UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-22192
AIP Multi-Strategy Fund A
(Exact Name of Registrant as specified in Charter)
100 Front Street, Suite 400
West Conshohocken, Pennsylvania 19428-2881
(Address of principal executive offices)
Stefanie V. Chang Yu, Esq.
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
(Name and address of agent for service)
Registrant’s Telephone Number, including Area Code: (212) 296-6970
Date of fiscal year end: December 31
Date of reporting period: September 30, 2011
Item 1. Schedule of Investments.
The Registrant’s schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:
| ALTERNATIVE INVESTMENT PARTNERS | Morgan Stanley | |
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited)
September 30, 2011
| Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
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| Investment Funds |
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| Distressed |
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| Monarch Debt Recovery Fund Ltd. |
3/1/2011 | $ | 1,200,000 | $ | 1,141,156 | 3.03 | % | |||||||||
| York Credit Opportunities Unit Trust |
5/1/2010 | 1,250,000 | 1,206,707 | 3.21 | ||||||||||||
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| Total Distressed |
2,450,000 | 2,347,863 | 6.24 | |||||||||||||
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| Equity Long/Short - High Hedge |
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| Ascend Partners Fund II, Ltd. |
5/1/2010 | 750,000 | 730,386 | 1.94 | ||||||||||||
| Diamondback Offshore Fund, Ltd. |
5/1/2010 | 1,000,000 | 975,930 | 2.59 | ||||||||||||
| Millennium International, Ltd. |
5/1/2010 | 1,750,000 | 1,924,192 | 5.12 | ||||||||||||
| Prism Partners IV Leveraged Offshore Fund |
5/1/2010 | 1,250,000 | 1,263,256 | 3.36 | ||||||||||||
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| Total Equity Long/Short - High Hedge |
4,750,000 | 4,893,764 | 13.01 | |||||||||||||
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| Equity Long/Short - Opportunistic |
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| Broadway Gate Offshore Fund, Ltd. |
5/1/2010 | 1,125,000 | 1,167,479 | 3.10 | ||||||||||||
| East Side Capital Offshore, Ltd. |
5/1/2010 | 1,000,000 | 954,951 | 2.54 | ||||||||||||
| Lansdowne Global Financials Fund Limited |
5/1/2010 | 1,000,000 | 743,523 | 1.98 | ||||||||||||
| Lansdowne UK Equity Fund Limited |
5/1/2010 | 1,078,395 | 942,191 | 2.51 | ||||||||||||
| S.A.C. Capital International, Ltd. |
5/1/2010 | 1,000,000 | 1,132,968 | 3.01 | ||||||||||||
| Seligman Tech Spectrum Fund |
5/1/2010 | 1,016,194 | 985,048 | 2.62 | ||||||||||||
| Visium Balanced Offshore Fund, Ltd. |
3/1/2011 | 1,100,000 | 1,054,281 | 2.80 | ||||||||||||
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| Total Equity Long/Short - Opportunistic |
7,319,589 | 6,980,441 | 18.56 | |||||||||||||
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| Event Driven Credit |
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| King Street Europe, Ltd. |
5/1/2010 | 562,503 | 537,508 | 1.43 | ||||||||||||
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| Total Event Driven Credit |
562,503 | 537,508 | 1.43 | |||||||||||||
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1
| ALTERNATIVE INVESTMENT PARTNERS | Morgan Stanley | |
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
September 30, 2011
| Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
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| Investment Funds (continued) |
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| Macro |
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| Brevan Howard Fund Limited |
6/1/2010 | $ | 1,499,100 | $ | 1,666,467 | 4.43 | % | |||||||||
| Citadel Tactical Trading Ltd. |
7/1/2010 | 1,273,104 | 1,766,046 | 4.70 | ||||||||||||
| D.E. Shaw Oculus International Fund |
5/1/2010 | 1,050,000 | 1,229,018 | 3.27 | ||||||||||||
| Discovery Global Opportunity Fund, Ltd. |
5/1/2010 | 1,000,000 | 1,123,727 | 2.99 | ||||||||||||
| Fortress Asia Macro Fund Ltd. |
8/1/2011 | 300,000 | 285,730 | 0.76 | ||||||||||||
| Spinnaker Global Opportunity Fund Ltd. |
4/1/2011 | 1,100,000 | 971,426 | 2.58 | ||||||||||||
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| Total Macro |
6,222,204 | 7,042,414 | 18.73 | |||||||||||||
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| Merger/Risk Arbitrage |
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| Magnetar Global Event Driven Fund Ltd. |
7/1/2011 | 1,325,000 | 1,273,087 | 3.39 | ||||||||||||
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| Total Merger/Risk Arbitrage |
1,325,000 | 1,273,087 | 3.39 | |||||||||||||
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| Mortgage Arbitrage |
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| Cerberus RMBS Opportunities Fund, L.P. |
9/1/2011 | 400,000 | 401,040 | 1.07 | ||||||||||||
| DoubleLine Opportunistic Income Fund II Ltd. |
3/1/2011 | 1,000,000 | 1,142,237 | 3.04 | ||||||||||||
| SPM Core Offshore Fund, Ltd. |
12/1/2010 | 1,600,000 | 1,798,498 | 4.78 | ||||||||||||
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| Total Mortgage Arbitrage |
3,000,000 | 3,341,775 | 8.89 | |||||||||||||
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| Multi-Strategy |
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| Farallon Capital Offshore Investors, Inc. |
5/1/2010 | 1,000,000 | 1,028,100 | 2.73 | ||||||||||||
| HBK Offshore Fund II L.P. |
5/1/2010 | 1,500,000 | 1,645,565 | 4.38 | ||||||||||||
| KLS Diversified Fund Ltd. |
7/1/2010 | 1,200,000 | 1,263,321 | 3.36 | ||||||||||||
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| Total Multi-Strategy |
3,700,000 | 3,936,986 | 10.47 | |||||||||||||
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2
| ALTERNATIVE INVESTMENT PARTNERS | Morgan Stanley | |
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
September 30, 2011
| Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
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| Investment Funds (continued) |
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| Statistical Arbitrage |
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| GSA Capital International Fund Limited |
2/1/2011 | $ | 2,000,000 | $ | 2,124,199 | 5.65 | % | |||||||||
| Two Sigma Eclipse Cayman Fund, Ltd. |
4/1/2011 | 893,356 | 954,890 | 2.54 | ||||||||||||
| Two Sigma Spectrum Cayman Fund, Ltd. |
5/1/2010 | 1,174,916 | 1,279,697 | 3.40 | ||||||||||||
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| Total Statistical Arbitrage |
4,068,272 | 4,358,786 | 11.59 | |||||||||||||
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| Total Investments in Investment Funds |
$ | 33,397,568 | 34,712,624 | 92.31 | ||||||||||||
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| Other Assets, less Liabilities |
2,891,560 | 7.69 | ||||||||||||||
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| Total Net Assets |
$ | 37,604,184 | 100.00 | % | ||||||||||||
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3
| ALTERNATIVE INVESTMENT PARTNERS | Morgan Stanley | |
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
September 30, 2011
| Strategy Allocation |
Percent of Net Assets |
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| Macro |
18.73 | % | ||
| Equity Long/Short - Opportunistic |
18.56 | |||
| Equity Long/Short - High Hedge |
13.01 | |||
| Statistical Arbitrage |
11.59 | |||
| Multi-Strategy |
10.47 | |||
| Mortgage Arbitrage |
8.89 | |||
| Distressed |
6.24 | |||
| Merger/Risk Arbitrage |
3.39 | |||
| Event Driven Credit |
1.43 | |||
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| Total Investments in Investment Funds |
92.31 | % | ||
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4
Notes to Schedule of Investments
Portfolio Valuation
The Board of Directors (the “Board”) of AIP Multi-Strategy Fund A (the “Fund”) has approved procedures pursuant to which the Fund values its investments in Investment Funds at fair value, which ordinarily will be the amount equal to the Fund’s pro rata interest in the net assets of each such Investment Fund, as such value is supplied by, or on behalf of, the Investment Fund’s investment manager from time to time, usually monthly. Values received from, or on behalf of, the Investment Funds’ respective investment managers are typically estimates only, subject to subsequent revision by such investment managers. Such values are generally net of management fees and performance incentive fees or allocations payable to the Investment Funds’ managers or general partners pursuant to the Investment Funds’ operating agreements. The Investment Funds value their underlying investments in accordance with policies established by each Investment Fund, as described in each of their financial statements or offering memoranda. The Fund’s investments in Investment Funds are subject to the terms and conditions of the respective operating agreements and offering memoranda, as appropriate.
The Fund’s investment adviser (the “Adviser”) has designed ongoing due diligence processes with respect to Investment Funds and their investment managers, which assist the Adviser in assessing the quality of information provided by, or on behalf of, each Investment Fund and in determining whether such information continues to be reliable or whether further investigation is necessary. Such investigation, as applicable, may or may not require the Adviser to forego its normal reliance on the value supplied by, or on behalf of, such Investment Fund and to determine independently the fair value of the Fund’s interest in such Investment Fund, consistent with the Fund’s fair valuation procedures.
Where no value is readily available from an Investment Fund or where a value supplied by an Investment Fund is deemed by the Adviser not to be indicative of its fair value, the Adviser will determine, in good faith, the fair value of the Investment Fund under procedures adopted by the Board and subject to Board supervision. The Adviser values the Fund’s investments based on such reasonably available relevant information as it considers material. Because of the inherent uncertainty of valuation, the fair values of the Fund’s investments may differ significantly from the values that would have been used had a ready market for the investments held by the Fund been available.
Fair Value of Financial Instruments
The fair value of the Fund’s assets and liabilities that qualify as financial instruments approximates the carrying amounts presented in the Schedule of Investments. Fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely 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. The Fund uses a three-tier hierarchy to distinguish between (a) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the fair value of the Fund’s investments.
5
The inputs are summarized in the three broad levels listed below:
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar investments, fair value of investments for which the Fund has the ability to fully redeem tranches at net asset value as of the measurement date or within the near term, short-term investments that are valued at amortized cost) |
| • | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments, fair value of investments for which the Fund does not have the ability to fully redeem tranches at net asset value as of the measurement date or within the near term) |
The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.
The units of account that are valued by the Fund are its interests in the Investment Funds or other financial instruments and not the underlying holdings of such Investment Funds or other financial instruments. Thus, the inputs used by the Fund to value its investments in each of the Investment Funds or other financial instruments may differ from the inputs used to value the underlying holdings of such Investment Funds or other financial instruments.
The Fund’s policy is to recognize transfers between Levels 1, 2 or 3 and transfers due to strategy reclassification, if any, as if they occurred as of the beginning of the reporting period. For the period from January 1, 2011 to September 30, 2011, the Fund did not have any transfers between Levels 1 and 2.
The following is a summary of the inputs used for investment tranches as of September 30, 2011 in valuing the Fund’s investments carried at fair value:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Investment Funds |
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| Distressed |
$ | — | $ | — | $ | 2,347,863 | $ | 2,347,863 | ||||||||
| Equity Long/Short - High Hedge |
— | 1,993,642 | 2,900,122 | 4,893,764 | ||||||||||||
| Equity Long/Short - Opportunistic |
— | 4,308,922 | 2,671,519 | 6,980,441 | ||||||||||||
| Event Driven Credit |
— | — | 537,508 | 537,508 | ||||||||||||
| Macro |
— | 6,070,988 | 971,426 | 7,042,414 | ||||||||||||
| Merger/Risk Arbitrage |
— | — | 1,273,087 | 1,273,087 | ||||||||||||
| Mortgage Arbitrage |
— | 2,940, 735 | 401,040 | 3,341,775 | ||||||||||||
| Multi-Strategy |
— | 2,291,421 | 1,645,565 | 3,936,986 | ||||||||||||
| Statistical Arbitrage |
— | 4,358,786 | — | 4,358,786 | ||||||||||||
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| Total Investment Funds |
$ | — | $ | 21,964,494 | $ | 12,748,130 | $ | 34,712,624 | ||||||||
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6
The following is a reconciliation of investment tranches for which significant unobservable inputs (Level 3) were used in determining value:
| Balance as of December 31, 2010 |
Transfers into Level 3 |
Transfers out of Level 3* |
Net realized gain (loss) |
Net change in unrealized appreciation/ depreciation |
Purchases | Distributions/ sales |
Balance as of September 30, 2011 |
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| Investment Funds |
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| Distressed |
$ | 1,274,842 | $ | — | $ | — | $ | — | $ | (126,979 | ) | $ | 1,200,000 | $ | — | $ | 2,347,863 | |||||||||||||||
| Equity Long/Short - High Hedge |
2,382,692 | — | — | — | 17,430 | 500,000 | — | 2,900,122 | ||||||||||||||||||||||||
| Equity Long/Short - Opportunistic |
2,280,567 | — | (656,530 | ) | 7,748 | (52,518 | ) | 1,600,000 | (507,748 | ) | 2,671,519 | |||||||||||||||||||||
| Event Driven Credit |
1,005,573 | — | — | (1,381 | ) | (30,568 | ) | — | (436,116 | ) | 537,508 | |||||||||||||||||||||
| Macro |
— | — | — | — | (128,574 | ) | 1,100,000 | — | 971,426 | |||||||||||||||||||||||
| Merger/Risk Arbitrage |
— | — | — | — | (51,913 | ) | 1,325,000 | — | 1,273,087 | |||||||||||||||||||||||
| Mortgage Arbitrage |
— | — | — | — | 1,040 | 400,000 | — | 401,040 | ||||||||||||||||||||||||
| Multi-Strategy |
1,068,281 | — | — | — | 77,284 | 500,000 | — | 1,645,565 | ||||||||||||||||||||||||
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| Total Investment Funds |
$ | 8,011,955 | $ | — | $ | (656,530 | ) | $ | 6,367 | $ | (294,798 | ) | $ | 6,625,000 | $ | (943,864 | ) | $ | 12,748,130 | |||||||||||||
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| Net change in unrealized appreciation/ depreciation on Level 3 investment tranches still held as of September 30, 2011 |
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| Investment Funds |
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| Distressed |
$ | (126,979 | ) | |
| Equity Long/Short - High Hedge |
17,430 | |||
| Equity Long/Short - Opportunistic |
6,624 | |||
| Event Driven Credit |
(30,568 | ) | ||
| Macro |
(128,574 | ) | ||
| Merger/Risk Arbitrage |
(51,913 | ) | ||
| Mortgage Arbitrage |
1,040 | |||
| Multi-Strategy |
77,284 | |||
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| Total Investment Funds |
$ | (235,656 | ) | |
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| * | Transfers out of Level 3 of $656,530 are due to transfers of Investment Fund interests into other Investment Fund interests managed by the same Investment Fund manager. |
7
Item 2. Controls and Procedures
| (a) | The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in the form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. |
| (b) | There were no changes or corrective actions during the Registrant’s third fiscal quarter with regard to significant deficiencies or material weaknesses in the Registrant’s internal controls over financial reporting or in other factors that could materially affect the Registrant’s internal controls over financial reporting. |
Item 3. Exhibits
| (a) | Certifications of Principal Executive Officer and Principal Financial Officer attached to the report as part of EX-99. CERT. |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused his report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | AIP Multi-Strategy Fund A | |
| By: | /s/ Jacques Chappuis | |
| Name: | Jacques Chappuis | |
| Title: | Principal Executive Officer | |
| Date: | November 28, 2011 | |
Pursuant to the requirement of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Jacques Chappuis | |
| Name: | Jacques Chappuis | |
| Title: | Principal Executive Officer | |
| Date: | November 28, 2011 | |
| By: | /s/ Noel Langlois | |
| Name: | Noel Langlois | |
| Title: | Principal Financial Officer | |
| Date: | November 28, 2011 | |