well as any Performance Allocation) exceed 1.92% on an
annualized basis of the Fund's net assets as of the end of each month.
Prior to August 25, 2010, the Prior Investment Manager had contractually agreed
to waive fees, and if necessary, reimburse expenses in respect of the Fund for
each fiscal year that the agreement was 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 Performance Allocation) did not exceed 2.30% on an annualized basis of
the Fund's net assets as of the end of each month.
Certain officers of the Fund are affiliated with the Advisor and the
Administrator. Such officers, with the exception of the Chief Compliance
Officer, receive no compensation from the Fund for serving in their respective
roles.
Effective August 25, 2010, the Fund adopted a Director Deferred Compensation
Plan (the "Plan") which allows the Independent Directors to defer the receipt of
all or a portion of compensation related to performance of their duties as a
Trustee. The deferred fees are invested in various J.P. Morgan Funds until
distribution in accordance with the Plan.
4. LINE OF CREDIT
From time to time, the Fund may borrow cash from a major institution under a
credit agreement up to a maximum of 10 % of the Fund's net assets with a cap of
$30 million. Prior to December 23, 2010, this cap was $8 million. Interest,
which is calculated based on any outstanding balance, and a LIBOR-based rate, is
payable to the lending institution. The Fund also pays a fee on the unused
amount on the line of credit. During the year
18
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
4. LINE OF CREDIT (CONTINUED)
ended March 31, 2011, the Fund had 98 days during the period in which it
utilized the credit facility. During those 98 days, the average borrowings
outstanding per day were $10,738,265 at an average annual interest rate of 2.26
%. The Fund had $15 million outstanding on this credit facility as of March 31,
2011. This balance was paid off in April 2011. Interest expense and Credit
facility fees incurred for the year ended March 31, 2011 amounted to $66,047 and
$89,902, respectively, and are included in the Statement of Operations.
5. SECURITY TRANSACTIONS
Aggregate purchases and sales of Investment Funds for the year ended March 31,
2011 amounted to $375,417,924 and $94,768,043, respectively.
At March 31, 2011, 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
$34,329,970 and gross unrealized depreciation was $3,659,027, resulting in net
unrealized appreciation of $30,670,943.
6. CONTRIBUTIONS, REDEMPTIONS, AND PERFORMANCE ALLOCATION
Generally, initial and additional subscription for interests ("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 generally
accepts Interests as of the first day of each month. At March 31, 2011 the Fund
received $70,521,131 in subscription proceeds in advance of the April 1, 2011
subscription date. This amount is included in the Statement of Assets,
Liabilities and Members' Capital.
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 quarterly, effective as of the last day of
March, June, September, and December. A 1.5% repurchase fee (the "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 year ended March 31, 2011, the Fund
did not charge any Repurchase Fees to Members.
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.
19
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
6. CONTRIBUTIONS, REDEMPTIONS, AND PERFORMANCE ALLOCATION (CONTINUED)
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, each Member's return on investment for the
year is determined and a portion of the net capital appreciation allocated to
each Member's capital account during the year (the "Performance Allocation"),
net of the Member's allocable share of the Management Fee and the Manager
Administrative Services Fee, equal to 10% of the portion of such net capital
appreciation that exceeds the Preferred Return (as defined below) will be
reallocated to the capital account of the Special Member. The "Preferred
Return" is equal to the 3-month U.S. Treasury Bill yield (as defined below) for
each month during the relevant calendar year (or any shorter period of
calculation). The "3-month U.S. Treasury Bill yield" for any month shall equal
one-twelfth of the annual yield for the 3-month U.S. Treasury Bill for the first
business day of the then current calendar quarter as set forth in the U.S.
Federal Reserve Statistical Release H.15 (519) under the caption "Treasury
constant maturities", or if such measurement is not available, such other source
as the Managing Member may determine appropriate in its discretion.
No Performance 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. Upon a repurchase of an Interest (other than at the end of a calendar
year) from a Member, a Performance Allocation will be determined and allocated
to the Special Member, and in the case of any repurchase of a partial Interest,
on a "first in - first out" basis (i.e., the portion of the Interest being
repurchased and the amount with respect to which the Performance Allocation is
calculated) will be deemed to have been taken from the first capital
contribution of such Member (as such contribution has been adjusted for net
capital appreciation or depreciation, Management Fees, Manager Administrative
Services Fees and other expenses) until it is decreased to zero and from each
subsequent capital contribution until such contribution (as adjusted) is
decreased to zero.
For financial reporting purposes, the Performance Allocation is calculated and
reallocated to the Special Member on an accrual basis as if the Performance
Allocation had occurred as of the end of the fiscal year. The Performance
Allocation for the fiscal years ended March 31, 2010 and March 31, 2011 were
$158,575 and $1,357,688, respectively. These amounts are reported as Performance
Allocation on the Statement of Changes in Members' Capital.
The Performance Allocation for the fiscal year ended March 31, 2010 is comprised
of $117,765 which was allocated as of December 31, 2009, $40,190 which was
accrued for the period January 31, 2010 to March 31, 2010 and reallocated as of
December 31, 2010 and $620 which was reallocated as of March 31, 2010, resulting
from tendering Interests for repurchase on that date.
20
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
6. CONTRIBUTIONS, REDEMPTIONS, AND PERFORMANCE ALLOCATION (CONTINUED)
The Performance Allocation for the fiscal year ended March 31, 2011 is
comprised of $578,382 which was allocated as of December 31, 2010, $774,034
which was accrued for the period January 31, 2011 to March 31, 2011 and
$2,968 and $2,304 which were reallocated as of September 30, 2010 and March
31, 2011, respectively, resulting from tendering Interests for repurchase
on these date. The amount accrued from January 1, 2011 through March 31,
2011 is subject to change as Performance Allocation is subject to change as
Performance Allocations occur at the end of the calendar year.
7. RISK EXPOSURE
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 the
Fund's investments in the Investment Funds.
In pursuing its investment objectives, the Fund invests in Investment Funds that
are not registered under the 1940 Act. These Investment Funds may utilize
diverse investment strategies, which are not generally managed against
traditional investment indices. The Investment Funds selected by the Fund will
invest in and actively trade securities and other financial instruments using a
variety of strategies and investment techniques that may involve significant
risks. Such risks arise from the volatility of the equity, fixed income,
commodity and currency markets, leverage both on and off balance sheet
associated with borrowings, short sales and derivative instruments, the
potential illiquidity of certain instruments including emerging markets, private
transactions, derivatives, and counterparty and broker defaults. Various risks
are also associated with an investment in the Fund, including risks relating to
the multi-manager structure of the Fund, risks relating to compensation
arrangements and risks related to limited liquidity of the Interests. The
Investment Funds provide for periodic redemptions ranging from monthly to
annually, and may be subject to various lock-up provisions and early withdrawal
fees.
The investments of the Investment Funds are subject to normal market
fluctuations and other risks inherent in investing in securities and there can
be no assurance that any appreciation in value will occur. The value of
investments can fall as well as rise and investors may not realize the amount
that they invest.
Although the Investment Manager will seek to select Investment Funds that offer
the opportunity to have their shares or units redeemed within a reasonable
timeframe, there can be no assurance that the liquidity of the investments of
such Investment Funds will always be sufficient to meet redemption requests as,
and when, made.
The Investment Manager may invest the Fund's assets in Investment Funds that
invest in illiquid securities and do not permit frequent withdrawals. 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 Members to incur losses because of an
inability to withdraw their investments from the Fund during or following
periods of negative performance.
21
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Notes to Financial Statements March 31, 2011 (continued)
7. RISK EXPOSURE (CONTINUED)
The Investment Funds may invest in the securities of foreign companies that
involve special risks and considerations not typically associated with investing
in U.S. companies. These risks include devaluation of currencies, less reliable
information about issuers, different securities transaction clearance and
settlement practices, and future adverse political and economic developments.
Moreover, securities of many foreign companies and their markets may be less
liquid and their prices more volatile than those securities of comparable U.S.
companies.
8. 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.
9. CONCENTRATIONS
One or more affiliates of the Fund's Investment Manager have investment
discretion with respect to their client's holdings in the Fund, which
collectively represent a significant portion of the Fund's assets. Significant
Member transactions, if any, may impact the Fund's performance.
22
J.P. MORGAN ACCESS 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 ages and
descriptions of their principal occupations during the past five years are
listed below.
NUMBER OF
PORTFOLIOS IN
NAME (YEAR OF BIRTH) FUND COMPLEX
POSITIONS WITH PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS HELD
THE FUND THE PAST 5 YEARS DIRECTOR(1) BY DIRECTOR
---------------------------- --------------------------------------- ------------- ---------------------------------
INDEPENDENT DIRECTORS
William J. Armstrong Retired; CFO and Consultant, 147 None.
(1941); Director since 2010. EduNeering, Inc. (internet business
education supplier) (2000-2001); Vice
President and Treasurer, Ingersoll-Rand
Company (manufacturer of industrial
equipment) (1972-2000).
John F. Finn Chairman (1985-present), President and 147 Director, Cardinal Health, Inc
(1947); Director since 2010. Chief Executive Officer, Gardner, Inc. (CAH) (1994-present);
(supply chain management company Director, Greif, Inc. (GEF)
serving industrial and consumer (industrial package products and
markets) (1974-present). services) (2007-present).
Dr. Matthew Goldstein Chancellor, City University of New 147 Director, New Plan Excel (NXL)
(1941); Director since 2010. York (1999-present); President, (1999-2005); Director, National
Adelphi University (New York) Financial Partners (NFP) (2003-
(1998-1999). 2005); Director, Bronx-Lebanon
Hospital Center; Director, United
Way of New York City (2002- present).
Robert J. Higgins Retired; Director of Administration of 147 None.
(1945); Director since 2010. the State of Rhode Island (2003-2004);
President - Consumer Banking and
Investment Services, Fleet Boston
Financial (1971-2001).
23
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Directors and Officers Biographical Data (unaudited) (continued)
NUMBER OF
PORTFOLIOS IN
NAME (YEAR OF BIRTH) FUND COMPLEX
POSITIONS WITH PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS HELD
THE FUND THE PAST 5 YEARS DIRECTOR(1) BY DIRECTOR
--------------------------- ------------------------------------- -------------- ----------------------------------
Peter C. Marshall Self-employed business consultant 147 Director, Center for
(1942); Director since 2010. (2000-present). Communication, Hearing and
Deafness (1990-present).
Marilyn McCoy* Vice President of Administration and 147 Trustee, Carleton College
(1948); Director since 2010. Planning, Northwestern University (2003-present).
(1985-present).
William G. Morton, Jr. Retired; Chairman Emeritus (2001- 147 Director, Radio Shack Corp.
(1937); Director since 2010. 2002), and Chairman and Chief (1987-2008); Trustee, Stratton
Executive Officer, Boston Stock Mountain School (2001- present).
Exchange (1985- 2001).
Robert A. Oden, Jr. Retired; President, Carleton College 141 Trustee, American University in
(1946); Director since 2010. (2002-2010); President, Kenyon Cairo (1999-present); Trustee,
College (1995-2002). Carleton College (2002-2010).
Fergus Reid, III Chairman, Joe Pietryka Inc. (formerly, 147 Trustee, Morgan Stanley Funds
(1932); Director since 2010. Lumelite Corporation) (plastics (105 portfolios) (1992-present).
manufacturing) (2003-present);
Chairman and Chief Executive Officer,
Lumelite Corporation (1985-2002).
Frederick W. Ruebeck Consultant (2000-present); Advisor, JP 147 Trustee, Wabash College
(1939); Director since 2010. Greene & Associates, LLC (broker- (1988-present); Chairman,
dealer) (2000-2009); Chief Investment Indianapolis Symphony
Officer, Wabash College (2004- Orchestra Foundation (1994-present).
present); Director of Investments, Eli
Lilly and Company
(pharmaceuticals)(1988-1999).
James J. Schonbachler Retired; Managing Director of Bankers 147 None.
(1943); Director since 2010. Trust Company (financial services)
(1968-1998).
24
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Directors and Officers Biographical Data (unaudited) (continued)
NUMBER OF
PORTFOLIOS IN
NAME (YEAR OF BIRTH) FUND COMPLEX
POSITIONS WITH PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS HELD
THE FUND DURING THE PAST 5 YEARS DIRECTOR(1) BY DIRECTOR
---------------------------- ------------------------------------ ------------- ---------------------------------
INTERESTED DIRECTORS
Frankie D. Hughes (**) President and Chief Investment 147 Trustee, The Victory Portfolios
(1952); Director since 2010. Officer, Hughes Capital Management, (2000-2008).
Inc. (fixed income asset management)
(1993- present).
Leonard M. Spalding, Jr. (***) Retired; Chief Executive Officer, 147 Director, Glenview Trust
(1935); Director since 2010. Chase Mutual Funds (investment Company, LLC (2001-present);
company) (1989-1998); President Trustee, St. Catharine College
and Chief Executive Officer, Vista (1998-present); Trustee,
Capital Management (investment Bellarmine University (2000-
management) (1990-1998); present); Director, Springfield-
Chief Investment Executive, Chase Washington County Economic
Manhattan Private Bank (investment Development Authority (1997-
management) (1990-1998). present); Trustee, Catholic
Education Foundation (2005- present).
---------------
(1) A Fund Complex means two or more registered investment companies that hold
themselves out to investors as related companies for purposes of investment
and investor services or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other registered investment companies. The J.P. Morgan Funds
Complex for which the Board of Directors serves currently includes ten
registered investment companies (147 funds).
* Ms. McCoy has served as Vice President of Administration and Planning for
Northwestern University since 1985. William M. Daley was the Head of
Corporate Responsibility for JPMorgan Chase & Co. prior to January 2011 and
served as a member of the Board of Trustees of Northwestern University from
2005 through 2010. JPMIM, the Funds' investment adviser, is a wholly-owned
subsidiary of JPMorgan Chase & Co. Three other members of the Board of
Trustees of Northwestern University are executive officers of registered
investment advisers (not affiliated with JPMorgan) that are under common
control with subadvisers to certain J.P. Morgan Funds.
** Ms. Hughes is treated as an "interested person" based on the portfolio
holdings of clients of Hughes Capital Management, Inc.
*** Mr. Spalding is treated as an "interested person" due to his ownership of
JPMorgan Chase stock.
Each Director serves for an indefinite term, subject to the Fund's current
retirement policy, which is age 75 for all Directors, except that the Board has
determined Messrs. Reid and Spalding should continue to serve until December 31,
2012. The Board of Directors decides upon general policies and is responsible
for overseeing the business affairs of the Fund.
The contact address for each of the Directors is 270 Park Avenue, New York,
NY 10017.
25
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Directors and Officers Biographical Data (unaudited) (continued)
NAME (YEAR OF BIRTH), PRINCIPAL OCCUPATION(S) DURING THE PAST
POSITIONS HELD WITH THE FUND 5 YEARS
-------------------------------- -----------------------------------------------------------------------------------
OFFICERS
Patricia A. Maleski Managing Director, J.P. Morgan Investment Management Inc. and Chief
(1960); President and Chief Administrative Officer, J.P. Morgan Funds and Institutional Pooled Vehicles since
Administrative Officer (2010) 2010; previously, Treasurer and Principal Financial Officer of the Trusts from 2008
Principal Executive Officer to 2010; previously, Head of Funds Administration and Board Liaison, J.P. Morgan
Funds prior to 2010. Ms. Maleski has been with JPMorgan Chase & Co. since 2001.
Joy C. Dowd Assistant Treasurer of the Trusts from 2009 to 2010; Executive Director, JPMorgan
(1972); Treasurer and Principal Funds Management, Inc. from February 2011; Vice President, JPMorgan Funds
Financial Officer (2010) Management, Inc. from December 2008 to February 2011; prior to joining JPMorgan
Chase, Ms. Dowd worked in MetLife's investments audit group from 2005 through
2008, and Vice President of Credit Suisse, in the audit area from 1999 through 2005.
Frank J. Nasta Managing Director and Associate General Counsel, JPMorgan Chase since 2008;
(1964); Secretary (2010) Previously, Director, Managing Director, General Counsel and Corporate Secretary,
J. & W. Seligman & Co. Incorporated; Secretary of each of the investment
companies of the Seligman Group of Funds and Seligman Data Corp.; Director and
Corporate Secretary, Seligman Advisors, Inc. and Seligman Services, Inc.
Stephen M. Ungerman Managing Director, JPMorgan Chase & Co.; Mr. Ungerman was head of Fund
(1953); Chief Compliance Officer (2010) Administration - Pooled Vehicles from 2000 to 2004. Mr. Ungerman has been with
JPMorgan Chase & Co. since 2000.
Paul L. Gulinello Vice President and Anti Money Laundering Compliance Officer for JPMorgan Asset
(1950); AML Compliance Officer (2010) Management Americas, additionally responsible for privacy, personal trading and
Code of Ethics compliance since 2004. Mr. Gulinello has been with JPMorgan Chase
& Co. since 1972.
Elizabeth A. Davin Vice President and Assistant General Counsel, JPMorgan Chase since 2005; Senior
(1964); Assistant Secretary (2010)* Counsel, JPMorgan Chase (formerly Bank One Corporation) from 2004 to 2005;
Assistant General Counsel and Associate General Counsel and Vice President,
Gartmore Global Investments, Inc. from 1999 to 2004.
Jessica K. Ditullio Executive Director and Assistant General Counsel, JPMorgan Chase since February,
(1962); Assistant Secretary (2010)* 2011; Ms. Ditullio has served as an attorney with various titles for JPMorgan Chase
(formerly Bank One Corporation) since 1990.
John T. Fitzgerald Executive Director and Assistant General Counsel, JPMorgan Chase since February
(1975); Assistant Secretary (2010) 2011; formerly, Vice President and Assistant General Counsel, JPMorgan Chase
from 2005 until February 2011; Associate, Willkie Farr & Gallagher LLP (law firm)
from 2002 to 2005.
Gregory S. Samuels Vice President and Assistant General Counsel, JPMorgan Chase since 2010;
(1980); Assistant Secretary (2010) Associate, Ropes & Gray (law firm) from 2008 to 2010; Associate, Clifford Chance
LLP (law firm) from 2005 to 2008.
Brian L. Duncan Vice President, JPMorgan Funds Management, Inc. since June 2007; prior to joining
(1965); Assistant Treasurer (2010)* JPMorgan Chase, Mr. Duncan worked for Penn Treaty American Corporation as
Vice President and Controller from 2004 through 2007 and Assistant Vice President
of Financial Reporting from 2003-2004.
Jeffrey D. House Vice President, JPMorgan Funds Management, Inc. since July 2006; formerly,
(1972); Assistant Treasurer (2010)* Senior Manager of Financial Services of BISYS Fund Services, Inc. from
December 1995 until July 2006.
26
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
Directors and Officers Biographical Data (unaudited) (continued)
NAME (YEAR OF BIRTH), PRINCIPAL OCCUPATION(S) DURING THE PAST
POSITIONS HELD WITH THE FUND 5 YEARS
--------------------------------- ------------------------------------------------------------------------------
Laura S. Melman Executive Director, JPMorgan Funds Management, Inc. since February 2011,
(1966); Assistant Treasurer (2010) responsible for Taxation; Vice President, JPMorgan Funds Management, Inc. from
August, 2006 to February 2011, responsible for Taxation; Vice President of
Structured Products at The Bank of New York Co., Inc. from 2001 until 2006.
Francesco Tango Vice President, JPMorgan Funds Management, Inc. since January 2003: Associate,
(1971); Assistant Treasurer (2010) JPMorgan Funds Management, Inc. since 1999.
The contact address for each of the officers, unless otherwise noted, is 270
Park Avenue, New York, NY 10017.
* The contact address for the officer is 1111 Polaris Parkway, Columbus, OH
43240.
27
J.P. MORGAN ACCESS MULTI-STRATEGY FUND, L.L.C.
The Fund's 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 Fund uses to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how the Fund voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, is available without charge, upon
request, by calling 1-212-648-1953, and (ii) on the Commission's website at
http://www.sec.gov.
28
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 William Armstrong 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
$45,423 for 2010 and $45,400 for 2011.
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 2010 and $12,000 for 2011.
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 $215,400 for 2010 and $0
for 2011.
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 2010 and $0 for 2011.
(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.
One or more members of the Audit Committee may be appointed as the
Committee's delegate for the purposes of considering whether to
approve such services. Any pre-approvals granted by the delegate will
be reported, for informational purposes only, to the Audit Committee
at its next scheduled meeting. The Audit Committee's responsibilities
to pre-approve services performed by the independent public registered
accounting firm are not delegated to management.
(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% for 2010 and 0% for 2011
(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 calendar
years was $0 for 2009 and $32.0 million for 2010.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
J.P. MORGAN PRIVATE INVESTMENTS INC.
PROXY VOTING POLICIES AND PROCEDURES
Advisers are fiduciaries and must act in the best interest of the client with
respect to functions undertaken on behalf of the client, including proxy voting
activities. An adviser must adopt and implement written policies and procedures
reasonably designed to ensure that proxies are voted in the best interest of the
client, conflicts are identified and handled appropriately; and fiduciary
obligations are fulfilled. An adviser must disclose to its clients how they may
obtain information on how proxies were voted for securities held for their
accounts. An adviser must disclose to clients information about its proxy voting
policies and procedures and how clients may obtain the policies and procedures.
THIS SECTION IS APPLICABLE TO JPMPI IN ITS CAPACITY TO PROVIDE INVESTMENT ADVICE
AND/OR ADMINISTRATIVE FUNCTIONS TO THE PRIVATE FUNDS.
1. Generally
On occasion, an issuer of an investment held by a Private Fund will request that
an action be taken by such issuer's investors (e.g., the Private Fund). The
terms of the partnership or limited liability company agreement of the Private
Fund will set forth the policies and procedures for casting the Private Fund's
vote on the action. In cases where the Private Fund's investors have the right
to vote on the matter, depending on the agreement, JPMPI, on behalf of the
Private Fund, will either (i) cast votes representing a percentage of the
Private Fund's interest in the issuer based on the percentage of votes JPMPI
received
from the Private Fund's investors or (ii) cast votes for the Private Fund's
entire interest in the issuer based on the votes JPMPI received from the Private
Fund's investors. In cases where JPMPI has the sole proxy authority to vote on a
matter (and investors do not have voting rights), JPMPI has adopted the
following voting policies and procedures:
2. Proxy Voting Policies and Procedures
In general, JPMPI will handle all proxies and other corporate actions in a
timely manner as part of its authority. JPMPI's President is ultimately
responsible for ensuring that all proxies received by JPMPI, on behalf of
Private Funds, are voted in a timely manner and in a manner consistent with the
Private Fund's best interests. JPMPI's fiduciary obligation to manage accounts
in the best interests of the Private Funds extends to proxy voting. When voting
proxies or acting with respect to corporate actions for Private Funds, JPMPI
will act in a prudent and diligent manner solely with the goal of maximizing the
economic value of the assets of the Private Fund's account and thereby providing
the greatest possible return to investors' investments consistent with governing
laws and the investment policies of the Private Fund.
As the management of a company is responsible for its day to day operations,
JPMPI believes that management, subject to the oversight of its board of
directors, is often in the best position to make decisions that serve the
interest of investors. However, JPMPI generally votes against management on
proposals where it perceives a conflict may exist between management and client
interests, such as those that may insulate management or diminish investor
rights. JPMPI also generally votes against management in other cases where the
facts and circumstances indicate that the proposal is not in its client's best
interests.
THIS SECTION IS APPLICABLE TO JPMPI IN ITS CAPACITY AS A SUB-ADVISOR TO THE
RICS.
- JPMPI seeks to have each investment management agreement set forth
whether JPMPI or the client are responsible for voting proxies. If
JPMPI is responsible, it is JPMPI's obligation to vote proxies in the
best interests of the client.
- Investment personnel are principally responsible for determining how
to vote individual proxies in accordance with the JPMorgan Asset
Management Proxy Voting Procedures and Guidelines.
- It is the policy of JPMPI to vote all proxies received on stock held
in portfolios over which JPMPI has discretionary management and proxy
voting authority, unless JPMPI determines that it is not in the best
interests of the client to vote any particular proxy.
- To assist JPMPI's investment personnel with proxy voting proposals,
JPMAM may retain the services of an independent proxy voting services
The services may assist with such items as: coordinating with client
custodians to ensure that all proxy materials are processed in a
timely fashion; voting all proposals that are clearly covered in the
JPMorgan Asset Management Proxy Voting Procedures and Guidelines;
providing JPMPI with a comprehensive analysis of each proxy proposal;
and providing JPMPI with recommendations on how to vote each proxy
proposal based on JPMorgan Asset Management Proxy Voting Procedures
and Guidelines.
- To oversee the proxy voting process on an on-going basis, JPMAM has
established a Proxy Committee has been established that meets at least
semi-annually. The Committee is composed of the Proxy Administrator
and senior officers from among the Investment, Legal, Compliance,
Operations and Risk Management Departments.
- The primary functions of the Proxy Committee are to periodically
review general proxy voting matters; to review and approve the
JPMorgan Asset Management Proxy Voting Procedures and Guidelines
annually; and to provide advice and recommendations on general proxy
voting matters as well as on specific voting issues to be implemented.
- JPMAM has established the role of a Proxy Administrator to oversee
the proxy voting process. The Proxy Administrator monitors
recommendations from outside proxy services, escalates issues to
appropriate investment professionals and confirms the outside
services' recommendation with the appropriate investment professional.
The Proxy Administrator utilizes an automated system to communicate,
track and store the relevant data regarding the proxy voting process.
- Investment personnel, which may include Corporate Governance
Specialists*, analyze issues to determine if any direct or indirect
conflict regarding proxy voting exists, and if any conflict is
identified the matter is referred to the Proxy Administrator.
- In situations in which the JPMorgan Asset Management Proxy Voting
Procedures and Guidelines are silent or recommend a case by case
analysis, the Proxy Administrator will forward the proxy voting
services' voting recommendations to the appropriate investment
professional. The investment professional will determine if the
recommendations provided should be accepted.
- If a material conflict of interest is identified by the Proxy
Administrator, investment professional or Corporate Governance
Specialist for the particular proxy vote, it is the responsibility of
the Proxy Administrator to convene a subset of the Proxy Committee to
review and determine what action should be taken, including the
possibility of retaining an independent third party to exercise
fiduciary responsibility in voting.
- An investment professional may override the recommendation of the
proxy service and/or the normal JPMPI policy position, if special
circumstances apply. If so, certification by the
investment professional is required and must include: a written
analysis supporting their recommendation, confirmation that the
Safeguard Policy and Information Barriers Policies were not violated
and a statement that there is not a conflict of interest.
- The Proxy Administrator's duties include reviewing overrides and
determining if they should be referred to the Proxy Committee for
review.
- The Compliance Department verifies that JPMPI's ADV contains
appropriate disclosure on how to obtain the JPMorgan Asset Management
Proxy Voting Policy and Guidelines and voting records.
- JPMPI's clients can obtain voting records for their portfolio(s).
- Following a request from a client to their Client Service Manager,
JPMPI's clients can obtain voting records for their portfolio(s) as
well as a copy of the JPMorgan Asset Management Proxy Voting Policy
and Guidelines.
---------------
* Please note: For international markets, where market practices
vary widely and where independent proxy voting services are less-well
developed, all voting decisions are made on a case-by-case basis by
Corporate Governance Specialists in conjunction with investment
professionals, based exclusively on the principles contained in the JPMPI's
Proxy Voting Guidelines, as opposed to the recommendations of third-party
agencies based on their interpretation of JPMPI's Proxy Voting Guidelines.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
PORTFOLIO MANAGEMENT TEAM
The senior portfolio management team of the Fund consists of Richard Madigan,
Managing Director, Chief Investment Officer and Head of the J.P. Morgan Global
Access Portfolios and the J.P. Morgan Access Funds; Stephen Parker, Vice
President of J. P. Morgan Chase Bank N.A. and an employee of J.P. Morgan Private
Investments, Inc. and Georgiy Zhikharev, Executive Director on the Global
Markets Strategy Team at J.P. Morgan Private Bank in New York and serves as a
Portfolio Manager for the firm's Global Access Portfolios. Mr. Zhikharev is also
a member of the Hedge Fund Advisory Council. The senior portfolio management
team determines the asset allocation for the Fund among Portfolio Managers,
Investment Funds and other investments. In addition to being the Chief
Investment Officer for the J.P. Morgan Global Access Portfolios and J.P. Morgan
Access Funds, Richard Madigan is also a senior member of the Strategy Team at
the J.P. Morgan Private Bank responsible for the development of investment
strategy, including tactical and strategic asset allocation for high net worth
clients. Prior to joining J.P. Morgan in 2002, Mr. Madigan was Head of Emerging
Markets Investments and Portfolio Manager at Offitbank, a New York-based wealth
management boutique, from 1998-2002, where he managed in excess of $1 billion in
both on and off-shore portfolios, including the firm's flagship emerging markets
mutual fund. Mr. Parker has served as portfolio manager for the JPMorgan Global
Access Portfolios since 2007. An employee since 2001, Mr. Parker previously
worked on the Investment Strategy Team supporting the Chief Investment Officer
of J.P. Morgan Private Bank. Mr. Zhikharev has been with J.P. Morgan since 2002
and prior to his current role, he spent three years as the Risk Officer for the
Global Access team overseeing quantitative risk analytics and research and
evaluating the risk impact of portfolio trades. Prior to this role, he developed
the non-discretionary risk management unit of the Private Bank. Previously, Mr.
Zhikharev was Director and Partner at Dialogue Investments, an investment
management and consulting company in Russia, responsible for proprietary
portfolio investments and investment management advisory business. Mr. Zhikharev
holds a Master in Business Administration with a concentration in Finance from
the DePaul University in Chicago. He also holds a
Ph.D.-equivalent degree in Economics from the Kazan State University, Russia.
Additionally, Mr. Zhikharev holds a Financial Risk Manager (FRM) designation
from the Global Association of Risk Professionals.
OTHER ACCOUNTS MANAGED
The following tables show information regarding other accounts managed by
portfolio managers of the Fund as of March 31, 2011:
Non-Performance Based Fee Advisory Accounts
Registered Investment Companies Other Pooled Investment Vehicles Other Accounts
Number of Number of Number of
Accounts Total Assets Accounts Total Assets Accounts Total Assets
----------------------------------- ------------------------------------ ----------------------------
Richard Madigan 2 $ 2,208,320 11 $ 5,152,939 0 $ 0
Stephen Parker 2 $ 2,208,320 8 $ 3,948,787 0 $ 0
Georgiy Zhikharev 0 $ 0 1 $ 58,426 0 $ 0
Performance Based Fee Advisory Accounts
Registered Investment Companies Other Pooled Investment Vehicles Other Accounts
Number of Number of Number of
Accounts Total Assets Accounts Total Assets Accounts Total Assets
----------------------------- -------------------------------- -----------------------
Richard Madigan 0 $ 0 12 $ 5,312,074 0 $ 0
Stephen Parker 0 $ 0 12 $ 5,312,074 0 $ 0
Georgiy Zhikharev 0 $ 0 7 $ 3,138,944 0 $ 0
POTENTIAL CONFLICTS OF INTEREST
The Investment Manager and Sub-Adviser provide investment management services to
other clients, including other multi-manager funds and discretionary managed
accounts, that follow investment programs substantially similar to that of the
Fund. As a result, when a limited investment opportunity would be appropriate
for the Fund and also for one or more of its other clients, the Investment
Manager and Sub-Adviser will be required to choose among the Fund and such other
clients in allocating such opportunity, or to allocate less of such opportunity
to the Fund than the Investment Manager or Sub-Adviser would ideally allocate if
it did not provide investment management services to other clients. In addition,
the Investment Manager and/or Sub-Adviser may determine that an investment
opportunity is appropriate for a particular client, or for itself or an
affiliate, but not for the Fund. Situations may arise in which other client
accounts managed by the Investment Manager and/or Sub-Adviser or its affiliates
have made investments that would have been suitable for investment by the Fund
but, for various reasons, were not pursued by, or available to, the Fund. The
Investment Manager and Sub-Adviser attempt to allocate limited investment
opportunities among the Fund and their other client accounts in a manner they
believe to be reasonable and equitable.
PORTFOLIO MANAGER COMPENSATION
The Adviser's portfolio managers participate in a competitive compensation
program that is designed to attract and retain outstanding people and closely
link the performance of investment professionals to client investment
objectives. The total compensation program includes a base salary fixed from
year to year and a variable performance bonus consisting of cash incentives and
restricted stock and may include mandatory notional investments (as described
below) in selected mutual funds advised by the Adviser or its affiliates. These
elements reflect individual performance and the performance of the Adviser's
business as a whole.
Each portfolio manager's performance is formally evaluated annually based on a
variety of factors including the aggregate size and blended performance of the
portfolios such portfolio manager manages. Individual contribution relative to
client goals carries the highest impact. Portfolio manager compensation is
primarily driven by meeting or exceeding clients' risk and return objectives,
relative performance to competitors or competitive indices and compliance with
firm policies and regulatory requirements. In evaluating each portfolio
manager's performance with respect to the mutual funds he or she manages, the
Funds' pre-tax performance is compared to the appropriate market peer group and
to each Fund's benchmark index listed in the Fund's prospectuses over one, three
and five year periods (or such shorter time as the portfolio manager has managed
the Fund). Investment performance is generally more heavily weighted to the
long-term.
Awards of restricted stock are granted as part of an employee's annual
performance bonus and comprise from 0% to 40% of a portfolio manager's total
bonus. As the level of incentive compensation increases, the percentage of
compensation awarded in restricted stock also increases. Up to 50% of the
restricted stock portion of a portfolio manager's bonus may instead be subject
to mandatory notional investment in selected mutual funds advised by the Adviser
or its affiliates. When these awards vest over time, the portfolio manager
receives cash equal to the market value of the notional investment in the
selected mutual funds.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGEMENT TEAM
As of March 31, 2011, none of the persons involved in the management of the
Fund's portfolio beneficially owns any interest in the Fund.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive 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 Access Multi-Strategy Fund, L.L.C.
By (Signature and Title)* /s/Patricia A. Maleski
----------------------------
Patricia A. Maleski,
Principal Executive Officer
(principal executive officer)
Date June 3, 2011
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/Patricia A. Maleski
----------------------------
Patricia A. Maleski,
Principal Executive Officer
(principal executive officer)
Date June 3, 2011
By (Signature and Title)* /s/Joy C. Dowd
----------------------------
Joy C. Dowd,
Principal Financial Officer
(principal financial officer)
Date June 3, 2011
----------
* Print the name and title of each signing officer under his or her signature.