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: 811-22193
AIP MULTI-STRATEGY FUND P
(Exact name of Registrant as specified in Charter)
100 Front Street, Suite 400
West Conshohocken, Pennsylvania 19428-2881
(Address of principal executive offices)
Registrants Telephone Number, including Area Code: (610) 260-7600
Stefanie V. Chang Yu, Esq.
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
(Name and address of agent for service)
COPY TO:
Richard Horowitz, Esq.
DECHERT LLP
1095 Avenue of the Americas
New York, NY 10036-6797
(212) 698-3500
Date of fiscal year end: December 31
Date of reporting period: June 30, 2013
ITEM 1. | REPORTS TO STOCKHOLDERS. The Registrants semi-annual report transmitted to limited partners pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: |
AIP MULTI-STRATEGY FUND P
Financial Statements (Unaudited)
For the Period from January 1, 2013 to |
AIP Multi-Strategy Fund P
Financial Statements (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Financial Statements (Unaudited) |
||||
1 | ||||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
Proxy Voting Policies and Procedures and Proxy Voting Record |
12 | |||
12 |
Unaudited financial statements for AIP Multi-Strategy Fund A for the period from January 1, 2013 to June 30, 2013 are attached to these financial statements and are an integral part thereof.
AIP Multi-Strategy Fund P
Statement of Assets and Liabilities (Unaudited)
June 30, 2013
Assets |
||||
Investment in AIP Multi-Strategy Fund A, at fair value (cost $43,941,696) |
$ | 45,675,448 | ||
Cash |
579,115 | |||
Repurchases receivable from AIP Multi-Strategy Fund A |
328,195 | |||
Due from adviser |
13,154 | |||
Other assets |
1,308 | |||
|
|
|||
Total assets |
46,597,220 | |||
|
|
|||
Liabilities |
||||
Payable for share repurchases |
328,195 | |||
Subscriptions received in advance |
350,000 | |||
Shareholder servicing fee payable |
32,186 | |||
Accrued expenses and other liabilities |
46,881 | |||
|
|
|||
Total liabilities |
757,262 | |||
|
|
|||
Net assets |
$ | 45,839,958 | ||
|
|
|||
Net assets consist of: |
||||
Net capital |
$ | 44,149,669 | ||
Accumulated undistributed net investment income (loss) |
(43,463 | ) | ||
Net unrealized appreciation on investments |
1,733,752 | |||
|
|
|||
Net assets |
$ | 45,839,958 | ||
|
|
|||
Net asset value per share: |
||||
43,926.768 shares issued and outstanding, no par value, 3,000,000 registered shares |
$ | 1,043.55 | ||
Maximum offering price per share |
||||
($1,043.55 plus sales load of 3% of net asset value per share) |
$ | 1,074.86 |
See accompanying notes and attached unaudited financial statements for AIP Multi-Strategy Fund A.
1
AIP Multi-Strategy Fund P
Statement of Operations (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Expenses |
||||
Shareholder servicing fees |
$ | 67,639 | ||
Professional fees |
24,325 | |||
Transfer agent fees |
20,052 | |||
Registration fees |
14,506 | |||
Custody fees |
400 | |||
Other |
8,164 | |||
|
|
|||
Total fund expenses |
135,086 | |||
Expense reimbursements |
(76,147 | ) | ||
|
|
|||
Net expenses |
58,939 | |||
|
|
|||
Net investment income (loss) |
(58,939 | ) | ||
|
|
|||
Unrealized gain (loss) from investments in AIP Multi-Strategy Fund A |
||||
Net change in unrealized appreciation/depreciation on investments |
1,571,679 | |||
|
|
|||
Net unrealized gain (loss) from investments in AIP Multi-Strategy Fund A |
1,571,679 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
$ | 1,512,740 | ||
|
|
See accompanying notes and attached unaudited financial statements for AIP Multi-Strategy Fund A.
2
AIP Multi-Strategy Fund P
Statements of Changes in Net Assets (Unaudited)
For the year ended December 31, 2012 |
||||
Net increase (decrease) in net assets resulting from operations: |
||||
Net investment income (loss) |
$ | 3,361,616 | ||
Net realized gain (loss) from investments |
39,571 | |||
Net change in unrealized appreciation/depreciation on investments |
780,221 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
4,181,408 | |||
|
|
|||
Distributions to shareholders from: |
||||
Net investment income |
(3,429,943 | ) | ||
Long-term capital gains |
(39,571 | ) | ||
|
|
|||
(3,469,514 | ) | |||
|
|
|||
Shareholder transactions |
||||
Subscriptions (representing 2,558.163 shares) |
2,626,247 | |||
Distributions reinvested (representing 3,483.380 shares) |
3,459,033 | |||
Repurchases (representing 1,948.574 shares) |
(1,980,288 | ) | ||
|
|
|||
Net increase (decrease) in net assets from shareholder transactions |
4,104,992 | |||
|
|
|||
Total increase (decrease) in net assets |
4,816,886 | |||
Net assets, beginning of year (representing 38,807.392 shares) |
38,446,237 | |||
|
|
|||
Net assets, end of year (representing 42,900.361 shares) |
$ | 43,263,123 | ||
|
|
|||
For the period from January 1, 2013 to June 30, 2013 |
||||
Net increase (decrease) in net assets resulting from operations: |
||||
Net investment income (loss) |
$ | (58,939 | ) | |
Net change in unrealized appreciation/depreciation on investments |
1,571,679 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
1,512,740 | |||
|
|
|||
Shareholder transactions |
||||
Subscriptions (representing 3,530.065 shares) |
3,678,000 | |||
Repurchases (representing 2,503.658 shares) |
(2,613,905 | ) | ||
|
|
|||
Net increase (decrease) in net assets from shareholder transactions |
1,064,095 | |||
|
|
|||
Total increase (decrease) in net assets |
2,576,835 | |||
Net assets, beginning of period (representing 42,900.361 shares) |
43,263,123 | |||
|
|
|||
Net assets, end of period (representing 43,926.768 shares) |
$ | 45,839,958 | ||
|
|
See accompanying notes and attached unaudited financial statements for AIP Multi-Strategy Fund A.
3
AIP Multi-Strategy Fund P
Statement of Cash Flows (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Cash flows from operating activities |
||||
Net increase (decrease) in net assets resulting from operations |
$ | 1,512,740 | ||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
||||
Net change in unrealized appreciation/depreciation on investments in AIP Multi-Strategy Fund A |
(1,571,679 | ) | ||
Purchase of investments in AIP Multi-Strategy Fund A |
(3,245,000 | ) | ||
Proceeds from sales of investments in AIP Multi-Strategy Fund A |
2,263,905 | |||
(Increase) decrease in repurchases receivable from AIP Multi-Strategy Fund A |
1,027,093 | |||
(Increase) decrease in due from adviser |
72,317 | |||
(Increase) decrease in other assets |
37 | |||
Increase (decrease) in shareholder servicing fee payable |
6,331 | |||
Increase (decrease) in accrued expenses and other liabilities |
(5,411 | ) | ||
|
|
|||
Net cash provided by (used in) operating activities |
60,333 | |||
|
|
|||
Cash flows from financing activities |
||||
Subscriptions (including subscriptions received in advance) |
3,778,000 | |||
Repurchases |
(3,640,998 | ) | ||
|
|
|||
Net cash provided by (used in) financing activities |
137,002 | |||
|
|
|||
Net change in cash |
197,335 | |||
Cash at beginning of period |
381,780 | |||
|
|
|||
Cash at end of period |
$ | 579,115 | ||
|
|
|||
Supplemental disclosure of cash flow information: |
||||
Conversion to shareholder subscriptions in 2013 of subscriptions received in advance during 2012 |
$ | 250,000 | ||
|
|
See accompanying notes and attached unaudited financial statements for AIP Multi-Strategy Fund A.
4
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited)
June 30, 2013
1. Organization
AIP Multi-Strategy Fund P (the Fund) was organized under the laws of the State of Delaware as a statutory trust on February 27, 2008. The Fund commenced operations on May 1, 2010 and operates pursuant to an Agreement and Declaration of Trust (the Trust Deed). The Fund is registered under the U.S. Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end, non-diversified management investment company. While non-diversified for 1940 Act purposes, the Fund intends to comply with the diversification requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), as such requirements are described in more detail below. The Fund has no fixed termination date and will continue unless the Fund is otherwise terminated under the terms of the Trust Deed or unless and until required by law.
The Fund is a Feeder fund in a Master-Feeder structure whereby the Fund invests substantially all of its assets in AIP Multi-Strategy Fund A (the Master Fund). The Master Fund is a statutory trust organized under the laws of the State of Delaware and is registered under the 1940 Act as a closed-end, non-diversified, management investment company (although it also intends to comply with Subchapter M diversification requirements, as described in more detail below). Morgan Stanley AIP GP LP, an affiliate of Morgan Stanley, serves as the Master Funds investment adviser (the Investment Adviser). Effective December 5, 2012, the Funds Board of Trustees approved a sub-advisory agreement between the Investment Adviser and Morgan Stanley Investment Management Limited for the latter to serve as the Master Funds sub-adviser (the Sub-Adviser) (collectively with the Investment Adviser, the Adviser). The Master Fund has the same investment objective as the Fund. The Master Funds investment objective is to seek long-term capital appreciation principally through investing in investment funds (Investment Funds) managed by third party investment managers who primarily employ a variety of investment strategies in pursuit of attractive risk-adjusted returns consistent with the preservation of capital. These investment strategies allow investment managers the flexibility to use leveraged or short-sale positions to take advantage of perceived inefficiencies across the global capital markets. The Master Fund may seek to gain investment exposure to certain Investment Funds or to adjust market or risk exposure by entering into derivative transactions such as total return swaps, options and futures. As of June 30, 2013, the Fund had an 86.02% ownership interest in the Master Fund. The financial statements of the Master Fund, including the Schedule of Investments, are attached to this report and should be read in conjunction with the Funds financial statements.
The Fund has a Board of Trustees (the Board) that has overall responsibility for monitoring and overseeing the Funds investment program and its management and operations. A majority of the members of the Board (the Trustees) are not interested persons (as defined by the 1940 Act) of the Fund, the Investment Adviser or the Sub-Adviser. The same Trustees also serve as the Master Funds Board of Trustees.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
5
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (US GAAP). Such policies are consistently followed by the Fund in preparation of its financial statements. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including the estimated fair value of investments. Actual results could differ from those estimates.
In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements (ASU 2013-08), which updates the criteria used in defining an investment company under US GAAP and also sets forth certain measurement and disclosure requirements. The amendments in ASU 2013-08 are effective for fiscal periods (including interim periods) beginning after December 15, 2013. While management is still assessing the impact of this update on disclosures, the impact of this update is not expected to be material to the Funds financial statements.
Investment in the Fund
The Fund offers on a continuous basis through Morgan Stanley Distribution, Inc. (the Distributor), an affiliate of Morgan Stanley, up to 3,000,000 shares of beneficial interest (Shares). The initial closing date (Initial Closing Date) for the public offering of Shares was May 3, 2010. Shares were offered at an initial offering price of $1,000 per Share, plus any applicable sales load, and have been offered in a continuous offering thereafter at the Funds then current net asset value per Share, plus any applicable sales load. The Distributor may enter into selected dealer arrangements with various brokers and dealers (Selling Agents), some of which may be affiliates of the Fund, that have agreed to participate in the distribution of the Funds Shares.
Shares are to be sold only to investors (Shareholders) that represent that they are accredited investors within the meaning of Rule 501(a) of Regulation D promulgated under the U.S. Securities Act of 1933, as amended, and qualified clients within the meaning of Rule 205-3 promulgated under the U.S. Investment Advisers Act of 1940. The Distributor or any Selling Agent may impose additional eligibility requirements for Shareholders who purchase shares through the Distributor or such Selling Agent. The minimum initial investment in the Fund by any Shareholder is $50,000. The minimum additional investment in the Fund by any Shareholder is $25,000. The minimum initial and additional investments may be reduced by the Fund with respect to certain Shareholders. Shareholders may only purchase their Shares through the Distributor or through a Selling Agent.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
6
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Investment in the Fund (continued)
The Fund may from time to time offer to repurchase Shares (or portions of them) at net asset value pursuant to written tenders by Shareholders. Any offer to repurchase Shares by the Fund will only be made to Shareholders at the same times as, and in parallel with, each repurchase offer made by the Master Fund to its investors, including the Fund. Each such parallel repurchase offer made by the Master Fund will generally apply to up to 15% of the net assets of the Master Fund. Repurchases will be made at such times, in such amounts and on such terms as may be determined by the Board, in its sole discretion. In determining whether the Fund should offer to repurchase Shares (or portions of them) from Shareholders, the Board will consider the recommendations of the Adviser as to the timing of such an offer, as well as a variety of operational, business and economic factors. The Adviser expects that, generally, it will recommend to the Board that the Fund offer to repurchase Shares (or portions of them) from Shareholders quarterly, on each March 31, June 30, September 30 and December 31. In general, the Fund will initially pay at least 90% of the estimated value of the repurchased Shares to Shareholders as of the later of: (1) a period of within 30 days after the value of the Shares to be repurchased is determined, or (2) if the Master Fund has requested withdrawals of its capital from any Investment Funds in order to fund the repurchase of Shares, within ten business days after the Master Fund has received at least 90% of the aggregate amount withdrawn by the Master Fund from such Investment Funds. The remaining amount (the Holdback Amount) will be paid promptly after the completion of the annual audit of the Fund and preparation of the Funds audited financial statements. As of June 30, 2013, the Holdback Amount was $28,195, which includes any Holdback Amount for repurchases as of June 30, 2013, and is included in payable for share repurchases in the Statement of Assets and Liabilities.
Investment in the Master Fund
The Fund records its investment in the Master Fund at fair value which is represented by the Funds proportionate interest in the net assets of the Master Fund as of June 30, 2013. The Funds investment in the Master Fund would be considered Level 3 as defined under fair valuation accounting standards. Valuation of Investment Funds and other investments held by the Master Fund, including the Master Funds disclosure of investments under the three-tier hierarchy, is discussed in the notes to the Master Funds financial statements. The performance of the Fund is directly affected by the performance of the Master Fund. The financial statements of the Master Fund, which are attached, are an integral part of these financial statements. Please refer to the accounting policies disclosed in the financial statements of the Master Fund for additional information regarding significant accounting policies that affect the Fund.
Income Recognition and Expenses
The Fund recognizes income and records expenses on an accrual basis. Income, expenses and realized and unrealized gains and losses are recorded monthly. The changes in net asset value of the investment in the Master Fund are included in net change in unrealized appreciation/depreciation on investments in the Statement of Operations. Realized gain (loss) from investment in the Master Fund is calculated using specific identification.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
7
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its Shareholders. Therefore, no provision for federal income taxes is required. The Fund files tax returns with the U.S. Internal Revenue Service and various states. The Fund has concluded there are no significant uncertain tax positions that would require recognition in the financial statements as of June 30, 2013. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Generally, open tax years under potential examination vary by jurisdiction, but at least each of the tax years in the four-year period ended December 31, 2012, remains subject to examination by major taxing authorities.
At June 30, 2013, the cost and related gross unrealized appreciation and depreciation for tax purposes were as follows:
Cost of investments for tax purposes |
$ | 43,941,696 | ||
|
|
|||
Gross tax unrealized appreciation |
$ | 1,733,752 | ||
Gross tax unrealized depreciation |
| |||
|
|
|||
Net tax unrealized appreciation/depreciation on investments |
$ | 1,733,752 | ||
|
|
Distribution of Income and Gains
The Fund declares and pays dividends annually from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes.
In order to satisfy the diversification requirements under Subchapter M of the Code, the Fund generally invests its assets in the Master Fund, which generally invests its assets in Investment Funds organized outside the United States that are treated as corporations for U.S. tax purposes and are expected to be classified as passive foreign investment companies. As such, the Fund expects that its distributions generally will be taxable as ordinary income to the Shareholders.
Pursuant to the dividend reinvestment plan established by the Fund (the DRIP), each Shareholder whose Shares are registered in its own name will automatically be a participant under the DRIP and have all income, dividends and capital gains distributions automatically reinvested in additional Shares unless such Shareholder specifically elects to receive all income, dividends and capital gain distributions in cash.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
8
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Distribution of Income and Gains (continued)
The tax character of distributions paid may differ from the character of distributions shown in the Statement of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. There were no distributions paid during the period from January 1, 2013 to June 30, 2013.
The tax character of distributions paid during the year ended December 31, 2012 was as follows:
Distributions paid from: |
||||
Ordinary income |
$ | 3,469,514 | ||
Long-term capital gains |
| |||
|
|
|||
$ | 3,469,514 | |||
|
|
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from US GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are primarily due to differing book and tax treatments in the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
3. Management Fee, Related Party Transactions and Other
The Fund bears all expenses incurred in the business of the Fund, including, but not limited to, expenses borne indirectly through the Funds investment in the Master Fund. The Fund does not pay the Adviser a management fee; however, as a holder of shares of the Master Fund, the Fund and its Shareholders are indirectly subject to the management fees charged to the Master Fund by the Investment Adviser. Please refer to the attached financial statements of the Master Fund for a discussion of the computation of the management fee.
The Investment Adviser has contractually agreed to waive or reimburse the Master Fund for expenses (other than extraordinary expenses and certain investment related expenses, such as foreign country tax expense and interest expense on amounts borrowed by the Master Fund) to the extent necessary in order to cap the Master Funds total annual operating expenses at 1.75% until the termination of the Master Funds investment advisory agreement. The Investment Adviser has voluntarily agreed to further reimburse the Fund for expenses (other than extraordinary expenses) to the extent necessary in order to cap the Funds total annual operating expenses (including Master Fund operating expenses) at 2.50% for the 12 month period beginning on the Initial Closing Date. Effective July 1, 2011, the Board resolved to reduce the Funds expense cap to 2.00%. Effective July 1, 2012, the Board resolved to reinstate the Funds total expense cap until July 1, 2013. For the period from January 1, 2013 to June 30, 2013, the Funds expense reimbursements were $76,147, of which $13,154 was receivable at June 30, 2013.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
9
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
3. Management Fee, Related Party Transactions and Other (continued)
The Distributor and Selling Agents may charge Shareholders a sales load of up to 3% of the Shareholders purchase. Investments less than $250,000 will be subject to a maximum sales load of 3%; investments of $250,000 - $999,999 will be subject to a maximum sales load of 2%; investments of $1,000,000 - $4,999,999 will be subject to a maximum sales load of 1%; and investments of $5,000,000 or more will be subject to a maximum sales load of 0.5%. The Distributor or a Selling Agent may, in its discretion, waive the sales load for certain investors.
The Fund will pay the Distributor, and the Distributor will pay each financial institution, broker-dealer and other industry professional (collectively, Service Agents) that enters into a shareholder servicing agreement with the Distributor, a monthly shareholder servicing fee of up to 0.0625% (0.75% on an annualized basis) of the net asset value of the outstanding Shares beneficially owned by customers of the Distributor or the Service Agent. In exchange for this fee, the Distributor or the Service Agent, as the case may be, will respond to Shareholder inquiries about the Fund, facilitate Fund communications with Shareholders, assist Shareholders in changing account designations or addresses, and assist Shareholders in processing repurchase requests. For the period from January 1, 2013 to June 30, 2013, the Fund incurred shareholder servicing fees of $67,639, of which $32,186 was payable at June 30, 2013.
State Street Bank and Trust Company (State Street) provides accounting and administrative services to the Fund. State Street also serves as the Funds custodian.
Effective August 5, 2013, UMB Fund Services, Inc. serves as the Funds transfer agent. Prior to August 5, 2013, Boston Financial Data Services, Inc. (BFDS) served as the Funds transfer agent. Transfer agent fees were payable monthly based on an annual per shareholder account charge plus out-of-pocket expenses incurred by BFDS on the Funds behalf.
As of June 30, 2013, there were two Shareholders, affiliated with Morgan Stanley, with a combined net asset balance that represented approximately 58% of the Funds net assets.
4. Contractual Obligations
The Fund enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
10
AIP Multi-Strategy Fund P
Notes to Financial Statements (Unaudited) (continued)
5. Financial Highlights
The following represents per Share data, ratios to average net assets and other financial highlights information for Shareholders. The calculations below are not annualized for periods less than one year.
For the Period from January 1, 2013 to June 30, 2013 |
For the Year Ended December 31, 2012 |
For the Year Ended December 31, 2011 |
For the Period from May 1, 2010 (a) to December 31, 2010 |
|||||||||||||
For a Share outstanding throughout the period: |
||||||||||||||||
Net asset value, beginning of period |
$ | 1,008.46 | $ | 990.69 | $ | 1,023.47 | $ | 1,000.00 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net investment income (loss) (b) |
(1.35 | ) | 82.08 | 52.43 | (4.04 | ) | ||||||||||
Net realized and unrealized gain (loss) from investments |
36.44 | 21.01 | (34.36 | ) | 27.51 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) resulting from operations |
35.09 | 103.09 | 18.07 | 23.47 | ||||||||||||
Distributions paid |
||||||||||||||||
Net investment income |
| (85.32 | ) | (50.85 | ) | | ||||||||||
Net realized gain |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net asset value, end of period |
$ | 1,043.55 | $ | 1,008.46 | $ | 990.69 | $ | 1,023.47 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total return (c) |
3.48 | % | 10.54 | % | 1.78 | % | 2.35 | % | ||||||||
Ratio of total expenses before expense reimbursements (d) |
1.17 | % | 2.36 | % | 3.82 | % | 2.93 | % | ||||||||
Ratio of total expenses after expense reimbursements (d) |
1.00 | % | 2.00 | % | 2.22 | % | 1.58 | % | ||||||||
Ratio of net investment income (loss) (e) |
(1.00 | %) | 6.21 | % | 3.32 | % | (1.57 | %) | ||||||||
Portfolio turnover (f) |
8 | % | 14 | % | 21 | % | 3 | % | ||||||||
Net assets, end of period (000s) |
$ | 45,840 | $ | 43,263 | $ | 38,446 | $ | 25,935 |
(a) | Commencement of operations. |
(b) | Calculated based on the average shares outstanding methodology, and excludes net investment income allocated from the Master Fund. |
(c) | Total return assumes a subscription of a Share to the Fund at the beginning of the period indicated and a repurchase of the Share on the last day of the period, assumes reinvestment of all distributions for the period, and does not reflect the impact of the sales load, if any, incurred when subscribing to the Fund. |
(d) | Includes expenses of the Master Fund. |
(e) | Includes income and expenses of the Master Fund. |
(f) | The portfolio turnover rate reflects investment activity of the Master Fund. |
The above ratios and total returns have been calculated for the Shareholders taken as a whole. An individual Shareholders return and ratios may vary from these returns and ratios due to the timing of Share transactions.
6. Subsequent Events
Unless otherwise stated throughout the Notes to the financial statements, the Fund noted no subsequent events that require disclosure in or adjustment to the financial statements.
See attached unaudited financial statements for AIP Multi-Strategy Fund A.
11
AIP Multi-Strategy Fund P
Proxy Voting Policies and Procedures and Proxy Voting Record (Unaudited)
A copy of (1) the Master Funds policies and procedures with respect to the voting of proxies relating to the Investment Funds; and (2) how the Master Fund voted proxies relating to Investment Funds during the most recent 12-month period ended June 30 is available without charge, upon request, by calling the Master Fund at 1-888-322-4675. This information is also available on the Securities and Exchange Commissions website at http://www.sec.gov.
Quarterly Portfolio Schedule (Unaudited)
The Fund also files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the Funds first and third fiscal quarters on Form N-Q. The Funds Forms N-Q are available on the Securities and Exchange Commissions website at http://www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the Securities and Exchange Commissions Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Once filed, the most recent Form N-Q will be available without charge, upon request, by calling the Fund at 1-888-322-4675.
12
AIP Multi-Strategy Fund P | ||
100 Front Street, Suite 400 | ||
West Conshohocken, PA 19428 | ||
Trustees | Legal Counsel | |
Michael Nugent, Chairperson of the Board and Trustee | Dechert LLP | |
Frank L. Bowman | 1095 Avenue of the Americas | |
Michael Bozic | New York, NY 10036 | |
Kathleen A. Dennis | ||
James F. Higgins | Kramer Levin Naftalis & Frankel | |
Dr. Manuel H. Johnson | LLP | |
Joseph J. Kearns | 1177 Avenue of the Americas | |
Michael F. Klein | New York, NY 10036 | |
W. Allen Reed | ||
Fergus Reid | ||
Officers | ||
Arthur Lev, President and Principal Executive Officer | ||
Stefanie V. Chang Yu, Vice President | ||
Mustafa Jama, Vice President | ||
Matthew Graver, Vice President | ||
Mary Ann Picciotto, Chief Compliance Officer | ||
Noel Langlois, Treasurer and Chief Financial Officer | ||
Mary E. Mullin, Secretary | ||
Master Funds Investment Adviser | ||
Morgan Stanley AIP GP LP | ||
100 Front Street, Suite 400 | ||
West Conshohocken, PA 19428 | ||
Master Funds Sub-Adviser | ||
Morgan Stanley Investment Management Limited | ||
25 Cabot Square | ||
Canary Wharf | ||
London E14-4QA, England | ||
Administrator, Custodian, Fund Accounting Agent and Escrow Agent | ||
State Street Bank and Trust Company | ||
One Lincoln Street | ||
Boston, MA 02111 | ||
Transfer Agent | ||
UMB Fund Services, Inc. | ||
803 W. Michigan Street | ||
Milwaukee, WI 53233 | ||
Independent Registered Public Accounting Firm | ||
Ernst & Young LLP | ||
One Commerce Square | ||
2005 Market Street, Suite 700 | ||
Philadelphia, PA 19103 |
13
AIP MULTI-STRATEGY FUND A
Financial Statements (Unaudited)
For the period from January 1, 2013 to |
AIP Multi-Strategy Fund A
Financial Statements (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Financial Statements (Unaudited) |
||||
1 | ||||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
9 | ||||
23 | ||||
Proxy Voting Policies and Procedures and Proxy Voting Record |
26 | |||
26 |
AIP Multi-Strategy Fund A
Statement of Assets and Liabilities (Unaudited)
June 30, 2013
Assets |
||||
Investments in investment funds, at fair value (cost $48,938,625) |
$ | 57,394,371 | ||
Short-term investments (cost $1,038,273) |
1,038,273 | |||
Cash |
228,195 | |||
Prepaid investments in investment funds |
1,900,000 | |||
Receivable for investments sold |
885,306 | |||
Other assets |
11,750 | |||
|
|
|||
Total assets |
61,457,895 | |||
|
|
|||
Liabilities |
||||
Line of credit payable |
7,600,000 | |||
Payable for share repurchases |
328,195 | |||
Subscriptions received in advance |
275,000 | |||
Management fee payable |
37,577 | |||
Accrued expenses and other liabilities |
118,412 | |||
|
|
|||
Total liabilities |
8,359,184 | |||
|
|
|||
Net assets |
$ | 53,098,711 | ||
|
|
|||
Net assets consist of: |
||||
Net capital |
$ | 44,671,585 | ||
Accumulated undistributed net investment income (loss) |
(454,583 | ) | ||
Accumulated net realized gain (loss) from investments |
425,963 | |||
Net unrealized appreciation on investments |
8,455,746 | |||
|
|
|||
Net assets |
$ | 53,098,711 | ||
|
|
|||
Net asset value per share: |
||||
50,368.001 shares issued and outstanding, no par value, 3,000,000 registered shares |
$ | 1,054.22 |
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
1
AIP Multi-Strategy Fund A
Statement of Operations (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Investment income |
||||
Dividend |
$ | 757 | ||
|
|
|||
Expenses |
||||
Management fees |
390,781 | |||
Professional fees |
62,175 | |||
Accounting and administration fees |
15,939 | |||
Registration fees |
14,506 | |||
Interest expense |
13,102 | |||
Custody fees |
12,529 | |||
Transfer agent fees |
12,500 | |||
Trustees fees |
2,250 | |||
Other |
12,566 | |||
|
|
|||
Total expenses |
536,348 | |||
Management fee waivers |
(81,008 | ) | ||
|
|
|||
Net expenses |
455,340 | |||
|
|
|||
Net investment income (loss) |
(454,583 | ) | ||
|
|
|||
Realized and unrealized gain (loss) from investments |
||||
Net realized gain (loss) from investments in investment funds |
876,220 | |||
|
|
|||
Net realized gain (loss) from investments |
876,220 | |||
|
|
|||
Net change in unrealized appreciation/depreciation on investments in investment funds |
1,355,547 | |||
|
|
|||
Net change in unrealized appreciation/depreciation on investments |
1,355,547 | |||
|
|
|||
Net realized and unrealized gain (loss) from investments |
2,231,767 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
$ | 1,777,184 | ||
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
2
AIP Multi-Strategy Fund A
Statements of Changes in Net Assets (Unaudited)
For the year ended December 31, 2012 |
||||
Net increase (decrease) in net assets resulting from operations: |
||||
Net investment income (loss) |
$ | (789,863 | ) | |
Net realized gain (loss) from investments |
454,131 | |||
Net change in unrealized appreciation/depreciation on investments |
4,940,574 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
4,604,842 | |||
|
|
|||
Distributions to shareholders from: |
||||
Net investment income |
(3,729,808 | ) | ||
|
|
|||
Shareholder transactions |
||||
Subscriptions (representing 5,244.073 shares) |
5,350,000 | |||
Distributions reinvested (representing 3,699.538 shares) |
3,709,710 | |||
Repurchases (representing 1,669.717 shares) |
(1,709,288 | ) | ||
|
|
|||
Net increase (decrease) in net assets from shareholder transactions |
7,350,422 | |||
|
|
|||
Total increase (decrease) in net assets |
8,225,456 | |||
Net assets, beginning of year (representing 40,056.158 shares) |
39,914,976 | |||
|
|
|||
Net assets, end of year (representing 47,330.052 shares) |
$ | 48,140,432 | ||
|
|
|||
For the period from January 1, 2013 to June 30, 2013 |
||||
Net increase (decrease) in net assets resulting from operations: |
||||
Net investment income (loss) |
$ | (454,583 | ) | |
Net realized gain (loss) from investments |
876,220 | |||
Net change in unrealized appreciation/depreciation on investments |
1,355,547 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
1,777,184 | |||
|
|
|||
Shareholder transactions |
||||
Subscriptions (representing 5,189.330 shares) |
5,445,000 | |||
Repurchases (representing 2,151.381 shares) |
(2,263,905 | ) | ||
|
|
|||
Net increase (decrease) in net assets from shareholder transactions |
3,181,095 | |||
|
|
|||
Total increase (decrease) in net assets |
4,958,279 | |||
Net assets, beginning of period (representing 47,330.052 shares) |
48,140,432 | |||
|
|
|||
Net assets, end of period (representing 50,368.001 shares) |
$ | 53,098,711 | ||
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
3
AIP Multi-Strategy Fund A
Statement of Cash Flows (Unaudited)
For the Period from January 1, 2013 to June 30, 2013
Cash flows from operating activities |
||||
Net increase (decrease) in net assets resulting from operations |
$ | 1,777,184 | ||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
||||
Net realized (gain) loss from investments in investment funds |
(876,220 | ) | ||
Net change in unrealized appreciation/depreciation on investments in investment funds |
(1,355,547 | ) | ||
Purchase of investments in investment funds |
(12,601,637 | ) | ||
Proceeds from sales of investments in investment funds |
3,842,791 | |||
Net (purchase) sales/maturities of short-term investments |
239,625 | |||
(Increase) decrease in prepaid investments in investment funds |
(1,650,000 | ) | ||
(Increase) decrease in receivable for investments sold |
770,143 | |||
(Increase) decrease in due from adviser |
4,538 | |||
(Increase) decrease in other assets |
(10,079 | ) | ||
Increase (decrease) in management fee payable |
37,577 | |||
Increase (decrease) in accrued expenses and other liabilities |
20,818 | |||
|
|
|||
Net cash provided by (used in) operating activities |
(9,800,807 | ) | ||
|
|
|||
Cash flows from financing activities |
||||
Proceeds from advances on line of credit |
7,600,000 | |||
Subscriptions (including subscriptions received in advance) |
5,520,000 | |||
Repurchases |
(3,290,998 | ) | ||
|
|
|||
Net cash provided by (used in) financing activities |
9,829,002 | |||
|
|
|||
Net change in cash |
28,195 | |||
Cash at beginning of period |
200,000 | |||
|
|
|||
Cash at end of period |
$ | 228,195 | ||
|
|
|||
Supplemental disclosure of cash flow information: |
||||
Conversion to shareholder subscriptions in 2013 of subscriptions received in advance during 2012 |
$ | 200,000 | ||
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
4
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited)
June 30, 2013
Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
Next Available Redemption Date* |
Liquidity** | ||||||||||||||
Investment Funds |
||||||||||||||||||||
Commodity Trading Advisors - Managed Futures |
||||||||||||||||||||
BlueTrend Fund Limited |
1/1/2012 | $ | 1,989,282 | $ | 1,783,413 | 3.36 | % | 7/31/2013 | Monthly | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Commodity Trading Advisors - Managed Futures |
1,989,282 | 1,783,413 | 3.36 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Distressed |
||||||||||||||||||||
Monarch Debt Recovery Fund Ltd |
3/1/2011 | 1,650,000 | 1,830,910 | 3.45 | 12/31/2013 | Annually | ||||||||||||||
York Credit Opportunities Unit Trust |
5/1/2010 | 1,600,000 | 1,952,525 | 3.68 | 4/30/2014 | Annually | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Distressed |
3,250,000 | 3,783,435 | 7.13 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Equity Long/Short - High Hedge |
||||||||||||||||||||
Citadel Tactical Trading Ltd. |
7/1/2010 | 703,398 | 1,193,682 | 2.25 | 9/30/2013 | Quarterly | ||||||||||||||
Diamondback Offshore Fund, Ltd. |
5/1/2010 | 6,171 | 8,553 | 0.02 | 9/30/2013 | Quarterly | ||||||||||||||
Millennium International, Ltd. |
5/1/2010 | 2,225,534 | 2,628,641 | 4.95 | 9/30/2013 | Quarterly | ||||||||||||||
Visium Balanced Offshore Fund, Ltd. |
3/1/2011 | 1,100,000 | 1,335,656 | 2.51 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Equity Long/Short - High Hedge |
4,035,103 | 5,166,532 | 9.73 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Equity Long/Short - Opportunistic |
||||||||||||||||||||
Broadway Gate Offshore Fund, Ltd. |
5/1/2010 | 1,125,000 | 1,449,171 | 2.73 | 9/30/2013 | Quarterly | ||||||||||||||
Cobalt Offshore Fund Limited |
1/1/2012 | 1,451,637 | 1,569,348 | 2.95 | 9/30/2013 | Quarterly | ||||||||||||||
Doonbeg Fund, Ltd. |
6/1/2013 | 2,000,000 | 1,974,200 | 3.72 | 9/30/2013 | Quarterly | ||||||||||||||
East Side Capital Offshore, Ltd. |
5/1/2010 | 1,000,000 | 1,412,975 | 2.66 | 9/30/2013 | Quarterly | ||||||||||||||
Lansdowne Global Financials Fund Limited |
5/1/2010 | 2,400,000 | 2,370,850 | 4.46 | 9/30/2013 | Monthly | ||||||||||||||
Quentec Fund, Ltd. |
11/1/2012 | 1,550,000 | 1,756,959 | 3.31 | 12/31/2013 | Quarterly | ||||||||||||||
S.A.C. Capital International, Ltd. |
5/1/2010 | 855,000 | 1,145,653 | 2.16 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Equity Long/Short - Opportunistic |
10,381,637 | 11,679,156 | 21.99 | |||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
5
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
June 30, 2013
Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
Next Available Redemption Date* |
Liquidity** | ||||||||||||||
Investment Funds (continued) |
||||||||||||||||||||
Macro |
||||||||||||||||||||
Avantium Liquid EM Macro Fund Limited |
11/1/2011 | $ | 1,100,000 | $ | 1,132,028 | 2.13 | % | 8/31/2013 | Monthly | |||||||||||
Brevan Howard Fund Limited |
6/1/2010 | 1,807,953 | 2,117,823 | 3.99 | 9/30/2013 | Monthly | ||||||||||||||
D.E. Shaw Oculus International Fund |
5/1/2010 | 1,550,000 | 2,129,036 | 4.01 | 9/30/2013 | Quarterly | ||||||||||||||
Discovery Global Opportunity Fund, Ltd. |
5/1/2010 | 1,000,000 | 1,492,822 | 2.81 | 12/31/2013 | Semi-annually | ||||||||||||||
Fortress Asia Macro Fund Ltd |
8/1/2011 | 1,700,000 | 2,079,764 | 3.92 | 9/30/2013 | Quarterly | ||||||||||||||
QFR Victoria Fund, Ltd. |
10/1/2011 | 1,400,000 | 1,388,797 | 2.61 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Macro |
8,557,953 | 10,340,270 | 19.47 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Merger/Risk Arbitrage |
||||||||||||||||||||
Magnetar Global Event Driven Fund Ltd |
7/1/2011 | 2,125,000 | 2,300,331 | 4.33 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Merger/Risk Arbitrage |
2,125,000 | 2,300,331 | 4.33 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Mortgage Arbitrage |
||||||||||||||||||||
Cerberus RMBS Opportunities Feeder Fund, Ltd. |
1/1/2012 | 1,999,622 | 2,444,492 | 4.60 | 9/30/2013 | Quarterly | ||||||||||||||
Midway Market Neutral International Fund, Ltd. |
4/1/2013 | 2,000,000 | 1,880,850 | 3.54 | 9/30/2013 | Monthly | ||||||||||||||
SPM Core Offshore Fund, Ltd. |
12/1/2010 | 1,423,820 | 1,871,474 | 3.53 | 9/30/2013 | Quarterly | ||||||||||||||
Tilden Park Offshore Investment Fund Ltd |
3/1/2012 | 2,100,000 | 2,792,938 | 5.26 | 12/31/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Mortgage Arbitrage |
7,523,442 | 8,989,754 | 16.93 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Multi-Strategy |
||||||||||||||||||||
Citadel Kensington Global Strategies Fund Ltd. |
11/1/2011 | 2,300,000 | 2,812,714 | 5.30 | 9/30/2013 | Quarterly | ||||||||||||||
Farallon Capital Offshore Investors, Inc. |
5/1/2010 | 1,450,000 | 1,671,659 | 3.15 | 12/31/2013 | Annually | ||||||||||||||
HBK Offshore Fund II L.P. |
5/1/2010 | 1,500,000 | 1,884,623 | 3.55 | 9/30/2013 | Quarterly | ||||||||||||||
KLS Diversified Fund Ltd. |
7/1/2010 | 1,757,872 | 1,913,003 | 3.60 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Multi-Strategy |
7,007,872 | 8,281,999 | 15.60 | |||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
6
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
June 30, 2013
Description |
First Acquisition Date |
Cost | Fair Value |
Percent of Net Assets |
Next Available Redemption Date* |
Liquidity** | ||||||||||||||
Investment Funds (continued) |
||||||||||||||||||||
Statistical Arbitrage |
||||||||||||||||||||
GSA Capital International Fund Limited |
2/1/2011 | $ | 2,000,000 | $ | 2,447,415 | 4.61 | % | 9/30/2013 | Quarterly | |||||||||||
Two Sigma Eclipse Cayman Fund, Ltd. |
4/1/2011 | 643,420 | 842,677 | 1.59 | 9/30/2013 | Quarterly | ||||||||||||||
Two Sigma Spectrum Cayman Fund, Ltd. |
5/1/2010 | 1,424,916 | 1,779,389 | 3.35 | 9/30/2013 | Quarterly | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Statistical Arbitrage |
4,068,336 | 5,069,481 | 9.55 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Investments in Investment Funds |
48,938,625 | 57,394,371 | 108.09 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Short-Term Investments |
||||||||||||||||||||
State Street Institutional Liquid Reserves Fund - Institutional Class 0.09% |
1,038,273 | 1,038,273 | 1.96 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Short-Term Investments |
1,038,273 | 1,038,273 | 1.96 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Investments in Investment Funds and Short-Term Investments |
$ | 49,976,898 | 58,432,644 | 110.05 | ||||||||||||||||
|
|
|||||||||||||||||||
Liabilities in excess of Other Assets |
(5,333,933 | ) | (10.05 | ) | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Total Net Assets |
$ | 53,098,711 | 100.00 | % | ||||||||||||||||
|
|
|
|
Detailed information about all of the Investment Funds portfolios is not available.
* | Investments in Investment Funds may be composed of multiple tranches. The Next Available Redemption Date relates to the earliest date after June 30, 2013 that redemption from a tranche is available. Other tranches may have an available redemption date that is after the Next Available Redemption Date. Redemptions from Investment Funds may be subject to fees. |
** | Available frequency of redemptions after initial lock-up period, if any. Different tranches may have different liquidity terms. |
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
7
AIP Multi-Strategy Fund A
Schedule of Investments (Unaudited) (continued)
June 30, 2013
Strategy Allocation |
Percent of Net Assets |
|||
Equity Long/Short - Opportunistic |
21.99 | % | ||
Macro |
19.47 | |||
Mortgage Arbitrage |
16.93 | |||
Multi-Strategy |
15.60 | |||
Equity Long/Short - High Hedge |
9.73 | |||
Statistical Arbitrage |
9.55 | |||
Distressed |
7.13 | |||
Merger/Risk Arbitrage |
4.33 | |||
Commodity Trading Advisors - Managed Futures |
3.36 | |||
Short-Term Investments |
1.96 | |||
|
|
|||
Total Investments in Investment Funds and Short-Term Investments |
110.05 | % | ||
|
|
The accompanying notes are an integral part of these financial statements and should be read in conjunction therewith.
8
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited)
June 30, 2013
1. Organization
AIP Multi-Strategy Fund A (the Fund) was organized under the laws of the State of Delaware as a statutory trust on February 27, 2008. The Fund commenced operations on May 1, 2010 and operates pursuant to an Agreement and Declaration of Trust (the Trust Deed). The Fund is registered under the U.S. Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end, non-diversified management investment company. While non-diversified for 1940 Act purposes, the Fund intends to comply with the diversification requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), as such requirements are described in more detail below. The Funds investment objective is to seek long-term capital appreciation principally through investing in investment funds (Investment Funds) managed by third party investment managers who primarily employ a variety of investment strategies in pursuit of attractive risk-adjusted returns consistent with the preservation of capital. These investment strategies allow investment managers the flexibility to use leveraged or short-sale positions to take advantage of perceived inefficiencies across the global capital markets. The Fund may seek to gain investment exposure to certain Investment Funds or to adjust market or risk exposure by entering into derivative transactions, such as total return swaps, options and futures.
Morgan Stanley AIP GP LP serves as the Funds investment adviser (the Investment Adviser). Effective December 5, 2012, the Funds Board of Trustees (the Board) approved a sub-advisory agreement between the Investment Adviser and Morgan Stanley Investment Management Limited (the Sub-Adviser) (collectively with the Investment Adviser, the Adviser). The Adviser is responsible for providing day-to-day investment management services to the Fund, subject to the supervision of the Board. Each of the Investment Adviser and Sub-Adviser is an affiliate of Morgan Stanley and is registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the Advisers Act). The Fund has no fixed termination date and will continue unless the Fund is otherwise terminated under the terms of the Trust Deed or unless and until required by law.
The Fund is a Master fund in a Master-Feeder structure whereby the feeder fund invests substantially all of its assets in the Fund. As of June 30, 2013, AIP Multi-Strategy Fund P, a feeder fund to the Fund, represented 86.02% of the Funds net assets.
The Board has overall responsibility for monitoring and overseeing the Funds investment program and its management and operations. A majority of the members of the Board are not interested persons (as defined by the 1940 Act) of the Fund, the Investment Adviser or the Sub-Adviser.
The Fund offers on a continuous basis through Morgan Stanley Distribution, Inc. (the Distributor), an affiliate of Morgan Stanley, up to 3,000,000 shares of beneficial interest (Shares). The initial closing date (Initial Closing Date) for the public offering of Shares was May 3, 2010. Shares were offered during an initial public offering period which ended on the Initial Closing Date at an initial offering price of $1,000 per Share and have been offered in a continuous offering thereafter at the Funds then current net asset value per Share. Investors purchasing Shares in the Fund (Shareholders) will not be charged a sales load. Shares may be purchased as of the first day of each month from the Distributor at the Funds then current net asset value per Share or through any registered investment adviser (a RIA) that
9
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
1. Organization (continued)
has entered into an arrangement with the Distributor for such RIA to recommend Shares to its clients in conjunction with a wrap fee, asset allocation or other managed asset program sponsored by such RIA.
Shares are to be sold only to Shareholders that represent that they are accredited investors within the meaning of Rule 501(a) of Regulation D promulgated under the U.S. Securities Act of 1933, as amended, and qualified clients within the meaning of Rule 205-3 promulgated under the Advisers Act. The minimum initial investment in the Fund by any Shareholder is $50,000. The minimum additional investment in the Fund by any Shareholder is $25,000. The minimum initial and additional investments may be reduced by the Fund with respect to certain Shareholders. Shareholders may only purchase their Shares through the Distributor or a RIA. Any RIA who recommends Shares to its clients may impose additional eligibility requirements on investors who purchase Shares through such RIA.
The Fund may from time to time offer to repurchase Shares (or portions of them) at net asset value pursuant to written tenders by Shareholders, and each such repurchase offer will generally apply to up to 15% of the net assets of the Fund. Repurchases will be made at such times, in such amounts and on such terms as may be determined by the Board, in its sole discretion. In determining whether the Fund should offer to repurchase Shares (or portions of them) from Shareholders, the Board will consider the recommendations of the Adviser as to the timing of such offer, as well as a variety of operational, business and economic factors. The Adviser expects that, generally, it will recommend to the Board that the Fund offer to repurchase Shares (or portions of them) from Shareholders quarterly, on each March 31, June 30, September 30 and December 31. In general, the Fund will initially pay at least 90% of the estimated value of the repurchased Shares to Shareholders as of the later of: (1) a period of within 30 days after the value of the Shares to be repurchased is determined, or (2) if the Fund has requested withdrawals of its capital from any Investment Funds in order to fund the repurchase of Shares, within ten business days after the Fund has received at least 90% of the aggregate amount withdrawn by the Fund from such Investment Funds. The remaining amount (the Holdback Amount) will be paid promptly after completion of the annual audit of the Fund and preparation of the Funds audited financial statements. As of June 30, 2013, the Holdback Amount was $28,195, which includes any Holdback Amount for repurchases as of June 30, 2013, and is included in payable for share repurchases in the Statement of Assets and Liabilities.
2. Significant Accounting Policies
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (US GAAP). Such policies are consistently followed by the Fund in preparation of its financial statements. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including the estimated fair value of investments. Actual results could differ from those estimates.
10
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements (ASU 2013-08), which updates the criteria used in defining an investment company under US GAAP and also sets forth certain measurement and disclosure requirements. The amendments in ASU 2013-08 are effective for fiscal periods (including interim periods) beginning after December 15, 2013. While management is still assessing the impact of this update on disclosures, the impact of this update is not expected to be material to the Funds financial statements.
Portfolio Valuation
The net asset value of the Fund is determined as of the close of business at the end of any fiscal period, generally monthly, 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.
As of June 30, 2013, 98.22% of the Funds portfolio was comprised of investments in Investment Funds. The remainder of the portfolio was comprised of short-term investments.
The Board 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 Funds pro rata interest in the net assets of each such Investment Fund, as such value is supplied by, or on behalf of, the Investment Funds 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 Funds investments in Investment Funds are subject to the terms and conditions of the respective operating agreements and offering memoranda, as appropriate.
Some of the Investment Funds may hold a portion of their assets in side pockets, which are sub-funds within the Investment Funds that have restricted liquidity, potentially extending over a much longer period than the typical liquidity an investment in the Investment Funds may provide. Should the Fund seek to liquidate its investment in an Investment Fund that maintains these side pockets, the Fund might not be able to fully liquidate its investment without delay, which could be considerable. In such cases, until the Fund is permitted to fully liquidate its interest in the Investment Fund, the fair value of its investment could fluctuate based on adjustments to the value of the side pocket as determined by the Investment Funds investment manager. At June 30, 2013, none of the Funds net assets were invested in side pockets maintained by the Investment Funds.
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
11
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Portfolio Valuation (continued)
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 Funds interest in such Investment Fund, consistent with the Funds 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 the fair value of the Investment Fund. In order to determine the fair value of these Investment Funds, the Adviser has established the Fund of Hedge Funds Valuation Committee (the Valuation Committee). The Valuation Committee is responsible for determining and implementing the Funds valuation policies and procedures, which have been adopted by the Board, and are subject to Board supervision. The Valuation Committee consists of voting members from Morgan Stanleys accounting, financial reporting and risk management groups, and non-voting members from portfolio management, legal and compliance groups. A member of the portfolio management team may attend each Valuation Committee meeting to provide knowledge, insight, and recommendations on valuation issues. The portfolio management team will recommend to the Valuation Committee a fair value for an Investment Fund, using such valuation techniques such as a market, income, or cost approach. In applying these valuation techniques, the portfolio management team uses their knowledge of the Investment Fund, industry expertise, information obtained through communication with the Investment Funds investment manager, and available relevant information as it considers material. After consideration of the portfolio management teams recommendation, the Valuation Committee will determine, in good faith, the fair value of the Investment Fund. The Valuation Committee shall meet at least annually to analyze changes in fair value measurements. Because of the inherent uncertainty of valuation, the fair values of the Funds investments may differ significantly from the values that would have been used had a ready market for these Investment Funds held by the Fund been available.
Short-Term Investments
Short-term investments are invested in a money market fund. Investments in money market funds are valued at net asset value.
Income Recognition and Expenses
The Fund recognizes income and records expenses on an accrual basis. Income, expenses and realized and unrealized gains and losses are recorded monthly. The changes in Investment Funds net asset values are included in net change in unrealized appreciation/depreciation on investments in Investment Funds in the Statement of Operations. Realized gain (loss) from investments in Investment Funds is calculated using specific identification.
12
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its Shareholders. Therefore, no provision for federal income taxes is required. The Fund files tax returns with the U.S. Internal Revenue Service and various states. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The Fund has concluded there are no significant uncertain tax positions that would require recognition in the financial statements as of June 30, 2013. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Generally, open tax years under potential examination vary by jurisdiction, but at least each of the tax years in the four-year period ended December 31, 2012, remains subject to examination by major taxing authorities.
At December 31, 2012, the Fund had an accumulated capital loss carryforward for tax purposes of $8,261, which will expire according to the following schedule:
Expiration | Amount | |||
December 31, 2018 |
$ | 8,261 | ||
|
|
At December 31, 2012, the Fund had available for Federal income tax purposes unused short-term and long-term capital losses that will not expire:
Short-term losses (no expiration) |
$ | 126,317 | ||
|
|
|||
Long-term losses (no expiration) |
$ | 312,581 | ||
|
|
To the extent that capital loss carryforwards are used to offset any future capital gains realized during the carryover period as provided by U.S. Federal income tax regulations, no capital gains tax liability will be incurred by a fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
13
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Income Taxes (continued)
At June 30, 2013, the cost and related gross unrealized appreciation and depreciation for tax purposes were as follows:
Cost of investments for tax purposes |
$ | 57,221,509 | ||
|
|
|||
Gross tax unrealized appreciation |
$ | 1,438,555 | ||
Gross tax unrealized depreciation |
(227,420 | ) | ||
|
|
|||
Net tax unrealized appreciation/depreciation on investments |
$ | 1,211,135 | ||
|
|
Distribution of Income and Gains
The Fund declares and pays dividends annually from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes.
In order to satisfy the diversification requirements under Subchapter M of the Code, the Fund generally invests its assets in Investment Funds organized outside the United States that are treated as corporations for U.S. tax purposes and are expected to be classified as passive foreign investment companies (PFICs). As such, the Fund expects that distributions generally will be taxable as ordinary income to the Shareholders.
Pursuant to the dividend reinvestment plan established by the Fund (the DRIP), each Shareholder whose Shares are registered in its own name will automatically be a participant under the DRIP and have all income, dividends and capital gains distributions automatically reinvested in additional Shares unless such Shareholder specifically elects to receive all income, dividends and capital gain distributions in cash.
The tax character of distributions paid may differ from character of distributions shown in the Statement of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. There were no distributions paid during the period from January 1, 2013 to June 30, 2013.
The tax character of distributions paid during the year ended December 31, 2012 was as follows:
December 31, 2012 | ||||
Distributions paid from: |
||||
Ordinary income |
$ | 3,729,808 | ||
|
|
Temporary differences are primarily due to differing book and tax treatments in the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
14
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
2. Significant Accounting Policies (continued)
Distribution of Income and Gains (continued)
As of June 30, 2013, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income |
$ | | ||
|
|
3. Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Investment Funds in which the Fund invests may 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, written option contracts, and equity swaps. The Funds risk of loss in each Investment Fund is limited to the value of the Funds interest in each Investment Fund as reported by the Fund.
4. Fair Value of Financial Instruments
The fair value of the Funds assets and liabilities that qualify as financial instruments approximates the carrying amounts presented in the Statement of Assets and Liabilities. 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 entitys 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 Funds investments. 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 or short-term investments that are valued at amortized cost |
| Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments) or 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 |
15
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
4. Fair Value of Financial Instruments (continued)
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 Funds 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, 2013 to June 30, 2013, 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 June 30, 2013 in valuing the Funds investments carried at fair value:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investment Funds |
||||||||||||||||
Commodity Trading Advisors - Managed Futures |
$ | | $ | 1,783,413 | $ | | $ | 1,783,413 | ||||||||
Distressed |
| | 3,783,435 | 3,783,435 | ||||||||||||
Equity Long/Short - High Hedge |
| 2,529,338 | 2,637,194 | 5,166,532 | ||||||||||||
Equity Long/Short - Opportunistic |
| 8,523,837 | 3,155,319 | 11,679,156 | ||||||||||||
Macro |
| 10,340,270 | | 10,340,270 | ||||||||||||
Merger/Risk Arbitrage |
| | 2,300,331 | 2,300,331 | ||||||||||||
Mortgage Arbitrage |
| 3,752,324 | 5,237,430 | 8,989,754 | ||||||||||||
Multi-Strategy |
| 4,043,139 | 4,238,860 | 8,281,999 | ||||||||||||
Statistical Arbitrage |
| 5,069,481 | | 5,069,481 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investment Funds |
$ | | $ | 36,041,802 | $ | 21,352,569 | $ | 57,394,371 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Short-Term Investments |
$ | | $ | 1,038,273 | $ | | $ | 1,038,273 | ||||||||
|
|
|
|
|
|
|
|
16
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
4. Fair Value of Financial Instruments (continued)
The following is a reconciliation of Level 3 investment tranches for the period from January 1, 2013 through June 30, 2013:
Investment Funds | Balance as of December 31, 2012 |
Transfers into Level 3* |
Transfers out of Level 3 |
Purchases | Sales | Net realized gain (loss) |
Net change in unrealized appreciation/ depreciation |
Balance as of June 30, 2013 |
||||||||||||||||||||||||
Distressed |
$ | 1,493,641 | $ | 1,279,240 | $ | | $ | 800,000 | $ | | $ | | $ | 210,554 | $ | 3,783,435 | ||||||||||||||||
Equity Long/Short - High Hedge |
2,059,413 | | | 550,000 | (100,864 | ) | 6,902 | 121,743 | 2,637,194 | |||||||||||||||||||||||
Equity Long/Short - Opportunistic |
2,813,979 | | | 601,637 | (557,365 | ) | 162,365 | 134,703 | 3,155,319 | |||||||||||||||||||||||
Merger/Risk Arbitrage |
1,668,355 | | | 550,000 | | | 81,976 | 2,300,331 | ||||||||||||||||||||||||
Mortgage Arbitrage |
3,655,073 | | | 1,200,000 | (493 | ) | 114 | 382,736 | 5,237,430 | |||||||||||||||||||||||
Multi-Strategy |
2,448,361 | 1,151,276 | | 450,000 | | | 189,223 | 4,238,860 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Investment Funds |
$ | 14,138,822 | $ | 2,430,516 | $ | | $ | 4,151,637 | $ | (658,722 | ) | $ | 169,381 | $ | 1,120,935 | $ | 21,352,569 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Funds | Net change in unrealized appreciation/ depreciation on Level 3 investment tranches still held as of June 30, 2013 |
|||
Distressed |
$ | 210,554 | ||
Equity Long/Short - High Hedge |
121,743 | |||
Equity Long/Short - Opportunistic |
134,703 | |||
Merger/Risk Arbitrage |
81,976 | |||
Mortgage Arbitrage |
382,736 | |||
Multi-Strategy |
189,223 | |||
|
|
|||
Total Investment Funds |
$ | 1,120,935 | ||
|
|
* | Transfers into Level 3 of $2,430,516 are due to changes in the Funds ability to fully redeem investment tranches based on changes to the available redemption date for each applicable investment tranche. |
As of June 30, 2013, all of the Level 3 investments were fair valued based on non-quantitative unobservable valuation inputs.
17
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
5. Investments in Investment Funds
The following table summarizes the fair value and liquidity terms of the Investment Funds as of June 30, 2013, aggregated by investment strategy:
Investment Funds | Fair Value | Redemption Frequency (if applicable) |
Redemption Notice Period (if applicable) | |||||
Commodity Trading Advisors - Managed Futures (a) |
$ | 1,783,413 | Monthly | 30 days | ||||
Distressed (b) |
3,783,435 | Annually | 60-90 days | |||||
Equity Long/Short - High Hedge (c) |
5,166,532 | Quarterly | 45-90 days | |||||
Equity Long/Short - Opportunistic (d) |
11,679,156 | Monthly to Quarterly | 30-90 days | |||||
Macro (e) |
10,340,270 | Monthly to Semi-annually | 30-90 days | |||||
Merger/Risk Arbitrage (f) |
2,300,331 | Quarterly | 90 days | |||||
Mortgage Arbitrage (g) |
8,989,754 | Monthly to Quarterly | 60-120 days | |||||
Multi-Strategy (h) |
8,281,999 | Quarterly to 18 months | 45-90 days | |||||
Statistical Arbitrage (i) |
5,069,481 | Quarterly | 55-60 days | |||||
|
|
|||||||
Total Investment Funds |
$ | 57,394,371 | ||||||
|
|
(a) | Investment Funds in this strategy invest in a variety of futures contracts, including currencies, interest rates, stocks, stock market indexes, derivatives, and commodities. These Investment Funds build quantitative models to price futures and then take long and short positions in the futures. |
(b) | Investment Funds in this strategy invest in, and may sell short, the securities of companies where the securitys price has been, or is expected to be, affected by a distressed situation such as a bankruptcy or corporate restructuring. |
(c) | Investment Funds in this strategy seek to profit by exploiting pricing inefficiencies between related equity securities, neutralizing exposure to market risk by combining long and short positions. |
(d) | Investment Funds in this strategy consist of a core holding of long equities hedged at all times with short sales of stocks or stock index options. Some of the Investment Funds respective investment managers maintain a substantial portion of assets within a hedged structure and commonly employ leverage. |
(e) | Investment Funds in this strategy invest by making leveraged bets on anticipated price movements of stock markets, interest rates, foreign exchange and physical commodities. |
(f) | Investment Fund in this strategy involves investing in securities of companies that are the subject of some form of extraordinary corporate transaction, including acquisition or merger proposals, exchange offers, cash tender offers and leveraged buy-outs. |
(g) | Investment Funds in this strategy seek to exploit pricing differentials between various issues of mortgage-related bonds. |
(h) | Investment Funds in this strategy tactically allocate capital to various hedge fund strategies based on their perceived risk and return profiles. |
(i) | Investment Funds in this strategy profit from temporary pricing discrepancies between related securities. This irregularity offers an opportunity to go long the cheaper security and to short the more expensive one in an attempt to profit as the prices of the two revert to their norm, or mean. |
18
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
5. Investments in Investment Funds (continued)
For the period from January 1, 2013 to June 30, 2013, aggregate purchases and proceeds from sales of investments in Investment Funds were $12,601,637 and $3,842,791, respectively.
6. Investment Receivables and Payables
As of June 30, 2013, $885,306 was due to the Fund from Investment Funds. The receivable amount represents the fair value of certain Investment Fund tranches, net of management fees and incentive fees/allocations, that were redeemed by the Fund at period-end or holdback amounts that will be received from certain Investment Funds. Substantially all of the receivable balance was collected subsequent to the balance sheet date.
Prepaid investments in Investment Funds represent amounts transferred to Investment Funds prior to period-end relating to investments to be made effective July 1, 2013, pursuant to each Investment Funds operating agreements.
7. Management Fee, Related Party Transactions and Other
The Fund bears all expenses related to its investment program, including, but not limited to, expenses borne indirectly through the Funds investments in the underlying Investment Funds.
In consideration of the advisory and other services provided by the Investment Adviser to the Fund, the Fund pays the Investment Adviser a monthly management fee of 0.125% (1.50% on an annualized basis) of the Funds month end net asset value. The management fee is an expense paid out of the Funds assets and is computed based on the value of the net assets of the Fund as of the close of business on the last business day of each month, before adjustments for any repurchases effective on that day. The management fee is in addition to the asset-based fees and incentive fees or allocations charged by the underlying Investment Funds and indirectly borne by Shareholders in the Fund. The Investment Adviser pays the Sub-Adviser a portion of the net advisory fees the Investment Adviser receives from the Fund on a monthly basis. For the period from January 1, 2013 to June 30, 2013, the Fund incurred management fees of $390,781, of which $37,577 was payable to the Investment Adviser at June 30, 2013.
The Investment Adviser has contractually agreed to waive or reimburse the Fund for expenses (other than extraordinary expenses and certain investment related expenses, such as foreign country tax expense and interest expense on amounts borrowed by the Fund) to the extent necessary in order to cap the Funds total annual operating expenses at 1.75% until the termination of the Funds investment advisory agreement. For the period from January 1, 2013 to June 30, 2013, management fee waivers was $81,008, none of which was receivable from the Adviser at June 30, 2013.
19
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
7. Management Fee, Related Party Transactions and Other (continued)
State Street Bank and Trust Company (State Street) provides accounting and administrative services to the Fund. Under an administrative services agreement, State Street is paid an administrative fee, computed and payable monthly at an annual rate ranging from 0.030% to 0.045%, based on the aggregate monthly net assets of certain Morgan Stanley products, including the Fund, for which State Street serves as the administrator. The administrative services fee is subject to an annual aggregate minimum based on $125,000 per Morgan Stanley product.
State Street also serves as the Funds custodian. Under a custody services agreement, State Street is paid a custody fee monthly at an annual rate ranging from 0.015% to 0.020%, based on (1) the aggregate monthly net assets of certain Morgan Stanley products, including the Fund, for which State Street serves as the custodian, and (2) investment purchases and sales activity related to the Fund.
The Fund is charged directly for certain reasonable out-of-pocket expenses related to the accounting, administrative and custodial services provided by State Street to the Fund.
The Fund has a deferred compensation plan (the DC Plan) that allows each member of the Board that is not an affiliate of Morgan Stanley to defer payment of all, or a portion, of the fees he or she receives for serving on the Board throughout the period. Each eligible member of the Board generally may elect to have the deferred amounts invested in the DC Plan in order to earn a return equal to the total return on one or more of the Morgan Stanley products that are offered as investment options under the DC Plan. Investments in the DC Plan, unrealized appreciation/depreciation on such investments and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. At June 30, 2013, the Funds proportionate share of assets attributable to the DC Plan was $296, which is included in the Statement of Assets and Liabilities under other assets and accrued expenses and other liabilities.
Effective August 5, 2013, UMB Fund Services, Inc. serves as the Funds transfer agent. Prior to August 5, 2013, Boston Financial Data Services, Inc. (BFDS) served as the Funds transfer agent. Transfer agent fees were payable monthly based on an annual per Shareholder account charge plus out-of-pocket expenses incurred by BFDS on the Funds behalf.
As of June 30, 2013, there were two Shareholders, affiliated with Morgan Stanley, that invested in the Fund indirectly through the feeder fund, with a combined net asset balance that represented approximately 58% of the Funds net assets.
20
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
8. Line of Credit
Effective May 23, 2013, the Fund entered into a secured credit agreement with State Street for a revolving line of credit (the Facility). The maximum availability under the Facility is the lesser of $12,000,000 or 25% of the Funds adjusted net assets, as defined in the credit agreement, subject to specific asset-based covenants. The Fund pays an annual administration fee related to the Facility of 0.25% of the unused commitment and the annual interest rate on borrowings is the greater of the Federal Funds Rate plus 1.75% or the overnight USD LIBOR plus 1.75%. Under the terms of the Facility, borrowings are repayable no later than May 23, 2014, the termination date of the Facility. At June 30, 2013, there was $7,600,000 outstanding against the Facility. For the period from May 23, 2013 to June 30, 2013, the Fund incurred interest expense of $13,102 in connection with the Facility. Borrowings are secured by the Funds investments in Investment Funds. Detailed below is summary information concerning the borrowings:
# of Days Outstanding |
Average Daily Balance |
Annualized Weighted Average Rate | ||
33 |
$7,600,000 | 1.88% |
9. Contractual Obligations
The Fund enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
21
AIP Multi-Strategy Fund A
Notes to Financial Statements (Unaudited) (continued)
10. Financial Highlights
The following represents per Share data, ratios to average net assets and other financial highlights information for Shareholders. The calculations below are not annualized for periods less than one year.
For the Period from January 1, 2013 to June 30, 2013 |
For the Year Ended December 31, 2012 |
For the Year Ended December 31, 2011 |
For the Period from May 1, 2010 (a) to December 31, 2010 |
|||||||||||||
For a Share outstanding throughout the period: |
||||||||||||||||
Net asset value, beginning of period |
$ | 1,017.12 | $ | 996.48 | $ | 1,027.49 | $ | 1,000.00 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net investment income (loss) (b) |
(9.21 | ) | (18.18 | ) | (18.17 | ) | (11.38 | ) | ||||||||
Net realized and unrealized gain (loss) from investments |
46.31 | 124.95 | 41.12 | 38.87 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) resulting from operations |
37.10 | 106.77 | 22.95 | 27.49 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Distributions paid |
||||||||||||||||
Net investment income |
| (86.13 | ) | (53.96 | ) | | ||||||||||
Net realized gain |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net asset value, end of period |
$ | 1,054.22 | $ | 1,017.12 | $ | 996.48 | $ | 1,027.49 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total return (c) |
3.65 | % | 10.84 | % | 2.25 | % | 2.75 | % | ||||||||
Ratio of total expenses before expense waivers and reimbursements (d) |
1.03 | % | 2.01 | % | 2.72 | % | 3.16 | % | ||||||||
Ratio of total expenses after expense waivers and reimbursements (d) |
0.87 | % | 1.75 | % | 1.75 | % | 1.16 | % | ||||||||
Ratio of net investment income (loss) (e) |
(0.87 | %) | (1.75 | %) | (1.75 | %) | (1.16 | %) | ||||||||
Portfolio turnover |
8 | % | 14 | % | 21 | % | 3 | % | ||||||||
Net assets, end of period (000s) |
$ | 53,099 | $ | 48,140 | $ | 39,915 | $ | 26,243 |
(a) | Commencement of operations. |
(b) | Calculated based on the average shares outstanding methodology. |
(c) | Total return assumes a subscription of a Share in the Fund at the beginning of the period indicated and a repurchase of the Share on the last day of the period, and assumes reinvestment of all distributions during the period. |
(d) | Ratio does not reflect the Funds proportionate share of the expenses of the Investment Funds. |
(e) | Ratio does not reflect the Funds proportionate share of the income and expenses of the Investment Funds. |
The above ratios and total returns have been calculated for the Shareholders taken as a whole. An individual Shareholders return and ratios may vary from these returns and ratios due to the timing of Share transactions.
11. Subsequent Events
Unless otherwise stated throughout the Notes to the financial statements, the Fund noted no subsequent events that require disclosure in or adjustment to the financial statements.
22
AIP Multi-Strategy Fund A
Investment Advisory Agreement Approval (Unaudited)
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the Funds investment advisory agreement, including selection of Investment Funds for investment of the Funds assets, allocation of the Funds assets among, and monitoring performance of, Investment Funds, evaluation of risk exposure of Investment Funds and reputation, experience and training of investment managers, management of short-term cash and operations of the Fund, day-to-day portfolio management and general due diligence examination of Investment Funds before and after committing assets of the Fund for investment. The Board reviewed similar information and factors regarding the Sub-Adviser (as defined herein), to the extent applicable. (The Adviser and the Sub-Adviser together are referred to as the Adviser and the investment advisory and sub-advisory agreements together are referred to as the Advisory Agreement.) The Board also reviewed and considered the nature and extent of the non-advisory, administrative services that the Adviser provides, or arranges at its expense, under the Advisory Agreement, including among other things, providing to the Fund office facilities, equipment and personnel.
The Board also reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Advisers portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services were necessary and appropriate for the conduct of the business and investment activities of the Fund.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance of the Fund compared to an appropriate benchmark and its peers, as determined by the Adviser. The Board also reviewed the fees and expenses of the Fund compared to its peers, as determined by Lipper, Inc. (Lipper). The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a funds performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2012, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the performance of the Fund was better than its benchmark for the one-year and since inception (May 2010) periods ended December 31, 2012, and for the one-year periods ended February 28, 2013 and March 31, 2013. The Board noted that the Funds performance was better than its Lipper peer group average for the one-year period but below its peer group average for the since inception period ended December 31, 2012. The Board discussed with the Adviser the level of the advisory fee for the Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the advisory fee, the Board also reviewed the Funds total expense ratio. The Board noted that the advisory fee and total expense ratio were lower than the Funds Lipper peer group average. After discussion, the Board concluded that the Funds performance, advisory fee and total expense ratio were competitive with the Lipper peer group average.
23
AIP Multi-Strategy Fund A
Investment Advisory Agreement Approval (Unaudited) (continued)
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Funds total expense ratio and particularly the Funds advisory fee rate, which does not include breakpoints. In conjunction with its review of the Advisers profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the advisory fee level is appropriate relative to current and projected asset levels and/or whether the advisory fee structure reflects economies of scale as asset levels change. The Board concluded that economies of scale for the Fund were not a factor that needed to be considered at the present time.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Advisers expenses and profitability supports its decision to approve the Advisory Agreement.
Other Benefits of the Relationship
The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. The Board considered sales charges on shares of the Funds feeder fund, AIP Multi-Strategy Fund P (AMS P), charged by a broker-dealer affiliate of the Adviser. The Board also considered that an affiliate of the Adviser receives from AMS P a shareholder servicing fee for services provided by the affiliate to its customers who are shareholders of AMS P. The Board also considered that affiliated brokers, dealers or other financial intermediaries may receive payments from the Adviser in connection with (i) the sale, distribution or retention of shares of the Fund and/or (ii) shareholder servicing. The Board reviewed with the Adviser these arrangements and the reasonableness of the Advisers costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Advisory Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Funds operations and the Boards confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Advisory Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
24
AIP Multi-Strategy Fund A
Investment Advisory Agreement Approval (Unaudited) (continued)
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Funds Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Funds business.
General Conclusion
After considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Fund and its Shareholders to approve renewal of the Advisory Agreement for another year. In reaching this conclusion, the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Advisory Agreement.
25
AIP Multi-Strategy Fund A
Proxy Voting Policies and Procedures and Proxy Voting Record (Unaudited)
A copy of (1) the Funds policies and procedures with respect to the voting of proxies relating to the Investment Funds; and (2) how the Fund voted proxies relating to Investment Funds during the most recent 12-month period ended June 30 is available without charge, upon request, by calling the Fund at 1-888-322-4675. This information is also available on the Securities and Exchange Commissions website at http://www.sec.gov.
Quarterly Portfolio Schedule (Unaudited)
The Fund also files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the Funds first and third fiscal quarters on Form N-Q. The Funds Forms N-Q are available on the Securities and Exchange Commissions website at http://www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the Securities and Exchange Commissions Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Once filed, the most recent Form N-Q will be available without charge, upon request, by calling the Fund at 1-888-322-4675.
26
AIP Multi-Strategy Fund A |
||
100 Front Street, Suite 400 |
||
West Conshohocken, PA 19428 |
||
Trustees |
Legal Counsel | |
Michael Nugent, Chairperson of the Board and Trustee |
Dechert LLP | |
Frank L. Bowman |
1095 Avenue of the Americas | |
Michael Bozic |
New York, NY 10036 | |
Kathleen A. Dennis |
||
James F. Higgins |
Kramer Levin Naftalis & Frankel | |
Dr. Manuel H. Johnson |
LLP | |
Joseph J. Kearns |
1177 Avenue of the Americas | |
Michael F. Klein |
New York, NY 10036 | |
W. Allen Reed |
||
Fergus Reid |
||
Officers |
||
Arthur Lev, President and Principal Executive Officer |
||
Stefanie V. Chang Yu, Vice President |
||
Mustafa Jama, Vice President |
||
Matthew Graver, Vice President |
||
Mary Ann Picciotto, Chief Compliance Officer |
||
Noel Langlois, Treasurer and Chief Financial Officer |
||
Mary E. Mullin, Secretary |
||
Investment Adviser |
||
Morgan Stanley AIP GP LP |
||
100 Front Street, Suite 400 |
||
West Conshohocken, PA 19428 |
||
Sub-Adviser |
||
Morgan Stanley Investment Management Limited |
||
25 Cabot Square |
||
Canary Wharf |
||
London E14-4QA, England |
||
Administrator, Custodian, Fund Accounting Agent and Escrow Agent | ||
State Street Bank and Trust Company |
||
One Lincoln Street |
||
Boston, MA 02111 |
||
Transfer Agent |
||
UMB Fund Services, Inc. |
||
803 W. Michigan Street |
||
Milwaukee, WI 53233 |
||
Independent Registered Public Accounting Firm |
||
Ernst & Young LLP |
||
One Commerce Square |
||
2005 Market Street, Suite 700 |
||
Philadelphia, PA 19103 |
27
ITEM 2. | CODE OF ETHICS. Not applicable to a semi-annual report. |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to a semi-annual report. |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to a semi-annual report. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the Registrant. |
ITEM 6. | SCHEDULE OF INVESTMENTS. Refer to Item 1. |
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to a semi-annual report. |
ITEM 8. | PORTFOLIO MANAGERS. Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES. Not applicable to the Registrant. |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The Registrants principal executive officer and principal financial officer have concluded that the Registrants disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions 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 in the Registrants internal control over financial reporting that occurred during the registrants most recent fiscal half-year (the registrants second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a) |
(1) | Code of Ethics is not applicable to a semi-annual report. |
(2) | Certifications of Principal Executive Officer and Principal Financial Officer attached to this report as part of EX-99.CERT. |
SIGNATURES
Pursuant to the requirements of 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.
AIP MULTI-STRATEGY FUND P
By: | /s/ Arthur Lev | |
Name: Arthur Lev | ||
Title: President | ||
Date: August 28, 2013 |
Pursuant to the requirements of 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: | /s/ Arthur Lev | |
Name: Arthur Lev | ||
Title: Principal Executive Officer | ||
Date: August 28, 2013 |
By: | /s/ Noel Langlois | |
Name: Noel Langlois | ||
Title: Principal Financial Officer | ||
Date: August 28, 2013 |