UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2013
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-52505
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Exact name of registrant as specified in its charter)
Delaware |
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30-0408280 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
c/o Merrill Lynch Alternative Investments LLC
Four World Financial Center, 11th Floor
250 Vesey Street
New York, New York 10080
(Address of principal executive offices)
(Zip Code)
609-274-5838
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited Liability Company Interest
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The Units of limited liability company interest of the registrant are not publicly traded. Accordingly, there is no aggregate market value for the registrants outstanding equity that is readily determinable.
As of February 28, 2014 Units of limited liability company interest with an aggregate Net Asset Value of $263,545,262 were outstanding and held by non-affiliates.
Documents Incorporated by Reference
The registrants 2013 Annual Report and Report of Independent Registered Public Accounting Firm, the annual report to security holders for the year ended December 31, 2013, is incorporated by reference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
ANNUAL REPORT FOR 2013 ON FORM 10-K
Table of Contents
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PAGE |
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PART I | |||
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Item 1. |
Business |
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1 |
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Item 1A. |
Risk Factors |
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16 |
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Item 1B. |
Unresolved Staff Comments |
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28 |
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Item 2. |
Properties |
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29 |
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Item 3. |
Legal Proceedings |
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29 |
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Item 4. |
Mine Safety Disclosures |
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29 |
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PART II | |||
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Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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29 |
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Item 6. |
Selected Financial Data |
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32 |
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Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
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40 |
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Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
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49 |
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Item 8. |
Financial Statements and Supplementary Data |
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60 |
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Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
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60 |
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Item 9A. |
Controls and Procedures |
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60 |
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Item 9B. |
Other Information |
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61 |
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PART III | |||
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Item 10. |
Directors, Executive Officers and Corporate Governance |
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61 |
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Item 11. |
Executive Compensation |
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65 |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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65 |
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Item 13. |
Certain Relationships and Related Transactions and Director Independence |
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65 |
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Item 14. |
Principal Accounting Fees and Services |
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65 |
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PART IV | |||
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Item 15. |
Exhibits, Financial Statement Schedules |
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66 |
PART I
Item 1: Business
(a) General Development of Business:
Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC) (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced operations on April 2, 2007. The Fund operates as a fund of funds, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (MLAI or the Sponsor), the manager of the Fund, among a number of different underlying FuturesAccess Funds (each a Portfolio Fund, and collectively the Portfolio Funds). MLAI is the sponsor and manager of the Portfolio Funds.
MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Portfolio Funds. MLAI may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Portfolio Funds. MLAI may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds are composed of direct-trading funds advised by a single trading advisor or funds of funds for which the Sponsor acts as the advisor and allocates capital among multiple commodity trading advisors. Investors can allocate and reallocate capital among different FuturesAccess Funds. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
The Portfolio Funds in which the Fund presently invests are specified below, and may change from time to time based on the investment discretion of MLAI. Each Portfolio Fund implements a systematic-based managed futures strategy under the direction of a trading advisor unaffiliated with MLAI (each a Trading Advisor). The Trading Advisors primarily employ systematic trading strategies, which seek to identify market and price trends and take positions in the direction of these trends. The Trading Advisors may also implement a variety of other pattern recognition and price movement trading systems. See Portfolio Funds Trading Programs, below. MLAI has full discretion over the selection of, and allocation and reallocation of Fund capital among the Portfolio Funds, see Portfolio FundsSelection and Allocations, below.
Unless the context requires otherwise, references herein to the trading activities, cash management, expenses and portfolio of the Fund refer to the Funds indirect activities engaged in, cash management, expenses incurred and portfolio held through each Portfolio Fund, and reference to the Trading Advisor herein include each Trading Advisor. The term Trading Program includes the Funds overall approach as well as each Trading Advisors strategy, as applicable.
The Fund issues units of limited liability company interest (Units) which are privately offered pursuant to Regulation D of the Securities Act of 1933, as amended (the Securities Act).
The Fund calculates the Net Asset Value per Unit of each Class of Units as of the first and sixteenth calendar day of each month and as of any other dates MLAI may determine in its discretion (each, a Calculation Date). The Funds Net Asset Value as of any Calculation Date generally equals the value of the Funds interests in the Portfolio Funds as of that date plus any other assets held by the Fund, minus accrued Sponsor fees, any offering or operating costs and all other liabilities of the Fund. MLAI or its delegates are authorized to make all Net Asset Value determinations.
As of December 31, 2013 the Net Asset Value and the Net Asset Value per Unit in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) was $297,282,028 and $1.0369 for Class A, $1.0135 for Class C, $1.2809 for Class D, $1.1115 for Class I, $0.000 for Class D1 and $0.9463 for Class M.
Since the Fund began trading activities the highest and lowest month-end Net Asset Value per Unit are listed below. The highest month-end Net Asset Value per Unit for Class A was $1.2561 (December 31, 2008) and the lowest was $0.9090 (August 31, 2007). The highest month-end Net Asset Value per Unit for Class C was $1.2909 (December 31, 2008) and the lowest was $0.9467 (August 31, 2007). The highest month-end Net Asset Value per Unit for Class D was $1.4900 (April 30, 2011) and the lowest was $1.0212 (August 31 2007). The highest month-end Net Asset Value per Unit for Class I was $1.3315 (April 30, 2011) and the lowest was $0.9500 (August 31, 2007). The highest month-end Net Asset Value per Unit for Class D1 was $1.3298 (April 30, 2011) and the lowest was $0.9113 (August 31, 2007). The highest month-end Net Asset Value per Unit for Class DA was $1.0282 (December 31, 2008) and the lowest was $0.9460 (July 31, 2009). The highest month-end Net Asset Value per Unit for Class M was $1.0460 (July 31, 2012) and the lowest was $.9026 (October 15, 2013).
(b) Financial Information about Segments:
The Funds business constitutes only one segment for financial reporting purposes, i.e., a speculative commodity pool. The Fund does not engage in sales of goods or services.
(c) Narrative Description of Business:
General
The Fund allocates and reallocates its capital under the direction of MLAI, among a number of different underlying FuturesAccess Funds (each a Portfolio Fund). Each Portfolio Fund implements a systematic-based managed futures strategy under the direction of its Trading Advisor.
Systematic trading generally assumes that a disciplined and automatic trading approach based on quantitative analysis without discretionary decision making can enable a trader to forecast price trends or other market dynamics and to take positions designed to profit from it. These systems can incur substantial losses when the market significantly deviates from its usual historical patterns; e.g., when weather-related catastrophes, international political disruptions, and unanticipated supply/demand imbalances unexpectedly dominate the market.
Systematic trading generally utilizes technical analysis. Technical analysis relies on information intrinsic to the market itself to determine trades, such as prices, price patterns, volume and volatility, unlike fundamental analysis, which is premised on the assumption that markets are not perfectly efficient, that informational advantages and mispricings do occur and that econometric analysis can identify trading opportunities.
Systematic technical trading systems share basic similarities, although the models which they apply to historical price data differ. These similarities imply that there will be certain market conditions which are likely to be adverse to all or substantially all of the underlying FuturesAccess Funds in the Funds portfolio.
Systematic trading strategies are speculative and involve substantial risk. By operating the Fund as a fund of funds and investing in a number of different underlying FuturesAccess Funds, MLAI attempts to mitigate the volatility and certain other risks of investing in a single FuturesAccess Fund. While diversifying among different trading advisors involves the risk of one managers loss frequently offsetting anothers profits, this same diversifying effect also typically reduces overall performance volatility, potentially producing a risk/return profile for the Fund that may be more consistent with the portfolio objectives of investors than investing in a single FuturesAccess Fund.
The Portfolio Funds in which the Fund holds investments as of December 31, 2013 are: Altis FuturesAccess LLC (Altis Fund), Aspect FuturesAccess LLC (Aspect Fund), ML BlueTrend FuturesAccess LLC (BlueTrend Fund), John Locke FuturesAccess LLC (John Locke Fund), Lynx FuturesAccess LLC (Lynx Fund),
ML Transtrend DTP Enhanced FuturesAccess LLC (Transtrend Fund), Tudor Tensor FuturesAccess LLC (Tudor Fund), ML Winton FuturesAccess LLC (Winton Fund). Each underlying Portfolio Fund has its own Trading Advisor.
As of March 31, 2014, the Altis Fund will no longer be a Portfolio Fund. In MLAIs discretion, the Fund will reallocate its redeemed capital from the Altis Fund among one or more Portfolio Funds.
Portfolio FundsSelection and Allocations
MLAI is responsible for identifying and selecting the underlying FuturesAccess Funds as Portfolio Funds in which the Fund invests, as well as for allocating and rebalancing Fund capital among the Portfolio Funds in an effort to maintain target allocations established by MLAI.
MLAI may use quantitative performance criteria, analytical and statistical techniques, market experience, qualitative due diligence and the subjective judgment of MLAI personnel in reviewing and selecting prospective FuturesAccess Funds as Portfolio Funds for the Fund. Selecting FuturesAccess Funds for inclusion in the Funds portfolio ultimately involves the subjective evaluation of both quantitative and qualitative factors by MLAIs personnel. In evaluating a trading advisor of a FuturesAccess Fund for possible inclusion in the Funds portfolio, MLAI considers a number of factors, which may include, but are not limited to, certain of the following factors: (i) the type of systematic-based trading strategy implemented and the time frames over which the systems operate; (ii) business acumen, organizational infrastructure and internal controls; (iii) assets under management and track record; (iv) quantitative performance analysis; (v) risk management controls and procedures; (vi) business terms; (vii) conflicts of interest; (viii) the professional background, reputation and experience of a trading advisors principals and key personnel; (ix) commitment of the personal assets of a trading advisors principals and key personnel to their trading program; (x) the diversification potential of including the FuturesAccess Fund together with the other FuturesAccess Funds in the Funds portfolio; and (xi) the sophistication and depth of resources committed to ongoing research effort. MLAI may consider a variety of factors in allocating and reallocating the Funds capital among underlying FuturesAccess Funds, and the list above is illustrative only.
MLAI is limited in its trading advisor selections to the FuturesAccess Funds. There are currently only a strictly limited number of FuturesAccess Funds available for investment by the Fund.
MLAI determines the target allocations and relative weightings among the FuturesAccess Funds selected for the Funds portfolio. MLAI makes allocation decisions based on a combination of factors, with emphasis on MLAIs assessment of the long-term return and risk forecasts of the various Portfolio Funds. The relative allocation of Fund capital among the Portfolio Funds will vary over time due to target allocation levels, market appreciation/depreciation and other factors. In addition to assigning target allocations, MLAI may establish an allocation range for certain or all Portfolio Funds, which affects when, and the manner in which, MLAI rebalances the Funds portfolio.
MLAI periodically reviews Portfolio Fund performance as well as changes in market conditions to determine whether to terminate existing or to add new underlying FuturesAccess Funds, and/or to adjust its target allocations and relative weightings among the existing Portfolio Funds.
There can be no assurance as to which factors MLAI may consider in making capital allocations for the Fund, or as to which allocations MLAI may make.
During the fiscal year ended December 31, 2013, MLAI did not terminate any of the Trading Advisors. On March 19, 2014, MLAI notified Altis Partners (Jersey) Limited regarding the Funds terminating its investment in the Altis Fund, effective March 31, 2014.
Portfolio Funds and Trading Advisors
(a) The Fund currently invests in the following underlying Portfolio Funds which are advised, respectively, by the Trading Advisors as indicated below:
Portfolio Funds |
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Trading Advisors |
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Altis FuturesAccess LLC |
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Altis Partners (Jersey) Limited* |
(the Altis Fund) |
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(Altis) |
Aspect FuturesAccess LLC |
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Aspect Capital Limited** |
(the Aspect Fund) |
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(Aspect) |
ML Transtrend DTP Enhanced FuturesAccess LLC |
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Transtrend B.V. |
(the Transtrend Fund) |
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(Transtrend) |
ML Winton FuturesAccess LLC |
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Winton Capital Management Limited** |
(the Winton Fund) |
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(Winton) |
John Locke FuturesAccess LLC |
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John Locke Investments SA |
(the John Locke Fund) |
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(John Locke) |
ML BlueTrend FuturesAccess LLC |
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BlueCrest Capital Management LLP** |
(the BlueTrend Fund) |
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(BlueTrend) |
Tudor Tensor FuturesAccess LLC |
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Tudor Investment Corporation** |
(the Tudor Fund) |
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(Tudor) |
Lynx FuturesAccess LLC |
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Lynx Asset Management AB |
(the Lynx Fund) |
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(Lynx) |
* As of March 31, 2014, the Altis Fund will no longer be a Portfolio Fund
** This Trading Advisor is registered under the Investment Advisers Act of 1940.
(b) The allocation percentages of the Funds investment in the underlying Portfolio Funds as of December 31, 2013 are as follows:
Altis FuturesAccess LLC |
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10.00 |
% |
Aspect FuturesAccess LLC |
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10.00 |
% |
ML Transtrend FuturesAccess LLC |
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16.00 |
% |
ML Winton FuturesAccess LLC |
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17.00 |
% |
John Locke FuturesAccess LLC |
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10.00 |
% |
ML Bluetrend FuturesAccess LLC |
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17.00 |
% |
Tudor Tensor FuturesAccess LLC. |
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10.00 |
% |
Lynx FuturesAccess LLC |
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10.00 |
% |
(c) Each of the Portfolio Funds is managed by MLAI. Each Trading Advisor has entered into an advisory agreement with the relevant Portfolio Fund and MLAI that govern the advisory services that each Trading Advisor provides to a Portfolio Fund. After the initial term of an advisory agreement, the advisory agreement generally will be automatically renewed for successive periods, on the same terms, unless terminated by either the Trading Advisor or the Portfolio Fund upon written notice to the other party in accordance with the advisory agreement. In addition, the advisory agreements may be terminated at any time upon the occurrence of certain events, such as the aggregate capitalization of a Portfolio Fund falling below a specified level or as a result of a material breach of an advisory agreement by any of the parties. An advisory agreement also will terminate immediately if the applicable Portfolio Fund is terminated and dissolved as determined by MLAI. The trading strategies and investment objectives of each of the Portfolio Funds are outlined in Portfolio Funds Trading Programs, below.
Portfolio Funds Trading Programs
Altis Fund
Altis trades its Global Futures Portfolio for the Altis Fund (the Altis Trading Program). Altis engages primarily in the management of futures, futures on options and F/X trading. The Altis Trading Program
participates in over 140 worldwide futures markets over multiple maturities. The Altis Program is a systematic, automated trading program that builds on the market experience of Altis principals and employs an asset allocator. The portfolio management technology combines original, traditional and contrasting investment techniques into one complete and comprehensive trading system. Investment changes are implemented after considering their effect on the whole portfolio, not just the individual markets concerned.
The Altis Trading Program is designed to give investors participation in broad sectors of the world economy. Altis trades in financial and commodity markets worldwide. Types of instruments traded include, but are not limited to, energies, metals, grains and livestock. Altis will also trade commodity indices, stock indices, currencies, F/X and other related futures and/or option contracts.
Aspect Fund
Aspect trades its Diversified Program for the Aspect Fund (the Aspect Trading Program). The Aspect Trading Program applies a systematic and broadly diversified global investment system, which deploys multiple investment strategies that, primarily through the use of listed futures and F/X OTC contracts, seek to identify and exploit directional moves in the market behavior of a broad range of financial instruments and other assets including, but not limited to, currencies; interest rates; equities; equity indices; debt securities, including bonds; and commodities, including energy, metal and agricultural commodities. Aspect does not engage in retail, off-exchange foreign currency investment pursuant to the Aspect Trading Program. By maintaining comparatively small exposure to any individual market and maintaining positions in a variety of contracts, Aspect aims to achieve long-term diversification.
The Aspect Trading Program employs an automated system to collect, process and analyze market data (including current and historical price data) and identify and exploit directional moves in market behavior. The Aspect Trading Program trades across a variety of frequencies to exploit trends over a range of timescales. Positions are taken according to the aggregate signal and are adjusted to control risk.
Generally, the Aspect Trading Program maintains positions in the majority of markets that have been identified as being available for investment by the program. Market concentration varies according to the strength of signals, volatility and liquidity, among other factors.
The core objectives of the Aspect Trading Program are to: (i) produce strong medium-term capital growth; (ii) seek and exploit profit opportunities in both rising and falling markets using a quantitative and systematic investment process; (iii) seek long-term diversification away from overall movements in traditional bond and stock markets; and (iv) minimize risk by operating in a diverse range of markets and sectors using an investment process that adheres to pre-defined and monitored risk limits and determines market exposure in accordance with factors including, but not limited to, market correlation, volatility, liquidity and the cost of market access.
The Aspect Trading Program is not applied by Aspect with any pre-determined preference for any market. Rather, allocations to strategies and individual markets depend upon an analysis of a range of factors which may include liquidity, correlation and cost of execution. Allocations are currently made on a long-term average risk basis which takes into account varying levels of market volatility and intra-market correlation. These allocations are subject to regular review and may change from time to time at Aspects discretion.
Aspects risk management process has been formally organized into two risk management streams. The first stream relates to market and liquidity risk and the second stream relates to operational risk. With respect to market and liquidity risk, Aspect employs a value-at-risk methodology and other risk management procedures to monitor the exposure of the Aspect Trading Program to this risk within pre-defined guidelines. If risk exceeds the maximum prescribed level, risk reducing investments will be entered into. Additionally, Aspect has developed mechanisms designed to provide that risk is controlled at both an individual market and portfolio level. In seeking to control the risks of the Aspect Trading Program, Aspect may intervene in the risk management framework in extreme market situations where Aspect believes that an intervention is in the best interests of the Aspect Fund. In terms of the second stream, Aspect has an Operational Risk Committee which is responsible for managing all operational risk affecting Aspect. Operational risk is defined as the risk of loss resulting from inadequate or failed processes, people and systems or external events. It includes the risk of failure of a broker or other service provider, the risk of the loss of trading or
operational capability at Aspect, the risk of breaches of intellectual property security and the risk of breaches of law or regulation.
BlueTrend Fund
BlueCrest trades its BlueTrend Program for the BlueTrend Fund (the BlueTrend Trading Program). The BlueTrend Trading Program is a systematic trend follower, but its decision-making inputs are 100% technical. BlueCrest aims to apply scientific techniques to the analysis and modeling of markets. The BlueTrend Fund trades daily futures and liquid OTC instruments across 150+ markets in equity indexes, fixed income, F/X, energy, metals, agriculturals and soft commodities.
The BlueTrend Trading Programs systematic trading team combines research, model development, implementation and execution functions. The BlueTrend Funds portfolio construction is regularly reviewed.
The trading strategy utilized by the BlueTrend Fund is a systematic trading model. Capital allocation decisions between the models, between the markets within a model and individual buy and sell decisions within such markets are made on a systematic basis using quantitative analysis.
John Locke Fund
John Locke trades its JLI Systematic Program (the John Locke Trading Program) for the John Locke Fund.
Within a risk management policy, the investment program will get long, short or neutral exposure to the main world markets by systematically trading a large portfolio of futures contracts and forward markets.
John Lockes investment process is based on the systematic application of computerized trading strategies, qualified within a quantified risk management framework. The strategies are purely technical, based on in-depth analysis of market price movements.
The John Locke Trading Program seeks to minimize volatility and reduce risk by diversifying the portfolio to avoid significant concentration within any one security or industry group.
In managing the John Locke Trading Program, John Locke employs systematic application of computerized trading strategies within a quantified risk management framework. The investment objective is pursued through a portfolio of more than 70 markets.
While commodity trading can rely on either fundamental or technical analysis, or a mix of both, John Lockes strategies are purely technical. These strategies are based on historical data analysis of a given markets price movements.
In order to seek to optimize the risk/return ratio, the strategies implemented make use of a multidimensional diversification approach. Under this approach, a variety of commodity interests, futures and other financial instruments are employed in the primary economic sectors in markets located across broad geographic zones.
The John Locke Trading Program primarily invests in the following instrument types: currencies; fixed income instruments; stock indices; energy; metals; grains; and other soft commodities.
A principal risk involved in trading a market is the volatility of that market. The John Locke Trading Program seeks to balance the long-term volatility of the overall portfolio by defining for each asset class a maximum number of contracts in which the John Locke Trading Program can be exposed. The John Locke Trading Program seeks to balance local volatility by adjusting current position sizes and using associated stop-loss orders. The John Locke Trading Program seeks to protect against catastrophic loss by employing Value At Risk (VaR) analysis by sector and capping the sector position size accordingly.
Lynx Fund
Lynx trades its Lynx Program for the Lynx Fund (the Lynx Trading Program). The Lynx Trading Program trades futures contracts on the global futures markets. The Lynx Trading Program is managed by applying a process that includes a focus on risk management. Lynx uses systematic futures trading programs or models to produce trading signals on a largely automated basis to trade futures contracts in the equity, fixed income, commodity and F/X asset classes.
One of the most important aspects of Lynxs management process is model development. Lynx believes that as financial markets are constantly developing, it is important to be continually improving the models used in the management of the program and developing new ones. Lynx has created databases containing historical price information for a wide variety of different financial instruments, in which the data series often go back thirty years or more. Ideas about how to improve the models in current use are tested on historical data using software developed by Lynx. Another important activity is to attempt to improve the portfolio structure by developing methods for allocating risk between different models and different markets.
The aim is for the models used in the management of the Lynx Trading Program to complement each other and contribute to greater diversification and a more uniform return. The models complement each other in terms of structure as well as the time horizons within which they operate. In the very short-term models, the average duration of the positions typically is only a couple of hours, while in the models with the longest time horizon, the average life of a holding generally is several months.
Risk management is an integrated feature in the investment process and Lynx focuses on diversification and portfolio construction. Around 70 futures markets are traded across four sectors: equity indices, fixed income, currencies and commodities. Position sizes are determined based on correlations with other markets. The models operate independently and the portfolio is built bottom-up based on the signals from each model. Tools designed to minimize each investments loss are integrated in the design of the models, e.g., by using automated stop-loss mechanisms. As a result the risk utilization in the program changes over time, which is intended to limit drawdowns. VaR is used to limit position concentration and risk levels.
Transtrend Fund
Transtrend trades its Diversified Trend Program (the Transtrend Trading Program) for the Transtrend Fund.
The Diversified Trading Program has two risk profiles: the Standard Risk Profile and the Enhanced Risk Profile, investable in various currencies. The Enhanced Risk Profile is approximately 1.5 times the leverage of the Standard Risk Profile. Transtrend will trade the Diversified Trading Program - Enhanced Risk Profile (USD) for the Transtrend Fund.
Transtrend trades the following instruments on U.S. and non-U.S. exchanges and markets: futures, options, options on futures, swaps, swaps on futures, and forward contracts on currencies, interest rates, interest rate instruments, commodities, equity-related indices and instruments, and other indices, in all cases traded on exchanges and/or OTC markets. The underlying values of these instruments traded may also include other economic variables which are now or may become the subject of organized futures, options, options on futures, swap, swaps on futures, and forward trading. The instruments that Transtrend trades may also include other derivative, margined instruments, traded on exchanges and/or OTC markets. The Transtrend Program does not currently trade OTC F/X and derivatives on individual stocks for the Fund.
The applied principles of risk management play a dominant role in Transtrends trading methodology. The Transtrend Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance. The Transtrend Trading Program is essentially based on quantitative analysis of signaled price behavior of instruments traded and therefore not on fundamental analysis. The Transtrend Trading Program is systematic by nature and requires a consistent application. Discretionary inputs are not essential to the effectiveness of the program.
The applied market approach does not forecast markets or price levels but participates in a systematic and dynamic way in signaled price patterns. The trading systems of the Transtrend Trading Program are designed to profit from recurring, non-random characteristics of price behavior in markets. In the trading systems there are elements which identify and respect the dominant market direction. The trading systems exploit directional price movement of single instruments and of intra-market and inter-market combinations, synthetics, of instruments.
While Transtrend generally will not use discretionary inputs in trading client accounts, in the event of exceptional market circumstances Transtrend may use discretion in an attempt to limit risk to a position or an account. The use of discretion by Transtrend may have a positive or negative impact on the performance of the Transtrend Fund.
The Transtrend Trading Program may hold positions in different instruments with one or more trading systems. The simultaneous application of diverging trading systems, each with a positive profit expectancy over the course of time, can contribute to a different timing of both purchase and sale transactions, thus enhancing smoother performance characteristics when compared to a single trading system. However, the profitability of trading systems, individually or in combination, cannot be guaranteed and the Transtrend Fund may incur substantial losses.
Once the acceptable portfolio components have been defined for an account, Transtrend determines the relative proportions of all components within the portfolio on the basis of signaled correlation over the course of time, which is re-computed from time to time. Correlation analysis contributes to the estimation of the risk of coinciding trended reversals at a portfolio level.
The allocation to instruments, i.e., the determination of portfolio components and their relative proportions, varies over the course of time, because, among other reasons, of changes to the list of instruments traded in the Transtrend Trading Program and because of observed changes in price behavior, correlation and market liquidity.
Risk management plays a role in Transtrends trading methodology. The Transtrend Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance. Specific risk provisions are computed for each market exposure. Risk assessments are determined on the basis of evaluation of price behavior.
The entry/exit tools used by Transtrend may contain both proprietary trend-following and contra-trend elements and include techniques of dynamic profit targets and dynamic stop levels for individual trades. Transtrend may change its trading techniques at any time without prior notice to or approval from the Transtrend Fund. The trading systems act at specific times or time intervals and upon specific price levels during a market session or during the day.
Tudor Fund
Tudor trades a customized version of the Tudor Tensor Strategy (the Tudor Trading Program) for the Tudor Fund. The principal investment objective of the Tudor Trading Program is to seek capital appreciation through global quantitative trading in the fixed income, currency, commodity and equity asset classes. Instruments traded in these asset classes include, but may not be limited to, exchange traded futures contracts and OTC currencies. Additional instruments may be traded by the Tudor Trading Program at any time. Tudor seeks to achieve the investment objective by directing the Tudor Trading Programs trading on U.S. and non-U.S. exchanges and markets, including emerging markets.
Tudor deploys trading strategies based on computerized mathematical and computational models, referred to as trading systems in this discussion, that produce automated computer-generated signals to trade on a global basis, both long and short, in the fixed income, currency, commodity and equity asset classes through exchange-traded futures contracts and OTC currencies.
Tudor uses its discretion in portfolio management decisions (and the timing of any decisions) including, but limited to, the commencement of trading, determining which trading strategies and trading systems warrant participation in the Tudor Trading Program, allocating assets among trading strategies and trading systems, adding and removing trading strategies or trading systems, executing trades, establishing and liquidating positions, de-leveraging and re-leveraging trading strategies, trading systems or assets traded by trading systems, determining the Tudor Trading
Programs leverage, and hedging and other risk management decisions. For example, Tudor has the ability, in its sole discretion, to include or remove additional risk constraints or take other measures to reduce risk in response to market conditions. In addition, Tudor may, in its sole discretion, override computer-generated trading signals. These overrides would typically occur in the event of extraordinary market conditions. Tudor may also exercise its discretion in determining how to comply with actions taken by regulatory or self-regulatory agencies or central banks.
The Tudor Trading Programs principal trading strategies include both technical and fundamental trading systems.
Technical trading systems involve the analysis of technical factors and historical trading patterns as a way to predict future price movements. Technical factors may be derived from daily or intraday price data. Price fluctuations, volume variations, market volatility and changes in open interest may also generate technical inputs or be used to size positions generated by other indicators. Technical trading systems may be based on fundamental foundations but use only price inputs.
Fundamental trading systems rely on factors external to markets to generate trades. These factors may include interest rates, earnings, inflation measures, gross domestic product and industrial production. Fundamental trading systems may also contain some technical inputs.
The Tudor Trading Program is subject to market and credit risk in connection with the Tudor Trading Programs trading activities. Tudor takes an active role in managing the Tudor Trading Programs market risks. Tudor reviews the Tudor Trading Programs largest exposures and sensitivities to certain market stress scenarios at the individual risk factor level and at various levels of aggregation. Tudor also performs daily stress tests on the Tudor Trading Programs positions in the aggregate.
Winton Fund
Winton trades its Diversified Program (the Winton Trading Program) for the Winton Fund. The Winton Trading Program pursues a diversified trading strategy that does not necessarily rely on favorable conditions in any particular market or on the direction of market prices to generate profits.
The Winton Trading Program employs what is traditionally known as a systematic approach to trading financial instruments. In this context, the term systematic implies that the vast majority of the trading decisions are executed, without discretion, either electronically or by a team responsible for the placement of orders, based on the instructions generated by the Winton Computer Trading System (the Winton Trading System). The majority of trades in the Winton Trading Program are in fact executed electronically. The Winton Trading Program blends short-term trading with long-term trend following, using multiple time frames in addition to multiple systems. The Winton Trading Program seeks to allocate for diversification.
The Winton Trading Program can be thought of as more technical than fundamental in nature. The term technical analysis is generally used to refer to analysis based on data intrinsic to a market, such as price and volume. It is often contrasted with fundamental analysis which relies on analysis of factors external to a market, such as crop conditions, the weather or supply and demand.
The Winton Trading Program relates the probability of the size and direction of future price movements with certain indicators derived from past price movements to produce algorithms that characterize the degree of trending of each market at any point in time.
In addition to its trend-following systems, the Winton Trading Program contains certain non-directional systems that derive their forecasts from ideas outside of technical analysis. These are quantitative systems where the primary input is not the market price. For example, the input could be information about the yield curve or an economic variable. These systems work in the same way as those that are based on technical analysis, except that they use a different set of forecasting variables.
While discretionary inputs are generally not essential to the effectiveness of a systematic trading model, it is nonetheless important to recognize that given the often rapid and unpredictable nature of some market events, not every decision to change the Winton Trading System can be conceived as entirely systematic and some may be more discretionary in nature. Examples of discretionary actions might include decreasing the margin-to-equity ratio, liquidating all positions in certain markets or declining to execute an order generated by the Winton Trading System. This discretionary decision-making would normally only be taken in order to reduce risk and would generally be temporary in nature. However, these actions may not enhance the performance of the Winton Trading Program over what might have otherwise been achieved without the exercise of such discretion.
Wintons focus within risk management is on targeting, measuring and managing risk. Owing to the leverage inherent in futures trading, position sizes are set according to Wintons expectation of the risk that the positions will provide, rather than the amount of capital required to fund the positions. Winton also conducts stress testing of its systems utilizing proprietary simulation software which attempts to measure risk.
Employees
The Fund has no employees.
Use of Proceeds and Cash Management Income
Subscription Proceeds
The Funds cash is used as security for and to pay the Funds trading losses as well as its expenses and redemptions. The primary use of the proceeds of the sale of the Units is to permit the Portfolio Funds to trade on a speculative basis in a wide range of commodities on behalf of the Fund (through the Portfolio Funds). While being used for this purpose, the Funds assets are also generally available for cash management, as more fully described below under Cash Management and Interest.
Margin
When a futures or options on futures position is established, initial margin is calculated by the exchange on which the position is listed and deposited with a Futures Commission Merchant (FCM) that is a member of the clearinghouse through which transactions on the relevant exchange are cleared. An FCM must, in turn, deposit initial margin with the clearinghouse, as calculated by the clearinghouse, to secure its obligations to the clearinghouse with respect to the positions of its customers. The amount of both the traders initial margin payment to the FCM and the FCMs initial margin payment to the clearinghouse are determined on the basis of risk, taking into account the price and volatility of the commodity underlying the position and, in certain cases, the offsetting risks that exist within a portfolio of positions. On most exchanges, at the close of each trading day variation margin, representing the unrealized gain or loss on the open positions, is either credited to or debited from a traders account. A trader must maintain a minimum margin level for each outstanding futures position known as maintenance margin, which is set by the relevant exchange and based on the risk of the futures position, often a set percentage of the initial margin. If variation margin payments cause a traders initial margin to fall below maintenance margin levels, a margin call is made, requiring the trader to deposit additional margin or have its position closed out. A clearinghouse likewise has maintenance margin requirements for member FCMs. An FCM may require a higher level of initial margin and maintenance margin from the trader than the clearinghouse requires from the FCM, but generally will not allow lower margin levels. Margin is also required to be posted with counterparties when making investments through forward, swaps or other OTC instruments. The counterparties calculate margin based on the risk of the underlying commodity and will deposit margin with each other based on a previously agreed upon schedule. In general, approximately 10% to 30% of the Portfolio Funds assets are expected to be committed as margin for futures or options on futures positions at any one time, although these amounts could occasionally be substantially higher. The Portfolio Funds exposure and liability are not limited to the amount placed on margin, but are based on the total value of the futures contracts being traded. Fund assets not committed to margin will be held in cash or cash equivalents and will earn interest as described below.
Custody of Assets
The Funds financial assets consist primarily of cash, futures and OTC FX forward and spot positions. In addition, the Fund has authority to trade options on futures and forwards and certain other OTC derivatives including swaps, but these contracts typically represent a small percentage of the Funds financial assets, if any are traded at all.
Futures and OTC forwards and other instruments typically constitute a predominant amount of the Funds investment risk, but the notional value of these instruments is not included on the Funds balance sheet.
The vast majority of the net assets of the Fund is, and has historically been, held in the form of cash. The Funds cash is used in various ways. It can be:
· posted as margin with MLPF&S in segregated or secured accounts in connection with commodities trading on regulated exchanges;
· pledged as collateral to MLIB for OTC forwards or options on forwards or to other OTC prime brokers for other OTC investments;
· deposited in savings or demand deposit accounts with the Funds custodian or other banking institutions, both in the United States and internationally;
· held in securities brokerage accounts maintained with MLPF&S; and
· invested in securities or other instruments generally viewed as cash equivalents, which are in turn held in segregated or secured accounts with MLPF&S.
Typically the vast majority of the Funds assets are held in segregated or secured accounts with MLPF&S. In general, approximately 10% to 30% of the Funds assets are expected to be required as margin or collateral at any one time. Approximately 90% of the Funds assets are held in customer segregated accounts at MLPF&S pursuant to applicable Commodity Futures Trading Commission (CFTC) regulations to margin U.S. exchange-traded futures contracts and options thereon, or in customer secured accounts at MLPF&S and used to margin futures trading on non-U.S. exchanges pursuant to CFTC regulations. The remaining approximately 10% is expected to be deposited with MLIB, other OTC prime brokers, or one or more third-party collateral custodians as margin for OTC trades if the Fund trades OTC instruments. These amounts could be substantially higher or lower and there is no obligation to maintain margin or collateral within these or any other specific ranges.
Assets held in segregated or secured accounts at MLPF&S may be invested only in CFTC-permitted investments, which include U.S. government and government agency securities, commercial paper and corporate notes and bonds guaranteed by the U.S. government, and money market mutual funds. Under the applicable regulations, such permitted investments are subject to instrument and issuer based concentration and time to maturity limits and must be managed with the objectives of preserving principal and maintaining liquidity.
Cash deposited in savings or demand deposit accounts with the Funds custodian or other banking institutions may be in excess of the limits on federal insurance for deposits, and thus not insured by the Federal Deposit Insurance Corporation (FDIC), and would be subject to the risk of bank failure.
MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with its BAC affiliates, such as MLPF&S and MLIB, although MLAI may, nevertheless, engage unaffiliated service providers as clearing brokers or prime brokers for the Fund. Other affiliates may from time to time be involved in the clearing, custody or investment of the Funds assets, including as prime brokers. However, the vast majority of the Funds assets are held with, and therefore subject to the credit risk of, MLPF&S. MLAI believes that its policy is in the best interest of investors due to the enhanced dependability and quality of service provided by MLPF&S and MLIB to FuturesAccess as a result of MLAIs relationship and shared corporate infrastructure with these affiliates. In addition, MLAI believes that MLPF&S is well capitalized and that the Fund benefits from the transparency provided to MLAI, as an affiliate of MLPF&S, into the controls MLPF&S has implemented to comply with the various regulatory requirements designed to protect customer funds. However, there nonetheless exists a substantial risk of loss with respect to each of the above custody arrangements in the event of the bankruptcy or insolvency of MLIB or MLPF&S if it does not properly segregate customer funds. See Risk Factors Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Custodians, Brokers and Exchanges below for a more detailed discussion of these risks.
Subject to the interest income arrangements discussed below, each BAC entity holding Fund assets, including MLPF&S, retains the additional economic benefit derived from possession and investment of those assets for the entitys own account.
Cash Management and Interest
MLAI is primarily responsible for the management of the Funds cash assets In exercising this responsibility, MLAIs primary considerations are safety of assets, seeking interest income, and the services provided by custodians. A vast majority of the Funds cash has historically been held in futures brokerage accounts with affiliates. To a smaller degree, the Funds cash assets may be held with the Funds bank custodian, which is at present the administrator.
MLAI retains the ability to change its cash management practices at any time, including by transferring a majority of the Funds cash assets to the Funds custodial bank accounts or other bank accounts or by retaining an asset management firm to invest the Funds cash assets in U.S. government and money market securities. Bank deposits may be in either savings accounts that pay interest, or demand deposit accounts, which may or may not pay interest and which may or may not be subject to FDIC insurance. Any of these banks or asset management firms may be affiliated with MLAI if MLAI believes that to be in the best interests of the investors in the Fund.
MLPF&S and any other BAC affiliates that hold the Funds cash receive economic benefits, which may be substantial, from holding this cash, even in low interest-rate environments in which the Fund receives little, or no interest on these cash assets.
BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will apply to Fund cash assets during any time they are maintained by MLAI with its affiliates. The present interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers and is calculated by the Federal Reserve Bank of New York using data provided by the brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
At present, due to the low interest rate environment that has prevailed in the United States since 2008, the Interest Earning Programs U.S. dollar floor rate of 0% applies. In interest rate environments like the current one in which the Fund does not earn interest under the Interest Earning Program, MLAI may seek to transfer cash from affiliates if it believes that any interest earned on this cash was consistent with its goal of safely maintaining these assets and otherwise would offset the advantages of maintaining cash with its affiliates.
MLPF&S, in the course of acting as commodity broker for the Fund, will have use of Fund cash and earn interest and receive other economic benefits as a result. The interest income arrangements with regard to cash held with MLPF&S will be equivalent with those under the Interest Earning Program as discussed above.
Charges
The following table summarizes the charges incurred by the Fund for the years ended December 31, 2013, 2012 and 2011.
|
|
2013 |
|
2012 |
|
2011 |
| |||||||||
Charges |
|
Dollar |
|
% of Average |
|
Dollar |
|
% of Average |
|
Dollar |
|
% of Average |
| |||
Other Expenses |
|
$ |
1,020,964 |
|
0.24 |
% |
$ |
1,444,939 |
|
0.20 |
% |
$ |
1,518,474 |
|
0.15 |
% |
Sponsor fees |
|
8,734,447 |
|
2.06 |
% |
15,170,255 |
|
2.14 |
% |
20,592,497 |
|
2.04 |
% | |||
Total |
|
$ |
9,755,411 |
|
2.30 |
% |
$ |
16,615,194 |
|
2.34 |
% |
$ |
22,110,971 |
|
2.19 |
% |
The foregoing table does not reflect: (i) the bid-ask spreads paid by the Portfolio Funds on their forward trading, (ii) brokerage commissions, (iii) the benefits which may be derived by BAC from the deposit of certain of the Portfolio Funds U.S. dollar assets maintained at MLPF&S, or (iv) sales commissions payable in connection with the sales of Class A, Class D and Class I Units of the Fund. Bid-ask spreads and brokerages commissions are components of the trading profit or loss of the Portfolio Fund rather than a distinct expense item separable from the Portfolio Funds trading; they are netted against realized and unrealized trading gains or losses in determining trading profit or loss. Benefits derived by BAC from the deposit of the Portfolio Funds assets at MLPF&S are neither a direct expense of the Fund nor readily quantifiable. Aggregate sales commissions are not included in the table of charges because they are not an expense of the Fund, but rather are paid to MLPF&S out of an investors subscription proceeds and therefore reduce the amount invested in the Fund by the investor.
Management fees and performance fees are not included in the above table of charges, because the Fund does not charge management fees or performance fees, but instead charges a sponsor fee which is set forth in the table. While the Trading Advisors to the Portfolio Funds in which the Fund invests do charge management fees and performance fees, these are not included in the table since such fees are not Fund expenses. However, such management fees and performance fees reduce the Net Asset Value of the Funds underlying investment in each Portfolio Fund.
Each Portfolio Fund pays the relevant Trading Advisor applicable performance fees and management fees. As an investor in the Portfolio Funds, the Funds investment in the Portfolio Funds is therefore reduced by the performance fees and management fees paid by the Portfolio Fund to the Trading Advisor. As a result, the Funds returns are decreased by the performance and management fees paid by the Portfolio Funds. The Portfolio Funds generally pay the performance fees and management fees out of the cash held by them, although such fees can be paid by liquidating Portfolio Fund assets. The performance fees and management fees are not charged directly to the Fund or its members.
The Funds average month-end Net Asset Values during 2013, 2012 and 2011 equaled $424,823,751, $708,964,217 and $1,008,658,737, respectively.
During 2013, the Fund earned $0 in interest income, or approximately 0.00% of the Funds average month-end Net Asset Values. During 2012, the Fund earned $0 in interest income, or approximately 0.00% of the Funds average month-end Net Asset Values. During 2011, the Fund earned $187 in interest income, or approximately 0.00% of the Funds average month-end Net Asset Values.
Description of Current Charges
Recipient |
|
Nature of Payment |
|
Amount of Payment |
MLPF&S |
|
Use of assets |
|
BAC may derive an economic benefit from the deposit of certain of the Portfolio Funds U.S. dollar assets in accounts maintained at MLPF&S. |
|
|
|
|
|
MLAI |
|
Sponsor fees |
|
A flat-rate monthly charge of 0.125% of 1% (1.50% annual rate) on Class A units, flat-rate monthly charge of 0.2083 of 1% (2.50% annual rate) on Class C Units, a flat-rate monthly charge of 0.0917 of 1% (1.10% annual rate) on Class I Units. Class D Units and Class M Units do not pay Sponsor fees. No Sponsor fees are charged to Class M Units because investors purchasing Class M Units are subject to asset-based fees on BAC managed accounts in which the Class M Units are held. |
MLPF&S |
|
Sales commissions |
|
Class A Units are subject to sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions paid to MLPF&S up to 0.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are deducted from subscription amounts. Units purchased and reflected in the Fund records are net of any commissions charged by MLPF&S. Class C and Class M Units are not subject to any sales commission. No sales commission is charged to Class M Units because investors purchasing Class M Units are subject to asset-based fees on the BAC managed accounts in which the Class M Units are held. |
|
|
|
|
|
MLIB (or an affiliate); Other counterparties
|
|
Bidask spreads |
|
Bidask spreads are not accounted for separately as an accounting item because bid-ask spreads are an integral part of the price paid or received on all contracts for the purposes of generally accepted accounting principles. |
|
|
|
|
|
MLIB (or an affiliate); Other counterparties |
|
EFP differentials |
|
Certain of the Portfolio Funds currency trades may be executed in the form of exchange of futures for physical transactions, in which a counterparty (which may be MLIB or an affiliate) receives an additional differential spread for exchanging the Funds cash currency positions for equivalent futures positions. |
|
|
|
|
|
Others |
|
Operating expense of Fund including audit, legal and tax services |
|
Actual payments to third parties. |
|
|
|
|
|
MLPF&S; Others
|
|
Brokerage commissions |
|
The aggregate brokerage commissions charges should equal approximately 0.50% per annum of each of the Portfolio Funds average month-end asset. No brokerage commission is charged at the Fund level, although brokerage commissions are charged at the Portfolio Funds level and investors in the Fund will be indirectly subject to their pro rata share of such fees based on the investment of the Fund in such underlying Portfolio Funds. |
|
|
|
|
|
Trading Advisors
|
|
Management fees |
|
A flat monthly charge of 0.1667% of 1% of the Portfolio Funds month-end net assets (a 2.0% annual rate), other than in respect of the Lynx Fund which is charged a 1% annual rate. MLAI also receives a 1.0% per annum management fee from the Lynx Fund. Some of the Trading Advisors have agreed to share a portion of their respective management fees with MLAI, at 25% or 50% sharing rates which vary among the Portfolio Funds, in order to defray costs in connection with and in consideration of BACs providing certain administrative and operational support for the Portfolio Fund. |
Trading Advisors
|
|
Performance fees |
|
Each Portfolio Fund pays an annual performance fee to its Trading Advisor, at 20% or 25% which rate varies among the Portfolio Funds, with respect to the Funds units in the Portfolio Fund. The Portfolio Fund calculates performance fees based on the aggregate performance of all classes subject to the same rate of performance fees (Class Group), rather than on the performance of the Portfolio Fund as a whole or of specific units of a particular class. The performance fee is also paid on net redemptions. The performance fee is based on New Trading Profits. New Trading Profits equal any increase in the net asset value, prior to reduction for any accrued performance fee or Sponsor fees, as of the current performance fee calculation date over the High Water Mark in respect of the Class Group. The High Water Mark equals the highest net asset value after reduction for the performance fee then paid, as of any preceding performance fee calculation date. Net asset value for purposes of calculating the performance fee does not include any interest income earned by the Portfolio Fund. Some of the Trading Advisors have agreed to share 25% of their respective performance fees with MLAI in order to defray costs in connection with and in consideration of BACs providing certain administrative and operation support for the Portfolio Fund. Effective as of January 1, 2014, the performance fee percentage payable by the Transtrend Fund to Transtrend B.V. reduces from 25% to 22.5%. |
Regulation
The CFTC has delegated to the National Futures Association (NFA) responsibility for the registration of commodity trading advisors, commodity pool operators, futures commission merchants, introducing brokers and their respective associated persons, and floor brokers and floor traders. The Commodity Exchange Act (CEA) requires commodity pool operators such as MLAI, certain commodity trading advisors and commodity brokers or FCMs such as MLPF&S to be registered and to comply with various reporting and record keeping requirements. CFTC regulations also require FCMs to maintain a minimum level of net capital. In addition, the CFTC and certain commodities exchanges have established limits referred to as speculative position limits on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges. All accounts owned or managed by the Trading Advisor will be combined for position limit purposes. The Trading Advisor could be required to liquidate positions in order to comply with such limits. Any such liquidation could result in substantial costs to the Fund. In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to reach its daily price limit for several days in a row, making it impossible for the Trading Advisor to liquidate a position and thereby experiencing dramatic losses. Currency forward contracts are not regulated as swaps under the CEA, but are subject to governmental regulation such as mandatory reporting and business conduct standards for swap dealers and major swap participants to the extent otherwise applicable to swaps under the CEA and applicable rules of the CFTC, see Item 1A Risk FactorsF/X Forward Trading and Regulatory Changes Could Restrict the Funds Operations.
Other than in respect of the registration requirements pertaining to the Funds securities under Section 12(g) of the Securities Exchange Act of 1934 (the Securities Exchange Act), the Fund is generally not subject to regulation by the Securities and Exchange Commission (the SEC). However, MLAI is registered as an investment adviser under the Investment Advisers Act of 1940. MLPF&S is also regulated by the SEC and the Financial Industry Regulatory Authority.
(d) Financial Information about Geographic Areas
The Portfolio Funds do not engage in material operations in foreign countries, nor is a material portion of the Funds revenue derived from customers in foreign countries.
The Portfolio Funds may trade on a number of foreign commodity exchanges. The Portfolio Funds and the Fund do not engage in the sales of goods or services.
Item 1A: Risk Factors
Past Performance Not Necessarily Indicative of Future Results
There can be no assurance that the Trading Program will produce profitable results. The past performance of the Fund or Trading Advisor is not necessarily indicative of how the Fund or the Trading Advisor will perform in the future. There can be no assurance that the Fund will achieve its investment objectives or avoid substantial or total loss. The Fund may sustain losses in the future under market conditions in which it achieved gains in the past.
Portfolio Limited to Underlying FuturesAccess Funds
The Fund only will invest in underlying FuturesAccess Funds and in cash. Only trading advisors which are willing to share their advisory fees with MLAI are included in FuturesAccess. Consequently, the universe of underlying FuturesAccess Funds is inherently limited correspondingly limiting the diversification of the Funds portfolio.
Concentration of Underlying Trading Advisors
The Fund is a single-strategy fund of funds that invests exclusively in systematic managed futures trading strategies via FuturesAccess Funds. The concentration of the Funds portfolio may cause its performance to be more volatile than that of a fund implementing a multi-strategy approach.
Systematic trading systems may differ materially from each other, but all of these systems are based on the principle that historical market prices and other technical market data can be used to identify price trends in the market on a systematic basis. The basic similarities of these systems may tend to cause many of them to incur losses at or about the same time.
There are certain market conditions in which most systematic trading systems will incur major losses. This is particularly true in trendless sideways markets and whipsaw markets in which numerous apparent price trends develop and then quickly reverse.
The Trading Advisors generally anticipate that most of the trades indicated by their systems can be expected to be unprofitable and look to generate profits from the occasional major price trends which generate substantial profits. In the absence of these price trends, material losses result.
Even if a Trading Advisor correctly identifies price trends before or as they occur, the Trading Advisor may nevertheless incur material losses if its system is unable to close out a position as a price trend is ending or reversing. Developing a systematic means of taking profits as well as identifying trends has proved to be extremely difficult for otherwise successful systematic trading systems.
No Formal Investment Restrictions or Allocation Limits
In constructing the Funds portfolio, MLAI is not subject to any formal diversification requirements or restrictions, other than the restrictions that only FuturesAccess Funds be included in the portfolio. There are no limitations on the minimum or maximum number of FuturesAccess Funds, or on the absolute or relative percentage of Fund capital, which may be allocated to any underlying FuturesAccess Fund. Certain FuturesAccess Funds selected by MLAI may be allocated substantially larger portions of Fund capital than others. In addition, the relative allocation among the underlying FuturesAccess Funds will vary, perhaps materially, over time due to market appreciation/depreciation and other factors, including MLAs decision to modify any one or more underlying FuturesAccess Funds target allocations and relative weightings.
Due to the limited number of available FuturesAccess Funds, the Fund necessarily allocates a significant percentage of its capital to certain of the FuturesAccess Funds.
Volatile Markets; Highly Leveraged Trading
Trading in the futures and OTC markets typically results in volatile performance. Market price levels fluctuate dramatically and may be materially affected by unpredictable factors such as weather and governmental intervention. The low margin requirements normally required in futures and OTC trading permit an extremely high degree of economic leverage. This combination of leverage and volatility creates a high degree of risk. Additionally, although the Trading Advisors may initiate stop-loss orders on certain positions to limit this risk, there can be no assurance that any stop-loss order will be executed or, even if executed, that it will be executed at the desired price or time.
Importance of General Market Conditions
Neither MLAI nor the Trading Advisors can predict or control overall market or economic conditions. These conditions, however, can be expected to have a material effect on the performance of a Trading Advisors Trading Program.
The Fund may incur major losses in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The risk of loss from pricing distortions is compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which the markets are moving. The financing available to the Fund from its banks, dealers and other counterparties is typically reduced in disrupted markets, which may result in substantial losses to the Fund. Market disruptions may from time to time cause dramatic losses for the Fund and can result in the Trading Advisors strategies performing with unprecedented volatility and risk.
Managed Futures Trading Strategies and Trading Systems
Trend-Following Systems
Many managed futures trading systems are trend-following systems generally anticipate that a majority of their trades will be unprofitable and seek to achieve overall profitability by substantial gains made on a limited number of positions. These strategies are generally only successful in markets in which strong price trends occur. In stagnant markets in which these trends do not occur, or in whipsaw markets in which apparent trends develop but then quickly reverse, trend-following trading systems are likely to incur substantial losses. Furthermore, the profit potential of trend-following systems may be diminished by the changing character of the markets, which may make historical price data, on which technical trading systems are based, only marginally relevant to future market patterns.
Discretionary Strategies
The Trading Advisor may utilize a discretionary, rather than systematic, trading strategy. Discretionary trading advisors may allow emotion to affect trading decisions and may exhibit a lack of discipline in their trading that systematic strategies are designed to avoid. Relying on subjective trading judgment may produce less consistent results than those obtained by more systematic approaches.
Technical Analysis and Trading Systems
The Trading Advisor may employ technical analysis and/or technical trading systems. Technical strategies rely on information intrinsic to the market itself to determine trades, such as prices, price patterns, volume and volatility. These strategies can incur major losses when factors exogenous to the markets themselves, including political events, natural catastrophes, acts of war or terrorism, dominate the markets. The widespread use of technical trading systems frequently results in numerous managers attempting to execute similar trades at or about the same time, altering trading patterns and affecting market liquidity.
Fundamental Analysis
The Trading Advisors strategy may rely on fundamental analysis. Fundamental analysis is premised on the assumption that markets are not perfectly efficient, that informational advantages and mispricings do occur and that econometric analysis can identify trading opportunities. Fundamental analysis may result in substantial losses if these economic factors are not correctly analyzed, not all relevant factors are identified and/or market forces cause mispricings to continue despite the traders having correctly identified mispricings. Fundamental analysis may also be more subject to human error and emotional factors than technical analysis.
Quantitative Trading
The Trading Advisor may engage in quantitative trading. Quantitative trading strategies are highly complex, and, for their successful application, require relatively sophisticated mathematical calculations and relatively complex computer programs. These programs anticipate that many of their trades may be unprofitable, seeking to achieve overall profitability through recognizing major profits on a limited number of positions while cutting losing positions quickly. These trading strategies are dependent upon various computer and telecommunications technologies and upon adequate liquidity in the markets traded. The successful execution of these strategies could be severely compromised by, among other things, a diminution in the liquidity of the markets traded, telecommunications failures, power loss and software-related system crashes. There are also periods when even an otherwise highly successful system incurs major losses due to external factors dominating the market, such as natural catastrophes and political interventions. Due to the high trading volume of quantitative trading strategies, the resulting transaction costs may be significant. In addition, the difference between the expected price of a trade and the price a trade is executed at, or slippage, may be significant and may result in losses.
Importance of Market Judgment
Although the Trading Advisor may use systematic or quantitative valuation models in evaluating the economic components of many prospective trades, the market judgment and discretion of the Trading Advisors personnel are often fundamental to the implementation of the Trading Program. The greater the importance of subjective factors, the more unpredictable a trading strategy becomes. The Trading Advisor may not have the same access to market information as do certain of its competitors, and the market decisions made by the Trading Advisor will, accordingly, often be based on less information and analysis than those available to competing investors.
F/X Forward Trading
The Fund may trade currencies in the F/X markets (F/X Markets), in addition to its trading in the futures markets. Prospective investors must recognize that the Funds OTC currency trading takes place in largely unregulated markets, rather than on futures exchanges, and may, but does not now, take place through retail F/X Markets subject to the jurisdiction of the CFTC or other regulatory bodies. The responsibility for performing under a particular transaction currently rests solely with the counterparties to that transaction, not with any exchange or clearinghouse. As a result, the Fund is exposed to the credit risk of the OTC counterparties with which it trades and deposits collateral, including that of MLIB as the F/X prime broker. See Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Custodians, Brokers and Exchanges, below.
The Fund is also subject to the risk that a forward counterparty may not settle a transaction in accordance with its terms, because the counterparty is unwilling or unable to do so, potentially resulting in significant losses. A counterpartys failure to perform could occur in respect of an offsetting forward contract on which the Fund remains obligated to perform. The Fund will not, however, be excused from performance under any forward contracts
into which it has entered due to defaults under other forward contracts. In addition, counterparties generally have the right to terminate trades under a number of circumstances including, for example, declines in the Funds net assets and certain key person events. Any premature termination of the Funds currency forward trades could result in significant losses for the Fund, because the Fund may be unable to quickly re-establish those trades and may only be able to do so at disadvantageous prices. Forward market counterparties are under no obligation to enter into forward transactions with the Fund, including transactions through which the Fund is attempting to liquidate open positions. In addition, the prices offered for the same forward contract may vary significantly among different forward market participants.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Reform Act) amended the definition of eligible contract participant, and each Portfolio Fund expects to meet the amended definition so long as its total assets exceed $10 million. If a Portfolio Fund does not meet the definition of eligible contract participant, it could lead to the Portfolio Funds bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees. Retail forex markets could also be significantly less liquid than the interbank market. Moreover, the creditworthiness of the counterparties with whom a Portfolio Fund may be required to trade could be significantly weaker than the creditworthiness of MLIB and the currency forward counterparties with which the Portfolio Fund would otherwise engage for its currency forward transactions.
The imposition of credit controls by governmental authorities or the implementation of regulations pursuant to the Reform Act might limit forward trading to less than that which MLAI would otherwise recommend, to the possible detriment of the Fund.
Derivatives Risks Generally
The Trading Advisor uses derivative instruments, primarily futures and OTC F/X forwards, in implementing the Trading Program. The market for many types of these derivative instruments is comparatively illiquid and inefficient, creating the potential for substantial mispricings, as well as sustained deviations between theoretical and market value. In addition, the derivatives market is, in comparison to other markets, a relatively new market, and the events of 2008 and 2009, including the bailout of American International Group, Inc., demonstrated that even the most sophisticated market participants may misunderstand how the market in derivatives will perform during periods of unusual price volatility or instability, market illiquidity, or credit distress. The primary risks associated with the use of derivatives are model risk, market risk and counterparty risk.
The Portfolio Funds trade exchange listed futures contracts. A listed futures contract is a firm commitment to buy or sell a standardized quantity of an underlying asset over a specified duration. The Portfolio Funds buy and sell contracts based on indices of financial assets such as stocks, domestic and global stock indices, as well as contracts on various physical commodities. Prices paid or received on these contracts are determined by the ask or bid provided by the exchanges on which they are traded. Contracts may be settled in physical form or cash settled depending upon the contract. Upon the execution of a trade, margin requirements determine the amount of cash that must be on deposit to secure the transaction. These amounts are considered restricted cash on the Portfolio Funds Statements of Financial Condition. Contracts are priced daily by the Portfolio Funds and the profit or loss based on the daily mark to market are recorded as unrealized profits. When the contract is closed, the Portfolio Funds record a realized profit or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited. The Portfolio Funds also trade futures contracts on the London Metals Exchange (LME). The valuation pricing for LME contracts is based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as supply and demand factors and bid and asks from open outcry sessions.
The Portfolio Funds investments in OTC derivatives are subject to greater risk of counterparty default and less liquidity than exchange-traded derivatives, although exchange-traded derivatives are subject to risk of failure of the exchange on which they are traded and the clearinghouse through which they are guaranteed. Counterparty risk includes not only the risk of default and failure to pay mark-to-market amounts and return risk premium, if any, but also the risk that the market value of OTC derivatives will fall if the creditworthiness of the counterparties to those derivatives weakens.
In addition, there are increased risks associated with offshore OTC trading, including the risk that assets held by offshore brokers and unregulated trading counterparties may not benefit from the protection afforded to customer funds deposited with regulated FCMs or broker-dealers.
The prices of derivative instruments can be highly volatile. Price movements of derivative instruments are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. In addition, governments from time to time intervene, directly and by regulation, in certain markets. This intervention often is intended directly to influence prices and may, together with other factors, cause all of such markets to move rapidly in the same direction because of, among other things, interest rate fluctuations.
There was substantial disruption in the derivatives markets related to the bankruptcies of Lehman Brothers Holdings, Inc. and MF Global Inc. and uncertainty relating to the government bailout of American International Group, Inc. This disruption and uncertainty can cause substantial losses if transactions are prematurely terminated, especially due to default when payment may be delayed or completely lost. Uncertainties in the derivatives markets continue due to proposed regulatory initiatives, new regulations requiring OTC derivatives clearing, and allegations of inappropriate behavior by market participants to cause or avoid payments under credit default swaps. See Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Custodians, Brokers and Exchanges in this section below.
Trading in Options
The Trading Advisor may trade options on futures contracts or options on F/X forward contracts. Although successful options trading requires many of the same skills as successful futures and forward trading, the risks involved are different. For example, the assessment of near-term market volatility, which is directly reflected in the price of outstanding options, can be of much greater significance in trading options than it is in many long-term futures strategies. The use of options can be extremely expensive if market volatility is incorrectly predicted. A purchaser of options is exposed to the risk of loss of the entire premium paid; a seller, or writer, of call options is exposed to the risk of theoretically unlimited loss, and the seller of put options is exposed to the risk of substantial loss far in excess of the premium received.
Exchange of Futures for Physicals
The Trading Advisor may engage in exchange of futures for physical (EFP) transactions on behalf of the Fund. As is the case with executing a transaction purely on an exchange or purely in the OTC market, EFP transactions, which are done partially on a futures exchange and partially in the OTC market, involve higher transaction costs.
Physical Commodities Trading in General
The Trading Advisor may engage in transactions that involve taking delivery of physical commodity assets such as agricultural commodities, freight, coal, oil, gas and electric power. These investments are subject to risks that are not typically directly applicable to other financial instruments, such as: destruction; loss; industry-specific regulation, such as pollution control regulation; operating failures; and work stoppages.
Physical commodities trading, as opposed to commodity futures trading, is substantially unregulated, and if the Fund engages in this type of trading, it will not be assured the same access to these markets as it might have in a regulated context.
Exchange Rate Risks; Currency Hedging
The Fund may invest and trade in currencies for speculative and/or hedging purposes. In addition, the Units are denominated, and the Fund values its assets in U.S. dollars and the Fund may trade and invest in assets denominated in non-U.S. currencies.
Currency-related investments are subject to the risk that the value of a particular currency will change
in relation to the U.S. dollar, and the exchange rates of currencies may be highly volatile. Among the factors that may affect currency values are direct government intervention, which is often intended specifically to change currency values, trade balances, the level of short-term interest rates, differences in the relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments.
While the Trading Advisor may from time-to-time hedge a certain amount of risks associated with currency trading, it is under no obligation to do so. Even if it chooses to do so, it is not economically feasible and often simply not possible to fully or effectively hedge exchange-rate risks. In a number of cases, otherwise highly successful investment funds have incurred significant, and in certain instances total, losses due to the decline in the value of the currencies in which their investments were denominated or in which they were invested for speculative purposes.
Off-Balance Sheet Risk
The Fund may invest in financial instruments with off-balance sheet risk. These instruments include futures and forward contracts, swaps and options contracts sold short. In entering into these contracts, there exists a market risk that the contracts may be significantly influenced by conditions, such as interest rate volatility, resulting in the contracts becoming less valuable. An off-balance sheet risk is associated with a financial instrument if it exposes the investor to a loss in excess of the investors recognized asset carrying value in the financial instrument, if any, or if the ultimate liability associated with the financial instrument has the potential to exceed the amount that the investor recognizes as a liability in the investors statement of assets and liabilities.
Recently it was alleged that certain interest rate benchmarks that underlie various swap agreements had been manipulated for several years and multiple banks involved in setting such benchmarks are currently under investigation for this manipulation. Certain of these banks have been fined by, or entered into civil or criminal settlements with, various international regulators, involving the U.S. Department of Justice, CFTC, and U.K. Financial Conduct Authority. In entering into swap agreements, the Fund relies on the integrity of interest rates and other benchmarks. If the level of these benchmarks is artificially influenced by market participants, the Fund could suffer losses.
Increased Assets Under Management
There appears to be a tendency for the rates of return achieved by managed futures advisors to decline as assets under management increase. The Trading Advisor has not agreed to limit the amount of additional equity which it may manage and may be at or near its all-time high in assets under management.
The aggregate capital committed to the managed futures sector in general is also at an all-time high. The more capital that is traded in these markets, or that is committed to any one particular strategy, the greater the competition for a finite number of positions and the less the profit potential for all strategies or for any particular strategy.
Dependence on Key Individuals
The success of the Fund is significantly dependent upon the expertise of one or more of the Trading Advisors principals. The loss of any one of these principals services may have a substantial impact on the performance of the Fund and may result in liquidation of the Fund which, if made at an inopportune time, may result in losses for the Fund.
Trading Advisor Risk
The Fund is subject to the risk of the bad judgment, negligence or misconduct of one or more of the Trading Advisors. There have been a number of instances in recent years in which private investment funds have incurred substantial losses due to manager misconduct.
Redemptions by Other Trading Advisor Fund Investors
Investors in other funds or accounts implementing the Trading Program or similar strategies may be
able to redeem their investments more frequently or on less prior notice than Investors in the Fund. Redemptions by investors in these funds or withdrawals from accounts that have less restrictive redemption terms could have a material adverse impact on the Funds portfolio and could disadvantage investors in certain circumstances.
Trade Execution Risk
The Trading Advisor may use executing brokers unaffiliated with BAC. In the event of a trading error, the Fund may have no effective remedy against these executing brokers.
Changes in Trading Program
The Trading Advisor may make material changes to the Trading Program without the knowledge of MLAI. It is virtually impossible for MLAI to detect these changes, particularly given the confidential, proprietary, systematic and/or quantitative nature of the Trading Program strategies, customarily referred to as black box strategies.
Illiquid Markets
Certain positions held by the Portfolio Funds may become illiquid, preventing a Trading Advisor from acquiring positions otherwise indicated by its Trading Program or making it impossible for the Trading Advisor to close out positions against which the market is moving.
Most U.S. futures exchanges limit fluctuations in some futures contract prices during a single day by regulations referred to as daily price limits. During a single trading day no trades may be executed in these contracts at prices beyond the daily price limit. Once the price of a futures contract has increased or decreased to the limit point, positions can be neither taken nor liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses. Also, the CFTC or exchanges may suspend or limit trading. Trading on non-U.S. exchanges may also be subject to price fluctuation limits and subject to periods of significant illiquidity. Trading in the F/X Markets and other OTC markets is not subject to daily limits, although OTC trading is also subject to periods of significant illiquidity.
Possible Effects of Speculative Position Limits
The CFTC and U.S. commodities exchanges have established limits referred to as speculative position limits on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options on futures contracts traded on U.S. commodities exchanges. All proprietary or client accounts owned or managed by the Trading Advisor are combined for purposes of calculating position limits. The Trading Advisor could be required to liquidate positions held for the Fund, or may not be able to fully implement the Trading Program, in order to comply with such limits, even though the positions attributable to the Fund do not themselves trigger the position limits or are a small portion of the aggregate positions directed by the Trading Advisor. Position limits could force the Fund to liquidate profitable positions, result in a tracking error between the Funds portfolio and the Trading Advisors standard Trading Program and cause the Fund to incur substantial transaction costs.
In October 2011, the CFTC adopted rules that, among other things, established a separate position limits regime for 28 so-called exempt, i.e., metals and energy, and agricultural futures and options contracts and their economically equivalent swap contracts. Position limits in spot months were generally set at 25% of the official estimated deliverable supply of the underlying commodity while position limits related to non-spot months were generally set at 10% of open interest in the first 25,000 contracts and 2.5% of the open interest thereafter. On September 28, 2012, the United States District Court for the District of Columbia issued an opinion that vacated these rules. In November 2013, the CFTC proposed a new set of speculative position rules which are not yet finalized (or effective).
In addition, the Reform Act significantly expands the CFTCs authority to impose position limits with
respect to futures contracts, options on futures contracts, swaps that are economically equivalent to futures or options on futures, swaps that are traded on a regulated exchange and certain swaps that perform a significant price discovery function.
MLAI is subject to CFTC-imposed position limits through its control of the Fund, and will have to aggregate positions of certain FuturesAccess Funds in determining whether the position limits are reached. The rules proposed by the CFTC in November 2013, if implemented in substance, in addition to expanding the contracts subject to CFTC-imposed position limits, narrow certain exemptions from the aggregation requirements, making it more likely that a party such as the Fund hiring multiple trading advisors may be required to aggregate the positions controlled by the various trading advisors. Although MLAI may claim exemption from the aggregation requirements for the majority of FuturesAccess Funds, the aggregation of positions of certain FuturesAccess Funds may be required. If the aggregation is required in the Funds case, the Trading Advisor may not be able to implement the Trading Program for the Fund in the same manner as for its other clients, causing the Fund to underperform other accounts utilizing the Trading Program, or the Fund may have to liquidate trading positions when the Trading Advisor would otherwise not advise doing so, resulting in losses to the Fund.
Any of the regulations discussed above could adversely affect the Fund in certain circumstances.
Trading on Non-U.S. Exchanges
The Trading Advisors may trade on futures exchanges outside the United States on behalf of the Fund. Trading on non-U.S. exchanges is not regulated by any U.S. government agency and may involve certain risks not applicable to trading on U.S. exchanges.
For example, some non-U.S. exchanges, in contrast to U.S. exchanges, are principals markets similar to the forward markets in which performance is the responsibility only of the individual member with whom the Fund has entered into a futures contract and not of any exchange or clearing corporation. In these cases, the Fund will be subject to the risk of the inability or refusal to perform with respect the individual member with whom the Fund has entered into a futures contract.
Trading on non-U.S. exchanges may involve the additional risks of expropriation, burdensome or confiscatory taxation (including taxes on specific trading activities), moratoriums, exchange or investment controls and political or diplomatic disruptions, each of which might materially adversely affect the Funds trading activities. The Fund could incur substantial losses trading on non-U.S. exchanges to which it would not have been subject had the Trading Advisors limited their trading to U.S. markets.
The U.S. tax treatment of non-U.S. futures trading may be adverse compared to the tax treatment of U.S. futures trading. The profits and losses derived from trading non-U.S. futures and options will generally be denominated in non-U.S. currencies. Consequently, the Fund will be subject to exchange-rate risk in trading those contracts.
Foreign Exchange Controls
Governments in non-U.S. markets may impose F/X controls at will, making it impossible to convert local currency into other currencies. Should the Fund trade on futures exchanges outside the United States or otherwise invest in non-U.S. markets, these controls may effectively prevent Fund capital from being removed from a country where its futures contracts and other investments are traded. In addition, certain countries do not have fully convertible currencies as a matter of policy, adding cost or delay to the trading of currency investments by the Fund. The imposition of currency controls by a non-U.S. government may negatively affect performance and liquidity in the Fund as capital becomes trapped in that country.
Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Custodians, Brokers and Exchanges
The Fund is exposed to the risk that the bankruptcy or insolvency of its trading counterparties and other entities holding Fund assets such as broker-dealers, FCMs, futures exchanges, clearinghouses, banks or other financial
institutions, particularly MLPF&S, MLIB and their affiliates could result in all or a substantial portion of the Funds assets being lost permanently or impounded for a matter of years pending the final disposition of legal proceedings. A bankruptcy or insolvency of this kind, or the threat of one, may cause MLAI to decide to liquidate the Fund or suspend, limit or otherwise alter trading, perhaps causing the Fund to miss significant profit opportunities.
MLAI has historically preferred BAC affiliates in clearing and prime brokerage relationships, and as a result has maintained the vast majority of its cash in futures brokerage accounts with its affiliates. This policy exposes the Fund to the specific credit risk of these BAC affiliates because balances in these accounts are not subject to FDIC or other form of deposit insurance against loss from failure of the BAC affiliate. Balances maintained with clearing brokers are, however, subject to the protections for customer segregated, cleared swaps customer accounts and secured accounts discussed below.
MLAIs policy that the Trading Advisor use MLPF&S and MLIB may increase the risks of insolvency described above by preventing the diversification of brokers and counterparties used by the Fund.
MLAI may have limited control over the selection of counterparties by the Fund. The Fund also may not be restricted from dealing with any particular counterparty, regulated or unregulated, or from concentrating any or all of its transactions with a single counterparty or limited number of counterparties or from initially transacting, clearing or brokering with a non-BAC broker and from giving up those trades to MLPF&S or the MLIB. In addition, to the extent assets are held at entities other than MLPF&S and the MLIB, MLAI may have limited ability to assess the extent to which the Trading Advisor maintains the Funds assets in unregulated accounts subject to the bankruptcy of the counterparties holding such assets.
The following paragraphs discuss the various uses of the Funds assets and the risks of loss in addition to losses from trading associated with each use.
Margin for Commodities Trading. Although MLAI believes that MLPF&S is appropriately capitalized to function as the Funds FCM, cash posted as margin for commodities trading with MLPF&S is nevertheless subject to the risk of insolvency of MLPF&S. The Fund maintains cash deposits with MLPF&S in segregated accounts, which are required by CFTC regulations to be separate from its proprietary assets for futures and options trading on U.S. exchanges. Funds held in segregated accounts are intended to be readily identifiable as customer funds in the event of MLPF&Ss bankruptcy and are expected to be reserved for distribution to customers of MLPF&S. If MLPF&S did not comply with the segregation requirement, however, the assets of the Fund might not be fully protected. Even given proper segregation, the Fund may be subject to a risk of loss of its funds because, although CFTC regulations require that FCMs invest customer funds only in certain types of interest bearing financial instruments, these instruments are still subject to credit and market risk. As a result, if the instruments in which customer segregated funds are invested lose value, there would be a shortfall in customer segregated funds held by MLPF&S in the event of MLPF&Ss insolvency.
In addition, there may be a shortfall in customer segregated funds held by MLPF&S in the event of a substantial default by one or more of MLPF&Ss other customers. If MLPF&S becomes insolvent, only a pro rata share of all property available for distribution to all of MLPF&Ss customers would be recovered, whether or not another customer also defaults and even if this property is held in segregated accounts.
In addition, if BAC directly or indirectly owns 10% or more of the Fund, which would typically result from BACs providing seed capital to the Fund to help ensure that the Fund has enough capital to commence trading activities, the Funds account at MLPF&S would be considered a proprietary account under CFTC regulations and the Funds assets, including assets used to margin U.S. exchange-traded futures and options, would not be protected as customer funds. If MLPF&S became insolvent at a time when the Funds assets on deposit with MLPF&S were not considered customer funds, the Fund would likely lose significantly more as a result of the bankruptcy than would otherwise be the case. Where BAC provides seed capital it also establishes a regular redemption schedule providing for withdrawal of the capital when the Fund capitalization reaches a certain level. Once BACs ownership of a FuturesAccess Fund falls below 10%, the account of the FuturesAccess Fund will be considered a customer account rather than a proprietary account.
MLPF&S is required by CFTC regulations to maintain in a secured account the amount required to
margin futures and options positions established on non-U.S. futures exchanges in order to protect customer funds in the event of MLPF&Ss bankruptcy. While the secured account requirement relating to trading non-U.S. futures exchanges is similar in some respects to the segregation requirement relating to trading on U.S. futures exchanges, they are not identical and there are special risks associated with funds maintained in a secured account. Funds held in a secured account may be commingled with funds of non-U.S. persons and, because they are by necessity held in a non-U.S. jurisdiction, are subject to different insolvency laws and customer protection regulations, which may be less favorable than U.S. laws and regulations. Moreover, funds transferred from a secured account to a non-U.S. FCM, exchange or clearing agency to margin trading on non-U.S. futures exchanges are not subject to the same limitations on permissible investments as funds held by U.S. FCMs. In addition to these special risks, funds held in a secured account are subject to risks comparable to those applicable to funds in a segregated account, namely that MLPF&S will not comply with the relevant regulations, that investments in the account will decline in value, of a shortfall in the event of the default by another customer, and that, if, BAC owns 10% or more of the Fund, the Funds assets will not be protected as customer funds.
If the Fund deposits assets with a particular entity and those assets are not held in segregation or in a secured account as customer funds for any of the reasons discussed above, in the event of the entitys insolvency the Fund could be a general creditor of the entity even with regard to property specifically traceable to the Funds account. As a result, the Funds claim would be paid along with the claims of other general creditors and the Fund would be subject to the loss of its entire deposit with the party.
To the extent the Fund enters into cleared swap transactions, the Fund will deposit collateral with MLPF&S in cleared swaps customer accounts, which are required by CFTC regulations to be separate from its proprietary collateral posted for cleared swaps transactions. Cleared swap customer collateral is subject to regulations that closely parallel the regulations governing customer segregated funds but provide certain additional protections to cleared swaps collateral in the event of an FCM or FCM customer default. For example, in the event of a default of both the FCM and a customer of the FCM, a clearing house is only permitted to access the cleared swaps collateral in the legally separate (but operationally comingled) account of the defaulting cleared swap customer of the FCM, as opposed to the treatment of customer segregated funds, under which the clearing house may access all of the commingled customer segregated funds of a defaulting FCM.
Collateral for OTC Transactions. Cash pledged as collateral with MLIB or any other OTC prime broker for OTC trades is subject to the risk of the insolvency of the prime broker. Unlike cash posted as margin for commodities trading on regulated exchanges is not required to be segregated or held in a secured account.
Bank Deposits. The vast majority of the cash deposited with banks would be in excess of the limits on federal insurance for deposits, and thus not insured by the FDIC, and would be subject to the risk of bank failure. Only up to $250,000 held in non-interest bearing demand deposit accounts will be insured under the FDICs general deposit insurance rules.
Cash in Securities Brokerage Accounts. Cash in securities brokerage accounts with MLPF&S is subject to the risk of insolvency of MLPF&S. While brokers are required to keep customer cash in a special reserve account for the benefit of customers, it is possible that a shortfall could exist in this account, in which case the Fund, along with other customers, would suffer losses. The Securities Investor Protection Corporation provides protection against these losses, up to a limit, but the cash deposited by the Fund in a securities brokerage account would far exceed the limit.
Direct Investments. Fund investments in U.S. government securities are backed by the full faith and credit of the U.S. government. To the extent the Fund makes investments in non-government securities it would be subject to a risk of loss that depended on the type of security.
Recent events underscore the risks described above. Significant losses incurred by many investment funds in relation to the bankruptcy and/or administration of Lehman Brothers Holdings Inc. and its affiliates illustrate the risks incurred in both derivatives trading and custody/brokerage arrangements. The bankruptcy liquidation of MF Global Inc. also demonstrates that even customer funds subject to segregation requirements may be difficult for an FCM to locate, and customer funds held by an FCM in bankruptcy may not be distributed promptly and may be subject to a
lengthy claims process.
Insolvency of Dual-Registered Entities
MLPF&S is registered as both an FCM with the CFTC and as a broker-dealer with the SEC. Other counterparties and entities holding Fund assets may also be entities registered with both the SEC and the CFTC. In the event of an insolvency of a dual-registered entity, the distribution of CFTC regulated customer funds would be governed by the CFTCs bankruptcy rules and Chapter 7 of the U.S. Bankruptcy Code, while the distribution of SEC regulated customer funds would be governed by the Securities Investor Protection Act of 1970 and applicable provisions of the U.S. Bankruptcy Code. Uncertainty exists regarding the application of the two separate insolvency regimes to the insolvency of a single entity.
Risk of Loss Due to Trading Errors and the Failure of Trading Systems
The Fund is subject to the risk of failures or inaccuracies in the trading systems of the Trading Advisors. Trades for the Portfolio Funds may be placed or executed in error due to technical errors such as coding or programming errors in software, hardware problems and inaccurate pricing information provided by third parties or execution errors such as keystroke, typographic or inadvertent drafting errors. Many exchanges have adopted obvious error rules that prevent the entry and execution of trades more than a specified amount away from the current best price on the exchange. However, these rules may not be in place on the exchanges on which the Trading Advisors trade on behalf of the Fund and may not be enforced even if in effect. These rules likely would not prevent the entry and execution of a trade entered close to the market price but at the wrong size.
The Fund is subject to the risk of the unavailability or failure of the computer systems of the exchanges on which the Trading Advisors trade. Any such errors or failures could subject the Fund to substantial losses.
Government Intervention; Market Disruptions
The global financial markets have in the past several years experienced pervasive and fundamental disruptions that have led to extensive and unprecedented governmental intervention. Government intervention has in certain cases been implemented on an emergency basis, suddenly and substantially eliminating market participants ability, at least on a temporary basis, to continue to implement certain strategies or manage the risk of their outstanding positions. In addition, as one would expect given the complexities of the financial markets and the limited time frame within which governments have taken action, these interventions typically have been difficult to interpret and unclear in scope and application, resulting in confusion and uncertainty. This confusion and uncertainty in itself has been materially detrimental to the efficient functioning of the markets as well as previously successful investment strategies.
The Fund may incur substantial losses in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted, the availability of credit is restricted or the ability to trade or invest capital, including exiting existing positions, is otherwise impaired. The risk of loss from pricing distortions is compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which the markets are moving. The financing available to private investment funds such as the Fund from banks, dealers and other counterparties is typically reduced in disrupted markets. Any reduction may result in substantial losses to the Fund. Market disruptions may from time to time cause dramatic losses for the Fund and these events can result in otherwise historically low-risk strategies performing with unprecedented volatility and risk.
Regulatory Changes Could Restrict the Funds Operations
The Fund implements speculative, highly leveraged strategies. From time to time there is governmental scrutiny of these types of strategies and political pressure to regulate their activities. The CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures, swaps, forward and options transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, as described
in further detail above under Possible Effects of Speculative Position Limits, the U.S. Congress and the CFTC have expressed the concern that speculative traders, and commodity funds in particular, may be responsible for unwarranted and dramatic swings in the prices of commodities and the CFTC enacted position limits designed to address such speculative trading. Non-U.S. governments have from time to time blamed the declines of their currencies on speculative currency trading and imposed restrictions on speculative trading in certain markets.
Regulatory changes could adversely affect the Fund by restricting the markets in which it trades, otherwise limiting its trading and/or increasing the taxes to which Investors are subject. Adverse regulatory initiatives could develop suddenly and without notice.
The Reform Act includes provisions that substantially increase the regulation of the OTC derivatives markets. Regulations implementing the Reform Act may require that a substantial portion of derivatives currently traded over the counter be executed in regulated markets and/or submitted for clearing to regulated clearinghouses. Those OTC derivatives may include OTC F/X forwards and swaps which may be traded by the Fund.
Although the U.S. Treasury has the discretion to exclude F/X forwards and swaps from certain of the new regulatory requirements, it has done so to date only in limited circumstances. Forwards and swaps that are not so excluded may be required by the Reform Act to be centrally cleared or traded on a regulated market. The Reform Act may also require other OTC derivatives traded by the Fund, if any, to be centrally cleared or traded on a regulated market. This may subject the Fund, the Trading Advisor, MLAI and/or the Funds counterparties to additional regulatory requirements including minimum initial and variation margin requirements, minimum capital requirements, registration with the SEC and/or the CFTC, new business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest and other regulatory burdens. Certain of these requirements apply to currency forwards and swaps even if they are excluded by the U.S. Treasury. Certain of these regulatory requirements could affect the Fund, the Trading Advisor, or MLAI directly, while others could impact the Fund, the Trading Advisor or MLAI indirectly due to the impact of the requirements on the Funds counterparties. These new regulatory burdens would further increase the counterparties costs, which are expected to be passed through to other market participants such as the Fund in the form of higher fees and less favorable dealer marks. They may also render certain strategies in which the Trading Advisor might otherwise engage impossible, or so costly that they will no longer be economical, to implement.
Although the Reform Act will require many OTC derivative transactions previously entered into on a principal-to-principal basis to be submitted for clearing by a regulated clearinghouse, some of the derivatives that may be traded by the Fund may not be centrally cleared. The risk of counterparty non-performance can be significant in the case of these OTC instruments, and bid-ask spreads may be unusually wide in these heretofore substantially unregulated markets. While the Reform Act is intended in part to reduce these risks, its success in this respect may not be evident for some time after the Reform Act is fully implemented, a process that may take several years. In addition, while the Reform Acts requirement that certain swaps be traded on a regulated market is intended to improve transparency in the market for these swaps, and may for more liquid swaps decrease trading costs, it may actually increase trading costs for less liquid swaps.
Certain steps are underway to regulate derivative transactions in the European Union (E.U.). On August 16, 2012, the E.U. Market Infrastructure Regulation on OTC derivatives, central counterparties and trade repositories (EMIR) became effective. EMIR will largely be implemented through secondary or Level 2 measures, and it is uncertain when these measures will take effect given that they are still being negotiated. However, it is likely that some aspects of EMIR, such as the obligation to timely confirm uncleared OTC derivatives transactions, will become effective some time in 2013. EMIR introduces certain requirements in respect of OTC derivative contracts, which will apply primarily to financial counterparties such as E.U.-authorized investment firms, credit institutions, insurance companies, UCITS and alternative investment funds managed by E.U. authorized alternative investment fund managers, and non-financial counterparties exceeding a certain threshold. Certain obligations under EMIR will also apply to non-E.U. counterparties, such as the Fund, where the counterparties contracts would be subject to EMIR if they were established in the E.U. and where their contract has a direct, substantial and foreseeable effect within the E.U., or where the obligation is necessary to prevent evasion of EMIR. In particular, EMIR imposes a general obligation to clear OTC derivative contracts through a duly authorized central counterparty (CCP) where those contracts belong to a class of derivatives which has been declared subject to the clearing obligation. Under EMIR, a CCP will be used to meet the
clearing obligations by interposing itself between the counterparties to the eligible derivative contracts. CCPs will connect with some derivative counterparties through their clearing members; other counterparties may clear via indirect clearing arrangements. Each derivative counterparty will be required to post both initial and variation margin to the clearing member, which in turn will be required to post margin to the CCP, or to the clearing members client in an indirect arrangement. EMIR requires CCPs to accept only highly liquid collateral with minimal credit and market risk. In relation to OTC derivatives which are not subject to the clearing obligation, counterparties which are subject to EMIR will have to ensure that appropriate procedures and arrangements are in place to measure, monitor and mitigate operational and credit risk. For example, counterparties will have to confirm contracts in a timely fashion, set up reconciliation, dispute resolution and compression procedures, exchange collateral and mark contracts to market or model on a daily basis. In addition, all counterparties and CCPs will be required to report their transactions in derivatives to a registered or recognized trade repository or, where no trade repository has been authorized in connection with a particular class of derivatives, to the European Securities and Markets Authority (ESMA).
Certain Level 2 measures that will provide more detailed rules that give effect to EMIR have not yet been finalized. In addition, ESMA has not yet identified and approved the list of derivatives subject to the clearing obligation. The E.U. regulatory framework relating to derivatives is established not only by EMIR but also by the proposals to recast the existing Markets in Financial Instruments Directive (MiFID II) which have not been finalized. In particular, MiFID II is expected to require transactions in derivatives to be traded on a regulated market and centrally cleared. In this respect, it is difficult to predict the full impact of these regulatory developments on the Fund. Prospective investors should be aware that the regulatory changes arising from EMIR and MiFID II may significantly raise the costs of entering into derivative contracts and may adversely affect the Funds ability to engage in transactions in derivatives.
Banking Regulation
BAC is subject to certain U.S. banking laws, including the Bank Holding Company Act of 1956 (BHCA) and to regulation by the Board of Governors of the Federal Reserve System. If BAC directly, or indirectly through its subsidiaries, makes capital contributions to the Fund in an aggregate amount such that BAC may be deemed to control the Fund for purposes of the BHCA, or if BAC is otherwise deemed to control the Fund for purposes of the BHCA, the Fund may be subject to certain investment and other limitations.
In addition to the changes in the regulation of U.S. markets described above, it is impossible to predict what additional interim or permanent governmental regulations, restrictions or limitations may be imposed, whether in the U.S. or non-U.S. markets, on, for example: (x) the markets in which the Fund invests and the strategies of the Fund; and (y) BAC. Such measures could have a material and adverse effect on the Fund, including expenses that result from increased compliance requirements.
Concerns Regarding the Downgrade of the U.S. Credit Rating and the Sovereign Debt Crisis in Europe
On August 5, 2011, Standard & Poors lowered its long term sovereign credit rating on the United States of America from AAA to AA+. This downgrade or future downgrades by Standard & Poors or other credit rating agencies could have material adverse effect on financial markets and economic conditions in the United States and throughout the world and, in turn, the markets anticipation of these impacts could have a material adverse effect on the investments made by the Fund and thereby the Funds financial condition and liquidity. The ultimate impact on global markets and the Funds business is unpredictable
Global markets and economic conditions have been negatively affected by the ability of E.U. member states to service their sovereign debt obligations. The continued uncertainty over the outcome of the E.U.s financial support programs and financial troubles could have an adverse effect on the Fund.
Item 1B: Unresolved Staff Comments
Not applicable.
Item 2: Properties
The Fund and the Portfolio Funds do not use any physical properties in the conduct of their business.
The Funds offices are the administrative offices of MLAI (Merrill Lynch Alternative Investments LLC, Four World Financial Center, 11th Floor, 250 Vesey Street, New York, New York 10080). MLAI performs administrative services for the Fund from MLAIs offices.
Item 3: Legal Proceedings
None
Item 4: Mine Safety Disclosures
Not applicable.
PART II
Item 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5(a)
(a) Market Information:
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. The Net Asset Value of redeemed Units is determined as of the Redemption Date. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
(b) Holders:
As of December 31, 2013, there were 4,903 holders of Units, none of whom owned 5% or more of the Funds Units.
(c) Dividends:
MLAI has not made and does not contemplate making any distributions on the Units.
(d) Securities Authorized for Issuance Under Equity Compensation Plans:
Not applicable.
(e) Performance Graph
Not applicable.
(f) Recent Sales of Unregistered Securities:
Units are privately offered and sold to accredited investors (as defined in Rule 501(a) under the Securities Act) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 thereunder. The selling agent of the Units was MLPF&S.
CLASS A
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
186,225 |
|
174,221 |
|
$ |
1.0689 |
|
1/16/2013 |
|
97,500 |
|
90,909 |
|
1.0725 |
| ||
2/01/2013 |
|
68,250 |
|
62,420 |
|
1.0934 |
| ||
2/16/2013 |
|
97,500 |
|
88,516 |
|
1.1015 |
| ||
3/01/2013 |
|
195,000 |
|
181,750 |
|
1.0729 |
| ||
3/16/2013 |
|
67,275 |
|
61,450 |
|
1.0948 |
| ||
4/01/2013 |
|
|
|
|
|
1.0917 |
| ||
4/16/2013 |
|
48,750 |
|
44,146 |
|
1.1043 |
| ||
5/01/2013 |
|
92,625 |
|
82,730 |
|
1.1196 |
| ||
5/16/2013 |
|
183,300 |
|
163,969 |
|
1.1179 |
| ||
6/01/2013 |
|
176,475 |
|
163,782 |
|
1.0775 |
| ||
6/16/2013 |
|
85,800 |
|
82,675 |
|
1.0378 |
| ||
7/01/2013 |
|
176,475 |
|
169,329 |
|
1.0422 |
| ||
7/16/2013 |
|
13,650 |
|
13,060 |
|
1.0452 |
| ||
8/01/2013 |
|
36,075 |
|
35,065 |
|
1.0288 |
| ||
8/16/2013 |
|
|
|
|
|
1.0193 |
| ||
9/01/2013 |
|
|
|
|
|
1.0013 |
| ||
9/16/2013 |
|
|
|
|
|
1.0223 |
| ||
10/01/2013 |
|
48,750 |
|
49,074 |
|
0.9928 |
| ||
10/16/2013 |
|
39,000 |
|
39,311 |
|
0.9921 |
| ||
11/01/2013 |
|
58,500 |
|
57,915 |
|
1.0101 |
| ||
11/16/2013 |
|
73,125 |
|
72,401 |
|
1.0100 |
| ||
12/01/2013 |
|
17,861 |
|
17,309 |
|
1.0319 |
| ||
12/16/2013 |
|
|
|
|
|
0.9953 |
| ||
01/01/2014 |
|
|
|
|
|
1.0369 |
| ||
01/16/2014 |
|
|
|
|
|
1.0154 |
| ||
02/01/2014 |
|
|
|
|
|
0.9920 |
| ||
CLASS C
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
383,000 |
|
362,896 |
|
$ |
1.0554 |
|
1/16/2013 |
|
104,000 |
|
98,252 |
|
1.0585 |
| ||
2/01/2013 |
|
1,181,000 |
|
1,094,938 |
|
1.0786 |
| ||
2/16/2013 |
|
768,000 |
|
707,052 |
|
1.0862 |
| ||
3/01/2013 |
|
406,000 |
|
383,888 |
|
1.0576 |
| ||
3/16/2013 |
|
392,999 |
|
364,327 |
|
1.0787 |
| ||
4/01/2013 |
|
226,000 |
|
210,193 |
|
1.0752 |
| ||
4/16/2013 |
|
640,000 |
|
588,723 |
|
1.0871 |
| ||
5/01/2013 |
|
715,000 |
|
648,997 |
|
1.1017 |
| ||
5/16/2013 |
|
247,000 |
|
224,627 |
|
1.0996 |
| ||
6/01/2013 |
|
241,000 |
|
227,487 |
|
1.0594 |
| ||
6/16/2013 |
|
223,000 |
|
218,649 |
|
1.0199 |
| ||
7/01/2013 |
|
605,000 |
|
590,878 |
|
1.0239 |
| ||
7/16/2013 |
|
180,000 |
|
175,370 |
|
1.0264 |
| ||
8/01/2013 |
|
422,000 |
|
417,905 |
|
1.0098 |
| ||
8/16/2013 |
|
298,000 |
|
297,970 |
|
1.0001 |
| ||
9/01/2013 |
|
204,000 |
|
207,739 |
|
0.9820 |
| ||
9/16/2013 |
|
106,000 |
|
105,757 |
|
1.0023 |
| ||
10/01/2013 |
|
341,000 |
|
350,282 |
|
0.9729 |
| ||
10/16/2013 |
|
227,000 |
|
233,587 |
|
0.9718 |
| ||
11/01/2013 |
|
352,000 |
|
355,915 |
|
0.9890 |
| ||
11/16/2013 |
|
406,000 |
|
410,723 |
|
0.9885 |
| ||
12/01/2013 |
|
146,000 |
|
144,626 |
|
1.0095 |
| ||
12/16/2013 |
|
119,000 |
|
122,264 |
|
0.9733 |
| ||
01/01/2014 |
|
157,000 |
|
154,909 |
|
1.0135 |
| ||
01/16/2014 |
|
182,000 |
|
183,449 |
|
0.9921 |
| ||
02/01/2014 |
|
440,000 |
|
454,123 |
|
0.9689 |
| ||
CLASS D
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
|
|
|
|
$ |
1.3008 |
|
1/16/2013 |
|
|
|
|
|
1.3060 |
| ||
2/01/2013 |
|
|
|
|
|
1.3322 |
| ||
2/16/2013 |
|
|
|
|
|
1.3430 |
| ||
3/01/2013 |
|
|
|
|
|
1.3090 |
| ||
3/16/2013 |
|
|
|
|
|
1.3365 |
| ||
4/01/2013 |
|
|
|
|
|
1.3336 |
| ||
4/16/2013 |
|
|
|
|
|
1.3498 |
| ||
5/01/2013 |
|
|
|
|
|
1.3693 |
| ||
5/16/2013 |
|
|
|
|
|
1.3681 |
| ||
6/01/2013 |
|
|
|
|
|
1.3194 |
| ||
6/16/2013 |
|
|
|
|
|
1.2716 |
| ||
7/01/2013 |
|
|
|
|
|
1.2779 |
| ||
7/16/2013 |
|
|
|
|
|
1.2823 |
| ||
8/01/2013 |
|
1,106,000 |
|
875,693 |
|
1.2630 |
| ||
8/16/2013 |
|
|
|
|
|
1.2521 |
| ||
9/01/2013 |
|
|
|
|
|
1.2308 |
| ||
9/16/2013 |
|
|
|
|
|
1.2574 |
| ||
10/01/2013 |
|
|
|
|
|
1.2219 |
| ||
10/16/2013 |
|
|
|
|
|
1.2218 |
| ||
11/01/2013 |
|
|
|
|
|
1.2447 |
| ||
11/16/2013 |
|
|
|
|
|
1.2454 |
| ||
12/01/2013 |
|
|
|
|
|
1.2732 |
| ||
12/16/2013 |
|
|
|
|
|
1.2287 |
| ||
01/01/2014 |
|
|
|
|
|
1.2809 |
| ||
01/16/2014 |
|
|
|
|
|
1.2551 |
| ||
02/01/2014 |
|
|
|
|
|
1.2270 |
| ||
CLASS I
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
|
|
|
|
$ |
1.1413 |
|
1/16/2013 |
|
10,000 |
|
8,731 |
|
1.1453 |
| ||
2/01/2013 |
|
10,000 |
|
8,563 |
|
1.1678 |
| ||
2/16/2013 |
|
|
|
|
|
1.1767 |
| ||
3/01/2013 |
|
85,000 |
|
74,152 |
|
1.1463 |
| ||
3/16/2013 |
|
35,000 |
|
29,917 |
|
1.1699 |
| ||
4/01/2013 |
|
16,000 |
|
13,713 |
|
1.1668 |
| ||
4/16/2013 |
|
70,000 |
|
59,302 |
|
1.1804 |
| ||
5/01/2013 |
|
280,000 |
|
233,918 |
|
1.1970 |
| ||
5/16/2013 |
|
419,000 |
|
350,510 |
|
1.1954 |
| ||
6/01/2013 |
|
|
|
|
|
1.1523 |
| ||
6/16/2013 |
|
|
|
|
|
1.1101 |
| ||
7/01/2013 |
|
15,000 |
|
13,453 |
|
1.1150 |
| ||
7/16/2013 |
|
|
|
|
|
1.1184 |
| ||
8/01/2013 |
|
53,730 |
|
48,801 |
|
1.1010 |
| ||
8/16/2013 |
|
|
|
|
|
1.0910 |
| ||
9/01/2013 |
|
70,000 |
|
65,305 |
|
1.0719 |
| ||
9/16/2013 |
|
116,000 |
|
105,965 |
|
1.0947 |
| ||
10/01/2013 |
|
93,142 |
|
87,556 |
|
1.0632 |
| ||
10/16/2013 |
|
|
|
|
|
1.0627 |
| ||
11/01/2013 |
|
20,000 |
|
18,483 |
|
1.0821 |
| ||
11/16/2013 |
|
|
|
|
|
1.0822 |
| ||
12/01/2013 |
|
|
|
|
|
1.1059 |
| ||
12/16/2013 |
|
|
|
|
|
1.0667 |
| ||
01/01/2014 |
|
|
|
|
|
1.1115 |
| ||
01/16/2014 |
|
|
|
|
|
1.0887 |
| ||
02/01/2014 |
|
|
|
|
|
1.0638 |
| ||
CLASS D1
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
|
|
|
|
$ |
1.1610 |
|
1/16/2013 |
|
|
|
|
|
1.1656 |
| ||
2/01/2013 |
|
|
|
|
|
1.1890 |
| ||
2/16/2013 |
|
|
|
|
|
1.1986 |
| ||
3/01/2013 |
|
|
|
|
|
1.1682 |
| ||
3/16/2013 |
|
|
|
|
|
1.1928 |
| ||
4/01/2013 |
|
|
|
|
|
1.1902 |
| ||
4/16/2013 |
|
|
|
|
|
1.2046 |
| ||
5/01/2013 |
|
|
|
|
|
1.2221 |
| ||
5/16/2013 |
|
|
|
|
|
1.2210 |
| ||
6/01/2013 |
|
|
|
|
|
1.1776 |
| ||
6/16/2013 |
|
238,015 |
|
209,723 |
|
1.1349 |
| ||
7/01/2013 |
|
|
|
|
|
1.1405 |
| ||
7/16/2013 |
|
|
|
|
|
1.1445 |
| ||
8/01/2013 |
|
|
|
|
|
1.1272 |
| ||
8/16/2013 |
|
|
|
|
|
1.1175 |
| ||
9/01/2013 |
|
182,376 |
|
166,038 |
|
1.0984 |
| ||
9/16/2013 |
|
|
|
|
|
1.1222 |
| ||
10/01/2013 |
|
|
|
|
|
1.0905 |
| ||
10/16/2013 |
|
|
|
|
|
1.0904 |
| ||
11/01/2013 |
|
|
|
|
|
1.1108 |
| ||
11/16/2013 |
|
|
|
|
|
1.1115 |
| ||
12/01/2013 |
|
|
|
|
|
1.1363 |
| ||
12/16/2013 |
|
|
|
|
|
1.0966 |
| ||
01/01/2014 |
|
|
|
|
|
0.0000 |
| ||
01/16/2014 |
|
|
|
|
|
0.0000 |
| ||
02/01/2014 |
|
|
|
|
|
0.0000 |
| ||
CLASS M
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
1/01/2013 |
|
$ |
|
|
|
|
$ |
0.9610 |
|
1/16/2013 |
|
|
|
|
|
0.9648 |
| ||
2/01/2013 |
|
|
|
|
|
0.9842 |
| ||
2/16/2013 |
|
100,000 |
|
100,786 |
|
0.9922 |
| ||
3/01/2013 |
|
17,000 |
|
17,580 |
|
0.9670 |
| ||
3/16/2013 |
|
|
|
|
|
0.9874 |
| ||
4/01/2013 |
|
|
|
|
|
0.9852 |
| ||
4/16/2013 |
|
|
|
|
|
0.9972 |
| ||
5/01/2013 |
|
|
|
|
|
1.0117 |
| ||
5/16/2013 |
|
50,000 |
|
49,466 |
|
1.0108 |
| ||
6/01/2013 |
|
200,000 |
|
205,170 |
|
0.9748 |
| ||
6/16/2013 |
|
6,000 |
|
6,387 |
|
0.9394 |
| ||
7/01/2013 |
|
|
|
|
|
0.9441 |
| ||
7/16/2013 |
|
50,000 |
|
52,776 |
|
0.9474 |
| ||
8/01/2013 |
|
44,000 |
|
47,155 |
|
0.9331 |
| ||
8/16/2013 |
|
20,000 |
|
21,622 |
|
0.9250 |
| ||
9/01/2013 |
|
|
|
|
|
0.9093 |
| ||
9/16/2013 |
|
15,000 |
|
16,148 |
|
0.9289 |
| ||
10/01/2013 |
|
|
|
|
|
0.9027 |
| ||
10/16/2013 |
|
16,000 |
|
17,727 |
|
0.9026 |
| ||
11/01/2013 |
|
|
|
|
|
0.9195 |
| ||
11/16/2013 |
|
|
|
|
|
0.9200 |
| ||
12/01/2013 |
|
|
|
|
|
0.9406 |
| ||
12/16/2013 |
|
|
|
|
|
0.9077 |
| ||
01/01/2014 |
|
45,000 |
|
47,554 |
|
0.9463 |
| ||
01/16/2014 |
|
|
|
|
|
0.9272 |
| ||
02/01/2014 |
|
|
|
|
|
0.9065 |
| ||
(1) Beginning of the period Net Asset Value
Item 5(b)
Not applicable.
Item 5(c)
Not applicable.
Item 6: Selected Financial Data
The following selected financial data has been derived from the financial statements of the Fund.
Statement of Operations |
|
For the year ended |
|
For the year ended |
|
For the year ended |
|
For the year ended |
|
For the year ended |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Trading profit (loss) |
|
|
|
|
|
|
|
|
|
|
| |||||
Realized, net |
|
$ |
(14,826,176 |
) |
$ |
20,681,999 |
|
$ |
15,968,361 |
|
$ |
16,360,846 |
|
$ |
(4,551,852 |
) |
Change in unrealized, net |
|
8,923,985 |
|
(51,734,232 |
) |
(92,022,075 |
) |
92,218,885 |
|
(57,300,048 |
) | |||||
Total trading profit (loss) |
|
(5,902,191 |
) |
(31,052,233 |
) |
(76,053,714 |
) |
108,579,731 |
|
(61,851,900 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
INVESTMENT INCOME: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest |
|
|
|
|
|
187 |
|
3,003 |
|
100,827 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
| |||||
Sponsor fees |
|
8,734,447 |
|
15,170,255 |
|
20,592,497 |
|
18,769,349 |
|
14,993,578 |
| |||||
Other |
|
1,020,964 |
|
1,444,939 |
|
1,518,474 |
|
1,451,397 |
|
1,066,617 |
| |||||
Total Expenses |
|
9,755,411 |
|
16,615,194 |
|
22,110,971 |
|
20,220,746 |
|
16,060,195 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
NET INVESTMENT INCOME (LOSS) |
|
(9,755,411 |
) |
(16,615,194 |
) |
(22,110,784 |
) |
(20,217,743 |
) |
(15,959,368 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
NET INCOME (LOSS) |
|
$ |
(15,657,602 |
) |
$ |
(47,667,427 |
) |
$ |
(98,164,498 |
) |
$ |
88,361,988 |
|
$ |
(77,811,268 |
) |
Balance Sheet Data |
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
|
December 31, 2010 |
|
December 31, 2009 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Members Capital |
|
$ |
297,282,028 |
|
$ |
543,069,764 |
|
$ |
909,115,762 |
|
$ |
1,027,411,886 |
|
$ |
868,301,244 |
|
Net Asset Value per Class A Unit |
|
1.0369 |
|
1.0689 |
|
1.1452 |
|
1.2523 |
|
1.1397 |
| |||||
Net Asset Value per Class C Unit |
|
1.0135 |
|
1.0554 |
|
1.1421 |
|
1.2615 |
|
1.1596 |
| |||||
Net Asset Value per Class D Unit |
|
1.2809 |
|
1.3008 |
|
1.3729 |
|
1.4789 |
|
1.3259 |
| |||||
Net Asset Value per Class I Unit |
|
1.1115 |
|
1.1413 |
|
1.2179 |
|
1.3265 |
|
1.2024 |
| |||||
Net Asset Value per Class D1 Unit** |
|
|
|
1.1609 |
|
1.2253 |
|
1.3199 |
|
1.1833 |
| |||||
Net Asset Value per Class DA Unit* |
|
|
|
|
|
|
|
|
|
|
| |||||
Net Asset Value per Class M Unit*** |
|
0.9463 |
|
0.9610 |
|
1.0143 |
|
|
|
|
| |||||
*Units liquidated as of September 30, 2009.
**Units liquidated as of December 31, 2013.
*** Units issued on December 1, 2011.
MLAI believes that the Net Asset Value used to calculate subscription and redemption value and report performance to investors is useful information for the members of the Fund.
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.2473 |
|
n/a |
|
$ |
1.2484 |
|
n/a |
|
$ |
1.2081 |
|
n/a |
|
$ |
1.1729 |
|
n/a |
|
$ |
1.1861 |
|
n/a |
|
$ |
1.1601 |
|
2010 |
|
n/a |
|
$ |
1.1036 |
|
n/a |
|
$ |
1.1154 |
|
n/a |
|
$ |
1.1686 |
|
n/a |
|
$ |
1.1825 |
|
n/a |
|
$ |
1.1447 |
|
n/a |
|
$ |
1.1423 |
|
2011 |
|
n/a |
|
$ |
1.2333 |
|
n/a |
|
$ |
1.2546 |
|
n/a |
|
$ |
1.2138 |
|
n/a |
|
$ |
1.2554 |
|
n/a |
|
$ |
1.1959 |
|
n/a |
|
$ |
1.1576 |
|
2012 |
|
n/a |
|
$ |
1.1480 |
|
n/a |
|
$ |
1.1623 |
|
n/a |
|
$ |
1.1364 |
|
n/a |
|
$ |
1.1449 |
|
n/a |
|
$ |
1.1710 |
|
n/a |
|
$ |
1.1146 |
|
2013 |
|
$ |
1.0725 |
|
$ |
1.0934 |
|
$ |
1.1015 |
|
$ |
1.0729 |
|
$ |
1.0948 |
|
$ |
1.0917 |
|
$ |
1.1043 |
|
$ |
1.1196 |
|
$ |
1.1179 |
|
$ |
1.0775 |
|
$ |
1.0378 |
|
$ |
1.0422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
$ |
1.1456 |
|
n/a |
|
$ |
1.1597 |
|
n/a |
|
$ |
1.1737 |
|
n/a |
|
$ |
1.1342 |
|
n/a |
|
$ |
1.1797 |
|
n/a |
|
$ |
1.1397 |
| ||||||
2010 |
|
n/a |
|
$ |
1.1244 |
|
n/a |
|
$ |
1.1654 |
|
n/a |
|
$ |
1.1926 |
|
n/a |
|
$ |
1.2352 |
|
n/a |
|
$ |
1.1991 |
|
n/a |
|
$ |
1.2523 |
| ||||||
2011 |
|
n/a |
|
$ |
1.1988 |
|
n/a |
|
$ |
1.1885 |
|
n/a |
|
$ |
1.1825 |
|
n/a |
|
$ |
1.1281 |
|
n/a |
|
$ |
1.1305 |
|
n/a |
|
$ |
1.1452 |
| ||||||
2012 |
|
n/a |
|
$ |
1.1707 |
|
n/a |
|
$ |
1.1523 |
|
n/a |
|
$ |
1.1176 |
|
$ |
1.1019 |
|
$ |
1.0655 |
|
$ |
1.0565 |
|
$ |
1.0617 |
|
$ |
1.0678 |
|
$ |
1.0689 |
| |||
2013 |
|
$ |
1.0452 |
|
$ |
1.0288 |
|
$ |
1.0193 |
|
$ |
1.0013 |
|
$ |
1.0223 |
|
$ |
0.9928 |
|
$ |
0.9921 |
|
$ |
1.0101 |
|
$ |
1.0100 |
|
$ |
1.0319 |
|
$ |
0.9953 |
|
$ |
1.0369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.2807 |
|
n/a |
|
$ |
1.2808 |
|
n/a |
|
$ |
1.2385 |
|
n/a |
|
$ |
1.2014 |
|
n/a |
|
$ |
1.2139 |
|
n/a |
|
$ |
1.1863 |
|
2010 |
|
n/a |
|
$ |
1.1220 |
|
n/a |
|
$ |
1.1329 |
|
n/a |
|
$ |
1.1860 |
|
n/a |
|
$ |
1.1991 |
|
n/a |
|
$ |
1.1598 |
|
n/a |
|
$ |
1.1564 |
|
2011 |
|
n/a |
|
$ |
1.2413 |
|
n/a |
|
$ |
1.2617 |
|
n/a |
|
$ |
1.2196 |
|
n/a |
|
$ |
1.2604 |
|
n/a |
|
$ |
1.1997 |
|
n/a |
|
$ |
1.1602 |
|
2012 |
|
n/a |
|
$ |
1.1439 |
|
n/a |
|
$ |
1.1572 |
|
n/a |
|
$ |
1.1304 |
|
n/a |
|
$ |
1.1380 |
|
n/a |
|
$ |
1.1629 |
|
n/a |
|
$ |
1.1060 |
|
2013 |
|
$ |
1.0585 |
|
$ |
1.0786 |
|
$ |
1.0862 |
|
$ |
1.0576 |
|
$ |
1.0787 |
|
$ |
1.0752 |
|
$ |
1.0871 |
|
$ |
1.1017 |
|
$ |
1.0996 |
|
$ |
1.0594 |
|
$ |
1.0199 |
|
$ |
1.0239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
$ |
1.1705 |
|
n/a |
|
$ |
1.1839 |
|
n/a |
|
$ |
1.1972 |
|
n/a |
|
$ |
1.1559 |
|
n/a |
|
$ |
1.2012 |
|
n/a |
|
$ |
1.1596 |
| ||||||
2010 |
|
n/a |
|
$ |
1.1374 |
|
n/a |
|
$ |
1.1779 |
|
n/a |
|
$ |
1.2043 |
|
n/a |
|
$ |
1.2463 |
|
n/a |
|
$ |
1.2089 |
|
n/a |
|
$ |
1.2615 |
| ||||||
2011 |
|
n/a |
|
$ |
1.2005 |
|
n/a |
|
$ |
1.1892 |
|
n/a |
|
$ |
1.1822 |
|
n/a |
|
$ |
1.1269 |
|
n/a |
|
$ |
1.1283 |
|
n/a |
|
$ |
1.1421 |
| ||||||
2012 |
|
n/a |
|
$ |
1.1607 |
|
n/a |
|
$ |
1.1415 |
|
n/a |
|
$ |
1.1062 |
|
$ |
1.0902 |
|
$ |
1.0538 |
|
$ |
1.0444 |
|
$ |
1.0491 |
|
$ |
1.0547 |
|
$ |
1.0554 |
| |||
2013 |
|
$ |
1.0264 |
|
$ |
1.0098 |
|
$ |
1.0001 |
|
$ |
0.9820 |
|
$ |
1.0023 |
|
$ |
0.9729 |
|
$ |
0.9718 |
|
$ |
0.9890 |
|
$ |
0.9885 |
|
$ |
1.0095 |
|
$ |
0.9733 |
|
$ |
1.0135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.4312 |
|
n/a |
|
$ |
1.4343 |
|
n/a |
|
$ |
1.3898 |
|
n/a |
|
$ |
1.3509 |
|
n/a |
|
$ |
1.3679 |
|
n/a |
|
$ |
1.3395 |
|
2010 |
|
n/a |
|
$ |
1.2855 |
|
n/a |
|
$ |
1.3008 |
|
n/a |
|
$ |
1.3645 |
|
n/a |
|
$ |
1.3825 |
|
n/a |
|
$ |
1.3400 |
|
n/a |
|
$ |
1.3389 |
|
2011 |
|
n/a |
|
$ |
1.4583 |
|
n/a |
|
$ |
1.4854 |
|
n/a |
|
$ |
1.4388 |
|
n/a |
|
$ |
1.4900 |
|
n/a |
|
$ |
1.4212 |
|
n/a |
|
$ |
1.3773 |
|
2012 |
|
n/a |
|
$ |
1.3780 |
|
n/a |
|
$ |
1.3969 |
|
n/a |
|
$ |
1.3674 |
|
n/a |
|
$ |
1.3794 |
|
n/a |
|
$ |
1.4126 |
|
n/a |
|
$ |
1.3462 |
|
2013 |
|
$ |
1.3060 |
|
$ |
1.3322 |
|
$ |
1.3430 |
|
$ |
1.3090 |
|
$ |
1.3365 |
|
$ |
1.3336 |
|
$ |
1.3498 |
|
$ |
1.3693 |
|
$ |
1.3681 |
|
$ |
1.3194 |
|
$ |
1.2716 |
|
$ |
1.2779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
$ |
1.3244 |
|
n/a |
|
$ |
1.3424 |
|
n/a |
|
$ |
1.3603 |
|
n/a |
|
$ |
1.3161 |
|
n/a |
|
$ |
1.3706 |
|
n/a |
|
$ |
1.3259 |
| ||||||
2010 |
|
n/a |
|
$ |
1.3196 |
|
n/a |
|
$ |
1.3694 |
|
n/a |
|
$ |
1.4031 |
|
n/a |
|
$ |
1.4551 |
|
n/a |
|
$ |
1.4143 |
|
n/a |
|
$ |
1.4789 |
| ||||||
2011 |
|
n/a |
|
$ |
1.4281 |
|
n/a |
|
$ |
1.4176 |
|
n/a |
|
$ |
1.4123 |
|
n/a |
|
$ |
1.3490 |
|
n/a |
|
$ |
1.3535 |
|
n/a |
|
$ |
1.3729 |
| ||||||
2012 |
|
n/a |
|
$ |
1.4158 |
|
n/a |
|
$ |
1.3952 |
|
n/a |
|
$ |
1.3549 |
|
$ |
1.3367 |
|
$ |
1.2934 |
|
$ |
1.2833 |
|
$ |
1.2904 |
|
$ |
1.2987 |
|
$ |
1.3008 |
| |||
2013 |
|
$ |
1.2823 |
|
$ |
1.2630 |
|
$ |
1.2521 |
|
$ |
1.2308 |
|
$ |
1.2574 |
|
$ |
1.2219 |
|
$ |
1.2218 |
|
$ |
1.2447 |
|
$ |
1.2454 |
|
$ |
1.2732 |
|
$ |
1.2287 |
|
$ |
1.2809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.3110 |
|
n/a |
|
$ |
1.3126 |
|
n/a |
|
$ |
1.2708 |
|
n/a |
|
$ |
1.2341 |
|
n/a |
|
$ |
1.2484 |
|
n/a |
|
$ |
1.2214 |
|
2010 |
|
n/a |
|
$ |
1.1647 |
|
n/a |
|
$ |
1.1774 |
|
n/a |
|
$ |
1.2340 |
|
n/a |
|
$ |
1.2492 |
|
n/a |
|
$ |
1.2096 |
|
n/a |
|
$ |
1.2075 |
|
2011 |
|
n/a |
|
$ |
1.3068 |
|
n/a |
|
$ |
1.3298 |
|
n/a |
|
$ |
1.2870 |
|
n/a |
|
$ |
1.3315 |
|
n/a |
|
$ |
1.2688 |
|
n/a |
|
$ |
1.2286 |
|
2012 |
|
n/a |
|
$ |
1.2213 |
|
n/a |
|
$ |
1.2369 |
|
n/a |
|
$ |
1.2097 |
|
n/a |
|
$ |
1.2192 |
|
n/a |
|
$ |
1.2474 |
|
n/a |
|
$ |
1.1877 |
|
2013 |
|
$ |
1.1453 |
|
$ |
1.1678 |
|
$ |
1.1767 |
|
$ |
1.1463 |
|
$ |
1.1699 |
|
$ |
1.1668 |
|
$ |
1.1804 |
|
$ |
1.1970 |
|
$ |
1.1954 |
|
$ |
1.1523 |
|
$ |
1.1101 |
|
$ |
1.1150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
$ |
1.2066 |
|
n/a |
|
$ |
1.2219 |
|
n/a |
|
$ |
1.2370 |
|
n/a |
|
$ |
1.1957 |
|
n/a |
|
$ |
1.2440 |
|
n/a |
|
$ |
1.2024 |
| ||||||
2010 |
|
n/a |
|
$ |
1.1890 |
|
n/a |
|
$ |
1.2328 |
|
n/a |
|
$ |
1.2619 |
|
n/a |
|
$ |
1.3075 |
|
n/a |
|
$ |
1.2696 |
|
n/a |
|
$ |
1.3265 |
| ||||||
2011 |
|
n/a |
|
$ |
1.2727 |
|
n/a |
|
$ |
1.2622 |
|
n/a |
|
$ |
1.2563 |
|
n/a |
|
$ |
1.1989 |
|
n/a |
|
$ |
1.2018 |
|
n/a |
|
$ |
1.2179 |
| ||||||
2012 |
|
n/a |
|
$ |
1.2479 |
|
n/a |
|
$ |
1.2286 |
|
n/a |
|
$ |
1.1921 |
|
$ |
1.1755 |
|
$ |
1.1369 |
|
$ |
1.1275 |
|
$ |
1.1332 |
|
$ |
1.1399 |
|
$ |
1.1413 |
| |||
2013 |
|
$ |
1.1184 |
|
$ |
1.1010 |
|
$ |
1.0910 |
|
$ |
1.0719 |
|
$ |
1.0947 |
|
$ |
1.0632 |
|
$ |
1.0627 |
|
$ |
1.0821 |
|
$ |
1.0822 |
|
$ |
1.1059 |
|
$ |
1.0667 |
|
$ |
1.1115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D1
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.2773 |
|
n/a |
|
$ |
1.2800 |
|
n/a |
|
$ |
1.2403 |
|
n/a |
|
$ |
1.2057 |
|
n/a |
|
$ |
1.2208 |
|
n/a |
|
$ |
1.1955 |
|
2010 |
|
n/a |
|
$ |
1.1473 |
|
n/a |
|
$ |
1.1609 |
|
n/a |
|
$ |
1.2178 |
|
n/a |
|
$ |
1.2339 |
|
n/a |
|
$ |
1.1959 |
|
n/a |
|
$ |
1.1949 |
|
2011 |
|
n/a |
|
$ |
1.3015 |
|
n/a |
|
$ |
1.3257 |
|
n/a |
|
$ |
1.2841 |
|
n/a |
|
$ |
1.3298 |
|
n/a |
|
$ |
1.2684 |
|
n/a |
|
$ |
1.2292 |
|
2012 |
|
n/a |
|
$ |
1.2298 |
|
n/a |
|
$ |
1.2467 |
|
n/a |
|
$ |
1.2204 |
|
n/a |
|
$ |
1.2311 |
|
n/a |
|
$ |
1.2607 |
|
n/a |
|
$ |
1.2014 |
|
2013 |
|
$ |
1.1656 |
|
$ |
1.1890 |
|
$ |
1.1986 |
|
$ |
1.1682 |
|
$ |
1.1928 |
|
$ |
1.1902 |
|
$ |
1.2046 |
|
$ |
1.2221 |
|
$ |
1.2210 |
|
$ |
1.1776 |
|
$ |
1.1349 |
|
$ |
1.1405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
$ |
1.1820 |
|
n/a |
|
$ |
1.1981 |
|
n/a |
|
$ |
1.2141 |
|
n/a |
|
$ |
1.1746 |
|
n/a |
|
$ |
1.2233 |
|
n/a |
|
$ |
1.1833 |
| ||||||
2010 |
|
n/a |
|
$ |
1.1777 |
|
n/a |
|
$ |
1.2222 |
|
n/a |
|
$ |
1.2522 |
|
n/a |
|
$ |
1.2986 |
|
n/a |
|
$ |
1.2623 |
|
n/a |
|
$ |
1.3199 |
| ||||||
2011 |
|
n/a |
|
$ |
1.2746 |
|
n/a |
|
$ |
1.2652 |
|
n/a |
|
$ |
1.2604 |
|
n/a |
|
$ |
1.2040 |
|
n/a |
|
$ |
1.2080 |
|
n/a |
|
$ |
1.2253 |
| ||||||
2012 |
|
n/a |
|
$ |
1.2635 |
|
n/a |
|
$ |
1.2452 |
|
n/a |
|
$ |
1.2092 |
|
$ |
1.1930 |
|
$ |
1.1543 |
|
$ |
1.1453 |
|
$ |
1.1516 |
|
$ |
1.1590 |
|
$ |
1.1609 |
| |||
2013 |
|
$ |
1.1445 |
|
$ |
1.1272 |
|
$ |
1.1175 |
|
$ |
1.0984 |
|
$ |
1.1222 |
|
$ |
1.0905 |
|
$ |
1.0904 |
|
$ |
1.1108 |
|
$ |
1.1115 |
|
$ |
1.1363 |
|
$ |
1.0966 |
|
$ |
0.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DA
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2009 |
|
n/a |
|
$ |
1.0222 |
|
n/a |
|
$ |
1.0244 |
|
n/a |
|
$ |
0.9927 |
|
n/a |
|
$ |
0.9649 |
|
n/a |
|
$ |
0.9770 |
|
n/a |
|
$ |
0.9568 |
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| |||
2009 |
|
n/a |
|
$ |
0.9460 |
|
n/a |
|
$ |
0.9588 |
|
n/a |
|
$ |
0.9716 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS M
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||
2011 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
| ||||||
2012 |
|
n/a |
|
$ |
1.0180 |
|
n/a |
|
$ |
1.0320 |
|
n/a |
|
$ |
1.0102 |
|
n/a |
|
$ |
1.0191 |
|
n/a |
|
$ |
1.0436 |
|
n/a |
|
$ |
0.9946 |
|
2013 |
|
$ |
0.9648 |
|
$ |
0.9842 |
|
$ |
0.9922 |
|
$ |
0.9670 |
|
$ |
0.9874 |
|
$ |
0.9852 |
|
$ |
0.9972 |
|
$ |
1.0117 |
|
$ |
1.0108 |
|
$ |
0.9748 |
|
$ |
0.9394 |
|
$ |
0.9441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 15th |
|
July |
|
Aug. 15th |
|
Aug. |
|
Sept. 15th |
|
Sept. |
|
Oct. 15th |
|
Oct. |
|
Nov. 15th |
|
Nov. |
|
Dec. 15th |
|
Dec. |
| ||||||||||||
2011 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0143 |
| |||||||||||
2012 |
|
n/a |
|
$ |
1.0460 |
|
n/a |
|
$ |
1.0308 |
|
n/a |
|
$ |
1.0010 |
|
$ |
0.9876 |
|
$ |
0.9556 |
|
$ |
0.9481 |
|
$ |
0.9533 |
|
$ |
0.9594 |
|
$ |
0.9610 |
| |||
2013 |
|
$ |
0.9474 |
|
$ |
0.9331 |
|
$ |
0.9250 |
|
$ |
0.9093 |
|
$ |
0.9289 |
|
$ |
0.9027 |
|
$ |
0.9026 |
|
$ |
0.9195 |
|
$ |
0.9200 |
|
$ |
0.9406 |
|
$ |
0.9077 |
|
$ |
0.9463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS A UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: July 1, 2007
Aggregate Subscriptions $232,533,083
Current Capitalization: $46,575,864
Worst Monthly Drawdown(2): (6.58)% (July 2008)
Worst Peak-to-Valley Drawdown(3): (20.91)% (January 2009 - December 2013)
Net Asset Value per Unit for Class A, December 31, 2013: $1.0369
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
2009 |
|
January |
|
2.29 |
% |
0.24 |
% |
(1.52 |
)% |
(3.17 |
)% |
0.70 |
% |
February |
|
(1.87 |
) |
1.25 |
|
1.73 |
|
1.07 |
|
0.09 |
|
March |
|
1.75 |
|
(2.23 |
) |
(3.25 |
) |
4.77 |
|
(3.22 |
) |
April |
|
2.56 |
|
0.75 |
|
3.43 |
|
1.19 |
|
(2.92 |
) |
May |
|
(3.76 |
) |
2.28 |
|
(4.74 |
) |
(3.20 |
) |
1.13 |
|
June |
|
(3.28 |
) |
(4.82 |
) |
(3.21 |
) |
(0.21 |
) |
(2.19 |
) |
July |
|
(1.29 |
) |
5.04 |
|
3.56 |
|
(1.57 |
) |
(1.25 |
) |
August |
|
(2.67 |
) |
(1.58 |
) |
(0.86 |
) |
3.65 |
|
1.23 |
|
September |
|
(0.85 |
) |
(3.01 |
) |
(0.50 |
) |
2.33 |
|
1.21 |
|
October |
|
1.74 |
|
(4.82 |
) |
(4.60 |
) |
3.57 |
|
(3.37 |
) |
November |
|
2.16 |
|
(0.19 |
) |
0.21 |
|
(2.92 |
) |
4.01 |
|
December |
|
0.48 |
|
0.68 |
|
1.31 |
|
4.44 |
|
(3.39 |
) |
Compound Annual Rate of Return |
|
(2.99 |
)% |
(6.66 |
)% |
(8.55 |
)% |
9.88 |
% |
(9.27 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since July 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since July 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is 3.69%.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS C UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: June 1, 2007
Aggregate Subscriptions: $1,019,404,832
Current Capitalization: $211,561,932
Worst Monthly Drawdown(2): (6.66)% (July 2008)
Worst Peak-to-Valley Drawdown(3): (24.59)% (January 2009 - December 2013)
Net Asset Value per Unit for Class C, December 31, 2013: $1.0135
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
2009 |
|
January |
|
2.20 |
% |
0.16 |
% |
(1.60 |
)% |
(3.24 |
)% |
(0.79 |
)% |
February |
|
(1.95 |
) |
1.16 |
|
1.64 |
|
0.97 |
|
0.01 |
|
March |
|
1.66 |
|
(2.32 |
) |
(3.33 |
) |
4.69 |
|
(3.30 |
) |
April |
|
2.46 |
|
0.67 |
|
3.34 |
|
1.10 |
|
(3.00 |
) |
May |
|
(3.84 |
) |
2.19 |
|
(4.82 |
) |
(3.28 |
) |
1.04 |
|
June |
|
(3.35 |
) |
(4.89 |
) |
(3.29 |
) |
(0.29 |
) |
(2.27 |
) |
July |
|
(1.38 |
) |
4.95 |
|
3.47 |
|
(1.64 |
) |
(1.33 |
) |
August |
|
(2.75 |
) |
(1.66 |
) |
(0.94 |
) |
3.56 |
|
1.14 |
|
September |
|
(0.93 |
) |
(3.09 |
) |
(0.58 |
) |
2.24 |
|
1.12 |
|
October |
|
1.65 |
|
(4.90 |
) |
(4.68 |
) |
3.49 |
|
(3.45 |
) |
November |
|
2.07 |
|
(0.28 |
) |
0.12 |
|
(3.00 |
) |
3.92 |
|
December |
|
0.40 |
|
0.60 |
|
1.22 |
|
4.35 |
|
(3.46 |
) |
Compound Annual Rate of Return |
|
(3.97 |
)% |
(7.59 |
)% |
(9.46 |
)% |
8.79 |
% |
(10.17 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since June 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since June 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is 1.35%.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS D UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: April 2, 2007
Aggregate Subscriptions: $175,068,921
Current Capitalization: $12,941,674
Worst Monthly Drawdown(2): (6.46)% (July 2008)
Worst Peak-to-Valley Drawdown(3): (17.95)% (May 2011 - December 2013)
Net Asset Value per Unit for Class D, December 31, 2013: $1.2809
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
2009 |
|
January |
|
2.41 |
% |
0.37 |
% |
(1.39 |
)% |
(3.05 |
)% |
(0.58 |
)% |
February |
|
(1.74 |
) |
1.37 |
|
1.86 |
|
1.19 |
|
0.22 |
|
March |
|
1.88 |
|
(2.11 |
) |
(3.13 |
) |
4.90 |
|
(3.10 |
) |
April |
|
2.68 |
|
0.88 |
|
3.56 |
|
1.32 |
|
(2.80 |
) |
May |
|
(3.64 |
) |
2.41 |
|
(4.62 |
) |
(3.07 |
) |
1.26 |
|
June |
|
(3.15 |
) |
(4.70 |
) |
(3.09 |
) |
(0.08 |
) |
(2.08 |
) |
July |
|
(1.17 |
) |
5.17 |
|
3.69 |
|
(1.44 |
) |
(1.13 |
) |
August |
|
(2.55 |
) |
(1.45 |
) |
(0.74 |
) |
3.77 |
|
1.36 |
|
September |
|
(0.72 |
) |
(2.89 |
) |
(0.38 |
) |
2.46 |
|
1.33 |
|
October |
|
1.87 |
|
(4.70 |
) |
(4.48 |
) |
3.71 |
|
(3.25 |
) |
November |
|
2.29 |
|
(0.06 |
) |
0.33 |
|
(2.80 |
) |
4.14 |
|
December |
|
0.60 |
|
0.81 |
|
1.43 |
|
4.57 |
|
(3.26 |
) |
Compound Annual |
|
(1.53 |
)% |
(5.25 |
)% |
(7.17 |
)% |
11.54 |
% |
(7.90 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since April 2, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since April 2, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is 28.09%.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS I UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: June 1, 2007
Aggregate Subscriptions: $150,715,003
Current Capitalization: $21,996,156
Worst Monthly Drawdown(2): (6.55)% (July 2008)
Worst Peak-to-Valley Drawdown(3): (20.11)% (May 2011 - December 2013)
Net Asset Value per Unit for Class I, December 31, 2013: $1.1115
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
2009 |
|
January |
|
2.32 |
% |
0.28 |
% |
(1.48 |
)% |
(3.14 |
)% |
(0.67 |
)% |
February |
|
(1.84 |
) |
1.28 |
|
1.76 |
|
1.09 |
|
0.12 |
|
March |
|
1.79 |
|
(2.20 |
) |
(3.22 |
) |
4.81 |
|
(3.18 |
) |
April |
|
2.59 |
|
0.79 |
|
3.46 |
|
1.23 |
|
(2.89 |
) |
May |
|
(3.73 |
) |
2.31 |
|
(4.71 |
) |
(3.17 |
) |
1.16 |
|
June |
|
(3.24 |
) |
(4.79 |
) |
(3.18 |
) |
(0.17 |
) |
(2.16 |
) |
July |
|
(1.26 |
) |
5.07 |
|
3.59 |
|
(1.53 |
) |
(1.21 |
) |
August |
|
(2.64 |
) |
(1.54 |
) |
(0.83 |
) |
3.68 |
|
1.27 |
|
September |
|
(0.81 |
) |
(2.98 |
) |
(0.47 |
) |
2.36 |
|
1.24 |
|
October |
|
1.78 |
|
(4.79 |
) |
(4.57 |
) |
3.61 |
|
(3.34 |
) |
November |
|
2.20 |
|
(0.16 |
) |
0.24 |
|
(2.89 |
) |
4.05 |
|
December |
|
0.51 |
|
0.71 |
|
1.34 |
|
4.47 |
|
(3.35 |
) |
Compound Annual |
|
(2.61 |
)% |
(6.29 |
)% |
(8.18 |
)% |
10.32 |
% |
(8.90 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since June 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since June 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is 11.15%.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS D1 UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: July 1, 2007
Aggregate Subscriptions: $54,954,764
Current Capitalization: $ 0
Worst Monthly Drawdown(2): (6.46)% (July 2008)
Worst Peak-to-Valley Drawdown(3): (17.95)% (May 2011 - December 2013)
Net Asset Value per Unit for Class D1, December 31, 2013: $0.0000
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
2009 |
|
January |
|
2.42 |
% |
0.37 |
% |
(1.39 |
)% |
(3.04 |
)% |
(0.58 |
)% |
February |
|
(1.75 |
) |
1.37 |
|
1.86 |
|
1.19 |
|
0.21 |
|
March |
|
1.88 |
|
(2.11 |
) |
(3.13 |
) |
4.90 |
|
(3.10 |
) |
April |
|
2.68 |
|
0.88 |
|
3.56 |
|
1.32 |
|
(2.79 |
) |
May |
|
(3.64 |
) |
2.40 |
|
(4.62 |
) |
(3.08 |
) |
1.25 |
|
June |
|
(3.15 |
) |
(4.70 |
) |
(3.09 |
) |
(0.08 |
) |
(2.07 |
) |
July |
|
(1.17 |
) |
5.17 |
|
3.69 |
|
(1.44 |
) |
(1.13 |
) |
August |
|
(2.56 |
) |
(1.45 |
) |
(0.74 |
) |
3.78 |
|
1.36 |
|
September |
|
(0.72 |
) |
(2.89 |
) |
(0.38 |
) |
2.45 |
|
1.34 |
|
October |
|
1.86 |
|
(4.70 |
) |
(4.48 |
) |
3.71 |
|
(3.25 |
) |
November |
|
2.30 |
|
(0.07 |
) |
0.33 |
|
(2.80 |
) |
4.15 |
|
December |
|
0.61 |
|
0.81 |
|
1.43 |
|
4.56 |
|
(3.27 |
) |
Compound Annual |
|
(1.52 |
)% |
(5.26 |
)% |
(7.17 |
)% |
11.54 |
% |
(7.90 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since July 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since July 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date of liquidation total return is 14.32%. Class D1 was liquidated on December 31, 2013.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS DA UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: December 1, 2008
Aggregate Subscriptions: $56,445,187
Current Capitalization: $ 0
Worst Monthly Drawdown(2): (3.09)% (March 2009)
Worst Peak-to-Valley Drawdown(3): (7.99)% (January 2009 - September 2009)
Net Asset Value per Unit for Class DA, December 31, 2013: $0.0000
Monthly Rates of Return (4)
Month |
|
2009 |
|
January |
|
(0.58 |
)% |
February |
|
0.22 |
|
March |
|
(3.09 |
) |
April |
|
(2.80 |
) |
May |
|
1.25 |
|
June |
|
(2.07 |
) |
July |
|
(1.13 |
) |
August |
|
1.35 |
|
September |
|
1.34 |
|
October |
|
|
|
November |
|
|
|
December |
|
0.00 |
% |
Compound Annual |
|
(5.50 |
)% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since December 1, 2008 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since December 1, 2008 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date of liquidation total return is (2.84)%. Class DA was liquidated on September 30, 2009.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(CLASS M UNITS) (5)
December 31, 2013
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: December 1, 2011
Aggregate Subscriptions: $13,111,306
Current Capitalization: $4,206,402
Worst Monthly Drawdown(2): (4.70)% (October 2013)
Worst Peak-to-Valley Drawdown(3): (13.65)% (August 2012 - December 2013)
Net Asset Value per Unit for Class M, December 31, 2013: $0.9463
Monthly Rates of Return (4)
Month |
|
2013 |
|
2012 |
|
2011 |
|
January |
|
2.41 |
% |
0.36 |
% |
|
|
February |
|
(1.75 |
) |
1.38 |
|
|
|
March |
|
1.88 |
|
(2.11 |
) |
|
|
April |
|
2.69 |
|
0.88 |
|
|
|
May |
|
(3.65 |
) |
2.40 |
|
|
|
June |
|
(3.15 |
) |
(4.70 |
) |
|
|
July |
|
(1.17 |
) |
5.17 |
|
|
|
August |
|
(2.55 |
) |
(1.45 |
) |
|
|
September |
|
(0.73 |
) |
(2.89 |
) |
|
|
October |
|
1.86 |
|
(4.70 |
) |
|
|
November |
|
2.29 |
|
(0.07 |
) |
|
|
December |
|
0.61 |
|
0.81 |
|
1.43 |
% |
Compound Annual |
|
(1.55 |
)% |
(5.25 |
)% |
1.43 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since December 1, 2011 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since December 1, 2011 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is (5.37)%.
Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
Operational Overview
The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund level and the allocation to each underlying Portfolio Fund.
December 31, 2013
|
|
|
|
Percent of |
| |
|
|
Net Unrealized |
|
Net Unrealized |
| |
Commodity Industry |
|
Profit (Loss) |
|
Profit (Loss) |
| |
Sector |
|
on Open Positions |
|
on Open Positions |
| |
|
|
|
|
|
| |
Agriculture |
|
$ |
2,287,260 |
|
17.46 |
% |
Currencies - Futures |
|
2,857,845 |
|
21.82 |
% | |
Currencies - Forward |
|
203,066 |
|
1.55 |
% | |
Energy |
|
(27,654 |
) |
-0.21 |
% | |
Interest rates |
|
158,299 |
|
1.21 |
% | |
Metals |
|
(251,413 |
) |
-1.93 |
% | |
Stock indices |
|
7,872,352 |
|
60.10 |
% | |
|
|
|
|
|
| |
Total |
|
$ |
13,099,755 |
|
100.00 |
% |
Results of Operations/Performance Summary
This performance summary is an outline description of how the Fund performed in the past, not necessarily any indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not have caused such movements, but simply occurred at or about the same time.
Year ended December 31, 2013
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
Transtrend |
|
$ |
(1,133,475 |
) |
Altis |
|
(994,297 |
) | |
Winton |
|
4,851,535 |
| |
Aspect |
|
(1,840,897 |
) | |
John Locke |
|
(770,711 |
) | |
BlueTrend |
|
(7,091,153 |
) | |
Tudor |
|
(1,856,365 |
) | |
Lynx |
|
2,933,172 |
| |
|
|
|
| |
|
|
$ |
(5,902,191 |
) |
The Fund experienced a net trading loss for the year ended December 31, 2013 of $5,902,191.
The Fund started the first quarter with a long bias in both risk assets and fixed income. The only meaningful short exposures were in the Japanese yen, natural gas, grains and soft commodities. This posture shifted partially over the course of the first quarter. The biggest changes took place in currencies and commodities. These two asset classes were most affected by rising risk aversion in February and March. The Portfolio Funds got short many foreign currencies as well as metals and livestock. The only market where the shift went the other way was natural gas, as the Portfolio Funds adopted a long posture as prices rose sharply in March. Equity indices drove performance. The Portfolio Funds came into 2013 with long positions across geographies given that stock prices have generally been rising since the summer of 2012. With the fiscal cliff issue resolved early in the first quarter, markets continued to rise, even picking up some momentum. Gains came from diverse positions during January. In February and March, there was some divergence in markets, with U.S. and Japanese equities continuing to rise while those in Europe and China saw some downward moves due to inconclusive elections in Italy, a banking crisis in Cyprus and signs of slowing growth in China. Despite this divergence, the asset class was positive each month of the first quarter. Currencies also contributed positively to performance over the first quarter. At the start of 2013, the Portfolio Funds had long positions in most foreign currencies, balanced by significant short exposure in the Japanese yen. This positioning performed positively in January given a pro-risk investment environment. In February, risk aversion returned to markets to some extent. A contracting euro-zone economy coupled with Italian elections where no single group of parties won enough votes to form a coalition government disrupted the stability for the continent. Many foreign currencies depreciated against the U.S. dollar and the Portfolio Funds generally adopted a short posture. The general trend of a strong U.S. dollar continued into March. At this point, the Portfolio Funds were decidedly long the U.S. dollar and generally made back the February losses. Overall, the asset class was positive for the first quarter. Short yen positions performed best, generating gains
each month of the first quarter. In fixed income, the Portfolio Funds had long positions throughout the first quarter resulting in losses. In January, these positions lost money. Risk assets were rallying while fixed income was selling off. Many even questioned whether a new period of rising interest rates was already upon us. These worries turned out to be premature as problems in Europe led to a renewed push into fixed income. Yields came back down and the Portfolio Funds made back some, though not all, of their January losses during February and March. Commodities also performed poorly. Coming into the first quarter, the Portfolio Funds had long exposure in the oil complex and metals coupled with short exposure in natural gas and agricultural markets. Many commodities initially rallied, generating some gains. That changed in February as markets generally fell due to slowing growth and the potential for less demand from China as well as from a contracting Europe. These moves hurt the Portfolio Funds. The Portfolio Funds generally adopted a short posture in all sectors except for oil.
In fixed income, the Portfolio Funds came into the second quarter positioned long across most markets they traded given the downward trend in yields. Their positioning performed well in April as the economic outlook was not especially strong and central banks seemed committed to quantitative easing. This changed abruptly in May and June as markets were concerned by comments made by U.S. Federal Reserve officials and yields rose. Profits made in April were given back and the asset class ended the quarter with losses. The losses were especially severe in May given that the Portfolio Funds had large positions. As yields rose, they significantly cut long exposure through the end of the second quarter. The Portfolio Funds were also long equity indices at the start of the second quarter. As global equity markets had generally been rising since late summer of 2012, with increased momentum in the first quarter of 2013, the Portfolio Funds had large long positions, with concentrations in U.S., European and Japanese equity indices. These positions generally made money in April and May, but suffered offsetting losses in June when markets reversed due to the possible withdrawal of monetary stimulus sooner than expected. Most trend followers were able to finish the second quarter with small profits in the asset class. In currencies, choppiness took a toll on returns. Some big reversals (in the Australian dollar, for example) and a lack of clear direction in many other currencies resulted in the Portfolio Funds consistently losing money each month during the second quarter. In April, European currencies rallied against short positions held in the Portfolio Funds; this happened even as poor economic numbers indicated further deterioration in the eurozone economy, but expectations of additional stimulus from the European Central Bank boosted many currencies. The Portfolio Funds tried to adapt by shifting direction and getting long these currencies, only to see the U.S. dollar rally. In June, it was the Japanese yens turn to reverse, ending multiple months of declines against the U.S. dollar and other currencies and hurting short positions. Currencies were the second worst performing asset class in the second quarter after fixed income. Performance in commodities was mixed. The gains came primarily from metals. After some declines in the first quarter, the Portfolio Funds came into April positioned short both industrial and precious metals. As prices fell sharply over the course of the second quarter, the Portfolio Funds were able to book profits in markets like gold, silver and copper. Trends were not as strong in the energy and agricultural markets. The Portfolio Funds saw muted gains and losses that generally canceled each other out. Due to the big trends in metals, commodities were the best performing asset class for most Portfolio Funds. In summary, big reversals in fixed income starting in May resulted in losses for the second quarter. In currencies, some choppiness and more mild reversals also led to negative performance. There were small gains in equity indices due to the continuing rally in April and May. Commodities performed well as a result of the downward trend in metals which the Portfolio Funds took advantage of well.
Multiple reversals in metals, fixed income, equity indices and oil markets resulted in losses for the Fund at different points in the third quarter. In fixed income, the Portfolio Funds came into the third quarter positioned short bonds and neutral rates. With the U.S. Federal Reserve hinting at tapering, fixed income markets had abruptly reversed in May and June, ending a prolonged period where falling yields had been the norm. With yields rising sharply during May and June, trend followers had gotten short many markets. The reversals in rates had been less severe and most Portfolio Funds had a neutral and balanced posture in that sector. Given the recent reversals, risk taking was generally minimal in the asset class. The uncertainty regarding tapering introduced volatility into markets. Central bank officials generally were able to calm markets in July and yields came back down some, only to rise further in August as the next Federal Open Market Committee meeting approached and then fall again in September when the U.S. Federal Reserve decided not to taper its bond purchases. This environment proved too choppy for most medium and longer term trend followers. Losses were sustained as the Trading Advisors tried to maneuver their portfolios based on the frequently shifting market direction. Given relatively low exposures, the losses were not too severe. The Portfolio Funds were long equity indices at the start of the third quarter. The downward moves in markets in June had not been large enough to force the Portfolio Funds to get short. The Portfolio Funds continued to maintain a long bias with respect to global equity indices. July was a positive month for the asset class. With fewer near-term policy worries, equity markets recovered from their June losses when fears of tapering had led to downward moves. In August, concerns over Syria made headlines and
markets tumbled as the possibility of military intervention grew. These concerns eased in early September, and the U.S. Federal Reserves decision not to taper buoyed markets. Despite these mixed moves, equities finished the third quarter higher and long positions held by trend followers generated profits. Equity indices were the only profitable asset class for the Portfolio Funds. Currencies continued to prove difficult to trade. The Portfolio Funds had a long U.S. dollar bias at the start of the third quarter. This positioning lost money in July and August. At first, dovish reassurances by central bankers pushed back market expectations on tapering and pointed towards policy remaining accommodative. This led to the U.S. dollar losing value, but only to strengthen again in August as a more risk averse-environment took hold. Finally, at quarter end, the U.S. dollar weakened after the U.S. Federal Reserves non-tapering decision. Thus, the direction in currency markets changed each month during the third quarter, too frequently for medium term trend followers to navigate. Losses were felt across all Portfolio Funds. Commodities were the worst performing asset class, generating the bulk of losses. The Portfolio Funds came into the third quarter with a short bias in metals, energies and agriculturals but significant whipsawing resulted in poor performance. First, metals reversed, rising against the trend in what could be deemed a relief rally. Large short positions held by trend followers saw losses. The new upward trend lasted only a few months and precious metals saw sharp down moves in September just as the Portfolio Funds were getting long. At the same time, oil markets were seeing appreciation early in the third quarter as geopolitical tensions rose in the Middle East, first in Egypt and then in Syria. The Portfolio Funds saw some losses initially but repositioned their portfolios to be long oil and oil product markets by the end of August. In September, oil reversed sharply after an apparent diplomatic solution was reached with Syria. This time, losses were felt in long positions. Agricultural markets also failed to produce strong gains. Thus, losses were seen across the commodity spectrum due to big reversals in several sectors. In summary, continuing upward trends in equity indices led to some gains in the third quarter but significant reversals and choppy moves in all other asset classes resulted in losses, overwhelming any profits made in equities. In an environment without sufficient sustained trends, all Portfolio Funds saw losses. Those with larger commodity allocations fared worse. The Portfolio Funds with larger equity allocations and those with longer time horizons performed slightly better.
In equities, the Portfolio Funds came into the fourth quarter positioned long given the upward trend in that market. As markets kept climbing in the final three months, the Portfolio Funds added to their long exposure across geographies and made profits in the asset class. Each month of the fourth quarter was profitable, with the best gains coming from U.S. and Japanese indices. Equities were the best-performing asset class for the Portfolio Funds trend-followers in the fourth quarter. Currencies were also profitable, although with less consistently. The Portfolio Funds trend-followers lost money in October, but made back the losses in November and December due to the strong downward trends in the Japanese yen and Canadian dollar and upward trends in the British pound and euro. In fixed income and commodities, the Portfolio Funds saw losses. The Portfolio Funds trend-followers were long fixed income coming into the fourth quarter. Yields fell following the U.S. Federal Reserves comments over the summer that it would not reduce its stimulus in September. The Portfolio Funds initially made money as yields moved lower, but gave back any gains when yields rose during December with the actual tapering. The Portfolio Funds generally finished the fourth quarter with small losses in the asset class. Commodities had mixed performance; losses were generally due to choppy moves in oil-related energy markets, which stayed range-bound. Industrial metals caused losses as well for similar reasons when sharp falls in November were followed by a swift recovery in December. There were small gains from short positions in precious metals and agricultural markets such as wheat and corn. These markets were generally lower at the end of the fourth quarter, yielding some profits. In summary, the fourth quarter did not see many big reversals. Trends continued for the most part, in areas like equity indices, the Japanese yen, British pound, precious metals and agriculturals, with a relatively small number of markets and sectors showing significant choppiness. In this environment, trend-followers were able to generate positive performance. Strong gains in equity indices and currencies were only slightly offset by smaller losses in commodities and fixed income.
Year ended December 31, 2012
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
Transtrend |
|
$ |
1,952,715 |
|
Altis |
|
(7,127,827 |
) | |
Winton |
|
(6,017,214 |
) | |
Aspect |
|
(6,877,343 |
) | |
John Locke |
|
(3,772,153 |
) | |
BlueTrend |
|
(1,622,871 |
) | |
Tudor |
|
(2,593,904 |
) | |
Lynx |
|
(4,993,636 |
) | |
|
|
|
| |
|
|
$ |
(31,052,233 |
) |
The Fund experienced a net trading loss for the year ended December 31, 2012 of $31,052,233.
In the first two months of 2012, the investment environment was one of risk seeking. Equities and commodities generally rallied and the U.S. dollar was down. Despite a bias towards risk, fixed income did not sell off in any significant way. The Portfolio Fund Trading Advisors generally spent part of January adjusting to this environment. By February, their portfolios were well positioned to take advantage of these trends. The Fund was up 1.3% in these two months. At the start of March, the Fund continued to be long risk assets and long fixed income. The only exceptions to the rule were short positions in natural gas, the euro, and some industrial metal and agricultural markets. This positioning suffered losses in March due to reversals. The most significant reversal in March was seen in fixed income, at the longer end of the curve. Yields on notes and bonds jumped higher in the middle of the month and given that most of the Portfolio Funds had sizeable positions resulted in losses. While yields backed down towards month end, the damage was done as many Portfolio Funds Trading Advisors had already reduced positions, failing to benefit from the latter moves. Currencies also saw some reversals as the U.S. dollar generally strengthened, in particular against commodity currencies such as the Australian dollar and the Canadian dollar. With Portfolio Funds typically holding long positions in these currencies, losses were posted to the Fund. Short positions in the euro were generally unprofitable as the currency ended relatively flat against the U.S. dollar despite poor economic performance in the Eurozone. Many commodities joined the reversal theme. Following two good months, commodity markets fell in March. These included many oil markets and precious metals, two sectors where the Portfolio Funds Trading Advisors had built up long positions, as a result, the reversals posted losses. In other sectors, trends seem to continue. Natural gas, where the Portfolio Funds Trading Advisors have been short for a while, had another very big leg down. For many of the Portfolio Funds Trading Advisors, this was the best performing market. Some industrial metal and agricultural markets also experienced profits from short positions due to falling prices. Equity indices generally saw positive performance. The Portfolio Funds Trading Advisors tended to be long, with the largest allocations to the U.S. and European indices. U.S. equity prices were up for the quarter, continuing the trend and producing gains. But equity prices in Europe were not able to keep up the momentum and fell, posting losses. The Portfolio Funds Trading Advisors also saw some profits from long positions in Japan and Asia.
The Fund started the second quarter long risk assets and long fixed income. April and May were positive months, thanks to strong gains in fixed income, small gains in currencies and relatively smaller losses in equity indices and commodities. The Portfolio Funds Trading Advisors repositioned their portfolios during these two months to match the prevailing investment environment, shorting risk assets and increasing long positions in fixed income. June saw reversals in every asset class causing significant losses across asset classes that erased the gains from April and May. In fixed income, the Portfolio Funds Trading Advisors started the second quarter long most markets. As the economic outlook began to deteriorate in April, yields started to head lower. In response, the Portfolio Funds Trading Advisors pushed their bets by adding to their long positions, resulting in strong gains as yields continued to make new lows. Gains were especially strong in May, as many fixed income markets reached new lows in yields. June saw a slight give back of these profits as yields backed-up due to improving sentiment. In the three remaining asset classes, trend followers generally lost money, with equities posting the worst returns. As a result of strong upward trends in the first quarter, the Portfolio Funds Trading Advisors were positioned long equities in several geographies. In April, global equity indices were down, driven by growing debt related concerns in Europe as well as signs of slowing in various economies. These downward moves continued during May, accelerating in many markets. As the Portfolio Funds posted losses, the Portfolio Funds Trading Advisors started to reduce their long positions. Given that most trend-followers in the Fund use medium- to long-term signals, their reaction to reversals is not immediate and it takes some
time to fully switch direction. It was not until late May that most Portfolio Funds Trading Advisors had finally exited most of their losing long positions and to go short. In June, equities recovered some, just as the Portfolio Funds Trading Advisors had established short positioning, adding to losses in this asset class. Commodities suffered losses as well and followed a similar path as equity indices. The Portfolio Funds Trading Advisors started the quarter with a long bias. The big reversals in May caused losses and the Portfolio Funds Trading Advisors spent the month repositioning for a new bearish environment. As the markets recovered in June, Portfolio Funds sustained further losses on the newly initiated short positions. The biggest losses came in May from long positions in oil, metals and agricultural markets. Smaller losses were sustained in June in a choppy market environment. Foreign exchange trading was also unprofitable. Starting the quarter, exposure to currencies was relatively low. In May, as the U.S. dollar rallied in a safe-haven play, the Portfolio Funds Trading Advisors adopted a long bias. Initially, this served them well in May as several currencies depreciated against the U.S. dollar. However, June saw a reversal as the European Union moved in a positive direction. As risk seeking returned to markets, the euro rallied against the U.S. dollar. The Portfolio Funds Trading Advisors had accumulated sizeable euro shorts in May, as it had exhibited a strong downward trend. With most currencies rallying against the U.S. dollar in June, losses were sustained. The asset class as a whole ended the quarter with negative performance, primarily due to euro losses.
The Fund started the third quarter with a bearish, risk-off posture. Overall exposure levels were moderate and the largest exposures were in long fixed income positions. In foreign exchange, short positions in the euro were the dominant exposure. Other foreign exchange exposure included small short positions in the Canadian dollar, British pound, and Swiss franc and small long positions in the Japanese yen and Australian dollar. Equity exposure was limited, but long biased due to long positions in the U.S. Elsewhere, equity exposure was more mixed with a combination of long and short positions resulting in a small net long position in European equities and a small net short position in Asian equities. Commodity exposure was short biased in most sectors except grains. Fixed income was the largest exposure and best-performing asset class during the third quarter. Within fixed income, the most common exposures and largest contributors to performance were long positions. In July, long positions in both bonds and shorter-dated instruments were profitable. As yields backed-up later in the quarter, long bond positions resulted in losses in both August and September, but gains still outweighed losses. The Portfolio Funds remained long biased throughout the quarter. However, the size of positions was reduced as reversals made this a more challenging sector. Equities, on the other hand, offered a very different exposure and return profile. The Fund came into the quarter with limited equity exposure but a net long bias. While fixed income exposure was reduced over the course of the quarter, equity exposure increased in response to accommodative central bank policies. Long positions in the U.S. and Europe generated gains in August and September. Foreign exchange contributed positively to performance early in the quarter but suffered losses later on as markets reversed. Within foreign exchange, the most common trade was short positions in the euro. These trades were positive contributors in July but incurred losses in August and September in connection with European Central Bank President Draghis comment to do whatever it takes to preserve the euro propelled the currency higher. Short euro positions, in fact, were one of the largest detractors in August. By the quarters end, short euro positions still remained in the portfolio, but they had been significantly reduced. The portfolio held other positions in foreign exchange, including short positions in the British pound and long positions in the Japanese yen and Australian and Canadian dollars but in much smaller size. Commodity trading contributed positively to performance in July and August, but the sector had the greatest impact on the Portfolio Funds in September. During that month a series of reversals resulted in sizable losses. While long positions in precious metals generated gains, the Portfolio Funds experienced losses in other sectors. Long positions in oil, which generated some gains in August, were hurt by Septembers sell-off. Conversely, short positions in natural gas were hurt by rising prices in that sector. Short positions in industrial metals suffered losses as accommodative central bank policies diminished global growth concerns. Long positions in grains, which had been profitable earlier in quarter, were hurt as signs that the U.S. harvest might be better than originally expected resulted in a steep retracement.
The Portfolio Funds started the fourth quarter positioned long most markets and asset classes. Choppiness in fixed income and commodities resulted in losses and those positions were reduced. The Trading Advisors continue to be long fixed income, but in smaller size. In commodities, they were net long metals and oil markets, but switched to a net short posture in grains, crops and natural gas. Positions were smaller across the board. Since equities and FX were the winning asset classes in the fourth quarter, the Trading Advisors increased their long exposures to both. The Japanese yen was the exception, where the Trading Advisors were short the currency coming into 2013. Coming into October, the Fund was positioned long in most sectors and markets. Unfortunately, most markets trended lower as the International Monetary Fund (IMF) cut its growth forecasts for most developed economies. In addition, the U.S. Federal Reserves (Fed) comment on the strains in the world economy as well as disappointing third-quarter corporate earnings in the U.S. added to the negative sentiment. Even as risk assets sold off
and the dollar strengthened, there was no significant flight to safety. Most sectors and asset classes suffered small losses adding up to a large negative number as the Fund declined in October. Risk appetite rebounded in November, but erratic price action in commodities caused losses. In December, commodities were still choppy, but gains from rising equities and currencies generated sufficient profits for a positive month. Commodities were the worst-performing asset class as a poor trading environment caused losses in each month during the quarter. Small-scale reversals in grains, energy markets such as oil and natural gas, precious metals and industrial metals all caused losses where no sector was profitable. In response to the difficult trading environment, the Trading Advisors reduced risk over the course of the quarter. In fixed income, the Trading Advisors were positioned long almost all markets. Yields generally bottomed mid-summer and have moved sideways in the second half of the year. Since yields moved in tight range, it resulted in mixed performance with some months showing gains and some months showing losses. There has not been a big reversal so the Trading Advisors have not yet shifted direction, but they have reduced risk and position sizes given the choppiness. In the fourth quarter, yields were up initially, then down, then up again to generally end the quarter higher. As a result, long positions saw losses and fixed income was a negative contributor to performance. Despite the choppiness seen in commodities and fixed income, the fourth quarter was generally characterized by risk seeking. In this environment, equity indices rallied while the U.S. dollar weakened, especially toward year end. In addition, political and policy developments in Japan led to a declining yen and sharply higher equity prices. The Trading Advisors generally made money by being long equity indices and foreign currencies against the U.S. dollar, with the exception of the yen where many managers had profitable short positions. Overall, the losses in commodities, and to a lesser extent fixed income, dominated the attribution profile of trend-followers in the fourth quarter. Gains in equity indices and currencies were insufficient to make up for these losses.
December 31, 2011
Year ended December 31, 2011
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
Transtrend |
|
$ |
(19,424,860 |
) |
Altis |
|
(44,402,871 |
) | |
Winton |
|
9,917,494 |
| |
Aspect |
|
5,314,184 |
| |
John Locke |
|
(11,808,229 |
) | |
BlueTrend |
|
(2,353,478 |
) | |
Tudor |
|
(13,295,954 |
) | |
|
|
|
| |
|
|
$ |
(76,053,714 |
) |
The Fund experienced a net trading loss for the year ended December 31, 2011of $76,053,714.
Overall, the quarter started poorly in January, the Portfolio Funds were profitable in February only to give it all back and then some in March. Coming into the first quarter, the Portfolio Funds were generally positioned for a rally in equities and commodities. Additionally, a short U.S. dollar bias was highly prevalent in the portfolio. The majority of the Portfolio Funds had reduced their exposure to fixed income positions going into the year, with smaller allocations remaining on the long side. In January, managed futures strategies generally suffered from a rally in the U.S. dollar and a substantial retracement in gold. In February, this positioning was able to generate positive performance when long positions in equities and energy rallied. However, while Februarys gains offset Januarys losses to a large extent, it was not enough to carry the strategy for the quarter. March was characterized by volatile trading conditions across several markets, creating losses for the month and putting Systematic Momentum in negative territory for the year. During March, most trend-following strategies were whipsawed by the sharp selloffs following the earthquake and tsunami in Japan and the sharp rebounds in the weeks afterwards. As a result, losses in agricultural commodities as well as global equity indices offset any gains from energy and currency positions. While it was generally a challenging first quarter for Fund as a whole, the individual Portfolio Fund returns varied. Five managers had negative returns while only two ended the quarter with positive performance. For the most part, the Portfolio Funds that used higher leverage and a shorter-term time frame tended to underperform. Shorter-term trading strategies found market conditions in March especially problematic since they were the first to react to downward moves in most markets by closing out of long positions. When markets rebounded later in the month, many of these programs did not generate buy signals soon enough to capture the rally. Conversely, longer-term strategies retained their positions and benefited from the
subsequent rally in equities and some commodities. The best performing Portfolio Fund over the first three months was BlueTrend. While the Portfolio Fund encountered many of same difficulties as others in the quarter, BlueTrend did a better job of capturing the upside in energy. The lagging performer in the portfolio was Altis which incurred losses primarily due to poor positioning in the currency and energy markets. Altis operates with a higher volatility target than other constituent programs so it was not unexpected that the Portfolio Fund generated higher losses in a difficult trading environment.
During the second quarter, the Portfolio Funds were focused on equity, commodity, and foreign exchange markets while fixed income exposure was generally limited. Long positions in commodities and equity indices in addition to short positions in the U.S. dollar were common themes across the portfolio. This positioning proved profitable in the first month of the quarter. With equities and commodities rallying and the U.S. dollar depreciating, profits were posted to the Fund in April, erasing its losses from the first quarter. However, Aprils gains were swiftly retracted as the same positioning that produced profits in April led to losses for the remainder of the quarter. The Portfolio Funds suffered losses in long equity and short U.S. dollar positions as these markets endured sharp reversals. Significant pullbacks in commodities, particularly in the energy, agricultural, and the precious metal sectors also made for a difficult quarter. While managed futures managers typically adapt their exposures to changing market dynamics, severe and abrupt market reversals can be rather problematic as there is insufficient time for managers to adjust their portfolios. The second quarter was one of those challenging environments. In fact, May and June ranked among the worst 15 months for the Dow Jones-Credit Suisse AllHedge Managed Futures Index since January 2005. In addition to being a difficult period for the strategy as a whole, the second quarter proved to be a challenging environment for all of the Portfolio Funds in the Fund. For the second quarter, the Portfolio Funds posted losses for the Fund. As a result, only one of the Portfolio Funds in the portfolio remains in positive territory for the year. For the most part, longer-term programs and the Portfolio Funds who utilize less leverage tended to outperform while the Portfolio Funds with shorter-term programs found the recent environment extremely difficult. For much of this year, the Portfolio Funds have allocated significant capital to long commodity positions. Programs suffered significant losses as oil markets, precious metals (particularly silver), and agricultural markets reversed direction and declined in May and June. In addition to commodities, the Portfolio Funds had a favorable bias toward equities at the outset of the quarter. In fact, the Portfolio Funds have held long positions in equity indices for some time. In the last two months of the second quarter, this sector experienced a significant sell off as uncertainty regarding the European debt crisis and the global economy weighed heavily on the markets. In currencies, the Portfolio Funds generally began the quarter positioned for U.S. dollar depreciation. However, short positions in the U.S. dollar against a variety of currencies resulted in losses as the dollar rallied in May. Allocations to fixed income were small at the beginning of the second quarter, but have increased considerably by the end of the quarter.
Coming into the third quarter, the Fund was positioned with a short bias toward the U.S. dollar and a long bias in fixed income. The Portfolio Funds still favored long positions in equity indices and commodities; however, these positions were much smaller than they had been earlier in the year. At the same time, the Portfolio Funds exposure to fixed income was growing as strong trends emerged in this asset class. At the outset of the quarter, the underlying Portfolio Funds were operating at slightly lower risk levels as several sharp reversals experienced in the second quarter brought down exposures. July was a favorable month for the Portfolio Funds as gains from long fixed income positions outweighed losses from the other asset classes. For the rest of the third quarter, long fixed income positions continued to generate strong profits while most other asset classes resulted in losses. Generally, foreign exchange, equities, and commodities incurred losses, eventually forcing the Portfolio Funds to shift their portfolios to reflect a more defensive environment Across the portfolio, the Portfolio Funds returns were generally positive. Asset class weighting was a key driver of performance this quarter. The Portfolio Funds with sizeable long fixed income exposures performed well as trends consolidated in this asset class. The duration of the types of programs used by the Portfolio Funds also had a direct influence on performance. The Portfolio Funds that use shorter-term signals and systems outperformed longer-term programs as they were able to identify market inflection points more quickly and adjust their portfolios. The best performing Portfolio Fund for the quarter was John Locke, as the trading advisors shorter time horizon was better able to navigate market reversals. The worst performing Portfolio Fund for the quarter was Altis. Altis underperformance may be partially explained by the design of its trading programs. Altis tends to operate with a higher degree of leverage and its historical volatility is generally higher than other Portfolio Funds in the portfolio. Altis program is designed to seek opportunities in markets that are less correlated. As a result, compared with the other Portfolio Funds, Altis lacked a sizeable allocation to fixed income, the best performing asset class, hurting its performance. At the same time, Altis maintained a higher weighting to commodities, which was a difficult asset class to trade in this quarter. Fixed income trading accounted for the largest share of profits in the third quarter as the Portfolio Funds were long both bonds and notes (or their derivatives), taking advantage of a strong downward trend in yields.
While fixed income trading was profitable, most other asset classes incurred losses. Currencies were extremely difficult to trade as short positions in the U.S. dollar suffered as the European debt crisis deepened. In commodities, precious metals and energy trading were volatile, leading managers to reduce their long positions, and in some cases going short. Equity indices also detracted from performance as stocks reversed and sold off through most of the third quarter.
The Portfolio Funds declined in the fourth quarter and was negative for the full year. Losses were significant in October and only slightly made back by gains in November and December. The majority of losses were incurred in equity index positions where the Portfolio Funds were short and were hurt by the October rebound in stocks. Other losses came from currency trading where the Portfolio Funds had negative attribution from long U.S. dollar positioning in October, but made some money back being short the Euro through the rest of the fourth quarter. In commodities, attribution was mixed as the Portfolio Funds made some money in markets that continued to trend, for example energy contracts like crude oil and natural gas, but lost money in other markets, such as gold which reversed its long-term up-trend in December. Performance from fixed income markets was flat as most interest rates remained stable with little volatility. As a result of a shift in investor sentiment starting in May, the Portfolio Funds were positioned for a more risk-averse environment coming into the post summer period. Whereas trends, and as a result the Portfolio Funds positioning, were towards the upside in the first half of the year in risk assets, many markets experienced reversals causing the Portfolio Funds to shift their positions throughout the summer. Hence, coming out of September trend following Portfolio Funds were generally: long bond and rate contracts, net short equity indices, long the U.S. dollar against a variety of currencies, and net short most commodities. In October risk assets, particularly equities, experienced significant gains as markets once again reversed the course they had been on for the preceding few months. These reversals caused sizeable losses for the Portfolio Funds and forced them to remove much of the risk from their bearish stance. Throughout the rest of the fourth quarter, the Portfolio Fund risk levels were lower than historic averages and attribution was mixed though most Portfolio Funds did make a little money back to end the year. Most Portfolio Funds had negative performance. The shorter-term Portfolio Funds tended to underperform in the fourth quarter giving up the outperformance they had accumulated in the previous quarter. As risk sentiment shifted throughout the summer, the shorter-term Portfolio Funds were able to more quickly change positioning and became more allocated to a bearish posture. Hence, these Portfolio Funds incurred greater losses when risk asset prices turned significantly higher in October.
Variables Affecting Performance
The principal variables that determine the net performance of the Fund are gross profitability from the Portfolio Funds trading activities and interest income.
The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.
During the periods set forth above in Selected Financial Data, the interest rates in many countries were at unusually low levels. In addition, low interest rates are frequently associated with reduced fixed income market volatility, and in static markets the Funds profit potential generally tends to be diminished. On the other hand, during periods of higher interest rates, the relative attractiveness of a high risk investment such as the Fund may be reduced as compared to high yielding and much lower risk fixed-income investments.
The Funds Sponsor fees are a constant percentage of the Funds assets.
Unlike many investment fields, there is no meaningful distinction in the operation of the Fund between realized and unrealized profits. Most of the contracts traded by the Portfolio Funds are highly liquid and can be closed out at any time.
Except in unusual circumstances, factorsregulatory approvals, cost of goods sold, employee relations and the likewhich often materially affect an operating business, have no material impact on the Fund.
Liquidity; Capital Resources
The Portfolio Funds borrow only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.
Substantially all of the Portfolio Funds assets are held in cash. The net asset value of the Portfolio Funds cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow.
A Portfolio Fund should be able to close out its open trading positions and liquidate its holdings relatively quickly and at market prices, except in unusual circumstances. This typically permits the Portfolio Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so.
As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash at the underlying Portfolio Funds, which they must have available to post initial and variation margin on futures contracts. This cash is also used to fund redemptions. While the Portfolio Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions. In the event that positions were liquidated to fund redemptions, MLAI, as the manager of the Portfolio Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the respective Trading Advisors would determine, in its discretion which investments should be liquidated.
(The Portfolio Funds and the Fund have no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 3.03(a)(4) and 3.03(a)(5) of Regulation S-K.)
Recent Accounting Developments
Recent accounting developments are discussed in Exhibit 13.01.
Item 7A: Quantitative and Qualitative Disclosures About Market Risks
Introduction
The Portfolio Funds are speculative commodity pools. The market sensitive instruments held by the Portfolio Funds are acquired for speculative trading purposes and all or substantially all of the Funds assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Funds main line of business.
Market movements result in frequent changes in the fair market value of the Portfolio Funds open positions and, consequently, in its earnings and cash flow. The Portfolio Funds market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Portfolio Funds open positions and the liquidity of the markets in which it trades.
The Portfolio Funds, under the direction of their respective Trading Advisors, rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Portfolio Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Portfolio Funds speculative trading and the recurrence in the markets traded by the Portfolio Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the experience to date (i.e., risk of ruin). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Portfolio Funds losses in any market sector will be limited to Value at Risk or by each Portfolio Funds attempts to manage its market risk.
Quantifying The Funds Trading Value At Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Funds market risk exposures contain forward-looking statement within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Portfolio Funds risk exposure in the various market sectors traded by the advisors is quantified below in terms of Value at Risk. Due to the Portfolio Funds fair value accounting, any loss in the fair value of the Portfolio Funds open positions is directly reflected in the Portfolio Funds earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements of the Portfolio Funds have been used as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Portfolio Funds), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers margins have been used.
100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading categorys aggregate Value at Risk. The diversification effects resulting from the fact that the Funds positions are rarely, if ever, 100% positively correlated have not been reflected.
The Funds Trading Value at Risk in Different Market Sectors
The following information with respect to Value at Risk (VaR) is set forth in respect of Portfolio Funds separately, rather than for the Fund on a stand alone basis.
Altis Class DS (1)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
1,123,636 |
|
2.65 |
% |
$ |
3,174,791 |
|
$ |
131,559 |
|
Energy |
|
447,697 |
|
1.06 |
% |
879,552 |
|
12,662 |
| |||
Interest Rates |
|
1,091,145 |
|
2.58 |
% |
1,513,148 |
|
283,758 |
| |||
Metals |
|
2,868,749 |
|
6.77 |
% |
4,901,210 |
|
985,823 |
| |||
Stock Indices |
|
785,448 |
|
1.85 |
% |
1,613,002 |
|
142,562 |
| |||
Currencies |
|
494,455 |
|
1.17 |
% |
1,020,015 |
|
6,122 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
6,811,130 |
|
16.08 |
% |
$ |
13,101,718 |
|
$ |
1,562,486 |
|
(1) Average capitalization of Altis Class DS is $42,364,577.
Altis Class DS (1)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
1,857,069 |
|
2.39 |
% |
$ |
3,511,512 |
|
$ |
618,042 |
|
Energy |
|
2,173,733 |
|
2.80 |
% |
4,029,618 |
|
10,119 |
| |||
Interest Rates |
|
1,189,169 |
|
1.53 |
% |
2,333,254 |
|
68,791 |
| |||
Metals |
|
2,131,662 |
|
2.74 |
% |
4,276,043 |
|
1,428,860 |
| |||
Stock Indices |
|
704,334 |
|
0.91 |
% |
1,323,230 |
|
176,778 |
| |||
Currencies |
|
1,520,971 |
|
1.96 |
% |
2,032,275 |
|
898,332 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
9,576,938 |
|
12.33 |
% |
$ |
17,505,932 |
|
$ |
3,200,922 |
|
(1) Average capitalization of Altis Class DS is $77,707,043.
Transtrend Class DS (2)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
418,382 |
|
0.62 |
% |
$ |
1,062,072 |
|
$ |
139,045 |
|
Energy |
|
310,522 |
|
0.46 |
% |
565,346 |
|
130,058 |
| |||
Interest Rates |
|
3,476,783 |
|
5.12 |
% |
8,288,044 |
|
475,491 |
| |||
Metals |
|
2,005,779 |
|
2.95 |
% |
5,143,266 |
|
832,242 |
| |||
Stock Indices |
|
981,431 |
|
1.45 |
% |
2,848,881 |
|
131,871 |
| |||
Currencies |
|
824,152 |
|
1.21 |
% |
2,452,697 |
|
15,306 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
8,017,049 |
|
11.81 |
% |
$ |
20,360,306 |
|
$ |
1,724,013 |
|
(2) Average capitalization of Transtrend Class DS is $67,904,391.
Transtrend Class DS (2)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
1,776,837 |
|
1.53 |
% |
$ |
2,905,495 |
|
$ |
81,935 |
|
Energy |
|
4,023,417 |
|
3.47 |
% |
7,114,444 |
|
63,074 |
| |||
Interest Rates |
|
1,343,413 |
|
1.16 |
% |
3,453,764 |
|
211,496 |
| |||
Metals |
|
1,950,368 |
|
1.68 |
% |
3,275,464 |
|
985,800 |
| |||
Stock Indices |
|
2,533,454 |
|
2.18 |
% |
6,113,573 |
|
499,946 |
| |||
Currencies |
|
978,813 |
|
0.84 |
% |
1,782,991 |
|
425,070 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
12,606,302 |
|
10.86 |
% |
$ |
24,645,731 |
|
$ |
2,267,321 |
|
(2) Average capitalization of Transtrend Class DS is $116,055,285.
Aspect Class DS (3)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
360,835 |
|
0.85 |
% |
$ |
1,049,393 |
|
$ |
81,169 |
|
Energy |
|
276,893 |
|
0.65 |
% |
570,531 |
|
108,695 |
| |||
Interest Rates |
|
1,074,607 |
|
2.53 |
% |
1,717,176 |
|
290,181 |
| |||
Metals |
|
1,080,884 |
|
2.55 |
% |
2,011,439 |
|
154,930 |
| |||
Stock Indices |
|
601,786 |
|
1.42 |
% |
1,776,959 |
|
5,028 |
| |||
Currencies |
|
619,574 |
|
1.46 |
% |
1,409,394 |
|
117,999 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
4,014,579 |
|
9.46 |
% |
$ |
8,534,892 |
|
$ |
758,002 |
|
(3) Average Capitalization of Aspect Class DS is $42,456,368.
Aspect Class DS (3)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
1,091,245 |
|
1.59 |
% |
$ |
1,751,993 |
|
$ |
574,568 |
|
Energy |
|
1,047,342 |
|
1.53 |
% |
2,280,888 |
|
194,539 |
| |||
Interest Rates |
|
1,045,052 |
|
1.52 |
% |
1,735,868 |
|
526,065 |
| |||
Metals |
|
271,836 |
|
0.40 |
% |
488,030 |
|
54,654 |
| |||
Stock Indices |
|
1,683,280 |
|
2.45 |
% |
2,662,219 |
|
170,713 |
| |||
Currencies |
|
274,658 |
|
0.40 |
% |
900,894 |
|
17,188 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
5,413,413 |
|
7.89 |
% |
$ |
9,819,892 |
|
$ |
1,537,727 |
|
(3) Average Capitalization of Aspect Class DS is $68,659,420.
Winton Class DS (5)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
330,760 |
|
0.46 |
% |
$ |
787,515 |
|
$ |
128,935 |
|
Energy |
|
186,718 |
|
0.26 |
% |
328,650 |
|
27,196 |
| |||
Interest Rates |
|
940,293 |
|
1.30 |
% |
1,424,806 |
|
645,500 |
| |||
Metals |
|
723,711 |
|
1.00 |
% |
1,632,245 |
|
35,075 |
| |||
Stock Indices |
|
822,884 |
|
1.14 |
% |
2,344,682 |
|
240,615 |
| |||
Currencies |
|
679,330 |
|
0.94 |
% |
1,191,984 |
|
284,459 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
3,683,696 |
|
5.10 |
% |
$ |
7,709,882 |
|
$ |
1,361,780 |
|
(5) Average capitalization of Winton Class DS is $72,248,683.
Winton Class DS (5)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
467,291 |
|
0.39 |
% |
$ |
857,123 |
|
$ |
73,469 |
|
Energy |
|
368,664 |
|
0.31 |
% |
874,813 |
|
11,799 |
| |||
Interest Rates |
|
2,097,111 |
|
1.75 |
% |
4,292,387 |
|
285,472 |
| |||
Metals |
|
1,015,937 |
|
0.85 |
% |
1,627,464 |
|
455,447 |
| |||
Stock Indices |
|
1,773,838 |
|
1.48 |
% |
3,436,520 |
|
473,238 |
| |||
Currencies |
|
1,179,031 |
|
0.98 |
% |
2,016,534 |
|
225,888 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
6,901,872 |
|
5.76 |
% |
$ |
13,104,841 |
|
$ |
1,525,313 |
|
(5) Average capitalization of Winton Class DS is $120,002,120.
John Locke Class DS (6)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
283,191 |
|
0.67 |
% |
$ |
430,746 |
|
$ |
172,907 |
|
Energy |
|
145,261 |
|
0.34 |
% |
383,411 |
|
50,994 |
| |||
Interest Rates |
|
1,587,243 |
|
3.74 |
% |
3,341,143 |
|
286,357 |
| |||
Metals |
|
1,681,281 |
|
3.96 |
% |
3,501,054 |
|
225,150 |
| |||
Stock Indices |
|
1,072,997 |
|
2.53 |
% |
2,261,428 |
|
37,083 |
| |||
Currencies |
|
819,172 |
|
1.93 |
% |
1,910,826 |
|
115,674 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
5,589,145 |
|
13.17 |
% |
$ |
11,828,608 |
|
$ |
888,165 |
|
(6) Average capitalization of John Locke Class DS is $42,483,485.
John Locke Class DS (6)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
1,812,772 |
|
2.25 |
% |
$ |
4,796,195 |
|
$ |
127,673 |
|
Energy |
|
1,277,429 |
|
1.58 |
% |
2,450,551 |
|
434,437 |
| |||
Interest Rates |
|
1,005,404 |
|
1.25 |
% |
1,904,936 |
|
123,814 |
| |||
Metals |
|
1,748,930 |
|
2.17 |
% |
2,981,899 |
|
460,036 |
| |||
Stock Indices |
|
2,537,272 |
|
3.15 |
% |
3,905,755 |
|
1,454,923 |
| |||
Currencies |
|
1,084,660 |
|
1.34 |
% |
1,879,736 |
|
333,031 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
9,466,467 |
|
11.74 |
% |
$ |
17,919,072 |
|
$ |
2,933,914 |
|
(6) Average capitalization of John Locke Class DS is $80,676,029.
BlueTrend Class DS (8)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
204,825 |
|
0.28 |
% |
$ |
313,111 |
|
$ |
78,252 |
|
Energy |
|
632,660 |
|
0.88 |
% |
849,184 |
|
166,912 |
| |||
Interest Rates |
|
3,204,187 |
|
4.45 |
% |
6,019,772 |
|
1,183,416 |
| |||
Metals |
|
743,451 |
|
1.03 |
% |
2,094,494 |
|
113,237 |
| |||
Stock Indices |
|
1,594,792 |
|
2.21 |
% |
4,766,509 |
|
22,459 |
| |||
Currencies |
|
991,609 |
|
1.38 |
% |
2,320,347 |
|
435,781 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
7,371,524 |
|
10.23 |
% |
$ |
16,363,417 |
|
$ |
2,000,057 |
|
(8) Average capitalization of BlueTrend Class DS is $72,076,214.
BlueTrend Class DS (8)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
831,347 |
|
0.61 |
% |
$ |
2,050,960 |
|
$ |
195,753 |
|
Energy |
|
1,640,634 |
|
1.20 |
% |
4,043,873 |
|
386,003 |
| |||
Interest Rates |
|
3,343,828 |
|
2.44 |
% |
10,151,884 |
|
275,936 |
| |||
Metals |
|
1,218,834 |
|
0.89 |
% |
2,036,992 |
|
243,884 |
| |||
Stock Indices |
|
2,277,676 |
|
1.66 |
% |
5,808,961 |
|
40,575 |
| |||
Currencies |
|
3,145,117 |
|
2.29 |
% |
6,737,462 |
|
143,600 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
12,457,436 |
|
9.09 |
% |
$ |
30,830,132 |
|
$ |
1,285,751 |
|
(8) Average capitalization of BlueTrend Class DS is $137,202,410.
Tudor Tensor Class DS (7)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
348,826 |
|
0.82 |
% |
$ |
882,779 |
|
$ |
78,156 |
|
Energy |
|
302,216 |
|
0.71 |
% |
465,942 |
|
20,112 |
| |||
Interest Rates |
|
859,089 |
|
2.02 |
% |
1,311,407 |
|
441,463 |
| |||
Metals |
|
1,353,559 |
|
3.19 |
% |
2,288,537 |
|
275,496 |
| |||
Stock Indices |
|
962,053 |
|
2.26 |
% |
2,244,343 |
|
326,242 |
| |||
Currencies |
|
258,870 |
|
0.61 |
% |
516,508 |
|
108,836 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
4,084,613 |
|
9.61 |
% |
$ |
7,709,516 |
|
$ |
1,250,305 |
|
(7) Average capitalization of Tudor Tensor Class DS is $42,475,211.
Tudor Tensor Class DS (7)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
543,813 |
|
0.70 |
% |
$ |
723,005 |
|
$ |
286,960 |
|
Energy |
|
832,391 |
|
1.07 |
% |
2,281,980 |
|
64,669 |
| |||
Interest Rates |
|
768,123 |
|
0.99 |
% |
2,510,971 |
|
132,766 |
| |||
Metals |
|
1,081,480 |
|
1.39 |
% |
3,065,063 |
|
157,964 |
| |||
Stock Indices |
|
1,649,472 |
|
2.12 |
% |
3,155,567 |
|
771,668 |
| |||
Currencies |
|
3,058,624 |
|
3.94 |
% |
6,066,754 |
|
921,826 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
7,933,903 |
|
10.21 |
% |
$ |
17,803,340 |
|
$ |
2,335,853 |
|
(7) Average capitalization of Tudor Tensor Class DS is $77,707,616.
Lynx Class DS (4)
|
|
December 31, 2013 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
101,037 |
|
0.24 |
% |
$ |
181,346 |
|
30,632 |
| |
Energy |
|
345,208 |
|
0.81 |
% |
403,043 |
|
292,543 |
| |||
Interest Rates |
|
171,441 |
|
0.40 |
% |
208,099 |
|
128,822 |
| |||
Metals |
|
2,050,446 |
|
4.83 |
% |
3,522,035 |
|
758,899 |
| |||
Stock Indices |
|
2,041,268 |
|
4.81 |
% |
3,804,714 |
|
444,985 |
| |||
Currencies |
|
409,136 |
|
0.96 |
% |
465,841 |
|
356,993 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
5,118,536 |
|
12.05 |
% |
$ |
8,585,078 |
|
$ |
2,012,874 |
|
(4) Average capitalization of Lynx Class DS is $42,472,532.
Lynx Class DS (4)
|
|
December 31, 2012 |
| |||||||||
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
|
$ |
353,778 |
|
0.57 |
% |
$ |
426,033 |
|
$ |
276,948 |
|
Energy |
|
612,255 |
|
0.99 |
% |
753,616 |
|
464,672 |
| |||
Interest Rates |
|
2,904,378 |
|
4.70 |
% |
3,394,980 |
|
2,365,570 |
| |||
Metals |
|
1,199,429 |
|
1.94 |
% |
1,514,532 |
|
876,101 |
| |||
Stock Indices |
|
2,419,840 |
|
3.92 |
% |
2,771,611 |
|
2,289,970 |
| |||
Currencies |
|
1,025,615 |
|
1.66 |
% |
1,540,924 |
|
528,806 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
|
$ |
8,515,295 |
|
13.78 |
% |
$ |
10,401,696 |
|
$ |
6,802,067 |
|
(4) Average capitalization of Lynx Class DS is $61,740,377.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Portfolio Funds are typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Portfolio Funds. The magnitude of the Portfolio Funds open positions creates a risk of ruin not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions unusual, but historically recurring from time to time could cause the Portfolio Funds to incur severe losses over a short period of time. The foregoing Value at Risk table as well as the past performance of the Portfolio Funds gives no indication of this risk of ruin.
Non-Trading Risk
However, these balances (as well as the market risk they represent) are immaterial. A Portfolio Fund also has non-trading market risk on the approximately 90% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Funds market risk exposures except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Funds primary market risk exposures as well as the strategies used and to be used by MLAI and the Portfolio Funds Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Funds risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Funds current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Trading Risk
MLAI has procedures in place intended to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds market exposure, MLAI may urge the Portfolio Funds Trading Advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are unusual, except in cases in which it appears that the advisors have begun to deviate from past practice and trading policies or to be trading erratically, MLAIs basic control procedures consist of simply of the ongoing process of monitoring the Trading Advisors with the market risk controls being applied by the Trading Advisors.
Risk Management
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Portfolio Funds, calculating the Net Asset Value of the Fund and the Portfolio Funds as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds market exposure, MLAI may urge the respective Trading Advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by respective Trading Advisors.
Non-Trading Risk
The Fund and the Portfolio Funds control the non-trading exchange rate risk by regularly converting foreign currency balances back into U.S. dollars at least once per week and more frequently if a particular foreign currency balance becomes unusually high.
The Fund and the Portfolio Funds have cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held by the Fund in order to facilitate margin payments and pay expenses and redemptions. MLAI does not take any steps to limit the cash flow risk on the cash held on deposit at MLPF&S.
Item 8: Financial Statements and Supplementary Data
Net Income (Loss) by Quarter
Eight Quarters through December 31, 2013
|
|
Fourth |
|
Third |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
First |
| ||||||||
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
| ||||||||
|
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
2012 |
|
2012 |
|
2012 |
|
2012 |
| ||||||||
Total Income (Loss) |
|
$ |
15,515,916 |
|
$ |
(17,027,866 |
) |
$ |
(18,194,186 |
) |
$ |
13,803,945 |
|
$ |
(25,746,718 |
) |
$ |
6,925,873 |
|
$ |
(9,916,361 |
) |
$ |
(2,315,027 |
) |
Total Expenses |
|
1,968,231 |
|
2,219,986 |
|
2,606,566 |
|
2,960,628 |
|
3,363,887 |
|
3,967,116 |
|
4,399,348 |
|
4,884,843 |
| ||||||||
Net Income (Loss) |
|
$ |
13,547,685 |
|
$ |
(19,247,852 |
) |
$ |
(20,800,752 |
) |
$ |
10,843,317 |
|
$ |
(29,110,605 |
) |
$ |
2,958,757 |
|
$ |
(14,315,709 |
) |
$ |
(7,199,870 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net Income (Loss) per weighted average Unit (a) |
|
$ |
0.0405 |
|
$ |
(0.0497 |
) |
$ |
(0.0484 |
) |
$ |
0.0226 |
|
$ |
(0.0530 |
) |
$ |
0.0048 |
|
$ |
(0.0208 |
) |
$ |
(0.0094 |
) |
(a) The Net Income (Loss) per weighted average Unit is based on the weighted average of the total Units for each quarter.
The financial statements required by this Item are included in Exhibit 13.01.
The supplementary financial information (information about oil and gas producing activities) specified by Item 302(b) of Regulation S-K is not applicable.
Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A: Controls and Procedures
Disclosure Controls and Procedures
MLAIs Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund, have evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act) with respect to the Fund as of and for the year ended December 31, 2013, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective.
Managements Annual Report on Internal Control over Financial Reporting
The Funds management is responsible for establishing and maintaining adequate internal control over financial reporting. The Funds internal control over financial reporting is a process designed under the supervision of MLAIs Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund and is effected by management, other personnel and service providers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and included those policy and procedures that:
· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Fund.
· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Fund are being made only in accordance with authorizations of management and directors of the Fund; and
· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Funds assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.
The Funds management assessed the effectiveness of the Funds internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on its assessment the Funds management concluded that at December 31, 2013, the Funds internal control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting (in connection with Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act) occurred during the quarter ended December 31, 2013 that has materially affected, or is reasonable likely to materially affect, the Funds internal control over financial reporting.
Item 9B: Other Information
Not applicable.
PART III
Item 10: Directors, Executive Officers and Corporate Governance to be updated
10(a) and 10(b) Identification of Directors and Executive Officers:
As a limited liability company, the Fund has no officers or directors and is managed by MLAI. Trading decisions are made by the Trading Advisors on behalf of the Portfolio Funds.
The managers and executive officers of MLAI and their respective business backgrounds are as follows:
Keith Glenfield |
Chief Executive Officer, President and Manager |
|
|
Barbra E. Kocsis |
Chief Financial Officer and Vice President |
|
|
Spencer Boggess |
Vice President and Manager |
|
|
James D. Bowden |
Vice President and Manager |
|
|
Dominick A. Carlino |
Vice President and Manager |
|
|
James L. Costabile |
Vice President and Manager |
|
|
Nancy Fahmy |
Vice President and Manager |
|
|
Ninon Marapachi |
Vice President and Manager |
|
|
Jeff McGoey |
Vice President and Manager |
|
|
Greg Parets |
Vice President and Manager |
|
|
Colleen R. Rusch |
Vice President and Manager |
|
|
Steven L. Suss |
Vice President and Manager |
Keith Glenfield, age 39, has been the Chief Executive Officer and President of MLAI since June 2013. Mr. Glenfield has been a Managing Director and Head of Global Wealth and Retirement Solutions groups (GWRS) Alternative Investments Group, a division within BAC that provides investment professionals and their clients with access to investment products and other services, since September 2012. GWRS is a business unit within the BAC Global Wealth & Investment Management Group (GWIM), a division within BAC. In this role, Mr. Glenfield is responsible for product management and development, strategy, operating risk and controls and other
aspects of BACs alternative investment platform. From August 2009 through August 2012, Mr. Glenfield was the Chief Operating Officer of GWRS. In addition to his responsibilities as Chief Operating Officer of GWRS, Mr. Glenfield was also responsible for leading business development within GWRSs Capital Markets Group from January 2012 through August 2012. Prior to assuming these roles Mr. Glenfield was the Chief Administration Officer for GWRSs Capital Markets Group from August 2008 until August 2009 and GWRSs Investment Management and Guidance Group from April 2008 to August 2008. Prior to becoming Chief Administration Officer for GWRSs Investment Management and Guidance Group, Mr. Glenfield was responsible for the Financial Planning and Wealth Management Analytics team within GWRS from February 2005 through April 2008. Mr. Glenfield has been registered with the CFTC as an associated person and listed as a principal of MLAI since June 10, 2013. Mr. Glenfield has also been registered with the CFTC as an associated person of MLPF&S since June 10, 2013. Mr. Glenfield holds a B.S. degree in Finance from the College of New Jersey and an M.B.A. from Rutgers University.
Barbra E. Kocsis, age 47, is the Chief Financial Officer for MLAI, has been listed with the CFTC as a principal of MLAI since May 21, 2007 and is a Director within BACs Global Wealth Investment Management Technology and Operations group, positions she has held since October 2006. Ms. Kocsis responsibilities include providing a full range of specialized financial and tax accounting services for the Alternative Investment products offered through the Selling Agent. She graduated cum laude from Monmouth College with a Bachelor of Science in Business Administration Accounting.
Spencer Boggess, age 46, has been a Vice President of MLAI since January 2014. Mr. Boggess has served as a Managing Director and the Head of Alternative Investments Due Diligence for Merrill Lynchs Wealth Management with GWRS since March 2009 with responsibility for research and due diligence for hedge funds, private equity and third party fund of funds. During this time, Mr. Boggess has also served as Portfolio Manager for a range of registered and private placement fund of funds. Prior to this, Mr. Boggess served as Head of Hedge Fund Research and Investment at BAC from July 2007 through March 2009 and President and CEO of Bank of America Capital Advisors LLC (BACA) from July 2007 to present. BACA is an investment advisor focusing on alternative investment products. Mr. Boggess has been listed as a principal of MLAI since January 2, 2014. Mr. Boggess received his B.A. degree from the University of Virginia and has also done graduate work at the Universitys Woodrow Wilson School of Foreign Affairs.
James D. Bowden, age 60, has been a Vice President of MLAI since January 2014. Mr. Bowden joined BACA in March 1998 to form the group and to manage BACs private equity fund of funds business. In that capacity, he has acted as the primary investment strategist for various private placement offerings and client advisory activities associated with the private equity asset class. He has also served as a member of BACAs investment committee since March 1998. In addition, Mr. Bowden has assisted GWIM professionals with the marketing and fundraising efforts for BACs private equity fund of funds products since March 1998. Mr. Bowden has been listed as a principal of MLAI since January 2, 2014. Mr. Bowden received his M.B.A. and his B.B.A. degree from the University of Michigan. He is a Certified Public Accountant.
Dominick A. Carlino, age 41, has been a Vice President of MLAI since January 2014. Mr. Carlino has been a Managing Director within GWRS heading Relationship Management and Business Development since May 2013. In his role, he is responsible for enhancing and driving relationships between MLAI and key asset management partners. Mr. Carlino was on a garden leave from July 2012 through May 2013. Prior to joining Merrill Lynch, Mr. Carlino was Senior Managing Director and Head of Business Development at AlphaOne Capital Partners LLC, an equity-focused alternative asset management firm, from March 2011 through July 2012. From April 2005 through March 2011, he served as an Executive Director within Morgan Stanley Alternative Investment Partners LP, a registered commodity pool operator, focused on business development and distribution. Mr. Carlino has been listed as a principal of MLAI since January 2, 2014. Mr. Carlino holds an M.B.A. and a B.S. degree in Finance from Villanova University.
James L. Costabile, age 38, has been a Vice President of MLAI and a Managing Director within GWRS responsible for alternative investment distribution for BAC since July 2007 and US Trust since January 2009. U.S. Trust is a division of BAC. Mr. Costabile has been listed as a principal of MLAI since July 14, 2010. He has also been registered with the CFTC as an associated person of MLPF&S since August 20, 2007. Mr. Costabile was previously registered as an associated person of Citigroup Global Markets Inc., a broker-dealer within Citigroup, Inc., a global financial services company, from December 5, 2003 to July 6, 2007. Mr. Costabile was responsible for, among other things, sales of alternative investment products to high net worth and institutional clientele at Citigroup Global
Markets Inc. from November 7, 1997 to July 6, 2007. As part of MLAIs management team, Mr. Costabile oversees the team of sales professionals and specialists responsible for supporting hedge funds, private equity and real asset offerings. Mr. Costabile received a B.S. from Fordham University and holds the Chartered Alternative Investment Analyst designation.
Nancy Fahmy, age 39, has been a Vice President of MLAI since January 2014. Ms. Fahmy has been a Managing Director within GWRS and responsible for Private Equity and Real Assets Technical Sales and Origination within MLAI since December 2012. She joined MLAI as a Director in November 2008 and was head of Private Equity and Real Assets Technical Sales from that date to December 2012. In these capacities, Ms. Fahmy was responsible for a team of private equity and real assets specialists that worked with financial advisors, portfolio managers and clients to educate and raise capital. Ms. Fahmy has been listed as a principal of MLAI since January 9, 2014. Ms. Fahmy was previously an NFA Associate Member and registered as an Associated Person of MLPF&S from March 2009 to November 2010. Ms. Fahmy holds a B.S. degree in Business Administration and Finance with a minor in Economics from the University of Delaware.
Ninon Marapachi, age 36, has been a Vice President of MLAI since January 2014. Mr. Marapachi has been the head of the Hedge Fund Origination and Product Management team within the BAC Alternative Investments Group, a division within BAC that provides investment professionals and their clients with access to investment products and other services, since September 2008. Her team is responsible for sourcing, structuring, negotiating and managing hedge funds and managed futures products on GWRS hedge fund platform. In addition, since September 2013 she has been a Director for the Board of Sponsors for Educational Opportunities, a non-profit organization with a goal to provide educational and career programs to young people from underserved communities to maximize their opportunities for higher education and future success. Ms. Marapachi has been an NFA Associate Member since February 2011 and registered as an Associated Person of MLPF&S since March 2011. Ms. Marapachi has been listed as a principal of MLAI since January 3, 2014. Ms. Marapachi graduated magna cum laude with a B.A. degree in Economics from Mount Holyoke College.
Jeff McGoey, age 37, has been a Vice President of MLAI and a Director within GWRS responsible for Alternative Investment Platform Oversight for BAC since December 2010. Mr. McGoey served as a Vice President with portfolio oversight to ten derivative based closed end funds from March 2009 through December 2010. Within GWRS Alternative Investments since May 2008, Mr. McGoey was a Vice President holding various roles including hedge fund and private equity origination, exchange fund and customized fund oversight, and has managed various strategic initiatives across the organization until December 2010. Mr. McGoey has been listed as a principal of MLAI since January 13, 2014. Mr. McGoey is a CFA Charter holder, maintains the CAIA designation and holds a B.A. degree in Economics from Rutgers College in New Jersey.
Greg Parets, age 37, has been Head of Cross Platform Initiatives for the Alternative Investments Group of GWIM since June 2013. Mr. Parets joined BAC in September 2010 as Head of Strategic Initiatives in the Alternative Investments Groups Origination & Product Management team and remained in this role until June 2013. In this role, he led creation and implementation of an industry-leading platform to offer hedge funds, managed futures, and select private equity funds to advisory accounts. Mr. Parets was in between employers from April 2010 to September 2010. Prior to joining BAC, he worked at UBS Wealth Management Americas, a provider of wealth management products and services, where he was Team Lead for the Strategy & Business Development Group from July 2006 through January 2009 and Head of Segment Strategy & Client Experience from February 2009 through April 2010. Mr. Parets has been listed as a principal of MLAI since January 2, 2014. Mr. Parets graduated summa cum laude from The George Washington University with a B.B.A. degree in International Business and cum laude from Harvard Law School with a J.D.
Colleen R. Rusch, age 46, has been a Vice President and Manager of MLAI and a Managing Director within GWRS responsible for overseeing GWRS Alternative Investments operations and trading platform since January 2008. Ms. Rusch has been listed as a principal of MLAI since September 14, 2010. In addition, from July 2005 to October 2010, Mrs. Rusch served as Chief Administrative Officer and Vice President of IQ Investment Advisors LLC (IQ), an investment advisory firm, and served as Vice President and Secretary of each of IQs publicly traded closed-end fund companies. Ms. Rusch holds a B.S. degree in Business Administration from Saint Peters College in New Jersey.
Steven L. Suss, age 54, has been a Vice President of MLAI since June 2012. He has been a Managing Director within GWRSs Alternative Investments Group since January 2008, responsible for managing finance, operational and other business aspects of BACs alternative investment platform. Mr. Suss has been listed as a principal of MLAI since June 12, 2012. Mr. Suss is also a director and the President of BACAP Alternative Advisors Inc. (BACAP), an alternative investment advisor affiliated with BAC. He has held these positions at BACAP since July 1, 2007, and is responsible for the management and supervision of the overall business of BACAP. Mr. Suss has also served as Senior Vice President of BACA since July 2007 and has been listed as a principal of BACA since November 19, 2012. Mr. Suss is responsible within BACA for the management of financial reporting and the operational affairs of the investment vehicles managed by BACA. Mr. Suss received a B.B.A. from the University of Texas at Austin.
As of December 31, 2013, the principals of MLAI had no investment in the Fund, and MLAIs sponsor interest in the Fund was valued at $0.
MLAI acts as the sponsor, general partner or manager to eight public futures funds whose units of limited partnership interests or limited liability company interests are registered under the Securities Exchange Act: Aspect FuturesAccess LLC, ML BlueTrend FuturesAccess LLC, Man AHL FuturesAccess LLC, ML Select Futures I L.P., Systematic Momentum FuturesAccess LLC, ML Transtrend DTP Enhanced FuturesAccess LLC, ML Trend-Following Futures Fund L.P, and ML Winton FuturesAccess LLC. Because MLAI serves as the sole sponsor, general partner or manager of each of these funds, the officers and managers of MLAI effectively manage them as officers and directors of such funds.
(c) Identification of Certain Significant Employees:
None.
(d) Family Relationships:
None.
(e) Business Experience:
See Items 10(a) and (b) above.
(f) Involvement in Certain Legal Proceedings:
None.
(g) Promoters and Control Persons:
Not applicable.
(h) Section 16(a) Beneficial Ownership Reporting Compliance:
To the Funds knowledge, all required Section 16(a) filings during the fiscal year ended December 31, 2013 were timely and correctly made.
Code of Ethics:
MLAI and BAC have adopted a code of ethics which applies to the Funds (MLAIs) principal executive officer and principal financial officer or persons performing similar functions on behalf of the Fund. A copy of the code of ethics is available to any person, without charge, upon request by calling 1-866-MER-ALTS.
Nominating Committee:
Not applicable. (Neither the Fund nor MLAI has nominating committee.)
Audit Committee: Audit Committee Financial Expert:
Not applicable. (Neither the Fund nor MLAI has an audit committee. There are no listed shares of the Fund or MLAI.)
Item 11: Executive Compensation
The managers and officers of MLAI are remunerated by BAC in their respective positions. The Fund does not have any officers, managers or employees. The Funds pay Sponsor fees to MLAI. The Portfolio Funds pay brokerage commissions to MLPF&S, which is a BAC affiliate. MLAI also receives a portion of the management fees from some of Trading Advisors or Portfolio Funds, and a portion of the performance fees from some of the Trading Advisors. MLAI or BAC affiliates may also receive certain economic benefits from possession of the Funds and Portfolio Funds U.S. dollar assets. The managers and officers receive no other compensation from the Fund, and the managers receive no compensation for serving as managers of MLAI. There are no compensation plans or arrangements relating to a change in control of either the Fund or MLAI.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners:
Not applicable. (The Units represent limited liability company interests. The Fund is managed by, its manager, MLAI.)
(b) Security Ownership of Management:
As of December 31, 2013, MLAI owned no Unit-equivalent member interests, and the principals of MLAI did not own any Units.
(c) Changes in Control:
None.
(d) Securities Authorized for Issuance Under Equity Compensation Plans:
Not applicable.
Item 13: Certain Relationships and Related Transactions and Director Independence
Not applicable
Director Independence
No person who served as a manager of MLAI during 2013 could be considered independent (based on the definition of an independent director under NASDAQ rules.)
Item 14: Principal Accounting Fees and Services
(a) Audit Fees
Aggregate fees billed directly to the Fund for professional services rendered by the principal accountant PricewaterhouseCoopers LLP, for the audit of the Funds annual financial statements and review of financial statements included in the Funds Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the years ended December 31, 2013 and 2012 were $173,595 and $163,000, respectively.
(b) Audit-Related Fees
There were no other audit-related fees billed for the years ended December 31, 2013 and 2012 related to the Fund.
(c) Tax Fees
No fees were billed by PricewaterhouseCoopers LLP or any member firms of PricewaterhouseCoopers and their respective affiliates for the years ended December 31, 2013 and 2012 for professional services rendered to the Fund in connection with tax compliance, tax advice and tax planning.
(d) All Other Fees
No other fees were billed by PricewaterhouseCoopers LLP or any member firms of PricewaterhouseCoopers and their respective affiliates for the years ended December 31, 2013 and 2012, other than as set forth in the preceding paragraph (a).
(e) Neither the Fund nor MLAI has an audit committee to pre-approve principal accountant fees and services. In lieu of an audit committee, the managers and the principal financial officer pre-approve all billings prior to the commencement of services.
PART IV
Item 15: Exhibits, Financial Statement Schedules
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Page |
1. |
Financial Statements: |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
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2. |
Financial Statement Schedules: |
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(a) Financial Statements of Altis FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
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(b) Financial Statements of Aspect FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
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(c) Financial Statements of BlueTrend FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
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(d) Financial Statements of John Locke FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
5 |
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Notes to Financial Statements |
8 |
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(e) Financial Statements of Lynx FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations) to December 31, 2012 |
3 |
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Statements of Changes in Members Capital for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations) to December 31, 2012 |
4 |
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Financial Data Highlights for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations)to December 31, 2012 |
5 |
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Notes to Financial Statements |
7 |
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(f) Financial Statements of ML Transtrend DTP Enhanced FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
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(g) Financial Statements of Tudor Tensor FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
5 |
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Notes to Financial Statements |
8 |
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(h) Financial Statements of Winton FuturesAccess LLC |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
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Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
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Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
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Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
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Notes to Financial Statements |
9 |
3. Exhibits: The following exhibits are incorporated by reference or are filed herewith to this Annual Report on Form 10-K:
Designation |
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Description |
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3.01 |
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Amended and Restated Certificate of Formation of Systematic Momentum FuturesAccess LLC. |
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Exhibit 3.01: |
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Is incorporated by reference from Exhibit 3.01 contained in the registrants Report on Form 8-K filed on February 14, 2012. |
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3.02 |
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Third Amended and Restated Limited Liability Company Operating Agreement of Systematic Momentum FuturesAccess LLC. |
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Exhibit 3.02 |
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Is incorporated by reference from Exhibit 3.02 contained in the registrants Report on Form 8-K, filed on December 6, 2012. |
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3.03 |
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Amendment to the Third Amended and Restated Limited Liability Company Operating Agreement of Systematic Momentum FuturesAccess LLC. |
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Exhibit 3.03 |
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Is incorporated by reference from Exhibit 3.02(i) contained in the registrants Report on Form 8-K filed on November 11, 2013. |
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13.01 |
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2013 Annual Report and Report of Independent Registered Public Accounting Firm. |
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13.02 |
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Financial Statements of Altis FuturesAccess LLC |
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13.03 |
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Financial Statements of Aspect FuturesAccess LLC |
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13.04 |
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Financial Statements of ML BlueTrend FuturesAccess LLC |
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13.05 |
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Financial Statements of John Locke FuturesAccess LLC |
13.06 |
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Financial Statements of Lynx FuturesAccess LLC |
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13.07 |
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Financial Statements of ML Transtrend DTP Enhanced FuturesAccess LLC |
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13.08 |
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Financial Statements of Tudor Tensor FuturesAccess LLC |
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13.09 |
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Financial Statements of ML Winton FuturesAccess LLC |
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Exhibit 13.01 |
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Exhibit 13.02: |
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Exhibit 13.03: |
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Exhibit 13.04 |
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Exhibit 13.05 |
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Exhibit 13.06 |
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Exhibit 13.07 |
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Exhibit 13.08 |
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Exhibit 13.09 |
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Are filed herewith. |
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31.01 and 31.02 |
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Rule 13a-14(a)/15d-14(a) Certifications |
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Exhibit 31.01 and 31.02: |
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Are filed herewith. |
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32.01 and 32.02 |
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Section 1350 Certifications. |
|
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Exhibit 32.01 and 32.02: |
|
Are filed herewith. |
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99.1 |
|
Amended and Restated Selling Agreement effective as of July 8, 2011 between Merrill Lynch Alternative Investments LLC (for itself, and as sponsor on behalf of the investment funds listed therein) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as selling agent). |
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Exhibit 99.1: |
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Is incorporated by reference from Exhibit 99.1 contained in the registrants Report on Form 8-K filed on July 11, 2011. |
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101 |
|
The following materials from the Funds Annual Report on Form 10-K for the fiscal year ended December 31, 2013 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. |
|
|
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Exhibit 101 |
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Is filed herewith. |
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
By: MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC, Manager
By: |
/s/Keith Glenfield |
|
Keith Glenfield |
| |
Chief Executive Officer, President and Manager |
| |
(Principal Executive Officer) |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
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Title |
|
Date |
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|
|
/s/Keith Glenfield |
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Chief Executive Officer, President and Manager |
|
March 25, 2014 |
Keith Glenfield |
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(Principal Executive Officer) |
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|
/s/ Barbra E. Kocsis |
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Chief Financial Officer and Vice President |
|
March 25, 2014 |
Barbra E. Kocsis |
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(Principal Financial and Officer) |
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/s/Spencer Boggess |
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Vice President and Manager |
|
March 25, 2014 |
Spencer Boggess |
|
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/s/James D. Bowden |
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Vice President and Manager |
|
March 25, 2014 |
James D. Bowden |
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/s/Dominick A. Carlino |
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Vice President and Manager |
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March 25, 2014 |
Dominick A.Carlino |
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/s/James L. Costabile |
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Vice President and Manager |
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March 25, 2014 |
James L. Costabile |
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/s/Nancy Fahmy |
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Vice President and Manager |
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March 25, 2014 |
Nancy Fahmy |
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/s/Ninon Marapachi |
|
Vice President and Manager |
|
March 25, 2014 |
Ninon Marapachi |
|
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|
|
/s/Jeff McGoey |
|
Vice President and Manager |
|
March 25, 2014 |
Jeff McGoey |
|
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|
/s/ Greg Parets |
|
Vice President and Manager |
|
March 25, 2014 |
Greg Parets |
|
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|
/s/Colleen R. Rusch |
|
Vice President and Manager |
|
March 25, 2014 |
Colleen R. Rusch |
|
|
|
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|
|
/s/Steven L. Suss |
|
Vice President and Manager |
|
March 25, 2014 |
Steven L. Suss |
|
|
|
|
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
2013 FORM 10-K
INDEX TO EXHIBITS
|
|
Exhibit |
|
|
|
Exhibit 13.01 |
|
2013 Annual Report and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.02 |
|
Altis FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013 and 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.03 |
|
Aspect FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.04 |
|
ML BlueTrend FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.05 |
|
John Locke FuturesAccess LLC (Formerly ML John Locke FuturesAccess LLC) Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.06 |
|
Lynx FuturesAccess LLC Financial Statements as of December 31, 2013 and 2012 and for the year ended December 31, 2013 and for the period July 1, 2012 (Commencement of Operations) to December 31, 2012 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.07 |
|
ML Transtrend DTP Enhanced FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.08 |
|
Tudor Tensor FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
|
|
|
Exhibit 13.09 |
|
ML Winton FuturesAccess LLC Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm |
Exhibit 31.01 and 31.02 |
|
Rule 13a - 14(a) / 15d - 14(a) Certifications |
|
|
|
Exhibit 32.01 and 32.02 |
|
Sections 1350 Certifications |
Exhibit 101 |
|
The following materials from the Funds Annual Report on Form 10-K for the fiscal year ended December 31, 2013 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. |
Exhibit 13.01
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for the years ended
December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
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Page |
|
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of Systematic Momentum FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of Systematic Momentum FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Cash |
|
$ |
364,271 |
|
$ |
351,777 |
|
Investment in Portfolio Funds (Cost $310,987,490 at 2013 and $565,995,535 at 2012) |
|
297,556,960 |
|
543,641,020 |
| ||
Other assets |
|
|
|
|
| ||
Receivable from Portfolio Fund |
|
15,633,240 |
|
16,572,631 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
313,554,471 |
|
$ |
560,565,428 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Sponsor fee payable |
|
$ |
540,195 |
|
$ |
933,374 |
|
Redemptions payable |
|
15,194,904 |
|
16,058,487 |
| ||
Other liabilities |
|
537,344 |
|
503,803 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
16,272,443 |
|
17,495,664 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (287,991,182 Units and 505,619,472 Units outstanding, unlimited Units authorized) |
|
297,282,028 |
|
543,069,764 |
| ||
Total members capital |
|
297,282,028 |
|
543,069,764 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
313,554,471 |
|
$ |
560,565,428 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
|
$ |
1.0369 |
|
$ |
1.0689 |
|
Class C |
|
$ |
1.0135 |
|
$ |
1.0554 |
|
Class D |
|
$ |
1.2809 |
|
$ |
1.3008 |
|
Class I |
|
$ |
1.1115 |
|
$ |
1.1413 |
|
Class D1 |
|
$ |
|
|
$ |
1.1609 |
|
Class M |
|
$ |
0.9463 |
|
$ |
0.9610 |
|
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(14,826,176 |
) |
$ |
20,681,999 |
|
$ |
15,968,361 |
|
Change in unrealized, net |
|
8,923,985 |
|
(51,734,232 |
) |
(92,022,075 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
(5,902,191 |
) |
(31,052,233 |
) |
(76,053,714 |
) | |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
|
|
|
|
187 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Sponsor fee |
|
8,734,447 |
|
15,170,255 |
|
20,592,497 |
| |||
Other |
|
1,020,964 |
|
1,444,939 |
|
1,518,474 |
| |||
Total expenses |
|
9,755,411 |
|
16,615,194 |
|
22,110,971 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(9,755,411 |
) |
(16,615,194 |
) |
(22,110,784 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(15,657,602 |
) |
$ |
(47,667,427 |
) |
$ |
(98,164,498 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class A |
|
64,199,499 |
|
104,025,213 |
|
121,155,293 |
| |||
Class C |
|
283,424,235 |
|
450,594,516 |
|
580,425,923 |
| |||
Class D |
|
13,067,524 |
|
27,385,393 |
|
36,049,556 |
| |||
Class I |
|
29,582,574 |
|
57,210,751 |
|
78,129,418 |
| |||
Class D1** |
|
7,907,549 |
|
16,810,201 |
|
30,682,341 |
| |||
Class M* |
|
9,577,845 |
|
1,610,040 |
|
150,000 |
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class A |
|
$ |
(0.0313 |
) |
$ |
(0.0693 |
) |
$ |
(0.1077 |
) |
Class C |
|
$ |
(0.0435 |
) |
$ |
(0.0758 |
) |
$ |
(0.1203 |
) |
Class D |
|
$ |
(0.0030 |
) |
$ |
(0.0568 |
) |
$ |
(0.1081 |
) |
Class I |
|
$ |
(0.0295 |
) |
$ |
(0.0686 |
) |
$ |
(0.1098 |
) |
Class D1** |
|
$ |
0.0014 |
|
$ |
(0.0525 |
) |
$ |
(0.0923 |
) |
Class M* |
|
$ |
(0.0436 |
) |
$ |
0.0418 |
|
$ |
0.0143 |
|
*Units issued on December 1, 2011 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2011 is for the period December 1, 2011 to December 31, 2011).
**Units liquidated as of December 31, 2013.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2013 |
|
Class A |
|
109,942,197 |
|
36,161,964 |
|
(27,688,933 |
) |
118,415,228 |
|
5,787,314 |
|
(44,286,275 |
) |
79,916,267 |
|
1,650,030 |
|
(36,646,942 |
) |
44,919,355 |
|
Class C |
|
545,907,287 |
|
109,176,693 |
|
(114,022,150 |
) |
541,061,830 |
|
18,344,112 |
|
(216,185,055 |
) |
343,220,887 |
|
8,543,047 |
|
(143,029,944 |
) |
208,733,990 |
|
Class D |
|
34,000,711 |
|
6,889,653 |
|
(7,925,754 |
) |
32,964,610 |
|
2,674,046 |
|
(15,005,967 |
) |
20,632,689 |
|
875,693 |
|
(11,404,838 |
) |
10,103,544 |
|
Class I |
|
78,308,142 |
|
7,441,738 |
|
(15,853,937 |
) |
69,895,943 |
|
1,484,387 |
|
(33,715,359 |
) |
37,664,971 |
|
1,118,369 |
|
(18,994,239 |
) |
19,789,101 |
|
Class D1** |
|
35,556,370 |
|
546,379 |
|
(15,693,347 |
) |
20,409,402 |
|
|
|
(8,681,423 |
) |
11,727,979 |
|
375,761 |
|
(12,103,740 |
) |
|
|
Class M* |
|
|
|
150,000 |
|
|
|
150,000 |
|
13,026,897 |
|
(720,218 |
) |
12,456,679 |
|
534,816 |
|
(8,546,303 |
) |
4,445,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
803,714,707 |
|
160,366,427 |
|
(181,184,121 |
) |
782,897,013 |
|
41,316,756 |
|
(318,594,297 |
) |
505,619,472 |
|
13,097,716 |
|
(230,726,006 |
) |
287,991,182 |
|
*Units issued on December 1, 2011.
**Units liquidated as of December 31, 2013.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
| |||||||||||||
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2013 |
| |||||||||||||
Class A |
|
$ |
137,682,539 |
|
$ |
43,711,467 |
|
$ |
(32,725,858 |
) |
$ |
(13,053,344 |
) |
$ |
135,614,804 |
|
$ |
6,563,991 |
|
$ |
(49,541,526 |
) |
$ |
(7,212,292 |
) |
$ |
85,424,977 |
|
$ |
1,762,136 |
|
$ |
(38,598,628 |
) |
$ |
(2,012,621 |
) |
$ |
46,575,864 |
|
Class C |
|
688,642,500 |
|
132,685,075 |
|
(133,565,678 |
) |
(69,805,950 |
) |
617,955,947 |
|
20,712,176 |
|
(242,275,102 |
) |
(34,161,992 |
) |
362,231,029 |
|
8,933,000 |
|
(147,275,707 |
) |
(12,326,390 |
) |
211,561,932 |
| |||||||||||||
Class D |
|
50,284,160 |
|
10,122,993 |
|
(11,252,683 |
) |
(3,896,426 |
) |
45,258,044 |
|
3,553,408 |
|
(20,416,658 |
) |
(1,555,326 |
) |
26,839,468 |
|
1,106,000 |
|
(14,965,007 |
) |
(38,787 |
) |
12,941,674 |
| |||||||||||||
Class I |
|
103,872,241 |
|
9,556,684 |
|
(19,721,881 |
) |
(8,579,840 |
) |
85,127,204 |
|
1,830,831 |
|
(40,047,438 |
) |
(3,923,302 |
) |
42,987,295 |
|
1,292,872 |
|
(21,410,745 |
) |
(873,266 |
) |
21,996,156 |
| |||||||||||||
Class D1** |
|
46,930,446 |
|
711,112 |
|
(19,802,857 |
) |
(2,831,089 |
) |
25,007,612 |
|
|
|
(10,510,076 |
) |
(881,860 |
) |
13,615,676 |
|
420,391 |
|
(14,047,447 |
) |
11,380 |
|
|
| |||||||||||||
Class M* |
|
|
|
150,000 |
|
|
|
2,151 |
|
152,151 |
|
12,443,306 |
|
(691,483 |
) |
67,345 |
|
11,971,319 |
|
518,000 |
|
(7,864,999 |
) |
(417,918 |
) |
4,206,402 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
1,027,411,886 |
|
$ |
196,937,331 |
|
$ |
(217,068,957 |
) |
$ |
(98,164,498 |
) |
$ |
909,115,762 |
|
$ |
45,103,712 |
|
$ |
(363,482,283 |
) |
$ |
(47,667,427 |
) |
$ |
543,069,764 |
|
$ |
14,032,399 |
|
$ |
(244,162,533 |
) |
$ |
(15,657,602 |
) |
$ |
297,282,028 |
|
*Units issued on December 1, 2011.
**Units liquidated as of December 31, 2013.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class D1* |
|
Class M |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year |
|
$ |
1.0689 |
|
$ |
1.0554 |
|
$ |
1.3008 |
|
$ |
1.1413 |
|
$ |
1.1609 |
|
$ |
0.9610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Realized and net unrealized change in trading profit (loss) |
|
(0.0138 |
) |
(0.0135 |
) |
(0.0168 |
) |
(0.0147 |
) |
(0.0150 |
) |
(0.0124 |
) | ||||||
Expenses |
|
(0.0182 |
) |
(0.0284 |
) |
(0.0031 |
) |
(0.0151 |
) |
(0.0027 |
) |
(0.0023 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, before liquidation |
|
|
|
|
|
|
|
|
|
1.1432 |
|
|
| ||||||
Less liquidating distribution |
|
|
|
|
|
|
|
|
|
1.1432 |
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.0369 |
|
$ |
1.0135 |
|
$ |
1.2809 |
|
$ |
1.1115 |
|
$ |
|
|
$ |
0.9463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return |
|
-3.00 |
% |
-3.96 |
% |
-1.53 |
% |
-2.61 |
% |
-1.53 |
% |
-1.53 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses |
|
1.74 |
% |
2.74 |
% |
0.24 |
% |
1.34 |
% |
0.24 |
% |
0.24 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-1.74 |
% |
-2.74 |
% |
-0.24 |
% |
-1.34 |
% |
-0.24 |
% |
-0.24 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
*Units liquidated as of December 31, 2013.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class D1 |
|
Class M |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year |
|
$ |
1.1452 |
|
$ |
1.1421 |
|
$ |
1.3729 |
|
$ |
1.2179 |
|
$ |
1.2253 |
|
$ |
1.0143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Realized and net unrealized change in trading profit (loss) |
|
(0.0572 |
) |
(0.0565 |
) |
(0.0694 |
) |
(0.0610 |
) |
(0.0620 |
) |
(0.0513 |
) | ||||||
Expenses |
|
(0.0191 |
) |
(0.0302 |
) |
(0.0027 |
) |
(0.0156 |
) |
(0.0024 |
) |
(0.0020 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.0689 |
|
$ |
1.0554 |
|
$ |
1.3008 |
|
$ |
1.1413 |
|
$ |
1.1609 |
|
$ |
0.9610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return |
|
-6.66 |
% |
-7.59 |
% |
-5.25 |
% |
-6.29 |
% |
-5.25 |
% |
-5.25 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses |
|
1.70 |
% |
2.70 |
% |
0.20 |
% |
1.30 |
% |
0.20 |
% |
0.20 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-1.70 |
% |
-2.70 |
% |
-0.20 |
% |
-1.30 |
% |
-0.20 |
% |
-0.20 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class D1 |
|
Class M* |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year or at the time of offer |
|
$ |
1.2523 |
|
$ |
1.2615 |
|
$ |
1.4789 |
|
$ |
1.3265 |
|
$ |
1.3199 |
|
$ |
1.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Realized and net unrealized change in trading profit (loss) |
|
(0.0874 |
) |
(0.0877 |
) |
(0.1039 |
) |
(0.0928 |
) |
(0.0927 |
) |
0.0145 |
| ||||||
Expenses |
|
(0.0197 |
) |
(0.0317 |
) |
(0.0021 |
) |
(0.0158 |
) |
(0.0019 |
) |
(0.0002 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.1452 |
|
$ |
1.1421 |
|
$ |
1.3729 |
|
$ |
1.2179 |
|
$ |
1.2253 |
|
$ |
1.0143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return |
|
-8.55 |
% |
-9.46 |
% |
-7.17 |
% |
-8.18 |
% |
-7.17 |
% |
1.43 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses |
|
1.64 |
% |
2.64 |
% |
0.15 |
% |
1.24 |
% |
0.15 |
% |
0.01 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-1.64 |
% |
-2.64 |
% |
-0.15 |
% |
-1.24 |
% |
-0.15 |
% |
-0.01 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
* Units issued on December 1, 2011.
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Formerly ML Systematic Momentum FuturesAccess LLC)
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC) (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced operations on April 2, 2007. The Fund operates as a fund of funds, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (MLAI or the Sponsor), the sponsor and manager of the Fund, among underlying FuturesAccess Funds (each a Portfolio Fund, and collectively the Portfolio Funds) (See Note 2). Presently there are eight Portfolio Funds. MLAI is the sponsor and manager of the Portfolio Funds.
MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Portfolio Funds. MLAI may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Portfolio Funds. MLAI may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
As of December 31, 2013 the Fund offers six Classes of Units to retail investors: Class A, Class C, Class D, Class D1, Class M and Class I. Each Class of Units is offered at Net Asset Value per Unit. The six Classes of Units are subject to different Sponsor fees. Class D1 is used exclusively for investments made by Systematic Momentum FuturesAccess LTD, which reflects an interest by another fund within the FuturesAccess group. The Class M Units are for Investors who are subscribing through a managed investment account program at MLPF&S and who satisfy other requirements as determined by the Sponsor from time to time.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and
are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
The Portfolio Funds may invest in commodity futures, options on futures and forward contract transactions which are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition of the Portfolio Funds as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss), on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations of the Portfolio Funds.
Trading profit (loss) of the Portfolio Funds includes brokerage commission costs on commodity contracts.
The resulting change between cost and market value (net of subscription and redemption activity in the investment in the Portfolio Funds) is reflected in the Statements of Operations as Change in unrealized. In addition, when the Fund redeems or partially redeems its interest in the Portfolio Funds, it records realized (net profit or loss) under Trading profit (loss) for such interests in the Statements of Operations of the Portfolio Fund.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, the Portfolio Funds may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition of the Fund and each of the Portfolio Funds. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.00% to 2.50%. Class D Units and Class I Units are subject to sales commissions paid to MLPF&S up to 0.50%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class M Units and Class D1Units are not subject to any sales commissions.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such members respective share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following are the major tax jurisdictions for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund will dissolve if certain circumstances occur as set forth in the limited liability company operating agreement, which include:
(a) Bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of the Fund.
(b) Any event which would make unlawful the continued existence of the Fund.
(c) Withdrawal of the Sponsor unless at such time there is at least one remaining manager.
(d) The determination by the Sponsor to liquidate the Fund and wind up its affairs.
2. INVESTMENTS IN PORTFOLIO FUNDS
The eight Portfolio Funds in which the Fund is invested in as of December 31, 2013 and 2012 are: Altis FuturesAccess LLC (Altis) (formerly ML Altis FuturesAccess LLC), Aspect FuturesAccess LLC (Aspect) (formerly ML Aspect FuturesAccess LLC), ML BlueTrend FuturesAccess LLC (BlueTrend), John Locke FuturesAccess LLC (John Locke) (formerly ML John Locke FuturesAccess LLC), Lynx FuturesAccess LLC (Lynx), ML Transtrend DTP Enhanced FuturesAccess LLC (Transtrend), Tudor Tensor FuturesAccess LLC (Tudor Tensor) and ML Winton FuturesAccess LLC (Winton). The strategy of these Portfolio Funds is to be trend followers. MLAI, in its discretion, may change the Portfolio Funds at any time. MLAI, also at its discretion, may vary the percentage of the Funds total portfolio allocated to the different Portfolio Funds. There is no pre-established range for the minimum and maximum allocations that may be made to any individual Portfolio Fund.
The investment transactions were accounted for on trade date. The investments in the Portfolio Funds are valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, MLAI utilized the net asset value of the underlying Portfolio Funds which approximates fair value. The fair value was net of all fees relating to the Portfolio Funds, paid or accrued. Additionally, MLAI monitored the performance of the Portfolio Funds. Such monitoring procedures included, but were not limited to: monitoring market movements in Portfolio Funds investments, comparing
performance to industry benchmarks, and conference calls and site visits with the Portfolio Funds respective trading advisors (Trading Advisors).
At December 31, 2013, investments in Portfolio Funds at fair value are as follows:
|
|
Percentage of |
|
Fair Value |
|
Profit (Loss) |
|
Cost @ 12/31/13 |
|
Management |
|
Performance |
|
Redemptions Permitted |
| |||||
Transtrend |
|
16.01 |
% |
47,609,112 |
|
(1,133,475 |
) |
48,383,987 |
|
(1,377,170 |
) |
|
|
Semi -Monthly |
| |||||
Altis |
|
10.01 |
% |
29,755,695 |
|
(994,297 |
) |
40,493,981 |
|
(860,493 |
) |
|
|
Semi -Monthly |
| |||||
Winton |
|
17.02 |
% |
50,584,682 |
|
4,851,535 |
|
42,814,840 |
|
(1,470,171 |
) |
(370,016 |
) |
Semi -Monthly |
| |||||
Aspect |
|
10.01 |
% |
29,755,695 |
|
(1,840,897 |
) |
29,271,612 |
|
(859,787 |
) |
|
|
Semi -Monthly |
| |||||
John Locke |
|
10.01 |
% |
29,755,701 |
|
(770,711 |
) |
32,368,986 |
|
(860,679 |
) |
|
|
Semi -Monthly |
| |||||
BlueTrend |
|
17.02 |
% |
50,584,682 |
|
(7,091,153 |
) |
54,095,167 |
|
(1,475,532 |
) |
(89,462 |
) |
Monthly |
| |||||
Tudor |
|
10.01 |
% |
29,755,698 |
|
(1,856,365 |
) |
33,877,844 |
|
(859,774 |
) |
|
|
Semi -Monthly |
| |||||
Lynx |
|
10.01 |
% |
29,755,695 |
|
2,933,172 |
|
29,681,073 |
|
(863,779 |
) |
(12,671 |
) |
Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
100.10 |
% |
$ |
297,556,960 |
|
$ |
(5,902,191 |
) |
$ |
310,987,490 |
|
$ |
(8,627,385 |
) |
$ |
(472,149 |
) |
|
|
At December 31, 2012, investments in Portfolio Funds at fair value are as follows:
|
|
Percentage of |
|
Fair Value |
|
Profit (Loss) |
|
Cost @ 12/31/12 |
|
Management |
|
Performance |
|
Redemptions Permitted |
| |||||
Transtrend |
|
16.02 |
% |
86,982,563 |
|
1,952,715 |
|
91,506,604 |
|
(2,486,864 |
) |
(120,573 |
) |
Semi -Monthly |
| |||||
Altis |
|
10.01 |
% |
54,364,101 |
|
(7,127,827 |
) |
75,847,367 |
|
(1,677,763 |
) |
|
|
Semi -Monthly |
| |||||
Winton |
|
17.02 |
% |
92,418,972 |
|
(6,017,214 |
) |
83,860,910 |
|
(2,533,168 |
) |
(5,246 |
) |
Semi -Monthly |
| |||||
Aspect |
|
10.01 |
% |
54,364,101 |
|
(6,877,343 |
) |
52,085,229 |
|
(1,443,377 |
) |
(87,941 |
) |
Semi -Monthly |
| |||||
John Locke |
|
10.01 |
% |
54,364,106 |
|
(3,772,153 |
) |
58,936,300 |
|
(1,761,077 |
) |
|
|
Semi -Monthly |
| |||||
BlueTrend |
|
17.02 |
% |
92,418,971 |
|
(1,622,871 |
) |
85,857,589 |
|
(2,835,668 |
) |
(63,100 |
) |
Monthly |
| |||||
Tudor |
|
10.01 |
% |
54,364,104 |
|
(2,593,904 |
) |
59,046,955 |
|
(1,683,773 |
) |
|
|
Semi -Monthly |
| |||||
Lynx* |
|
10.01 |
% |
54,364,102 |
|
(4,993,636 |
) |
58,854,581 |
|
(327,449 |
) |
(21,511 |
) |
Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
100.11 |
% |
$ |
543,641,020 |
|
$ |
(31,052,233 |
) |
$ |
565,995,535 |
|
$ |
(14,749,139 |
) |
$ |
(298,371 |
) |
|
|
* Issued as of July 1, 2012.
There are no investments held by the Portfolio Funds that in the aggregate exceed 5% of the Funds members capital. These investments are recorded at fair value. In accordance with Regulation S-X, a prescribed regulation by the Securities and Exchange Commission, there are specific formats and contents of financial reports. The following is summarized financial information for each of the significant Portfolio Funds:
|
|
As of December 31, 2013 |
|
|
| |||||||
|
|
Total Assets |
|
Total Liabilities |
|
Total Capital |
|
|
| |||
Winton |
|
$ |
1,006,017,501 |
|
$ |
27,668,096 |
|
$ |
978,349,405 |
|
|
|
Bluetrend |
|
128,712,857 |
|
14,876,861 |
|
113,835,996 |
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Total |
|
$ |
1,134,730,358 |
|
$ |
42,544,957 |
|
$ |
1,092,185,401 |
|
|
|
|
|
As of December 31, 2012 |
|
|
| |||||||
|
|
Total Assets |
|
Total Liabilities |
|
Total Capital |
|
|
| |||
Altis |
|
$ |
56,323,395 |
|
$ |
1,959,294 |
|
$ |
54,364,101 |
|
|
|
Aspect |
|
$ |
279,441,442 |
|
$ |
7,200,449 |
|
$ |
272,240,993 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
$ |
335,764,837 |
|
$ |
9,159,743 |
|
$ |
326,605,094 |
|
|
|
|
|
For the year ended December 31, 2013 |
| ||||||||||
|
|
|
|
|
|
|
|
Net |
| ||||
|
|
Income (Loss) |
|
Commissions |
|
Other |
|
Income (Loss) |
| ||||
Winton |
|
$ |
6,929,127 |
|
$ |
(89,788 |
) |
$ |
(1,987,804 |
) |
$ |
4,851,535 |
|
Bluetrend |
|
(4,927,776 |
) |
(377,641 |
) |
(1,785,736 |
) |
(7,091,153 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
$ |
2,001,351 |
|
$ |
(467,429 |
) |
$ |
(3,773,540 |
) |
$ |
(2,239,618 |
) |
|
|
For the year ended December 31, 2012 |
| ||||||||||
|
|
|
|
|
|
|
|
Net |
| ||||
|
|
Income (Loss) |
|
Commissions |
|
Other |
|
Income (Loss) |
| ||||
Altis |
|
$ |
(4,910,111 |
) |
$ |
(362,329 |
) |
$ |
(1,855,387 |
) |
$ |
(7,127,827 |
) |
Aspect |
|
$ |
(4,929,332 |
) |
$ |
(196,865 |
) |
$ |
(1,751,146 |
) |
$ |
(6,877,343 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
$ |
(9,839,443 |
) |
$ |
(559,194 |
) |
$ |
(3,606,533 |
) |
$ |
(14,005,170 |
) |
The income statement information presented above is the Funds proportionate ownership of the Portfolio Fund.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at measurement date (i.e. the exit price). Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for
these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Investments in Portfolio Funds are valued using the net asset value reported by the Portfolio Funds, which management believes approximates fair value. These net asset values are the prices used to execute trades with these Portfolio Funds. As such, the Fund determined that its investments in these Portfolio Funds would be classified as Level II. There were no transfers to or from Level II during 2013 and 2012.
The following table summarizes the valuation of the Funds investment by the above fair value hierarchy levels as of December 31, 2013 and 2012:
Investment in |
|
|
|
|
|
|
|
|
| ||||
Portfolio Funds |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
297,556,960 |
|
$ |
|
|
$ |
297,556,960 |
|
$ |
|
|
December 31, 2012 |
|
$ |
543,641,020 |
|
$ |
|
|
$ |
543,641,020 |
|
$ |
|
|
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year ended December 31, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the years ended December 31, 2013, 2012, and 2011 amounted to $92,030, $151,107 and $208,890, respectively, of which $10,835 and $13,062 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Portfolio Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Portfolio Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Portfolio Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Portfolio Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Portfolio Funds account and is posted to the Portfolio Funds account on a monthly basis.
MLPF&S charges the Portfolio Funds at prevailing local interest rates for financing realized and unrealized losses on each Portfolio Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund charges Sponsor fees on the month-end net assets, after all other charges at annual rates equal to 1.50% for Class A Units, 2.50% for Class C Units, and 1.10% for Class I Units. Class D1 Units, Class D Units and Class M Units are not charged a Sponsor fee.
Interest and Sponsor fees as presented on the Statements of Operations are paid to related parties.
5. ADVISORY AGREEMENTS
Each Portfolio Fund implements a systematic-based managed futures strategy under the direction of its Trading Advisors which are listed below:
|
|
Trading |
|
Next Renewal Date |
|
Management |
|
Performance |
|
Portfolio Fund |
|
Advisor |
|
of Advisory Agreement |
|
Fee Rate |
|
Fee Rate |
|
Altis |
|
Altis Partners (Jersey) Limited |
|
December 31, 2016 |
|
2 |
% |
20 |
% |
Aspect |
|
Aspect Capital Limited |
|
December 31, 2016 |
|
2 |
% |
20 |
% |
Transtrend |
|
Transtrend B.V. |
|
December 31, 2014 |
|
2 |
% |
25 |
% |
Winton |
|
Winton Capital Management Limited |
|
December 31, 2014 |
|
2 |
% |
20 |
% |
John Locke |
|
John Locke Investments SA |
|
December 31, 2016 |
|
2 |
% |
20 |
% |
BlueTrend |
|
BlueCrest Capital Management LLP |
|
December 31, 2014 |
|
2 |
% |
25 |
% |
Tudor |
|
Tudor Investment Corporation |
|
December 31, 2015 |
|
2 |
% |
20 |
% |
Lynx |
|
Lynx Asset Management AB |
|
June 30, 2014 |
|
2 |
% |
20 |
% |
Each of the Trading Advisors, the Portfolio Funds and MLAI have entered into advisory agreements (collectively Advisory Agreements) that govern the advisory services that each Trading Advisor provides to a Portfolio Fund. Subject to the Advisory Agreements, each Trading Advisor has the sole and exclusive authority and responsibility for directing the relevant Portfolio Funds trading, subject to MLAIs ability to intervene in limited circumstances. Under the Advisory Agreements, although the Trading Advisors are responsible for the commodities trading for the Portfolio Funds, the Portfolio Funds and MLAI, and not the Trading Advisors, are responsible for management of cash and other assets not involved in the Portfolio Funds trading programs. After the initial term of an Advisory Agreement, the Advisory Agreement generally will be automatically renewed for successive periods, on the same terms, unless terminated by either Trading Advisor or the Portfolio Fund upon written notice to the other party in accordance with the particular Advisory Agreement. In addition, the Advisory Agreements may be terminated upon the occurrence of certain events as set forth in the particular Advisory Agreement.
The Portfolio Funds pay their respective Trading Advisors a management fee of 1/12 of 2.0% (a 2.0% annual rate) of their average month-end assets after reduction for the brokerage commissions accrued with respect to such assets, other than Lynx for which the management fee is 1/12 of 1.0% (a 1.0% annual rate). Lynx also pays MLAI a 1.0% per annum management fee. For Altis, BlueTrend, Transtrend and Tudor, the respective Trading Advisors share with MLAI 50% of the 2.0% management fees. For Aspect, John Locke and Winton, the respective Trading Advisors share with MLAI 25% of the 2.0% management fees.
Performance fees charged by the Portfolio Funds are calculated at 20% for all Portfolio Funds except BlueTrend and Transtrend which is calculated at 25% of any New Trading Profit, as defined in the respective Advisory Agreements, and earned by the respective Trading Advisors. Performance fees are also paid out in respect of Units redeemed as of the end of interim month, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. For Aspect, John Locke and Winton, the respective Trading Advisors share with MLAI 25% of the 20% performance fees.
The Trading Advisors sharing of management fees and/or performance fees with MLAI is to defray costs in connection with and in consideration of BACs providing certain administrative and operational support for the Portfolio Fund.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding for each Class for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, the FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Portfolio Funds net unrealized profits (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition of the Portfolio Funds. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held
by the Portfolio Funds as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Portfolio Funds, calculating the Net Asset Value of the Fund and the Portfolio Funds as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds market exposure, MLAI may urge the respective Trading Advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by respective Trading Advisors.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profits on open contracts, if any, included in the Portfolio Funds Statements of Financial Condition.
MLAI, as sponsor of the Portfolio Funds, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Portfolio Funds.
The Portfolio Funds, in their normal course of business, enter into various contracts, with MLPF&S acting as their futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Concentration Risk
The Funds investments in the Portfolio Funds are subject to the market and credit risk of the Portfolio Funds. Because the majority of the Funds capital is invested in the Portfolio Funds, any changes in the market conditions that would adversely affect the Portfolio Funds could significantly impact the solvency of the Fund.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
In respect to Class DS Units, effective as of February 1, 2014: (i) the management fee percentage payable by the Transtrend Fund to Transtrend B.V. reduces from 2.0% per annum to 1.0% per annum, and (ii) the Transtrend Fund pays a 0.5% per annum management fee to MLAI, and Transtrend B.V. no longer shares any portion of its management fees with MLAI. Effective as of January 1, 2014, the performance fee percentage payable by the Transtrend Fund to Transtrend B.V. reduces from 25% to 22.5%.
On March 19, 2014, MLAI notified Altis Partners (Jersey) Limited regarding the Funds terminating its investment in the Altis Fund, effective March 31, 2014.
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no other subsequent events that require adjustments to, or disclosure in, the financial statements.
* * * * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
|
/s/Barbra E. Kocsis |
|
|
Barbra E. Kocsis |
|
|
Chief Financial Officer |
|
|
Merrill Lynch Alternative Investments LLC |
|
|
Sponsor of |
|
|
Systematic Momentum FuturesAccess LLC |
|
Exhibit 13.02
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for
the years ended December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of Altis FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of Altis FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $6,111,495 for 2013 and $8,059,026 for 2012) |
|
$ |
29,241,769 |
|
$ |
54,311,261 |
|
Net unrealized profit on open futures contracts |
|
2,044,548 |
|
1,484,206 |
| ||
Cash |
|
370,379 |
|
527,928 |
| ||
Accrued interest receivable |
|
213 |
|
|
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
31,656,909 |
|
$ |
56,323,395 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
674,550 |
|
$ |
988,076 |
|
Management fees payable |
|
52,421 |
|
93,013 |
| ||
Redemptions payable |
|
1,075,087 |
|
815,332 |
| ||
Other liablilities |
|
99,156 |
|
62,873 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
1,901,214 |
|
1,959,294 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (24,215,227 Units and 42,140,145 Units outstanding, unlimited Units authorized) |
|
29,755,695 |
|
54,364,101 |
| ||
Total members capital |
|
29,755,695 |
|
54,364,101 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
31,656,909 |
|
$ |
56,323,395 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT |
|
$ |
1.2288 |
|
$ |
1.2901 |
|
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(595,613 |
) |
$ |
68,513 |
|
$ |
(38,752,015 |
) |
Change in unrealized, net |
|
873,868 |
|
(4,984,150 |
) |
(2,398,749 |
) | |||
Brokerage commissions |
|
(273,026 |
) |
(362,329 |
) |
(544,573 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
5,229 |
|
(5,277,966 |
) |
(41,695,337 |
) | |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(83 |
) |
5,526 |
|
12,924 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
860,493 |
|
1,677,763 |
|
2,535,363 |
| |||
Other |
|
138,950 |
|
177,624 |
|
185,094 |
| |||
Total expenses |
|
999,443 |
|
1,855,387 |
|
2,720,457 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(999,526 |
) |
(1,849,861 |
) |
(2,707,533 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(994,297 |
) |
$ |
(7,127,827 |
) |
$ |
(44,402,870 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class DS |
|
33,061,671 |
|
59,319,745 |
|
78,602,136 |
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class DS |
|
$ |
(0.0301 |
) |
$ |
(0.1202 |
) |
$ |
(0.5649 |
) |
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2013 |
|
Class DS |
|
66,182,939 |
|
20,029,950 |
|
(8,581,034 |
) |
77,631,855 |
|
|
|
(35,491,710 |
) |
42,140,145 |
|
2,609,445 |
|
(20,534,363 |
) |
24,215,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
66,182,939 |
|
20,029,950 |
|
(8,581,034 |
) |
77,631,855 |
|
|
|
(35,491,710 |
) |
42,140,145 |
|
2,609,445 |
|
(20,534,363 |
) |
24,215,227 |
|
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
|
|
|
|
|
|
Members Capital |
|
|
|
|
|
Net |
|
Members Capital |
|
|
|
|
|
Net |
|
Members Capital |
| |||||||||||||
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
Net Income(loss) |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
Income(loss) |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
Income(Loss) |
|
December 31, 2013 |
| |||||||||||||
Class DS |
|
$ |
134,071,502 |
|
$ |
34,629,126 |
|
$ |
(12,595,559 |
) |
$ |
(44,402,870 |
) |
$ |
111,702,199 |
|
$ |
|
|
$ |
(50,210,271 |
) |
$ |
(7,127,827 |
) |
$ |
54,364,101 |
|
$ |
3,366,201 |
|
$ |
(26,980,310 |
) |
$ |
(994,297 |
) |
$ |
29,755,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
134,071,502 |
|
$ |
34,629,126 |
|
$ |
(12,595,559 |
) |
$ |
(44,402,870 |
) |
$ |
111,702,199 |
|
$ |
|
|
$ |
(50,210,271 |
) |
$ |
(7,127,827 |
) |
$ |
54,364,101 |
|
$ |
3,366,201 |
|
$ |
(26,980,310 |
) |
$ |
(994,297 |
) |
$ |
29,755,695 |
|
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.2901 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.0229 |
) | |
Brokerage commissions |
|
(0.0083 |
) | |
Interest income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0301 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.2288 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-4.75 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-4.75 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.34 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.34 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.33 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.4389 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.1110 |
) | |
Brokerage commissions |
|
(0.0066 |
) | |
Interest income, net |
|
0.0001 |
| |
Expenses |
|
(0.0313 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.2901 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-10.34 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-10.34 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.23 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.23 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.22 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
2.0258 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.5451 |
) | |
Brokerage commissions |
|
(0.0071 |
) | |
Interest income, net |
|
0.0002 |
| |
Expenses |
|
(0.0349 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.4389 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-28.97 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-28.97 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.12 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.12 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.11 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ALTIS FUTURESACCESS LLC
(Formerly ML Altis FuturesAccess LLC)
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Altis FuturesAccess LLC (Formerly ML Altis FuturesAccess LLC) (the Fund), a FuturesAccessSM Program (FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund engages in the speculative trading of futures on a wide range of commodities. Altis Partners (Jersey) Limited (Altis or Trading Advisor) is the trading advisor of the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market
quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund may terminate if certain circumstances occur as set forth in the private placement memorandum, which include but are not limited to the following:
(a) Bankruptcy, dissolution, withdrawal or other termination of the trading advisor of this Fund.
(b) Any event which would make unlawful the continued existence of this Fund.
(c) Determination by MLAI to liquidate or withdraw from the Fund.
(d) Withdrawal of the Sponsor.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
435 |
|
$ |
3,821 |
|
0.01 |
% |
(773 |
) |
$ |
905,436 |
|
3.04 |
% |
$ |
909,257 |
|
3.05 |
% |
January 2014 - September 2014 |
|
Currencies |
|
216 |
|
446,880 |
|
1.50 |
% |
(123 |
) |
134,202 |
|
0.45 |
% |
581,082 |
|
1.95 |
% |
March 2014 |
| |||
Energy |
|
269 |
|
100,471 |
|
0.34 |
% |
(2 |
) |
(4,123 |
) |
-0.01 |
% |
96,348 |
|
0.33 |
% |
January 2014 - September 2014 |
| |||
Interest rates |
|
865 |
|
(133,236 |
) |
-0.45 |
% |
(343 |
) |
270,554 |
|
0.91 |
% |
137,318 |
|
0.46 |
% |
March 2014 - December 2015 |
| |||
Metals |
|
469 |
|
257,956 |
|
0.87 |
% |
(594 |
) |
(784,103 |
) |
-2.64 |
% |
(526,147 |
) |
-1.77 |
% |
January 2014 - October 2014 |
| |||
Stock indices |
|
144 |
|
294,981 |
|
0.99 |
% |
(41 |
) |
(122,841 |
) |
-0.41 |
% |
172,140 |
|
0.58 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
970,873 |
|
3.26 |
% |
|
|
$ |
399,125 |
|
1.34 |
% |
$ |
1,369,998 |
|
4.60 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
456 |
|
$ |
(377,729 |
) |
-0.69 |
% |
(684 |
) |
$ |
246,794 |
|
0.45 |
% |
$ |
(130,935 |
) |
-0.24 |
% |
January 2013 - November 2013 |
|
Currencies |
|
484 |
|
737,372 |
|
1.36 |
% |
(138 |
) |
(31,157 |
) |
-0.06 |
% |
706,215 |
|
1.30 |
% |
February 2013 - March 2013 |
| |||
Energy |
|
136 |
|
202,200 |
|
0.37 |
% |
(117 |
) |
(131,063 |
) |
-0.24 |
% |
71,137 |
|
0.13 |
% |
January 2013 - September 2013 |
| |||
Interest rates |
|
2,613 |
|
149,078 |
|
0.27 |
% |
(503 |
) |
(197,792 |
) |
-0.36 |
% |
(48,714 |
) |
-0.09 |
% |
March 2013 - December 2014 |
| |||
Metals |
|
679 |
|
571,953 |
|
1.05 |
% |
(457 |
) |
(977,451 |
) |
-1.80 |
% |
(405,498 |
) |
-0.75 |
% |
January 2013 - October 2013 |
| |||
Stock indices |
|
422 |
|
303,925 |
|
0.56 |
% |
|
|
|
|
0.00 |
% |
303,925 |
|
0.56 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
1,586,799 |
|
2.92 |
% |
|
|
$ |
(1,090,669 |
) |
-2.01 |
% |
$ |
496,130 |
|
0.91 |
% |
|
|
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance by U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
970,873 |
|
$ |
723,671 |
|
$ |
247,202 |
|
$ |
|
|
Short |
|
399,125 |
|
1,260,894 |
|
(861,769 |
) |
|
| ||||
|
|
$ |
1,369,998 |
|
$ |
1,984,565 |
|
$ |
(614,567 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
|
|
|
|
$ |
|
| ||
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
1,369,998 |
|
$ |
1,984,565 |
|
$ |
(614,567 |
) |
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
1,586,799 |
|
$ |
1,209,811 |
|
$ |
376,988 |
|
$ |
|
|
Short |
|
(1,090,669 |
) |
(157,434 |
) |
(933,235 |
) |
|
| ||||
|
|
$ |
496,130 |
|
$ |
1,052,377 |
|
$ |
(556,247 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
|
|
|
|
$ |
|
| ||
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
496,130 |
|
$ |
1,052,377 |
|
$ |
(556,247 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the year. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. For the years ended December 31, 2013 and 2012 the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
Commodity Industry |
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
1,073,748 |
|
$ |
(2,195,502 |
) |
$ |
(10,488,645 |
) |
Currencies |
|
2,476,193 |
|
(136,949 |
) |
(12,010,587 |
) | |||
Energy |
|
(3,117,056 |
) |
720,396 |
|
(4,414,436 |
) | |||
Interest rates |
|
(189,152 |
) |
593,030 |
|
8,837,140 |
| |||
Metals |
|
(1,824,365 |
) |
(4,991,099 |
) |
(8,126,336 |
) | |||
Stock indices |
|
1,858,887 |
|
1,094,487 |
|
(14,947,900 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
278,255 |
|
$ |
(4,915,637 |
) |
$ |
(41,150,764 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Where a substantial portion of the Funds capital was tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the years ended December 31, 2013, 2012, and 2011 amounted to $8,584, $16,697 and $23,368, respectively of which $1,082 and $2,943 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis. MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund pays brokerage commissions on actual cost per round-turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $6.65, $7.38 and $8.37, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions and Interest as presented on the Statements of Operations are all received from or all paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and Altis have entered into an advisory agreement. This agreement shall continue in effect until December 31, 2016. Thereafter, this agreement shall be automatically renewed for successive three-year periods, on the same terms, unless terminated at any time by either Altis or the Fund upon 90 days written notice to the other party. Altis determines the commodity futures, options on futures and forward contract trades to be made on behalf of their respective Fund accounts, subject to certain trading policies and to certain rights reserved by MLAI.
The Fund pays Altis annual management fees of 2.00% of the Funds average month-end net assets allocated to them after reduction for the brokerage commissions accrued with respect to such assets. MLAI receives 50% of the 2.00% management fee for sponsoring and providing ongoing administration and operational support of the Fund.
Performance fees paid by the Fund are calculated as 20% of any New Trading Profit, as defined in the private placement memorandum, and are recognized by Altis as of either the end of each calendar year or upon the net reallocation of assets away from Altis. Performance fees are also paid out in respect of Units redeemed as of the end of interim months, to the extent of the applicable percentage of any New Trading Profit attributable to such Units.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early
application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Altis, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge Altis to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by Altis.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
On March 19, 2014, MLAI notified Altis Partners (Jersey) Limited regarding the Funds terminating its investment in the Altis Fund, effective March 31, 2014.
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no other subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.03
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and
for the years ended December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of Aspect FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of Aspect FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $19,838,945 for 2013 and $25,873,362 for 2012) |
|
$ |
170,957,522 |
|
$ |
273,776,825 |
|
Net unrealized profit on open futures contracts |
|
6,577,251 |
|
4,426,946 |
| ||
Net unrealized profit on open forwards contracts |
|
854,236 |
|
655,236 |
| ||
Cash |
|
491,639 |
|
562,107 |
| ||
Other assets |
|
317 |
|
20,328 |
| ||
TOTAL ASSETS |
|
$ |
178,880,965 |
|
$ |
279,441,442 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
227,884 |
|
$ |
1,282,046 |
|
Net unrealized loss on open forwards contracts |
|
|
|
|
| ||
Brokerage commissions payable |
|
17,157 |
|
18,934 |
| ||
Sponsor and Advisory fees payable |
|
510,075 |
|
788,788 |
| ||
Redemptions payable |
|
9,336,743 |
|
4,802,586 |
| ||
Other liabilities |
|
1,571,611 |
|
308,095 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
11,663,470 |
|
7,200,449 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (125,668,741 Units and 190,525,071 Units) |
|
167,217,495 |
|
272,240,993 |
| ||
Total members capital |
|
167,217,495 |
|
272,240,993 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
178,880,965 |
|
$ |
279,441,442 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
(Based on 125,668,741 and 190,525,071 Units outstanding, unlimited Units authorized) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
|
$ |
1.3517 |
|
$ |
1.4498 |
|
Class C |
|
$ |
1.2426 |
|
$ |
1.3462 |
|
Class D |
|
$ |
1.5681 |
|
$ |
1.6565 |
|
Class I |
|
$ |
1.3987 |
|
$ |
1.4940 |
|
Class DS |
|
$ |
1.5609 |
|
$ |
1.6494 |
|
Class DT |
|
$ |
1.6420 |
|
$ |
1.7271 |
|
Class M |
|
$ |
0.8365 |
|
$ |
0.8868 |
|
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(8,226,582 |
) |
$ |
(21,798,094 |
) |
$ |
34,448,070 |
|
Change in unrealized, net |
|
3,403,467 |
|
(3,325,837 |
) |
(6,723,263 |
) | |||
Brokerage commissions |
|
(837,585 |
) |
(853,631 |
) |
(667,386 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
(5,660,700 |
) |
(25,977,562 |
) |
27,057,421 |
| |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(8,964 |
) |
(9 |
) |
22,505 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
4,599,613 |
|
6,063,474 |
|
5,916,501 |
| |||
Sponsor fee |
|
3,496,422 |
|
4,335,920 |
|
3,238,858 |
| |||
Performance fee |
|
|
|
19,461 |
|
3,958,922 |
| |||
Other |
|
1,958,518 |
|
962,052 |
|
640,865 |
| |||
Total expenses |
|
10,054,553 |
|
11,380,907 |
|
13,755,146 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(10,063,517 |
) |
(11,380,916 |
) |
(13,732,641 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(15,724,217 |
) |
$ |
(37,358,478 |
) |
$ |
13,324,780 |
|
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class A |
|
21,420,348 |
|
19,944,082 |
|
16,189,399 |
| |||
Class C |
|
90,020,993 |
|
99,514,465 |
|
71,034,125 |
| |||
Class D |
|
4,424,535 |
|
5,888,753 |
|
7,847,297 |
| |||
Class I |
|
5,967,248 |
|
10,216,218 |
|
8,404,770 |
| |||
Class DS |
|
26,429,490 |
|
40,046,307 |
|
56,338,152 |
| |||
Class DT |
|
11,618,802 |
|
15,811,700 |
|
22,255,722 |
| |||
Class M* |
|
9,052,573 |
|
2,871,584 |
|
|
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class A |
|
$ |
(0.1035 |
) |
$ |
(0.2081 |
) |
$ |
0.0691 |
|
Class C |
|
$ |
(0.1029 |
) |
$ |
(0.2030 |
) |
$ |
0.0462 |
|
Class D |
|
$ |
(0.0743 |
) |
$ |
(0.2184 |
) |
$ |
0.0960 |
|
Class I |
|
$ |
(0.0918 |
) |
$ |
(0.1726 |
) |
$ |
0.0475 |
|
Class DS |
|
$ |
(0.0774 |
) |
$ |
(0.1717 |
) |
$ |
0.0943 |
|
Class DT |
|
$ |
(0.0754 |
) |
$ |
(0.1745 |
) |
$ |
0.1105 |
|
Class M* |
|
$ |
(0.0493 |
) |
$ |
(0.1104 |
) |
$ |
|
|
* Units issued on April 1, 2012. (Presentation of weighted average units outstanding and net income (loss) per weighted average unit for this share class for 2012 is for the period April 1, 2012 to December 31, 2012.)
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Class A |
|
14,518,670 |
|
7,156,378 |
|
(5,314,820 |
) |
16,360,228 |
|
9,196,088 |
|
(4,092,705 |
) |
21,463,611 |
|
4,040,957 |
|
(7,150,882 |
) |
18,353,686 |
|
Class C |
|
59,323,819 |
|
33,485,445 |
|
(7,333,603 |
) |
85,475,661 |
|
35,094,825 |
|
(20,616,593 |
) |
99,953,893 |
|
7,453,250 |
|
(38,698,184 |
) |
68,708,959 |
|
Class D |
|
6,256,747 |
|
4,857,690 |
|
(6,181,653 |
) |
4,932,784 |
|
2,097,892 |
|
(1,468,248 |
) |
5,562,428 |
|
92,294 |
|
(3,172,357 |
) |
2,482,365 |
|
Class I |
|
6,130,636 |
|
7,230,944 |
|
(2,671,080 |
) |
10,690,500 |
|
2,259,152 |
|
(5,795,399 |
) |
7,154,253 |
|
364,380 |
|
(3,362,171 |
) |
4,156,462 |
|
Class DS |
|
59,087,316 |
|
846,307 |
|
(13,198,855 |
) |
46,734,768 |
|
1,609,577 |
|
(15,384,630 |
) |
32,959,715 |
|
524,475 |
|
(14,551,987 |
) |
18,932,203 |
|
Class DT |
|
25,243,355 |
|
|
|
(7,423,802 |
) |
17,819,553 |
|
|
|
(4,110,103 |
) |
13,709,450 |
|
|
|
(5,177,757 |
) |
8,531,693 |
|
Class M* |
|
|
|
|
|
|
|
|
|
9,721,721 |
|
|
|
9,721,721 |
|
1,590,801 |
|
(6,809,149 |
) |
4,503,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
170,560,543 |
|
53,576,764 |
|
(42,123,813 |
) |
182,013,494 |
|
59,979,255 |
|
(51,467,678 |
) |
190,525,071 |
|
14,066,157 |
|
(78,922,487 |
) |
125,668,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
10,319 |
|
|
|
(10,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C |
|
10,328 |
|
|
|
(10,328 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sponsors Units |
|
20,647 |
|
|
|
(20,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Units issued on April 1, 2012
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
|
|
|
|
Net |
|
Members Capital |
|
|
|
|
|
Net |
|
Members Capital |
|
|
|
|
|
Net |
|
Members Capital |
| |||||||||||||
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
Income/(Loss) |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
Income/(Loss) |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
Income/(Loss) |
|
December 31, 2013 |
| |||||||||||||
Class A |
|
$ |
22,955,242 |
|
$ |
11,490,829 |
|
$ |
(8,725,839 |
) |
$ |
1,118,558 |
|
$ |
26,838,790 |
|
$ |
14,718,539 |
|
$ |
(6,288,432 |
) |
$ |
(4,151,237 |
) |
$ |
31,117,660 |
|
$ |
5,769,551 |
|
$ |
(9,861,129 |
) |
$ |
(2,217,748 |
) |
$ |
24,808,334 |
|
Class C |
|
88,856,777 |
|
50,449,304 |
|
(11,072,523 |
) |
3,279,694 |
|
131,513,252 |
|
52,990,250 |
|
(29,741,527 |
) |
(20,204,291 |
) |
134,557,684 |
|
9,796,129 |
|
(49,715,504 |
) |
(9,262,850 |
) |
85,375,459 |
| |||||||||||||
Class D |
|
10,968,679 |
|
8,795,594 |
|
(11,409,648 |
) |
753,401 |
|
9,108,026 |
|
3,802,750 |
|
(2,410,716 |
) |
(1,286,049 |
) |
9,214,011 |
|
149,775 |
|
(5,142,642 |
) |
(328,558 |
) |
3,892,586 |
| |||||||||||||
Class I |
|
9,909,054 |
|
12,031,061 |
|
(4,338,613 |
) |
398,835 |
|
18,000,337 |
|
3,791,276 |
|
(9,340,053 |
) |
(1,763,091 |
) |
10,688,469 |
|
558,096 |
|
(4,885,123 |
) |
(547,925 |
) |
5,813,517 |
| |||||||||||||
Class DS |
|
103,143,351 |
|
1,483,646 |
|
(24,015,843 |
) |
5,314,184 |
|
85,925,338 |
|
2,887,420 |
|
(27,571,314 |
) |
(6,877,343 |
) |
54,364,101 |
|
868,829 |
|
(23,636,338 |
) |
(2,045,044 |
) |
29,551,548 |
| |||||||||||||
Class DT |
|
45,566,638 |
|
|
|
(13,893,618 |
) |
2,458,921 |
|
34,131,941 |
|
|
|
(7,694,457 |
) |
(2,759,516 |
) |
23,677,968 |
|
|
|
(8,792,936 |
) |
(876,002 |
) |
14,009,030 |
| |||||||||||||
Class M* |
|
|
|
|
|
|
|
|
|
|
|
8,938,051 |
|
|
|
(316,951 |
) |
8,621,100 |
|
1,402,908 |
|
(5,810,897 |
) |
(446,090 |
) |
3,767,021 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Interest |
|
$ |
281,399,741 |
|
$ |
84,250,434 |
|
$ |
(73,456,084 |
) |
$ |
13,323,593 |
|
$ |
305,517,684 |
|
$ |
87,128,286 |
|
$ |
(83,046,499 |
) |
$ |
(37,358,478 |
) |
$ |
272,240,993 |
|
$ |
18,545,288 |
|
$ |
(107,844,569 |
) |
$ |
(15,724,217 |
) |
$ |
167,217,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class A |
|
$ |
16,186 |
|
$ |
|
|
$ |
(16,928 |
) |
$ |
742 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Class C |
|
15,446 |
|
|
|
(15,891 |
) |
445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Sponsors Interest |
|
$ |
31,632 |
|
$ |
|
|
$ |
(32,819 |
) |
$ |
1,187 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
281,431,373 |
|
$ |
84,250,434 |
|
$ |
(73,488,903 |
) |
$ |
13,324,780 |
|
$ |
305,517,684 |
|
$ |
87,128,286 |
|
$ |
(83,046,499 |
) |
$ |
(37,358,478 |
) |
$ |
272,240,993 |
|
$ |
18,545,288 |
|
$ |
(107,844,569 |
) |
$ |
(15,724,217 |
) |
$ |
167,217,495 |
|
* Units issued on April 1, 2012
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, beginning of year or at the time of offer |
|
$ |
1.4498 |
|
$ |
1.3462 |
|
$ |
1.6565 |
|
$ |
1.4940 |
|
$ |
1.6494 |
|
$ |
1.7271 |
|
$ |
0.8868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit (loss) |
|
(0.0295 |
) |
(0.0272 |
) |
(0.0341 |
) |
(0.0305 |
) |
(0.0340 |
) |
(0.0357 |
) |
(0.0183 |
) | |||||||
Brokerage commissions |
|
(0.0051 |
) |
(0.0047 |
) |
(0.0059 |
) |
(0.0053 |
) |
(0.0058 |
) |
(0.0061 |
) |
(0.0031 |
) | |||||||
Interest income, net |
|
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0000 |
) | |||||||
Expenses |
|
(0.0634 |
) |
(0.0716 |
) |
(0.0483 |
) |
(0.0594 |
) |
(0.0486 |
) |
(0.0432 |
) |
(0.0289 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.3517 |
|
$ |
1.2426 |
|
$ |
1.5681 |
|
$ |
1.3987 |
|
$ |
1.5609 |
|
$ |
1.6420 |
|
$ |
0.8365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-6.75 |
% |
-7.67 |
% |
-5.34 |
% |
-6.37 |
% |
-5.34 |
% |
-4.86 |
% |
-5.34 |
% | |||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Total return after Performance fees |
|
-6.75 |
% |
-7.67 |
% |
-5.34 |
% |
-6.37 |
% |
-5.34 |
% |
-4.86 |
% |
-5.34 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (b) |
|
4.51 |
% |
5.51 |
% |
3.01 |
% |
4.11 |
% |
3.01 |
% |
2.51 |
% |
3.01 |
% | |||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Expenses (including Performance fees) |
|
4.51 |
% |
5.51 |
% |
3.01 |
% |
4.11 |
% |
3.01 |
% |
2.51 |
% |
3.01 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-4.51 |
% |
-5.51 |
% |
-3.01 |
% |
-4.11 |
% |
-3.01 |
% |
-2.51 |
% |
-3.01 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M* |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, beginning of year or at the time of offer |
|
$ |
1.6405 |
|
$ |
1.5386 |
|
$ |
1.8464 |
|
$ |
1.6838 |
|
$ |
1.8386 |
|
$ |
1.9154 |
|
$ |
1.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit (loss) |
|
(0.1254 |
) |
(0.1166 |
) |
(0.1430 |
) |
(0.1292 |
) |
(0.1424 |
) |
(0.1491 |
) |
(0.0973 |
) | |||||||
Brokerage commissions |
|
(0.0044 |
) |
(0.0041 |
) |
(0.0050 |
) |
(0.0045 |
) |
(0.0049 |
) |
(0.0052 |
) |
(0.0020 |
) | |||||||
Interest income, net (c) |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
| |||||||
Expenses |
|
(0.0609 |
) |
(0.0717 |
) |
(0.0419 |
) |
(0.0561 |
) |
(0.0419 |
) |
(0.0340 |
) |
(0.0139 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.4498 |
|
$ |
1.3462 |
|
$ |
1.6565 |
|
$ |
1.4940 |
|
$ |
1.6494 |
|
$ |
1.7271 |
|
$ |
0.8868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-11.65 |
% |
-12.53 |
% |
-10.31 |
% |
-11.29 |
% |
-10.31 |
% |
-9.86 |
% |
-11.59 |
% | |||||||
Performance fees |
|
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.02 |
% |
0.26 |
% | |||||||
Total return after Performance fees |
|
-11.69 |
% |
-12.57 |
% |
-10.35 |
% |
-11.33 |
% |
-10.35 |
% |
-9.88 |
% |
-11.33 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (d) |
|
3.82 |
% |
4.82 |
% |
2.32 |
% |
3.42 |
% |
2.32 |
% |
1.82 |
% |
2.34 |
% | |||||||
Performance fees |
|
0.01 |
% |
0.01 |
% |
0.01 |
% |
0.01 |
% |
0.01 |
% |
0.00 |
% |
-0.28 |
% | |||||||
Expenses (including Performance fees) |
|
3.83 |
% |
4.83 |
% |
2.33 |
% |
3.43 |
% |
2.33 |
% |
1.82 |
% |
2.06 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-3.82 |
% |
-4.82 |
% |
-2.32 |
% |
-3.42 |
% |
-2.32 |
% |
-1.81 |
% |
-2.05 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(c) Interest income, net is less than $0.0001 per Unit
(d) The expense ratios do not include brokerage commissions.
* Units issued on April 1, 2012
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year |
|
$ |
1.5811 |
|
$ |
1.4978 |
|
$ |
1.7531 |
|
$ |
1.6163 |
|
$ |
1.7456 |
|
$ |
1.8051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.1439 |
|
0.1356 |
|
0.1607 |
|
0.1474 |
|
0.1601 |
|
0.1657 |
| ||||||
Brokerage commissions |
|
(0.0035 |
) |
(0.0033 |
) |
(0.0039 |
) |
(0.0036 |
) |
(0.0039 |
) |
(0.0041 |
) | ||||||
Interest income, net |
|
0.0001 |
|
0.0001 |
|
0.0001 |
|
0.0001 |
|
0.0001 |
|
0.0001 |
| ||||||
Expenses |
|
(0.0811 |
) |
(0.0916 |
) |
(0.0636 |
) |
(0.0764 |
) |
(0.0633 |
) |
(0.0514 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.6405 |
|
$ |
1.5386 |
|
$ |
1.8464 |
|
$ |
1.6838 |
|
$ |
1.8386 |
|
$ |
1.9154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return before Performance fees |
|
5.00 |
% |
3.96 |
% |
6.59 |
% |
5.42 |
% |
6.59 |
% |
7.13 |
% | ||||||
Performance fees |
|
-1.45 |
% |
-1.45 |
% |
-1.45 |
% |
-1.45 |
% |
-1.45 |
% |
-1.16 |
% | ||||||
Total return after Performance fees |
|
3.55 |
% |
2.51 |
% |
5.14 |
% |
3.97 |
% |
5.14 |
% |
5.97 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses (excluding Performance fees) (c) |
|
3.74 |
% |
4.74 |
% |
2.23 |
% |
3.34 |
% |
2.23 |
% |
1.72 |
% | ||||||
Performance fees |
|
1.33 |
% |
1.33 |
% |
1.33 |
% |
1.33 |
% |
1.33 |
% |
1.06 |
% | ||||||
Expenses (including Performance fees) |
|
5.07 |
% |
6.07 |
% |
3.56 |
% |
4.67 |
% |
3.56 |
% |
2.78 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-5.06 |
% |
-6.06 |
% |
-3.55 |
% |
-4.65 |
% |
-3.55 |
% |
-2.77 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(c) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ASPECT FUTURESACCESS LLC
(Formerly ML Aspect FuturesAccess LLC)
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Aspect FuturesAccess LLC (formerly ML Aspect FuturesAccess LLC) (the Fund), a FuturesAccessSM Program (FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on May 17, 2004 and commenced trading activities on April 1, 2005. The Fund engages in the speculative trading of futures and forward contracts on a wide range of commodities. Aspect Capital Limited (Aspect or Trading Advisor) is the trading advisor of the Fund. The Trading Advisor utilizes the Aspect Diversified Program (the Trading Program) for the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
As of December 31, 2013 the Fund offers seven Classes of Units: Class A, Class C, Class I, Class D, Class DT, Class DS and Class M. Each Class of Units is offered at the Net Asset Value per Unit. The Sponsor fees differ among classes.
The Class M Units are for Investors who are subscribing through a managed investment account program at MLPF&S and who satisfy other requirements as determined by the Sponsor from time to time. The Class M Units are not subject to an upfront sales commission and no ongoing compensation is paid to MLFPF&S as selling agent. Class DT is solely for investments made by Trend-Following Futures Fund L.P. and Class DS is solely for investments made by Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC) ), which reflects interests by other funds within the FuturesAccess group.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. Certain prior year items have been reclassified to conform to the current year presentation.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D Units and Class I Units are subject to sales commissions up to 0.5%. The rate assessed to a given subscription is based upon
the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class DS Units, Class DT Units and Class M Units are not subject to any sales commissions.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that a provision for income tax of $1,164,420 is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund will dissolve if certain circumstances occur as set forth in the limited liability company operating agreement, which include:
(a) Bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of the Fund.
(b) Any event which would make unlawful the continued existence of the Fund.
(c) Withdrawal of the Sponsor unless at such time there is at least one remaining manager.
(d) The determination by the Sponsor to liquidate the Fund and wind up its affairs.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
614 |
|
$ |
(278,619 |
) |
-0.17 |
% |
(1,599 |
) |
$ |
1,463,093 |
|
0.87 |
% |
$ |
1,184,474 |
|
0.70 |
% |
January 2014 - April 2014 |
|
Currencies - Futures |
|
46 |
|
17,340 |
|
0.01 |
% |
(41 |
) |
30,336 |
|
0.02 |
% |
47,676 |
|
0.03 |
% |
March 2014 |
| |||
Currencies - Forwards* |
|
11,227,496,417 |
|
349,522 |
|
0.21 |
% |
(10,788,044,279 |
) |
504,714 |
|
0.30 |
% |
854,236 |
|
0.51 |
% |
January 2014 - March 2014 |
| |||
Energy |
|
621 |
|
(242,123 |
) |
-0.14 |
% |
(3 |
) |
14,452 |
|
0.01 |
% |
(227,671 |
) |
-0.13 |
% |
January 2014 - December 2014 |
| |||
Interest rates |
|
3,432 |
|
(704,833 |
) |
-0.42 |
% |
(3,172 |
) |
2,147,690 |
|
1.28 |
% |
1,442,857 |
|
0.86 |
% |
March 2014 - June 2016 |
| |||
Metals |
|
528 |
|
326,364 |
|
0.20 |
% |
(603 |
) |
(304,309 |
) |
-0.18 |
% |
22,055 |
|
0.02 |
% |
February 2014 - April 2014 |
| |||
Stock indices |
|
1,589 |
|
3,903,721 |
|
2.33 |
% |
(224 |
) |
(23,745 |
) |
-0.01 |
% |
3,879,976 |
|
2.32 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
3,371,372 |
|
2.02 |
% |
|
|
$ |
3,832,231 |
|
2.29 |
% |
$ |
7,203,603 |
|
4.31 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
326 |
|
$ |
(168,590 |
) |
-0.06 |
% |
(1,375 |
) |
$ |
1,275,558 |
|
0.47 |
% |
$ |
1,106,968 |
|
0.41 |
% |
February 2013 - March 2013 |
|
Currencies - Futures |
|
105 |
|
(14,529 |
) |
-0.01 |
% |
(14 |
) |
100,025 |
|
0.04 |
% |
85,496 |
|
0.03 |
% |
March 2013 |
| |||
Currencies - Forwards* |
|
5,687,194,796 |
|
27,838 |
|
0.01 |
% |
(6,394,391,628 |
) |
627,398 |
|
0.23 |
% |
655,236 |
|
0.24 |
% |
January 2013 |
| |||
Energy |
|
248 |
|
268,765 |
|
0.10 |
% |
(693 |
) |
166,215 |
|
0.06 |
% |
434,980 |
|
0.16 |
% |
January 2013 - February 2013 |
| |||
Interest rates |
|
7,047 |
|
199,089 |
|
0.07 |
% |
(624 |
) |
(30,816 |
) |
-0.01 |
% |
168,273 |
|
0.06 |
% |
March 2013 - June 2015 |
| |||
Metals |
|
1,029 |
|
(861,550 |
) |
-0.32 |
% |
(735 |
) |
(775,158 |
) |
-0.28 |
% |
(1,636,708 |
) |
-0.60 |
% |
February 2013 - April 2013 |
| |||
Stock indices |
|
4,017 |
|
3,012,821 |
|
1.11 |
% |
(15 |
) |
(26,930 |
) |
-0.01 |
% |
2,985,891 |
|
1.10 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
2,463,844 |
|
0.90 |
% |
|
|
$ |
1,336,292 |
|
0.50 |
% |
$ |
3,800,136 |
|
1.40 |
% |
|
|
*Currencies - Forwards are stated in notional amounts.
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party
pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts, by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
3,021,850 |
|
$ |
2,701,133 |
|
$ |
320,717 |
|
$ |
|
|
Short |
|
3,327,517 |
|
3,920,111 |
|
(592,594 |
) |
|
| ||||
|
|
$ |
6,349,367 |
|
$ |
6,621,244 |
|
$ |
(271,877 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
349,522 |
|
$ |
|
|
$ |
349,522 |
|
$ |
|
|
Short |
|
504,714 |
|
|
|
504,714 |
|
|
| ||||
|
|
$ |
854,236 |
|
$ |
|
|
$ |
854,236 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
7,203,603 |
|
$ |
6,621,244 |
|
$ |
582,359 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
2,436,006 |
|
$ |
2,480,431 |
|
$ |
(44,425 |
) |
$ |
|
|
Short |
|
708,894 |
|
1,416,965 |
|
(708,071 |
) |
|
| ||||
|
|
$ |
3,144,900 |
|
$ |
3,897,396 |
|
$ |
(752,496 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
27,838 |
|
$ |
|
|
$ |
27,838 |
|
$ |
|
|
Short |
|
627,398 |
|
|
|
627,398 |
|
|
| ||||
|
|
$ |
655,236 |
|
$ |
|
|
$ |
655,236 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
3,800,136 |
|
$ |
3,897,396 |
|
$ |
(97,260 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the year. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin amounts determined by the respective broker. At December 31, 2013 and December 31, 2012, the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition as Cash included in Cash in Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
Commodity Industry |
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Sector |
|
Profit (loss) from trading, Net |
|
Profit (loss) from trading, Net |
|
Profit (loss) from trading, Net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
3,640,588 |
|
$ |
(2,510,922 |
) |
$ |
(7,968,416 |
) |
Currencies |
|
(4,843,485 |
) |
(5,694,277 |
) |
(1,897,906 |
) | |||
Energy |
|
(18,787,514 |
) |
(4,842,480 |
) |
6,595,182 |
| |||
Interest rates |
|
(16,906,536 |
) |
10,688,895 |
|
43,093,225 |
| |||
Metals |
|
10,406,240 |
|
(14,676,939 |
) |
(6,157,884 |
) | |||
Stock indices |
|
21,667,592 |
|
(8,088,208 |
) |
(5,939,394 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
(4,823,115 |
) |
$ |
(25,123,931 |
) |
$ |
27,724,807 |
|
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Where a substantial portion of the Funds capital was tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year ended December 31, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed/sponsored funds on a monthly basis based on the funds net assets. The Transfer Agent fee allocated to the Fund for the years ended December 31, 2013, 2012, and 2011 amounted to $46,139, $61,360 and $60,576, respectively, of which $6,106 and $10,210 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund charges Sponsor fees on the month-end net assets after all other charges at annual rates equal to 1.50% for Class A Units, 2.50% for Class C Units, and 1.10% for Class I Units. Class D Units, Class DS Units, Class DT Units and Class M Units are not charged a Sponsor fee.
The Fund pays brokerage commissions on actual cost per round turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012, and 2011 was approximately $5.50, $5.64 and $6.00, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
On December 31, 2011, MLAI liquidated its position in the fund.
5. ADVISORY AGREEMENT
The Fund and Aspect have entered into an advisory agreement. The advisory agreement will continue in effect until December 31, 2016. Thereafter, the advisory agreement will be automatically renewed for successive three-year periods, on the same terms, unless terminated at any time by either Aspect or the Fund upon 90 days written notice to the other party. Pursuant to the advisory agreement Aspect has sole and exclusive authority and responsibility for directing the Funds trading, subject to MLAIs fiduciary authority to intervene, to overrule or unwind trades if MLAI deems that doing so is necessary or advisable for the protection of the Fund.
The Fund charges management fees on the average month-end net asset value of each investments units after reduction for the brokerage commissions accrued with respect to such assets, and are payable to Aspect on a monthly basis. Management fees are at a rate equal to 2.0% per year for all Classes, except for Class DT Units, which is charged a 1.5% Management Fee. Aspect agreed to share 25% of its management fees with MLAI in order to defray costs in connection with and inconsideration of BAC providing certain administrative and support services for the Fund. This fee sharing arrangements does not apply in respect of Class DT Units.
Performance fees are charged by the Fund on any New Trading Profit (as defined in the advisory agreement) and are payable to Aspect as of either the end of each calendar year or upon any interim period for which there are net redemption of Units, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. The Fund charges a 20% performance fee for all classes, except Class DT Units, which is charged a performance fee of 15%. Aspect pays MLAI 25% of any Performance fees paid by the Fund except Class DT Units.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, the FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Aspect, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge Aspect to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by Aspect.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the
members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.04
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 and Report of Independent Registered Public Accounting Firm
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of ML BlueTrend FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of ML BlueTrend FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $15,660,472 for 2013 and $23,668,477 for 2012) |
|
$ |
122,942,320 |
|
$ |
172,005,727 |
|
Net unrealized profit on open futures contracts |
|
4,777,527 |
|
2,586,200 |
| ||
Net unrealized profit on open forwards contracts |
|
557,548 |
|
2,286,887 |
| ||
Cash |
|
435,336 |
|
469,172 |
| ||
Other assets |
|
126 |
|
10,099 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
128,712,857 |
|
$ |
177,358,085 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
193,597 |
|
$ |
650,211 |
|
Net unrealized loss on open forwards contracts |
|
535,473 |
|
|
| ||
Brokerage commissions payable |
|
30,519 |
|
15,367 |
| ||
Sponsor and Advisory fees payable |
|
290,564 |
|
336,587 |
| ||
Redemptions payable |
|
13,556,748 |
|
5,813,840 |
| ||
Other liabilities |
|
269,960 |
|
237,644 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
14,876,861 |
|
7,053,649 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Sponsors Interest |
|
|
|
|
| ||
Members Interest (105,581,313 and 135,843,182 Units outstanding, unlimited Units authorized) |
|
113,835,996 |
|
170,304,436 |
| ||
Total members capital |
|
113,835,996 |
|
170,304,436 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
128,712,857 |
|
$ |
177,358,085 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
|
$ |
0.9896 |
|
$ |
1.1196 |
|
Class C |
|
$ |
0.9485 |
|
$ |
1.0838 |
|
Class D |
|
$ |
|
|
$ |
1.1740 |
|
Class I |
|
$ |
1.0117 |
|
$ |
1.1399 |
|
Class DS |
|
$ |
1.2410 |
|
$ |
1.3830 |
|
Class DT |
|
$ |
1.0503 |
|
$ |
1.1598 |
|
Class M |
|
$ |
0.9184 |
|
$ |
1.0235 |
|
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(11,727,253 |
) |
$ |
7,099,428 |
|
$ |
6,885,962 |
|
Change in unrealized, net |
|
383,129 |
|
(3,439,687 |
) |
(2,990,881 |
) | |||
Brokerage commissions |
|
(815,030 |
) |
(886,130 |
) |
(940,971 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
(12,159,154 |
) |
2,773,611 |
|
2,954,110 |
| |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
2,577 |
|
(8,831 |
) |
10,526 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
2,951,301 |
|
4,156,778 |
|
4,986,858 |
| |||
Sponsor fee |
|
937,658 |
|
729,287 |
|
797,628 |
| |||
Performance fee |
|
49,399 |
|
102,552 |
|
667 |
| |||
Other |
|
475,775 |
|
555,699 |
|
593,820 |
| |||
Total expenses |
|
4,414,133 |
|
5,544,316 |
|
6,378,973 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(4,411,556 |
) |
(5,553,147 |
) |
(6,368,447 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(16,570,710 |
) |
$ |
(2,779,536 |
) |
$ |
(3,414,337 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class A |
|
6,650,341 |
|
3,796,490 |
|
3,951,820 |
| |||
Class C |
|
28,861,844 |
|
20,059,393 |
|
20,884,009 |
| |||
Class D** |
|
11,710,900 |
|
12,027,977 |
|
12,264,819 |
| |||
Class I |
|
8,328,474 |
|
8,496,186 |
|
8,604,531 |
| |||
Class DS |
|
55,013,245 |
|
101,066,005 |
|
119,289,283 |
| |||
Class DT |
|
17,533,305 |
|
25,615,135 |
|
34,421,497 |
| |||
Class M* |
|
5,100,591 |
|
2,879,028 |
|
|
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class A |
|
$ |
(0.1379 |
) |
$ |
(0.0229 |
) |
$ |
(0.0230 |
) |
Class C |
|
$ |
(0.1349 |
) |
$ |
(0.0394 |
) |
$ |
(0.0371 |
) |
Class D** |
|
$ |
(0.1098 |
) |
$ |
(0.0123 |
) |
$ |
(0.0133 |
) |
Class I |
|
$ |
(0.1357 |
) |
$ |
(0.0266 |
) |
$ |
(0.0261 |
) |
Class DS |
|
$ |
(0.1289 |
) |
$ |
(0.0161 |
) |
$ |
(0.0197 |
) |
Class DT |
|
$ |
(0.1000 |
) |
$ |
0.0024 |
|
$ |
0.0056 |
|
Class M* |
|
$ |
(0.0982 |
) |
$ |
0.0121 |
|
$ |
|
|
*Units issued on December 1, 2012 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2012 is for the period December 1, 2012 to December 31, 2012).
**Units fully redeemed as of December 31, 2013.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
4,266,016 |
|
|
|
(613,029 |
) |
3,652,987 |
|
2,303,199 |
|
(804,984 |
) |
5,151,202 |
|
3,402,816 |
|
(2,348,742 |
) |
6,205,276 |
|
Class C |
|
22,460,685 |
|
|
|
(2,430,213 |
) |
20,030,472 |
|
5,778,189 |
|
(4,965,322 |
) |
20,843,339 |
|
24,527,961 |
|
(8,981,458 |
) |
36,389,842 |
|
Class D** |
|
12,285,319 |
|
|
|
(82,000 |
) |
12,203,319 |
|
871,840 |
|
(933,822 |
) |
12,141,337 |
|
1,457,214 |
|
(13,598,551 |
) |
|
|
Class I |
|
8,622,031 |
|
|
|
(381,000 |
) |
8,241,031 |
|
2,229,818 |
|
(2,882,197 |
) |
7,588,652 |
|
1,824,865 |
|
(4,990,349 |
) |
4,423,168 |
|
Class DS |
|
112,965,644 |
|
9,417,782 |
|
(80,221 |
) |
122,303,205 |
|
4,688,392 |
|
(60,168,372 |
) |
66,823,225 |
|
1,591,224 |
|
(27,653,706 |
) |
40,760,743 |
|
Class DT |
|
39,111,385 |
|
317,057 |
|
(10,039,396 |
) |
29,389,046 |
|
|
|
(8,972,647 |
) |
20,416,399 |
|
489,464 |
|
(7,469,796 |
) |
13,436,067 |
|
Class M* |
|
|
|
|
|
|
|
|
|
2,879,028 |
|
|
|
2,879,028 |
|
4,342,614 |
|
(2,855,425 |
) |
4,366,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
199,711,080 |
|
9,734,839 |
|
(13,625,859 |
) |
195,820,060 |
|
18,750,466 |
|
(78,727,344 |
) |
135,843,182 |
|
37,636,158 |
|
(67,898,027 |
) |
105,581,313 |
|
*Units issued on December 1, 2012.
**Units fully redeemed as of December 31, 2013.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(loss) |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(loss) |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(loss) |
|
Members Capital |
| |||||||||||||
Class A |
|
$ |
5,027,628 |
|
$ |
|
|
$ |
(743,757 |
) |
$ |
(90,788 |
) |
$ |
4,193,083 |
|
$ |
2,563,239 |
|
$ |
(902,325 |
) |
$ |
(86,893 |
) |
$ |
5,767,104 |
|
$ |
3,701,561 |
|
$ |
(2,410,733 |
) |
$ |
(916,928 |
) |
$ |
6,141,004 |
|
Class C |
|
26,142,926 |
|
|
|
(2,886,851 |
) |
(774,970 |
) |
22,481,105 |
|
6,344,593 |
|
(5,445,105 |
) |
(791,021 |
) |
22,589,572 |
|
24,756,622 |
|
(8,939,694 |
) |
(3,892,562 |
) |
34,513,938 |
| |||||||||||||
Class D** |
|
14,733,244 |
|
|
|
(100,360 |
) |
(163,402 |
) |
14,469,482 |
|
1,000,000 |
|
(1,067,530 |
) |
(148,355 |
) |
14,253,597 |
|
1,773,429 |
|
(14,741,456 |
) |
(1,285,570 |
) |
|
| |||||||||||||
Class I |
|
10,263,653 |
|
|
|
(446,378 |
) |
(224,219 |
) |
9,593,056 |
|
2,540,072 |
|
(3,256,795 |
) |
(225,870 |
) |
8,650,463 |
|
2,080,395 |
|
(5,125,541 |
) |
(1,130,561 |
) |
4,474,756 |
| |||||||||||||
Class DS |
|
159,599,857 |
|
13,700,969 |
|
(108,250 |
) |
(2,353,478 |
) |
170,839,098 |
|
6,567,934 |
|
(83,365,190 |
) |
(1,622,871 |
) |
92,418,971 |
|
2,008,284 |
|
(36,751,420 |
) |
(7,091,153 |
) |
50,584,682 |
| |||||||||||||
Class DT |
|
45,566,640 |
|
362,854 |
|
(11,990,909 |
) |
192,520 |
|
34,131,105 |
|
|
|
(10,513,699 |
) |
60,564 |
|
23,677,970 |
|
520,202 |
|
(8,333,364 |
) |
(1,753,279 |
) |
14,111,529 |
| |||||||||||||
Class M* |
|
|
|
|
|
|
|
|
|
|
|
2,911,849 |
|
|
|
34,910 |
|
2,946,759 |
|
4,239,296 |
|
(2,675,311 |
) |
(500,657 |
) |
4,010,087 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
261,333,948 |
|
$ |
14,063,823 |
|
$ |
(16,276,505 |
) |
$ |
(3,414,337 |
) |
$ |
255,706,929 |
|
$ |
21,927,687 |
|
$ |
(104,550,644 |
) |
$ |
(2,779,536 |
) |
$ |
170,304,436 |
|
$ |
39,079,789 |
|
$ |
(78,977,519 |
) |
$ |
(16,570,710 |
) |
$ |
113,835,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Units issued on December 1, 2012.
**Units fully redeemed as of December 31, 2013.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D* |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| ||||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net asset value or offering price, beginning of year or at time of offer |
|
$ |
|
1.1196 |
|
$ |
1.0838 |
|
$ |
1.1740 |
|
$ |
1.1399 |
|
$ |
1.3830 |
|
$ |
1.1598 |
|
$ |
1.0235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net realized and net change in unrealized trading profit (loss) |
|
(0.0837 |
) |
(0.0804 |
) |
(0.0887 |
) |
(0.0854 |
) |
(0.1044 |
) |
(0.0881 |
) |
(0.0773 |
) | ||||||||
Brokerage commissions |
|
(0.0056 |
) |
(0.0054 |
) |
(0.0059 |
) |
(0.0057 |
) |
(0.0070 |
) |
(0.0059 |
) |
(0.0052 |
) | ||||||||
Interest income, net: (c) |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
| ||||||||
Expenses |
|
(0.0407 |
) |
(0.0495 |
) |
(0.0259 |
) |
(0.0371 |
) |
(0.0306 |
) |
(0.0155 |
) |
(0.0226 |
) | ||||||||
Net asset value, before full redemption |
|
0.9896 |
|
0.9485 |
|
1.0535 |
|
1.0117 |
|
1.2410 |
|
1.0503 |
|
0.9184 |
| ||||||||
Less distribution |
|
|
|
|
|
1.0535 |
|
|
|
|
|
|
|
|
| ||||||||
Net asset value, end of year |
|
$ |
|
0.9896 |
|
$ |
0.9485 |
|
$ |
|
|
$ |
1.0117 |
|
$ |
1.2410 |
|
$ |
1.0503 |
|
$ |
0.9184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total return before Performance fees |
|
-11.70 |
% |
-12.58 |
% |
-10.36 |
% |
-11.35 |
% |
-10.36 |
% |
-9.46 |
% |
-10.36 |
% | ||||||||
Performance fees |
|
-0.07 |
% |
-0.07 |
% |
-0.07 |
% |
-0.07 |
% |
-0.07 |
% |
-0.16 |
% |
-0.07 |
% | ||||||||
Total return after Performance fees |
|
-11.77 |
% |
-12.65 |
% |
-10.43 |
% |
-11.42 |
% |
-10.43 |
% |
-9.62 |
% |
-10.43 |
% | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Expenses (excluding Performance fees) (d) |
|
3.81 |
% |
4.81 |
% |
2.33 |
% |
3.41 |
% |
2.32 |
% |
1.32 |
% |
2.31 |
% | ||||||||
Performance fees |
|
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
0.07 |
% |
-0.02 |
% | ||||||||
Expenses (including Performance fees) |
|
3.79 |
% |
4.79 |
% |
2.31 |
% |
3.39 |
% |
2.30 |
% |
1.39 |
% |
2.29 |
% | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net investment income (loss) |
|
-3.78 |
% |
-4.78 |
% |
-2.29 |
% |
-3.39 |
% |
-2.29 |
% |
-1.37 |
% |
-2.29 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The expense ratios do not include brokerage commissions.
*Units fully redeemed as of December 31, 2013.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M* |
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value or offering price, beginning of year or at time of offer |
|
$ |
1.1479 |
|
$ |
1.1223 |
|
$ |
1.1857 |
|
$ |
1.1641 |
|
$ |
1.3968 |
|
$ |
1.1614 |
|
$ |
1.0114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.0191 |
|
0.0186 |
|
0.0197 |
|
0.0193 |
|
0.0232 |
|
0.0193 |
|
0.0147 |
| |||||||
Brokerage commissions |
|
(0.0046 |
) |
(0.0045 |
) |
(0.0048 |
) |
(0.0047 |
) |
(0.0056 |
) |
(0.0047 |
) |
(0.0005 |
) | |||||||
Interest income, net: |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0001 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
Expenses |
|
(0.0428 |
) |
(0.0526 |
) |
(0.0266 |
) |
(0.0388 |
) |
(0.0313 |
) |
(0.0162 |
) |
(0.0021 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.1196 |
|
$ |
1.0838 |
|
$ |
1.1740 |
|
$ |
1.1399 |
|
$ |
1.3830 |
|
$ |
1.1598 |
|
$ |
1.0235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-2.52 |
% |
-3.49 |
% |
-1.05 |
% |
-2.13 |
% |
-1.05 |
% |
-0.05 |
% |
1.20 |
% | |||||||
Performance fees |
|
-0.01 |
% |
-0.01 |
% |
-0.01 |
% |
-0.01 |
% |
-0.01 |
% |
-0.16 |
% |
0.00 |
% | |||||||
Total return after Performance fees |
|
-2.53 |
% |
-3.50 |
% |
-1.06 |
% |
-2.14 |
% |
-1.06 |
% |
-0.21 |
% |
1.20 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (c) |
|
3.78 |
% |
4.78 |
% |
2.28 |
% |
3.38 |
% |
2.27 |
% |
1.27 |
% |
2.46 |
% | |||||||
Performance fees |
|
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
-0.02 |
% |
0.12 |
% |
0.00 |
% | |||||||
Expenses (including Performance fees) |
|
3.76 |
% |
4.76 |
% |
2.26 |
% |
3.36 |
% |
2.25 |
% |
1.39 |
% |
2.46 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-3.75 |
% |
-4.75 |
% |
-2.24 |
% |
-3.35 |
% |
-2.24 |
% |
-1.39 |
% |
-2.47 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(c) The expense ratios do not include brokerage commissions.
*Units issued on December 1, 2012.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value or offering price, beginning of year or at time of offer |
|
$ |
1.1785 |
|
$ |
1.1639 |
|
$ |
1.1993 |
|
$ |
1.1904 |
|
$ |
1.4128 |
|
$ |
1.1650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.0179 |
|
0.0180 |
|
0.0177 |
|
0.0179 |
|
0.0209 |
|
0.0170 |
| ||||||
Brokerage commissions |
|
(0.0042 |
) |
(0.0041 |
) |
(0.0043 |
) |
(0.0042 |
) |
(0.0051 |
) |
(0.0042 |
) | ||||||
Interest income, net: |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0001 |
|
0.0000 |
| ||||||
Expenses |
|
(0.0443 |
) |
(0.0555 |
) |
(0.0270 |
) |
(0.0400 |
) |
(0.0319 |
) |
(0.0164 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.1479 |
|
$ |
1.1223 |
|
$ |
1.1857 |
|
$ |
1.1641 |
|
$ |
1.3968 |
|
$ |
1.1614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return before Performance fees |
|
-2.85 |
% |
-3.82 |
% |
-1.38 |
% |
-2.46 |
% |
-1.38 |
% |
-0.38 |
% | ||||||
Performance fees |
|
-0.16 |
% |
-0.16 |
% |
-0.16 |
% |
-0.16 |
% |
-0.16 |
% |
-0.35 |
% | ||||||
Total return after Performance fees |
|
-3.01 |
% |
-3.98 |
% |
-1.54 |
% |
-2.62 |
% |
-1.54 |
% |
-0.73 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses (excluding Performance fees) (b) |
|
3.74 |
% |
4.74 |
% |
2.24 |
% |
3.34 |
% |
2.24 |
% |
1.23 |
% | ||||||
Performance fees |
|
-0.05 |
% |
-0.05 |
% |
-0.05 |
% |
-0.05 |
% |
-0.05 |
% |
0.14 |
% | ||||||
Expenses (including Performance fees) |
|
3.69 |
% |
4.69 |
% |
2.19 |
% |
3.29 |
% |
2.19 |
% |
1.37 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-3.69 |
% |
-4.69 |
% |
-2.19 |
% |
-3.29 |
% |
-2.19 |
% |
-1.37 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ML BLUETREND FUTURESACCESS LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
ML Bluetrend FuturesAccess LLC (the Fund), a FuturesAccessSM Program (FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on April 30, 2008 and commenced trading activities on September 1, 2008. The Fund engages in the speculative trading of futures and forward contracts on a wide range of commodities. BlueCrest Capital Management LLP (BlueCrest or Trading Advisor) is the trading advisor of the Fund. The Trading Advisor utilizes the BlueTrend Program (the Trading Program) for the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
As of December 31, 2013 the Fund offers seven Classes of Units: Class A, Class C, Class I, Class D, Class DS, Class DT and Class M. Each Class of Units is offered at the Net Asset Value per Unit. The seven Classes of Units are subject to different Sponsor fees.
The Class M Units are for investors who are subscribing through a managed investment account program at MLPF&S and who satisfy other requirements as determined by the Sponsor from time to time. Class DT is solely for investments made by Trend-Following Futures Fund L.P. and Class DS is solely for investments made by Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC), which reflects interests by other funds within the FuturesAccess group.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. Certain prior year items have been reclassified to conform to the current year presentation.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) net on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D Units and Class I Units are subject to sales commissions up to 0.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class DS Units, Class DT Units and Class M Units are not subject to any sales commissions.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the first calendar day of each month (a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the first of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value effective as of the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the first of every month. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st day of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund will dissolve if certain circumstances occur as set forth in the limited liability company operating agreement, which include:
a) Bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of the Fund.
b) Any event which would make unlawful the continued existence of the Fund.
c) Withdrawal of the Sponsor unless at such time there is at least one remaining manager.
d) The determination by the Sponsor to liquidate the Fund and wind up its affairs.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
213 |
|
$ |
(235,914 |
) |
-0.21 |
% |
(592 |
) |
$ |
493,766 |
|
0.43 |
% |
$ |
257,852 |
|
0.22 |
% |
March 2014 |
|
Currencies-Forwards* |
|
35,391,596,844 |
|
(535,473 |
) |
-0.47 |
% |
(23,534,575,720 |
) |
557,548 |
|
0.49 |
% |
22,075 |
|
0.02 |
% |
March 2014 |
| |||
Energy |
|
601 |
|
236,523 |
|
0.21 |
% |
(2 |
) |
(170 |
) |
0.00 |
% |
236,353 |
|
0.21 |
% |
January 2014 - April 2014 |
| |||
Interest rates |
|
1,130 |
|
(627,061 |
) |
-0.55 |
% |
(837 |
) |
414,227 |
|
0.36 |
% |
(212,834 |
) |
-0.19 |
% |
March 2014 - December 2017 |
| |||
Metals |
|
482 |
|
842,393 |
|
0.74 |
% |
(541 |
) |
(1,080,178 |
) |
-0.95 |
% |
(237,785 |
) |
-0.21 |
% |
January 2014 - April 2014 |
| |||
Stock indices |
|
1,946 |
|
4,118,179 |
|
3.62 |
% |
(364 |
) |
422,165 |
|
0.37 |
% |
4,540,344 |
|
3.99 |
% |
January 2014 - April 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
3,798,647 |
|
3.34 |
% |
|
|
$ |
807,358 |
|
0.70 |
% |
$ |
4,606,005 |
|
4.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
23 |
|
$ |
(5,275 |
) |
0.00 |
% |
(334 |
) |
$ |
156,176 |
|
0.09 |
% |
$ |
150,901 |
|
0.09 |
% |
March 2013 |
|
Currencies-Forwards* |
|
38,928,071,228 |
|
750,786 |
|
0.44 |
% |
(6,252,919,955 |
) |
1,536,101 |
|
0.90 |
% |
2,286,887 |
|
1.34 |
% |
March 2013 |
| |||
Energy |
|
366 |
|
163,991 |
|
0.10 |
% |
(183 |
) |
92,920 |
|
0.05 |
% |
256,911 |
|
0.15 |
% |
January 2013 - April 2013 |
| |||
Interest rates |
|
9,869 |
|
377,814 |
|
0.22 |
% |
|
|
|
|
0.00 |
% |
377,814 |
|
0.22 |
% |
March 2013 - September 2016 |
| |||
Metals |
|
416 |
|
150,850 |
|
0.09 |
% |
(344 |
) |
(614,945 |
) |
-0.36 |
% |
(464,095 |
) |
-0.27 |
% |
January 2013 - April 2013 |
| |||
Stock indices |
|
3,210 |
|
1,612,198 |
|
0.95 |
% |
(194 |
) |
2,260 |
|
0.00 |
% |
1,614,458 |
|
0.95 |
% |
January 2013 - April 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
3,050,364 |
|
1.80 |
% |
|
|
$ |
1,172,512 |
|
0.68 |
% |
$ |
4,222,876 |
|
2.48 |
% |
|
|
* Currencies-Forwards are stated in notional amounts.
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance by U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
4,334,119 |
|
$ |
3,552,651 |
|
$ |
781,468 |
|
$ |
|
|
Short |
|
249,810 |
|
1,410,948 |
|
(1,161,138 |
) |
|
| ||||
|
|
$ |
4,583,929 |
|
$ |
4,963,599 |
|
$ |
(379,670 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
(535,472 |
) |
$ |
|
|
$ |
(535,472 |
) |
$ |
|
|
Short |
|
557,548 |
|
|
|
557,548 |
|
|
| ||||
|
|
$ |
22,076 |
|
$ |
|
|
$ |
22,076 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
4,606,005 |
|
$ |
4,963,599 |
|
$ |
(357,594 |
) |
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
2,299,578 |
|
$ |
2,181,368 |
|
$ |
118,210 |
|
$ |
|
|
Short |
|
(363,589 |
) |
255,806 |
|
(619,395 |
) |
|
| ||||
|
|
$ |
1,935,989 |
|
$ |
2,437,174 |
|
$ |
(501,185 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
750,786 |
|
$ |
|
|
$ |
750,786 |
|
$ |
|
|
Short |
|
1,536,101 |
|
|
|
1,536,101 |
|
|
| ||||
|
|
$ |
2,286,887 |
|
$ |
|
|
$ |
2,286,887 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
4,222,876 |
|
$ |
2,437,174 |
|
$ |
1,785,702 |
|
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the year. There were no transfers to or from any level during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. For the years ended December 31, 2013 and 2012 the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
|
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Commodity Industry Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
(2,334,162 |
) |
$ |
(2,319,528 |
) |
$ |
(399,800 |
) |
Currencies |
|
(7,175,453 |
) |
(5,102,842 |
) |
(2,053,075 |
) | |||
Energy |
|
(8,749,395 |
) |
(5,341,711 |
) |
(6,001,826 |
) | |||
Interest rates |
|
(14,152,361 |
) |
18,627,116 |
|
46,931,053 |
| |||
Metals |
|
(420,315 |
) |
(6,273,910 |
) |
(503,473 |
) | |||
Stock indices |
|
21,487,562 |
|
4,070,616 |
|
(34,077,798 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
(11,344,124 |
) |
$ |
3,659,741 |
|
$ |
3,895,081 |
|
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Were a substantial portion of the Funds capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the year ended December 31, 2013, 2012, and 2011 amounted to $31,685, $43,168 and $51,011, respectively, of which $4,635 and $6,793 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund charges Sponsor fees on the month-end net assets, after all other charges at annual rates equal to 1.50% for Class A Units, 2.50% for Class C Units, and 1.10% on Class I Units. Class D Units, Class DS Units, Class DT Units and Class M Units are not charged a Sponsor Fee.
The Fund pays brokerage commissions on actual cost per round turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $6.64, $6.35 and $6.59, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and BlueCrest have entered into an advisory agreement. The advisory agreement will continue in effect until December 31, 2014. Thereafter, the advisory agreement will be automatically renewed for successive one-year periods, on the same terms, unless terminated at any time by either BlueCrest or the Fund upon 120 days written notice to the other party. Pursuant to the advisory agreement, BlueCrest has sole and exclusive authority and responsibility for directing the Funds trading, subject to MLAIs fiduciary authority to intervene, to overrule or unwind trades if MLAI deems that doing so is necessary or advisable for the protection of the Fund.
The Fund charges management fees on the average month-end net asset value of each investments units after reduction for the brokerage commissions accrued with respect to such assets, and are payable to BlueCrest on a monthly basis. Management Fees are at a rate equal to 2.0% per year for all classes, except for Class DT Units, which is charged a 1% Management Fee. BlueCrest agreed to share 50% of its management fees with MLAI in order to defray costs in connection with and in consideration of BAC providing certain administrative and support services for the Fund. This fee sharing arrangement does not apply in respect of Class DT Units.
Performance fees are charged by the Fund on any New Trading Profit, (as defined in the advisory agreement) and are payable to BlueCrest as of either the end of each calendar year or upon any interim period for which there are net redemption of Units, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. The Fund charges a 25% performance fee for all classes.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of BlueCrest, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge BlueCrest to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by BlueCrest.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.05
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for
the years ended December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
|
Page |
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
1 |
|
|
|
FINANCIAL STATEMENTS: |
|
|
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
|
2 |
|
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
|
3 |
|
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
|
4 |
|
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
|
5 |
|
|
|
Notes to Financial Statements |
|
8 |
Report of Independent Registered Public Accounting Firm
To the Members of John Locke FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of John Locke FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $4,233,921 for 2013 and $8,410,234 for 2012) |
|
$ |
30,100,463 |
|
$ |
55,161,351 |
|
Net unrealized profit on open futures contracts |
|
1,100,086 |
|
1,027,645 |
| ||
Cash |
|
366,279 |
|
530,192 |
| ||
Other receivables |
|
46 |
|
88 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
31,566,874 |
|
$ |
56,719,276 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
94,276 |
|
$ |
767,641 |
|
Management fees payable |
|
52,491 |
|
94,109 |
| ||
Redemptions payable |
|
1,547,361 |
|
1,419,363 |
| ||
Other liabilities |
|
704,531 |
|
661,543 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
2,398,659 |
|
2,942,656 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (23,703,863 Units and 42,891,866 Units outstanding, unlimited Units authorized) |
|
29,168,215 |
|
53,776,620 |
| ||
Total members capital |
|
29,168,215 |
|
53,776,620 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
31,566,874 |
|
$ |
56,719,276 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT |
|
$ |
1.2305 |
|
$ |
1.2538 |
|
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(176,506 |
) |
$ |
21,036 |
|
$ |
(1,990,737 |
) |
Change in unrealized, net |
|
745,806 |
|
(1,118,828 |
) |
(5,628,379 |
) | |||
Brokerage commissions |
|
(333,203 |
) |
(723,283 |
) |
(1,200,086 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
236,097 |
|
(1,821,075 |
) |
(8,819,202 |
) | |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(1,267 |
) |
(2,528 |
) |
(751 |
) | |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
860,679 |
|
1,761,077 |
|
2,790,838 |
| |||
Sponsor fee |
|
|
|
|
|
|
| |||
Performance fee |
|
|
|
|
|
10,429 |
| |||
Other |
|
144,862 |
|
774,959 |
|
187,008 |
| |||
Total expenses |
|
1,005,541 |
|
2,536,036 |
|
2,988,275 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(1,006,808 |
) |
(2,538,564 |
) |
(2,989,026 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(770,711 |
) |
$ |
(4,359,639 |
) |
$ |
(11,808,228 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class DS |
|
34,639,376 |
|
66,639,593 |
|
100,894,703 |
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class DS |
|
$ |
(0.0222 |
) |
$ |
(0.0654 |
) |
$ |
(0.1170 |
) |
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Class DS |
|
98,954,171 |
|
8,899,310 |
|
(17,687,831 |
) |
90,165,650 |
|
|
|
(47,273,784 |
) |
42,891,866 |
|
316,731 |
|
(19,504,734 |
) |
23,703,863 |
|
Class DT** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
98,954,171 |
|
8,899,310 |
|
(17,687,831 |
) |
90,165,650 |
|
|
|
(47,273,784 |
) |
42,891,866 |
|
316,731 |
|
(19,504,734 |
) |
23,703,863 |
|
See notes to financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(Loss) |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(Loss) |
|
Members Capital |
| |||||||||||||
Class DS |
|
$ |
144,646,855 |
|
$ |
12,356,614 |
|
$ |
(24,900,561 |
) |
$ |
(11,808,228 |
) |
$ |
120,294,680 |
|
$ |
|
|
$ |
(62,158,421 |
) |
$ |
(4,359,639 |
) |
$ |
53,776,620 |
|
$ |
393,507 |
|
$ |
(24,231,201 |
) |
$ |
(770,711 |
) |
$ |
29,168,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
144,646,855 |
|
$ |
12,356,614 |
|
$ |
(24,900,561 |
) |
$ |
(11,808,228 |
) |
$ |
120,294,680 |
|
$ |
|
|
$ |
(62,158,421 |
) |
$ |
(4,359,639 |
) |
$ |
53,776,620 |
|
$ |
393,507 |
|
$ |
(24,231,201 |
) |
$ |
(770,711 |
) |
$ |
29,168,215 |
|
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.2538 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
0.0266 |
| |
Brokerage commissions |
|
(0.0097 |
) | |
Interest Income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0402 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.2305 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-0.88 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-0.88 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.35 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.35 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.35 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.3342 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.0262 |
) | |
Brokerage commissions |
|
(0.0111 |
) | |
Interest Income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0431 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.2538 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-6.00 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-6.00 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.90 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.90 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.90 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.4618 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.0862 |
) | |
Brokerage commissions |
|
(0.0119 |
) | |
Interest Income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0295 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
1.3342 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-8.74 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-8.74 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.13 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.13 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.13 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
JOHN LOCKE FUTURESACCESS LLC
(Formerly ML John Locke FuturesAccess LLC)
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
John Locke FuturesAccess LLC (formerly ML John Locke FuturesAccess LLC) (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund engages in the speculative trading of futures on a wide range of commodities. John Locke Investments SA (John Locke or Trading Advisor) is the trading advisor of the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one
period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund may terminate if certain circumstances occur as set forth in the private placement memorandum, which include but are not limited to the following:
(a) Bankruptcy, dissolution, withdrawal or other termination of the trading advisor of this Fund.
(b) Any event which would make unlawful the continued existence of this Fund.
(c) Determination by MLAI to liquidate or withdraw from the Fund.
(d) Withdrawal of the Sponsor.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
63 |
|
$ |
(87,845 |
) |
-0.30 |
% |
(356 |
) |
$ |
274,339 |
|
0.94 |
% |
$ |
186,494 |
|
0.64 |
% |
February 2014 - March 2014 |
|
Currencies |
|
283 |
|
246,741 |
|
0.85 |
% |
(274 |
) |
140,586 |
|
0.48 |
% |
387,327 |
|
1.33 |
% |
March 2014 |
| |||
Energy |
|
162 |
|
(202,002 |
) |
-0.69 |
% |
(13 |
) |
10,860 |
|
0.04 |
% |
(191,142 |
) |
-0.65 |
% |
January 2014 |
| |||
Interest rates |
|
126 |
|
(38,598 |
) |
-0.13 |
% |
(115 |
) |
28,782 |
|
0.10 |
% |
(9,816 |
) |
-0.03 |
% |
March 2014 - June 2014 |
| |||
Metals |
|
348 |
|
423,096 |
|
1.45 |
% |
(321 |
) |
(434,871 |
) |
-1.49 |
% |
(11,775 |
) |
-0.04 |
% |
January 2014 - October 2014 |
| |||
Stock indices |
|
252 |
|
645,981 |
|
2.21 |
% |
(2 |
) |
(1,259 |
) |
0.00 |
% |
644,722 |
|
2.21 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
987,373 |
|
3.39 |
% |
|
|
$ |
18,437 |
|
0.07 |
% |
$ |
1,005,810 |
|
3.46 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
8 |
|
$ |
(3,650 |
) |
-0.01 |
% |
(249 |
) |
$ |
(4,964 |
) |
-0.01 |
% |
$ |
(8,614 |
) |
-0.02 |
% |
February 2013 - March 2013 |
|
Currencies |
|
359 |
|
297,250 |
|
0.55 |
% |
(114 |
) |
158,653 |
|
0.30 |
% |
455,903 |
|
0.85 |
% |
March 2013 |
| |||
Energy |
|
50 |
|
39,497 |
|
0.07 |
% |
(119 |
) |
(2,370 |
) |
0.00 |
% |
37,127 |
|
0.07 |
% |
January 2013 |
| |||
Interest rates |
|
2,731 |
|
413,244 |
|
0.77 |
% |
(3 |
) |
(2,999 |
) |
-0.01 |
% |
410,245 |
|
0.76 |
% |
March 2013 - June 2013 |
| |||
Metals |
|
363 |
|
246,954 |
|
0.46 |
% |
(299 |
) |
(879,929 |
) |
-1.64 |
% |
(632,975 |
) |
-1.18 |
% |
January 2013 - October 2013 |
| |||
Stock indices |
|
852 |
|
(1,682 |
) |
0.00 |
% |
|
|
|
|
0.00 |
% |
(1,682 |
) |
0.00 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
991,613 |
|
1.84 |
% |
|
|
$ |
(731,609 |
) |
-1.36 |
% |
$ |
260,004 |
|
0.48 |
% |
|
|
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance by U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels, as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
987,373 |
|
$ |
581,327 |
|
$ |
406,046 |
|
$ |
|
|
Short |
|
18,437 |
|
549,237 |
|
(530,800 |
) |
|
| ||||
|
|
$ |
1,005,810 |
|
$ |
1,130,564 |
|
$ |
(124,754 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
|
|
$ |
|
| |
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
1,005,810 |
|
$ |
1,130,564 |
|
$ |
(124,754 |
) |
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
991,613 |
|
$ |
773,844 |
|
$ |
217,769 |
|
$ |
|
|
Short |
|
(731,609 |
) |
100,630 |
|
(832,239 |
) |
|
| ||||
|
|
$ |
260,004 |
|
$ |
874,474 |
|
$ |
(614,470 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
|
|
$ |
|
| |
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
260,004 |
|
$ |
874,474 |
|
$ |
(614,470 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the year. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. For the years ended December 31, 2013 and 2012 the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
Commodity Industry |
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
170,969 |
|
$ |
522,295 |
|
$ |
(6,001,771 |
) |
Currencies |
|
(100,706 |
) |
(4,328,476 |
) |
(6,750,995 |
) | |||
Energy |
|
(3,005,178 |
) |
2,404,788 |
|
(4,024,095 |
) | |||
Interest rates |
|
(2,810,475 |
) |
2,901,757 |
|
12,140,348 |
| |||
Metals |
|
891,925 |
|
(2,855,249 |
) |
1,433,784 |
| |||
Stock indices |
|
5,422,765 |
|
257,093 |
|
(4,416,387 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
569,300 |
|
$ |
(1,097,792 |
) |
$ |
(7,619,116 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Where a substantial portion of the Funds capital was tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the year ended December 31, 2013, 2012, and 2011 amounted to $8,706, $17,396 and $25,841, respectively, of which $1,082 and $2,894 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund pays brokerage commissions on actual cost per round-turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $5.62, $6.19 and $6.37 respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or all paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and John Locke have entered into an advisory agreement. This agreement shall continue in effect until December 31, 2016. Thereafter, this agreement shall be automatically renewed for successive three-year periods, on the same terms, unless terminated at any time by either John Locke or the Fund upon 120 days written notice to the other party. John Locke determines the commodity futures, options on futures and forward contract trades to be made on behalf of their respective Fund accounts, subject to certain trading policies and to certain rights reserved by MLAI.
The Fund pays John Locke annual management fees of 2% of the Funds average month-end net assets allocated to them after reduction for the brokerage commissions accrued with respect to such assets. MLAI receives 25% of the 2% management fee for sponsoring and providing ongoing administration and operational support of the Fund.
Performance fees paid by the Fund are calculated as 20% of any New Trading Profit, as defined in the private placement memorandum, and are recognized by John Locke as of either the end of each calendar year or upon the net reallocation of assets away from John Locke. Performance fees are also paid out in respect of Units redeemed as of the end of interim months, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. MLAI receives 25% of the 20% annual performance fee.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value
basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of John Locke, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge John Locke to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by John Locke.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.06
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations) to December 31, 2012 and Report of Independent Registered Public Accounting Firm
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations) to December 31, 2012 |
3 |
|
|
Statements of Changes in Members Capital for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations) to December 31, 2012 |
4 |
|
|
Financial Data Highlights for the year ended December 31, 2013 and for the period July 1, 2012 (commencement of operations)to December 31, 2012 |
5 |
|
|
Notes to Financial Statements |
7 |
Report of Independent Registered Public Accounting Firm
To the Members of Lynx FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of Lynx FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for the year ended December 31, 2013, and for the period from July 1, 2012 (commencement of operations) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $5,261,935 for 2013 and $7,256,436 for 2012) |
|
$ |
30,231,147 |
|
$ |
56,196,408 |
|
Net unrealized profit on open futures contracts |
|
2,475,501 |
|
237,773 |
| ||
Cash |
|
387,834 |
|
524,378 |
| ||
Other Assets |
|
50,023 |
|
50,145 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
33,144,505 |
|
$ |
57,008,704 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
|
|
$ |
963,781 |
|
Management fees payable |
|
52,989 |
|
46,764 |
| ||
Redemptions payable |
|
3,115,181 |
|
1,399,971 |
| ||
Perfomance fee payable |
|
12,671 |
|
|
| ||
Other liablilities |
|
207,969 |
|
234,086 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
3,388,810 |
|
2,644,602 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (29,757,039 Units and 58,854,581 Units, unlimited Units authorized) |
|
29,755,695 |
|
54,364,102 |
| ||
Total members capital |
|
29,755,695 |
|
54,364,102 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
33,144,505 |
|
$ |
57,008,704 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT |
|
$ |
1.0000 |
|
$ |
0.9237 |
|
See notes to financial statements.
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013 AND FOR THE PERIOD JULY 1, 2012 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2012
|
|
2013 |
|
2012 |
| ||
TRADING PROFIT (LOSS): |
|
|
|
|
| ||
|
|
|
|
|
| ||
Realized, net |
|
$ |
1,016,024 |
|
$ |
(3,100,729 |
) |
Change in unrealized, net |
|
3,201,509 |
|
(726,008 |
) | ||
Brokerage commissions |
|
(233,377 |
) |
(201,368 |
) | ||
|
|
|
|
|
| ||
Total trading profit (loss), net |
|
3,984,156 |
|
(4,028,105 |
) | ||
|
|
|
|
|
| ||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
| ||
Interest, net |
|
1,816 |
|
(1,395 |
) | ||
|
|
|
|
|
| ||
EXPENSES: |
|
|
|
|
| ||
Management fee |
|
863,779 |
|
327,449 |
| ||
Performance fee |
|
12,671 |
|
21,511 |
| ||
Other |
|
176,350 |
|
615,176 |
| ||
Total expenses |
|
1,052,800 |
|
964,136 |
| ||
|
|
|
|
|
| ||
NET INVESTMENT INCOME (LOSS) |
|
(1,050,984 |
) |
(965,531 |
) | ||
|
|
|
|
|
| ||
NET INCOME (LOSS) |
|
$ |
2,933,172 |
|
$ |
(4,993,636 |
) |
|
|
|
|
|
| ||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Weighted average number of Units outstanding |
|
|
|
|
| ||
Class DS* |
|
46,096,743 |
|
67,108,127 |
| ||
|
|
|
|
|
| ||
Net income (loss) per weighted average Unit |
|
|
|
|
| ||
Class DS* |
|
$ |
0.0636 |
|
$ |
(0.0744 |
) |
*Units issued on July 1, 2012.
See notes to financial statements.
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2013 AND
FOR THE PERIOD JULY 1, 2012 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2012
|
|
Initial Offering |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Class DS* |
|
72,353,594 |
|
|
|
(13,499,013 |
) |
58,854,581 |
|
743,306 |
|
(29,840,848 |
) |
29,757,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
72,353,594 |
|
|
|
(13,499,013 |
) |
58,854,581 |
|
743,306 |
|
(29,840,848 |
) |
29,757,039 |
|
*Units issued on July 1, 2012.
See notes to financial statements.
|
|
Initial Offering |
|
Subscriptions |
|
Redemptions |
|
Net |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net |
|
Members Capital |
| |||||||||
Class DS* |
|
$ |
72,353,594 |
|
$ |
|
|
$ |
(12,995,856 |
) |
$ |
(4,993,636 |
) |
$ |
54,364,102 |
|
$ |
667,340 |
|
$ |
(28,208,919 |
) |
$ |
2,933,172 |
|
$ |
29,755,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total Members Capital |
|
$ |
72,353,594 |
|
$ |
|
|
$ |
(12,995,856 |
) |
$ |
(4,993,636 |
) |
$ |
54,364,102 |
|
$ |
667,340 |
|
$ |
(28,208,919 |
) |
$ |
2,933,172 |
|
$ |
29,755,695 |
|
*Units issued on July 1, 2012.
See notes to financial statements.
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS FOR
THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class DS |
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value at time of offer |
|
$ |
0.9237 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
0.1038 |
| |
Brokerage commissions |
|
(0.0050 |
) | |
Interest Income, net (c) |
|
0.0000 |
| |
Expenses |
|
(0.0225 |
) | |
|
|
|
| |
Net asset value, end of year # |
|
$ |
1.0000 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
8.30 |
% | |
Performance fees |
|
-0.04 |
% | |
Total return after Performance fees |
|
8.26 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.38 |
% | |
Performance fees |
|
0.04 |
% | |
Expenses (including Performance fees) |
|
2.42 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.41 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE PERIOD JULY 1, 2012 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class DS* |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value at time of offer |
|
$ |
1.0000 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.0593 |
) | |
Brokerage commissions |
|
(0.0030 |
) | |
Interest Income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0140 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
0.9237 |
|
|
|
|
| |
Total Return: (b) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-7.66 |
% | |
Performance fees |
|
-0.03 |
% | |
Total return after Performance fees |
|
-7.69 |
% | |
|
|
|
| |
Ratios to Average Members Capital: (a) |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (d) |
|
2.90 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.90 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.89 |
% |
(a) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(b) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The expense ratios do not include brokerage commissions.
*Units issued on July 1, 2012.
See notes to financial statements.
LYNX FUTURESACCESS LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Lynx FuturesAccess LLC (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on May 31, 2012 and commenced trading activities on July 1, 2012. The Fund engages in the speculative trading of futures on a wide range of commodities. Lynx Asset Management AB (Lynx or Trading Advisor) is the trading advisor of the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Initial Offering and Organizational Costs
Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance. Initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statement of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statement of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2012.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the year ended December 31, 2013 and for the period ended December 31, 2012.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund may terminate if certain circumstances occur as set forth in the private placement memorandum, which include but are not limited to the following:
(a) Bankruptcy, dissolution, withdrawal or other termination of the trading advisor of this Fund.
(b) Any event which would make unlawful the continued existence of this Fund.
(c) Determination by MLAI to liquidate or withdraw from the Fund.
(d) Withdrawal of the Sponsor.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
76 |
|
$ |
(82,830 |
) |
-0.28 |
% |
(327 |
) |
$ |
189,279 |
|
0.64 |
% |
$ |
106,449 |
|
0.36 |
% |
February 2014 - December 2014 |
|
Currencies |
|
136 |
|
117,606 |
|
0.40 |
% |
(219 |
) |
294,456 |
|
0.99 |
% |
412,062 |
|
1.39 |
% |
March 2014 |
| |||
Energy |
|
101 |
|
(38,644 |
) |
-0.13 |
% |
(6 |
) |
(9,050 |
) |
-0.03 |
% |
(47,694 |
) |
-0.16 |
% |
January 2014 - May 2014 |
| |||
Interest rates |
|
369 |
|
(104,553 |
) |
-0.35 |
% |
(219 |
) |
75,671 |
|
0.25 |
% |
(28,882 |
) |
-0.10 |
% |
March 2014 - December 2015 |
| |||
Metals |
|
183 |
|
227,942 |
|
0.77 |
% |
(221 |
) |
(130,207 |
) |
-0.44 |
% |
97,735 |
|
0.33 |
% |
January 2014 - March 2014 |
| |||
Stock indices |
|
681 |
|
1,935,831 |
|
6.51 |
% |
|
|
|
|
0.00 |
% |
1,935,831 |
|
6.51 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
2,055,352 |
|
6.92 |
% |
|
|
$ |
420,149 |
|
1.41 |
% |
$ |
2,475,501 |
|
8.33 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
120 |
|
$ |
(283,947 |
) |
-0.52 |
% |
(138 |
) |
$ |
16,720 |
|
0.03 |
% |
$ |
(267,227 |
) |
-0.49 |
% |
February 2013 - December 2013 |
|
Currencies |
|
576 |
|
(224,576 |
) |
-0.41 |
% |
(174 |
) |
39,463 |
|
0.07 |
% |
(185,113 |
) |
-0.34 |
% |
March 2013 |
| |||
Energy |
|
63 |
|
73,746 |
|
0.14 |
% |
(48 |
) |
(88,416 |
) |
-0.16 |
% |
(14,670 |
) |
-0.02 |
% |
January 2013 - May 2013 |
| |||
Interest rates |
|
1,272 |
|
(147,678 |
) |
-0.27 |
% |
(901 |
) |
(57,417 |
) |
-0.11 |
% |
(205,095 |
) |
-0.38 |
% |
March 2013 - December 2014 |
| |||
Metals |
|
288 |
|
161,788 |
|
0.30 |
% |
(218 |
) |
(654,616 |
) |
-1.20 |
% |
(492,828 |
) |
-0.90 |
% |
January 2013 - March 2013 |
| |||
Stock indices |
|
823 |
|
438,925 |
|
0.81 |
% |
|
|
|
|
0.00 |
% |
438,925 |
|
0.81 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
18,258 |
|
0.05 |
% |
|
|
$ |
(744,266 |
) |
-1.37 |
% |
$ |
(726,008 |
) |
-1.32 |
% |
|
|
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance by U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party
pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
2,055,352 |
|
$ |
1,827,860 |
|
$ |
227,492 |
|
$ |
|
|
Short |
|
420,149 |
|
620,967 |
|
(200,818 |
) |
|
| ||||
|
|
$ |
2,475,501 |
|
$ |
2,448,827 |
|
$ |
26,674 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
2,475,501 |
|
$ |
2,448,827 |
|
$ |
26,674 |
|
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
18,258 |
|
$ |
(146,418 |
) |
$ |
164,676 |
|
$ |
|
|
Short |
|
(744,266 |
) |
(94,400 |
) |
(649,866 |
) |
|
| ||||
|
|
$ |
(726,008 |
) |
$ |
(240,818 |
) |
$ |
(485,190 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
(726,008 |
) |
$ |
(240,818 |
) |
$ |
(485,190 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the period. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. For the year ended December 31, 2013 and for the period ended December 31, 2012 the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses before brokerage commissions, by type/commodity industry sector, on derivative instruments for the year ended December 31, 2013 and for the period ended December 31, 2012:
Commodity Industry |
|
December 31, 2013 |
|
December 31, 2012 |
| ||
Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| ||
|
|
|
|
|
| ||
Agriculture |
|
$ |
624,520 |
|
$ |
291,355 |
|
Currencies |
|
(722,644 |
) |
(1,411,931 |
) | ||
Energy |
|
(2,773,578 |
) |
(1,336,578 |
) | ||
Interest rates |
|
(3,362,910 |
) |
(1,158,786 |
) | ||
Metals |
|
306,974 |
|
(1,622,905 |
) | ||
Stock indices |
|
10,145,171 |
|
1,412,108 |
| ||
|
|
|
|
|
| ||
Total |
|
$ |
4,217,533 |
|
$ |
(3,826,737 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Where a substantial portion of the Funds capital was tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the year ended December 31, 2013and for the period ended December 31, 2012 amounted to $7,376 and $6,576 of which $1,082 and $3,233 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund pays brokerage commissions on actual cost per round-turn. The average round-turn commission rate charged to the Fund for the year ended December 31, 2013 and for the period ended December 31, 2012 was approximately $3.86 and $4.14 (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions and Interest as presented on the Statements of Operations are all received from or all paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statements of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and Lynx have entered into an advisory agreement. This agreement shall continue in effect until June 30, 2014. Thereafter, this agreement shall be automatically renewed for successive six month periods, on the same terms, unless terminated at any time by either Lynx or the Fund upon 90 days written notice to the other party. Lynx determines the commodity futures, options on futures and forward contract trades to be made on behalf of their respective Fund accounts, subject to certain trading policies and to certain rights reserved by MLAI.
The Fund pays Lynx annual management fees of 1% of the aggregate gross asset value of the Fund allocated to them after reduction for the brokerage commissions accrued with respect to such assets. Lynx Fund also pays MLAI a 1% per annum management fee.
Performance fees paid by the Fund are calculated as 20% of any New Trading Profit, as defined in the private placement memorandum, and are recognized by Lynx as of either the end of each calendar year or upon the net reallocation of assets away from Lynx. Performance fees are also paid out in respect of Units redeemed as of the end of interim months, to the extent of the applicable percentage of any New Trading Profit attributable to such Units.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the year ended December 31, 2013 and for the period ended December 31, 2012 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the period.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in
the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of John Locke, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge John Locke to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by John Locke. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by Lynx.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S
and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.07
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and for the years ended
December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of ML Transtrend DTP Enhanced FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of ML Transtrend DTP Enhanced FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $14,999,063 for 2013 and $23,426,907 for 2012) |
|
$ |
91,648,859 |
|
$ |
150,062,262 |
|
Net unrealized profit on open futures contracts |
|
5,348,804 |
|
3,460,072 |
| ||
Cash |
|
530,432 |
|
528,396 |
| ||
Other assets |
|
90 |
|
120 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
97,528,185 |
|
$ |
154,050,850 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
461,338 |
|
$ |
673,241 |
|
Sponsor and Advisory fees payable |
|
182,957 |
|
283,361 |
| ||
Redemptions payable |
|
10,248,917 |
|
3,841,372 |
| ||
Other liabilities |
|
303,483 |
|
200,444 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
11,196,695 |
|
4,998,418 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (66,052,414 Units and 111,802,279 Units outstanding; unlimited Units authorized) |
|
86,331,490 |
|
149,052,432 |
| ||
Total members capital |
|
86,331,490 |
|
149,052,432 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
97,528,185 |
|
$ |
154,050,850 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
|
$ |
1.1143 |
|
$ |
1.1397 |
|
Class C |
|
$ |
1.0114 |
|
$ |
1.0448 |
|
Class D |
|
$ |
0.9409 |
|
$ |
0.9480 |
|
Class I |
|
$ |
1.1254 |
|
$ |
1.1465 |
|
Class DS |
|
$ |
1.4415 |
|
$ |
1.4524 |
|
Class DT |
|
$ |
1.5651 |
|
$ |
1.5612 |
|
Class M |
|
$ |
0.9347 |
|
$ |
0.9418 |
|
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
(257,587 |
) |
$ |
11,822,071 |
|
$ |
(19,290,462 |
) |
Change in unrealized, net |
|
2,100,635 |
|
(5,010,392 |
) |
(1,469,413 |
) | |||
Brokerage commissions |
|
(802,619 |
) |
(1,122,005 |
) |
(1,084,608 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
1,040,429 |
|
5,689,674 |
|
(21,844,483 |
) | |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(3,284 |
) |
7,111 |
|
(17,755 |
) | |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
2,284,350 |
|
3,502,971 |
|
4,663,195 |
| |||
Sponsor fee |
|
520,856 |
|
630,871 |
|
673,816 |
| |||
Performance fee |
|
|
|
158,705 |
|
|
| |||
Other |
|
545,922 |
|
656,058 |
|
644,087 |
| |||
Total expenses |
|
3,351,128 |
|
4,948,605 |
|
5,981,098 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(3,354,412 |
) |
(4,941,494 |
) |
(5,998,853 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(2,313,983 |
) |
$ |
748,180 |
|
$ |
(27,843,336 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class A |
|
8,518,918 |
|
9,600,043 |
|
7,578,294 |
| |||
Class C |
|
14,406,210 |
|
15,502,703 |
|
17,953,162 |
| |||
Class D |
|
6,911,105 |
|
4,344,135 |
|
2,015,591 |
| |||
Class I |
|
1,326,366 |
|
1,389,136 |
|
1,100,947 |
| |||
Class DS |
|
48,446,905 |
|
80,202,527 |
|
115,338,397 |
| |||
Class DT |
|
12,942,589 |
|
18,128,492 |
|
24,763,644 |
| |||
Class M* |
|
3,899,097 |
|
2,087,589 |
|
|
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class A |
|
$ |
(0.0381 |
) |
$ |
(0.0454 |
) |
$ |
(0.1699 |
) |
Class C |
|
$ |
(0.0407 |
) |
$ |
(0.0419 |
) |
$ |
(0.1584 |
) |
Class D |
|
$ |
(0.0164 |
) |
$ |
(0.1080 |
) |
$ |
(0.1052 |
) |
Class I |
|
$ |
(0.0334 |
) |
$ |
(0.0355 |
) |
$ |
(0.1544 |
) |
Class DS |
|
$ |
(0.0234 |
) |
$ |
0.0243 |
|
$ |
(0.1684 |
) |
Class DT |
|
$ |
(0.0085 |
) |
$ |
0.0233 |
|
$ |
(0.1577 |
) |
Class M* |
|
$ |
(0.0004 |
) |
$ |
(0.0108 |
) |
$ |
|
|
*Units issued on October 1, 2012. (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2012is for the period October 1, 2012 to December 31, 2012).
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Class A |
|
3,458,026 |
|
6,523,393 |
|
(1,054,773 |
) |
8,926,646 |
|
2,398,527 |
|
(1,851,875 |
) |
9,473,298 |
|
891,952 |
|
(4,539,161 |
) |
5,826,089 |
|
Class C |
|
15,140,200 |
|
6,132,543 |
|
(4,254,902 |
) |
17,017,841 |
|
2,572,479 |
|
(4,237,929 |
) |
15,352,391 |
|
3,042,907 |
|
(6,848,411 |
) |
11,546,887 |
|
Class D |
|
2,000,000 |
|
62,362 |
|
|
|
2,062,362 |
|
4,838,004 |
|
(62,362 |
) |
6,838,004 |
|
248,619 |
|
(5,239,250 |
) |
1,847,373 |
|
Class I |
|
911,417 |
|
368,795 |
|
(327,359 |
) |
952,853 |
|
832,501 |
|
(394,420 |
) |
1,390,934 |
|
391,505 |
|
(594,321 |
) |
1,188,118 |
|
Class DS |
|
111,667,815 |
|
8,143,951 |
|
(15,405,971 |
) |
104,405,795 |
|
|
|
(44,516,616 |
) |
59,889,179 |
|
1,649,241 |
|
(28,510,989 |
) |
33,027,431 |
|
Class DT |
|
26,281,259 |
|
618,514 |
|
(5,258,056 |
) |
21,641,717 |
|
12,221 |
|
(6,487,285 |
) |
15,166,653 |
|
115,978 |
|
(6,266,014 |
) |
9,016,617 |
|
Class M* |
|
|
|
|
|
|
|
|
|
3,691,820 |
|
|
|
3,691,820 |
|
1,272,322 |
|
(1,364,243 |
) |
3,599,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
159,458,717 |
|
21,849,558 |
|
(26,301,061 |
) |
155,007,214 |
|
14,345,552 |
|
(57,550,487 |
) |
111,802,279 |
|
7,612,524 |
|
(53,362,389 |
) |
66,052,414 |
|
*Units issued on October 1, 2012.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members Capital |
| |||||||||||||
Class A |
|
$ |
4,597,909 |
|
$ |
8,485,986 |
|
$ |
(1,262,333 |
) |
$ |
(1,287,510 |
) |
$ |
10,534,052 |
|
$ |
2,866,271 |
|
$ |
(2,167,161 |
) |
$ |
(436,058 |
) |
$ |
10,797,104 |
|
$ |
985,698 |
|
$ |
(4,965,966 |
) |
$ |
(324,482 |
) |
$ |
6,492,354 |
|
Class C |
|
18,827,816 |
|
7,351,464 |
|
(4,741,010 |
) |
(2,843,124 |
) |
18,595,146 |
|
2,831,398 |
|
(4,736,568 |
) |
(649,325 |
) |
16,040,651 |
|
3,109,502 |
|
(6,885,459 |
) |
(586,382 |
) |
11,678,312 |
| |||||||||||||
Class D |
|
2,146,621 |
|
59,699 |
|
|
|
(212,045 |
) |
1,994,275 |
|
5,019,388 |
|
(62,025 |
) |
(469,022 |
) |
6,482,616 |
|
235,000 |
|
(4,866,210 |
) |
(113,194 |
) |
1,738,212 |
| |||||||||||||
Class I |
|
1,209,298 |
|
474,204 |
|
(387,009 |
) |
(169,935 |
) |
1,126,558 |
|
1,012,139 |
|
(494,730 |
) |
(49,273 |
) |
1,594,694 |
|
444,000 |
|
(657,269 |
) |
(44,274 |
) |
1,337,151 |
| |||||||||||||
Class DS |
|
183,611,518 |
|
13,056,819 |
|
(22,578,894 |
) |
(19,424,860 |
) |
154,664,583 |
|
|
|
(69,634,735 |
) |
1,952,715 |
|
86,982,563 |
|
2,359,243 |
|
(40,599,219 |
) |
(1,133,475 |
) |
47,609,112 |
| |||||||||||||
Class DT |
|
45,566,638 |
|
979,606 |
|
(8,508,687 |
) |
(3,905,862 |
) |
34,131,695 |
|
20,467 |
|
(10,895,819 |
) |
421,627 |
|
23,677,970 |
|
179,963 |
|
(9,635,888 |
) |
(110,517 |
) |
14,111,528 |
| |||||||||||||
Class M* |
|
|
|
|
|
|
|
|
|
|
|
3,499,318 |
|
|
|
(22,484 |
) |
3,476,834 |
|
1,187,000 |
|
(1,297,354 |
) |
(1,659 |
) |
3,364,821 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Capital |
|
$ |
255,959,800 |
|
$ |
30,407,778 |
|
$ |
(37,477,933 |
) |
$ |
(27,843,336 |
) |
$ |
221,046,309 |
|
$ |
15,248,981 |
|
$ |
(87,991,038 |
) |
$ |
748,180 |
|
$ |
149,052,432 |
|
$ |
8,500,406 |
|
$ |
(68,907,365 |
) |
$ |
(2,313,983 |
) |
$ |
86,331,490 |
|
*Units issued on October 1, 2012.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, beginning of year |
|
$ |
1.1397 |
|
$ |
1.0448 |
|
$ |
0.9480 |
|
$ |
1.1465 |
|
$ |
1.4524 |
|
$ |
1.5612 |
|
$ |
0.9418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.0254 |
|
0.0229 |
|
0.0216 |
|
0.0257 |
|
0.0330 |
|
0.0360 |
|
0.0214 |
| |||||||
Brokerage commissions |
|
(0.0071 |
) |
(0.0065 |
) |
(0.0060 |
) |
(0.0072 |
) |
(0.0092 |
) |
(0.0099 |
) |
(0.0059 |
) | |||||||
Interest income, net (c) |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
Expenses |
|
(0.0437 |
) |
(0.0498 |
) |
(0.0227 |
) |
(0.0396 |
) |
(0.0347 |
) |
(0.0222 |
) |
(0.0226 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.1143 |
|
$ |
1.0114 |
|
$ |
0.9409 |
|
$ |
1.1254 |
|
$ |
1.4415 |
|
$ |
1.5651 |
|
$ |
0.9347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-2.23 |
% |
-3.20 |
% |
-0.75 |
% |
-1.84 |
% |
-0.75 |
% |
0.25 |
% |
-0.75 |
% | |||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Total return after Performance fees |
|
-2.23 |
% |
-3.20 |
% |
-0.75 |
% |
-1.84 |
% |
-0.75 |
% |
0.25 |
% |
-0.75 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (b) |
|
3.96 |
% |
4.96 |
% |
2.46 |
% |
3.56 |
% |
2.46 |
% |
1.46 |
% |
2.46 |
% | |||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Expenses (including Performance fees) |
|
3.96 |
% |
4.96 |
% |
2.46 |
% |
3.56 |
% |
2.46 |
% |
1.46 |
% |
2.46 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-3.95 |
% |
-4.96 |
% |
-2.45 |
% |
-3.55 |
% |
-2.45 |
% |
-1.45 |
% |
-2.45 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M* |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, beginning of year or at time of offer |
|
$ |
1.1801 |
|
$ |
1.0927 |
|
$ |
0.9670 |
|
$ |
1.1823 |
|
$ |
1.4814 |
|
$ |
1.5771 |
|
$ |
1.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.0140 |
|
0.0135 |
|
0.0108 |
|
0.0138 |
|
0.0165 |
|
0.0169 |
|
(0.0507 |
) | |||||||
Brokerage commissions |
|
(0.0073 |
) |
(0.0068 |
) |
(0.0061 |
) |
(0.0074 |
) |
(0.0093 |
) |
(0.0099 |
) |
(0.0017 |
) | |||||||
Interest Income, net |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0001 |
|
0.0001 |
|
(0.0000 |
) | |||||||
Expenses |
|
(0.0471 |
) |
(0.0546 |
) |
(0.0237 |
) |
(0.0422 |
) |
(0.0363 |
) |
(0.0230 |
) |
(0.0058 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.1397 |
|
$ |
1.0448 |
|
$ |
0.9480 |
|
$ |
1.1465 |
|
$ |
1.4524 |
|
$ |
1.5612 |
|
$ |
0.9418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-3.48 |
% |
-4.45 |
% |
-2.03 |
% |
-3.10 |
% |
-2.03 |
% |
-1.04 |
% |
-5.82 |
% | |||||||
Performance fees |
|
-0.08 |
% |
-0.08 |
% |
-0.08 |
% |
-0.08 |
% |
-0.08 |
% |
-0.13 |
% |
0.00 |
% | |||||||
Total return after Performance fees |
|
-3.56 |
% |
-4.53 |
% |
-2.11 |
% |
-3.18 |
% |
-2.11 |
% |
-1.17 |
% |
-5.82 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (c) |
|
3.87 |
% |
4.87 |
% |
2.36 |
% |
3.47 |
% |
2.36 |
% |
1.36 |
% |
2.43 |
% | |||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.05 |
% |
0.00 |
% | |||||||
Expenses (including Performance fees) |
|
3.87 |
% |
4.87 |
% |
2.36 |
% |
3.47 |
% |
2.36 |
% |
1.41 |
% |
2.43 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-3.86 |
% |
-4.87 |
% |
-2.36 |
% |
-3.46 |
% |
-2.36 |
% |
-1.40 |
% |
-2.43 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The total return ratios are not annualized.
(c) The expense ratios do not include brokerage commissions.
*Units issued on October 1, 2012.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year |
|
$ |
1.3296 |
|
$ |
1.2436 |
|
$ |
1.0733 |
|
$ |
1.3268 |
|
$ |
1.6443 |
|
$ |
1.7338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net realized and net change in unrealized trading profit (loss) |
|
(0.0971 |
) |
(0.0905 |
) |
(0.0789 |
) |
(0.0971 |
) |
(0.1209 |
) |
(0.1280 |
) | ||||||
Brokerage commissions |
|
(0.0053 |
) |
(0.0050 |
) |
(0.0043 |
) |
(0.0053 |
) |
(0.0067 |
) |
(0.0070 |
) | ||||||
Interest income, net |
|
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) |
(0.0001 |
) | ||||||
Expenses |
|
(0.0470 |
) |
(0.0553 |
) |
(0.0230 |
) |
(0.0420 |
) |
(0.0352 |
) |
(0.0216 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.1801 |
|
$ |
1.0927 |
|
$ |
0.9670 |
|
$ |
1.1823 |
|
$ |
1.4814 |
|
$ |
1.5771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return before Performance fees |
|
-11.28 |
% |
-12.16 |
% |
-9.94 |
% |
-10.92 |
% |
-9.94 |
% |
-9.03 |
% | ||||||
Performance fees |
|
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.04 |
% |
-0.08 |
% | ||||||
Total return after Performance fees |
|
-11.32 |
% |
-12.20 |
% |
-9.98 |
% |
-10.96 |
% |
-9.98 |
% |
-9.11 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses (excluding Performance fees) (c) |
|
3.75 |
% |
4.74 |
% |
2.25 |
% |
3.35 |
% |
2.25 |
% |
1.25 |
% | ||||||
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.04 |
% | ||||||
Expenses (including Performance fees) |
|
3.75 |
% |
4.74 |
% |
2.25 |
% |
3.35 |
% |
2.25 |
% |
1.29 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-3.75 |
% |
-4.75 |
% |
-2.26 |
% |
-3.36 |
% |
-2.26 |
% |
-1.30 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(c) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
ML Transtrend DTP Enhanced FuturesAccess LLC (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund engages in the speculative trading of futures on a wide range of commodities. Transtrend B.V. (Transtrend or Trading Advisor) is the trading advisor of the Fund. The Trading Advisor utilizes the Transtrend Diversified Trend Program-Enhanced Risk Profile (the Trading Program) for the Fund. The Enhanced Risk Profile is approximately 1.5 times the leverage of the Standard Risk Profile.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
As of December 31, 2013 the Fund offers seven Classes of Units: Class A, Class C, Class I, Class D, Class DS, Class DT, and Class M. Each Class of Units is offered at the Net Asset Value per Unit. The seven Classes of Units are subject to different Sponsor fees.
The Class M Units are for Investors who are subscribing through a managed investment account program at MLPF&S and who satisfy other requirements as determined by the Sponsor from time to time. Class DT is solely for investments made by Trend-Following Futures Fund L.P. and Class DS is solely for investments made by Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC), which reflects interests by other funds within the FuturesAccess group.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not
guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss), net in open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss), net in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D Units and Class I Units are subject to sales commissions up to 0.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class DS Units, Class DT Units and Class M Units are not subject to any sales commissions.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund will dissolve if certain circumstances occur as set forth in the limited liability company operating agreement, which include:
(a) Bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of the Fund.
(b) Any event which would make unlawful the continued existence of the Fund.
(c) Withdrawal of the Sponsor unless at such time there is at least one remaining manager.
(d) The determination by the Sponsor to liquidate the Fund and wind up its affairs.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit/loss on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
541 |
|
$ |
(109,641 |
) |
-0.13 |
% |
(1,296 |
) |
$ |
1,022,304 |
|
1.18 |
% |
$ |
912,663 |
|
1.05 |
% |
January 2014 - December 2014 |
|
Currencies |
|
655 |
|
1,056,453 |
|
1.22 |
% |
(507 |
) |
870,273 |
|
1.01 |
% |
1,926,726 |
|
2.23 |
% |
February 2014 - March 2014 |
| |||
Energy |
|
760 |
|
159,271 |
|
0.18 |
% |
(44 |
) |
20,151 |
|
0.02 |
% |
179,422 |
|
0.20 |
% |
January 2014 - December 2015 |
| |||
Interest rates |
|
1,161 |
|
(187,202 |
) |
-0.22 |
% |
(942 |
) |
572,202 |
|
0.66 |
% |
385,000 |
|
0.44 |
% |
March 2014 - December 2017 |
| |||
Metals |
|
518 |
|
385,034 |
|
0.45 |
% |
(828 |
) |
(295,853 |
) |
-0.34 |
% |
89,181 |
|
0.11 |
% |
January 2014 - October 2014 |
| |||
Stock indices |
|
848 |
|
1,235,820 |
|
1.43 |
% |
(466 |
) |
158,654 |
|
0.18 |
% |
1,394,474 |
|
1.61 |
% |
January 2014 - June 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
2,539,735 |
|
2.93 |
% |
|
|
$ |
2,347,731 |
|
2.71 |
% |
$ |
4,887,466 |
|
5.64 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
731 |
|
$ |
(931,174 |
) |
-0.62 |
% |
(1,641 |
) |
$ |
1,594,170 |
|
1.07 |
% |
$ |
662,996 |
|
0.45 |
% |
January 2013 - December 2013 |
|
Currencies |
|
1,703 |
|
(4,071 |
) |
0.00 |
% |
(486 |
) |
480,758 |
|
0.32 |
% |
476,687 |
|
0.32 |
% |
March 2013 |
| |||
Energy |
|
154 |
|
133,950 |
|
0.09 |
% |
(880 |
) |
824,023 |
|
0.55 |
% |
957,973 |
|
0.64 |
% |
January 2013 - December 2014 |
| |||
Interest rates |
|
5,417 |
|
1,241,021 |
|
0.83 |
% |
(3,174 |
) |
(187,087 |
) |
-0.13 |
% |
1,053,934 |
|
0.70 |
% |
March 2013 - December 2016 |
| |||
Metals |
|
369 |
|
119,647 |
|
0.08 |
% |
(312 |
) |
(744,175 |
) |
-0.50 |
% |
(624,528 |
) |
-0.42 |
% |
January 2013 - May 2013 |
| |||
Stock indices |
|
1,782 |
|
281,988 |
|
0.19 |
% |
(179 |
) |
(22,219 |
) |
-0.01 |
% |
259,769 |
|
0.18 |
% |
January 2013 - June 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
841,361 |
|
0.57 |
% |
|
|
$ |
1,945,470 |
|
1.30 |
% |
$ |
2,786,831 |
|
1.87 |
% |
|
|
No individual contracts unrealized profit or loss comprised greater than 5% of the Funds Members Capital as of December 31, 2013 and 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts, by the above fair value hierarchy levels, as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
2,539,735 |
|
$ |
2,154,701 |
|
$ |
385,034 |
|
$ |
|
|
Short |
|
2,347,731 |
|
3,418,524 |
|
(1,070,793 |
) |
|
| ||||
|
|
$ |
4,887,466 |
|
$ |
5,573,225 |
|
$ |
(685,759 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
4,887,466 |
|
$ |
5,573,225 |
|
$ |
(685,759 |
) |
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
841,361 |
|
$ |
788,009 |
|
$ |
53,352 |
|
$ |
|
|
Short |
|
1,945,470 |
|
2,669,390 |
|
(723,920 |
) |
|
| ||||
|
|
$ |
2,786,831 |
|
$ |
3,457,399 |
|
$ |
(670,568 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Short |
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
2,786,831 |
|
$ |
3,457,399 |
|
$ |
(670,568 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout these periods. There were no transfers to or from any level during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of and the net profits and losses on derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. At December 31, 2013 and December 31, 2012, the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
|
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Commodity Industry Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Gain (loss) from trading |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
567,255 |
|
$ |
(6,096,889 |
) |
$ |
(12,391,662 |
) |
Currencies |
|
(3,024,130 |
) |
1,497,662 |
|
(15,346,290 |
) | |||
Energy |
|
(7,079,331 |
) |
(2,751,878 |
) |
(600,805 |
) | |||
Interest rates |
|
(4,537,269 |
) |
10,649,479 |
|
13,882,891 |
| |||
Metals |
|
3,012,643 |
|
(1,858,621 |
) |
1,345,868 |
| |||
Stock indices |
|
12,903,880 |
|
5,371,926 |
|
(7,649,877 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
1,843,048 |
|
$ |
6,811,679 |
|
$ |
(20,759,875 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Were a substantial portion of the Funds capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year ended December 31, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the years ended December 31, 2013, 2012, and 2011 amounted to $24,570, $38,121 and $51,287, respectively, of which $3,262 and $5,324 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund charges Sponsor fees on the month-end net assets after all other charges at annual rates equal to 1.50% for Class A Units, 2.50% for Class C Units, and 1.10% for Class I Units. Class D Units, Class DS Units, DT Units and Class M Units are not charged a Sponsor fee.
The Fund pays brokerage commissions on actual cost per round turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $5.81, $5.91 and $6.10, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statements of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and Transtrend have entered into an advisory agreement. The advisory agreement will continue in effect until December 31, 2014. Thereafter, the advisory agreement will be automatically renewed for successive one-year periods, on the same terms, unless terminated at any time by either Transtrend or the Fund upon 90 days written notice to the other party. Pursuant to the advisory agreement, Transtrend has sole and exclusive authority and responsibility for directing the Funds trading, subject to MLAIs fiduciary authority to intervene, to overrule or unwind trades if MLAI deems that doing so is necessary or advisable for the protection of the Fund.
Management fees are based on the average month-end net asset value of the Fund, after reduction for the brokerage commissions accrued with respect to such assets, and are payable to Transtrend on a monthly basis. Management fees are 2% per year for all Classes, except for Class DT Units, which is charged a 1% management fee. Transtrend has agreed to share 50% of the management fees with MLAI in order to defray costs in connection with and in consideration of BACs providing certain administrative and operational support for the Fund. The fee sharing arrangement does not apply in respect of Class DT Units.
Performance fees are based on any New Trading Profit (as defined in the advisory agreement) and are payable to Transtrend as of the end of each calendar year or upon any interim period for which there are net redemption of Units, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. The Fund charges a 25% performance fee for all Classes.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets
and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, the FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Transtrend, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge Transtrend to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by Transtrend.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the
financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Effective as of February 1, 2014: (i) the management fee percentage payable by the Fund to Transtrend reduces from 2.0% per annum to 1.0% per annum, in respect to Class A Units, Class C Units, Class D Units, Class I Units, Class DS Units and Class M Units. The management fee percentage payable by the Fund in respect to Class DT Units remains at 1.0% per annum. (ii) The Fund pays a 0.5% per annum management fee to MLAI, except in respect of Class DT Units, and (iii) Transtrend no longer shares any portion of its management fees with MLAI. Effective as of January 1, 2014, the performance fee percentage payable by the Fund to Transtrend reduces from 25% to 22.5%.
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no other subsequent events that require adjustments to, or disclosure in, the financial statements.
* * * * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
|
/s/Barbra E. Kocsis |
|
|
Barbra E. Kocsis |
|
|
Chief Financial Officer |
|
|
Merrill Lynch Alternative Investments LLC |
|
|
Sponsor of |
|
|
ML Transtrend DTP Enhanced FuturesAccess LLC |
|
Exhibit 13.08
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and
for the years ended December 31, 2013, 2012 and 2011 and
Report of Independent Registered Public Accounting Firm
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
5 |
|
|
Notes to Financial Statements |
8 |
Report of Independent Registered Public Accounting Firm
To the Members of Tudor Tensor FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of Tudor Tensor FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
New York, NY
March 25, 2014
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $2,968,540 for 2013 and $5,212,214 for 2012) |
|
$ |
29,973,163 |
|
$ |
55,184,412 |
|
Net unrealized profit on open futures contracts |
|
639,431 |
|
437,577 |
| ||
Net unrealized profit on open forwards contracts |
|
93,878 |
|
516,609 |
| ||
Cash |
|
426,601 |
|
554,100 |
| ||
Accrued interest receivable |
|
10 |
|
219 |
| ||
Other assets |
|
12,000 |
|
12,000 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
31,145,083 |
|
$ |
56,704,917 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Net unrealized loss on open futures contracts |
|
$ |
14,402 |
|
$ |
646,892 |
|
Net unrealized loss on open forwards contracts |
|
63,936 |
|
103,072 |
| ||
Brokerage commissions payable |
|
104,861 |
|
76,882 |
| ||
Management fees payable |
|
52,390 |
|
94,726 |
| ||
Redemptions payable |
|
937,680 |
|
1,240,333 |
| ||
Other liablilities |
|
874,470 |
|
837,262 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
2,047,739 |
|
2,999,167 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (34,972,177 Units and 60,782,131 Units outstanding, unlimited Units authorized) |
|
29,097,344 |
|
53,705,750 |
| ||
Total members capital |
|
29,097,344 |
|
53,705,750 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
31,145,083 |
|
$ |
56,704,917 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT |
|
$ |
0.8320 |
|
$ |
0.8836 |
|
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
296,243 |
|
$ |
1,015,639 |
|
$ |
(8,911,467 |
) |
Change in unrealized, net |
|
450,749 |
|
(185,500 |
) |
85,378 |
| |||
Brokerage commissions |
|
(1,597,442 |
) |
(1,567,106 |
) |
(1,558,890 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
(850,450 |
) |
(736,967 |
) |
(10,384,979 |
) | |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(6,747 |
) |
3,207 |
|
(2,752 |
) | |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
859,774 |
|
1,683,773 |
|
2,589,847 |
| |||
Performance fee |
|
|
|
|
|
7,422 |
| |||
Other |
|
139,394 |
|
834,723 |
|
310,954 |
| |||
Total expenses |
|
999,168 |
|
2,518,496 |
|
2,908,223 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(1,005,915 |
) |
(2,515,289 |
) |
(2,910,975 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
(1,856,365 |
) |
$ |
(3,252,256 |
) |
$ |
(13,295,954 |
) |
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class DS |
|
48,497,674 |
|
90,868,164 |
|
131,916,131 |
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class DS |
|
$ |
(0.0383 |
) |
$ |
(0.0358 |
) |
$ |
(0.1008 |
) |
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Members Capital |
|
Class DS |
|
127,509,239 |
|
14,985,580 |
|
(22,056,370 |
) |
120,438,449 |
|
544,129 |
|
(60,200,447 |
) |
60,782,131 |
|
658,341 |
|
(26,468,295 |
) |
34,972,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
127,509,239 |
|
14,985,580 |
|
(22,056,370 |
) |
120,438,449 |
|
544,129 |
|
(60,200,447 |
) |
60,782,131 |
|
658,341 |
|
(26,468,295 |
) |
34,972,177 |
|
See notes to financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income(loss) |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net |
|
Members Capital |
|
Subscriptions |
|
Redemptions |
|
Net |
|
Members Capital |
| |||||||||||||
Class DS |
|
$ |
131,325,427 |
|
$ |
14,987,542 |
|
$ |
(21,312,640 |
) |
$ |
(13,295,954 |
) |
$ |
111,704,375 |
|
$ |
490,651 |
|
$ |
(55,237,020 |
) |
$ |
(3,252,256 |
) |
$ |
53,705,750 |
|
$ |
600,360 |
|
$ |
(23,352,401 |
) |
$ |
(1,856,365 |
) |
$ |
29,097,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
131,325,427 |
|
$ |
14,987,542 |
|
$ |
(21,312,640 |
) |
$ |
(13,295,954 |
) |
$ |
111,704,375 |
|
$ |
490,651 |
|
$ |
(55,237,020 |
) |
$ |
(3,252,256 |
) |
$ |
53,705,750 |
|
$ |
600,360 |
|
$ |
(23,352,401 |
) |
$ |
(1,856,365 |
) |
$ |
29,097,344 |
|
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
0.8836 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
0.0107 |
| |
Brokerage commissions |
|
(0.0336 |
) | |
Interest Income, net |
|
(0.0002 |
) | |
Expenses |
|
(0.0285 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
0.8320 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-4.82 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-4.82 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.36 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
2.36 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.35 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
0.9275 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
0.0053 |
| |
Brokerage commissions |
|
(0.0179 |
) | |
Interest Income, net (c) |
|
0.0000 |
| |
Expenses |
|
(0.0313 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
0.8836 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-4.72 |
% | |
Performance fees |
|
0.00 |
% | |
Total return after Performance fees |
|
-4.72 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
3.01 |
% | |
Performance fees |
|
0.00 |
% | |
Expenses (including Performance fees) |
|
3.01 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-3.00 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements
|
|
Class DS |
| |
|
|
|
| |
Per Unit Operating Performance: |
|
|
| |
|
|
|
| |
Net asset value, beginning of year |
|
$ |
1.0299 |
|
|
|
|
| |
Net realized and net change in unrealized trading profit (loss) |
|
(0.0685 |
) | |
Brokerage commissions |
|
(0.0118 |
) | |
Interest Income, net (c) |
|
(0.0000 |
) | |
Expenses |
|
(0.0221 |
) | |
|
|
|
| |
Net asset value, end of year |
|
$ |
0.9275 |
|
|
|
|
| |
Total Return: (a) |
|
|
| |
|
|
|
| |
Total return before Performance fees |
|
-9.99 |
% | |
Performance fees |
|
-0.04 |
% | |
Total return after Performance fees |
|
-10.03 |
% | |
|
|
|
| |
Ratios to Average Members Capital: |
|
|
| |
|
|
|
| |
Expenses (excluding Performance fees) (b) |
|
2.24 |
% | |
Performance fees |
|
-0.01 |
% | |
Expenses (including Performance fees) |
|
2.23 |
% | |
|
|
|
| |
Net investment income (loss) |
|
-2.23 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
See notes to financial statements.
TUDOR TENSOR FUTURESACCESS LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tudor Tensor FuturesAccess LLC (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on September 7, 2009 and commenced trading activities on January 1, 2010. The Fund engages in the speculative trading of futures and forward contracts on a wide range of commodities. Tudor Investment Corporation (Tudor or Trading Advisor) is the trading advisor of the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI). MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. Certain prior year items have been reclassified to conform to the current year presentation.
Initial Offering and Organizational Costs
Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance. Initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund may terminate if certain circumstances occur as set forth in the private placement memorandum, which include but are not limited to the following:
(a) Bankruptcy, dissolution, withdrawal or other termination of the trading advisor of this Fund.
(b) Any event which would make unlawful the continued existence of this Fund.
(c) Determination by MLAI to liquidate or withdraw from the Fund.
(d) Withdrawal of the Sponsor.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional * |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional * |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
109 |
|
$ |
(57,948 |
) |
-0.20 |
% |
(282 |
) |
$ |
176,402 |
|
0.61 |
% |
$ |
118,454 |
|
0.41 |
% |
February 2014 - July 2014 |
|
Currencies - Futures |
|
17 |
|
7,044 |
|
0.02 |
% |
(102 |
) |
25,059 |
|
0.09 |
% |
32,103 |
|
0.11 |
% |
March 2014 |
| |||
Currencies - Forwards* |
|
4,581,247,517 |
|
93,879 |
|
0.32 |
% |
(6,421,110,294 |
) |
(63,937 |
) |
-0.22 |
% |
29,942 |
|
0.10 |
% |
January 2014 - February 2014 |
| |||
Energy |
|
146 |
|
(76,082 |
) |
-0.26 |
% |
(61 |
) |
36,970 |
|
0.13 |
% |
(39,112 |
) |
-0.13 |
% |
January 2014 - March 2014 |
| |||
Interest rates |
|
527 |
|
(82,904 |
) |
-0.28 |
% |
(506 |
) |
7,427 |
|
0.03 |
% |
(75,477 |
) |
-0.25 |
% |
March 2014 - June 2015 |
| |||
Metals |
|
554 |
|
822,939 |
|
2.83 |
% |
(544 |
) |
(719,248 |
) |
-2.47 |
% |
103,691 |
|
0.36 |
% |
January 2014 - July 2014 |
| |||
Stock indices |
|
316 |
|
485,652 |
|
1.67 |
% |
(2 |
) |
(282 |
) |
0.00 |
% |
485,370 |
|
1.67 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
1,192,580 |
|
4.10 |
% |
|
|
$ |
(537,609 |
) |
-1.83 |
% |
$ |
654,971 |
|
2.27 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional * |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional * |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
257 |
|
$ |
(265,266 |
) |
-0.49 |
% |
(318 |
) |
$ |
183,522 |
|
0.34 |
% |
$ |
(81,744 |
) |
-0.15 |
% |
February 2013 - May 2013 |
|
Currencies - Futures |
|
15 |
|
1,044 |
|
0.00 |
% |
(69 |
) |
12,004 |
|
0.02 |
% |
13,048 |
|
0.02 |
% |
March 2013 |
| |||
Currencies - Forwards* |
|
10,361,623,161 |
|
516,609 |
|
0.96 |
% |
(9,231,526,304 |
) |
(103,072 |
) |
-0.19 |
% |
413,537 |
|
0.77 |
% |
January 2013 - February 2013 |
| |||
Energy |
|
130 |
|
254,414 |
|
0.47 |
% |
(114 |
) |
(109,412 |
) |
-0.20 |
% |
145,002 |
|
0.27 |
% |
January 2013 - February 2013 |
| |||
Interest rates |
|
1,163 |
|
(2,697 |
) |
-0.01 |
% |
(523 |
) |
(93,893 |
) |
-0.17 |
% |
(96,590 |
) |
-0.18 |
% |
March 2013 - December 2014 |
| |||
Metals |
|
942 |
|
698,557 |
|
1.30 |
% |
(909 |
) |
(1,219,826 |
) |
-2.27 |
% |
(521,269 |
) |
-0.97 |
% |
January 2013 - May 2013 |
| |||
Stock indices |
|
568 |
|
332,101 |
|
0.62 |
% |
(1 |
) |
137 |
|
0.00 |
% |
332,238 |
|
0.62 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
1,534,762 |
|
2.85 |
% |
|
|
$ |
(1,330,540 |
) |
-2.47 |
% |
$ |
204,222 |
|
0.38 |
% |
|
|
* Currencies-Forwards are stated in notional amounts.
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance by U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party
pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
1,098,702 |
|
$ |
292,497 |
|
$ |
806,205 |
|
$ |
|
|
Short |
|
(473,672 |
) |
250,960 |
|
(724,632 |
) |
|
| ||||
|
|
$ |
625,030 |
|
$ |
543,457 |
|
$ |
81,573 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
93,878 |
|
$ |
|
|
$ |
93,878 |
|
$ |
|
|
Short |
|
(63,937 |
) |
|
|
(63,937 |
) |
|
| ||||
|
|
$ |
29,941 |
|
$ |
|
|
$ |
29,941 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
654,971 |
|
$ |
543,457 |
|
$ |
111,514 |
|
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
1,018,153 |
|
$ |
366,090 |
|
$ |
652,063 |
|
$ |
|
|
Short |
|
(1,227,468 |
) |
(75,067 |
) |
(1,152,401 |
) |
|
| ||||
|
|
$ |
(209,315 |
) |
$ |
291,023 |
|
$ |
(500,338 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
516,609 |
|
$ |
|
|
$ |
516,609 |
|
$ |
|
|
Short |
|
(103,072 |
) |
|
|
(103,072 |
) |
|
| ||||
|
|
$ |
413,537 |
|
$ |
|
|
$ |
413,537 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
204,222 |
|
$ |
291,023 |
|
$ |
(86,801 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively are representative of the activity throughout the year. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. For the years ended December 31, 2013 and 2012 the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
Commodity Industry |
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
36,835 |
|
$ |
(1,105,421 |
) |
$ |
(3,497,750 |
) |
Currencies |
|
(1,909,692 |
) |
(965,068 |
) |
(7,072,142 |
) | |||
Energy |
|
(1,208,547 |
) |
2,799,510 |
|
787,962 |
| |||
Interest rates |
|
(2,170,219 |
) |
404,447 |
|
11,176,426 |
| |||
Metals |
|
130,460 |
|
(1,979,721 |
) |
1,191,847 |
| |||
Stock indices |
|
5,868,155 |
|
1,676,392 |
|
(11,412,432 |
) | |||
|
|
|
|
|
|
|
| |||
Total |
|
$ |
746,992 |
|
$ |
830,139 |
|
$ |
(8,826,089 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Where a substantial portion of the Funds capital was tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each funds net assets. The Transfer Agent fee allocated to the Fund for the years ended December 31, 2013, 2012, and 2011 amounted to $8,733, $16,787 and $26,443, respectively, of which $1,082 and $1,836 was payable to the Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund pays brokerage commissions on actual cost per round-turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $18.4, $11.63 and $11.46, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or all paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
5. ADVISORY AGREEMENT
The Fund and Tudor have entered into an advisory agreement. This agreement shall continue in effect until December 31, 2015. Thereafter, this agreement shall be automatically renewed for successive two-year periods, on the same terms, unless terminated at any time by either Tudor or the Fund upon 90 days written notice to the other party. Tudor determines the commodity futures, options on futures and forward contract trades to be made on behalf of their respective Fund accounts, subject to certain trading policies and to certain rights reserved by MLAI.
The Fund pays Tudor annual management fees of 2.00% of the Funds average month-end net assets allocated to them after reduction for the brokerage commissions accrued with respect to such assets. MLAI receives 50% of the 2.00% management fee for sponsoring and providing ongoing administration and operational support of the Fund.
Performance fees paid by the Fund are calculated as 20% of any New Trading Profit, as defined in the private placement memorandum, and are recognized by Tudor as of either the end of each calendar year or upon the net reallocation of assets away from Tudor. Performance fees are also paid out in respect of Units redeemed as of the end of interim months, to the extent of the applicable percentage of any New Trading Profit attributable to such Units.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units outstanding, for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a noncontrolling interest in another investment company should be measured
at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Tudor, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge Altis to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by Tudor.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Exhibit 13.09
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
Financial Statements as of December 31, 2013 and 2012 and
for the years ended December 31, 2013, 2012 and 2011
and Report of Independent Registered Public Accounting Firm
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
|
Page |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 |
|
|
FINANCIAL STATEMENTS: |
|
|
|
Statements of Financial Condition as of December 31, 2013 and 2012 |
2 |
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011 |
3 |
|
|
Statements of Changes in Members Capital for the years ended December 31, 2013, 2012 and 2011 |
4 |
|
|
Financial Data Highlights for the years ended December 31, 2013, 2012 and 2011 |
6 |
|
|
Notes to Financial Statements |
9 |
Report of Independent Registered Public Accounting Firm
To the Members of ML Winton FuturesAccess LLC:
In our opinion, the accompanying statements of financial condition, and the related statements of operations, changes in members capital, and financial data highlights present fairly, in all material respects, the financial position of ML Winton FuturesAccess LLC (the Fund) at December 31, 2013 and 2012, and the results of its operations, the changes in its members capital and its financial data highlights for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial data highlights (hereafter referred to as the financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
February 21, 2014
PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue, New York, NY 10017 |
T: (646) 471 3000, F: (813) 286 6000, www.pwc.com/us |
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2013 AND 2012
|
|
December 31, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
ASSETS: |
|
|
|
|
| ||
Equity in commodity trading accounts: |
|
|
|
|
| ||
Cash (including restricted cash of $74,790,241 for 2013 and $88,048,482 for 2012) |
|
$ |
974,168,421 |
|
$ |
1,094,747,864 |
|
Net unrealized profit on open futures contracts |
|
30,289,658 |
|
13,181,192 |
| ||
Net unrealized profit on open forwards contracts |
|
927,780 |
|
2,787,207 |
| ||
Cash |
|
631,442 |
|
872,010 |
| ||
Accrued interest receivable |
|
200 |
|
646 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
|
$ |
1,006,017,501 |
|
$ |
1,111,588,919 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Brokerage commissions payable |
|
$ |
7,723 |
|
$ |
5,975 |
|
Sponsor and Advisory fees payable |
|
9,079,002 |
|
3,208,763 |
| ||
Redemptions payable |
|
17,236,150 |
|
10,403,455 |
| ||
Net unrealized loss on open futures contracts |
|
|
|
3,495,313 |
| ||
Net unrealized loss on open forwards contracts |
|
688,767 |
|
1,636,300 |
| ||
Other liabilities |
|
656,454 |
|
451,936 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
27,668,096 |
|
19,201,742 |
| ||
|
|
|
|
|
| ||
MEMBERS CAPITAL: |
|
|
|
|
| ||
Members Interest (632,945,962 Units and 695,939,035 Units) |
|
978,349,405 |
|
1,092,387,177 |
| ||
Total members capital |
|
978,349,405 |
|
1,092,387,177 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS CAPITAL |
|
$ |
1,006,017,501 |
|
$ |
1,111,588,919 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
(Based on 632,945,962 and 695,939,035 Units outstanding; unlimited Units authorized) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
|
$ |
1.7385 |
|
$ |
1.6478 |
|
Class C |
|
$ |
1.5919 |
|
$ |
1.5240 |
|
Class D |
|
$ |
1.8309 |
|
$ |
1.7095 |
|
Class I |
|
$ |
1.7875 |
|
$ |
1.6874 |
|
Class DS |
|
$ |
1.8286 |
|
$ |
1.7074 |
|
Class DT |
|
$ |
1.9307 |
|
$ |
1.7935 |
|
Class M |
|
$ |
1.0288 |
|
$ |
0.9606 |
|
Class F |
|
$ |
1.0007 |
|
$ |
|
|
Class F1 |
|
$ |
1.0254 |
|
$ |
|
|
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
2013 |
|
2012 |
|
2011 |
| |||
|
|
|
|
|
|
|
| |||
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
84,320,010 |
|
$ |
(12,985,638 |
) |
$ |
99,005,031 |
|
Change in unrealized, net |
|
19,691,885 |
|
(12,556,280 |
) |
(4,178,895 |
) | |||
Brokerage commissions |
|
(1,310,913 |
) |
(1,658,223 |
) |
(1,079,201 |
) | |||
|
|
|
|
|
|
|
| |||
Total trading profit (loss), net |
|
102,700,982 |
|
(27,200,141 |
) |
93,746,935 |
| |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest, net |
|
(370,405 |
) |
(268,920 |
) |
14,326 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fee |
|
21,013,843 |
|
22,799,470 |
|
20,733,371 |
| |||
Sponsor fee |
|
15,912,263 |
|
17,137,471 |
|
13,783,782 |
| |||
Performance fee |
|
6,385,339 |
|
519 |
|
14,143,666 |
| |||
Other |
|
2,145,799 |
|
2,111,326 |
|
1,536,998 |
| |||
Total expenses |
|
45,457,244 |
|
42,048,786 |
|
50,197,817 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(45,827,649 |
) |
(42,317,706 |
) |
(50,183,491 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
56,873,333 |
|
$ |
(69,517,847 |
) |
$ |
43,563,444 |
|
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Weighted average number of Units outstanding |
|
|
|
|
|
|
| |||
Class A |
|
98,692,610 |
|
112,525,532 |
|
85,306,244 |
| |||
Class C |
|
320,078,129 |
|
338,215,096 |
|
265,133,320 |
| |||
Class D |
|
79,113,900 |
|
97,233,575 |
|
92,583,109 |
| |||
Class I |
|
50,548,810 |
|
53,305,559 |
|
44,020,921 |
| |||
Class DS |
|
41,616,725 |
|
72,728,392 |
|
103,988,669 |
| |||
Class DT |
|
10,750,384 |
|
16,327,295 |
|
22,748,773 |
| |||
Class M* |
|
45,571,438 |
|
9,121,131 |
|
|
| |||
Class F** |
|
45,094,466 |
|
|
|
|
| |||
Class F1*** |
|
32,348,368 |
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
| |||
Class A |
|
$ |
0.0896 |
|
$ |
(0.1037 |
) |
$ |
0.0694 |
|
Class C |
|
$ |
0.0652 |
|
$ |
(0.1119 |
) |
$ |
0.0490 |
|
Class D |
|
$ |
0.1433 |
|
$ |
(0.0781 |
) |
$ |
0.0953 |
|
Class I |
|
$ |
0.1002 |
|
$ |
(0.0992 |
) |
$ |
0.0757 |
|
Class DS |
|
$ |
0.1166 |
|
$ |
(0.0827 |
) |
$ |
0.0954 |
|
Class DT |
|
$ |
0.1342 |
|
$ |
(0.0767 |
) |
$ |
0.1134 |
|
Class M* |
|
$ |
0.0669 |
|
$ |
0.0164 |
|
$ |
|
|
Class F** |
|
$ |
0.0136 |
|
$ |
|
|
$ |
|
|
Class F1*** |
|
$ |
0.0254 |
|
$ |
|
|
$ |
|
|
* Units issued on March 1, 2012 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2012 is for the period March 1, 2012 to December 31, 2012).
** Units issued on May 16, 2013 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2013 is for the period May 16, 2013 to December 31, 2013).
*** Units issued on June 1, 2013 (Presentation of weighted average units outstanding and net income (loss) per weighted average units for this share class for 2013 is for the period June 1, 2013 to December 31, 2013).
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (IN UNITS)
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
|
|
Members Capital |
|
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
December 31, 2013 |
|
Class A |
|
65,325,934 |
|
42,958,269 |
|
(5,874,240 |
) |
102,409,963 |
|
29,640,100 |
|
(26,228,313 |
) |
105,821,750 |
|
9,547,008 |
|
(26,089,547 |
) |
89,279,211 |
|
Class C |
|
222,514,645 |
|
108,437,883 |
|
(28,029,412 |
) |
302,923,116 |
|
92,775,855 |
|
(60,957,404 |
) |
334,741,567 |
|
30,030,602 |
|
(75,515,200 |
) |
289,256,969 |
|
Class D |
|
81,540,462 |
|
19,288,627 |
|
(7,441,994 |
) |
93,387,095 |
|
16,402,430 |
|
(10,563,847 |
) |
99,225,678 |
|
6,206,542 |
|
(58,735,323 |
) |
46,696,897 |
|
Class I |
|
40,328,794 |
|
13,111,177 |
|
(3,550,463 |
) |
49,889,508 |
|
13,773,459 |
|
(12,995,108 |
) |
50,667,859 |
|
6,983,219 |
|
(9,961,751 |
) |
47,689,327 |
|
Class DS |
|
107,809,869 |
|
5,140,859 |
|
(26,348,415 |
) |
86,602,313 |
|
|
|
(32,474,284 |
) |
54,128,029 |
|
|
|
(26,465,655 |
) |
27,662,374 |
|
Class DT |
|
25,990,209 |
|
|
|
(7,704,389 |
) |
18,285,820 |
|
|
|
(5,083,599 |
) |
13,202,221 |
|
|
|
(5,893,382 |
) |
7,308,839 |
|
Class M* |
|
|
|
|
|
|
|
|
|
38,151,931 |
|
|
|
38,151,931 |
|
16,525,784 |
|
(8,494,429 |
) |
46,183,286 |
|
Class F** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,520,691 |
|
|
|
46,520,691 |
|
Class F1*** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,348,368 |
|
|
|
32,348,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members Units |
|
543,509,913 |
|
188,936,815 |
|
(78,948,913 |
) |
653,497,815 |
|
190,743,775 |
|
(148,302,555 |
) |
695,939,035 |
|
148,162,214 |
|
(211,155,287 |
) |
632,945,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
9,713 |
|
|
|
(9,713 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C |
|
9,757 |
|
|
|
(9,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sponsors Units |
|
19,470 |
|
|
|
(19,470 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Units issued on March 1, 2012.
** Units issued on May 16, 2013.
*** Units issued on June 1, 2013.
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
|
|
|
|
|
Net Income |
|
Members Capital |
| |||||||||||||
|
|
December 31, 2010 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2011 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2012 |
|
Subscriptions |
|
Redemptions |
|
(Loss) |
|
December 31, 2013 |
| |||||||||||||
Class A |
|
$ |
109,814,969 |
|
$ |
73,551,880 |
|
$ |
(10,104,554 |
) |
$ |
5,916,349 |
|
$ |
179,178,644 |
|
$ |
50,675,735 |
|
$ |
(43,814,019 |
) |
$ |
(11,666,559 |
) |
$ |
174,373,801 |
|
$ |
16,098,619 |
|
$ |
(44,097,135 |
) |
$ |
8,838,824 |
|
$ |
155,214,109 |
|
Class C |
|
352,948,772 |
|
174,378,174 |
|
(45,212,829 |
) |
12,996,341 |
|
495,110,458 |
|
147,487,040 |
|
(94,603,982 |
) |
(37,852,175 |
) |
510,141,341 |
|
46,650,874 |
|
(117,187,044 |
) |
20,855,066 |
|
460,460,237 |
| |||||||||||||
Class D |
|
138,000,547 |
|
33,469,377 |
|
(13,304,513 |
) |
8,820,611 |
|
166,986,022 |
|
28,547,708 |
|
(18,316,402 |
) |
(7,589,299 |
) |
169,628,029 |
|
10,820,354 |
|
(106,288,749 |
) |
11,338,552 |
|
85,498,186 |
| |||||||||||||
Class I |
|
68,871,557 |
|
23,007,930 |
|
(6,182,374 |
) |
3,333,224 |
|
89,030,337 |
|
23,922,022 |
|
(22,162,942 |
) |
(5,289,965 |
) |
85,499,452 |
|
11,980,169 |
|
(17,299,983 |
) |
5,064,476 |
|
85,244,114 |
| |||||||||||||
Class DS |
|
182,235,678 |
|
8,803,779 |
|
(46,292,649 |
) |
9,917,495 |
|
154,664,303 |
|
|
|
(56,228,117 |
) |
(6,017,214 |
) |
92,418,972 |
|
|
|
(46,685,825 |
) |
4,851,535 |
|
50,584,682 |
| |||||||||||||
Class DT |
|
45,566,638 |
|
|
|
(14,013,641 |
) |
2,578,630 |
|
34,131,627 |
|
|
|
(9,201,191 |
) |
(1,252,467 |
) |
23,677,969 |
|
|
|
(11,009,023 |
) |
1,442,581 |
|
14,111,527 |
| |||||||||||||
Class M* |
|
|
|
|
|
|
|
|
|
|
|
36,497,781 |
|
|
|
149,832 |
|
36,647,613 |
|
16,330,357 |
|
(8,514,087 |
) |
3,048,165 |
|
47,512,048 |
| |||||||||||||
Class F** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,942,000 |
|
|
|
612,511 |
|
46,554,511 |
| |||||||||||||
Class F1*** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,348,368 |
|
|
|
821,623 |
|
33,169,991 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Interest |
|
$ |
897,438,161 |
|
$ |
313,211,140 |
|
$ |
(135,110,560 |
) |
$ |
43,562,650 |
|
$ |
1,119,101,391 |
|
$ |
287,130,286 |
|
$ |
(244,326,653 |
) |
$ |
(69,517,847 |
) |
$ |
1,092,387,177 |
|
$ |
180,170,741 |
|
$ |
(351,081,846 |
) |
$ |
56,873,333 |
|
$ |
978,349,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class A |
|
$ |
16,602 |
|
$ |
|
|
$ |
(16,994 |
) |
$ |
392 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Class C |
|
15,545 |
|
|
|
(15,947 |
) |
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Sponsors Interest |
|
$ |
32,147 |
|
$ |
|
|
$ |
(32,941 |
) |
$ |
794 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Members Capital |
|
$ |
897,470,308 |
|
$ |
313,211,140 |
|
$ |
(135,143,501 |
) |
$ |
43,563,444 |
|
$ |
1,119,101,391 |
|
$ |
287,130,286 |
|
$ |
(244,326,653 |
) |
$ |
(69,517,847 |
) |
$ |
1,092,387,177 |
|
$ |
180,170,741 |
|
$ |
(351,081,846 |
) |
$ |
56,873,333 |
|
$ |
978,349,405 |
|
* Units issued on March 1, 2012.
** Units issued on May 16, 2013.
*** Units issued on June 1, 2013.
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2013
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
|
Class F* |
|
Class F1** |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net asset value, beginning of year or at the time of offer |
|
$ |
1.6478 |
|
$ |
1.5240 |
|
$ |
1.7095 |
|
$ |
1.6874 |
|
$ |
1.7074 |
|
$ |
1.7935 |
|
$ |
0.9606 |
|
$ |
1.0000 |
|
$ |
1.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net realized and net change in unrealized trading profit (loss) |
|
0.1667 |
|
0.1534 |
|
0.1743 |
|
0.1711 |
|
0.1741 |
|
0.1833 |
|
0.0980 |
|
0.0082 |
|
0.0386 |
| |||||||||
Brokerage commissions |
|
(0.0021 |
) |
(0.0019 |
) |
(0.0021 |
) |
(0.0021 |
) |
(0.0021 |
) |
(0.0023 |
) |
(0.0012 |
) |
(0.0007 |
) |
(0.0007 |
) | |||||||||
Interest income, net |
|
(0.0006 |
) |
(0.0005 |
) |
(0.0006 |
) |
(0.0006 |
) |
(0.0006 |
) |
(0.0006 |
) |
(0.0003 |
) |
(0.0001 |
) |
(0.0003 |
) | |||||||||
Expenses |
|
(0.0733 |
) |
(0.0831 |
) |
(0.0502 |
) |
(0.0683 |
) |
(0.0502 |
) |
(0.0432 |
) |
(0.0283 |
) |
(0.0067 |
) |
(0.0122 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of year |
|
$ |
1.7385 |
|
$ |
1.5919 |
|
$ |
1.8309 |
|
$ |
1.7875 |
|
$ |
1.8286 |
|
$ |
1.9307 |
|
$ |
1.0288 |
|
$ |
1.0007 |
|
$ |
1.0254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total return before Performance fees |
|
6.13 |
% |
5.07 |
% |
7.73 |
% |
6.56 |
% |
7.73 |
% |
8.27 |
% |
7.73 |
% |
-0.03 |
% |
3.07 |
% | |||||||||
Performance fees/other (c) |
|
-0.66 |
% |
-0.66 |
% |
-0.66 |
% |
-0.66 |
% |
-0.66 |
% |
-0.63 |
% |
-0.66 |
% |
0.04 |
% |
-0.55 |
% | |||||||||
Total return after Performance fees |
|
5.47 |
% |
4.41 |
% |
7.07 |
% |
5.90 |
% |
7.07 |
% |
7.64 |
% |
7.07 |
% |
0.01 |
% |
2.52 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Expenses (excluding Performance fees) (d) |
|
3.75 |
% |
4.76 |
% |
2.25 |
% |
3.35 |
% |
2.25 |
% |
1.75 |
% |
2.25 |
% |
1.25 |
% |
1.26 |
% | |||||||||
Performance fees (c) |
|
0.62 |
% |
0.62 |
% |
0.62 |
% |
0.62 |
% |
0.62 |
% |
0.61 |
% |
0.62 |
% |
-0.07 |
% |
0.54 |
% | |||||||||
Expenses (including Performance fees) |
|
4.37 |
% |
5.38 |
% |
2.87 |
% |
3.97 |
% |
2.87 |
% |
2.36 |
% |
2.87 |
% |
1.18 |
% |
1.80 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) |
|
-4.37 |
% |
-5.37 |
% |
-2.87 |
% |
-3.97 |
% |
-2.87 |
% |
-2.35 |
% |
-2.87 |
% |
-1.17 |
% |
-1.78 |
% |
(a) The total return is based on compounded monthly returns and are calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The performance fee ratios are not annualized.
(c) Performance fees include reimbursement of performance fees allocated to the share classes in accordance with offering documents.
(d) The expense ratios do not include brokerage commissions.
* Units issued on May 16, 2013.
** Units issued on June 1, 2013.
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2012
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M* |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, beginning of year or at the time of offer |
|
$ |
1.7496 |
|
$ |
1.6344 |
|
$ |
1.7881 |
|
$ |
1.7846 |
|
$ |
1.7859 |
|
$ |
1.8666 |
|
$ |
1.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net realized and net change in unrealized trading profit(loss) |
|
(0.0366 |
) |
(0.0341 |
) |
(0.0376 |
) |
(0.0374 |
) |
(0.0375 |
) |
(0.0393 |
) |
(0.0202 |
) | |||||||
Brokerage commissions |
|
(0.0024 |
) |
(0.0023 |
) |
(0.0025 |
) |
(0.0025 |
) |
(0.0025 |
) |
(0.0026 |
) |
(0.0012 |
) | |||||||
Interest income, net |
|
(0.0004 |
) |
(0.0004 |
) |
(0.0004 |
) |
(0.0004 |
) |
(0.0004 |
) |
(0.0004 |
) |
(0.0002 |
) | |||||||
Expenses |
|
(0.0624 |
) |
(0.0736 |
) |
(0.0381 |
) |
(0.0569 |
) |
(0.0381 |
) |
(0.0308 |
) |
(0.0178 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net asset value, end of year |
|
$ |
1.6478 |
|
$ |
1.5240 |
|
$ |
1.7095 |
|
$ |
1.6874 |
|
$ |
1.7074 |
|
$ |
1.7935 |
|
$ |
0.9606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total return before Performance fees |
|
-5.82 |
% |
-6.76 |
% |
-4.40 |
% |
-5.44 |
% |
-4.40 |
% |
-3.92 |
% |
-3.95 |
% | |||||||
Performance fees/other (c) |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Total return after Performance fees |
|
-5.82 |
% |
-6.76 |
% |
-4.40 |
% |
-5.44 |
% |
-4.40 |
% |
-3.92 |
% |
-3.95 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Ratios to Average Members Capital: (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses (excluding Performance fees) (d) |
|
3.71 |
% |
4.71 |
% |
2.21 |
% |
3.31 |
% |
2.21 |
% |
1.71 |
% |
2.22 |
% | |||||||
Performance fees (c) |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
Expenses (including Performance fees) |
|
3.71 |
% |
4.71 |
% |
2.21 |
% |
3.31 |
% |
2.21 |
% |
1.71 |
% |
2.22 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income (loss) |
|
-3.71 |
% |
-4.71 |
% |
-2.21 |
% |
-3.31 |
% |
-2.21 |
% |
-1.71 |
% |
-2.22 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) The ratios to average members capital have been annualized. The performance fee ratios are not annualized.
(c) Performance fees include reimbursement of performance fees allocated to the share classes in accordance with offering documents.
(d) The expense ratios do not include brokerage commissions.
* Units issued on March 1, 2012.
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2011
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, beginning of year |
|
$ |
1.6810 |
|
$ |
1.5862 |
|
$ |
1.6924 |
|
$ |
1.7078 |
|
$ |
1.6903 |
|
$ |
1.7532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net realized and net change in unrealized trading profit(loss) |
|
0.1571 |
|
0.1476 |
|
0.1592 |
|
0.1599 |
|
0.1591 |
|
0.1653 |
| ||||||
Brokerage commissions |
|
(0.0018 |
) |
(0.0017 |
) |
(0.0018 |
) |
(0.0018 |
) |
(0.0018 |
) |
(0.0019 |
) | ||||||
Interest income, net (b) |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
| ||||||
Expenses |
|
(0.0867 |
) |
(0.0977 |
) |
(0.0617 |
) |
(0.0813 |
) |
(0.0617 |
) |
(0.0500 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net asset value, end of year |
|
$ |
1.7496 |
|
$ |
1.6344 |
|
$ |
1.7881 |
|
$ |
1.7846 |
|
$ |
1.7859 |
|
$ |
1.8666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total return before Performance fees |
|
5.46 |
% |
4.41 |
% |
7.05 |
% |
5.88 |
% |
7.05 |
% |
7.59 |
% | ||||||
Performance fees/other (c) |
|
-1.43 |
% |
-1.43 |
% |
-1.43 |
% |
-1.43 |
% |
-1.43 |
% |
-1.15 |
% | ||||||
Total return after Performance fees |
|
4.03 |
% |
2.98 |
% |
5.62 |
% |
4.45 |
% |
5.62 |
% |
6.44 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ratios to Average Members Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expenses (excluding Performance fees) (d) |
|
3.68 |
% |
4.68 |
% |
2.17 |
% |
3.28 |
% |
2.17 |
% |
1.66 |
% | ||||||
Performance fees (c) |
|
1.38 |
% |
1.38 |
% |
1.38 |
% |
1.38 |
% |
1.38 |
% |
1.11 |
% | ||||||
Expenses (including Performance fees) |
|
5.06 |
% |
6.06 |
% |
3.55 |
% |
4.66 |
% |
3.55 |
% |
2.77 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income (loss) |
|
-5.05 |
% |
-6.06 |
% |
-3.55 |
% |
-4.65 |
% |
-3.55 |
% |
-2.77 |
% |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members return may vary from these returns based on timing of capital transactions.
(b) Interest income, net is less than $0.0001 per Unit.
(c) Performance fees include reimbursement of performance fees allocated to the share classes in accordance with offering documents.
(d) The expense ratios do not include brokerage commissions.
See notes to financial statements.
ML WINTON FUTURESACCESS LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
ML Winton FuturesAccess LLC (the Fund), a FuturesAccessSM Program (the FuturesAccess) fund, was organized under the Delaware Limited Liability Company Act on May 17, 2004 and commenced trading activities on February 1, 2005. The Fund engages in the speculative trading of futures and forward contracts on a wide range of commodities. Winton Capital Management Limited (Winton or Trading Advisor) is the trading advisor of the Fund. The Trading Advisor utilizes the Winton Diversified Program (the Trading Program) for the Fund.
Merrill Lynch Alternative Investments LLC (MLAI or Sponsor) is the sponsor and manager of the Fund. MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as BAC. Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) is currently the exclusive clearing broker for the Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (MLIB) is the primary foreign exchange (F/X) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (OTC) prime brokers, including Merrill Lynch International (MLI).MLPF&S, MLIB and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (FuturesAccess Funds). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies, with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
As of December 31, 2013 the Fund offers ten Classes of Units: Class A, Class C, Class I, Class D, Class DT, Class DS, Class M, Class F, Class F1and Class G. Each Class of Units is offered at the Net Asset Value per Unit. The nine Classes of Units are subject to different Sponsor fees.
The Class M Units are for investors who are subscribing through a managed investment account program at MLPF&S and who satisfy other requirements as determined by the Sponsor from time to time. Class DT is solely for investments made by Trend-Following Futures Fund L.P. and Class DS is solely for investments made by Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC), which reflects interests by other funds within the FuturesAccess group.
On May 16, 2013 and June 1, 2013 the Fund opened Class F Units and Class F1 Units, respectively, at $1.00 per Unit. Class G is open for investment however, currently has no investors. Class F Units, Class F1 Units and Glass G Units (together, the New Classes) have been designed for certain high-net-worth and institutional investors that have a total fund investment of at least $20 million or an overall total investment of at least $60 million. The New Classes are generally subject to the same terms as the existing Class D Units, except as set forth below. Differences between the New Classes and Class D Units include different eligibility requirements, Management Fees, upfront sales commissions, ongoing selling agent compensation, and fee sharing with the Sponsor.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. Certain prior year items have been reclassified to conform to the current year presentation.
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Revenue Recognition
Commodity futures, options on futures and forward contract transactions are recorded on trade date. Open contracts are reflected in Net unrealized profit (loss) on open contracts in the Statements of Financial Condition as the difference between the original contract value and the market value (for those commodity interests for which market quotations are readily available) or at fair value. The change in unrealized profit (loss) on open contracts from one period to the next is reflected in Change in unrealized under Trading profit (loss), net in the Statements of Operations.
Trading profit (loss) includes brokerage commission costs on commodity contracts.
Foreign Currency Transactions
The Funds functional currency is the U.S. dollar; however, it may transact business in U.S. dollars and in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect as of the dates of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the year. Profits and losses, including adjustments, resulting from the translation to U.S. dollars are included in Trading profit (loss) in the Statements of Operations.
Equity in Commodity Trading Accounts
A portion of the assets maintained at MLPF&S is restricted cash required to meet maintenance margin requirements of the exchanges the Funds contracts are traded on and /or requirements greater than those of the exchanges as may be required by MLPF&S, in its sole discretion.
Operating Expenses and Selling Commissions
The Fund pays for all routine operating costs (including ongoing offering costs, administration, custody, transfer, exchange and redemption processing, legal, regulatory filing, tax, audit, escrow, accounting and printing fees and other expenses) incurred by the Fund.
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D Units, Class I Units, Class G Units and Class F Units are subject to sales commissions paid to MLPF&S up to 0.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class DS Units, Class DT Units, Class M Units and Class F1 Units are not subject to any sales commissions.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Members share of the Funds income and expenses as reported for income tax purposes.
The Fund follows the Accounting Standards Codification (ASC) guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds financial statements to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. MLAI has analyzed the Funds tax positions and has concluded that no provision for income tax is required in the Funds financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States 2010.
Distributions
Each Member is entitled to receive, equally per Unit, any distributions which may be made by the Fund. No such distributions have been declared for the years ended December 31, 2013, 2012 and 2011.
Subscriptions
The Fund generally offers Units for investment as of the 1st and 16th calendar day of each month (each a Subscription Date) at the net asset value per Unit of their respective Classes, although MLAI may in its discretion, discontinue subscriptions at any time. Investors must submit their executed Signature Pages on or before the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. Investors subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate net asset value equal to the dollar amount invested.
Redemptions and Exchanges
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a Redemption Date), upon providing oral or written notice by the Subscription/Redemption Notice Date, which is eight business days prior to the 1st and 16th of every month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
An investor in the Fund can exchange their Units for Units of the same Class in other Program Funds as of the 1st and the 16th of each calendar month upon providing notice by the Subscription/Redemption Notice Date. The minimum exchange amount is $10,000.
Redemption requests are accepted within the Subscription/Redemption Notice Date. The Fund does not accept any redemption requests after the Subscription/Redemption Notice Date. All redemption requests received after the Subscription/Redemption Notice Date will be processed for the following month.
Dissolution of the Fund
The Fund will dissolve if certain circumstances occur as set forth in the limited liability company operating agreement, which include:
(a) Bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of the Fund.
(b) Any event which would make unlawful the continued existence of the Fund.
(c) Withdrawal of the Sponsor unless at such time there is at least one remaining manager.
(d) The determination by the Sponsor to liquidate the Fund and wind up its affairs.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Funds investments, defined as net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of December 31, 2013 and 2012 are as follows:
December 31, 2013
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
1,692 |
|
$ |
(904,240 |
) |
-0.09 |
% |
(3,532 |
) |
$ |
3,600,461 |
|
0.37 |
% |
$ |
2,696,221 |
|
0.28 |
% |
January 2014 - May 2014 |
|
Currencies - Futures |
|
4,996 |
|
3,146,465 |
|
0.32 |
% |
(3,705 |
) |
4,093,122 |
|
0.42 |
% |
7,239,587 |
|
0.74 |
% |
March 2014 |
| |||
Currencies - Forwards* |
|
138,254,480,312 |
|
927,780 |
|
0.09 |
% |
(3,593,062,052 |
) |
(688,767 |
) |
-0.07 |
% |
239,013 |
|
0.02 |
% |
January 2014 - June 2014 |
| |||
Energy |
|
693 |
|
407,390 |
|
0.04 |
% |
(303 |
) |
(596,799 |
) |
-0.06 |
% |
(189,409 |
) |
-0.02 |
% |
January 2014 - March 2014 |
| |||
Interest rates |
|
19,506 |
|
(5,225,777 |
) |
-0.53 |
% |
(1,606 |
) |
631,192 |
|
0.06 |
% |
(4,594,585 |
) |
-0.47 |
% |
February 2014 - December 2016 |
| |||
Metals |
|
641 |
|
35,533 |
|
0.00 |
% |
(1,131 |
) |
2,627,090 |
|
0.27 |
% |
2,662,623 |
|
0.27 |
% |
January 2014 - April 2014 |
| |||
Stock indices |
|
8,131 |
|
22,478,186 |
|
2.30 |
% |
(41 |
) |
(2,965 |
) |
0.00 |
% |
22,475,221 |
|
2.30 |
% |
January 2014 - March 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total, net |
|
|
|
$ |
20,865,337 |
|
2.13 |
% |
|
|
$ |
9,663,334 |
|
0.99 |
% |
$ |
30,528,671 |
|
3.12 |
% |
|
|
December 31, 2012
|
|
Long Positions |
|
Short Positions |
|
|
|
|
|
|
| |||||||||||
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
Sector |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
Contracts/Notional* |
|
Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
699 |
|
$ |
(1,095,039 |
) |
-0.10 |
% |
(1,992 |
) |
$ |
159,061 |
|
0.01 |
% |
$ |
(935,978 |
) |
-0.09 |
% |
January 2013 - May 2013 |
|
Currencies - Futures |
|
6,497 |
|
(674,405 |
) |
-0.06 |
% |
(1,892 |
) |
12,880,662 |
|
1.18 |
% |
12,206,257 |
|
1.12 |
% |
March 2013 |
| |||
Currencies - Forwards* |
|
175,546,642,037 |
|
2,787,207 |
|
0.25 |
% |
(103,642,972,722 |
) |
(1,636,300 |
) |
-0.15 |
% |
1,150,907 |
|
0.10 |
% |
January 2013 - May 2013 |
| |||
Energy |
|
191 |
|
455,395 |
|
0.04 |
% |
(760 |
) |
(1,295,491 |
) |
-0.12 |
% |
(840,096 |
) |
-0.08 |
% |
January 2013 - March 2013 |
| |||
Interest rates |
|
23,739 |
|
3,139,701 |
|
0.29 |
% |
(491 |
) |
(93,348 |
) |
-0.01 |
% |
3,046,353 |
|
0.28 |
% |
January 2013 - December 2015 |
| |||
Metals |
|
1,133 |
|
(4,627,214 |
) |
-0.42 |
% |
(581 |
) |
(2,550,129 |
) |
-0.23 |
% |
(7,177,343 |
) |
-0.65 |
% |
January 2013 - May 2013 |
| |||
Stock indices |
|
9,645 |
|
3,400,966 |
|
0.31 |
% |
(42 |
) |
(14,280 |
) |
0.00 |
% |
3,386,686 |
|
0.31 |
% |
January 2013 - March 2013 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total, net |
|
|
|
$ |
3,386,611 |
|
0.31 |
% |
|
|
$ |
7,450,175 |
|
0.68 |
% |
$ |
10,836,786 |
|
0.99 |
% |
|
|
*Currencies-Forwards are stated in notional amounts.
No individual contracts unrealized profit or loss comprised greater than 5% of Members Capital as of December 31, 2013 and December 31, 2012.
With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts, netting unrealized losses against unrealized profits as applicable. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAIs assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.
The independent pricing sources obtain market quotations and actual transaction prices for investments that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of investments that are not actively traded. In general, these methods involve the use of matrix pricing in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like investments, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of investments with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forward and certain futures contracts.
The Funds net unrealized profit (loss) on open forward and futures contracts, by the above fair value hierarchy levels as of December 31, 2013 and 2012 are as follows:
2013 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
19,937,557 |
|
$ |
19,905,154 |
|
$ |
32,403 |
|
$ |
|
|
Short |
|
10,352,101 |
|
10,767,146 |
|
(415,045 |
) |
|
| ||||
|
|
$ |
30,289,658 |
|
$ |
30,672,300 |
|
$ |
(382,642 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
927,780 |
|
$ |
|
|
$ |
927,780 |
|
$ |
|
|
Short |
|
(688,767 |
) |
|
|
(688,767 |
) |
|
| ||||
|
|
$ |
239,013 |
|
$ |
|
|
$ |
239,013 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2013 |
|
$ |
30,528,671 |
|
$ |
30,672,300 |
|
$ |
(143,629 |
) |
$ |
|
|
2012 |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net unrealized profit (loss) on open contracts |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Futures |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
599,404 |
|
$ |
1,681,353 |
|
$ |
(1,081,949 |
) |
$ |
|
|
Short |
|
9,086,475 |
|
11,474,717 |
|
(2,388,242 |
) |
|
| ||||
|
|
$ |
9,685,879 |
|
$ |
13,156,070 |
|
$ |
(3,470,191 |
) |
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Forwards |
|
|
|
|
|
|
|
|
| ||||
Long |
|
$ |
2,787,207 |
|
$ |
|
|
$ |
2,787,207 |
|
$ |
|
|
Short |
|
(1,636,300 |
) |
|
|
(1,636,300 |
) |
|
| ||||
|
|
$ |
1,150,907 |
|
$ |
|
|
$ |
1,150,907 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2012 |
|
$ |
10,836,786 |
|
$ |
13,156,070 |
|
$ |
(2,319,284 |
) |
$ |
|
|
The Funds volume of trading forwards and futures at December 31, 2013 and 2012, respectively, are representative of the activity throughout the year. There were no transfers to or from Level I or Level II during 2013 and 2012.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of, and the net profits and losses on, derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2, above.
The Fund presents its futures and forward contract amounts gross on the Statements of Financial Condition. The Fund maintains margin deposits and cash collateral with its futures and forward brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. At December 31, 2013 and December 31, 2012, the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition included in Cash in the Equity in commodity trading accounts and the variation margin on open contracts as unrealized gain or loss on futures or forward contracts, respectively.
The following table indicates the trading profits and losses, before brokerage commissions, by type/commodity industry sector, on derivative instruments for the years ended December 31, 2013, 2012 and 2011:
|
|
December 31, 2013 |
|
December 31, 2012 |
|
December 31, 2011 |
| |||
Commodity Industry Sector |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
|
Profit (loss) from trading, net |
| |||
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
18,252,148 |
|
$ |
(15,604,240 |
) |
$ |
(672,949 |
) |
Currencies |
|
22,068,047 |
|
(28,551,422 |
) |
(1,178,520 |
) | |||
Energy |
|
(19,454,292 |
) |
(23,874,054 |
) |
348,366 |
| |||
Interest rates |
|
(54,443,134 |
) |
58,632,850 |
|
99,166,455 |
| |||
Metals |
|
21,130,440 |
|
(23,650,501 |
) |
16,692,243 |
| |||
Stock indices |
|
116,458,686 |
|
7,505,449 |
|
(19,529,459 |
) | |||
|
|
|
|
|
|
|
| |||
Total, net |
|
$ |
104,011,895 |
|
$ |
(25,541,918 |
) |
$ |
94,826,136 |
|
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Were a substantial portion of the Funds capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated dealers and brokers.
4. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the Transfer Agent), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the year ended December 31, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each Funds net assets. The Transfer Agent fee allocated to the Fund for the year ended December 31, 2013, 2012, and 2011 amounted to $209,488, $226,250 and $203,872, respectively, of which $33,843 and $38,237 was payable to the Registrar and Transfer Agent as of December 31, 2013 and 2012, respectively.
Typically the vast majority of the Funds U.S. dollar assets are maintained at MLPF&S. MLPF&S and any other BAC affiliates that hold the Funds cash assets receive economic benefits, which may be substantial, from holding this cash, even in low interest rate environments in which the Fund receives little, or no, interest on these cash assets. BACs Interest Earning Program, which offers interest on cash balances subject to a negotiated schedule, will generally apply to Fund cash assets at any time they are maintained by MLAI with its affiliates. As of December 31, 2013, the interest rate under the Interest Earning Program on U.S. dollar cash balances is the daily effective federal funds rate less 20 basis points, recalculated and accrued daily, and subject to a floor of 0%. The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by the Federal Reserve Bank of New York using data provided by brokers. Interest is computed based upon the daily net equity balance of the Funds account and is posted to the Funds account on a monthly basis.
MLPF&S charges the Fund at prevailing local interest rates for financing realized and unrealized losses on the Funds non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
The Fund charges Sponsor fees on the month-end net assets after all other charges at annual rates equal to 1.50% for Class A Units, 2.50% for Class C Units, and 1.10% on Class I Units. Class D Units, Class DS Units, Class DT Units, Class M Units, Class F Units and Class F1 Units and Class G Units are not charged a Sponsor fee.
The Fund pays brokerage commissions on actual cost per round turn. The average round-turn commission rate charged to the Fund for the years ended December 31, 2013, 2012 and 2011 was approximately $4.48, $5.48 and $5.47, respectively (not including, in calculating round-turn, forward contracts on a futures-equivalent basis).
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as seen on the Statement of Financial Condition are held with a related party.
On December 31, 2011 MLAI liquidated its position in the Fund.
5. ADVISORY AGREEMENT
The Fund, MLAI and Winton entered into an advisory agreement. The advisory agreement will continue in effect until December 31, 2014. Thereafter, the advisory agreement will be automatically renewed for successive three-year periods, on the same terms, unless terminated at any time by either Winton or the Fund upon 90 days written notice to the other party. Pursuant to the advisory agreement, Winton has the sole and exclusive authority and responsibility for directing the Funds trading, subject to MLAIs fiduciary authority to intervene to overrule or unwind trades if MLAI reasonably deems that doing so is necessary or advisable for the protection of the Fund.
The Fund charges management fees on the average month-end net asset value of each investors Units, after reduction for the brokerage commissions accrued with respect to such assets, and are payable to Winton on a monthly basis. Management fees are charged at a rate equal to 2% per year for Class A Units, Class C Units, Class I Units, Class D Units, Class DS Units and Class M Units. Management Fees are charged at a rate equal to 1.5% per year for Class DT Units. Management fees are charged at a rate equal to 1.25% per year for Class G Units. Management fees are charged at a rate equal to 1% per year for Class F Units and Class F-1 Units.
Performance fees are charged by the Fund on any New Trading Profit (as defined in the advisory agreement) and are payable to Winton as of either the end of each calendar year or upon any interim period for which there are net redemption of Units, to the extent of the applicable percentage of any New Trading Profit attributable to such Units. The Fund pays a 20% performance fee to Winton with respect to all classes, except Class DT Units, which is charged a performance fee of 15%.
With respect to the Class A Units, Class C Units, Class I Units, Class M Units, Class D Units and Class DS Units, Winton has agreed to share with MLAI, 25% of the 2% management fee and 25% of the 20% performance fee. With respect to Class F Units and Class F-1 Units, Winton has agreed to share with MLAI, 15% of the 1% management fee and 12.5% of the 20% performance fee. With respect to Class G Units, Winton has agreed to share with MLAI 20% of the 1.25% management fee
and 25% of the 20% performance fee. Winton has agreed to share these fees with MLAI in order to defray costs in connection with and in consideration of BACs providing certain administrative and operational support for the Fund. This fee sharing arrangement does not apply in respect of Class DT Units.
6. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income (loss) per weighted average Unit. The weighted average number of Units, outstanding for each Class, for the years ended December 31, 2013, 2012 and 2011 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the year.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the presentation of financial statements under the liquidation basis of accounting. This guidance addresses when and how an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The standard is effective for annual periods beginning after December 15, 2013, and interim periods therein, with early adoption permitted. The Sponsor does not believe that this guidance will have a material impact to the Funds financial statements.
In June 2013, the FASB issued an update relating to the criteria used in defining an investment company under U.S. GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a non controlling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Funds financial statements.
8. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Funds net
unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition. The Funds exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Winton, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge Winton to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAIs basic risk control procedures will consist of the ongoing process of Trading Advisor monitoring, with the market risk controls being applied by Winton.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Statements of Financial Condition.
MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker. Pursuant to the brokerage arrangement with MLPF&S, MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Funds experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
EXHIBIT 31.01
Rule 13a-14(a)/15d-14(a) Certifications
I, Keith Glenfield, certify that:
1. I have reviewed this annual report on Form 10-K of Systematic Momentum FuturesAccess LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter 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; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 25, 2014
By |
/s/ KEITH GLENFIELD |
|
Keith Glenfield |
| |
Chief Executive Officer, President and Manager |
| |
(Principal Executive Officer) |
|
EXHIBIT 31.02
Rule 13a-14(a)/15d-14(a) Certifications
I, Barbra E. Kocsis, certify that:
1. I have reviewed this annual report on Form 10-K of Systematic Momentum FuturesAccess LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter 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; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 25, 2014
By |
/s/ BARBRA E. KOCSIS |
|
Barbra E. Kocsis |
| |
Chief Financial Officer |
| |
(Principal Financial Officer) |
|
EXHIBIT 32.01
Section 1350 Certification
In connection with this annual report of Systematic Momentum FuturesAccess LLC (the Company) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (this Report), I, Keith Glenfield, Chief Executive Officer, President and Manager of Merrill Lynch Alternative Investments, LLC the manager of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002, that:
1. This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 25, 2014
By |
/s/KEITH GLENFIELD |
|
Keith Glenfield |
| |
Chief Executive Officer, President and Manager |
| |
(Principal Executive Officer) |
|
EXHIBIT 32.02
Section 1350 Certification
In connection with this annual report of Systematic Momentum FuturesAccess LLC, (the Company) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (this Report), I, Barbra E. Kocsis, Chief Financial Officer of Merrill Lynch Alternative Investments LLC, the manager of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002, that:
1. This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 25, 2014
By |
/s/ BARBRA E. KOCSIS |
|
Barbra E. Kocsis |
| |
Chief Financial Officer |
| |
(Principal Financial Officer) |
|
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