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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

(7) Fair Value Measurements

In accordance with the Fair Value Measurements Topic of the Financial Accounting Standards Board Accounting Standards Codification, the Trust established a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the relevant measurement date. The three levels are defined as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trust’s exchange-traded futures contracts and options fall into this category.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts, options on forward currency contracts and fixed income securities that the Trust values using models or other valuation methodologies derived from observable market data.

Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of June 30, 2013 and the year ended December 31, 2012, the Trust did not have any Level 3 assets or liabilities.

An asset or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs for an asset or liability (Level 3).

The Trust’s exchange-traded futures contracts and options on futures contracts are valued based on quoted prices (unadjusted) in active markets for identical assets or liabilities. The Trust’s forward currency contracts and options on forward currency contracts are based on third-party quoted dealer values on the interbank market, based on similar assets or liabilities. The Trust’s fixed income securities are valued using inputs that are observable for the asset or liability, including prices of similar fixed income securities or present values of expected future cash flow models.

At June 30, 2013, the Trust held a non-controlling interest in a non-affiliated limited liability company – the Global Diversified Managed Futures Portfolio, LLC (the “Global Diversified Portfolio”). The Global Diversified Portfolio trades primarily in exchange-traded futures contracts and fixed income investments, and maintains daily liquidity. The Trust obtains details of the individual investment holdings of the Global Diversified Portfolio and verifies fair values independently. There is no lock-up period and the Trust has no unfunded commitments. Accordingly, the Trust’s investment in the Global Diversified Portfolio is classified within Level 1 of the valuation hierarchy.

The following table presents the Trust’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and year ended December 31, 2012, respectively:

	June 30, 2013
	Level 1		Level 2		Level 3		Total
Assets
Unrealized gain on open contracts:
Futures positions	$	146,825	$	-	$	-	$	146,825
Investment in Global Diversified Managed Futures Portfolio LLC		982,881		-		-		982,881
Purchased options on futures contracts		2,266,543		-		-		2,266,543
Fixed income securities		-		11,775,841		-		11,775,841
Total assets		3,396,249		11,775,841		-		15,172,090

Liabilities
Options written on futures contracts		3,070,552		-		-		3,070,552
Total fair value	$	325,697	$	11,775,841	$	-	$	12,101,538

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Unrealized gain on open contracts:
Futures positions	$	260,744	$	-	$	-	$	260,744
Purchased options on futures contracts		728,440		-		-		728,440
Fixed income securities		-		11,003,681		-		11,003,681
Total assets		989,184		11,003,681		-		11,992,865

Liabilities
Options written on futures contracts		884,242		-		-		884,242
Total fair value	$	104,942	$	11,003,681	$	-	$	11,108,623

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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