0000905148-11-002216.txt : 20111223 0000905148-11-002216.hdr.sgml : 20111223 20111223163118 ACCESSION NUMBER: 0000905148-11-002216 CONFORMED SUBMISSION TYPE: 10-12G PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20111223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Highbridge Commodities FuturesAccess LLC CENTRAL INDEX KEY: 0001534977 IRS NUMBER: 452608276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12G SEC ACT: 1934 Act SEC FILE NUMBER: 000-54573 FILM NUMBER: 111280626 BUSINESS ADDRESS: STREET 1: C/O MLAI, FOUR WORLD FINANCIAL CENTER STREET 2: 250 VESEY STREET CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 212-449-3517 MAIL ADDRESS: STREET 1: C/O MLAI, FOUR WORLD FINANCIAL CENTER STREET 2: 250 VESEY STREET CITY: NEW YORK STATE: NY ZIP: 10080 10-12G 1 efc11-708_fm1012g.htm efc11-708_fm1012g.htm

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10
 
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
(Exact name of registrant as specified in its charter)
 
DELAWARE
(State or other jurisdiction of
incorporation or organization)
 
45-2608276
(I.R.S.  Employer
Identification No.)
 
 
c/o MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC
4 World Financial Center
250 Vesey Street, 10th Floor
New York, NY 10080
212-449-3517
 
Barbra E. Kocsis
Merrill Lynch Alternative Investments LLC
1200 Merrill Lynch Drive (1B)
Pennington, NJ 08534
(609) 274-5838
 
__________________________
 
Copies to:
 
Mark Borrelli
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603

 
Securities to be registered pursuant to Section 12(b) of the Act: NONE
 
Securities to be registered pursuant to Section 12(g) of the Act:  Units of Limited Liability Company Interest
   (Title of Class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a 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   ___________  Accelerated filer   __________
       
 Non-accelerated filer   ___________  Smaller reporting company    ____X_____
 
 
 
 
 

 
 
 
 
TABLE OF CONTENTS
 

 
     
Item 1:
Business
1
Item 1A:
Risk Factors
27
Item 2:
Financial Information
27
Item 3:
Properties
27
Item 4:
Security Ownership of Certain Beneficial Owners and Management
28
Item 5:
Directors and Executive Officers
28
Item 6:
Executive Compensation
32
Item 7:
Certain Relationships and Related Transactions, and Director Independence
33
Item 8:
Legal Proceedings
34
Item 9:
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
34
Item 10:
Recent Sales of Unregistered Securities
34
Item 11:
Description of Registrant’s Securities to be Registered
36
Item 12:
Indemnification of Directors and Officers
41
Item 13:
Financial Statements and Supplementary Data
42
Item 14:
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
42
Item 15:
Financial Statements and Exhibits
42

 

 

 
 
ITEM 1:  BUSINESS
 
(a)
General Development of Business
 
Highbridge Commodities FuturesAccess LLC (the “Fund”) is a Delaware limited liability company, formed on June 15, 2011 for which Merrill Lynch Alternative Investments LLC, a Delaware limited liability company (the “Sponsor”), serves as the sponsor.  The Fund will invest substantially all of its assets through Highbridge Commodities FuturesAccess Master Fund Ltd. (the “HCFA Master Fund”), which has the same investment objectives as the Fund. The Sponsor has delegated commodities trading authority for the HCFA Master Fund to  Highbridge Capital Management, LLC (the “Trading Advisor”), as the single professional commodity trading advisor (“CTA”) to manage the HCFA Master Fund’s speculative trading of commodity-related investments.  The Trading Advisor is not affiliated with the Sponsor or the Fund.
 
Highbridge Commodities FuturesAccess Ltd. (the “Offshore Fund”) and BA Highbridge Commodities Fund LLC (the “BA Feeder” and, together with the Offshore Feeder and the Fund, the “Feeder Funds”) will also invest substantially all of their assets through the HCFA Master Fund.  It is anticipated that the HCFA Master Fund will offer three separate classes of shares which will have identical terms but will be invested in by the Fund, the Offshore Fund and the BA Feeder, respectively.  The HCFA Master Fund will issue each Feeder Fund a class of shares in order to track the Performance Fee separately with respect to each Feeder Fund as described below.  See “Description of Current Charges.”  References herein with respect to the Fund’s activities, expenses and portfolio include those of the HCFA Master Fund unless the context requires otherwise.  As used herein, the “Funds” refer to the HCFA Master Fund and the Feeder Funds.
 
The Fund is part of the Merrill Lynch FuturesAccessSM Program (“FuturesAccess”), which has been sponsored and designed by the Sponsor to make available to eligible investors different futures funds, including the Fund (“FuturesAccess Funds”), for direct investment, investment through a fund of funds, or investment through a master fund.
 
The Fund will file annual, quarterly and current reports and certain other information with the Securities and Exchange Commission (“SEC”).  Persons may read and copy any documents the Fund files at the SEC’s public reference room at 100 F Street, NE, Washington D.C. 20549 on official business days between the hours of 10 a.m. and 3 p.m.  You may obtain information on the operation at the public reference room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.  A copy of any such filings will be provided free of charge to any investor in the Fund (“Investor”) upon written request to the Fund at its business address, c/o Merrill Lynch Alternative Investments LLC, 4 World Financial Center, 250 Vesey Street, 10th Floor New York, NY 10080.
 
 
 
1

 
 
Plan of Operation
 
The Fund commenced trading on or about November 1, 2011.  The Fund’s objective is to achieve a positive return on capital by pursuing trading strategies focused on commodity-related investments.  The Trading Advisor’s investment strategies and models use a proprietary quantitative economics-based model to estimate expected returns, manage risks and seek the optimal risk-return trade-off adjusted for estimated transaction costs (the “Trading Program”).  The Trading Advisor currently implements the Trading Program primarily by investing in futures contracts, although the Trading Advisor may in the future increase the utilization of options on futures or over-the-counter (“OTC”) derivatives such as forward contracts, as well as other instruments.
 
The Trading Program employs factors based on economic principles and relationships that the Trading Advisor believes to be durable in commodities markets, including the impact of historical prices, the perceived relationships between and among various commodities and macroeconomic factors.  The HCFA Master Fund will attempt to profit from, among other things: commodities experiencing supply shock; commodity futures in backwardation, i.e., having prices lower than the cash price; and event anomalies, such as spread opportunities and unusual momentum or trending, rather than solely from trends in the commodities markets.  The HCFA Master Fund will emphasize risk management as a part of the investment process and seek to deploy a drawdown management process to dynamically decrease (or increase) the risk target as the portfolio decreases (or increases) in value.  The Trading Advisor will attempt to effect this strategy principally by trading in commodity-related futures contracts and options, including certain currencies whose returns may be correlated to those of commodities.  The underlying commodities may include, but are not limited to, soybeans, corn, soymeal, soybean oil, wheat, cotton, crude oil, natural gas, RBOB gasoline, heating oil, cocoa, coffee, sugar, gold, copper, silver, live cattle, lean hogs, feeder cattle, aluminum, lead, nickel, zinc and gas oil.  The Trading Program may include long and short positions and is generally expected to have a net long bias.  The Trading Program may also include trading forward contracts, swaps and other instruments but will not include securities unless otherwise determined by the Sponsor.
 
The Trading Advisor has developed policies and procedures that provide that the Trading Advisor will allocate investment opportunities and make purchase and sale decisions among the HCFA Master Fund and the Trading Advisor’s other clients in a manner that the Trading Advisor considers, in its sole discretion and consistent with its fiduciary obligation to its clients, to be reasonable.  In many cases, these policies may result in the pro rata allocation of limited opportunities across accounts, but in many other cases, the allocations may reflect numerous other factors based upon the Trading Advisor’s good faith assessment of the best use of such limited opportunities relative to the objectives, limitations and requirements of each of its clients and applying a variety of factors.  The Trading Advisor seeks to treat all clients fairly in light of all factors relevant to managing an account, and in some cases it is possible such factors may result in allocations in which certain accounts may receive an allocation when other accounts, including the HCFA Master Fund, do not.  Similarly, the Trading Advisor may cause the liquidation of such positions for the HCFA Master Fund and its other clients in its discretion in
 
 
 
 
2

 
 
 
accordance with the foregoing principles.  These allocations or liquidations may benefit another client instead of the HCFA Master Fund or may be detrimental to the HCFA Master Fund.
 
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 trader’s initial margin payment to the FCM and the FCM’s 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 trader’s 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 trader’s “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 over-the-counter 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 5% to 15% of the HCFA Master Fund’s 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 HCFA Master Fund’s 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 further described below under Item 1(c) “Narrative Description of Business ─ Use of Proceeds and Cash Management Income.”  The HCFA Master Fund is not required to invest any minimum percentage of its assets in its account with the Trading Advisor beyond what is required by the FCM margin requirements.
 
Under the Fund’s limited liability company operating agreement (the “Operating Agreement”), the management and operation of the Fund and the determination of its policies are vested exclusively in the Sponsor.  The Sponsor may place capital under the management of, and withdraw capital from, the discretionary control of the Trading Advisor by investing all or substantially all of the Fund’s assets in the HCFA Master Fund and redeeming therefrom.  The Sponsor is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator (“CPO”) and as a CTA and is a member of the National Futures Association (“NFA”) in such capacities.  The Sponsor is also registered with the SEC as an investment adviser.
 
 
 
 
3

 
 
 
The Fund’s disclosure document will be prepared in accordance with applicable CFTC rules and will be filed with and reviewed by the NFA prior to its distribution to potential investors.  The Fund’s units of limited liability company interest (“Units”) will be privately offered pursuant to Rule 506 under Regulation D and Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) (although Class Z Units may be issued solely in reliance on the exemption provided by Section 4(2)).
 
The Fund’s assets may be used to engage in the trading of commodity futures contracts and other commodity-related investments pursuant to the investment methodology of the Trading Advisor.  The Sponsor was responsible for selecting and will be responsible for monitoring the Trading Advisor, and it may replace the Trading Advisor or terminate the Fund in the future, in its sole discretion.  The Sponsor selected the Trading Advisor based on the Sponsor’s diligence on the Trading Advisor, the markets in which the Trading Advisor is active and the Trading Advisor’s past performance.  The Sponsor may add replacement or additional trading advisors, but is unlikely to do so absent removal or resignation of the current Trading Advisor.
 
The Fund’s fiscal year ends on December 31.
 
As the Fund trades primarily in commodity interests rather than securities, the Fund qualifies for an exclusion from the definition of, and is not registered as, an investment company under the Investment Company Act of 1940 (the “Company Act”).  Consequently, Investors will not have the benefit of the investor protection provisions afforded by the Company Act.
 
(b)
Financial Information about Segments
 
The Fund’s business constitutes only one segment: a speculative “commodity pool.”  The Fund does not engage in sales of goods or services.
 
(c)
Narrative Description of Business
 
General
 
The HCFA Master Fund will principally trade in commodity-related futures contracts and options on futures contracts, including certain currencies whose returns may be correlated to those of commodities.  The underlying commodities may include, but are not limited to, soybeans, corn, soymeal, soybean oil, wheat, cotton, crude oil, natural gas, RBOB gasoline, heating oil, cocoa, coffee, sugar, gold, copper, silver, live cattle, lean hogs, feeder cattle, aluminum, lead, nickel, zinc and gas oil.  However, investment in the Fund is only appropriate for a limited portion of that segment of an Investor’s portfolio which is intended to be invested in investments that bear a high level of risk.  Traditional portfolios invested in stocks, bonds and cash equivalents can be diversified by allocating a portion of their assets to non-traditional investments such as commodities.
 
The potential non-correlation with the performance of stocks and bonds means that managed futures can help to improve long-term returns and reduce portfolio volatility, although there can be no assurance that the Fund will achieve these objectives or avoid substantial losses.  Below is
 
 
 
4

 
 
 
a chart showing the relationships between the Fund, the Sponsor and several of the major service providers to the Fund.
 
 
 

 
 
 
5

 
 
 

*The Sponsor sponsors and manages a variety of alternative investment funds, including the Fund, other FuturesAccess Funds, other commodity pools and funds which trade primarily in securities rather than commodities, including hedge funds, funds of funds and private equity funds.
 
 

 
6

 
 
Sponsor
 
The Sponsor is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“ML & Co.”).  ML & Co. is a wholly-owned subsidiary of Bank of America Corporation (“Bank of America”).  For convenience, ML & Co. together with Bank of America and its affiliates are sometimes collectively referred to as “Merrill Lynch” or “BOA/ML.”
 
The Sponsor sponsors and manages a variety of alternative investments, including hedge funds, funds of funds, managed futures funds and private equity funds.  The Sponsor’s capabilities in this field of investment date back as far as 1986 through its predecessor organizations.  The Sponsor’s affiliates also act as general partner, sponsor or investment manager for a number of hedge funds, single manager feeder funds, funds of funds, managed futures and private equity funds.
 
The Trading Advisor
 
The Trading Advisor is a global alternative investment management firm founded in 1992.  Since its inception, the firm has developed a diversified investment platform that includes hedge funds, traditional investment management products and private equity.  The Trading Advisor manages capital for sophisticated investors, including financial institutions, public and corporate pension funds, endowments, foundations and family offices, as well as individuals.  The firm is based in New York with offices in Hong Kong, London and Tokyo.  The Trading Advisor is a subsidiary of JPMorgan Asset Management Holdings Inc. (“JPMAM”).  JPMAM is a subsidiary of JPMorgan Chase & Co.  The Trading Advisor is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, is registered with the CFTC as a CPO and CTA and is a member of the NFA.
 
The Sponsor, the HCFA Master Fund and the Trading Advisor are parties to an advisory agreement with respect to the Trading Advisor trading the Trading Program for the HCFA Master Fund.
 
The Trading Advisor is the exclusive CTA for the HCFA Master Fund and is responsible for the commodities trading.  The Sponsor is responsible for management of cash and other assets not involved in the Trading Program.  The Sponsor is responsible for the management of any HCFA Master Fund excess cash.
 
The HCFA Master Fund accesses the Trading Program by placing funds allocated to trading in a CFTC-regulated managed account held by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), the HCFA Master Fund’s commodity broker.  OTC, foreign currency, spot and forwards trading are held at Merrill Lynch International Bank Ltd. (“MLIB”), which acts as a prime broker with respect to these transactions.  The HCFA Master Fund also utilizes custody accounts with The Bank of New York Mellon for cash and other assets.
 
The Trading Advisor has agreed in writing with the Sponsor to the list of commodity interests that the Trading Advisor intends to trade on the HCFA Master Fund’s behalf or may in the future
 
 
 
 
7

 
 
 
 trade on the HCFA Master Fund’s behalf.  The Sponsor may remove a commodity interest from such trading list, upon notice to the Trading Advisor.
 
The Trading Advisor has the sole and exclusive authority and responsibility for directing the HCFA Master Fund’s commodities trading, subject to the Sponsor’s fiduciary authority to trade the HCFA Master Fund’s portfolio or otherwise intervene to effectively overrule trades, by causing HCFA Master Fund to take positions opposite of existing positions, or unwind trades if the Sponsor deems that doing so is necessary or advisable for the protection of the Funds.  The HCFA Master Fund or the Sponsor may also liquidate trading positions or instruct the Trading Advisor to cause the HCFA Master Fund to liquidate trading positions to the extent necessary to:  (i) fund any distributions or redemptions of shares to be made by the HCFA Master Fund; (ii) pay the HCFA Master Fund’s expenses; and/or (iii) comply with speculative position limits which may apply to the Trading Advisor and/or the Sponsor, subject to applicable rules requiring the aggregation of positions; provided that the HCFA Master Fund and the Sponsor must permit the Trading Advisor three days in which to liquidate positions for the purposes set forth in clauses (i) and (ii) above, and as set forth in clause (iii) above if such liquidation is being done solely to comply with speculative position limits applicable to the Trading Advisor, prior to exercising its authority to liquidate positions.  Under the advisory agreement, the Trading Advisor will have no liability for the results of any action or non-action of the Sponsor or HCFA Master Fund in liquidating HCFA Master Fund positions pursuant to clauses (i)-(iii) above; provided that, if action was taken pursuant to clause (iii) above in order to comply with speculative position limits applicable to the Trading Advisor, the Trading Advisor will have no liability only if the Sponsor’s intervention is proven to be an error and the Trading Advisor was in fact in compliance with all speculative position limits applicable to the Trading Advisor.
 
The advisory agreement will continue in effect until October 1, 2013.  Thereafter, the advisory agreement will be automatically renewed for three successive one-year periods, on the same terms, unless terminated by either the Trading Advisor or the HCFA Master Fund upon notice to the other party no later than 90 days before the expiration of the then-current term. The advisory agreement may, however, be terminated at any time pursuant to any of the following: (i) in its discretion, the Sponsor may terminate the advisory agreement at the end of any month upon 30 days’ notice; (ii) the Trading Advisor may terminate the advisory agreement at any time the net assets of the HCFA Master Fund are less than $30 million; (iii) the Trading Advisor may terminate the advisory agreement as of any month-end following October 31, 2013 if the average net assets of the HCFA Master Fund over the immediately preceding six-month period as calculated at such month-end are less than $75 million; and (iv) the HCFA Master Fund and/or the Sponsor, on the one hand, or the Trading Advisor, on the other, may terminate the advisory agreement as a result of a material breach of the advisory agreement by the other party, after due notice and an opportunity to cure.  The advisory agreement will also terminate immediately if the HCFA Master Fund is terminated and dissolved as determined by the Sponsor.
 
Upon the dissolution of the Fund, the Sponsor (or, if the Sponsor has withdrawn, such other liquidator as the Investors may, by vote of more than 50% of the outstanding Units, by net asset value, not including Units held by Sponsor parties, select) will wind up the Fund’s affairs and, in connection therewith, will distribute the Fund’s assets pursuant to the Fund’s Operating
 
 
 
 
8

 
 
Agreement.  While there are no separate fees related to terminating the advisory agreement, if there is a Performance Fee owed to the Trading Advisor on the date of termination, this fee is due on the termination of the advisory agreement.
 
The Funds will indemnify, defend and hold harmless the Trading Advisor from and against any and all Losses, as defined below, incurred by the Trading Advisor (“Trading Advisor Losses”), resulting from a demand, claim, lawsuit, action or proceeding relating to, based upon or arising out of the advisory agreement or the advisory services rendered by the Trading Advisor or its affiliates or their respective owners, principals, directors, officers, employees, representatives or controlling persons (“Trading Advisor Parties”) with respect to the HCFA Master Fund; provided that the conduct of the Trading Advisor Party that is the subject of the demand, claim, lawsuit, action or proceeding did not constitute negligence, intentional misconduct or a material breach of the advisory agreement or of any fiduciary obligation to the Funds and was done in good faith and in a manner such Trading Advisor Party reasonably believed to be in, or not opposed to, the best interests of the Funds.  Trading Advisor Losses include amounts incurred or paid by the Trading Advisor with respect to other Trading Advisor Parties as a result of indemnification by the Trading Advisor against Losses incurred by such Trading Advisor Parties to the extent the Trading Advisor would be entitled to indemnification against such Losses if such Losses had been such incurred directly by the Trading Advisor.  “Losses” is defined in the advisory agreement to mean claims, damages, liabilities (joint and several), costs and expenses, including any reasonable investigatory, legal and other expenses incurred in connection with, and any amounts paid in, any settlement, provided that the indemnifying party shall have approved such settlement.  The termination of any demand, claim, lawsuit, action or proceeding by settlement will not, in itself, create a presumption that the conduct in question was not undertaken in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the HCFA Master Fund.
 
Use of Proceeds and Cash Management Income
 
Subscription Proceeds
 
The HCFA Master Fund’s assets will be used for the HCFA Master Fund’s trading activity, expenses and redemptions.  The primary use of the proceeds of the sale of the Units is to permit the Trading Advisor, through the HCFA Master Fund, to trade on a speculative basis in futures and other commodity-related investments on behalf of the HCFA Master Fund, on a speculative basis via the Trading Program.  While being used for this purpose, the HCFA Master Fund’s assets also generally will be available for cash management.
 
Markets Traded
 
The HCFA Master Fund engages in speculative trading in the U.S. and non-U.S. futures and forward markets.  The HCFA Fund’s commitments to different types of markets — U.S. and non-U.S., regulated and non-regulated — differ substantially from time to time, as well as over time.  The HCFA Master Fund has no diversification policy restricting its concentration in any of these different types of markets.
 
 
 
9

 
 
 
Custody of Assets
 
Certain of the HCFA Master Fund’s assets will be held in customer-segregated accounts at MLPF&S or its affiliates in cash or invested in CFTC authorized investments for customer funds, including, without limitation, commercial paper, U.S. government and government agency securities, prime non-U.S. government securities, corporate notes and money market funds.  However certain of such assets are not required to be, and generally are not, held in customer segregated accounts.  For example, assets used as collateral for margin trading in the OTC forward markets, including assets held by Merrill Lynch International Bank (“MLIB”) as F/X prime broker and counterparty, are typically not segregated.
 
For so long as Merrill Lynch indirectly owns, as a result of investing any “seed” capital as described below or otherwise, 10% or more of the HCFA Master Fund, the HCFA Master Fund’s account will be considered a “proprietary account” pursuant to applicable CFTC regulations and the HCFA Master Fund’s assets will not be afforded the same protections as “customer funds” held in customer segregated accounts.  Merrill Lynch has provided seed capital to the HCFA Master Fund, and, as a result, currently owns, indirectly, more than 10% of the HCFA Master Fund’s account at MLPF&S and will continue to hold 10% or more of such account for some time.  See “Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management,” below.
 
Interest
 
The HCFA Master Fund generally will earn interest, as described below, on its cash, which is deemed to include, in addition to actual cash held by the HCFA Master Fund, its “open trade equity” i.e., equity attributable to unrealized gain and loss marked to market daily on open positions.  Cash is held primarily in U.S. dollars, and to a lesser extent in foreign currencies.  Cash does not include, and the HCFA Master Fund does not earn interest income on, the HCFA Master Fund’s gains or losses on its open forward, commodity option and certain non-U.S. futures positions since these gains and losses are not collected or paid until such positions are closed out.
 
The HCFA Master Fund’s cash may be greater than, less than or equal to the HCFA Master Fund’s net asset value, on which the underlying redemption value of the Units is based, primarily because net asset value reflects all gains and losses on open positions as well as accrued but unpaid expenses.
 
MLPF&S intends to pay interest on the HCFA Master Fund’s cash, irrespective of how such cash is held or invested, at the most favorable rate payable by MLPF&S to accounts of Merrill Lynch affiliates, which will consist of the current federal funds rate of interest minus a spread based on the currency held.  MLPF&S will receive the amount of the spread, in addition to any amounts it receives over the federal funds rate due to its investing activities, as well as any amounts it, or its affiliates, receive in brokerage commissions as described herein.  The HCFA Master Fund receives interest on its cash held in excess of margin.  MLPF&S retains the additional economic benefit derived from possession of the HCFA Master Fund’s cash, which
 
 
 
 
10

 
 
includes the ability to invest such cash throughout MLPF&S’s cash management programs, which may include investments in vehicles managed or sponsored by MLPF&S or its affiliates.
 
MLPF&S, in the course of acting as commodity broker for the HCFA Master Fund, may lend certain currencies to, and borrow certain currencies from, the HCFA Master Fund.  In the course of doing so, MLPF&S both retains certain amounts of interest and receives other economic benefits.  In doing so, MLPF&S follows its standard procedures for paying interest on the assets of the commodity pools sponsored by the Sponsor and other MLPF&S affiliates and traded through MLPF&S.
 
Net Asset Value
 
The Fund will calculate the net asset value per each class of Units (“Class”) as of the close of business on the last business day of each calendar month and such other dates as the Sponsor may determine in its discretion.  On a monthly basis, the Sponsor, pursuant to applicable CFTC regulations, sends to each Investor summary financial information for the Fund for the prior month, including relevant net asset values.  The Fund’s net asset value as of any date will generally equal the net asset value of the Fund’s investment in the HCFA Master Fund under the management of the Trading Advisor as of such date, plus any other assets held by the Fund, minus Sponsor’s Fees (as defined below), organizational expense amortization and any operating costs and other liabilities of the Fund. The net asset value of the Fund’s investment in the HCFA Master Fund will reflect reduction (at the HCFA Master Fund level) for accrued brokerage commissions, Management Fees and Performance Fees (as defined below), trading liabilities and any operating costs and other liabilities of the HCFA Master Fund.  The net asset value of each Class as of any date will generally equal the net asset value of the Fund attributable to such Class, after the deduction of all transaction costs and operating expenses, but prior to accrual of the Sponsor’s Fees, less the Sponsor’s Fees charged specifically to that Class.  The net asset value of each Class is then divided equally among all Units of such Class in order to calculate the net asset value per Unit.  As a result, all Units of the same Class will have the same net asset value.
 
The Bank of New York Mellon, which acts as the HCFA Master Fund’s administrator, values the HCFA Master Fund’s managed futures positions. The liquidating value of a commodity futures contract or option traded on a U.S. commodity exchange is based upon the settlement price on the commodity exchange on which the particular commodity futures contract or option is traded; provided that, if a contract or option cannot be liquidated on the day with respect to which net asset value is being determined, the basis for determining the liquidating value of such contract or option will be such value as the Sponsor may deem fair and reasonable.
 
The liquidating value of a futures, forward or options contract not traded on a U.S. exchange is determined based upon policies established by the Sponsor, on a basis consistently applied for each different variety of contract.
 
The Sponsor is authorized to make all net asset value determinations including, without limitation, for purposes of determining redemption payments and calculating Sponsor’s Fees, on
 
 
 
 
11

 
 
 
the basis of estimated numbers.  The Sponsor generally will not make retroactive adjustments in order to reflect the difference between estimated and final numbers, but rather reflects such difference including, for purposes of calculating redemption payments and Sponsor’s Fees, in the accounting period when such differences are determined.
 
The Sponsor may suspend the calculation of the net asset value of the Fund’s Units during any period for which the Sponsor is unable to value a material portion of the Fund’s positions or when the HCFA Master Fund is not reporting its net asset value.  The Fund will give notice of any such suspension to all Investors.
 
Reports
 
Each month, as required by CFTC regulations, the Sponsor sends to the Investors an account statement which includes the most recent month-end net asset value of the Fund, the percentage change from the previous month, the net asset value of the Fund’s Units and a brief summary of the Fund’s income and expenses, as well as any such other information as the Sponsor may deem appropriate.  Investors will also receive, after the close of the Fund’s fiscal year, audited financial statements and the tax information necessary for the preparation of their annual federal income tax returns.
 
Charges

The Fund will offer four classes (“Classes”) of Units to outside investors:  Class A, Class C, Class I and Class D.  Each Class participates on equal terms in the profits and losses of the Fund and has equal ownership rights in the equity thereof.  Classes are differentiated only by the fees paid by each and the type of investor eligible to invest in each.  Class eligibility is determined on the basis of an Investor’s total investment in all FuturesAccess Funds, HedgeAccess Funds (as defined below) and certain other funds or programs sponsored by the Sponsor or its affiliates (“Total Investment”).
 
Although the Sponsor uses the term “Class” to distinguish the four types of units of limited liability company interest, and while the four types have different fees and investment minimums, they have the same rights, preferences and privileges, and the Sponsor therefore does not believe that different fees and investment minimums are sufficient differences to make them four separate “classes” under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”).
 
No minimum Total Investment is required to invest in Class A or Class C Units, other than the minimum subscription amounts required to invest in the Fund.  As described in more detail below, Class A Units are subject to a one-time, upfront sales commission (“sales commission”) of between 1.0% and 2.5%, depending on the size of the subscription, and Class C Units are not subject to a sales commission but pay a higher Sponsor’s Fee (as defined below) than the Class A Units.  Investors with a Total Investment of $5,000,000 or more are eligible to purchase Class I Units.  Investors with investments in the Fund of $5,000,000 or more or a Total Investment of $15,000,000 or more are eligible to purchase Class D Units.
 
 
 
 
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Merrill Lynch has provided initial “seed” capital to enable the HCFA Master Fund to begin trading, before sufficient client capital has been raised, to meet the HCFA Master Fund’s minimum capitalization parameters.  See “Security Ownership of Certain Beneficial Owners and Management—Security Ownership of Management,” below.  Seed capital is invested in Class Z Units which do not have a minimum subscription amount requirement.  However, neither the Sponsor nor any other Merrill Lynch entity has any obligation to “seed” the HCFA Master Fund.  Class Z Units are not subject to Sponsor’s Fees.  Class Z Units may be redeemed at any time on no notice.
 
Other classes may be offered from time to time, with such terms as determined by the Sponsor in its sole discretion.
 
 
 
 
 
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Description of Current Charges
 
 
Recipient
Nature of Payment
Amount of Payment
MLPF&S
Sales Commission
Sales commissions are based on gross subscription amounts, i.e., the total subscription prior to deduction of the sales commission.
 
Class A
1.00% – 2.50%
 
The initial sales commission applicable to subscriptions for Class A Units are as follows:
 
Total Investment of less than $1,000,000                                                   2.5%
Total Investment of at least $1,000,000,
less than $2,000,000                                                                                      2.0%
Total Investment of at least $2,000,000,
less than $3,000,000                                                                                      1.5%
Total Investment of at least $3,000,000,
less than $5,000,000                                                                                      1.0%
 
Class C
None
 
Class I
Up to 0.50%, subject to negotiation by individual Investors, but not to exceed 0.50% in any case
 
Class D
Up to 0.50%, subject to negotiation by individual Investors, but not to exceed 0.50% in any case
 
The Sponsor may waive or reduce sales commissions for certain Investors without entitling any other Investor to such waiver or reduction.
 
 
 
 

 
 
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Recipient
Nature of Payment
Amount of Payment
The Sponsor
Sponsor’s Fees (asset-based)
Class A Units, which pay a sales commission, pay the Sponsor a monthly Sponsor’s Fee of 1/12 of 1.5% of their month-end net asset value.
 
Class C Units, which pay no sales commissions, pay the Sponsor a monthly Sponsor’s Fee of 1/12 of 2.5% of their month-end net asset value.
 
Class I Units, which pay a sales commission, pay the Sponsor a monthly Sponsor’s Fee of 1/12 of 1.1% of their month-end net asset value.
 
Class D Units, which pay a sales commission, pay no Sponsor’s Fees.
 
Net asset value, for purposes of calculating the Sponsor’s Fee, is calculated prior to reduction for the Sponsor’s Fee being calculated.
 
The Sponsor will charge the Sponsor Fee at the Fund level, rather than the HCFA Master Fund level.
 
The Sponsor may waive, reduce or rebate Sponsor’s Fees for certain Investors without entitling any other Investor to a waiver or reduction.
 
The Trading
Advisor; the Sponsor
Management Fees
 (asset-based)
As of the last business day of each calendar month, the HCFA Master Fund will pay the Trading Advisor a Management Fee equal to 1/12 of 1.5% (a 1.5% annual rate) of the month-end net asset value of the HCFA Master Fund, prior to reduction for the Management Fees being calculated or for any accrued Performance Fees, as described below.  In order to help defray the costs of the Sponsor’s sponsoring and providing ongoing administration and operational support to the HCFA Master Fund, the Trading Advisor will pay, or direct the HCFA Master Fund to pay, the Sponsor an amount equal to 40% of the Management Fee.
 
 
 
 
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Recipient
Nature of Payment
Amount of Payment
The Trading Advisor
Performance Fees
The HCFA Master Fund will pay to the Trading Advisor, as of each December 31 (“Performance Fee Calculation Date”), a Performance Fee equal to 15% of the New Trading Profit (defined below) attributable to the class of shares of the HCFA Master Fund in which each of the Fund, the BA Feeder and the Offshore Feeder invest.  Performance Fees will be charged as of each year end as well as on net redemptions from the HCFA Master Fund.  Performance Fees will be calculated and charged separately with respect to each Feeder Fund rather than for the HCFA Master Fund as a whole.  As a result each Feeder Fund’s investment in the HCFA Master Fund will have its own High Water Mark and increases and decreases in net asset value will be separately determined in calculating Performance Fees.  Performance Fees will be calculated with respect to each class separately, irrespective of the performance experienced by different investors in each of the Feeder Funds.
 
Since the Management Fees and Performance Fees will be charged at the HCFA Master Fund level, the Sponsor’s Fee and any other expenses taken at the Fund level will not be deducted from the net asset value of the HCFA Master Fund for purposes of calculating the Management Fee or in determining the increase or decrease in net asset value of the Fund’s investment in the HCFA Master Fund for purposes of calculating the Performance Fee.  The charging of these fees at the HCFA Master Fund level also means that the Sponsor’s Fee will be charged on net asset value of the Fund after reduction for the Management Fee and Performance Fee.  Since Performance Fees will be calculated based on the Fund’s investment in the HCFA Master Fund and not the overall performance of the HCFA Master Fund, the Fund could be subject to Performance Fees despite the HCFA Master Fund’s incurring losses in the aggregate due to the timing of the Fund’s investment in the HCFA Master Fund.
 
    “New Trading Profit” equals any increase in the net asset value of the Fund’s investment in the HCFA Master Fund as of the current Performance Fee Calculation Date over the High Water Mark attributable to such investment.  The High Water Mark attributable the Fund’s investment in the HCFA Master Fund is equal to the highest net asset value of the Fund’s investment in the HCFA Master Fund after reduction for the Performance Fee then paid, as
 
 
 
 
 
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Recipient
Nature of Payment
Amount of Payment
   
any preceding Performance Fee Calculation Date over the life of the HCFA Master Fund.  The High Water Mark will be increased dollar-for-dollar by new subscriptions and decreased proportionately when capital withdrawals attributable to the Fund are made from the HCFA Master Fund.  The proportionate High Water Mark reduction made as a result of capital withdrawals shall be calculated by multiplying the High Water Mark in effect immediately prior to such capital withdrawal by a fraction, the numerator of which is the aggregate net asset value of the Fund’s investment in the HCFA Master Fund immediately following such capital withdrawal and the denominator of which is the net asset value of the Fund’s investment in HCFA Master Fund immediately before such capital withdrawal, in each case prior to reduction for any accrued Performance Fee.  New Trading Profit is calculated prior to the reduction for any Performance Fees being calculated as of the Performance Fee Calculation Date.  In addition, net asset value for purposes of calculating the Performance Fee will not include any interest income earned by the HCFA Master Fund and will not be reduced by the Sponsor’s Fees, although interest income will increase, and the Sponsor’s Fees will decrease, net asset value for purposes of determining the value of the Units.
 
   
The Performance Fee is equal to 15% of New Trading Profit as of the Performance Fee Calculation Date.  For example, if the Fund’s investment in the HCFA Master Fund had a High Water Mark of $40 million, and the Fund’s investment in the HCFA Master Fund had a value of $39 million at the beginning of the period for which the Performance Fee is being calculated and a value of $42 million at the end of the period, the Performance Fee would equal 15% of $2 million, or $300,000, and the new High Water Mark would equal $41.7 million.
 
MLPF&S
Brokerage Commissions
The principal operating costs of the HCFA Master Fund are the per-trade brokerage commissions paid to MLPF&S (a portion of which is paid to the HCFA Master Fund’s executing brokers, which may or may not include MLPF&S, as commissions for their execution services).
 
The HCFA Master Fund’s brokerage commissions are paid on the completion or liquidation of a trade and are referred to as “round-turn” commissions, which cover both the initial purchase (or sale)
 
 
 
 
 
 
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Recipient
Nature of Payment
Amount of Payment
   
and the subsequent offsetting sale (or purchase) of a single commodity futures contract.  If 100 contracts are included in a single trade, 100 round-turn commissions are charged.  The brokerage commission rate charged in respect of the Trading Advisor may vary based on the frequency of its trading.  If the Trading Advisor has faster turnover, the Trading Advisor may be charged a lower per trade rate in an attempt to maintain the overall brokerage costs of the different FuturesAccess Funds at generally comparable levels.  However, the commission expenses of the different FuturesAccess Funds, both in the aggregate and on a “round-turn” basis, will vary, perhaps materially.
 
The “round-turn” commissions paid by the HCFA Master Fund on futures exchanges are expected to be approximately $15 per round-turn plus fees, except in the case of certain non-U.S. contracts on which the rates may be as high as $100 per round-turn plus fees due, in part, to the large size of the contracts traded.
Various Banks and Dealers, including Merrill Lynch International Bank
Currency (F/X) Dealer Spreads
The HCFA Master Fund’s currency trades, if any, may be executed in the spot and forward foreign exchange markets (the “F/X Markets”) in which there are no direct execution costs.  Instead, the banks and dealers in the F/X Markets, including MLIB, an affiliate of the Sponsor, would take a “spread” between the prices at which they are prepared to buy and sell a particular currency, and such spreads are built into the pricing of the spot or forward contracts with the HCFA Master Fund.
 
Should the HCFA Master Fund engage in exchange of futures for physical (“EFP”) trading, the HCFA Master Fund would acquire cash currency positions through banks and dealers, including Merrill Lynch.  The HCFA Master Fund would pay a spread when it exchanges these positions for futures.  This spread would reflect, in part, the different settlement dates of the cash and the futures contracts, as well as prevailing interest rates, but also would include a pricing spread in favor of the dealer, which will often be Merrill Lynch.
 
Service Providers, including Merrill Lynch Entities
Operating Costs
The Fund pays, in addition to the other expenses described above, its operating costs and its pro rata share of the operating costs of the HCFA Master Fund including, without limitation:  execution and clearing brokerage commissions, as described above; forward and other over-the-counter trading spreads, as described above;
 
 
 
 
 
 
 
 
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Recipient
Nature of Payment
Amount of Payment
   
fees and other related charges; administrative, transfer, exchange and redemption processing, legal, regulatory, reporting, filing, tax, audit, escrow, accounting and printing fees and expenses, as well as extraordinary expenses.  Operating costs are allocated pro rata among the Fund’s Classes of Units, as well as, when applicable, among the HCFA Master Fund’s classes of shares, based on their respective net asset values.  Investors thus pay directly the operating costs of the Fund and pay indirectly their pro rata share of the operating costs of the HCFA Master Fund.
The Sponsor retains outside service providers to supply certain services to FuturesAccess, including, without limitation, legal, tax reporting, custody, accounting, administrative and escrow services.  Operating costs include the Fund’s, as well as the HCFA Master Fund’s, allocable share of the fees and expenses of these outside service providers, as well as the fees and expenses of any Merrill Lynch entity or other service providers which may be retained to provide these or other services in the future.  Certain other costs related to FuturesAccess as a whole including, for example, additional third party service providers and costs related to improvements over the entire platform, such as a consultant brought in to improve processes platform wide, are allocated pro rata among all FuturesAccess Funds, including the Fund and HCFA Master Fund.  These costs will vary significantly from period to period.
 
The Sponsor
Organization-al and Initial Offering Costs
The Fund charges the costs associated with the organization and initial offering of the Fund to Investors. For operational purposes, i.e., for processing subscriptions and redemptions and for reporting purposes, these costs are amortized against net asset value at the Fund level in 60 monthly installments, beginning with the first month-end after the initial issuance of Units.  If such costs are deemed material, however, they will be treated differently for financial reporting purposes than for operational purposes.  In this event, for financial reporting purposes, organizational costs would be fully expensed upon the Fund’s launch, and initial offering costs would be amortized over the first twelve months of the Fund’s operations.  The Fund ultimately pays for all of these costs and will reimburse the Sponsor for any such costs that it advanced on behalf of the Fund.
 
 
 
 
 
 
 
 
 
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Recipient
Nature of Payment
Amount of Payment
N/A
Ongoing Offering Expenses
The Fund will pay its own ongoing offering expenses, which are allocated pro rata among each Class of Units in accordance with their respective net asset values.  The ongoing offering expenses payable by the Fund are not expected to exceed $100,000 per year, although these expenses could exceed this estimate during any given year.
 
 
Conflicts of Interest
 
Merrill Lynch-Affiliated Entities
 
Other than the Trading Advisor and certain executing brokers utilized by the Trading Advisor, all parties involved in the operations of the Fund and the HCFA Master Fund are affiliated with Merrill Lynch.  Consequently, many of the business terms of the Fund and the HCFA Master Fund have not been negotiated at arm’s-length.
 
Were Investors to seek redress from BOA/ML for damages relating to the offering of the Units or the operations of the Fund, they would be unlikely to have recourse against any BOA/ML entity, such as ML & Co., which is not a direct party to an agreement with the Fund.  Even in the case of direct entities, Investors would likely have recourse only on a derivative basis, suing not individually but in the right of the Fund.
 
MLPF&S and MLIB
 
MLPF&S executes, and MLIB acts as counterparty to, trades for many different clients in the same markets at the same time.  Consequently, other clients may receive better prices than the HCFA Master Fund on some trades, causing the HCFA Master Fund to pay higher prices for its positions.
 
Many MLPF&S clients pay lower futures brokerage rates, and many MLIB clients pay lower prime brokerage fees and lower bid-ask spreads on OTC F/X trading, if any, than the HCFA Master Fund.  Brokerage commissions and bid-ask spreads have a major impact on the HCFA Master Fund’s performance, and the cumulative effect of the higher rates paid by the HCFA Master Fund is material.
 
MLPF&S and MLIB each must allocate their resources among many different clients.  They have financial incentives to favor certain accounts over the HCFA Master Fund, including by devoting more business time to such other accounts or by providing lower brokerage commissions to accounts with higher trading volume than the HCFA Master Fund.  Because of the competitive nature of the markets in which the HCFA Master Fund trades, to the extent that either of MLPF&S or MLIB prefers other clients over the HCFA Master Fund, the HCFA Master Fund is likely to have lower investment performance than is otherwise the case.
 
 
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MLPF&S and MLIB do not have to compete to provide services to the HCFA Master Fund; consequently, there is no independent check on the quality of their services.
 
The Sponsor
 
Use of Merrill Lynch Affiliates

The Sponsor and its affiliates are the Fund’s and the HCFA Master Fund’s primary service providers, other than the Trading Advisor and certain executing brokers utilized by the HCFA Master Fund, and will remain so even if using other firms would be more advantageous for the HCFA Master Fund.  Because the Fund’s and the HCFA Master Fund’s primary service providers are the Sponsor or its affiliates, the principals or key employees of the Sponsor may be associated persons of these primary service providers.

Proprietary Investments

From time to time, the Sponsor or Merrill Lynch may have substantial proprietary investments with the Trading Advisor.  The Sponsor and Merrill Lynch have a conflict of interest in allocating capital to the Trading Advisor, and the terms of the Sponsor’s or Merrill Lynch’s proprietary investment with the Trading Advisor may have substantially different terms than those the Sponsor or Merrill Lynch would receive by investing into the Fund, including the potential for more advantageous fees and liquidity than are offered to Investors.

Other Funds Sponsored by the Sponsor

The Sponsor might be able to add more value to the Fund if certain Sponsor personnel were to focus exclusively on managing the Fund, but none do so.  The Sponsor is a registered investment adviser and commodity pool operator and operates trading accounts other than the Fund because these accounts generate significant revenues for the Sponsor, and also diversify the Sponsor’s exposure to one or more of such accounts’ performing poorly.  The amount of time the Sponsor will devote to managing the Fund will vary significantly over time and is very difficult to quantify, but the Sponsor believes that the time it devotes to the Fund will be sufficient for the Sponsor to manage the Fund in accordance with its obligations and duties to the Fund.

The Sponsor sponsors or manages a total of 192 funds other than the Fund, including 14 other FuturesAccess Funds, 2 commodity pools not included in FuturesAccess and 176 funds which trade primarily in securities rather than commodities, including hedge funds, funds of funds and private equity funds.  These funds are generally privately offered and may compete with or take positions opposite the HCFA Master Fund.  The Sponsor does not attempt to ensure any consistency of trading results across the pools it sponsors.  Each of these funds presents a potential conflict for the time and services of the Sponsor’s personnel and the Sponsor may have financial incentives to favor certain of such funds over the Fund, such as in cases where these other funds pay higher fees or attract more subscriptions than the Fund.
 
 
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Certain clients of the Sponsor pay materially lower brokerage rates than does the HCFA Master Fund.  In particular, certain institutional clients of Merrill Lynch receive, as a result of arm’s-length negotiations, better commission rates than the HCFA Master Fund.

There is, in general, a shortage of qualified futures trading advisors available to manage customer assets.  The Sponsor has a conflict of interest in selecting the Trading Advisor for the HCFA Master Fund and trading advisors for other accounts sponsored by the Sponsor.

Per-Trade Revenues
 
Because the FuturesAccess Funds, including the HCFA Master Fund, pay brokerage commissions and forward trading spreads to MLPF&S and MLIB on a per trade basis, the Sponsor has an incentive to select trading advisors for FuturesAccess, including the Trading Advisor, which trade in higher volume, generating more revenue for MLPF&S and MLIB.

The Trading Advisor

Other Clients and Business Activities of the Trading Advisor
 
The HCFA Master Fund might benefit significantly from an exclusive focus by the Trading Advisor on the HCFA Master Fund rather than on its other accounts, including accounts owned by its principals.  The HCFA Master Fund could be adversely affected by the fact that the Trading Advisor trades other accounts at the same time that it is managing the HCFA Master Fund’s account. The Trading Advisor has numerous different clients and financial incentives to favor certain of such clients over the HCFA Master Fund.  The amount of time the Trading Advisor will devote to managing the account of the HCFA Master Fund will vary significantly over time and is very difficult to quantify, but the Sponsor believes will be sufficient for the Trading Advisor to discharge its duties to the HCFA Master Fund.
 
Other client accounts managed by the Trading Advisor may significantly outperform the HCFA Master Fund.
 
The Trading Advisor and its principals devote a substantial portion of their business time to ventures and accounts other than managing the HCFA Master Fund, including, in some cases, ventures that are unrelated to futures trading.
 
The Trading Advisor acts, or may in the future act, as sponsor of its own single- or multi-advisor futures funds.  These funds may, from time to time, be in direct competition with the HCFA Master Fund for positions in the market.  The Trading Advisor may advise accounts or funds that trade the same or substantially the same strategy as the HCFA Master Fund and which may be in competition for the same positions in the market.
 
 
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Brokers and Dealers Selected by Trading Advisor
 
The Trading Advisor may require, as a condition of its managing the HCFA Master Fund’s account, that the account trade through certain non-Merrill Lynch brokers with which the Trading Advisor has ongoing business dealings, even though Merrill Lynch remains the clearing broker for the HCFA Master Fund.  The Trading Advisor may have a conflict of interest between insisting on the use of these brokers and using the brokers most advantageous for the HCFA Master Fund.
 
The Trading Advisor may execute trades for the HCFA Master Fund’s account through executing brokers affiliated with the Trading Advisor.
 
Performance Fees
 
The fact that the Trading Advisor is eligible to receive Performance Fees may cause it to trade in a more speculative fashion than it otherwise would.
 
Financial Advisors
 
“Financial Advisors” are the individual Merrill Lynch brokers who deal directly with Merrill Lynch clients.  Financial Advisors are compensated, in part, on the basis of the amount of securities commissions which they generate from client transactions.  Financial Advisors receive ongoing compensation and, in certain cases, initial selling commissions on the Units they sell and have a financial incentive to encourage Investors to purchase, and discourage Investors from redeeming, Units.
 
Proprietary Trading
 
The Sponsor, MLPF&S and the Trading Advisor, and their respective affiliates, principals, key employees and related persons may trade in the commodity markets for their own accounts as well as for the accounts of their clients.  Records of this trading will not be available for inspection by Investors.  These persons may take positions which are the same as or opposite to those held by the HCFA Master Fund.  As a result of a neutral allocation system, testing a new trading system, trading their proprietary accounts more aggressively or other actions not in violation of their fiduciary or other duties, these persons may from time to time take positions in their proprietary accounts ahead of the positions taken for the HCFA Master Fund.  In addition, on occasion orders may be filled more advantageously for the account of one or more such persons than for the HCFA Master Fund’s account.
 
Direct and Indirect Investors
 
Investors will be permitted to invest directly in the Fund and the Fund may, in the future, be an underlying fund for the Trend-Following Fund, Systematic Momentum or other funds of funds managed by the Sponsor in the future.  Under certain circumstances, the potentially disparate interests of the direct Investors and the relevant fund(s) of funds could materially adversely affect one or both groups of investors.  For example, the Sponsor, in managing the relevant
 
 
23

 
 
multi-advisor fund(s) of funds, has a conflict of interest when reallocating capital away from one underlying fund to another between acting in the best interests of the fund of funds investors and of the direct investors.  As a result, the Sponsor may not make allocations that it would otherwise have considered in the best interest of the relevant fund(s) of funds.  Further, the Sponsor may allocate additional fund of fund capital to an underlying fund, such as the Fund, even though doing so prevents the direct Investors from themselves investing more due to capacity constraints.
 
Permitting different sets of investors to participate in the same underlying portfolios increases both the conflicts of interest and the potential risks to which such Investors are subject.
 
           Transactions Between Merrill Lynch and the Fund or HCFA Master Fund
 
Many of the service providers to the Fund or the HCFA Master Fund, including the exclusive clearing broker for the HCFA Master Fund, MLPF&S, are affiliates of Merrill Lynch.  Merrill Lynch negotiated with the Trading Advisor regarding the level of its Management Fee and Performance Fee and certain other terms of its advisory agreement.  However, the fees paid by the Fund or the HCFA Master Fund to any Merrill Lynch parties were established by such parties based on rates charged to similarly-situated customers rather than being negotiated, and they are higher than would have been obtained in arm’s-length bargaining.
 
The HCFA Master Fund pays Merrill Lynch substantial prime brokerage commissions on spot and forward currency trades.  The HCFA Master Fund also will pay MLPF&S interest on short-term loans extended by MLPF&S to cover losses on foreign currency positions.  Merrill Lynch retains certain economic benefits from possession of the HCFA Master Fund’s capital.
 
In the case of EFP transactions with MLIB, Merrill Lynch recognizes certain incremental profits from the “differential” at which the HCFA Master Fund’s cash currency positions are exchanged for futures.  Consequently, the Sponsor may have a financial incentive to encourage the Trading Advisor to trade EFPs to a greater extent than it otherwise might.
 
Certain entities in the Merrill Lynch organization, including, but not limited to, MLPF&S and MLIB, are the beneficiary of the revenues generated from the HCFA Master Fund.  The Sponsor controls the management of the Fund and the HCFA Master Fund, and serves as sponsor of each.  Although the Sponsor has not sold any assets directly to the Fund or the HCFA Master Fund, Merrill Lynch makes substantial profits from the Fund and the HCFA Master Fund due to the foregoing revenues.
 
To the extent that cash is placed with affiliates of Merrill Lynch, Merrill Lynch indirectly receives certain economic benefits and therefore has a conflict of interest in selecting these third parties.  For example, Merrill Lynch may invest in money market funds managed by its affiliates and, therefore, potentially benefits from its economic interest in these affiliates whenever these affiliates receive compensation for managing cash invested in money market investment funds managed by the affiliates.
 
 
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No loans have been, are or will be outstanding between the Sponsor or any of its principals and the Fund.
 
Regulation
 
The Sponsor is registered with the CFTC as a CPO and a CTA and is a member of the NFA in these capacities.  The Trading Advisor is registered with the CFTC as a CPO and a CTA and is a member of the NFA.  MLPF&S is registered with the CFTC as a futures commission merchant and is a member of the NFA in this capacity.  MLPF&S is a clearing member of the Chicago Mercantile Exchange, and is either a clearing member or member of all other principal U.S. futures and futures options exchanges.
 
Other than in respect of requirements arising from the registration of the Fund’s securities under Section 12(g) of the Exchange Act, the Fund is generally not subject to regulation by the SEC.  In particular, as the Fund trades primarily in commodity interests rather than securities, the Fund qualifies for an exclusion from the definition of, and is not registered as, an “investment company” under the Company Act.  Consequently, Investors will not have the benefit of the investor protection provisions afforded by the Company Act.  However, the Sponsor itself 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, Inc.
 
Registered CPOs and CTAs are subject to significant disclosure, reporting and recordkeeping requirements under CFTC regulations.  Although compliance with these requirements afford investors certain benefits, they also increase administrative burdens and expenses.  The Sponsor, MLPF&S and the Fund are also subject to anti-money laundering regulations and offering restrictions with respect to the sale of the Units pursuant to Rule 506 under Regulation D of the Securities Act.  These restrictions limit the type of investor that may purchase Units.
 
The CFTC and the 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 contracts traded on U.S. commodities exchanges.  All commodity accounts controlled by the Trading Advisor are combined for speculative position limit purposes.  The Trading Advisor could be required to liquidate positions held for the HCFA Master Fund, or may not be able to fully implement trading instructions generated by its trading models, in order to comply with such limits.  Any such liquidation or limited implementation could result in substantial costs to the HCFA Master Fund.  Additionally, most U. S. exchanges also limit the maximum change in some, but not all, futures prices during any single trading day.  These price limits may have an impact on the HCFA Master Fund’s trading method because once the price limit has been reached, it becomes very difficult to execute trades in the same direction the market has moved.  These price limits apply on a day-to-day basis, and therefore do not limit ultimate losses, but may reduce or temporarily eliminate liquidity.
 
 
 
25

 
CFTC regulations also prohibit trading advisors from trading certain instruments for accounts of U.S. persons such as the Fund.  As a result, some instruments that may be traded by the Trading Advisor for its non-U.S. accounts may not be traded for the HCFA Master Fund.
 
Pursuant to CFTC regulations, MLPF&S, as the HCFA Master Fund’s futures commission merchant, is required to segregate assets for on-exchange futures (and options on futures) trading.  If the assets of the HCFA Master Fund were not so segregated by MLPF&S, the HCFA Master Fund would be subject to the risk of the failure of MLPF&S.  Even given proper segregation, in the event of the insolvency of MLPF&S, the HCFA Master Fund may be subject to a risk of loss of its funds and would be able to recover only a pro rata share of assets, such as U.S. Treasury bills, specifically traceable to the commodity customers of MLPF&S such as the HCFA Master Fund.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was enacted in July 2010.  The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time.  The Reform Act requires that a substantial portion of over-the-counter derivatives be executed in regulated markets and submitted for clearing to regulated clearinghouses.  Those over-the-counter derivatives may include over-the-counter foreign exchange forwards and swaps which are traded by the HCFA Master Fund, although the U.S. Treasury has the discretion to exclude foreign exchange forwards and swaps from certain of the new regulatory requirements.  If these forwards and swaps are not so excluded, the Reform Act may require them to be cleared and may subject the HCFA Master Fund, the Trading Advisor, the Sponsor and/or the Fund’s 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.  Some or all of these requirements may apply even if forwards and swaps are not excluded by the U.S. Treasury.  These new regulatory burdens would further increase the dealers’ costs, which are expected to be passed through to other market participants such as the HCFA Master 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.
 
The Reform Act includes a provision that has come to be known as the “Volcker Rule” that places significant limitations on the ability of a “banking entity” to sponsor or invest in hedge funds, private equity funds or similar funds (collectively, “private funds”).  The term “banking entity” generally includes a company that controls a Federal Deposit Insurance Corporation (“FDIC”)-insured depository institution, such as Bank of America, or a non-U.S. bank that is treated as a bank holding company and any affiliate or subsidiary of any such company, such as the Sponsor, and other systemically significant organizations regulated by the Federal Reserve.  Under certain circumstances the Volcker Rule will permit a banking entity to organize and make or retain a de minimis investment in a private fund, in connection with the banking entity’s fiduciary or investment advisory business.  The implementation of the Volcker Rule requires rulemaking from multiple federal government agencies, including the SEC, CFTC, the Federal
 
 
26

 
 
Reserve and various other banking regulators.  On October 11, 2011 the proposed Volcker Rule was issued for comments.  The Volcker Rule is effective in July 2012 and provides for a conformance period of up to two years following the effective date.  There is uncertainty regarding what the rule will ultimately require.
 
(d)
Financial Information about Geographic Areas
 
The Fund has no operations in foreign countries, although the HCFA Master Fund trades on non-U.S. exchanges and other non-U.S. markets.  The HCFA Master Fund is organized under the laws of the Cayman Islands.  The Fund does not engage in sales of goods or services.
 
(e)
Available Information
 
Not applicable.
 
(f)
Reports to Investors
 
Not applicable.
 
(g)
Enforceability of Civil Liabilities Against Foreign Persons
 
Not applicable.
 
(h)
Smaller Reporting Companies
 
The requirements of Reg. S-K Item (h)(4)(i) through (xi) and (h)(5) are not applicable.  The Fund has no employees of its own.

ITEM 1A:  RISK FACTORS
 
Not applicable, the Fund is a smaller reporting company.
 
ITEM 2:  FINANCIAL INFORMATION
 
The Fund has only recently been organized and, as of November 1, 2011, has no meaningful performance history.
 
ITEM 3:  PROPERTIES
 
The Fund does not own or use any physical properties in the conduct of its business.  The Sponsor or an affiliate performs administrative services for the Fund from the Sponsor’s office, but the Sponsor bears its own overhead costs, including the costs of the Sponsor’s facilities.
 
 
27

 
 
ITEM 4:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
(a)
Security Ownership of Certain Beneficial Owners
 
Not applicable.
 
(b)
Security Ownership of Management
 
The Fund has no officers or directors.  Under the terms of the Operating Agreement, the Fund’s affairs are managed by the Sponsor, which has discretionary authority over the Fund’s trading (although this authority has been delegated to the Trading Advisor with respect to the Fund’s investment in the HCFA Master Fund).  As of December 1, 2011, the Sponsor and the principals of the Sponsor did not own any Units.
 
Merrill Lynch provided approximately $23.8 million in “seed capital” to meet minimum initial investment amount currently required by the Trading Advisor for the HCFA Master Fund to commence operations, indirectly through an investment in the Fund.  Once the capitalization of the HCFA Master Fund, including Merrill Lynch seed capital, exceeds $35 million Merrill Lynch intends to redeem its seed capital. To the extent Merrill Lynch redeems such seed capital, it will redeem $1 of its investment in the applicable Feeder Fund for each $1 in new net investments — i.e., net subscriptions by investors, after reduction for upfront sales commissions, as applicable, minus redemptions — to the applicable Feeder Fund.  Any such redemption of seed capital will be made monthly without notice to investors in the relevant Feeder Fund and without regard to any redemption notice requirement, or any other liquidity restraints related to redemptions, of the Feeder Fund.
 
(c)
Changes in Control
 
None.
 
ITEM 5:  DIRECTORS AND EXECUTIVE OFFICERS
 
(a) and (b)  Identification of Directors and Executive Officers.

The Fund itself has no officers or directors, but is managed by the Sponsor.  Accordingly, Investors do not receive the benefit of a direct fiduciary relationship with the officers and managers of the Sponsor.  The Sponsor has a board of managers rather than a board of directors.  In each case below, the managers and officers of the Sponsor are not independent and are employed for an indefinite term, subject to removal by the Sponsor.
 
The principal officers and managers of the Sponsor and their business backgrounds as of December 1, 2011 were as follows:
 
 
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Name
Title
Age
JUSTIN C. FERRI
Chief Executive Officer, President, and Manager
36
JAMES L. COSTABILE
Vice President and Manager
36
PAUL D. HARRIS
Vice President and Manager
41
DEANN MORGAN
Vice President and Manager
42
COLLEEN R. RUSCH
Vice President and Manager
44
BARBRA E. KOCSIS
Chief Financial Officer and Vice President
45

Justin C. Ferri has been the Chief Executive Officer and President of the Sponsor since August 2009.  Mr. Ferri has been listed as a principal of the Sponsor since July 29, 2008.  He has been registered with the CFTC as an associated person of the Sponsor since September 11, 2009.  He has served as Managing Director within the BOA/ML Global Wealth & Investment Management group (“GWIM”) and Global Wealth and Retirement Solutions group (“GWRS”) since January 2007, and has been responsible for heading GWIM’s Alternative Investments business since August 2009 and was responsible for platform and product management for the business from January 2007 until taking over as head in August 2009.  Prior to his role in GWRS, Mr. Ferri was a Director in the MLPF&S Global Private Client Market Investments & Origination group from January 2005 to January 2007 where he was responsible for the structured fund business for Merrill Lynch wealth management, and before that, he served as a Vice President and head of the MLPF&S Global Private Client Rampart Equity Derivatives team from January 2003 to January 2005.  In addition, from June 2005 to October 2010, Mr. Ferri served as President of IQ Investment Advisors LLC (“IQ”), an indirect, wholly-owned investment adviser subsidiary of ML & Co., and served as President of each of IQ’s publicly traded closed-end mutual fund companies.  Prior to joining BOA/ML in January 2002 as Vice President and Co-Head of Analytic Development, Mr. Ferri was a Vice President within the Quantitative Development group of mPower Advisors LLC, an on-line investment advice and retirement education company, from June 1999 to January 2002, and prior to that, he worked in the Private Client division of J.P. Morgan & Co., a global financial services company, from June 1997 to June 1999, working as an associate in the bank’s wealth management business for high-net worth individuals where he was responsible for the development and implementation of a wealth management client account trading system. Mr. Ferri was listed as a principal and registered as an associated person of BACAP Alternative Advisors, Inc., a commodity pool operator, from January 8, 2010 to May 5, 2010 and January 14, 2010 to May 5, 2010, respectively, where he was responsible for supervision of certain unregistered “fund of hedge fund” investment vehicles.  He was also listed as a principal of Banc of America Investment Advisors, Inc., an investment adviser and an indirect, wholly-owned subsidiary of BOA where he was responsible for supervision of certain registered and unregistered “fund of hedge fund” investment vehicles from January 2010 to September 2010.  Mr. Ferri holds a B.A. degree from Loyola College in Maryland.
 
James L. Costabile has been a Vice President of the Sponsor and a Managing Director within the BOA/ML Global Investments Solutions group responsible for alternative investment distribution for BOA/ML since July 2007 and US Trust since January 2009.  Mr. Costabile has been listed as a principal of the Sponsor 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
 
 
29

 
 
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 the Sponsor management team, Mr. Costabile oversees the team of sales professionals and specialists responsible for supporting hedge funds, private equity and real asset offerings.  Prior to joining BOA/ML in July 2007, Mr. Costabile spent ten years with Citigroup Inc., most recently as a Managing Director for Citigroup Alternative Investments, the business group responsible for the private client alternative investment business within Citigroup Inc., where he was responsible for co-heading Smith Barney Alternative Investment Distribution from February 2005 to June 2007.  Smith Barney Alternative Investment Distribution was responsible for sales and marketing of alternative products to high net worth and institutional clientele of Smith Barney Inc., an investment bank and brokerage firm.  Prior to that, Mr. Costabile held a number of positions involving sales, marketing, product management and financial advisor training within the following divisions of Citigroup, Inc.: Citigroup Alternative Investments from May 2003 to February 2005 (sales manager for hedge funds, private equity funds, structured products and exchange funds); the Private Capital Group, the business team responsible for privately placed investments to clients of Citigroup Inc.,  from February 2001 to May 2003 (sales desk manager for alternative funds for Smith Barney and Citi Private Bank); Salomon Smith Barney Alternative Investment Group, the business group responsible for alternative investments for clients of Salomon Smith Barney, Inc., from February 1999 to February 2001 (producing sales desk manager for alternative investment funds); Smith Barney Alternative Investments, the business group responsible for alternative investments for clients of the Smith Barney, Inc., from March 1998 to February 1999 (sales desk supervisor for alternative investment funds) and Smith Barney Capital Management, the business unit responsible for traditional asset management capabilities, which later merged into Citigroup Asset Management, from November 1997 to March 1998 (participating in sales, marketing and product management).  Mr. Costabile received a B.S. from Fordham University and holds the Chartered Alternative Investment Analyst designation.
 
Paul D. Harris has been a Vice President of the Sponsor and a Managing Director and head of Strategy and Marketing in the Alternative Investment group within GWRS since December 2009.  Mr. Harris has been listed as a principal of the Sponsor since August 26, 2010.  Mr. Harris is responsible for leading Strategy, Marketing and Information Management functional teams in developing alternative investment solutions, including hedge funds, managed futures, private equity and real assets investments for financial advisors.  Prior to joining BOA/ML in December 2009, Mr. Harris was a Managing Director at PH Investment Group, LLC, an investment management firm where he was responsible for asset allocation and investment origination, from May 2008 to November 2009, and before that a Director at Bridgewater Associates, LP, a hedge fund management company, where he was responsible for sales and relationship management with the firm’s hedge fund of fund investors, from June 2007 to March 2008.  Mr. Harris was not engaged in futures-related or other employment during April 2008 or the period beginning January 2007 through June 2007.  From June 2004 to January 2007, Mr. Harris was a Director at Citigroup Alternative Investments, the business group responsible for the private client alternative investment business within Citigroup Inc., where he was responsible for strategic
 
 
30

 
 
initiatives, product development and channel management, and from June 2003 to June 2004, a Senior Vice President in the Strategy and Mergers and Acquisitions team at Citigroup’s investment bank.  Mr. Harris was not engaged in futures-related or other employment during the period beginning January 2003 through June 2003. From January 2002 to January 2003, Mr. Harris was the Director of Business Development at Pomona Capital, a private equity management company where he was responsible for institutional sales and investor relations.  In addition, Mr. Harris worked in strategic consulting as a Project Leader at the Boston Consulting Group, a strategic consulting services firm, from September 1999 to January 2002.  Mr. Harris holds an MBA from Harvard Business School and a BA in Economics and Politics from Essex University, UK.
 
Deann Morgan is a Managing Director of GWRS and has been a Vice President of the Sponsor since March 2008.  As a Vice President of the Sponsor and a Managing Director within GWRS, Ms. Morgan is responsible for overseeing GWRS Alternative Investments Origination.  From April 2006 until December 2008, Ms. Morgan was a Director for BOA/ML’s Investments, Wealth Management & Insurance group, where she was responsible for origination of private equity and listed alternative investments.  From 1999 to April 2006, Ms. Morgan worked for BOA/ML’s Investment Banking Group covering Asian corporate clients.  She received her M.B.A. from the University of Chicago and her B.B.A. from University of Michigan and is a Chartered Financial Analyst (CFA) charterholder. Ms. Morgan has been registered with the CFTC as an associated person and listed as a principal of the Sponsor since August 21, 2009.  Ms. Morgan has also been registered with the CFTC as an associated person of MLPF&S since April 13, 2009.
 
Colleen R. Rusch has been a Vice President of the Sponsor and a Director within GWRS responsible for overseeing GWRS Alternative Investments operations and trading platform since December 2007.  Ms. Rusch has been listed as a principal of the Sponsor since September 14, 2010.  Prior to her role in GWRS, Ms. Rusch was a Director in the MLPF&S Global Private Client — Market Investment & Origination Group (“MIO”) where she was the business manager and Chief Administrative Officer (“CAO”) for IQ Investment Advisors LLC from July 2005 to December 2007.  Prior to her role as a Director in MIO, Ms. Rusch was a Director of Merrill Lynch Investment Managers where she was responsible for originating and overseeing closed-end funds from January 2005 to July 2005 and a Vice President where she held various roles within the mutual fund business from April 1993 to December 2004.  In addition, from July 2005 to October 2010, Mrs. Rusch served as CAO and Vice President of IQ and served as Vice President and Secretary of each of IQ’s publicly traded closed-end mutual fund companies.  Ms. Rusch holds a B.S. degree in Business Administration from Saint Peter’s College in New Jersey.
 
Barbra E. Kocsis is the Chief Financial Officer and Vice President for the Sponsor, has been listed with the CFTC as a principal of the Sponsor since May 21, 2007 and is a Director within the BOA/ML’s Global Wealth Management Investment Services 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 MLPF&S.  Prior to serving in her current roles, she was the Fund Controller of the Sponsor from May 1999 to September 2006.  Before joining the Sponsor, Ms. Kocsis held various accounting
 
 
31

 
 
and tax positions at Derivatives Portfolio Management LLC, a back office and administrative services firm dedicated to the commodity pool and hedge fund industry, from May 1992 until May 1999, at which time she held the position of accounting director.  Prior to that, she was an associate at Coopers & Lybrand, an international public accounting firm, in both the audit and tax practices from September 1988 to February 1992.  She graduated cum laude from Monmouth College with a Bachelor of Science in Business Administration - Accounting.
 
(c)  Identification of Certain Significant Employees
 
None.
 
(d)  Family Relationships
 
None.
 
(e)  Business Experience
 
See Item 5 (a) and (b) above.
 
(f)  Involvement in Certain Legal Proceedings
 
None.
 
(g)  Promoters and Control Persons.
 
On July 31, 2007, the CFTC issued an order against the Sponsor and its affiliate Merrill Lynch Investment Managers, L.P. (“MLIM”), to which the Sponsor and MLIM consented, containing findings, which the Sponsor and MLIM neither admitted nor denied, that the Sponsor and MLIM filed with the NFA a number of annual reports for commodity pools for which they acted as CPOs after the deadline established by the CFTC’s regulations, in violation of CFTC Regulation 4.22(c).  MLIM and the Sponsor were ordered to cease and desist from violating Regulation 4.22(c) and to pay a civil penalty in the amount of $500,000.
 
ITEM 6:  EXECUTIVE COMPENSATION
 
The officers of the Sponsor are remunerated by Merrill Lynch in their respective positions.  The Fund does not itself have any officers, directors or employees.  None of the principals, officers or employees of the Sponsor receives compensation from the Fund.  All persons serving in the capacity of officers or executives of the Sponsor are compensated by the Sponsor or an affiliate in respect of their respective positions with the Sponsor, which involve numerous duties unrelated to the operation of the Fund.  The Sponsor receives a monthly Sponsor’s Fee from the Class A Units (which pay a sales commission) equal to 1/12 of 1.5% of their month-end net asset value.  Class C Units (which pay no sales commissions) pay the Sponsor a monthly Sponsor’s Fee of 1/12 of 2.5% of their month-end net asset value.  Class I Units (which pay a sales commission) pay the Sponsor a monthly Sponsor’s Fee of 1/12 of 1.1% of their month-end net
 
 
32

 
 
asset value.  MLPF&S will receive brokerage commissions, and compensation related to the HCFA Master Fund’s cash accounts, as described elsewhere in this Form 10.
 
There are no compensation plans or arrangements relating to a change in control of either the Fund or the Sponsor.
 
ITEM 7:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
(d)           Transactions Between Merrill Lynch and the Fund and the HCFA Master Fund
 
Many of the service providers to the Fund and the HCFA Master Fund are affiliates of Merrill Lynch, although the Trading Advisor is not an affiliate of Merrill Lynch.  The Sponsor negotiated with the Trading Advisor regarding the level of its Management Fee and Performance Fee and certain other terms of its advisory agreement.  However, the fees paid by the Fund or the HCFA Master Fund to any Merrill Lynch parties were established by such parties based on rates charged to similarly-situated customers rather than being negotiated, and they are higher than would have been obtained in arm’s-length bargaining.
 
As noted above, the HCFA Master Fund pays Merrill Lynch substantial brokerage commissions as well as bid-ask spreads on forward currency trades.  Bid-ask spreads are not a quantifiable expense of the HCFA Master Fund but do represent a profit margin to the dealer for making a market in currencies.  The HCFA Master Fund cannot quantify the amount of dealer profit that is embedded in a price quoted by a dealer but believes that the HCFA Master Fund will effect currency transactions at prevailing market prices.  Dealer profit from the HCFA Master Fund’s currency trading may, over time, be substantial. The HCFA Master Fund also pays Merrill Lynch interest on short-term loans extended by Merrill Lynch to cover losses on foreign currency positions, and Merrill Lynch retains certain economic benefits from possession of the HCFA Master Fund’s capital.
 
Certain entities in the Merrill Lynch organization are the beneficiaries of revenues generated from the HCFA Master Fund.  The Sponsor controls the management of the HCFA Master Fund and serves as its sponsor.  Although the Sponsor has not sold any assets, directly or indirectly, to the Fund or the HCFA Master Fund, Merrill Lynch makes substantial profits from the HCFA Master Fund due to the foregoing revenues.
 
No loans have been, are or will be outstanding between the Sponsor or any of its principals and the Fund.
 
The Sponsor pays substantial selling commissions and trailing commissions to MLPF&S for distributing the Units.  The Sponsor is ultimately paid back for these expenditures from the revenues it receives from the Fund.
 
The Trend-Following Fund and Systematic Momentum may invest in the Units but will not be subject to selling commissions or the Sponsor’s Fee.
 
 
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MLPF&S, an affiliate of the Sponsor, acts as the principal commodity broker for the HCFA Master Fund.  Additionally, the Sponsor and its affiliates may have derived certain economic benefits from possession of the Fund’s assets, as well as from foreign exchange and exchange for physical trading.
 
See Item 1(c) “Narrative Description of Business — Charges” for a discussion of other business dealings between the Sponsor and the Fund.
 
The Fund has no parent company other than the Sponsor which controls the Fund as its sponsor.
 
ITEM 8:  LEGAL PROCEEDINGS
 
None.
 
ITEM 9:  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
(a)
Market Information
 
There is no trading market for the Units, and none is likely to develop.  Units may be redeemed or transferred subject to the conditions imposed by the Operating Agreement, which is attached hereto as Exhibit 3.02.
 
Classes.
 
Holders
 
As of December 1, 2011, there were 22 holders of Class A, 37 holders of Class C, 4 holders of Class I, 6 holders of Class D, and 1 holder of Class Z Units.
 
(b)
Dividends
 
Distributions, if any, may be made in the Sponsor’s discretion.  No distributions have been made on the Units and none are contemplated.
 
(d)           Securities Authorized for Issuance Under Equity Compensation Plans
 
None.
 
(e)           Performance Graph
 
Not applicable; the Fund is a smaller reporting company.
 
ITEM 10:  RECENT SALES OF UNREGISTERED SECURITIES
 
As of December 1, 2011, the Fund had issued Units at monthly closings as set forth in the following chart.
 
 
34

 
 
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 (although Class Z Units may be issued solely in reliance on the exemption provided by Section 4(2)).  The selling agent of the Units was MLPF&S.
 
CLASS A
 
   
Subscription
 
   
Amount
   
Units
 
November 1, 2011
  $ 611,175       611,175  
December 1, 2011
  $ 441,057       455,872  

CLASS C
 
   
Subscription
 
   
Amount
   
Units
 
                 
November 1, 2011
  $ 609,151       609,151  
December 1, 2011
  $ 1,232,525       1,274,982  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35

 

 

CLASS D
   
Subscription
 
   
Amount
   
Units
 
                 
December 1, 2011
  $ 2,313,375       2,313,375  

CLASS I
 
   
Subscription
 
   
Amount
   
Units
 
                 
November 1, 2011
  $ 41,850       41,850  
December 1, 2011
  $ 35,000       36,164  

CLASS Z
 
   
Subscription
 
   
Amount
   
Units
 
                 
November 1, 2011
  $ 23,846,000       23,846,000  

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 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 and Class Z Units are not subject to any sales commissions.
 
ITEM 11:  DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED
 
The securities to be registered consist of Units of limited liability company interest.
 
The Fund’s Operating Agreement effectively gives the Sponsor full control over the management of the Fund.  Investors have no voice in its operations.  The Sponsor, its affiliates and their respective officers, employees, representatives and agents (each, a “Sponsor Party” and, collectively, the “Sponsor Parties”) are exculpated and indemnified by the Fund from and against any claims, costs, expenses, damages or losses (including, without limitation, from and against any judgment, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened action or proceeding) suffered or sustained by any of them by reason of the fact that a Sponsor Party is or was connected in any respect with the Fund, provided, that the conduct or omission which led to the claim, cost, expense, damage or loss was in, or not opposed to, the best interests of the Fund and that such conduct or omission did not constitute gross negligence or intentional misconduct on the part of such Sponsor Party.
 
Investors have no right to participate in the control or management of the Fund through their ownership of Units, but they are entitled to: (i) vote on or approve certain changes to the Operating Agreement or the term of the Fund, (ii) receive annual audited financial statements, such monthly information as the CFTC requires and timely tax information; (iii) inspect the Fund’s books and records; (iv) redeem Units, barring suspension of redemptions; and (v) remove
 
 
36

 
 
the Sponsor as manager of the Fund in accordance with the procedure as set forth in the next paragraph.
 
Upon at least 60 days’ written notice to the Sponsor and all Investors in the Fund, the Sponsor may be required to withdraw as manager of the Fund by a vote of Investors owning not less than 50% of the Units of the Fund (by net asset value) not including Units held by Sponsor Parties.  Any such removal will be effective as of the end of the calendar quarter in which such vote occurs.
 
The Operating Agreement provides for the economic and tax allocations of the Fund’s profit and loss.  Capital accounts have been established for each Unit, and for the Sponsor on a Unit-equivalent basis.  Economic allocations are based on Investors’ and the Sponsor’s capital accounts, and the tax allocations generally attempt to equalize tax and capital accounts by, for example, making a priority allocation of taxable income to Investors who redeem at a profit.  For the purposes of maintaining capital accounts, amounts payable to the Sponsor for items such as services fees are treated as if paid or payable to a third party and are not credited to the capital account or interest held in the Fund held by the Sponsor.
 
The Sponsor may amend the Operating Agreement in any manner not materially adverse to the Investors without need of obtaining their consent.  These amendments can be for clarification of inaccuracies or ambiguities, modifications in response to changes in tax code or regulations, to provide for the issuance of new Classes of Units or any other changes the Sponsor deems advisable.
 
(a)(1)(i)  Dividend Rights.
 
No distributions have been made on the Units and none are contemplated, but distributions may be made in the Sponsor’s discretion.
 
(ii)   Terms of Conversion.
 
Not applicable.
 
(iii)   Sinking Fund Provisions.
 
Not applicable.
 
(iv)  Redemption Provisions.
 
An Investor will be entitled to redeem as of the end of any calendar month all or part of the Investor’s Units, upon giving at least 38 days’ notice.  Investors who have Merrill Lynch customer securities accounts may give such notice by contacting their Merrill Lynch Financial Advisor, orally or in writing.  Redemption requests are irrevocable once made.  The Fund does not charge a redemption fee.  Units are redeemable at net asset value as of the close of business on the date of their redemption, minus any accrued fees (including Performance Fees) and brokerage commissions.  The Sponsor will cause the Fund to distribute to redeeming Investors
 
 
37

 
 
the estimated net asset value of the Units redeemed by them, generally approximately 10 business days after the effective date of redemption, although there can be no assurance of the timing of such payment.  See Item 1(c) “Narrative Description of Business — Net Asset Value” for a more detailed description of how net asset values are determined.  Units which have been redeemed, but the proceeds of which have not yet been paid, will nevertheless be deemed to have ceased to be outstanding from the effective date of redemption for all other purposes.  No interest will be paid to Investors on redemption proceeds held pending distribution.  The Fund will retain any such interest.
 
There is no limitation on the number of an Investor’s redemptions.
 
The Sponsor may suspend redemptions during any period for which the Sponsor is unable to value a material portion of the Fund’s positions or investments or when the HCFA Master Fund is not reporting its net asset value.  In addition, the Sponsor may delay or suspend both the payment of redemption proceeds and the effective date of redemptions if the Sponsor determines that not doing so would have adverse consequences for the non-redeeming Investors.  In the event of suspension, the Fund will resume redemptions in accordance with normal redemption procedures when the Sponsor determines that such valuations are available and/or redemptions may be resumed without adverse consequences for the non-redeeming Investors, as applicable. All Units subject to suspended redemption requests will continue to be treated as outstanding for all purposes as if no redemption requests relating thereto had been submitted, until the effective date of their suspended redemption.  The Fund will give notice of any such suspension to all Investors promptly after the suspension is imposed, together with an explanation of the reason for the suspension.  Given the unpredictable timing of the circumstances that would cause the Sponsor to suspend redemptions, the Sponsor does not expect that Investors will receive advance notice of redemption suspensions.
 
If the Sponsor determines that a portion, but not all, of pending redemption requests can be processed in due course, the requests of all Investors submitting timely redemption requests with respect to any given redemption date will be satisfied pro rata (based on the aggregate net asset value of the Units requested to be redeemed by all Investors) as the Sponsor determines are available for distribution.
 
In addition, the Sponsor may delay or suspend the payment of redemption proceeds if the Sponsor determines that not doing so would have adverse consequences for the non-redeeming Investors.
 
The Sponsor may mandatorily redeem part or all of the Units held by a particular Investor:  (i) if the Sponsor determines that the Investor’s continued holding of Units could result in adverse consequences to the Fund; (ii) the Investor has a history of excessive exchanges between different FuturesAccess Funds and/or funds in the Sponsor’s HedgeAccess program (“HedgeAccess”) that is contrary to the purpose and/or efficient management of FuturesAccess or HedgeAccess; (iii) the Investor’s investment in the Units, or aggregate investment in FuturesAccess, is below the minimum level established by the Sponsor (including any increase
 
 
38

 
 
in such minimum level that the Sponsor may implement in the future); or (iv) for any other reason.
 
The Sponsor will mandatorily redeem all of the Fund’s outstanding Units in the event that the Sponsor concludes that it is no longer advisable to operate the Fund or if the amount of assets invested in the Fund declines to a level that the Sponsor believes makes the continued operation of the Fund impracticable or uneconomical.
 
Units mandatorily redeemed will be redeemed as of the specified month-end without any further action on the part of the affected Investor.  In the event that the Sponsor mandatorily redeems any of an Investor’s Units, the Investor will have the option to redeem all of the Investor’s Units as of the date fixed for redemption.
 
In the event that the Fund is required to pay or withhold state, local or other taxes with respect to a particular Investor or Investors, the Fund may redeem an appropriate number of the Investor’s or Investors’ Units as of the end of the accounting period immediately following such payment in order to reimburse the Fund for the amount of such payment, together with interest on the amounts so paid at the 91-day Treasury bill rate as in effect as of the beginning of each calendar month, starting with the calendar month in which the payment is made, through the end of such accounting period.

As provided in the Operating Agreement, any material adverse amendment to the Fund’s redemption provisions described herein would require notice to and consent from Investors holding more than 50% of the outstanding Units.

(v)  Voting Rights.
 
The Units do not carry voting rights regarding the election of the Sponsor, which manages the Fund.  However certain actions involving the Fund are subject to the vote or consent of the Investors as outlined herein, including removal of the Sponsor.  If there is a dissolution event,  Investors holding more than 50% of the outstanding Units may vote to continue the Fund, if it is lawful to do so, and to appoint one or more managers for the Fund.   Amendments to the Operating Agreement which are materially adverse to the Investors are subject to the consent of  Investors holding more than 50% of the outstanding Units.  Material amendments to the Operating Agreement which are not adverse to Investors may be made without obtaining the consent of Investors.  The voting rights of Units are determined by their respective net asset values.  Any vote or consent of Fund Investors will exclude Units held by the Sponsor Parties.
 
(vi)  Classification of the Board of Directors.
 
Not applicable.
 
(vii) Liquidation Rights.
 
Upon the occurrence of an event causing the dissolution of the Fund, the Sponsor, or, if the Sponsor has withdrawn, such other liquidator as the Investors may, by vote of more than 50% of
 
 
39

 
 
the outstanding Units, select, will wind up the Fund’s affairs and, in connection therewith, distribute the Fund’s assets as described below.
 
In connection with a dissolution of the Fund, the Operating Agreement provides for the assets of the Fund to be distributed as follows:  first, to the payment and discharge of all claims of creditors of the Fund, including creditors who are Investors; second, to the establishment of such reserves as the Sponsor or other liquidator may consider reasonably necessary or appropriate for any losses, contingencies, liabilities or other matters of or relating to the Fund; provided, however, that if and when the Sponsor or other liquidator determines that the causes for such reserves have ceased to exist, the funds, if any, then held in reserve will be distributed in the manner hereinafter provided; and third, after making all final allocations contemplated by the Operating Agreement, and for such purposes treating the date of dissolution as if it were a December 31, to the distribution in cash of the remaining assets of the Fund among the Investors in accordance with the positive balance in each of the Investor’s closing capital account as of the last day of the accounting period in which the Fund’s dissolution occurs.  Any assets distributed in kind in the liquidation will be valued, for purposes of distribution, in accordance with the Operating Agreement as of the date of distribution, and any difference between this value and the carrying value of the assets will, to the extent not otherwise taken into account in determining net asset value, be deemed to constitute income or loss to the Fund.
 
(viii)  Preemption Rights.
 
Not applicable.
 
(ix)  Liability Imposed on the Stockholders.
 
Except as otherwise provided by law, liability of Investors for the liabilities of the Fund is limited to the capital contribution of the Investor plus its share of undistributed profits and assets, if any, including any obligation under law to return to the Fund distributions and returns of contributions.
 
(x)  Restriction on Alienability.
 
Units are subject to restriction on alienability.  Assignment, transfer or disposition of any Units or part or all of any right, title or interest in the capital or profits of the Fund by an Investor may only be effected by giving written notice to and receiving the written consent of the Sponsor and must be in compliance with federal and state securities laws, provided, however, that an Investor may transfer the economic benefits of ownership of its Units without regard to such consent.
 
(xi)  Provision that Discriminates Against a Stockholder.
 
Not applicable.
 
(a)(2) – (a)(5)
 
Not applicable.
 
 
40

 
(b)  Debt Securities.
 
Not applicable.
 
(c)   Warrants and Rights.
 
Not applicable.
 
(d) Other Securities.
 
Securities to be registered consist of Units of Limited Liability Company Interest.
 
(e) Market Information on Securities Other Than Common Equity.
 
Not applicable.
 
(f) American Depository Receipts.
 
Not applicable.
 
ITEM 12:  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
The Fund has agreed to indemnify and hold harmless the Sponsor Parties from and against any claims, costs, expenses, damages or losses (including, without limitation, from and against any judgment, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened action or proceeding) suffered or sustained by any of them by reason of the fact that a Sponsor Party is or was connected in any respect with the Fund; provided, that the conduct or omission which led to the claim, cost, expense, damage or loss was in, or not opposed to, the best interests of the Fund and that such conduct or omission  did not constitute gross negligence or intentional misconduct on the part of such Sponsor Party.
 
The Fund is obligated to advance payments asserted by a Sponsor Party to be due under the preceding paragraph pending a final determination of whether such indemnification is, in fact, due; provided, that the Sponsor Party agrees in writing to return any amounts so advanced, without interest, in the event such indemnification is finally determined not to be due.
 
Whether or not a Sponsor Party is entitled to indemnification will be determined by the judgment of independent counsel as to whether the Sponsor Party has reasonable grounds for asserting that indemnification is so due, unless otherwise determined by a court, arbitral tribunal or administrative forum.
 
In the event the Fund is made a party to any claim, dispute or litigation, or otherwise incurs any loss or expense, as a result of or in connection with any Investor’s activities, obligations or liabilities unrelated to the Fund’s business, the Investor must indemnify and reimburse the Fund for all loss and expense incurred, including attorneys’ fees.
 
 
41

 
ITEM 13:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The financial statements with regard to the Fund required by this Item are included beginning on page F-1.
 
The supplementary financial information specified in Item 302 of Regulation S-K is not applicable.
 
ITEM 14:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 15:  FINANCIAL STATEMENTS AND EXHIBITS
 
(a)           Financial Statements

The financial statements required by this Item are included beginning at page F-1.
 
(b)           Exhibits
 
Exhibit Designation
Description
3.01
Certificate of Formation of Highbridge Commodities FuturesAccess LLC.
3.02
Limited Liability Company Operating Agreement of Highbridge Commodities FuturesAccess LLC.
10.01
Customer Agreement between Highbridge Commodities FuturesAccess Master Fund Ltd. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
10.02
Amended and Restated Advisory Agreement among Highbridge Commodities FuturesAccess Master Fund Ltd., Merrill Lynch Alternative Investments LLC and Highbridge Capital Management, LLC.
99.1
Amended and Restated Selling Agreement 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).
 
 
 
 
 
42

 
 

 
SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Dated:  December 23, 2011 HIGHBRIDGE COMMODITIES FUTURESACCESS LLC  
       
  By: Merrill Lynch Alternative Investments LLC Sponsor  
       
 
By:
/s/ Barbra E. Kocsis   
    Name:    Barbra E.  Kocsis  
    Title:      Chief Financial Officer and Vice President  
       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
 

 
 
 
 
 

 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
(A Delaware Limited Liability Company)
 
 
 
Financial Statement as of October 31, 2011 and
Report of Independent Registered Public Accounting Firm
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
 (A Delaware Limited Liability Company)
 
 
 
TABLE OF CONTENTS 
 


 
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
FINANCIAL STATEMENT:
 
 
Statement of Financial Condition as of October 31, 2011
 
2
 
Notes to Statement of Financial Condition
3
 
 
 
 
 
 

 

 
PWC
 
Report of Independent Registered Public Accounting Firm
 
 
To the Members of Highbridge Commodities FuturesAccess LLC:
 
 
In our opinion, the accompanying statement of financial condition presents fairly, in all material respects, the financial position of Highbridge Commodities FuturesAccess LLC ("the Fund") at October 31, 2011 in confirmity with accounting principles generally accepted in the United States of America. This financial statement is the responsibility of the Fund's management; our responsiblity is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of financial condition, assessing the accounting principles used and significant estimates made by management, and evaluating the overall statement of financial condition presentation. We believe that our audit of the statement of financial condition provides a reasonable basis for our opinion.
 
 
November 21, 2011
 
 

 
F-1

 

 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC (a Delaware Limited Liability Company)
 
STATEMENT OF FINANCIAL CONDITION
 
 
 

      October 31, 2011  
         
ASSETS
       
 
 
   $ 178,910   
Due from Merrill Lynch Alternative Investments LLC        
      178,910   
       TOTAL ASSETS        
         
LIABILITIES AND MEMBERS’ CAPITAL:
    178,910   
         
Accrued Expenses
  $ 178,910  
         
       Total liabilities
    178,910  
         
MEMBERS’ CAPITAL:
  $ -  
         
        Total members’ capital        
         
      TOTAL ABILITIES AND MEMBERS' CAPITAL
  $ 178,910  
         
NET ASSET VALUE PER UNIT
  $ -  
 
 
See notes to Statement of Financial Condition

 
 
F-2

 

 
 
 
 
 
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
(a Delaware Limited Liability Company)
 
NOTES TO THE FINANCIAL STATEMENT
 
1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization
 
Highbridge Commodities FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccess Program (the  “Program”) Fund was organized under the Delaware Limited Liability Company Act on June 15, 2011 and plans on its first receipt of investor capital on November 1, 2011. Commercial operations will start upon receipt of such investor capital. The Fund will issue new units of limited liability company interests (“Units”) at Net Asset Value per Unit as of the beginning of each calendar month following the commencement of operations. The Fund has not issued any units as of October 31, 2011.
 
The Fund is part of a master-feeder structure that will invest substantially all of its assets through Highbridge Commodities FuturesAccess Master Fund Ltd. (the “HCFA Master Fund”), which has the same investment objective as the Fund. The HCFA Master Fund will engage in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Merrill Lynch Alternative Investments LLC (“MLAI”) is the sponsor (“Sponsor”) and the manager (“Manager”) of the Fund. MLAI has delegated commodities trading authority for the HCFA Master Fund to Highbridge Capital Management, LLC (“HCM” or the “Trading Advisor”).
 
MLAI is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch, is the Fund’s commodity broker. Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.
 
The Program is a group of commodity pools sponsored by MLAI (each pool is a “Program Fund” or collectively, “Program Funds”) each of which places substantially all of its assets in a managed futures or forward trading account managed by a single or multiple commodity trading advisors. Each Program Fund is generally similar in terms of fees, Classes of Units and redemption rights.  Each of the Program Funds implements a different trading strategy.
 
Estimates
 
The preparation of the Statement of Financial Condition and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities in the Statement of Financial Condition and accompanying notes.  As a result, actual results could differ from these estimates and such differences could be material.

 
F-3

 

Revenue Recognition
 
Upon commencement of operations, commodity futures, options on futures and forward contract transactions will be recorded on the trade date. Open contracts will be reflected in Net unrealized profit (loss) on open contracts in the Statement 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, after the commencement of trading, from the beginning of the period to the end of the period will be reflected in Change in unrealized under Trading profit (loss) in the Statement of Operations.
 
Foreign Currency Transactions
 
The Fund’s 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 will be translated into U.S. dollars at the rates in effect at the date 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. Gains and losses resulting from the translation to U.S. dollars are to be included in Trading Profit (Loss) in the Statement of Operations of the Fund.
 
Equity in Commodity Trading Account
 
A portion of the assets maintained at MLPF&S will be considered to be restricted cash required to meet maintenance margin requirements. Currently there are no assets maintained at MLPF&S.
 
Cash and Cash Equivalents
 
The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. Currently the Fund holds no cash or cash equivalents.
 
Income Taxes
 
No provision for income taxes has been made in the accompanying financial statements as the Member is individually responsible for reporting income or loss based on such Members’ share of the Fund’s income and expenses as reported for income tax purposes.
 
The Fund follows the 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 Fund's 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-likely­than-not" threshold would be recorded as a tax benefit or expense in the current period.
 
Subscriptions
 
Units will be offered as of the close of business at the end of each month starting in November 2011.  Units are purchased as of the first business day of any month at Net Asset Value, but the subscription request must be submitted at least three calendar days before the end of the preceding month. Subscriptions submitted less than three days before the end of a month will be applied to Units subscriptions as of the beginning of the second month after receipt, unless revoked by MLAI.

 
F-4

 

Redemptions and Exchanges
 
A Member may redeem or exchange some or all of such Member’s Units at Net Asset Value as of the close of business, on the last business day of any month, upon ten calendar days’ notice (“notice period”).
 
An investor in the Fund can exchange these Units for Units of the same Class in other Program Funds as of the beginning of each calendar month upon at least ten days prior notice.  The minimum exchange amount is $10,000.
 
Redemption requests are accepted within the notice period.  The Fund does not accept any redemption requests after the notice period.  All redemption requests received after the notice period 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.

2.    RELATED PARTY TRANSACTIONS
 
The Fund’s U.S. dollar assets will be maintained at MLPF&S. On assets held in U.S. dollars, MLPF&S credits the Fund with interest at the most favorable rate payable by MLPF&S to accounts of Merrill Lynch affiliates but not less than 75% of such prevailing rate.  The Fund is credited with interest on any of its assets and net profits actually held by MLPF&S in non-U.S. dollar currencies at a prevailing local rate received by MLPF&S. MLPF&S may derive certain economic benefit, in excess of the interest which MLPF&S pays to the Fund, from possession of such assets.
 
MLPF&S will charge the Fund at prevailing local interest rates for financing realized and unrealized losses on the Fund’s non-U.S. dollar-denominated positions. Such amounts are netted against interest income due to the insignificance of such amounts.
 
The Fund will charge Sponsor Fees on the month-end net assets after all other charges. There will not be Sponsor Fees charged at the HCFA Master Fund level. The Fund’s Class A Units and Class I Units, when issued, will pay MLAI a Sponsor’s Fee of 1/12 of 1.5% and 1/12 of 1.1%, respectively, of their month-end net asset value.  Class C Units, when issued, will pay MLAI a monthly Sponsor’s Fee of 1/12 of 2.5% of their month-end net asset value.  Class D Units, when issued, will pay no Sponsor’s Fee. Net asset value, for purposes of calculating the Sponsor’s Fees, is calculated prior to reduction for the Sponsor’s Fee being calculated.
 
Pursuant to an informal agreement between the Fund and MLAI, costs incurred prior to the Fund accepting external subscriptions are indemnified by MLAI and will not constitute obligations of the Fund. As of the date of the Statement of Financial Condition no external subscriptions had been accepted, and as a result, the Fund recorded a receivable, which is carried at fair value as it is short term in nature, from MLAI for costs incurred through the date of the Statement of Financial Condition. Upon receipt of subscriptions, MLAI will be released from its responsibility and these expenses incurred will become the obligations of the Fund and its Unit holders.

 
F-5

 

3.    ADVISORY AGREEMENT
 
The HCFA Master Fund and HCM have entered into an advisory agreement that will become effective once funds are allocated for trading (see note 6 regarding Subsequent events). This agreement shall continue in effect until October 1, 2013.  Thereafter, this agreement shall be automatically renewed for three successive one-year periods, on the same terms, unless terminated at any time by either HCM or the HCFA Master Fund upon notice to either party no later than 90 days before the expiration of the then current term. HCM 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.
 
As of the last business day of each calendar month, the Master Fund shall pay the Trading Advisor a management fee equal to 1/12 of 1.50% (a 1.50% annual rate) of the month-end net asset value of the Master Fund, prior to reduction for any accrued Incentive Fees or for the management fee being calculated.
 
Performance fees will be charged by the Fund on any New Trading Profit, as defined in the private placement memorandum, and are payable to HCM 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 HCFA Master Fund pays a 15% performance fee to HCM.
 
In order to help defray the costs of MLAI’s sponsoring and providing ongoing administration and operational support to the HCFA Master Fund, HCM will pay, or direct the Master Fund to pay, MLAI an amount equal to 40% of the Management Fee.
 
4.    WEIGHTED AVERAGE UNITS
 
The weighted average number of Units outstanding for each Class is computed for purposes of calculating net income per weighted average Unit.  The weighted average number of Units outstanding for each Class for the period ended October 31, 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. There are no Units outstanding at October 31, 2011.
 
5.    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 third parties, including affiliates of the Fund, for breach of certain representations and warranties made by the Fund. 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 Fund’s experience, MLAI expected the risk of loss to be remote and, therefore, no provision has been recorded.
 
6.    SUBSEQUENT EVENTS
 
As of November 1, 2011 the subscriptions accepted were $25,108,176. Consequently, MLAI is no longer responsible for the organization expenses incurred prior to the commencement of operations.
 
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.

 
F-6

 

* * * * * * * * * * *
 
To the best of the knowledge and belief of the
undersigned, the information contained in this report
is accurate and complete.
 
 
 
 
 

Barbra E. Kocsis
Chief Financial Officer
Merrill Lynch Alternative Investments LLC
Sponsor of
Highbridge Commodities FuturesAccess LLC
 
 
 
 
 
 
 
F-7
 

 
EX-3.01 2 efc11-708_ex301.htm efc11-708_ex301.htm
Exhibit 3.01
 
PAGE 1
Delaware 

The First State
 
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF “HIGHBRIDGE COMMODITIES FUTURESACCESS LLC” AS RECEIVED AND FILED IN THIS OFFICE.
 
THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:
 
CERTIFICATE OF FORMATION, FILED THE FIFTEENTH DAY OF JUNE, A.D.  2011, AT 2:41 O’CLOCK P.M.
 
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED LIABILITY COMPANY, “HIGHBRIDGE COMMODITIES FUTURESACCESS LLC”.
 
 
 
 
 
 
 
 

 
PAGE 1
Delaware 

The First State
 
 
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF FORMATION OF “HIGHBRIDGE COMMODITIES FUTUREACCESS LLC”, FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF JUNE, A.D.  2011, AT 2:41 O’CLOCK P.M.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
     State of Delaware
Secretary of State
Division of Corporations
Delivered 02:57 PM 06/15/2011
FILED 02:41 PM 06/15/2011
SRV 110725731 – 4997250 FILE
 
 
CERTIFICATE OF FORMATION
 
OF
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
 
This Certificate of Formation of Highbridge Commodities FuturesAccess LLC (the “LLC”), dated as of June ___, 2011, is being duly executed and filed by Colleen R. Rusch, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. § 18-101, etseq.).
 
FIRST.            The name of the limited liability company formed hereby is Highbridge Commodities FuturesAccess LLC.
 
SECOND.       The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
 
THIRD.           The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
 
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.
 
 
 
 
     
 

 
 
 

EX-3.02 3 efc11-708_ex302.htm efc11-708_ex302.htm
 
Exhibit 3.02
 

 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
 
 
 
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT

 
_______________________________

 
THE UNITS OF LIMITED LIABILITY COMPANY INTEREST CREATED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER APPLICABLE SECURITIES LAWS AND WITH THE CONSENT OF THE SPONSOR.
_______________________________
 
 
 
Merrill Lynch Alternative Investments LLC
 
Sponsor
 
 
September 16, 2011
 
 
 
 

 
 


 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
 


 
TABLE OF CONTENTS
 
ARTICLE I ORGANIZATION
 
   
SECTION 1.01. OBJECTIVES AND PURPOSES
1
   
SECTION 1.02. INVESTMENT OF CASH RESERVES
2
   
SECTION 1.03. FISCAL YEAR; ACCOUNTING PERIODS
3
   
SECTION 1.04. REGISTERED AGENT AND OFFICE; PRINCIPAL OFFICE
3
   
SECTION 1.05. DURATION OF THIS FUTURESACCESS FUND
3
   
SECTION 1.06. NON-ASSIGNABILITY OF UNITS; SUBSTITUTED INVESTORS; LIMITED
    ASSIGNABILITY OF THE SPONSOR’S INTEREST
3
   
SECTION 1.07. LIABILITY OF INVESTORS
4
   
ARTICLE II CAPITAL AND TAX ALLOCATIONS
 
   
SECTION 2.01. CAPITAL CONTRIBUTIONS
4
   
SECTION 2.02. OPENING CAPITAL ACCOUNTS
5
   
SECTION 2.03. FINANCIAL ALLOCATIONS AMONG THE UNITS
6
   
SECTION 2.04. NET ASSET VALUE
6
   
SECTION 2.05. SPONSOR’S FEES; OPERATING EXPENSES
7
   
SECTION 2.06. ALLOCATION OF PROFITS AND LOSSES FOR FINANCIAL PURPOSES
8
   
SECTION 2.07. ALLOCATION OF PROFITS AND LOSSES FOR INCOME TAX PURPOSES
8
   
SECTION 2.08. CHARGEBACKS TO CURRENT OR FORMER INVESTORS
10
   
SECTION 2.09. PROCESSING OF SUBSCRIPTIONS
10
   
SECTION 2.10. VALUATION OF ASSETS
10
   
SECTION 2.11. USE OF ESTIMATES
12
   
SECTION 2.12. ACCOUNTING PRACTICES
12
   
ARTICLE III PARTICIPATION IN FUTURESACCESS FUND PROPERTY;  REDEMPTIONS AND DISTRIBUTIONS
 
   
SECTION 3.01. NO UNDIVIDED INTERESTS IN FUTURESACCESS FUND PROPERTY
12
   
SECTION 3.02. REDEMPTIONS OF UNITS; EXCHANGES
12
   
SECTION 3.03. WITHDRAWALS OF CAPITAL BY THE SPONSOR
13
   
SECTION 3.04. MANDATORY REDEMPTIONS
13
 
 
 
 
 
A-i

 
 
 
TABLE OF CONTENTS (cont.)
 
   
SECTION 3.05. MANDATORY REDEMPTIONS TO PAY TAXES
14
   
SECTION 3.06. DISTRIBUTIONS
14
   
SECTION 3.07. FORM OF DISTRIBUTION AND REDEMPTION PAYMENTS
14
   
SECTION 3.08. REMOVAL OF THE SPONSOR
14
   
ARTICLE IV WITHDRAWAL OF THE SPONSOR AND INVESTORS
 
   
SECTION 4.01. WITHDRAWAL OF THE SPONSOR
14
   
SECTION 4.02. WITHDRAWAL OF AN INVESTOR
14
   
SECTION 4.03. STATUS AFTER WITHDRAWAL
14
   
ARTICLE V MANAGEMENT
 
   
SECTION 5.01. AUTHORITY OF THE SPONSOR
14
   
SECTION 5.02. SERVICE PROVIDERS; INVESTMENTS; ACCOUNTS
15
   
SECTION 5.03. ACTIVITIES OF THE SPONSOR PARTIES
15
   
SECTION 5.04. SERVICES TO THIS FUTURESACCESS FUND
16
   
SECTION 5.05. INTERESTED PARTIES
16
   
SECTION 5.06. EXCULPATION
16
   
SECTION 5.07. INDEMNIFICATION
16
   
SECTION 5.08. THE MASTER FUND’S STANDARD OF LIABILITY AND INDEMNIFICATION
17
   
SECTION 5.09. INVESTORS’ TRANSACTIONS
17
   
SECTION 5.10. RELIANCE BY THIRD PARTIES
17
   
SECTION 5.11. REGISTRATION OF ASSETS
17
   
SECTION 5.12. LIMITATION ON AUTHORITY OF THE SPONSOR
17
   
ARTICLE VI ADMISSION OF INVESTORS
 
   
SECTION 6.01. PROCEDURE AS TO NEW INVESTORS
17
   
SECTION 6.02. PROCEDURE AS TO NEW MANAGERS
17
   
ARTICLE VII BOOKS OF ACCOUNT; AUDITS; REPORTS TO INVESTORS
 
   
SECTION 7.01. BOOKS OF ACCOUNT
18
   
SECTION 7.02. ANNUAL AUDIT
18
   
SECTION 7.03. INTERIM REPORTS
18
   
ARTICLE VIII CONFLICTS OF INTEREST
 
   
SECTION 8.01. INVESTORS’ CONSENT
19
   
SECTION 8.02. INVESTORS’ REPRESENTATIVE.
19
 
 
 
 
A-ii

 
 
 
TABLE OF CONTENTS (cont.)
 
   
ARTICLE IX DISSOLUTION AND WINDING UP OF THIS FUTURES ACCESS FUND
 
   
SECTION 9.01. EVENTS OF DISSOLUTION
20
   
SECTION 9.02. DISSOLUTION
20
   
ARTICLE X BENEFIT PLAN INVESTORS
 
   
SECTION 10.01. INVESTMENT IN ACCORDANCE WITH LAW
20
   
SECTION 10.02. DISCLOSURES AND RESTRICTIONS REGARDING BENEFIT PLAN INVESTORS
21
   
ARTICLE XI MISCELLANEOUS PROVISIONS
 
   
SECTION 11.01. INVESTORS NOT TO CONTROL
21
   
SECTION 11.02. POWER OF ATTORNEY
21
   
SECTION 11.03. AMENDMENTS; CONSENTS
21
   
SECTION 11.04. NOTICES
22
   
SECTION 11.05. LEGAL EFFECT; MANNER OF EXECUTION
23
   
SECTION 11.06. ENTIRE AGREEMENT
23
   
SECTION 11.07. GOVERNING LAW
23
   
SECTION 11.08. CONSENT TO JURISDICTION
23
   
SECTION 11.09. “TAX MATTERS PARTNER”; TAX ELECTIONS
23
   
SECTION 11.10. DETERMINATION OF MATTERS NOT PROVIDED FOR IN THIS AGREEMENT
23
   
SECTION 11.11. NO PUBLICITY
23
   
SECTION 11.12. SURVIVAL
23
   
SECTION 11.13. WAIVERS
23
   
SECTION 11.14. VOTING RIGHTS
24
   
SECTION 11.15. ISSUANCE OF DIFFERENT CLASSES
24
   
SECTION 11.16. COMPLIANCE WITH THE INVESTMENT ADVISERS ACT OF 1940; SECURITIES LAWS
24
   
 
 
__________________

TESTIMONIUM
SIGNATURES
 
 
 
 
 
A-iii

 
 
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
 
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
 
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (“Agreement”) dated as of September 16, 2011 of Highbridge Commodities FuturesAccess LLC (this “FuturesAccess Fund”) by and among Merrill Lynch Alternative Investments LLC, a Delaware limited liability company (the “Sponsor”), and those persons who shall invest in the units of limited liability company interest (“Units”) created pursuant to this Agreement — Class A, Class C, Class D, Class I, Class Z and such other classes as may be established in the future — and shall therefore be admitted as members (such members being hereinafter sometimes referred to collectively as “Investors”; provided that for purposes of voting, Units held by the Sponsor shall not be considered to be held by an Investor).
 
WHEREAS, the parties hereto desire to form this FuturesAccess Fund, a limited liability company under the provisions of the Delaware Limited Liability Company Act (the “Act”), which shall be one of the funds included in the Merrill Lynch FuturesAccessSM Program (“FuturesAccess”), such other funds to be hereinafter sometimes referred to as “FuturesAccess Funds,” and is anticipated to invest all or substantially all of its assets in Highbridge Commodities FuturesAccess Master Fund Ltd. (the “Master Fund”).
 
WHEREAS, units of limited liability company interest issued by the FuturesAccess Funds in general shall hereinafter be referred to as “Units.”
 
WHEREAS, Highbridge Commodities FuturesAccess Ltd. and BA Highbridge Commodities Fund LLC also will invest all or substantially all of their assets in the Master Fund.
 
WHEREAS, the Sponsor is the sponsor and the manager of this FuturesAccess Fund and the sponsor of the Master Fund for purposes of the Act.
 
WHEREAS, in addition to FuturesAccess, the Sponsor also sponsors the HedgeAccessSM Program (“HedgeAccess”) of private investment funds concentrating on securities, rather than futures and forward trading (such funds being hereinafter referred to as “HedgeAccess Funds”).
 
WHEREAS, the parties hereby desire to set forth the terms pursuant to which this FuturesAccess Fund shall be governed.
 
NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
ARTICLE I
ORGANIZATION
 
SECTION 1.01.  OBJECTIVES AND PURPOSES
 
 
(a)
This FuturesAccess Fund shall have the following objectives and purposes:
 
 
(i)
to access, by investing all or substantially all of its assets in the Master Fund, a professional trading advisor (the “Trading Advisor”) which will manage the Master Fund’s speculative trading in the futures, forward, options and other markets as described in the “Part One (A) Confidential Program Disclosure Document:  FuturesAccessSM Program General Information,” the “Part One (B) Confidential Program Disclosure Document:  Trading Advisor Information” and the “Part Two Confidential Program Disclosure Document:  Statement of Additional Information,” as they may be updated or supplemented from time to time (collectively, the “Disclosure Document”); provided that the Sponsor may in its discretion retain the Trading Advisor directly at this FuturesAccess Fund level, rather than at the Master Fund level;
 
 
 
 
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Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011

 

 
 
 
 
(ii)
to maintain such futures brokerage, forward dealing and other counterparty accounts, as well as such cash reserves as the Sponsor may from time to time deem to be appropriate and to invest and manage all such cash reserves; and
 
 
(iii)
to engage in any other lawful act or activity within and without the United States for which limited liability companies may be organized under the laws of the State of Delaware.
 
 
(b)
this FuturesAccess Fund, and the Sponsor on behalf of this FuturesAccess Fund, shall have the power to enter into, make and perform all contracts and other undertakings, and engage in all activities and transactions as may be necessary or advisable to the carrying out of the foregoing purposes, including, without limitation, the power:
 
 
(i)
indirectly to trade futures, forwards, options and other instruments, on margin and otherwise, through investing in the Master Fund; provided that the Sponsor in its discretion may retain the Trading Advisor directly at the FuturesAccess Fund level, rather than at the Master Fund level;
 
 
(ii)
to borrow money from banks or brokers, and to secure the payment of any obligations of this FuturesAccess Fund by hypothecation or pledge of all or part of the assets of this FuturesAccess Fund;
 
 
(iii)
to exercise, as applicable, all rights, powers, privileges and other incidents of ownership or possession with respect to the assets of this FuturesAccess Fund;
 
 
(iv)
to open, maintain and close bank, brokerage and other accounts;
 
 
(v)
to prepare and file all tax returns required of this FuturesAccess Fund and make any election or determination on behalf of this FuturesAccess Fund in connection therewith or as otherwise required or permitted by applicable tax laws;
 
 
(vi)
to bring, defend, compromise and settle legal actions or other claims on behalf of this FuturesAccess Fund;
 
 
(vii)
to maintain insurance on behalf of this FuturesAccess Fund, including indemnification insurance; and
 
 
(viii)
to take any and all such actions as the Sponsor may deem to be necessary or advisable in connection with the foregoing.
 
SECTION 1.02.  INVESTMENT OF CASH RESERVES.  The Sponsor shall invest all or substantially all of this FuturesAccess Fund’s capital in the Master Fund and appoint the Trading Advisor to have discretionary authority to trade and invest the capital of the Master Fund as described in the Disclosure Document; provided that the Sponsor may retain the Trading Advisor directly at this FuturesAccess Fund level, rather than at the Master Fund level.
 
The Master Fund may execute transactions in commodity interests, currency interests, swap agreements and any other manner of instruments, on either a principal or an agency basis, with or through affiliates of the Sponsor (the Sponsor and such affiliates being hereafter referred to as “Merrill Lynch”) or third parties.  The sole clearing broker and the principal forward trading counterparty for the Master Fund and, if applicable, this FuturesAccess Fund, shall be Merrill Lynch unless the Sponsor otherwise determines.
 
The Master Fund shall deposit, and this FuturesAccess Fund may, if applicable, deposit all or substantially all of its capital with Merrill Lynch or any other clearing brokers selected by the Sponsor pursuant to the arrangements described in the Disclosure Document, all Investors acknowledging that Merrill Lynch will not only receive futures brokerage commissions and bid-ask spreads from the Master Fund but also will retain significant economic benefits from the possession of the
 
 
 
 A-2
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
Master Fund’s assets (including assets representing this FuturesAccess Fund’s investment in the Master Fund) in addition to the interest which Merrill Lynch will credit to this FuturesAccess Fund’s and/or Master Fund’s account.  In addition, the Sponsor may maintain this FuturesAccess Fund’s assets (as well as those of the Master Fund) in deposit or similar accounts with, or in money market funds operated by, one or more affiliates of the Sponsor, which affiliates may benefit from the possession of such assets, as well as with unaffiliated entities.  The interest paid by such affiliated and unaffiliated entities on this FuturesAccess Fund’s and the Master Fund’s cash so invested will be paid to this FuturesAccess Fund or the Master Fund, as the case may be.  However, neither the Sponsor nor any of its affiliates (or any third parties) will be obligated to account to this FuturesAccess Fund, the Master Fund or any Investor for any additional economic benefits which the Sponsor or any such affiliate may derive from possession of this FuturesAccess Fund’s and the Master Fund’s assets.
 
SECTION 1.03.  FISCAL YEAR; ACCOUNTING PERIODS.  The fiscal year of this FuturesAccess Fund shall end on each December 31.  This FuturesAccess Fund’s accounting periods (“Accounting Periods”), as of the end of each of which increases and decreases in this FuturesAccess Fund’s “Net Assets” (as defined in Section 2.04) shall be calculated and reflected in the “Net Asset Value” (as defined in Section 2.04) of the Units issued by this FuturesAccess Fund, shall begin: (i) as of the day that this FuturesAccess Fund first begins operations; (ii) as of the day that any Unit is issued; (iii) as of the day immediately following any redemption of Units or withdrawal from an Investor’s Capital Account (as defined in Section 1.07(b)); (iv) as of the beginning of each calendar month; and (v) as of such other day as the Sponsor may determine.  An Accounting Period shall end on the day immediately preceding the beginning of the next Accounting Period.
 
SECTION 1.04.  REGISTERED AGENT AND OFFICE; PRINCIPAL OFFICE.  This FuturesAccess Fund shall maintain in the State of Delaware a registered agent and office.  The identity and location of said registered agent and office shall be determined by the Sponsor, and may be changed from time to time by the Sponsor.
 
The initial registered office of this FuturesAccess Fund in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
 
The principal office of this FuturesAccess Fund shall be located at the offices of the Sponsor, 4 World Financial Center, 250 Vesey Street, 10th Floor, New York, New York  10080, or such other place as the Sponsor may designate from time to time.
 
SECTION 1.05.  DURATION OF THIS FUTURESACCESS FUND.  The term of this FuturesAccess Fund commenced as of the date its Certificate of Formation was filed with the Secretary of State of the State of Delaware, and shall continue until terminated by the dissolution and winding up of this FuturesAccess Fund as hereinafter provided.
 
SECTION 1.06.  NON-ASSIGNABILITY OF UNITS; SUBSTITUTED INVESTORS; LIMITED ASSIGNABILITY OF THE SPONSOR’S INTEREST. 
 
 
(a)
No Investor shall assign, encumber, pledge, hypothecate or otherwise transfer any of such Investor’s Units without the consent of the Sponsor; provided, however, that an Investor may transfer the economic benefit of ownership of such Investor’s Units without the prior written consent of the Sponsor.  Any assignment, encumbrance, pledge, hypothecation or transfer of Units, whether voluntary, involuntary or by operation of law, to which the Sponsor does not consent, and for which the Sponsor’s consent was required pursuant to the previous sentence, shall result in the Units so assigned, encumbered, pledged, hypothecated or otherwise transferred being mandatorily redeemed as of the end of the  month during which such purported assignment, encumbrance, pledge, hypothecation or transfer occurred.  Any assignment, encumbrance, pledge, hypothecation or transfer which shall result in the termination of this FuturesAccess Fund for federal income tax purposes shall be null and void ab initio and of no legal force or effect whatsoever.  An assigning Investor shall remain liable to this FuturesAccess Fund as provided in the Act, regardless of whether his or her assignee becomes a substituted Investor.
 
 
(b)
The Sponsor may not assign, encumber, pledge, hypothecate or otherwise transfer all or any portion of its manager’s interest in this FuturesAccess Fund; provided, that the Sponsor may assign such interest to an affiliate of the Sponsor upon notice (which need not be prior notice) to the Investors or in connection with
 
 
 
 A-3
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
 
the sale or transfer of all or a material portion of the Sponsor’s equity or assets.  See Sections 4.01 and 6.02.
 
SECTION 1.07.  LIABILITY OF INVESTORS.
 
 
(a)
Nothing herein shall require the Sponsor to maintain any minimum net worth or shall make any person associated with the Sponsor individually liable for any debt, liability or obligation of this FuturesAccess Fund or of the Sponsor.
 
 
(b)
No Investor shall have any obligation to restore any negative balance in the capital account established for each Unit pursuant to Section 2.02 (“Capital Account”) of such Investor.
 
 
(c)
The Sponsor shall have no obligation to restore any negative balance in any Investor’s or in the Sponsor’s Capital Account.
 
 
(d)
Except as provided in Section 2.08 (providing for chargebacks to current or former Investors), the Sponsor and the Investors shall be liable for the repayment, satisfaction and discharge of debts, liabilities and obligations of this FuturesAccess Fund only to the extent of the Sponsor’s or such Investor’s investment in this FuturesAccess Fund and not in excess thereof.
 
ARTICLE II
CAPITAL AND TAX ALLOCATIONS
 
SECTION 2.01.  CAPITAL CONTRIBUTIONS.  All contributions of capital to this FuturesAccess Fund (“Capital Contributions”) shall be made in cash.  Capital Contributions may be made in such amounts, and at such times, as the Sponsor may determine.  The Sponsor may permit certain Investors to make smaller initial or subsequent Capital Contributions than is otherwise generally required by the Sponsor without entitling any other Investor to make smaller initial or subsequent Capital Contributions.
 
Investors will receive Units in return for their Capital Contributions.  Each class of Units (“Class”) shall initially be issued at $1.00 per Unit, and thereafter at Net Asset Value.
 
This FuturesAccess Fund shall invest in the Master Fund as a single investor, irrespective of the different times that Investors subscribe for Units.
 
The Sponsor (and/or any other Merrill Lynch entity) may, but need not, make Capital Contributions as of any date that any Units are issued.  Merrill Lynch may provide initial (“seed”) capital to enable the Master Fund to begin trading before sufficient client capital has been raised to meet the Master Fund’s minimum capitalization.  Seed capital (if any) will be invested in Class Z Units which do not have a minimum subscription amount requirement.  However, neither the Sponsor nor any other Merrill Lynch entity has any obligation to “seed” the Master Fund (or any other FuturesAccess Fund).  The Units may be issued in the five Classes described herein— Class A Units, Class C Units, Class D Units, Class I and Class Z Units.  Units of a new Class or series may be issued in the Sponsor’s sole discretion.  This FuturesAccess Fund will itself acquire Class DA Units in the Master Fund, although it may acquire different Class(es) of Units in the Master Fund in the Sponsor’s discretion.
 
Sales commissions will be deducted from Class A, Class D and Class I subscriptions as described in the Disclosure Document, and the net amount of such subscriptions (after deducting applicable sales commissions) will be invested in the Units.  The Sponsor may waive or reduce sales commissions for certain Investors without entitling any other Investor to any such waiver or reduction.
 
Fractional Units shall not be issued to Investors (but may be issued to the Sponsor or any other Merrill Lynch entity).  Investors’ subscriptions shall be used to purchase the largest whole number of Units of the appropriate Class possible.  Any subscription amount which cannot be used to purchase whole Units shall be credited (in cash) to Investors’ Merrill Lynch customer securities accounts.
 
 
 
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Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
Provided this FuturesAccess Fund’s overall minimum capitalization is met, there is no minimum number of Units of a particular Class that must be sold in order for Units of that particular Class to be issued.
 
Once this FuturesAccess Fund has begun operations, there is no minimum dollar amount of subscriptions that must be received as of the beginning of any calendar quarter in order for additional Units of any Class to be issued.  All Units will be issued only as the Sponsor may determine, irrespective of how many subscriptions are received.
 
The eligibility requirements, including minimum subscription amounts, if any, for each of the Class A Units, Class C Units, Class D Units, Class I Units or any other Class of Units issued by this FuturesAccess Fund shall be as set forth in the Disclosure Document.  Any applicable minimum subscription amounts may be calculated based on aggregate investments in a particular FuturesAccess Fund, all FuturesAccess Funds, both FuturesAccess and HedgeAccess and/or any particular group of products offered or sponsored by Merrill Lynch.  The Sponsor may waive or modify any eligibility requirements applicable to a particular Class of Units with respect to any one or more Investors, including Sponsor Parties, without entitling any other Investor to so such waiver or modification.  The eligibility requirements of the Class Z Units shall be determined by the Sponsor from time to time.
 
This FuturesAccess Fund may from time to time offer to certain Merrill Lynch clients a customized Class of Units having different financial terms than those described in the Disclosure Document, provided that doing so does not have a material adverse effect on existing Investors.  Such customized Classes will generally be designed for Investors who are subject to additional fees on their investments in this FuturesAccess Fund depending on the type of Merrill Lynch Account held by such Investors or other reasons, and shall not be generally available to other Investors.
 
The amount of each Investor’s Capital Contribution shall be set forth in such Investor’s FuturesAccess Program Subscription and Exchange Agreement Signature Page.  A FuturesAccess Program Subscription and Exchange Agreement (including the FuturesAccess Program Subscription and Exchange Agreement Signature Page) must be completed and accepted by the Sponsor prior to an Investor’s initial Capital Contribution if such Investor is not already an investor in FuturesAccess.  The Sponsor may require a new Program Subscription and Exchange Agreement Signature Page each time an existing Investor makes an additional Capital Contribution or exchange.
 
The aggregate of all Capital Contributions shall be available to this FuturesAccess Fund to carry out its objectives and purposes.
 
No Investor shall be obligated to make any additional Capital Contributions, except as provided in Section 2.08.
 
No provision of this Agreement shall be construed as guaranteeing the return, by any Sponsor Party or this FuturesAccess Fund, of all or any part of the Capital Contribution(s) of any Investor.
 
SECTION 2.02.  OPENING CAPITAL ACCOUNTS..
 
 
(a)
There shall be established for each Unit of each Class on the books of this FuturesAccess Fund, as of the first day of each Accounting Period, an opening capital account (“Opening Capital Account”) which, for the Accounting Period as of the beginning of which such Unit is issued, shall be the Capital Contribution made in respect of such Unit and which, for each Accounting Period thereafter, shall be an amount equal to the closing capital account (“Closing Capital Account”) (determined as set forth in Section 2.06) attributable to such Unit for the immediately preceding Accounting Period.
 
 
(b)
The Sponsor may, but shall not be required to, make Capital Contributions to this FuturesAccess Fund from time to time as new Units are issued, which shall be accounted for on a Unit-equivalent basis and shall participate in the profits and losses of the Units on the same basis as the Capital Accounts of the Class D Units.
 
 
(c)
For all purposes of this Agreement, references to Units shall be deemed to include the Sponsor’s Capital Account on a Unit-equivalent basis (unless the context otherwise requires or the reference is made explicit for greater certainty).
 
 
 
 A-5
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
SECTION 2.03.  FINANCIAL ALLOCATIONS AMONG THE UNITS.  The net profits and losses are allocated to each Class as provided in Section 2.06 and shall be allocated equally among the Units of such Class.  All Units of the same Class shall have the same Net Asset Value.
 
SECTION 2.04.  NET ASSET VALUE.  For the purposes of this Agreement, unless the context otherwise requires, “Net Assets” and “Net Asset Value” shall mean assets less liabilities.  For purposes of determining Opening Capital Accounts, Net Asset Value shall be determined as of the beginning of, and for purposes of determining Closing Capital Accounts, Net Asset Value will be determined as of the close of, business on the relevant valuation date.
 
 
(a)
The assets of this FuturesAccess Fund shall include:
 
 
(i)
this FuturesAccess Fund’s entire investment in the Master Fund;
 
 
(ii)
all cash on hand or on deposit in bank or other interest-bearing accounts, including any interest accrued thereon;
 
 
(iii)
any accrued gains on open positions which have not been settled by crediting this FuturesAccess Fund’s account, as valued pursuant to Section 2.10;
 
 
(iv)
all bills, demand notes and accounts receivable;
 
 
(v)
all securities (including, without limitation, money-market funds, Treasury bills and other short-term, interest-bearing instruments), commodity interests, currency interests, swap agreements and all other instruments owned or contracted for by this FuturesAccess Fund;
 
 
(vi)
all interest accrued on any interest-bearing securities owned by this FuturesAccess Fund except to the extent that the same is included or reflected in the valuation of such securities; and
 
 
(vii)
all other assets of every kind and nature, including prepaid expenses.
 
 
(b)
The liabilities of this FuturesAccess Fund shall be deemed to include the following (provided, however, that in determining the amount of such liabilities, this FuturesAccess Fund may calculate expenses of a regular or recurring nature for any given period on an estimated basis in advance, and may accrue the same in such manner as the Sponsor may deem appropriate over such period):
 
 
(i)
any accrued losses on open positions which have not been settled by debiting this FuturesAccess Fund’s account, as valued pursuant to Section 2.10;
 
 
(ii)
all bills and accounts payable;
 
 
(iii)
all expenses accrued, reimbursable or payable; and
 
 
(iv)
all other liabilities, present or future, including such reserves as the Sponsor may (as contemplated by Section 2.04(g)), deem advisable.
 
 
(c)
The “Sponsor’s Fees” (as defined in Section 2.05(a)) shall be determined, and Units’ Capital Accounts correspondingly reduced, after the allocation of the other components of Net Asset Value, as described above.
 
 
(d)
Operating expenses shall be allocated among the Units pro rata based on their respective Net Asset Values as of the beginning of the month.
 
 
(e)
Extraordinary costs, if any, shall be allocated as incurred in such manner as the Sponsor may deem to be fair and equitable.
 
 
 
 A-6
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
(f)
Organizational and initial offering costs shall be deducted from Net Asset Value in installments as of the end of each of the first 60 calendar months after the initial issuance of the Units, as contemplated by Section 2.05(b).  However, for financial reporting purposes, organizational costs, to the extent material, will be deducted from net asset value as of the date of such initial issuance and initial offering costs will be amortized over a 12-month period to the extent material.
 
 
(g)
All Investors, by becoming party to this Agreement, hereby agree and consent to the Sponsor’s authority to establish whatever reserves the Sponsor may determine to be appropriate in order to cover losses, contingencies, liabilities, uncertain valuations and other factors.  Such authority shall extend to the Sponsor’s establishing such reserves as the sponsor of the Master Fund.  Any such reserves shall, unless the Sponsor determines that such reserves are properly attributable to certain but less than all outstanding Units, reduce the Net Asset Value of the Units of each Class pro rata based on their respective Net Asset Values, after reduction for accrued Sponsor’s Fees, operating expenses and extraordinary expenses until such time, if any, as such reserves are reversed.  Reserves, when reversed, shall be similarly allocated among the Units then outstanding pro rata based on their respective Net Asset Value (irrespective of whether such Units were outstanding when the reserves were established).
 
 
(h)
The Sponsor may suspend the calculation of Net Asset Value during any period for which the Sponsor is unable to value a material portion of this FuturesAccess Fund’s positions or when the Master Fund is not reporting its Net Asset Value.  The Sponsor will give notice of any such suspension to all Investors.
 
SECTION 2.05.  SPONSOR’S FEES; OPERATING EXPENSES..
 
 
(a)
The Sponsor shall receive monthly sponsor’s fees (“Sponsor’s Fees”), payable in arrears of 1/12 of 1.50%, 2.50%, 0% and 1.10%, respectively, of the aggregate Net Asset Value of the Class A, Class C, Class D and Class I Units, in each case as of the close of business (as determined by the Sponsor) on the last business day of each calendar month (Net Asset Value for purposes of calculating the Sponsor’s Fees shall not be reduced by the accrued Sponsor’s Fees being calculated).  The Sponsor’s Fees shall be accrued monthly.  The Sponsor may waive or reduce Sponsor’s Fees for certain Investors without entitling any other Investor to any such waiver or reduction.
 
 
(b)
As contemplated by Section 2.04(f), this FuturesAccess Fund shall reimburse the Sponsor for the organizational and initial offering costs incurred by this FuturesAccess Fund in respect of the initial offering of the Units (of all Classes combined) as determined by the Sponsor in its sole discretion.
 
 
(c)
The Sponsor’s Fees, as well as operating expenses due to the Sponsor (including:  organizational and initial offering costs; ongoing offering costs; administrative, custody, transfer, subscription and redemption processing, legal, regulatory, filing, tax, audit, escrow, accounting and printing costs; and extraordinary expenses), shall be debited by the Sponsor directly from this FuturesAccess Fund’s account and paid to the Sponsor, where appropriate, as if to a third party, not credited to the Sponsor’s Capital Account.
 
 
(d)
A management fee (“Management Fee”) and performance fee (“Performance Fee”) shall be paid to the Trading Advisor at the Master Fund level.
 
 
(e)
This FuturesAccess Fund shall pay all transaction costs relating to any direct investing done by it, as incurred.
 
 
(f)
The Sponsor’s Fees, but not reimbursement payments for organizational and initial offering costs, shall be appropriately pro rated in the case of partial calendar months.
 
 
(g)
This FuturesAccess Fund shall pay all expenses, including administrative and ongoing offering costs, as well as any extraordinary expenses, incurred in its operations (including the expenses of any services provided by the Sponsor, other than in its capacity as Sponsor, or its affiliates); provided, that this FuturesAccess Fund shall not pay any allocable Sponsor overhead.
 
 
 
 A-7
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
(h)
The Sponsor retains outside service providers to supply tax reporting, custody and accounting services to FuturesAccess.  This FuturesAccess Fund’s operating costs will include its allocable share of the fees and expenses of such service providers, as well as the fees and expenses of any Merrill Lynch entity which may provide such (or other) services in the future.
 
 
(i)
The Class Z Units and Capital Account of the Sponsor (if any) shall not be subject to Sponsor’s Fees.
 
SECTION 2.06.  ALLOCATION OF PROFITS AND LOSSES FOR FINANCIAL PURPOSES.  As of the end of each Accounting Period and before giving effect to any redemptions then being made, the Closing Capital Account of each Class shall be determined by adjusting the Opening Capital Account of each such Class as of the beginning of such Accounting Period in the following manner:
 
 
(a)
Any increase or decrease in the Net Asset Value of this FuturesAccess Fund, after the deduction of all operating expenses, but prior to accrual of the Sponsor’s Fees, during such Accounting Period shall be credited pro rata, without any order or priority, among:  (i) each Class of Units; and (ii) the Sponsor’s Capital Account, if any, based in each case on the aggregate Opening Capital Accounts attributable to each such Class of Units and the Sponsor’s Capital Account.  Extraordinary expenses shall be allocated as the Sponsor may determine.
 
 
(b)
If the Closing Capital Account per Unit of any Class is reduced to zero, any further decrease in the Net Asset Value per Unit shall be allocated to the Sponsor’s Capital Account, if any.
 
 
(c)
The Sponsor’s Fee shall be debited from each Class, in each case after the Section 2.06(a) and (b) allocations are made.
 
 
(d)
The Net Assets of each Class shall be divided equally among all Units of such Class.
 
SECTION 2.07.  ALLOCATION OF PROFITS AND LOSSES FOR INCOME TAX PURPOSES.
 
 
(a)
A Tax Account shall be established for each Unit of each Class.  The Tax Accounts of all outstanding Units shall initially be equal to each Unit’s net purchase price (i.e., the subscription price for such Unit reduced by any sales commissions) and shall subsequently be increased by such Unit’s share of the taxable and tax-exempt income and gain of this FuturesAccess Fund and decreased by such Unit’s share of the items of loss or expense and nondeductible items of loss or expense of this FuturesAccess Fund, as well as by any distributions.
 
 
(b)
For federal income tax purposes, items of ordinary income and loss, capital gain and capital loss shall, unless the Sponsor believes that doing so would not equitably reflect the economic experience of the Units, be allocated as of December 31 of each year among the Units, in the following order and priority:
 
 
(i)
Items of ordinary income and deduction generated by this FuturesAccess Fund (as reported to it by the Master Fund) shall be allocated pro rata among the Units which were outstanding during the months in such year when such items of ordinary income and deduction accrued.
 
 
(ii)
Gains will be allocated FIRST, to Investors who have redeemed Units during such year (including as of December 31), to the extent of the positive difference (if any) between the amounts received or receivable upon redemption and the respective Tax Account balances of the redeemed Units.  SECOND, gains will be allocated to Investors to the extent of the positive difference (if any) between the Capital Account balance and the Tax Account balance attributable to their remaining Units.  THIRD, gains will be allocated among all Investors based on the respective Net Asset Values of their outstanding Units.
 
 
(iii)
Losses shall be allocated FIRST, to Investors who have redeemed Units during such year (including as of December 31), to the extent of the negative difference (if any) between the amounts received or receivable upon redemption and the respective Tax Account balances of the
 
 
 
 
 A-8
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
 
redeemed Units.  SECOND, losses shall be allocated to Investors to the extent of the negative difference (if any) between the Capital Account balance and Tax Account balance attributable to their remaining Units.  THIRD, losses shall be allocated among all Investors based on the respective Net Asset Values of their outstanding Units.
 
 
(iv)
In the case of each of the FIRST and SECOND allocation levels set forth in Sections 2.07(b)(ii) and (iii), if there is insufficient gain or loss to make the complete allocation required at such level, such allocation will be made pro rata among all Investors who are subject to an allocation at such level in accordance with the respective amounts which would have been allocated had a complete allocation been possible.
 
 
(v)
Sponsor’s Fees, as well as the operating expenses (in each case as adjusted to reflect the non-deductibility of all or a portion of such Sponsor’s Fees and operating expenses) and extraordinary expenses, shall be allocated, for tax purposes, to the Investors based on the amount of the foregoing actually debited from the Units’ respective Capital Accounts of the Investors’ respective Units.
 
 
(vi)
Items of ordinary income and/or gain attributable to amounts received by this FuturesAccess Fund from the Trading Advisor for payment to the Sponsor shall be specially allocated to the Sponsor.
 
 
(c)
The character of items of income, gain, loss or deduction (ordinary, short-term and long-term) and of the items required to be separately stated by Section 702(a) of the Internal Revenue Code of 1986, as amended (the “Code”), shall be allocated to the Investors pursuant to this Section 2.07 so as equitably to reflect, without discrimination or preference among Investors, the amounts credited or debited to the Units’ respective Capital Accounts pursuant to Section 2.06.  Furthermore, to the extent that this FuturesAccess Fund has a net long-term capital gain or loss that may be subject to more than one maximum federal income tax rate, allocations of such gain or loss shall be made pro rata from among the amounts subject to each maximum tax rate.
 
 
(d)
In the case of Units which are transferred during a fiscal year, the tax allocations shall be made to such Units as provided above.  The tax items so allocated will then be divided among the transferor(s) and the transferee(s) based on the number of months during such year that each held such Units, or in such other manner as the Sponsor may deem equitable.
 
 
(e)
Having in mind the principles of the allocations set forth above in this Section 2.07 (to which all Investors consent by becoming Investors), the Sponsor may nevertheless make such allocations of items of ordinary income and gain, ordinary deduction and loss and any items required to be separately stated by Section 702(a) of the Code as the Sponsor may deem fair and equitable — even if not consistent with the foregoing allocations — in order to cause the tax items allocated to the Investors, respectively, better to take into account (as determined by the Sponsor) the Units’ respective Opening Capital Accounts and distributive shares of net profit and net loss, any entry of new Investors, any redemptions, any differences between income for tax purposes and for Net Asset Value purposes, the differences between the Classes of Units and any other special circumstances which may arise; provided, however, that no such allocation by the Sponsor shall discriminate unfairly against any Investor; and provided further, that the Sponsor shall be under no obligation whatsoever to deviate from the allocations set forth above.
 
 
(f)
This FuturesAccess Fund may, to the extent practicable (i.e., to the extent that this FuturesAccess Fund receives gross tax allocations from the Master Fund), allocate tax items on a gross rather than a net basis.
 
 
(g)
Allocations pursuant to this Section 2.07 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Unit’s Capital Account or share of net profits, net losses or distributions.
 
 
 A-9
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
(h)
The tax allocations set forth in this Section 2.07 are intended to allocate items of this FuturesAccess Fund’s income, gains, losses and deductions (ordinary, short-term and long-term) in accordance with Sections 704(b) and 704(c) of the Code, and the regulations thereunder, including, without limitation, the requirements set forth therein regarding a “qualified income offset.”
 
 
(i)
The Sponsor may make such modifications to this Agreement as the Sponsor believes may be required to comply with Section 704 of the Code and the regulations thereunder.
 
 
(j)
In the event that the Sponsor determines to issue a new Class of Units, the foregoing tax allocations shall be adjusted so as equitably to allocate tax items between or among the different Classes.
 
SECTION 2.08.  CHARGEBACKS TO CURRENT OR FORMER INVESTORS.  Each Investor, by subscribing for Units, agrees to repay, despite the fact that such Investor no longer remains an Investor, to this FuturesAccess Fund any amount (including interest at the rate set by the Sponsor in good faith from the date of any payment of redemption or distribution proceeds to such Investor by this FuturesAccess Fund) which the Sponsor may reasonably determine to be due to this FuturesAccess Fund from such Investor as a result, for example, of any claims arising (prior or subsequent to such Investor’s withdrawal from this FuturesAccess Fund) relating to events or circumstances (whether known or unknown at the time of such Investor’s withdrawal) in existence while such Investor was an Investor or, subject to the following paragraph, in the event that the Net Asset Value per Unit (of any Class) at which such Investor was permitted to redeem is later determined to have been overstated or otherwise miscalculated due to circumstances (whether known or unknown at the time of such Investor’s redemption) in existence as of the date of redemption (either at the level of this FuturesAccess Fund or at that of the Master Fund).  In no event shall any provision of this Section 2.08 require an Investor to repay to this FuturesAccess Fund any amounts in excess of the redemption proceeds received by such Investor from, or the amounts distributed to such Investor by, this FuturesAccess Fund, plus interest thereon as provided above.
 
In the event that the Sponsor determines that an amount paid by this FuturesAccess Fund to a withdrawn or continuing Investor was less or more than the amount which such Investor was, in fact, entitled to receive, the Sponsor shall not (unless the Sponsor otherwise determines) attempt to make appropriate adjusting payments to, or formally request appropriate adjusting payments from, such withdrawn Investor or make retroactive adjustments to such continuing Investor’s Units in order to reflect such discrepancy, but rather shall reflect such adjustments in the Accounting Period in which they become known.
 
SECTION 2.09.  PROCESSING OF SUBSCRIPTIONS.
 
 
(a)
The Sponsor may admit new Investors to this FuturesAccess Fund at such times and upon such notice (if any) as the Sponsor may determine.  Investors’ Merrill Lynch Accounts will be debited on or about the issuance date of such Units, and the amount so debited, less any applicable sales commission, will be invested directly in this FuturesAccess Fund.  No interest will be payable in respect of any such subscriptions.
 
 
(b)
To the extent required by Rule 15c2-4 of the Securities Exchange Act of 1934, as amended, all subscriptions while held in escrow during the initial offering period pending release to this FuturesAccess Fund shall be held by a bank independent of the Sponsor, its affiliates, and their respective officers, employees, representatives and agents (each, a “Sponsor Party” and, collectively, the “Sponsor Parties”).
 
SECTION 2.10.  VALUATION OF ASSETS.  For all purposes of this Agreement, including, without limitation, the determination of the Net Asset Value per Unit of each Class, the assets of this FuturesAccess Fund shall be valued according to the following principles:
 
 
(a)
The Net Assets of this FuturesAccess Fund are its assets less its liabilities determined in accordance with generally accepted accounting principles and as described below.
 
 
(b)
This FuturesAccess Fund’s investments in the Master Fund shall be valued by the Master Fund.
 
 
 
 A-10
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
(c)
The Sponsor shall value any asset of this FuturesAccess Fund other than its investment in the Master Fund by applying the following general principles:
 
 
(i)
commodity interests and currency interests which are traded on a United States exchange shall be valued at their settlement on the date as of which the values are being determined;
 
 
(ii)
commodity interests and currency interests not traded on a United States exchange shall be valued based upon policies established by the Sponsor, generally based on prices as reported by any reliable source selected by the Sponsor, consistently applied for each variety of interest;
 
 
(iii)
swap agreements shall be valued in the good faith discretion of the Sponsor based on quotations received from dealers deemed appropriate by the Sponsor;
 
 
(iv)
bank and other interest-bearing accounts, Treasury bills and other short-term, interest-bearing instruments shall be valued at cost plus accrued interest;
 
 
(v)
securities which are traded on a national securities exchange shall be valued at their closing price on the date as of which their value is being determined on the national securities exchange on which such securities are principally traded or on a consolidated tape which includes such exchange, whichever shall be selected by the Sponsor, or, if there is no closing price on such date on such exchange or consolidated tape, at the prior day’s closing price;
 
 
(vi)
securities not traded on a national securities exchange but traded over-the-counter shall be valued based on prices as reported by any reliable source selected by the Sponsor;
 
 
(vii)
money-market funds shall be valued at their net asset value on the date as of which their value is being determined;
 
 
(viii)
if on the date as of which any valuation is being made, the exchange or market herein designated for the valuation of any given assets is not open for business, the basis for valuing such assets shall be such value as the Sponsor may deem fair and reasonable;
 
 
(ix)
all other assets, including securities traded on foreign exchanges, and liabilities shall be valued in good faith by the Sponsor, including assets and liabilities for which there is no readily identifiable market value;
 
 
(x)
the foregoing valuations may be modified by the Sponsor if and to the extent that it shall determine that modifications are advisable in order better to reflect the true value of any asset; and
 
 
(xi)
the Sponsor, as sponsor of this FuturesAccess Fund and the Master Fund, may reduce the valuation of any asset (or of this FuturesAccess Fund or the Master Fund) by reserves established, as contemplated by Section 2.04(g), to reflect losses, contingencies, liabilities, uncertain valuations or other factors, which the Sponsor determines reduce, or might reduce, the value of such asset (or of this FuturesAccess Fund or the Master Fund as a whole in the case of reserves not specifically attributable to any particular asset).
 
All determinations of value by the Sponsor shall be final and conclusive as to all Investors, in the absence of manifest error, and the Sponsor shall be absolutely protected in relying upon valuations furnished to the Sponsor by third parties, provided that such reliance is in good faith.
 
The Sponsor may suspend the calculation of Net Asset Value during any period in which the Sponsor believes that it is reasonably impracticable to value a material portion of this FuturesAccess Fund’s assets or when the Master Fund has done so.
 
 
 
 A-11
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
SECTION 2.11.  USE OF ESTIMATES.  The Sponsor is authorized to make all Net Asset Value determinations (including, without limitation, for purposes of determining redemption payments and calculating Sponsor’s Fees) on the basis of estimated numbers (in most cases as estimated by the Sponsor itself as sponsor of the Master Fund).  The Sponsor shall not (unless the Sponsor otherwise determines) attempt to make any retroactive adjustments in order to reflect the differences between such estimated and the final numbers, but rather shall reflect such differences in the Accounting Period in which final numbers become available.  The Sponsor also shall not (unless the Sponsor otherwise determines) revise Sponsor’s Fee calculations to reflect differences between estimated and final numbers (including differences which have resulted in economic benefit to a Sponsor Party.
 
If, after payment of redemption proceeds, the Sponsor determines that adjustment to the Net Asset Value of the redeemed Units is necessary, the redeeming Investor (if the Net Asset Value is adjusted upwards) or the remaining Investors (if the Net Asset Value is adjusted downwards) will bear the risk of such adjustment.  The redeeming Investor will neither receive further distributions from, nor will it be required to reimburse, this FuturesAccess Fund in such circumstances.
 
SECTION 2.12.  ACCOUNTING PRACTICES.  All matters concerning this FuturesAccess Fund’s accounting practices shall be determined by the Sponsor on a fair and equitable basis, and all such determinations shall be final and conclusive as to all Investors.  However, the Sponsor shall be under no obligation whatsoever to make any deviations from the allocations set forth in this Article II.
 
In reporting Net Asset Values to Investors and third parties on an interim basis, the Sponsor shall be entitled to accrue fees and payments due at the end of a period as if such fees or payments were due (on a pro rata basis, if appropriate) as of the end of an interim period within such period.
 
 
ARTICLE III
PARTICIPATION IN FUTURESACCESS FUND PROPERTY;
REDEMPTIONS AND DISTRIBUTIONS
 
SECTION 3.01.  NO UNDIVIDED INTERESTS IN FUTURESACCESS FUND PROPERTY.  Each Unit shall represent an interest in this FuturesAccess Fund, not an undivided interest in any property of this FuturesAccess Fund (including its investments in the Master Fund).  The Units shall constitute personal property for all purposes.
 
SECTION 3.02.  REDEMPTIONS OF UNITS; EXCHANGES.
 
 
(a)
Timing and Amount of Redemptions.  Subject to this Section 3.02, an Investor shall be entitled to redeem as of the end of any calendar month all or part of such Investor’s Units, upon giving at least 38 days’ written or oral notice; provided that the Class Z Units may be redeemed at any time on no notice.  Investors who have Merrill Lynch customer securities accounts may give such notice by contacting their Merrill Lynch Financial Advisor, orally or in writing; Investors who no longer have a Merrill Lynch customer securities account must submit written notice of redemption, with the signature guaranteed by a United States bank or broker-dealer, to the Sponsor.
 
 
(b)
No Redemption Fees.  This FuturesAccess Fund shall not charge a redemption fee.
 
 
(c)
Payment of Redemptions.  The Sponsor shall cause this FuturesAccess Fund to distribute to redeeming Investors the estimated Net Asset Value of the Units redeemed by them, generally approximately 10 business days after the effective date of redemption, although there can be no assurance of the timing of such payment.
 
Units which have been redeemed, but the proceeds of which have not yet been paid, shall nevertheless be deemed to have ceased to be outstanding from the effective date of redemption for all other purposes hereunder.
 
No interest shall be paid to Investors on redemption proceeds held pending distribution.  This FuturesAccess Fund shall retain any such interest.
 
 
 
 A-12
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
(d)
Suspension of Redemptions.  In the event that this FuturesAccess Fund suspends the calculation of Net Asset Value, the Sponsor shall, upon written notice to all affected Investors, suspend any or all redemption requests (as well as any request to exchange Units for Units of other FuturesAccess Funds).  Any unsatisfied redemption requests shall be suspended until such time as this FuturesAccess Fund is able to determine Net Asset Value.  All Units subject to suspended redemption requests shall continue to be treated as outstanding for all purposes hereunder, as if no redemption requests relating thereto had been submitted, until the effective date of their suspended redemption.  During any period in which this FuturesAccess Fund is suspending redemptions, Investors will not be able to exchange Units for Units of other FuturesAccess Funds.  The Sponsor shall suspend redemptions during any period when the calculation of Net Asset Value has been suspended.
 
If the Sponsor determines that a portion, but not all, of pending redemption requests can be processed in due course, the requests of all Investors submitting timely redemption requests with respect to any given redemption date shall be satisfied pro rata (based on the aggregate Net Asset Value of the Units requested to be redeemed by all Investors) from such funds as the Sponsor determines are available for distribution.
 
In addition to the foregoing provisions of this Section 3.02(d), the Sponsor may delay or suspend both the payment of redemption proceeds and the effective date of redemptions if the Sponsor determines that not doing so would have adverse consequences for the non-redeeming Investors.
 
 
(e)
Exchanges.  Investors may generally exchange Units for Units in other FuturesAccess Funds as described in the FuturesAccess Program Subscription and Exchange Agreement and Signature Pages thereto, as supplemented and amended from time to time.  Any circumstance leading to a delay or suspension of either redemption dates or the receipt of the proceeds of redemptions from this FuturesAccess Fund shall have a corresponding effect on Investors’ exercise of their Exchange Privileges relating to this FuturesAccess Fund.
 
SECTION 3.03.  WITHDRAWALS OF CAPITAL BY THE SPONSOR.
 
 
(a)
The Sponsor may withdraw capital from its Capital Account(s), if any, without notice to the Investors.
 
 
(b)
To the extent Merrill Lynch has provided any “seed” capital to this FuturesAccess Fund and/or the Master Fund, Merrill Lynch may redeem such seed capital pursuant to the terms set forth in the Disclosure Document.  For the avoidance of doubt, Merrill Lynch may withdraw seed capital at different times and on different terms than are available to Investors.
 
SECTION 3.04.  MANDATORY REDEMPTIONS.
 
 
(a)
The Sponsor may mandatorily redeem part or all of the Units held by a particular Investor if the Sponsor determines that:  (i) such Investor’s continued holding of Units could result in adverse consequences to this FuturesAccess Fund; (ii) such Investor has a history of excessive exchanges between different FuturesAccess Funds and/or HedgeAccess Funds that is contrary to the purpose and/or efficient management of FuturesAccess and/or HedgeAccess; (iii) such Investor’s investment in the Units, or aggregate investment in FuturesAccess, is below the minimum level established by the Sponsor (including any increase in such minimum level that the Sponsor may implement in the future); or (iv) for any other reason.
 
 
(b)
The Sponsor will mandatorily redeem all of this FuturesAccess Fund’s outstanding Units in the event that the Sponsor concludes that it is no longer advisable to operate this FuturesAccess Fund or if the amount of assets invested in this FuturesAccess Fund declines to a level that the Sponsor believes makes the continued operation of this FuturesAccess Fund impracticable or uneconomical.
 
 
(c)
Units mandatorily redeemed shall be redeemed as of the specified month-end without any further action on the part of the affected Investor, and the provisions of Sections 3.02 and 3.07 shall apply.  In the
 
 
 
 A-13
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
 
event that the Sponsor mandatorily redeems any of an Investor’s Units, such Investor shall have the option to redeem all of such Investor’s Units as of the date fixed for redemption.
 
SECTION 3.05.  MANDATORY REDEMPTIONS TO PAY TAXES.  In the event that this FuturesAccess Fund is required to pay or withhold state, local or other taxes with respect to a particular Investor or Investors, this FuturesAccess Fund may redeem an appropriate number of such Investor’s or Investors’ Units as of the end of the Accounting Period immediately following such payment in order to reimburse this FuturesAccess Fund for the amount of such payment, together with interest on the amounts so paid at the 91-day Treasury bill rate as in effect as of the beginning of each calendar month, starting with the calendar month in which such payment is made, through the end of such Accounting Period.
 
SECTION 3.06.  DISTRIBUTIONS.  Distributions by this FuturesAccess Fund to Investors shall be made in the sole discretion of the Sponsor.  No distributions are required.
 
SECTION 3.07.  FORM OF DISTRIBUTION AND REDEMPTION PAYMENTS.  No Investor shall have the right to demand or receive any property other than cash upon redemption.  Distributions or payouts made to Investors may be made in cash or in-kind, provided that such in-kind distribution or payout is not materially adverse to the interests of the Investors.
 
SECTION 3.08.  REMOVAL OF THE SPONSOR.  Upon at least 60 days written notice to the Sponsor and all Investors in this FuturesAccess Fund, the Sponsor may be required to withdraw as manager of this FuturesAccess Fund by a vote of Investors owning not less than 50% of the outstanding Units (by Net Asset Value), not including Units held by Sponsor Parties.  Any such removal shall be effective as of the end of the calendar quarter in which such vote occurs.
 
ARTICLE IV
WITHDRAWAL OF THE SPONSOR AND INVESTORS
 
SECTION 4.01.  WITHDRAWAL OF THE SPONSOR.
 
 
(a)
The Sponsor may withdraw from this FuturesAccess Fund at any time, without any breach of this Agreement, upon 90 calendar days’ written notice to the Investors.  Withdrawal of the Sponsor shall not dissolve this FuturesAccess Fund if at the time there is at least one other manager remaining; however, all Investors shall be entitled to redeem their Units, in total and not in part, as of the effective date of any such withdrawal by the Sponsor, unless an entity affiliated with the Sponsor remains as a manager of this FuturesAccess Fund.  Nothing in this Section 4.01(a) shall, however, restrict the Sponsor from assigning and delegating its rights and obligations under this Agreement to an affiliate of the Sponsor upon notice (which need not be prior notice) to the Investors or in connection with the sale of all or a material portion of the Sponsor’s equity or assets.
 
 
(b)
Withdrawal of the last remaining manager shall dissolve this FuturesAccess Fund.
 
SECTION 4.02.  WITHDRAWAL OF AN INVESTOR.  An Investor shall withdraw from this FuturesAccess Fund upon redemption of all of such Investor’s outstanding Units.  Withdrawal of an Investor shall not be a cause for dissolution of this FuturesAccess Fund.
 
SECTION 4.03.  STATUS AFTER WITHDRAWAL.  Except to the extent provided in Section 2.08 or Section 7.02, each Investor upon redemption of the last of such Investor’s Units shall cease to have any rights under this Agreement.
 
ARTICLE V
MANAGEMENT
 
SECTION 5.01.  AUTHORITY OF THE SPONSOR.
 
 
(a)
The management and operation of this FuturesAccess Fund and the determination of its policies shall be vested exclusively in the Sponsor.  The Sponsor shall have the authority and power on behalf and in the name of this FuturesAccess Fund to carry out any and all of the objectives and purposes of this
 
 
 A-14
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
 
FuturesAccess Fund set forth in Section 1.01: make, execute, sign and file a Certificate of Formation of this FuturesAccess Fund, any amendments thereto authorized herein, any amendments to this Agreement authorized herein, and all such other instruments, documents and certificates, which may, from time to time, be required by, or deemed advisable by the Sponsor under, the laws of the United States of America, the State of Delaware, the State of New Jersey, the State of New York or any other state or political subdivision in which the Sponsor shall determine that this FuturesAccess Fund shall do business, to effectuate, implement and continue the valid existence of this FuturesAccess Fund; and perform all acts and enter into, execute and perform all contracts and other undertakings which the Sponsor may deem necessary or advisable in connection with such objectives and purposes or incidental thereto.  All actions and determinations to be made by the Sponsor hereunder shall, unless otherwise expressly provided, be made in the Sponsor’s sole and absolute discretion.
 
 
(b)
The Sponsor is specifically authorized to manage this FuturesAccess Fund’s cash flow and pay costs by bank or other borrowings.
 
SECTION 5.02.  SERVICE PROVIDERS; INVESTMENTS; ACCOUNTS
 
.  The Sponsor is hereby authorized and empowered to carry out and implement any and all of the objectives and purposes of this FuturesAccess Fund, including and without limiting the generality of the foregoing:
 
 
(a)
to place capital under the management of, and withdraw capital from, the discretionary control of the Trading Advisor by investing all or substantially all of this FuturesAccess Fund’s assets in the Master Fund and redeeming therefrom; provided, that the Master Fund shall not retain any other Trading Advisor (although the Sponsor may dissolve this FuturesAccess Fund and/or the Master Fund at any time or engage the Trading Advisor at the FuturesAccess fund level rather than the Master Fund level);
 
 
(b)
to engage attorneys, accountants, agents and other persons as the Sponsor may deem necessary or advisable;
 
 
(c)
to open, maintain and close accounts, including margin, discretionary and cash management accounts, with brokers, dealers, counterparties or other persons (in each case, including affiliates of the Sponsor) and to pay the customary fees and charges applicable to transactions in, or the maintenance of, all such accounts;
 
 
(d)
to invest in money-market funds (including funds sponsored by affiliates of the Sponsor), Treasury bills or other short-term, interest-bearing instruments;
 
 
(e)
to open, maintain and close bank and other interest-bearing and non-interest-bearing accounts; and
 
 
(f)
to enter into, make, execute and perform such contracts, agreements and other undertakings as the Sponsor may deem necessary, advisable or incidental to the conduct of the business of this FuturesAccess Fund.
 
SECTION 5.03.  ACTIVITIES OF THE SPONSOR PARTIES.
 
 
(a)
The respective Sponsor Parties will not devote their full business time, or any material portion of their business time, to this FuturesAccess Fund, as each is involved in the management of numerous other client and proprietary accounts.  However, the Sponsor hereby agrees to devote to the objectives and purposes of this FuturesAccess Fund such amount of the business time of its officers and employees as the Sponsor shall deem necessary for the management of the affairs of this FuturesAccess Fund; provided, however, that nothing contained in this Section 5.03(a) shall preclude any Sponsor Party from acting as a director, stockholder, officer or employee of any corporation, a trustee of any trust, a partner of any partnership, a manager or member of any other limited liability company or an administrative official of any other business or governmental entity, or from receiving compensation for services rendered thereto, from participating in profits derived from investments in any such entity or from investing in any securities or other property for such person’s own account.
 
 
 
 A-15
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
 
(b)
As contemplated by Section 2.05(g), the Sponsor retains outside service providers to supply certain services to FuturesAccess, including, but not limited to: tax reporting; custody; accounting; and escrow services to FuturesAccess.  Operating costs include this FuturesAccess Fund’s allocable share of the fees and expenses of such (or other) service providers, as well as the fees and expenses of any Sponsor Party which may provide such (or other) services in the future.
 
SECTION 5.04.  SERVICES TO THIS FUTURESACCESS FUND.  Any Sponsor Party may perform administrative services for this FuturesAccess Fund, without such Sponsor Party waiving its fees for such services.
 
SECTION 5.05.  INTERESTED PARTIES.  The fact that a Sponsor Party or an Investor is directly or indirectly interested in or connected with this FuturesAccess Fund or a related party with which or with whom this FuturesAccess Fund has dealings, including but not limited to the Sponsor’s sharing in the Management Fees paid and Performance Fees paid by the Master Fund to the Trading Advisor, the receipt or rebate of other advisory and/or management fees, brokerage commissions, “bid-ask” spreads, mark-ups or other expenses, shall not preclude such dealings or make them void or voidable; and neither this FuturesAccess Fund nor any of the Investors shall have any rights in or to any such dealings or in or to any profits derived therefrom.
 
SECTION 5.06.  EXCULPATION.  The Sponsor Parties shall not be liable to this FuturesAccess Fund or any Investor for any claims, costs, expenses, damages or losses arising out of or in connection with this Agreement, the Sponsor acting as manager of this FuturesAccess Fund, this FuturesAccess Fund in general or the offering of the Units, for any conduct undertaken or omitted in good faith, and in the belief that such conduct or omission was in, or not opposed to, the best interests of this FuturesAccess Fund; provided, that such conduct or omission did not constitute gross negligence or intentional misconduct on the part of such Sponsor Party.
 
No Sponsor Party shall be liable to this FuturesAccess Fund or any Investor for failure to obtain for the Master Fund or this FuturesAccess Fund the lowest negotiated brokerage commission rates, or to combine or arrange trading orders so as to obtain the lowest brokerage commission rates with respect to any transaction on behalf of the Master Fund or this FuturesAccess Fund or for the failure to recapture, directly or indirectly, any brokerage commissions for the benefit of the Master Fund or this FuturesAccess Fund.
 
No Sponsor Party shall be liable to this FuturesAccess Fund or any Investor for claims, costs, expenses, damages or losses due to circumstances beyond any Sponsor Party’s control, or due to the negligence, dishonesty, bad faith or misfeasance of any third party chosen by a Sponsor Party in good faith.
 
In no respect by way of limiting the foregoing exculpatory provisions but rather by way of greater certainty, no Sponsor Party shall be liable to this FuturesAccess Fund or any Investor for any actions or omissions of:  (i) the Trading Advisor; (ii) any broker, dealer or counterparty unaffiliated with Merrill Lynch chosen by a Sponsor Party in good faith; or (iii) any broker, dealer or counterparty chosen by the Trading Advisor for the Master Fund.
 
Affiliates of the Sponsor will provide this FuturesAccess Fund with futures brokerage, forward dealing and other counterparty and dealer services, and shall receive compensation in connection therewith.
 
SECTION 5.07.  INDEMNIFICATION.  This FuturesAccess Fund shall indemnify and hold harmless the Sponsor Parties from and against any claims, costs, expenses, damages or losses (including, without limitation, from and against any judgment, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened action or proceeding) suffered or sustained by any of them by reason of the fact that a Sponsor Party is or was connected in any respect with this FuturesAccess Fund; provided, that the conduct or omission which led to such claim, cost, expense, damage or loss met the standard of exculpation set forth in Section 5.06 above.
 
This FuturesAccess Fund shall advance payments asserted by a Sponsor Party to be due under the preceding paragraph pending a final determination of whether such indemnification is, in fact, due; provided, that such Sponsor Party agrees in writing to return any amounts so advanced (without interest) in the event such indemnification is finally determined not to be due.
 
 
 
 A-16
 
Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 
 
 
Whether or not a Sponsor Party is entitled to indemnification hereunder shall be determined by the judgment of independent counsel as to whether such Sponsor Party has reasonable grounds for asserting that indemnification is so due, unless otherwise determined by a court, arbitral tribunal or administrative forum.
 
In the event this FuturesAccess Fund is made a party to any claim, dispute or litigation, or otherwise incurs any loss or expense, as a result of or in connection with any Investor’s activities, obligations or liabilities unrelated to this FuturesAccess Fund’s business, such Investor shall indemnify and reimburse this FuturesAccess Fund for all loss and expense incurred, including attorneys’ fees.
 
SECTION 5.08.  THE MASTER FUND’S STANDARD OF LIABILITY AND INDEMNIFICATION.  The Investors acknowledge and agree that the Master Fund will apply the same standard of liability and indemnification as set forth in this Agreement to the Sponsor in its capacity as sponsor of the Master Fund.
 
SECTION 5.09.  INVESTORS’ TRANSACTIONS.  Nothing in this Agreement is intended to prohibit any Investor from buying, selling or otherwise transacting in securities, commodity interests, currency interests, swap agreements or other instruments for such Investor’s own account, including commodity interests, currency interests, swap agreements, securities or other instruments which are the same as those held by this FuturesAccess Fund or the Master Fund.
 
SECTION 5.10.  RELIANCE BY THIRD PARTIES.  In dealing with the Sponsor acting on behalf of this FuturesAccess Fund, no person shall be required to inquire into the authority of the Sponsor to bind this FuturesAccess Fund.  Persons dealing with this FuturesAccess Fund shall also be entitled to rely on a certification by the Sponsor with regard to the authority of other persons to act on behalf of this FuturesAccess Fund in any matter.
 
SECTION 5.11.  REGISTRATION OF ASSETS.  Any assets owned by this FuturesAccess Fund may be registered in this FuturesAccess Fund’s name, in the name of a nominee or in “street name.”
 
SECTION 5.12.  LIMITATION ON AUTHORITY OF THE SPONSOR.  The Sponsor shall not have the authority without the consent of Investors holding more than 50% of the outstanding Units (by Net Asset Value), not including Units held by Sponsor Parties, then held by Investors to:
 
 
(a)
do any act in contravention of this Agreement (other than pursuant to the Sponsor’s authority to unilaterally amend this Agreement, as provided in Section 11.03);
 
 
(b)
confess a judgment against this FuturesAccess Fund; or
 
 
(c)
possess this FuturesAccess Fund’s property or assign rights to this FuturesAccess Fund’s property for other than a purpose of this FuturesAccess Fund.
 
ARTICLE VI
ADMISSION OF INVESTORS
 
SECTION 6.01.  PROCEDURE AS TO NEW INVESTORS.  The Sponsor may, as of the beginning of any calendar month (or as of such other times as the Sponsor may deem appropriate), admit one or more new Investors by issuing to such Investor(s) Units of the appropriate Class.  Each new Investor to FuturesAccess shall execute and deliver an appropriate FuturesAccess Program Subscription and Exchange Agreement, and the Sponsor may require that each additional Capital Contribution (whether a new subscription or an exchange) be accompanied by a new FuturesAccess Program Subscription and Exchange Agreement Signature Page.  This FuturesAccess Fund may charge an Investor such amount as may be deemed appropriate by the Sponsor to compensate this FuturesAccess Fund in the case of any Capital Contribution received by this FuturesAccess Fund after the day as of which the new Investor making such Capital Contribution is admitted to this FuturesAccess Fund and such Investor’s Units are deemed to have been issued.
 
Admission of a new Investor shall not result in a dissolution of this FuturesAccess Fund.
 
SECTION 6.02.  PROCEDURE AS TO NEW MANAGERS.  One or more additional managers may be admitted to this FuturesAccess Fund by the Sponsor, without the consent of any Investor, if, but only if, the additional manager or
 
 
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managers are affiliates of the Sponsor or successors to all or a material portion of the Sponsor’s equity or assets.  The Sponsor shall promptly notify the Investors of the admission of any such affiliated manager or managers (such notice need not, however, be prior notice).  No manager or managers which is not or are not affiliated with the Sponsor may be admitted to this FuturesAccess Fund without the consent of Investors holding more than 50% of the outstanding Units (by Net Asset Value), not including Units held by Sponsor Parties, then held by Investors; provided, that the foregoing restriction shall not apply in the case of a sale of all or a material portion of the Sponsor’s equity or assets.
 
 
ARTICLE VII
BOOKS OF ACCOUNT; AUDITS; REPORTS TO INVESTORS
 
SECTION 7.01.  BOOKS OF ACCOUNT.  The books of account of this FuturesAccess Fund shall be maintained in accordance with generally accepted accounting principles under the accrual basis of accounting by or under the supervision of the Sponsor and shall be open to inspection by any Investor or such Investor’s representative during regular business hours; provided, however, that such books and records shall only be available for inspection pursuant to a valid, non-commercial purpose related to an Investor’s status as an Investor.  This FuturesAccess Fund’s books of account shall not, however, for such purpose include any record of the particular transactions entered into by this FuturesAccess Fund.
 
SECTION 7.02.  ANNUAL AUDIT.  The accounts of this FuturesAccess Fund shall be audited as of the close of each fiscal year by an independent public accounting firm (the “Accountant”) selected by the Sponsor and in accordance with the applicable Commodity Futures Trading Commission regulations.
 
The Sponsor or its agents shall cause to be prepared and mailed to each Investor, including Investors who have redeemed all of their Units and withdrawn but who were Investors at any time during a fiscal year, audited financial statements and a report prepared by the Accountant, setting forth as of the end of such fiscal year:
 
 
(a)
the assets and liabilities of this FuturesAccess Fund;
 
 
(b)
the net capital appreciation or depreciation of this FuturesAccess Fund for such fiscal year;
 
 
(c)
the Net Asset Value of this FuturesAccess Fund as of the end of such fiscal year; and
 
 
(d)
the Net Asset Value per Unit of each Class as of the end of such fiscal year.
 
The Sponsor shall not be required to provide Investors with an annual audit in respect of any given year by any particular date in the following year, nor shall the Net Asset Value of the Units be audited as of any date other than the end of a fiscal year.
 
The Investors acknowledge that the Sponsor will be unable to provide the Investors with this FuturesAccess Fund’s audited financial statements until the Sponsor has received the audited financial statements or necessary unaudited financial information from the Master Fund.
 
The Sponsor or its agents shall cause each Investor, including former Investors who were Investors at any time during such fiscal year, to be furnished with all information relating to this FuturesAccess Fund necessary to enable such Investor to prepare such Investor’s federal income tax return; provided, that all Investors acknowledge and agree that such information may initially be provided in the form of estimates pending completion of this FuturesAccess Fund’s audit for such fiscal year, and that Investors may be required to obtain extensions of the date by which their federal and state income tax returns must be filed.  The Sponsor will have no liability to any Investor as a result of such Investor being required to obtain any such extensions.
 
SECTION 7.03.  INTERIM REPORTS.  From time to time, but no less frequently than monthly, the Sponsor shall cause to be prepared and delivered (at the expense of this FuturesAccess Fund), to each Investor interim reports indicating this FuturesAccess Fund’s estimated results of operations and presenting such other matters concerning this FuturesAccess Fund’s operations as the Sponsor may deem appropriate as well as those required by the applicable Commodity Futures
 
 
 
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Trading Commission regulations.  The estimated performance of this FuturesAccess Fund will be available upon request to the Sponsor by any Investor.
 
ARTICLE VIII
CONFLICTS OF INTEREST
 
SECTION 8.01.  INVESTORS’ CONSENT.  Each Investor, by subscribing for Units, gives full and informed consent to the conflicts of interest to which the Sponsor Parties are subject in their operation of this FuturesAccess Fund, as disclosed in the Disclosure Document and as contemplated herein (including without limitation Merrill Lynch’s acting as exclusive clearing broker and principal forward contract and swap dealer for the Master Fund and, if applicable, this FurturesAccess Fund, at rates and dealer spreads which have not been negotiated at arm’s-length as well as the Sponsor sharing in the Management and Performance Fees paid with respect to this FuturesAccess Fund’s investment in the Master Fund, whether such sharing is achieved directly or through the Master Fund’s special allocation to the Sponsor of such shared Management Fees and Performance Fees, and covenants not to object to or bring any proceedings against any Sponsor Party relating to any such conflicts of interest; provided, that such Sponsor Party complies with the standard of exculpation set forth in Section 5.06.
 
The Sponsor is hereby specifically authorized by all Investors to cause the Master Fund to use Merrill Lynch as the Master Fund’s exclusive clearing broker and primary forward contract and swap counterparty, and all Investors acknowledge and agree that the brokerage rates and dealer spreads charged by Merrill Lynch to the Master Fund are higher than those charged to other Merrill Lynch clients; in addition, Merrill Lynch will retain significant additional economic benefit from possession of the Master Fund’s assets.
 
SECTION 8.02.  INVESTORS’ REPRESENTATIVE.
 
 
(a)
An Investors’ Representative — a professional services firm that is independent of the Sponsor and its affiliates and that does not otherwise perform material services for the Sponsor, this FuturesAccess Fund, or any affiliated entity (other than as an investors’ representative for other funds) — may be appointed by the Sponsor from time to time as a means of providing (or withholding) the informed consent of Investors required for this FuturesAccess Fund to enter into certain transactions which otherwise may be inappropriate or impermissible due to the conflicts of interest involved.  The transactions submitted to the Investors’ Representative for consent will typically be transactions which the Sponsor believes to be in the best interests of this FuturesAccess Fund but which, nevertheless, may require Investor consent under Section 206(3) or other applicable provisions of the Investment Advisers Act of 1940, as amended (the “Advisers Act”).  The role of the Investors’ Representative will not be to make investment recommendations or pricing determinations nor to review the merits of any transaction presented to it, but only to confirm that the conflicts of interest involved have been resolved and that this FuturesAccess Fund enters into such transactions on an arm’s length basis.  The Investors’ Representative will be exculpated and indemnified by this FuturesAccess Fund to the extent that its actions are not determined to constitute fraud, bad faith, negligence, gross negligence or reckless or intentional misconduct.
 
 
(b)
In the event an Investors’ Representative is appointed, the Sponsor will notify Investors of any change in the appointment of the Investors’ Representative and will report annually to Investors all transactions approved by the Investors’ Representative during the fiscal-year period then ended.  The Sponsor may resolve conflict of interest situations itself without referring the matter to the Investors’ Representative, unless otherwise required by law.
 
 
(c)
By subscribing for Units in this FuturesAccess Fund, each Investor expressly authorizes the Sponsor to appoint an Investors’ Representative to act as its agent in consenting (or withholding consent) to transactions presented to it.
 
 
 
 
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ARTICLE IX
DISSOLUTION AND WINDING UP OF THIS FUTURES ACCESS FUND
 
SECTION 9.01.  EVENTS OF DISSOLUTION.  This FuturesAccess Fund will be dissolved, the affairs of this FuturesAccess Fund will be wound up and this FuturesAccess Fund will be liquidated upon the occurrence of any of the following events:
 
 
(a)
bankruptcy, dissolution, withdrawal or other termination of the last remaining manager of this FuturesAccess Fund;
 
 
(b)
any event which would make unlawful the continued existence of this FuturesAccess Fund;
 
 
(c)
withdrawal of the Sponsor unless at such time there is at least one remaining manager; or
 
 
(d)
the determination by the Sponsor to liquidate this FuturesAccess Fund and wind up its affairs.
 
Nothing in this Section 9.01 shall impair the right of Investors holding more than 50% of the outstanding Units then held by Investors to vote within 90 calendar days of any of the foregoing events of dissolution to continue this FuturesAccess Fund on the terms set forth herein (if it is lawful to do so), and to appoint one or more managers for this FuturesAccess Fund.
 
SECTION 9.02.  DISSOLUTION.  Upon the dissolution of this FuturesAccess Fund, the Sponsor (or, if the Sponsor has withdrawn, such other liquidator as the Investors may, by vote of more than 50% of the outstanding Units by Net Asset Value, not including Units held by Sponsor Parties, select) shall wind up this FuturesAccess Fund’s affairs and, in connection therewith, shall distribute this FuturesAccess Fund’s assets in the following manner and order:
 
 
(a)
FIRST, to the payment and discharge of all claims of creditors of this FuturesAccess Fund (including creditors who are Investors);
 
 
(b)
SECOND, to the establishment of such reserves as the Sponsor (or such other liquidator) may consider reasonably necessary or appropriate for any losses, contingencies, liabilities or other matters of or relating to this FuturesAccess Fund; provided, however, that if and when the Sponsor (or such other liquidator) determines that the causes for such reserves have ceased to exist, the monies, if any, then held in reserve shall be distributed in the manner hereinafter provided; and
 
 
(c)
THIRD, after making all final allocations contemplated by Article II (and for such purposes treating the date of dissolution as if it were a December 31), to the distribution in cash of the remaining assets of this FuturesAccess Fund among the Investors in accordance with the positive balance in each such Investor’s Closing Capital Account as of the last day of the Accounting Period in which this FuturesAccess Fund’s dissolution occurs.  Any assets distributed in kind in the liquidation shall be valued, for purposes of such distribution, in accordance with Section 2.10 as of the date of distribution, and any difference between such value and the carrying value of such assets shall, to the extent not otherwise taken into account in determining Net Asset Value, be deemed to constitute income or loss to this FuturesAccess Fund.
 
 
ARTICLE X
BENEFIT PLAN INVESTORS
 
SECTION 10.01.  INVESTMENT IN ACCORDANCE WITH LAW.  Each Investor that is, or is investing assets on behalf of, an “employee benefit plan,” as defined in, and subject to the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or a “plan,” as defined in and subject to the Code (each such employee benefit plan and plan, a “Plan”), and each fiduciary thereof who has caused the Plan to become an Investor (a “Plan Fiduciary”), represents and warrants that (a) the Plan Fiduciary has considered an investment in this FuturesAccess Fund for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in this FuturesAccess Fund for such Plan is consistent with the Plan Fiduciary’s
 
 
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responsibilities under ERISA; (c) the investment in this Futures Access Fund by the Plan does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan’s investment in this FuturesAccess Fund has been duly authorized and approved by all necessary parties; (e) none of the Sponsor, the Trading Advisor, Merrill Lynch, any of their respective affiliates or any of their respective agents or employees:  (i) has investment discretion with respect to the investment of assets of the Plan used to purchase Units; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase Units for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to make, and is responsible for, the decision for the Plan to invest in this FuturesAccess Fund, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to minimize the risks of large losses; (ii) is independent of the Sponsor, the Trading Advisor, Merrill Lynch, and each of their respective affiliates, and (iii) is qualified to make such investment decision.
 
SECTION 10.02.  DISCLOSURES AND RESTRICTIONS REGARDING BENEFIT PLAN INVESTORS.  Each Investor that is a “benefit plan investor” (defined as any Plan and any entity (“Plan Assets Entity”) deemed for any purpose of ERISA or Section 4975 of the Code to hold assets of any Plan) represents that the individual signing the Subscription Agreement on behalf of such Investor has disclosed such Investor’s status as a benefit plan investor by accurately responding to the applicable questions in the Subscription Agreement.  Each Investor that is not a “benefit plan investor” represents and agrees that if at a later date such Investor becomes a benefit plan investor, such Investor will immediately notify the Sponsor of such change of status.  In addition, each Plan Assets Entity agrees to promptly provide information to the Sponsor, upon the Sponsor’s reasonable request, regarding the percentage of the Plan Assets Entity’s equity interests held by benefit plan investors.  Notwithstanding anything herein to the contrary, the Sponsor, on behalf of this FuturesAccess Fund, may take any and all action including, but not limited to, refusing to admit persons as Investors or refusing to accept additional capital contributions, and requiring the withdrawal of the Units of any Investor in accordance with Section 3.04 hereof, as may be necessary or desirable to assure that at all times less than twenty-five percent (25%) of the total value of each “class of equity interests in this FuturesAccess Fund,” as determined pursuant to United States Department of Labor Regulation Section 2510.3-101 and Section 3(42) of ERISA, is held by benefit plan investors (not including the investments of the Sponsor, the Trading Advisor, any person who provides investment advice for a fee (direct or indirect) with respect to this FuturesAccess Fund and individuals and entities (other than benefit plan investors) that are “affiliates,” as such term is defined in the applicable regulation promulgated under ERISA, of any such person) or to otherwise prevent this FuturesAccess Fund from holding “plan assets” under Section 3(42) of ERISA.
 
 
ARTICLE XI
MISCELLANEOUS PROVISIONS
 
SECTION 11.01.  INVESTORS NOT TO CONTROL.  The Investors shall take no part in the conduct or control of this FuturesAccess Fund’s business and shall have no authority or power to act for or to bind this FuturesAccess Fund.
 
SECTION 11.02.  POWER OF ATTORNEY.  Each Investor, by subscribing for Units, does hereby constitute and appoint the Sponsor, as such Investor’s true and lawful representative and attorney-in-fact, with authority in such Investor’s name, place and stead to make, execute, sign and file a Certificate of Formation of this FuturesAccess Fund, any amendments thereto authorized herein, any amendments to this Agreement authorized herein, and all such other instruments, documents and certificates which may, from time to time, be required by, or deemed advisable by the Sponsor under, the laws of the United States of America, the State of Delaware, the State of New Jersey, the State of New York or any other state or political subdivision in which the Sponsor shall determine that this FuturesAccess Fund shall do business, to effectuate, implement and continue the valid existence of this FuturesAccess Fund.
 
SECTION 11.03.  AMENDMENTS; CONSENTS.  This Agreement may not be modified or amended without the written consent of the Sponsor.
 
 
 
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This Agreement may be modified or amended at any time with the consent of the Sponsor and by Investors holding more than 50% of the outstanding Units (by Net Asset Value) not including Units held by Sponsor Parties.
 
For all purposes of this Agreement, except as provided in the last paragraph of this Section 11.03, when the consent of Investors is required, the affirmative consent of Investors is not required; “negative consent” by failure to object in writing after reasonable notice of a proposed modification or amendment is sufficient — 30 calendar days to be conclusively presumed to constitute “reasonable notice” for such purposes.
 
The Sponsor may, without the consent of the Investors, modify or amend any provision of this Agreement for any of the following purposes:
 
 
(a)
to add to this Agreement any further covenants, restrictions, undertakings or other provisions for the protection or benefit of Investors;
 
 
(b)
to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions contained herein or in the Disclosure Document;
 
 
(c)
to cause the allocations contained in Article II to comply with Section 704 of the Code or any other statutory provisions or regulations relating to such allocations;
 
 
(d)
to provide for the issuance of new Classes of Units, or to amend the manner in which Units may be exchanged among funds in FuturesAccess or between different Classes of Units, provided that doing so is not adverse to outstanding Units (as contemplated by Section 11.13);
 
 
(e)
to take such actions as may be necessary or appropriate to avoid the assets of this FuturesAccess Fund being treated for any purpose of ERISA or Section 4975 of the Code as assets of any plan or to avoid this FuturesAccess Fund’s engaging in a prohibited transaction as defined in Section 406 of ERISA or Section 4975(c) of the Code; or
 
 
(f)
to cause this FuturesAccess Fund to retain the Trading Advisor directly at this FuturesAccess Fund level, rather than at the Master Fund level, including to reflect expenses that would be incurred directly by this FuturesAccess Fund such as brokerage and other trading expenses and Management and Performance Fees, calculation of the Net Asset Value of any assets held directly by this FuturesAccess Fund and any other related changes deemed necessary or advisable by the Sponsor; or
 
 
(g)
to make any other change not materially adverse to the interests of the Investors.
 
Notwithstanding anything in this Section 11.03 to the contrary, without the affirmative written consent of each Investor affected thereby, no such modification or amendment shall: reduce the liabilities, obligations or responsibilities of the Sponsor (except that the Sponsor may take action to admit any person or entity which is an affiliate of the Sponsor as a substitute manager, and to provide for the Sponsor subsequently to withdraw from this FuturesAccess Fund or to provide for the Sponsor to withdraw from this FuturesAccess Fund without admitting any such substitute manager to this FuturesAccess Fund); increase the liabilities of Investors; or reduce the participation of Investors in the profits and losses of this FuturesAccess Fund or in any distributions made by this FuturesAccess Fund as set forth herein.
 
SECTION 11.04.  NOTICES.  Any notice to this FuturesAccess Fund or the Sponsor relating to this Agreement shall be in writing and delivered in person or by registered or certified mail and addressed to the Sponsor at the principal office of this FuturesAccess Fund.  All notices and reports sent to the Investors shall be addressed to each Investor at the address set forth in such Investor’s FuturesAccess Program Subscription and Exchange Agreement (including the FuturesAccess Program Subscription and Exchange Agreement Signature Page).  Any Investor may designate a new address by written notice to the Sponsor.  Unless otherwise specifically provided in this Agreement, a notice shall be deemed to have been given to this FuturesAccess Fund or the Sponsor when actually received by the Sponsor, and to have been given to an Investor three business days after being deposited in a post office or regularly maintained mailbox or when delivered in
 
 
 
 
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person.  The Sponsor may waive any notice requirement relating to notice to this FuturesAccess Fund or to itself, but no such waiver shall constitute a continuing waiver.
 
SECTION 11.05.  LEGAL EFFECT; MANNER OF EXECUTION.  This Agreement shall be binding upon the Investors, the Sponsor and their respective permitted successors and assigns.  This Agreement shall inure to the benefit of the foregoing parties as well as to the benefit of the Sponsor Parties.
 
This Agreement may be executed by power-of-attorney embodied in a FuturesAccess Program Subscription and Exchange Agreement (including the FuturesAccess Program Subscription and Exchange Agreement Signature Page) or similar instrument with the same effect as if the parties executing the FuturesAccess Program Subscription and Exchange Agreement (including the FuturesAccess Program Subscription and Exchange Agreement Signature Page) or similar instrument had all executed one counterpart of this Agreement; provided, that this Agreement may also be executed in separate counterparts.
 
SECTION 11.06.  ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement between the parties hereto and amends, restates, and supersedes all prior agreements among any of the parties hereto with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as between the parties unless it shall be in writing and signed by the party against whom enforcement is sought.
 
SECTION 11.07.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  THE RIGHTS AND LIABILITIES OF THE INVESTORS SHALL BE AS PROVIDED IN THE ACT, EXCEPT AS HEREIN OTHERWISE EXPRESSLY PROVIDED.
 
SECTION 11.08.  CONSENT TO JURISDICTION.  All controversies arising hereunder or in connection with the affairs of this FuturesAccess Fund shall be brought in the state or federal courts located in New York, New York, and all Investors hereby irrevocably consent to such jurisdiction and venue.
 
SECTION 11.09.  “TAX MATTERS PARTNER”; TAX ELECTIONS.  The Sponsor is designated as the “Tax Matters Partner” for this FuturesAccess Fund and shall be empowered to make or revoke any elections now or hereafter required or permitted to be made by the Code, regulations promulgated thereunder or any state or local tax law.
 
Unless the Sponsor otherwise consents, each Investor, by subscribing for Units, agrees not to treat any tax item on such Investor’s individual tax return in a manner inconsistent with the treatment of such item by this FuturesAccess Fund, as reflected on the Schedule K-1 or other information statement furnished by this FuturesAccess Fund to such Investor, or to file any claim for refund relating to any such tax item which would result in such inconsistent treatment.
 
SECTION 11.10.  DETERMINATION OF MATTERS NOT PROVIDED FOR IN THIS AGREEMENT.  The Sponsor shall be empowered to decide, in its good faith judgment, any questions arising with respect to this FuturesAccess Fund or to this Agreement, and to provide for matters arising hereunder but which are not specifically set forth herein, as the Sponsor may deem to be in, or not opposed to, the best interests of this FuturesAccess Fund.
 
SECTION 11.11.  NO PUBLICITY.  Each Investor agrees that such Investor will in no event provide information concerning this FuturesAccess Fund to any third party, knowing that such third party may use such information in any form of publication, newsletter or circular, whether publicly or privately distributed.  Each Investor’s investment in this FuturesAccess Fund, as well as the performance of such investment, shall be maintained on a strictly confidential basis; provided, that the Sponsor may make use of this FuturesAccess Fund’s performance record in the ordinary course of the Sponsor’s business activities.
 
SECTION 11.12.  SURVIVAL.  The indemnity and exculpation provisions hereof, as well as the obligations to settle accounts, shall survive the withdrawal of any Investor as well as the dissolution of this FuturesAccess Fund.
 
SECTION 11.13.  WAIVERS.  The Sponsor may waive any provision of this Agreement restricting the actions of Investors in respect of certain but not all Investors provided that doing so will have no adverse effect on other Investors.
 
 
 
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SECTION 11.14.  VOTING RIGHTS.  The voting rights of the Units shall be determined by their respective Net Asset Values.  In determining the number of Units entitled to vote or consent and the number of votes or consents needed for approval of any matter for which such a vote or consent is provided for herein, Units held by any Sponsor Party (including, without limitation, the Sponsor’s Capital Account, if any, on a Unit-equivalent basis) shall not be counted.
 
SECTION 11.15.  ISSUANCE OF DIFFERENT CLASSES.
 
 
(a)
The Sponsor may, at any time and from time to time, issue different Classes of Units, and may adjust the allocation, voting and other provisions of this Agreement so as equitably to reflect the issuance of such additional Classes.  The Sponsor may also alter the terms on which Units of any Class are sold, provided that doing so does not adversely affect existing Investors.
 
 
(b)
The fact that, for purposes of convenience, Units issued by this FuturesAccess Fund shall be designated as being Units of different “Classes” shall in no respect imply that these Units constitute different classes of equity interests as opposed to simply being subject to different fees.
 
SECTION 11.16.  COMPLIANCE WITH THE INVESTMENT ADVISERS ACT OF 1940; SECURITIES LAWS.
 
 
(a)
This FuturesAccess Fund is not an “advisory client” of the Sponsor for purposes of the Advisers Act due to this FuturesAccess Fund’s trading futures, forward and options contracts other than securities through the Master Fund.  Nevertheless, to the extent that any provision hereof may be construed in a manner inconsistent with the Advisers Act, it is the express intent of the Sponsor and the Investors that such provision be interpreted and applied ab initio so as to comply with the Advisers Act in all respects (even if doing so effectively amends the terms of this Agreement).
 
 
(b)
Nothing in this Agreement shall be deemed to constitute a waiver by any Investor of such Investor’s rights under any federal or state securities laws.
 
 
*  *  *  *  *  *  *
 
 
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Limited Liability Company Operating Agreement Dated as of September 16, 2011
 

 

 
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their respective representatives thereunto duly authorized.
 
INVESTORS:
 
SPONSOR:
     
By:
Merrill Lynch Alternative Investments LLC
 
Merrill Lynch Alternative Investments LLC
 
Attorney-in-Fact
   
       
By:
/s/ Deann Morgan  
By:
/s/ Deann Morgan
 
Name:  Deann Morgan
   
Name:  Deann Morgan
 
Title:    V.P. of MLAI
   
Title:    V.P. of MLAI
         
         
         
         
       
 

 
 
 
 
 
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Highbridge Commodities FuturesAccess LLC
Limited Liability Company Operating Agreement Dated as of September 16, 2011

EX-10.01 4 efc11-708_ex1010.htm efc11-708_ex1010.htm
Exhibit 10.01
 
 
Futures Client
Account Application,
Disclosure Statements,
and Notices
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Lynch, Pierce, Fenner & Smith, Inc
One South Wacker Drive, Suite 300, Chicago, Illinois 60606
Tel: 312-442-5448
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 2
 
 
Documentation Instructions
 
 
Documents Page
   
Required supplemental documentation
3, 4
Please complete and/or sign the following documents that correspond to the type of account being opened. Note that the documents must be completed in full, signed, and dated in the appropriate spaces.
 
   
All Accounts
 
Client Account Application
4, 5, 6
Tax Form (W9, W8-BEN or W8-IMY – complete the form appropriate to your tax status
7, 8, 9, 10
Cross Trade Consent (if Client trades at NYBOT)
11
Arbitration Agreement (optional)
12
   
Advised Accounts
 
Discretionary Trading Authorization and Limited Power of Attorney Agreement
(or provide a copy of your advisory agreement or other power of attorney document)
13
Advisor’s Statement Concerning Registration and Provision of Disclosure Document
(to be completed by the third party advisor)
14
   
Mutual Fund Accounts
 
Investment Company Acknowledgement
15
   
Electronically Traded Accounts
 
Electronic Terms for Third Party Vendors
16, 17
   
Sample Documents
 
Sample Corporate Resolution (please complete or provide your own similarly worded document)
18
Sample Certificate of Incumbency
19
   
For Client Introduced by a Third Party Brokerage Firm Only
 
 Acknowledgement by Client of Role of Introducing Broker  
 
20
   
Disclosure Documents
 
   
Please read all Disclosure Documents and Information Statements as applicable to Client’s account and the products Client trades.
 21-33
   
   
Schedule of Beneficial Owners
 
   
To be completed only if Client answered “yes” to Question 3 of the Application
34
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 3
 
 
Required Supplemental Documentation

In this booklet, we have included sample documents on pages 18 and 19 of some of the types of authorizing documents noted in this section which may contain the language required to authorize your accounts with us.  However, we are happy to review any substitute documentation you have to determine if it meets our requirements.  Please contact your New Account Specialist or the New Account Manager at (312) 442-5448 with any questions.

All Clients
§  
MLPF&S must be provided with written collateral wire instructions.   Please send the instructions in a letter, on company letterhead, signed by two authorized individuals.  The letter must be accompanied by evidence that the two individuals who sign have the authority to do so.
§  
All Clients must provide specific evidence of the authority of the person or persons signing the customer agreement and application.  This authority may be a certificate of incumbency, a resolution or may be contained in an operating document.
§  
Based on your location and structure, please provide the appropriate tax form (W-9, W-8BEN or W-8IMY)
§  
Please provide your most recent audited financials

Verification of Client’s Identity: Please notify us if you have other trading accounts with Merrill Lynch – your identification documentation may already by on file with us.    Otherwise, please provide a copy of the following applicable document verifying Client’s identity for compliance with anti-money laundering regulations:
 
 
Corporation
-
Articles of Incorporation and Certificate of Incorporation
LLC
-
Articles of Organization and Certificate of Formation
Partnership
-
Partnership Agreement and Certificate of Partnership Agreement (for LPs)
Trust
-
Trust Agreement
Mutual Fund
-
Prospectus and SAI
Hedge Fund
-
Offering Memorandum and Subscription Agreement
 
Evidence of Futures Trading Authority. Please provide a copy of the following applicable document showing Client’s specific authority to trade futures:
 
Corporation
-
Corporate Resoluton
LLC
-
Operatiang Agreement
Partnership
-
Partnership Agreement
Trust
-
Trust Agreement
Mutual Fund
-
Prospectus and SAI

Additional Documentation Requirements.  If Client falls into any of the categories below, please provide a copy of the listed documents:

Commodity Pool or any collective investment fund – Prospectus or Offering Memorandum
Pension Plan or Insurance Company – Plan Document or Investment Guidelines
Public Entities or Municipalities – Opinion of counsel or state statute authorizing trading in futures or derivatives
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 4
 
 
Cayman Island entity – Current copy of the Company’s Register of Directors and Officers certified by the Registered Office in the Cayman Islands or Certificate of Incumbency which lists the directors and officers issued by the Registrar of Companies
British Virgin Island Entity – Current Certificate of Incumbency listing directors and officers issued or verified by its Registered Agent.
Non-US Banks – Foreign Bank certification (if not already on file with Merrill Lynch)
Non-US Entities not listed above – Please contact Futures New Accounts at 312/442-5448 or e-mail the department at: FF&ONewAccountsChicago@Exchange.ML.com for supporting documentation requirements.
 
Merrill Lynch may request additional information if it is deemed necessary.
 

ACCOUNT APPLICATION

General Information – Please print or type

 Highbridge Commodities FuturesAccess Master Fund Ltd.
____________________________________________________________________________________
Client Name

Merrill Lynch Bank and Trust Company (Cayman) Limited, Harbour Centre, 4th Floor, North Church Street, ____________________________________________________________________________________
Registered Address:  Please check r if this is the Mailing Address for Notices and Statements.

 George Town, Grand Cayman, Cayman Islands P.O. Box 1164GT
____________________________________________________________________________________
City         State/CountryZip/Postal Code

_c/o Merrill Lynch Alternative Investments, LLC 250 Vesey Street, 10th Floor
____________________________________________________________________________________
Headquarters Address:  Please check r if this is the is the Mailing Address for Notices and Statements.

New York _______________________________New York ___________________________10080  
_____________________________________________________________________________________
City        State/CountryZip/Postal Code
c/o Merrill Lynch Alternative Investments, LLC 250 Vesey Street, 10th Floor
_____________________________________________________________________________________
Operational Address:  Please check r if this is the is the Mailing Address for Notices and Statements.

New York _______________________________New York ___________________________10080  
_____________________________________________________________________________________
City        State/CountryZip/Postal Code

212-236-2771____________________2112-449-1000______________________________________
Fax NumberPhone Number

No Physical Statements
 ___________________________________________________________________________________
Mailing Address for Notices and Statements (if different from above or for duplicate statements).

_____________________________________________________________________________________
City        State/CountryZip/Postal Code
 
 
 
 
 

 
 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 5
 

 
Account numbers of any other accounts held at Merrill Lynch: ____________________________________

Merrill Lynch Account representative: _______________________________________________________


Client Information

Date of formation:06/28_/_2011 Nature of Business: Speculative Trading of Commodities Interests
 
Client conducts business (and/or solicits clients from) within the following Countries:  __________________

_____________________________________________________________________________________
 
Operations Contact:    _Noelle Labowicz_________(609) 274-8773 ______________________________
    Name and Phone Number
 
Noelle_Labowicz@ml.com________________________________________
     Email


Commodity Trading Information

1. Type of Account Requested:  x Speculative    r Hedging

2. Does any person or entity, other than the Undersigned or its employees, control, manage or direct the
           trading in this account?  x Yes  r No

If yes, complete the Discretionary Trading Authorization and Limited Power of Attorney Agreement on page 13 
or provide a copy of your signed investment advisory agreement.

The advisor must complete the Advisor’s Statement Concerning Registration and Provision of
Disclosure Document on page 14.

3. Does any person or entity have a 10% or greater ownership interest in this account?

    xYes    r No   If Yes, please complete the Schedule of Beneficial Owners at the end of this booklet (page 34).

4. Does Client own or lease an exchange membership?    r Yes   xNo

If Yes, please list exchange (this may qualify you for discounted rates):__________________________

5. Does Client solicit or accept funds from any person or entity for trading in futures contracts or options
    on futures contracts?  r Yes  xNo
 (client is a fund sponsored by MLAI, LLC a Registered CPO)
If Yes, please check one of the following:

[  ]   Client is a Commodity Pool Operator registered with the appropriate authority.  
NFA ID #_________________________.

   [  ]    Client is exempt from registration as a Commodity Pool Operator and the exemption letter has been filed with the Commodity
Futures Trading Commission (you may be asked to provide a copy of the   letter).

If Client is an investment company registered under the Investment Company Act of 1940, please
complete the Investment Company Acknowledgment on Page 15.

6. Please indicate by checking the appropriate box(es) below if you are one of the following entities.  
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 6
 
 
These entities are considered “eligible contract participants” under the Commodity Exchange Act
and are permitted to engage in certain activities available to such institutional clients:
 
r      Bank
r      Registered Broker/Dealer or Futures Commission Merchant
r      Regulated Insurance Company 
r      Regulated Investment Company
x     Commodity Pool with assets exceeding $5,000,000 operated by a registered Commodity Pool Operator
r      Other entity with assets exceeding $10,000,000
r      Other entity with assets exceeding $5,000,000 AND client is a hedge account
r      A governmental entity which owns and invests assets greater than $25,000,000
r      Employee Benefit Plan with total assets exceeding $5,000,000 AND client is a hedge account
r      A floor broker or floor trader registered with the NFA and holding the exchange membership and 
          when trading in those OTC products approved for trading by the CFTC.
r      A natural person with total assets exceeding $10,000,000. (Requires Compliance approval.)
r      None of the above.

 7.Electronic Delivery of Statements

 
The CFTC permits a client to receive daily and monthly statements for its Futures Accounts by fax or electronic mail in lieu of ordinary mail, subject to obtaining customer consent.  Should you wish to receive electronic daily and monthly statements, you should be aware of the following:  (a) your consent will be effective upon receipt by Merrill Lynch, (b) you may revoke your consent at any time by written notice to Merrill Lynch, and (c) you will not be charged any fee for such electronic delivery.  To indicate your consent to receive electronic statements in lieu of ordinary mail, please initial the appropriate box and complete the information below:
 
 x   Client hereby consents to electronic delivery of statements by the following method:
 
 
Daily statements
Facsimile number:  
       
    OR  
       
   
Email address:
 mlacctmf@ml.com
       
  Monthly Statements
Facsimile number:
 
       
    OR  
       
    Email Address:       mlacctmf@ml.com
 
If you wish additional persons to receive copies of the statements, please attach a list with the name and the facsimile number or email address as applicable.

 

The above information in this Application is true and correct and Client agrees it will notify Merrill Lynch of any material changes to such information:
 
 
/s/ Justin Ferri        8-25-2011
 Signature   Date

 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 7
 
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 8
 
 
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
 
 Page 9
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 10
 
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 11
 
 
Authorization to Take Other Side of Transaction – For Clients trading at the New York Board of Trade

By signing the space below, Client authorizes Merrill Lynch, its directors, officers, employees or agents, without prior notice to Client, to take the other side of Client’s transactions by the purchase or sale for an account in which Merrill Lynch or any person affiliated with Merrill Lynch has a direct or indirect interest, subject to the limitations and conditions, if any, contained in the rules or regulations of any board of trade upon which buy or sell orders are executed, and subject to the limitations and conditions, if any, contained in Applicable Law.


Client Name:    Highbridge Commodities FuturesAccess Master Fund Ltd. _______

Signature:                      /s/ Justin Ferri                                 
 
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 12
 
 
Arbitration Agreement
You may voluntarily agree to submit your disputes with Merrill Lynch to arbitration. If you sign this Arbitration Agreement, you will have agreed to submit all future disputes with Merrill Lynch, its employees, agents and assignees to arbitration if such disputes arise out of or relate to your account.
 
If you sign this Arbitration Agreement and a dispute arises you will have a choice of at least two qualified arbitration forums. You will be provided with a list of such forums when you notify Merrill Lynch that you intend to submit a dispute to arbitration or when Merrill Lynch notifies you that Merrill Lynch intends to submit a dispute to arbitration.
 
If a dispute is submitted to arbitration, your will have the right to have the dispute heard by a mixed panel. A mixed panel is composed of one or more arbitrators where the single arbitrator or a majority of the arbitrators are not associated with any contract market, the members of any contract market, or the employees of members of any contract market. If the dispute is heard by a registered futures association, a mixed panel will be composed of a majority of arbitrators who are not associated with the registered futures association, its members or the employees of its members. If you choose to have a dispute heard by a mixed panel, Merrill Lynch will pay any incremental fees which may be assessed by the arbitration forum for providing a mixed panel, except that you may be required to pay such fees if the arbitrators in the proceeding decide that you acted in bad faith initiating or conducting the proceeding.
 
Three forums exist for the resolution of commodity disputes: Civil court litigation; reparations at the Commodity Futures Trading Commission (CFTC); and arbitration conducted by a self-regulatory or other private organization.

The CFTC recognizes that the opportunity to settle disputes by arbitration may in some cases provide many benefits to clients, including the ability to obtain an expeditious and final resolution of disputes without incurring substantial costs. The CFTC requires, however, that each client individually examine the relative merits of arbitration and that your consent to the arbitration agreement be voluntary.

By signing this agreement, you: (1) may be waiving your right to sue in a court of law; and (2) are agreeing to be bound by arbitration of any claims or counterclaims which you or Merrill Lynch may submit to arbitration under this agreement. You are not, however, waiving your right to elect instead to petition the CFTC to institute reparations proceedings under Section 14 of the Commodity Exchange Act with respect to any dispute which may be arbitrated pursuant to this Agreement. In the event a dispute arises, you will be notified if Merrill Lynch intends to submit the dispute to arbitration. If you believe a violation of the Commodity Exchange Act is involved and if you prefer to request a Section 14 “Reparations” proceeding before the CFTC, you have 45 days from the date of such notice in which to make that election.

You need not sign this Agreement to open an account with Merrill Lynch. See 17 CFR 166.5.

 
 
       
 Signature    Date  
       
       
 Pring Name and Title      
 
 

 
 
 

 


 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 13

 

Discretionary Trading Authorization / Limited Power of Attorney Agreement

POWER OF ATTORNEY/TRADING AUTHORIZATION

To:
Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates (collectively referred to herein as “Merrill Lynch”)

The undersigned client (“Client”) hereby appoints ____________________________________ (“Advisor”) as Client’s agent and attorney-in-fact to give instructions on behalf of the Client for transactions in Client’s Account, and specifically: (i) to give written or oral instructions, by mail, telephone, facsimile, any electronic medium (including through any electronic trading platform or through any electronic messaging system) or otherwise to Merrill Lynch to buy or sell (including short sales) stocks, bonds, options and/or other securities, commodities and commodity futures and options on futures, whether for immediate or future delivery or for the purposes of engaging in any foreign exchange transactions (including, without limitation, any spot, forward and/or option contracts), security futures products, and any similar instruments which may be purchased or sold by or through Merrill Lynch; (ii) to borrow money in the name of the Client from or through Merrill Lynch and to secure payment, therefore with property of Client, including, but not limited to, stocks, bonds, options, and/or other securities; (iii) to post cash, securities and/or any other property of the Client to Merrill Lynch as collateral to secure any obligation of Client under any transaction in the Account and (iv) to instruct the transfer of funds, including, but not limited to, the entire Account, by wire, check or otherwise from the any futures Account of Client held by Merrill Lynch to any other of Client’s accounts held by Merrill Lynch and to instruct the deposit of funds into Client’s futures Account.
 
In all such purchases, sales or trades Merrill Lynch is authorized to follow the instructions of the Advisor in every respect concerning Client’s Account with Merrill Lynch.  Client hereby Indemnifies and holds harmless Merrill Lynch from any and all losses, claims, suits and demands arising out of or relating to any action taken by Advisor with respect to Client’s Account.
 
Advisor hereby ratifies and confirms that any and all transactions with Merrill Lynch heretofore or hereafter made by it for Client’s account has been duly authorized.
 
This authorization and indemnity is in addition to (and in no way limits or restricts) any rights which Merrill Lynch may have under any other agreement or agreements between Client and Merrill Lynch and Merrill Lynch’s affiliates.
 
This power of attorney and authorization shall continue in full force and Merrill Lynch and Merrill Lynch’s successors and assigns shall be relying thereon, until Merrill Lynch shall receive written notice or revocation thereof, signed by Client or Advisor and such revocation or termination shall in no way affect the validity of this power and Client’s liability under the indemnity herein contained, with reference to any transaction initiated by Advisor, prior to the actual receipt by Merrill Lynch of notice of such revocation or termination, as above provided.
 
 
 
       
Name of Investment Manager    Name of Client  
       
       
Signature   Signature  
       
       
 Print Name    Print Name  
       
       
 Date    Date  
 
 
 
 
 
 

 


 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 14


Advisor’s Statement Concerning Registration
and Provision of Disclosure Document

To Merrill Lynch:

The undersigned advisor (“Advisor”) has been appointed as Agent of Client by the Discretionary Trading Authorization/Limited Power of Attorney or an investment advisory agreement.    Advisor hereby represents and warrants to Merrill Lynch as follows: [Please check appropriate box]

r
Advisor is not required to register as a commodity trading advisor (“CTA”) because Advisor has provided advice to 15 or fewer persons during the past 12 months and does not hold itself out generally to the public as a CTA.

x
Advisor is registered as a CTA but is not required to provide a full disclosure document pursuant to CFTC Regulation 4.7 pertaining to commodity trading advisors whose clients are limited to qualified eligible persons.

r
Advisor is exempt from registration as a commodity trading advisor pursuant to Section 4.14(a)(8) of the CFTC Regulations.

r
Advisor is registered as a commodity trading advisor and has provided the appropriate disclosure document to client pursuant to Regulation 4.31.  A copy of such disclosure statement or an acknowledgement of receipt of such statement by client  is attached.

r
Other: _________________________________________________________________________________

 
_________________________________________________________________________________


Advisor further represents that if Advisor is qualified to, and engages in, post-execution allocation under CFTC Regulation 1.35, Advisor has all requisite authority from its customers to allocate in such a manner.


Name of Advisor: __Highbridge Capital Management, LLC
 
________________________________________________________________
 
 
 By: /s/ Jim Glynn           9/22/11
  Signature   Date
       
  Jim Glynn       Chief Financial Officer
  Prnt Name   Title
       
 
40 West 57th Street, 32nd Floor
New York, NY 10019
      212-287-4900
  Address   Telephone
       
  20-1901985    
 
 Advisor's Tax I.D.
   
       
 
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 15


Investment Company Acknowledgement

The following applies if Client is registered under the Investment Company Act of 1940 as a Mutual Fund or Investment Trust and Client wishes to deposit margin funds directly with Merrill Lynch:

a) 
Merrill Lynch shall comply with the segregation requirements of section 4d(2) of the Commodity Exchange Act [7 U.S.C. 6d(2)] and the rules thereunder [17 C.F.R. Chapter I] or, if applicable, the secured amount requirements of rule 30.7 under the Commodity Exchange Act [17 C.F.R. 30.7];

b)
Merrill Lynch, as appropriate to Client’s transactions and in accordance with the Commodity Exchange Act [7 U.S.C. 1 through 25] and the rules and regulations thereunder (including 17 C.F.R. Part 30), may place and maintain Client’s assets to effect Client’s transactions with another Futures Commission Merchant, a Clearing Organization, a U.S. or Foreign Bank, or a member of a foreign board of trade, and shall obtain an acknowledgement, as required under rules 1.20(a) or 30.7(c) under the Commodity Exchange Act [17 C.F.R. 1.20(a) or 30.7(c)], as applicable, that such assets are held on behalf of Merrill Lynch’s clients in accordance with the provisions of the Commodity Exchange Act; and

c) 
Merrill Lynch shall promptly furnish copies of or extracts from Merrill Lynch’s records or such other information pertaining to Client’s assets as the Securities and Exchange Commission through its employees or agents may request.

d) 
Merrill Lynch agrees to return to Client any excess variation margin in Client’s Account when such excess variation margin is above a de minimis amount. Such excess variation margin shall be returned on the next business day following Merrill Lynch’s receipt of the amount from the clearing organization or counterparty.

If Client is registered under the Investment Company Act of 1940 as a Mutual Fund or Investment Trust and will be depositing margin funds directly with Merrill Lynch, kindly acknowledge Client’s receipt of, and agreement with, this notice by having an authorized representative of Client (and Advisor, if applicable) sign in the space below.

Acknowledged and Accepted:

Client: _________________________________________________________________________
 
 
 By: /s/ Justin Ferri    8-25-2011
  Signature   Date
       
   Justin Ferri    Director
  Prnt Name   Title
       
 
 
Advisor (if applicable)  _____________________________________________________________
 
 
 By:      
  Signature   Date
       
       
  Prnt Name   Title
       
 
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 16

Electronic Access Terms

You have requested that Merrill Lynch Pierce Fenner & Smith Incorporated (“Merrill Lynch”) allow you, your employees, or advisors to route orders electronically through a third party vendor or through an exchange issued terminal directly to exchange systems, transmittal lines, floors or unaffiliated brokers, as applicable, (“Electronic Trading Access”) under Merrill Lynch’s name and/or clearing number in connection with your trading in exchange-traded futures and options under the Institutional Futures Client Account Agreement, Uniform Brokerage Services “Give Up” Agreement or other governing client documentation (the “Client Agreement”) entered into between us. These supplementary terms and conditions (the “Electronic Terms”) shall apply with respect to such electronic access.
 
Subject to your acknowledgement of these Electronic Terms, and in consideration for permitting such Electronic Trading Access, Merrill Lynch will agree to clear trades entered via Electronic Trading Access through a vendor or an exchange terminal which is not affiliated with Merrill Lynch (each a “Vendor”) to one or more exchanges as pre-approved by Merrill Lynch (each a “Relevant Exchange”). You understand and agree that Merrill Lynch is not responsible for the Vendor or its systems (“Vendor System”) and you will hold Merrill Lynch harmless from any claims, losses or debits arising from your use of the Vendor System.
 
Specifically, you understand and agree that Merrill Lynch is not responsible for any defect, delay, outage or failure of network, communication or computer systems or equipment owned or operated by Vendor and/or any defect in or failure of the Vendor System to link to any Relevant Exchange.  
 
While Merrill Lynch does not control the Vendor System, Merrill Lynch will use commercially reasonable efforts to notify you of any outages, connectivity or equipment failures. Further, Merrill Lynch will assist you to the best of its ability in resolving errors, delays, outages and other issues you may have with Vendor.  
 
Merrill Lynch is only required to clear or settle trades entered by you, your employees or your designated advisor and has no obligation to clear or settle any trades where you have provided the Vendor System to any other third party without Merrill Lynch’s prior written consent.   
 
You will only use Electronic Trading Access to enter trades within the scope of your Client Agreement and in accordance with the rules, regulations, practices, procedures and customs of the Relevant Exchanges and relevant regulatory authorities and all other applicable laws as in force from time to time (“Applicable Rules). You will be fully responsible for all fines and/or sanctions incurred by Merrill Lynch as a result of your use of the Vendor System.
 
Merrill Lynch will notify you if we intend to charge any additional fees for the Electronic Trading Access and such fees will either be mutually agreed upon under the terms of the Client Agreement or you may cancel your Electronic Trading Access.
 
You accept responsibility for ensuring that all orders are accurate and you acknowledge that you will be responsible for settling such trades in accordance with the terms of your Client Agreement and are bound by the content of all such orders as they appear in the clearing systems of the Relevant Exchanges.  In particular (but without limitation) you will be bound by such orders notwithstanding any typographical or keystroke errors made when such instructions are entered and any corruption or distortion of your orders which may occur when such orders are transmitted through the Vendor System to us or to a Relevant Exchange. Any dispute regarding the execution of such orders, where Merrill Lynch did not execute the order, should be addressed with Vendor or the executing broker/Exchange system help desk.
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 17

You acknowledge that we have the right, and in many cases are required by Applicable Rules, to set limits and/or parameters or other controls which we consider appropriate to control your ability to use Electronic Trading Access by using a pre-programmed filter or by any other means. Such limits, parameters or other controls may include limits, parameters or controls which we may be required to implement in accordance with Applicable Rules or which we determine should be imposed for our protection. You agree that you shall not take any action to change, alter or modify such limits, parameters or controls. Further, you understand that we have the right to notify either Vendor or the Relevant Exchange of any termination of your access under these Electronic Terms and we will provide you notice of such termination.
 
In the event these Electronic Terms are executed on your behalf by an advisor (“Advisor”) Advisor hereby represents and warrants that Advisor is expressly authorized by the client to enter into this Agreement on client’s behalf, and that this authorization will remain effective unless client or Advisor provides notice to Merrill Lynch.
 
These Electronic Terms supplement, and form a single agreement with, the Client Agreement.  

Please indicate your understanding and agreement of these terms by signing below.

Highbridge Commodities FuturesAccess Master Fund Ltd.
 
 __________________________________________________________________________________
(Client Name — if Advisor is not authorized to sign on the Client’s behalf, Client must sign)

 
 
 By:  /s/ Justin Ferri    8-25-2011
  Signature   Date
       
   Justin Ferri    Director
  Prnt Name   Title
       
 
 
_____________________________________________________________________________________
(Name of Advisor, on its own behalf, and unless Client has signed above, as Client’s authorized agent)
 
 
 
 By:      
  Signature   Date
       
       
  Prnt Name   Title
       

 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 18

 
Corporate Resolution

The Undersigned, Secretary of  ____________________________________________________,  a corporation duly organized and validly existing under the laws of ________________________, hereby certifies to Merrill Lynch that at a meeting of the Board of Directors of this Corporation, duly held on the _____________ day of______________________,  20____ at which a quorum was present and acting throughout, the following Resolutions were duly adopted and are still in full force and effect without amendment or modification:
 
RESOLVED:(a)   That the specific officers designated in section (b) are hereby authorized for and on behalf of this Corporation to establish and maintain one or more accounts with Merrill Lynch for the purpose of purchasing, investing in, or otherwise acquiring, selling (including short sales), possessing, transferring, exchanging, pledging of or realizing upon, and generally dealing in and with any and all forms of commodities, derivatives and commodity futures and options on futures, specifically including, but not limited to, United States Treasury securities, foreign currencies, precious metals, securities in cash, forward and futures transactions.
 
Such officers have been duly elected or appointed and are hereby empowered to authorize persons to act on behalf of this Corporation in the trading of the hereinabove described instruments to the full extent authorized above and to execute any and all contracts, agreements, acknowledgments, documents and instruments and take all such actions as may be necessary or appropriate in order to give full effect to this Resolution.
 
 (b)    Merrill Lynch may deal with any and all of the officers listed below with their stated titles as though they were dealing with this Corporation directly.
 
Name:      
       
Title:      
       
Name:      
       
Title:      

 (If additional space is required, attach a separate sheet)
 
 (c) Merrill Lynch may conclusively rely upon any certification given in accordance with these resolutions until it receives written notice of a change in any of the information recited therein.
 
I certify that each of the above officers have been duly elected or appointed and that each officer is now legally holding the office set opposite his/her name. Further, in the event of any change in the office or powers of persons hereby authorized, I shall promptly certify such change in writing to Merrill Lynch. Such notification, when received, shall be adequate both to terminate and substitute authorization of the officers so listed.  I certify that the foregoing resolution is authorized by the Charter and By-Laws of this Corporation, that no limitation has been otherwise imposed upon such authority, and that I have been duly authorized to make this certification on behalf of this Corporation.
 
Secretary:      
       
Print Name:      
       
Date::      
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 19

 
Incumbency Certificate

The undersigned hereby certifies that:

1.
The undersigned is the duly elected and acting Secretary/Assistant Secretary of____________ _______________________________________________(“Company”), a ________________________ corporation.

 2.
The persons whose names appear below each were duly elected to the office of Company set forth opposite each such person’s name prior to the date hereof, each has been duly qualified and has acted in the official capacity as such officer of Company at all times since the date of such person’s election, and any one such person may act on behalf of Company with respect to all matters relating to the conduct of the commodity futures business of Company with Merrill Lynch Pierce Fenner & Smith Incorporated, including, but not limited to, the execution of all agreements related thereto:

 
  NAME   OFFICE  
         
         
         
         
         
         
         
 
 
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of the _________ day of _____________________, 20_____.



__________________________________________________
Secretary/Assistant Secretary

__________________________________________________
Print Name
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 20

 
ACKNOWLEDGMENT BY CLIENT OF ROLE OF INTRODUCING BROKER

If the account of the undersigned (“Client” or “you”) is introduced to Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) by another broker and Merrill Lynch is carrying it on its books on a “fully disclosed basis”, Client understands that Client is a customer of the Introducing Broker firm (“IB”) and that IB is setting commission rates and receiving a portion of all such commissions..  Client understands that Merrill Lynch has been engaged by IB to perform certain bookkeeping and operational functions with regard to Client’s account.  This means that Merrill Lynch is responsible only for executing orders (when such orders are directed to Merrill Lynch) and confirming transactions effected for Client’s account, segregating funds in accordance with the rules and regulations promulgated by the Commodity Futures Trading Commission, and margining the Client’s account as well as transmitting reports of all transactions to the Client.
 
Introducing Broker is not an agent or affiliate of Merrill Lynch.  Client understands and agrees that Merrill Lynch is not responsible for any of the acts or omissions of, or advice given to Client by, IB.  The individual account representative at IB and IB are responsible for managing Client’s account, monitoring margin limits and account risk, and supervising their employees’ sales practices with respect to Client.

CLIENT AGREES TO INDEMNIFY AND HOLD MERRILL LYNCH HARMLESS FROM ALL DAMAGES, CLAIMS, COSTS, LIABILITIES AND/OR EXPENSES (INCLUDING ATTORNEYS’ FEES) ARISING WITH RESPECT TO YOUR ACCOUNT FROM THE CONDUCT OF INTRODUCING BROKER OR ANY OF ITS EMPLOYEES OR AGENTS.

Client agrees that the Introducing Broker shall be a third party beneficiary of Paragraphs 7,11,12, 17, 18 and 19 of the Institutional Client Account Agreement between Client and Merrill Lynch and shall be entitled to act upon and enforce any provisions of said paragraphs and receive any benefit therefrom.
 
 
Name of Introducing Brokerage Firm:   ______________________________________


Understood and Agreed:
 
 
     
Signature of Client                                                                                       Date
     
     
Prnt Nameand Title    
     
 
 
 
 
 

 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 21

 
Notice Regarding Average Price System ("APS")

You should be aware that certain US and non-US exchanges, including the CME and CBOT, may now or in the future allow a futures commission merchant (“FCM”) such as Merrill Lynch to confirm trades executed on such exchanges to some or all of their customers on an average price basis regardless of whether the exchanges have average price systems of their own.  Average prices that are not calculated by an exchange system will be calculated by your FCM.  In either case, trades that are confirmed to you at average prices will be designated as such on your daily and monthly statements.
 
APS enables a clearing firm to confirm to customers an average price when multiple execution prices are received on an order or series of orders for the same accounts.  For example, if an order transmitted by an account manager on behalf of several customers is executed at more than one price, those prices may be averaged and the average may be confirmed to each customer.  Customers may choose whether to use APS, and may request that APS be used for discretionary or non-discretionary accounts.
 
An order subject to APS must be for the same commodity.  An APS order may be used for futures, options or combination transactions.  An APS order for futures must be for the same commodity and month, and for options, it must be for the same commodity, month, put/call and strike.
 
An APS indicator will appear on the confirmation and monthly statement for a customer whose positions have been confirmed at an average price.  This indicator will notify the customer that the confirmed price represents an average price or rounded average price.
 
The average price is not the actual execution price.  APS will calculate the same price for all customers that participate in the order.
 
APS may be used when a series of orders are entered for a group of accounts.  For example, a bunched APS order (an order that represents more than one customer account) executed at 10:00 a.m. could be averaged with a bunched APS order executed at 12:00 p.m. provided that each of the bunched orders is for the same accounts.  In addition, market orders and limit orders may be averaged, as may limit orders at different prices, provided that each order is for the same accounts.
 
The following scenario exemplifies what occurs if an APS order is only partially executed.  At 10:00 a.m. an APS order to buy 100 Dec S & P 500 futures contracts is transmitted at a limit price of 376.00; 50 are executed at 376.00, and the balance is not filled.  At 12:00 p.m. an APS order to buy 100 Dec S & P 500 futures contracts is transmitted at a limit price of 375.00; 50 are executed at 375.00, and the balance is not filled.  Both orders are part of a series for the same group of accounts.  In this example, the two prices will be averaged.  If the order was placed for more than one account, the account controller must rely on pre-existing allocation procedures to determine the proportions in which each account will share in the partial fill.
 
Upon receipt of an execution at multiple prices for an order with an APS indicator, an average will be computed by multiplying the execution prices by the quantities at those prices divided by the total quantities.  An average price for a series of orders will be computed based on the average prices of each order in that series.  The actual average price or the average price rounded to the next price increment may be confirmed to customers.  If a clearing member confirms the rounded average price, the clearing member must round the average price up to the next price increment for a sell order.  The rounding process will create a cash residual of the difference between the actual average price and the rounded average price that must be paid to the customer.
 
APS may produce prices that do not conform to whole cent increments.  In such cases, any amounts less than one cent may be retained by the clearing member.  For example, if the total residual to be paid to a customer on a rounded average price for 10 contracts is $83.333333, the clearing member may pay $83.33 to the customer.   If you would like more information on APS orders, please contact account representative.
 
 
 
 
 

 
 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 22



Electronic Trading and Order Routing Systems Disclosure Statement

Electronic trading and order routing systems differ from traditional open outcry pit trading and manual order routing methods. Transactions using an electronic system are subject to the rules and regulations of the exchange(s) offering the system and/or listing the contract. Before you engage in transactions using an electronic system, you should carefully review the rules and regulations of the exchange(s) offering the system and/or listing contracts you intend to trade.
 
Differences Among Electronic Trading Systems
Trading or routing orders through electronic systems varies widely among the different electronic systems.  You should consult the rules and regulations of the exchange offering the electronic system and/or listing the contract traded or order routed to understand, among other things, in the case of trading systems, the system’s order matching procedure, opening and closing procedures and prices, error trade policies, and trading limitations or requirements; and in the case of all systems, qualifications for access and grounds for termination and limitations on the types of orders that may be entered into the system. Each of these matters may present different risk factors with respect to trading on or using a particular system. Each system may also present risks related to system access, varying response times, and security.  In the case of Internet-based systems, there may be additional types of risks related to system access, varying response times and security, as well as risks related to service providers and the receipt and monitoring of electronic mail.
 
Risks Associated with System Failure
Trading through an electronic trading or order routing system exposes you to risks associated with system or component failure. In the event of system or component failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. System or component failure may also result in loss of orders or order priority.
 
Simultaneous Open Outcry and Electronic Pit Trading
Some contracts offered on an electronic trading system may be traded electronically and through open outcry during the same trading hours. You should review the rules and regulations of the exchange offering the system and/or listing the contract to determine how orders that do not designate a particular process will be executed.
 
Limitation of Liability
Exchanges offering an electronic trading or order routing system and/or listing the contract may have adopted rules to limit their liability, the liability of FCMs, and software and communication system vendors and the amount of damages you may collect for system failure and delays. These limitations of liability provisions vary among the exchanges. You should consult the rules and regulations of the relevant exchange(s) in order to understand these liability limitations.
 
*Each exchange’s relevant rules are available upon request from the industry professional with whom you have an account. Some exchange’s relevant rules also are available on the exchange’s Internet home page.
 
Uniform Notification Regarding Access to Exchange Market Data
 
As a market user you may obtain access to exchange Market Data available through an electronic trading system, software or device that is provided or made available to you by a broker or an affiliate of such.  Market Data may include, but is not limited to, “real time” or delayed market prices, opening and closing prices and ranges, high-low prices, settlement prices, estimated and actual volume information, bids or offers and the applicable sizes and numbers of such bids or offers.
 
You are hereby notified that Market Data constitutes valuable confidential information that is the exclusive proprietary property of the applicable exchange, and is not within the public domain. Such Market Data may only be used for your firm’s internal use. You may not, without the authorization of the applicable exchange, redistribute, sell, license, retransmit or otherwise provide Market Data, internally or externally and in any format by electronic or other means, including, but not limited to the Internet.
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
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You must provide upon request of the broker through which your firm has obtained access to Market Data, or the applicable exchange, information demonstrating your firm’s use of the Market Data in accordance with this Notification. Each applicable exchange reserves the right to terminate a market user’s access to Market Data for any reason. You also agree that you will cooperate with an exchange and permit an exchange reasonable access to your premises should an exchange wish to conduct an audit or review connected to the distribution of Market Data.
 
NEITHER THE EXCHANGE NOR THE BROKER, NOR THEIR RESPECTIVE MEMBERS, SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, GUARANTEE THE TIMELINESS, SEQUENCE, ACCURACY OR COMPLETENESS OF THE DESIGNATED MARKET DATA, MARKET INFORMATION OR OTHER INFORMATION FURNISHED NOR THAT THE MARKET DATA HAVE BEEN VERIFIED.  YOU AGREE THAT THE MARKET DATA AND OTHER INFORMATION PROVIDED IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS AN OFFER OR SOLICITATION WITH RESPECT TO THE PURCHASE OR SALE OF ANY SECURITY OR COMMODITY.
 
NEITHER THE EXCHANGE NOR THE BROKER NOR THEIR RESPECTIVE MEMBERS, SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, SHALL BE LIABLE TO YOU OR TO ANY OTHER PERSON, FIRM OR CORPORATION WHATSOEVER FOR ANY LOSSES, DAMAGES, CLAIMS, PENALTIES, COSTS OR EXPENSES (INCLUDING LOST PROFITS) ARISING OUT OF OR RELATING TO THE MARKET DATA IN ANY WAY, INCLUDING BUT NOT LIMITED TO ANY DELAY, INACCURACIES, ERRORS OR OMISSIONS IN THE MARKET DATA OR IN THE TRANSMISSION THEREOF OR FOR NONPERFORMANCE, DISCONTINUANCE, TERMINATION OR INTERRUPTION OF SERVICE OR FOR ANY DAMAGES ARISING THEREFROM OR OCCASIONED THEREBY, DUE TO ANY CAUSE WHATSOEVER, WHETHER OR NOT RESULTING FROM NEGLIGENCE ON THEIR PART.  IF THE FOREGOING DISCLAIMER AND WAIVER OF LIABILITY SHOULD BE DEEMED INVALID OR INEFFECTIVE, NEITHER THE EXCHANGE NOR THE BROKER, NOR THEIR RESPECTIVE SHAREHOLDERS, MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS SHALL BE LIABLE IN ANY EVENT, INCLUDING THEIR OWN NEGLIGENCE, BEYOND THE ACTUAL AMOUNT OF LOSS OR DAMAGE, OR THE AMOUNT OF THE MONTHLY FEE PAID BY YOU TO BROKER, WHICHEVER IS LESS.  YOU AGREE THAT NEITHER THE EXCHANGE NOR THE BROKER NOR THEIR RESPECTIVE SHAREHOLDERS, MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, SHALL BE LIABLE TO YOU OR TO ANY OTHER PERSON, FIRM OR CORPORATION WHATSOEVER FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS, COSTS OF DELAY, OR COSTS OF LOST OR DAMAGED DATA.
 
 
Disclosure Statement on Futures Exchange Ownership Interests
and Incentive Programs

You should  be aware that your Futures Commission Merchant (“FCM”) or one or more of its affiliates may own stock of, or has some other form of ownership interest in, one or more  U.S. or foreign exchanges and clearing houses that you may trade on or that may clear your trades.  As a result, you should be aware that your FCM or its affiliate might receive financial benefits related to its ownership interest when trades are executed on such an exchange or cleared at such a clearing house.
 
In addition, futures exchanges from time to time have in place other arrangements that  may provide members with volume or market making discounts or credits,  may call for participating members to pre-pay fees based on volume thresholds or may provide other incentive or arrangements that are intended to encourage market participants to trade on or direct trades to that exchange.  Your FCM, or one or more of its affiliates, may participate in and obtain financial benefits from such an incentive program.
 
You should contact your FCM directly if you would like to know whether it has an ownership interest in a particular exchange or clearing house, or whether it participates in any incentive program on a particular
 
 
 
 
 

 
 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 24

 
 
exchange or clearing house.  You may also contact any particular futures exchange directly to ask if it has any such incentive program for member firms.


Disclosure on Payment for Order Flow

When firms provide execution services to customers, either in conjunction with clearing services or in an execution only capacity, they may, in some circumstances, direct orders to unaffiliated market makers, other executing firms, individual floor brokers or floor brokerage groups for execution. When such unaffiliated parties are used, they may, where permitted, agree to price concessions, volume discounts or refunds, rebates or similar payments in return for receiving such business. Likewise, on occasion, in connection with exchanges that permit pre-execution discussions and “off-floor” transactions such as block trading, exchanges of physicals, swaps or options for futures or equivalent transactions, a counterparty solicited to trade opposite customers of an executing firm may make payments described above and/or pay a commission to the executing firm in connection with that transaction. This could be viewed as an apparent conflict of interest. In order to determine whether transactions executed for your account are subject to the above circumstances, please contact your executing firm account representative.


Direct Order Transmittal Client Disclosure Statement

This statement applies to the ability of authorized clients of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) to place orders for foreign futures and options transactions directly with non-US entities (each, an “Executing Firm’’) that execute transactions on behalf of Merrill Lynch’s foreign futures and options customer omnibus accounts.

Please be aware of the following should you be permitted to place the type of orders specified above.

The orders you place with an Executing Firm are for Merrill Lynch’s foreign futures and options customer omnibus account maintained with a foreign clearing firm.  Consequently, Merrill Lynch may limit or otherwise condition the orders you place with the Executing Firm.

 You should be aware of the relationship of the Executing Firm and Merrill Lynch.  Merrill Lynch may not be responsible for the acts, omissions, or errors of the Executing Firm, or its representatives, with which you place your orders.  In addition, the Executing Firm may not be affiliated with Merrill Lynch.  If you choose to place orders directly with an Executing Firm, you may be doing so at your own risk.

 It is your responsibility to inquire about the applicable laws and regulations that govern the foreign exchanges on which transactions will be executed on your behalf.  Any orders placed by you for execution on that exchange will be subject to such rules and regulations, its customs and usages, as well as any local laws that may govern transactions on that exchange.  These laws, rules, regulations, customs and usages may offer different or diminished protection from those that govern transactions on US exchanges.  In particular, funds received from clients to margin foreign futures transactions may not be provided the same protections as funds received to margin futures transactions on domestic exchanges.  Before you trade, you should familiarize yourself with the foreign rules which will apply to your particular transaction. United States regulatory authorities may be unable to compel the enforcement of the rules of regulatory authorities or markets in non-US jurisdictions where transactions may be effected.

 It is your responsibility to determine whether the Executing Firm has consented to the jurisdiction of the courts in the United States.  In general, neither the Executing Firm nor any individuals associated with the Executing Firm will be registered in any capacity with the Commodity Futures Trading Commission.  Similarly, your contacts with the Executing Firm may not be sufficient to subject the Executing Firm to the jurisdiction of courts in the United States in the absence of the Executing Firm’s consent.  Accordingly, neither the courts of the United States nor the Commission’s reparations program may be available as a forum for resolution of any disagreements you may have with the Executing Firm, and your recourse may be limited to actions outside the United States.
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 25


Unless you object within five (5) days, by giving us written notice, Merrill Lynch will assume your consent to the aforementioned conditions.  Any such notice should be directed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, One South Wacker, Suite 300, Chicago, IL  60606, Attention: Futures New Accounts.


 
Foreign Trader Disclosure Statement and Special Calls for Information
 
In accordance with Rules 15.05 and 21.03 of the Commodity Futures Trading Commission ("CFTC"), 17 C.F.R. §§15.05 and 21.03, we are considered to be your agent for purposes of accepting delivery and service of communications from or on behalf of the CFTC regarding any commodity futures contracts or commodity option contracts which are or have been maintained in your account(s) with us. In the event that you are acting as agent or broker for any other person(s), we are also considered to be their agent, and the agent of any person(s) for whom they may be acting as agent or broker, for purposes of accepting delivery and service of such communications. Service or delivery to us of any communication issued by or on behalf of the CFTC (including any summons, complaint, order, subpoena, special call, request for information, notice, correspondence or other written document) will be considered valid and effective service or delivery upon you or any person for whom you may be acting, directly or indirectly, as agent or broker.
 
You should be aware that Rule 15.05 also provides that you may designate an agent other than Merrill Lynch. Any such alternative designation of agency must be evidenced by a written agency agreement which you must furnish to us and which we, in turn, must forward to the CFTC. If you wish to designate an agent other than us, please contact us in writing. You should consult 17 C.FR. § 15.05 for a more complete explanation of the foregoing.
 
Upon a determination by the CFTC that information concerning your account(s) with us may be relevant in enabling the CFTC to determine whether the threat of a market manipulation, corner, squeeze, or other market disorder exists, the CFTC may issue a call for specific information from us or from you. In the event that the CFTC directs a call for information to us, we must provide the information requested within the time specified by the CFTC. If the CFTC directs a call for information to you through us as your agent, we must promptly transmit the call to you, and you must provide the information requested within the time specified by the CFTC. If any call by the CFTC for information regarding your account(s) with us is not met, the CFTC has authority to restrict such account(s) to trading for liquidation only. You have the right to a hearing before the CFTC to contest any call for information concerning your account(s) with us, but your request for a hearing will not suspend the CFTC's call for information unless the CFTC modifies or withdraws the call. Please consult 17 C.F.R. §21.03 for a more complete description of the foregoing (including the type of information you may be required to provide).
 
Certain additional regulations may affect you. Part 17 of the CFTC Regulations, 17 C.F.R. Part 17, requires each futures commission merchant and foreign broker to submit a report to the CFTC with respect to each account carried by such futures commission merchant or foreign broker which contains a reportable futures position. (Specific reportable position levels for all futures contracts traded on U.S. exchanges are established in Rule 15.03.) In addition, Part 18 of the CFTC Regulations, 17 C.F.R. Part 18, requires all traders (including foreign traders) who own or control a reportable futures or options position and who have received a special call from the CFTC to file a Large Trader Reporting Form (Form 103) with the CFTC within one day after the special call upon such trader by the CFTC. Please consult 17 C.F.R. Parts 17 and 18 for more complete information with respect to the foregoing.
 
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
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NOTICE TO CLIENTS
 
POSITION LIMIT AND LARGE OPEN POSITION REPORTING REQUIREMENTS FOR OPTIONS AND FUTURES TRADED ON THE HONG KONG EXCHANGES

 
The Hong Kong regulatory regime imposes position limit and reportable position requirements for stock options and futures contracts traded on the Stock Exchange of Hong Kong and on the Hong Kong Futures Exchange.
 
These requirements are set out in the Hong Kong Securities and Futures (Contracts Limits and Reportable Positions) Rules (as amended, the “Rules”) made by the Securities and Futures Commission (“SFC”) under the Securities and Futures Ordinance. The Rules impose monitoring and reporting obligations with regard to large open positions. Where you are holding a reportable position for your client, you must disclose the identity of the client.  For the purposes of the Rules, a client is the person who is ultimately responsible for originating instructions you receive for transactions - i.e., the transaction originator.
 
Further guidance on the Rules and what they require is set out in the SFC’s Guidance Note on Position Limits and Large Open Position Reporting Requirements. Copies of the Rules and Guidance Note can be downloaded from the SFC’s website (www.sfc.hk).
 
Purpose of the Rules

The purpose of the Rules is to avoid potentially destabilizing market conditions arising from an over-concentration of futures/options positions accumulated by a single person or group of persons acting in concert, and to increase market transparency.
 
Some of the major requirements of the Rules and Guidance Note are summarised below. However, you should review the Rules and Guidance Note in their entirety, and consult with your legal counsel in order to ensure that you have a full understanding of your obligations in connection with trading in Hong Kong.
 
Please note that the Rules make you responsible for ensuring that you comply with the Rules. Section 8 of the Rules makes it a criminal offence not to comply (subject to a maximum fine of HK$100,000 and imprisonment for up to 2 years).
 
In 2004, the SFC investigated 6 breaches of the Rules, including a breach by a non-Hong Kong fund manager which was referred to the fund manager’s overseas regulator. It should be noted that the SFC has expressly stated that it is not sympathetic to claims by overseas persons that they are not aware of the Hong Kong restrictions, and that a failure to trade within the limits or make reports reflects badly on a firm’s internal control measures (which might itself lead to disciplinary action).
 
Position Limits

The Rules say that you may not hold or control futures contracts or stock options contracts in excess of the prescribed limit, unless you have obtained the prior authorisation of the Hong Kong regulators.  For example, the prescribed limit for Hang Seng Index futures and options contracts and Mini-Hang Seng Index futures and options contracts is 10,000 long or short position delta limit for all contract months combined, provided the position delta for the Mini-Hang Seng Index futures contracts or Mini-Hang Seng Index options contracts shall not at any time exceed 2,000 long or short for all contract months combined.  For many futures contracts and stock options contracts, the position limit is set at 5,000 contracts for any one contract/expiry month.
 
The prescribed limit for each contract traded on the Hong Kong exchanges is set out in the Rules.
 
 
 
 
 

 
 
 
 
 
 
 
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Rev. 2/08
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Reportable Positions

If you hold or control an open position in futures contracts or stock options contracts in excess of the specified level, the Rules require you to report that position in writing to the relevant Hong Kong exchange (i) within one day (ignoring Hong Kong public holidays and Saturdays) of first holding or controlling that position, and (ii) on each succeeding day on which you continue to hold or control that position.

The specified reporting level for each contract traded on the Hong Kong exchanges is set out in the Rules.  The report must state:

(a)  
the number of contracts held or controlled in respect of the position in each relevant contract month; and

(b)  
if the position is held or controlled for a client, the identity of the client, and the number of contracts held or controlled for such person in respect of the reportable position in each relevant contract month.
 
Scope of the Rules

You should note:

·  
The prescribed limits and reportable position requirements apply to all positions held or controlled by any person, including positions in any account(s) that such person controls, whether directly or indirectly. The SFC takes the view that a person is regarded as having control of positions if, for example, the person is allowed to exercise discretion to trade or dispose of the positions independently without the day-to-day direction of the owner of the positions.  (Section 4 of the Rules and Para. 2.6 of the Guidance Note)

·  
If a person holds or controls positions in accounts at more than one intermediary, the Rules require him to aggregate the positions for the purposes of applying the prescribed limits and reportable position requirements.  (Para. 6.1 of the Guidance Note)

·  
The person holding or controlling a reportable position in accounts at more than one intermediary has the sole responsibility to notify the relevant exchange of the reportable position.  The person may request its intermediary to submit the notice of the reportable position.  If a firm agrees to submit the notice on his behalf, the person should provide to the firm its total positions held at other intermediaries so that the firm can submit the notice of the reportable position.  Alternatively, the person should ask all of his intermediaries to report the positions in each of the accounts separately to the exchange, even if the positions in the individual accounts do not reach the reportable level. (Paras. 4.6 and 6.2 of the Guidance Note)

·  
Where you are holding a reportable position for your client, the Rules say that you must disclose the identity of the client.  The SFC’s view is that, for the purposes of the Rules, a client is the person who is ultimately responsible for originating the transaction instructions - i.e., the transaction originator.  (Para. 6.4 of the Guidance Note)

·  
The Rules apply separately to the positions held by each of the underlying clients of an omnibus account, except where the omnibus account operator has discretion over the positions in which case the account operator must also aggregate these positions with his own positions. Positions held by different underlying clients should not be netted off for purposes of calculating and reporting reportable positions or determining compliance with the prescribed limits. (Para. 6.8 of the Guidance Note)


A GUIDE TO THE STRUCTURE AND MARKET TERMINOLOGY OF THE LONDON METAL EXCHANGE

INTRODUCTION AND PURPOSE
 
 
 
 

 
 
 
 
 
 
 MERRILL LYNCH   
Rev. 2/08
   Page 28


This document is designed to provide customers of the London Metal Exchange (LME) with an overview of the structure of the LME, market terminology, and order execution. It is not a comprehensive trading guide, nor a complete guide to market terminology. Customers should always ensure that their requirements are explained in detail to the member responsible for order execution.
 
THE LME

Principal Nature
 
There are two types of contracts traded on the LME - Exchange Contracts and Client Contracts. Exchange Contracts are contracts between clearing members of the LME. Client Contracts are contracts between customers and ring dealing members (RDMs), or associate broker clearing members (ABCMs), or associate broker members (ABMs). Only RDMs, ABCMs and ABMs may issue Client Contracts. Open Position Statements issued to clients must state clearly “THIS IS AN LME REGISTERED CLIENT CONTRACT”. Contract criteria relating to LME contracts, including metal/plastic specifications, acceptable currencies, prompt dates, option strike prices for metals etc. are detailed in the LME rulebook and appropriate notices.
 
Exchange Contracts are traded between members, matched in the LME matching and clearing system (LMEMS) and margined by LCH.Clearnet (LCH). Client Contracts are registered at the LCH but margining arrangements are left to members to agree with their customers (subject to LME rules).
 
All LME contracts are between parties acting as principals. This prevents any party entering into an LME Contract as agent for someone else but does not prevent an agent effecting a contract between two parties if the resulting LME contract is between disclosed parties, each acting as a principal. It is an essential requirement of an LME Client Contract that one party must be an RDM, ABCM or ABM. A list of members is available from the LME, and on the LME website: www.lme.com. A principal relationship does not mean that members do not take on quasi-fiduciary responsibilities when they effect trades for customers. In particular, if a member undertakes to deliver a particular service, for example deal a specific number of lots 'in the Ring' (see below), then it should take care to ensure that it complies with all the terms of such a transaction.
 
In respect of Exchange Contracts, an LME broker buying metal or plastic under an Exchange Contract from another LME broker cannot do so as agent for his customer. Where an LME broker buys metal or plastic under an Exchange Contract with a view to selling that metal or plastic to his customer, this is achieved by entering into a back-to-back Client Contract with the customer. Brokers and customers can agree the conditions that apply to their Client Contracts. For example, a customer may make it a condition of his Client Contract that the broker must enter into a back-to-back Exchange Contract for the metal or plastic being bought or sold. This does not make the customer a party to the Exchange Contract but does create additional duties and obligations owed by the broker under the Client Contract.
 
Customers should be clear about conditions that apply to their Client Contracts and about the obligations and duties that the broker owes as a result of those conditions.
 
Brokers should be clear about the duties and obligations they owe as a result of conditions attaching to their Client Contracts. They should also be clear about the duties they owe to their customers under the FSA's Conduct of Business Rules (COB).
 
 
Dual Capacity

LME members may act both in the capacity of market maker and broker. They may act in a particular manner depending on a number of circumstances, including the size of the order, the liquidity of the market at the time the order was placed, and, not least, the customer's instructions. Customer orders may be filled directly from a member's 'book' or following the purchase/sale of metal or plastic in the LME market. Furthermore, customer orders may be offset, amalgamated, broken-up or netted for execution. These methodologies apply equally to orders whether any resulting Exchange Contract is effected in the ring, in the inter-office market, or on LME Select.
 
 
 
 

 
 
 
 
 
 
 
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Customers with specific order requirements must make these known to the member at the time the order is placed. Customers wishing to know how their order was executed should request such information from the member.

Trading on the LME

Trading takes place on the LME by open outcry in the rings and kerbs, between members in the inter-office, and over the Exchange's electronic trading system LME Select.

Open Outcry

Historically, during ring and kerb sessions, the majority of customer business reflects prices traded in the open outcry sessions. Customers can follow the market activity by monitoring quoted and traded prices disseminated via the LME market data system (MDS), or by listening to the simultaneous floor commentary provided by member(s). The MDS publishes prices traded during ring and kerb times on price vendor information services such as Reuters. Members can continue to 'make a market' when requested by a customer during the ring and kerb sessions, although this is entirely at the member's discretion. Alternatively, the customer can decide whether to place an order using the 'order styles' mentioned below.
 
Inter-office

Inter-office trading is conducted between members by telephone or by electronic means. On contacting an LME member for a quote, customers will usually be provided with the member's current bid and offer. The customer may trade on this quote, call another member in an attempt to improve the quote, leave a resting order with a member, or wait and monitor prices on the LME market data system. If an order cannot be filled from the member's book, it may be executed via a back-to-back Exchange Contract agreed via a telephone deal with another member or executed via an electronic trading system.

LME Select

LME Select allows members to trade LME futures contracts in metals and plastics, traded options and TAPOs, and an Index future and option. Some brokers offer their customers an order-routing facility via an API where they can view Select prices, execute trades, and place resting orders. All trading on LME Select is in US dollars.
 
LME Select replaces neither inter-office trading nor trading in the ring. Depending on the time of day, it is possible for members to deal by telephone or electronically in the inter-office, by LME Select, or in the rings. Customers should specify which mechanism their broker should use to effect an order, where they have a preference.
 
Firm prices of the best bid and offer available on LME Select, the total volumes available at these prices, and the price and volume of each trade transacted are distributed to and displayed in real time by information vendors. Only LME Select prices are displayed, not those of other third party electronic trading systems providing LME prices. Only RDMs and ABCMs are eligible to become LME Select Participants and to have direct access to the system. Customers may effect back-to-back Client Contracts with RDMs and ABCMs based upon prices available on LME Select, whether on the telephone or via electronic order-routing systems.
 
ORDER STYLES

Ring

Customer orders are not traded in the rings or kerbs, so an order using the term 'in/on/during the ring/kerb' will be executed on the basis of the prices traded/quoted during the particular session. If a customer requires their order to be 'shown' or traded across the ring/kerb then they should make this requirement known to their executor, who may or may not accept this as a term of the order. The
 
 
 
 
 

 
 
 
 
 
 
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equivalent Exchange Contract for a customer order may not replicate its terms. As the customer is not a party to any Exchange Contracts i.e. those traded in open outcry between members in the ring/kerb sessions, in specifying ring/kerb, the customer is merely identifying a pricing mechanism. A member which undertakes to match a price traded in the ring/kerb is not necessarily undertaking that it will trade during that ring/kerb, only that it may do so. However, a customer may place an order with the specific request that the member trades an Exchange Contract replicating its order in the ring. In such circumstance the RDM can only trade this order by open outcry in the ring.

If a customer trades at the prevailing market quote proffered in the ring/kerb, their executor is not necessarily obliged to effect an Exchange Contract at the same price. This can lead to situations where the customer has traded at the prevailing market quote, without that same price trading in open outcry across the floor of the Exchange. However, if the instructions from the customer are to achieve a specific price i.e. close of ring 2, then this is the price that should be given, if that specific order is accepted.

Market

In normal circumstances a market order is one executed on a timely basis at the prevailing market price. As mentioned above, at certain times of the business day, trading is taking place simultaneously in the ring or kerb, on LME Select, and in the inter-office market. Traditionally, when open outcry trading is in session, the market is defined by activity within the ring/kerb. At other times, the market is split between inter-office trading and trading on LME Select. During inter-office sessions, indicative quotes are available on the MDS; firm prices are available on LME Select and the LME Select page on information vendors' systems. The indicative prices might not be available to all parties.

Best

Order styles on the LME using the word 'best' confer some discretion upon the members when executing the order, requiring them to use their 'best endeavours' on the customer's behalf. The extent of the discretion is fixed by the terms of the order. This type of order is distinct from 'best execution' as defined by the FSA.
 
Best orders may be executed both in rings/kerbs, inter-office and on LME Select. Inter-office trades rely upon the members' skill in determining the level of the market at any particular time. Best orders received during ring/kerb times may not result in the customer receiving the 'best' price achieved during the session if the price improves after the member has booked the metal or plastic intended to fill the order. At any given time, the best price on LME Select will be displayed on the system and by the information vendors. Customers should be aware that depending on market conditions, the best price may move during the period from when the order was placed and when it was executed.

Close

Most orders placed 'on the close' are for either the close of the second ring (official LME prices) or the final kerb (closing prices). Both these prices are demonstrable because of the publication of official and closing prices. Closing prices for other sessions are harder to determine, although the LME does publish unofficial prices which are established at the close of the fourth ring. In all circumstances, customers and members need to agree the style of execution i.e. bid/offer, mean or traded price. Members may not always be able to guarantee execution (price or volume) due to prevailing market conditions. A closing price on LME Select is the last price traded before the system closes.

Open

Customers placing orders to trade on the opening of a market session must provide clear instructions to the LME member which indicate how this order should be activated i.e. basis the opening bid/offer or basis the first trade in the session. Customers will also need to inform their executor of their requirements if the executor is unable to fill the order basis the 'opening' price in its entirety, due to market constraints such as insufficient liquidity. Customers may place orders with members for LME Select that can be placed into the system for activation when the market opens.
 
 
 
 

 
 
 
 
 
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Resting Orders

When placing resting orders such as 'good 'til cancelled' ('GTC', or any derivations thereof) or stop loss orders, customers should ensure that they are in agreement with their executor's definition of the 'trigger' point of the order. Usually, this is interpreted as being the point when the order price is seen to be trading in the market, but it is possible to request the order be activated when the order level is either bid or offered as appropriate, via the prevailing market quote. Stop loss orders become market orders when a trade, or a bid or an offer triggers the stop, with members then executing the order at the current market price.
 
It is possible for a customer not to receive a 'fill' on a resting order despite the 'trigger' point being 'touched'. This could be due to a number of circumstances such as order priority, illiquidity, prevailing market conditions etc. Whatever the reason, the executor should be able to provide the customer with a full explanation of why it was unable to fill the order.
 
Customers should be aware that resting orders might be activated during periods of illiquidity in the market. As previously mentioned, this could result in the trade not being filled, or for 'stop' orders, a worse fill than anticipated ('slippage'). Customers should ensure the executor is fully aware of their requirements regarding the execution of an order, and adheres to any limitations, especially if the customer is not in contact with the market/member when the trigger point is reached.
 
It is possible for customers to ask members to place resting orders in LME Select. Where the broker has an order routing system into Select, customers will be able to place orders more directly. The system accepts GTC and Good for Day (DAY) orders. DAY orders are automatically deleted from the system at close of trading.

Conclusion

The above order styles do not represent all possible methods of order execution on the LME. Members and customers should ensure that orders are communicated in meaningful terms that deliver the required execution in accordance with LME rules.
 
For the purposes of this document these categories of members will be referred to as LME members, members or by the appropriate abbreviation.
 
2 TAPO traded average price option
 
3 API Application Protocol Interface
 
 
Merrill Lynch Business Continuity Statement

Merrill Lynch is responsible for creating and maintaining business continuity plans for all of its businesses.  In the event of a business disruption, we have plans designed to allow us to continue operations of critical business functions, such as entering of client orders, completing securities transactions and providing clients access to their cash and securities. We accomplish this in part by:

 Relocating impacted businesses to designated recovery locations.
 Using redundant processing capacity at other locations.
 Designing our technology and systems to support the recovery processes for critical business functions.  
 
Using business and technology teams that are responsible for activating and managing the recovery process.
 
 Adopting a communication plan to ensure that Merrill Lynch employees receive emergency notifications and instructions via a variety of sources, including in-building announcements, telephone contact, toll-free phone numbers and websites.
 

 
 
 

 
 
 
 
 
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 Rehearsing our recovery procedures and testing those procedures on a regular basis.  
 
As part of our plans, Merrill Lynch has identified the applications that are critical to each of our business divisions. These applications are implemented in separate production and recovery data centers using industry-standard practices to copy data from the production site to the recovery site in real time. In most cases, recovery times will range from nearly instantaneous to approximately four hours. For some business functions, next-day recovery is projected.
 
With regard to client assets, nearly all market-traded securities are held in central depositories (such as the Depository Trust Co. in the U.S.) or with custodian banks, rather than in physical certificates.  Ownership of the securities is reflected on a book-entry record-keeping basis with our custodian banks or depositories’ participants (such as Merrill Lynch) maintaining on their records the beneficial ownership positions of their clients. This structure is recognized worldwide as providing investors with an unsurpassed level of liquidity and security for the assets they choose to custody with major financial institutions.
 
As a premier financial service firm, we take our commitment to our clients very seriously and participate globally in various industry-level discussions regarding business continuity planning under the auspices of industry organizations.  Participation in these types of forums increases our ability to proactively recognize and manage business disruption risks and coordinate recovery efforts across the financial service industry.  Although we have taken significant steps to develop and implement sound business recovery plans, we cannot guarantee that systems will always be available or recoverable after a disaster or significant business disruption. However, we believe that our planning for such events is robust and consistent with many of the best practices established within the industry.  Any material changes to the above information will be available on our website or upon request.
 
If you have further questions regarding our business continuity plans, please contact your Merrill Lynch representative.


Privacy and Data Security Information Statement

With respect to any personal information delivered or made available to Merrill Lynch pursuant to the Institutional Futures Clearing Agreement (the “Agreement”), Merrill Lynch agrees that:

(a)
 it shall use and process such personal information solely for the purposes of carrying out its obligations under, and as expressly set forth in, the Agreement and not for any other purposes;

(b)
 it shall maintain an effective information security program, keep such personal information confidential and take appropriate administrative, technical and physical measures to secure and protect such personal information against unauthorized, unlawful or accidental access, disclosure, transfer, destruction, loss or alteration;

(c)
 it shall limit access to such information to employees and agents who require such access in order to perform the services described in the Agreement and shall inform its employees and agents who have access to such personal information of its highly confidential nature and the limitations and procedures that apply to access and use of such personal information;

(d)
 it may make such information available to vendors which provide services to Merrill Lynch for its futures trading and processing, however, it shall not disclose or make such personal information available to a vendor without entering into an agreement in writing with the vendor whereby the vendor agrees to comply with, and treat such personal information in accordance with, these policies
 
(e)
 it shall promptly notify Client if it becomes aware of any unauthorized access of such personal information or if it becomes the subject of any government, other enforcement or private proceeding


 
 

 
 
 
 
 
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(e)
relating to its data handling practices with respect to such personal information and

(f)
 it shall, upon the reasonable request of Client, provide Client with information regarding its privacy/data protection practices.

Nothing herein shall affect any data or information that Merrill Lynch validly receives from a source apart from the Agreement or the relationship established pursuant to the Agreement, nor affect Merrill Lynch’s rights to use certain data or information in a non-identifiable, statistical manner.
 

 
 
 

 
 
 
 
 
 
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SCHEDULE OF BENEFICIAL OWNERS

 
 
1.
Highbridge Commodities FuturesAccess LLC
45-2608276
c/o Merrill Lynch Alternative Investments, 250 Vesey St. New York, NY
   
 
First Name or Entity Name
 
Last Name
 
 
 
 
 
 
 
 
 
 
  Tax Identification Number OR
 
  Passport No./Driver's License No.   Middle Initial
 
 
 
 
 
 
 
 
 
 
Street Address
 
  Address   Date of Birth
 
 
 
 
 
 
   
 
City
 
  State/Province    
2.
 
Highbridge Commodities FuturesAccess Ltd.
 
 
 
 
 
 
 
First Name or Entity Name
 
  Last Name   Postal Code
 
 
 
 
 
 
 
 
 
 
Tax Identification Number OR
 
  Passport No./Driver's License No.   Middle Initial
 
 
 
 
 
 
 
 
 
 
Address
 
  Address   Date of Birth
 
 
 
 
 
   
 
City
 
  State/Province    
3.
 
 
 
 
 
 
 
First Name or Entity Name
 
  Last Name   Postal Code
 
 
 
 
 
 
 
 
 
  Tax Identification Number OR   Passport No./Driver's License No.   Middle Initial
 
 
 
 
 
 
 
 
  Address   Address
 
  Date of Birth
 
 
 
 
 
 
   
  City   State/Province    
4.
 
 
 
 
 
 
 
First Name or Entity Name
 
  Last Name   Postal Code
 
 
 
 
 
 
 
 
 
 
 
Tax Identification Number OR
 
  Passport No./Driver's License No.   Middle Initial
 
 
 
 
 
 
 
 
 
 
Address
 
  Address  
Date of Birth
 
 
 
 
 
   
  City
 
  State/Province    
 
 
 
 
 
 
 
  City   State/Province  
Postal Code
           
           
  Please attach additional sheet if necessary.        
           
           
 
 
 
       
 
 
 
       
           

 
 
 

 
 
 
 
Institutional
Futures Client
Account Agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Lynch, Pierce, Fenner & Smith, Inc
One South Wacker Drive, Suite 300, Chicago, Illinois 60606

Tel: 312-442-5453
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
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Risk Disclosure Statement For Futures and Options
 
This brief statement does not disclose all of the risks and other significant aspects of trading in futures and options.  In light of the risks, you should undertake such transactions only If you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to risk.  Trading in futures and options is not suitable for many members of the public.  You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances.
 
Futures
 
1.
Effect of ‘Leverage’ or ‘Gearing’
 
Transactions in futures carry a high degree of risk.  The amount of initial margin is small relative to the value of the futures contract so that transactions are ‘leveraged’ or ‘geared’.  A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit:  this may work against you as well as for you.  You may sustain a total loss of initial margin funds and any additional funds deposited with the firm to maintain your position.  If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position.  If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.
 
2.
Risk-reducing orders or strategies
 
The placing of certain orders (e.g. ‘stop-loss’ orders, where permitted under local law, or ‘stop-limit’ orders) which are intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders.  Strategies using combinations of positions, such as ‘spread’ and ‘straddle’ positions may be as risky as taking simple ‘long’ or ‘short’ positions.
 
Options
 
3.
Variable degree of risk.
 
Transactions in options carry a high degree of risk.  Purchasers and sellers of options should familiarize themselves with the type of option (i.e. put or call) which they contemplate trading and the associated risks.  You should calculate the extent to which the value of the options must increase for your position to become profitable, taking into account the premium and all transaction costs.
 
The purchaser of options may offset or exercise the options or allow the options to expire.  The exercise of an option results either in a cash settlement or in the purchaser acquiring or delivering the underlying interest.  If the option is on a future, the purchaser will acquire a futures position with associated liabilities for margin (see the section on Futures above).  If the purchased options expire worthless, you will suffer a total loss of your investment which will consist of the option premium plus transaction costs.  If you are contemplating purchasing deep-cut-of-the-money options, you should be aware that the chance of such options becoming profitable ordinarily is remote.
 
Selling (‘writing’ or ‘granting’) an option generally entails considerably greater risk than purchasing options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of that amount.  The seller will be liable for additional margin to maintain the position if the market moves unfavorably.  The seller will also be exposed to the risk of the purchaser exercising the option and the seller will be obligated to either settle the option in cash or to acquire or deliver the underlying interest.  If the option is on a future, the seller will acquire a position in a future with associated liabilities for margin (see the section on Futures above).  If the option is ‘covered’ by the seller holding a corresponding position in the underlying interest or a future or another option, the risk may be reduced.  If the option is not covered, the risk of loss can be unlimited.
 
 
 
 
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Certain exchanges in some jurisdictions permit deferred payment of the option premium, exposing the purchaser to liability for margin payments not exceeding the amount of the premium.  The purchaser is still subject to the risk of losing the premium and transaction costs.  When the option is exercised or expires, the purchaser is responsible for any unpaid premium outstanding at that time.
 
Additional risks common to futures and options
 
4.
Terms and conditions of contracts
 
You should ask the firm with which you deal about the terms and conditions of the specific futures or options which you are trading and associated obligations (e.g. the circumstances under which you may become obligated to make or take delivery of the underlying interest of a futures contract and, in respect of options, expiration dates and restrictions on the time for exercise).  Under certain circumstances the specifications of outstanding contracts (including the exercise price of an option) may be modified by the exchange or clearing house to reflect changes in the underlying interest.
 
5.
Suspension or restriction of trading and pricing relationships
 
Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any contract or contract month because of price limits or ‘circuit breakers’) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions.  If you have sold options, this may increase the risk of loss.
 
Further, normal pricing relationships between the underlying interest and the future, and the underlying interest and the option may not exist.  This can occur when, for example, the futures contract underlying the option is subject to price limits while the option is not.  The absence of an underlying reference price may make it difficult to judge ‘fair value.
 
6.
Deposited cash and property
 
You should familiarize yourself with the protections accorded money or other property you deposit for domestic and foreign transactions, particularly in the event of a firm insolvency or bankruptcy.  The extent to which you may recover your money or property may be governed by specific legislation or local rules.  In some jurisdictions, property which had been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
 
7.
Commission and other charges
 
Before you begin to trade, you should obtain a clear explanation of all commissions, fees and other charges for which you will be liable.  These charges will affect your net profit (if any) or increase your loss.
 
8.
Transactions in other jurisdictions
 
Transactions on markets in other jurisdictions, including markets formally linked to a domestic market, may expose you to additional risk.  Such markets may be subject to regulation which may offer different or diminished investor protection.  Before you trade you should inquire about any rules relevant to your particular transactions.  Your local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected.  You should ask the firm with which you deal for details about the types of redress available in both your home jurisdiction and other relevant jurisdictions before you start to trade.
 
9.
Currency risks
 
The profit or loss in transactions in foreign currency-denominated contracts (whether they are traded in your own or another jurisdiction) will be affected by fluctuations in currency rates where there is a need to convert from the currency denomination of the contract to another currency.
 
10.
Trading facilities
 
Most open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration or clearing of trades.  As with all facilities and systems,
 
 
 
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 MERRILL LYNCH   
 
   
 
 
they are vulnerable to temporary disruption or failure.  Your ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or member firms.  Such limits may vary; you should ask the firm with which you deal for details in this respect.
 
11.
Electronic trading
 
Trading on an electronic trading system may differ not only from trading in an open-outcry market but also from trading on other electronic trading systems.  If you undertake transactions on an electronic trading system, you will be exposed to risks associated with the system including the failure of hardware and software.  The result of any system failure may be that your order is either not executed according to your instructions or is not executed at all.
 
12.
Off-exchange transactions
 
In some jurisdictions, and only then in restricted circumstances, firms are permitted to effect off-exchange transactions.  The firm with which you deal may be acting as your counterparty to the transaction.  It may be difficult or impossible to liquidate an existing position, to assess the value, to determine a fair price or to assess the exposure to risk.  For these reasons, these transactions may involve increased risks.  Off-exchange transactions may be less regulated or subject to a separate regulatory regime.  Before you undertake such transactions, you should familiarize yourself with applicable rules and attendant risks.
 
 
 
 
 
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Institutional Futures Client Account Agreement
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated, with an office at 1 South Wacker Drive, Suite 300, Chicago, Illinois, 60606, (“Merrill Lynch”) agrees to carry one or more account(s) (“Account”) for the undersigned (“Client”) and provide services to Client in connection with the purchase and sale of cash commodities (including financial instruments), options on cash commodities, commodity futures contracts, options on futures contracts, security futures products, forward or leverage contracts, exchange of futures for physicals, and any similar instruments which may be purchased or sold by or through Merrill Lynch for Client’s Account (collectively referred to as “Futures Contracts”).  In consideration thereof, Client and Merrill Lynch agree as follows;
 
1.
AUTHORIZATIONS AND ACKNOWLEDGMENTS
 
Merrill Lynch is authorized to purchase or sell Futures Contracts for Client’s Account in accordance with Client’s oral or written instructions. Client hereby waives any defense that any such instructions were not in writing as may be required by any law, rule or regulation.  In any such transaction, Merrill Lynch may act as agent or principal and may charge a mark-up or commission, as notified in advance to Client, as may be limited by law, rule or regulation.  All contracts and transactions entered into after the close of any applicable futures exchange’s normal business hours may be considered next business day activity.  Merrill Lynch is not acting as a fiduciary, commodity trading advisor, investments advisor or commodity pool operator with respect to Client or any Futures Contracts or Account and Merrill Lynch shall have no responsibility for compliance with any law or regulation governing the conduct of any such fiduciary or advisor selected by Client or Client’s conduct as a fiduciary, if applicable.
 
2.
APPLICABLE LAW
 
All transactions under this Agreement shall be subject to the Commodity Exchange Act and the constitution, rules, regulations, customs, usages, rulings and interpretations of the Commodity Futures Trading Commission (“CFTC”), domestic or foreign exchange markets, and their clearing houses. If any, where the transactions are executed by Merrill Lynch or Merrill Lynch’s agents (“Applicable Law”).  Merrill Lynch is hereby authorized, in its discretion, to employ affiliated and nonaffiliated clearing members, carrying brokers and floor brokers as Merrill Lynch’s agents or to engage in pre-execution discussions if entering orders electronically, in connection with the execution, carrying, clearance, delivery and settlement of any such transactions as permitted by Applicable Law.  Client agrees to provide Merrill Lynch any information necessary for Merrill Lynch to respond to any inquiry from any exchange or other regulatory agency pursuant to Applicable Law.
 
Absent a separate written agreement with Client with respect to give-ups, Merrill Lynch, in its discretion, may, but shall not be obligated to, accept from other brokers selected by Client, Futures Contracts executed by such brokers which are given up to Merrill Lynch for clearing in Client’s Account.  If Client has executed with other brokers and Merrill Lynch is required to pay such executing brokers give up fees, Client agrees that Merrill Lynch may withhold such fees from Client’s Account in anticipation of such payment coming due.
 
3.
MERRILL LYNCH REPRESENTATIONS
 
Merrill Lynch and its managing directors, officers, employees and affiliates may take or hold positions in or advise other clients concerning contracts which are the subject of advice from Merrill Lynch to Client, which positions and advice may be consistent with or contrary to positions which are the subject of advice to Client.  In addition, Merrill Lynch, its directors, officers, employees, parent companies and affiliates may act on the other side of Client’s order by the purchase or sale for Client’s Account in which Merrill Lynch or any person affiliated with Merrill Lynch has a direct or indirect interest, subject to compliance with and the limitations and conditions of Applicable Law.
 
4.
CLIENT REPRESENTATIONS
 
Client represents and warrants that (a) the individuals) whose signatures are stated below is/are duly authorized and empowered to execute and deliver this Agreement and to effect purchases and sales of Futures Contracts through Merrill Lynch in Client’s Account until such time as Merrill Lynch is notified by
 
 
 
 
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 MERRILL LYNCH   
 
   
 
 
Client to the contrary; (b) regardless of any subsequent determination to the contrary, Client is a sophisticated user of the futures markets and is aware of the risks and obligations of Futures Contracts and is fully prepared to assume such risks and obligations; (c) trading in Futures Contracts is within the power of Client and such activity will in no manner contravene the provisions of any corporate resolutions, by-laws, statutes, rules, regulations, operating agreement, partnership agreements, plan documents, trust agreements or any judgments, orders or other agreements to which Client is bound; (d) Client is duly organized and in good standing under the laws of the jurisdiction in which it was organized and in all jurisdictions where it is qualified to do business; (e) Client is acting as principal and not as agent in transactions under this Agreement and no person other than Client has or will have an interest in Client’s Account except as otherwise disclosed to Merrill Lynch herein; and (f) Merrill Lynch is authorized to follow the instructions of the undersigned in every respect concerning this Account, including, but not limited to, payment of monies.  With respect to activity in the Account, Merrill Lynch may rely upon the instructions of the above referenced individuals or any individuals subsequently authorized by Client until Client notifies Merrill Lynch to the contrary.
 
If Client engages in exchange of futures for physical (“EFP”) transactions, Client acknowledges and agrees that, in connection with any EFP that (a) if Client is the seller of the cash contract(s) then Client is the buyer of the futures contract(s) being exchanged in the EFP, and Client has an ownership interest in the contract(s) sufficient to allow the delivery in satisfaction of Client’s obligations resulting from the execution of the EFP; and (b) if Client is the buyer of the cash contract(s) then Client is the seller of the futures contract(s) being exchanged in the EFP.  Upon request by Merrill Lynch, Client agrees to provide documentation sufficient to verify its purchase or sale of the cash contract.
 
5.
MODIFICATION AND TERMINATION
 
Whenever any statute shall be enacted which shall affect in any manner or be inconsistent with any of the provisions hereof, or whenever any rule or regulation shall be prescribed or promulgated by the CFTC, various commodity exchanges, or other agency or body having jurisdiction, which shall affect in any manner or be inconsistent with any of the provisions hereof, the provisions of this Agreement so affected shall be deemed modified or superseded, as the case may be, by such statute, rule or regulation, and all other provisions of this Agreement and the provisions as modified or superseded, shall in all respects continue to be in full force and effect.  Merrill Lynch shall use its best efforts to give notice to Client of any material change in conduct under this Agreement required by any such statute, rule or regulation.
 
Either party may terminate this Agreement at any time by notice to the other.  However, such termination by Client shall not affect any transaction entered into by Client prior to receipt of such notice by Merrill Lynch, or any open commodity positions or any liability held by or owed to Merrill Lynch by Client at the time of such termination.  If Client has outstanding give-up bills owed to other brokers at the time of its termination of this Agreement, Merrill Lynch may withhold the amount of such fees in order to make such payments.
 
Other than as set forth in the first paragraph above, no provision of this Agreement shall in any respects be waived, altered, modified or amended unless such waiver, alteration, modification or amendment is in writing and signed by one Merrill Lynch’s authorized officers and by one of Client’s authorized officers.
 
6.
ADVICE
 
All advice with respect to Futures Contracts transmitted by Merrill Lynch with respect to the Account is solely incidental to the conduct of Merrill Lynch’s business as a futures commission merchant and such advice will not serve as the primary basis for any decision by Client.  Merrill Lynch shall have no discretionary authority, power or control over any decision made by Client with respect to the Account, whether or not Merrill Lynch’s advice is utilized in such decision.
 
7.
POSITION LIMITS
 
Client acknowledges Merrill Lynch’s right, upon five (5) business days’ notice to Client, to limit the number of open positions which Client may maintain or acquire through Merrill Lynch at any time.  For the avoidance of doubt, as long as Client continues to comply with its margin payment obligations under Section 12, this
 
 
 
 
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 MERRILL LYNCH   
 
   
 
 
provision shall not limit the ability of Client to implement any decrease or other adjustment in the number of open positions within the time frame(s) deemed appropriate by Client or to enter into or maintain positions which have the effect of reducing Merrill Lynch’s overall exposure to Client.  In addition, Client agrees it will not exceed contract market position limits without appropriate prior approval from the relevant contract market.  Client agrees that it shall not agree with any exchange or contract market to act as a market maker using Merrill Lynch’s execution or clearing capabilities without the prior written approval of Merrill Lynch.
 
8.
EXTRAORDINARY EVENTS AND THIRD PARTY ACTIONS
 
Merrill Lynch shall not be liable for breakdown or failure of transmission of communication facilities, systems or software, in each case beyond its reasonable control, or government restrictions, war or acts of terrorism, exchange failures or market rulings or natural disasters.  Merrill Lynch shall not be liable to Client for any loss, cost, expense or damage to Client with respect thereto, except as a result of Merrill Lynch’s negligence, willful misconduct or bad faith.
 
Under no circumstances shall Merrill Lynch have any responsibility, liability or obligation regarding any conduct, act, omission or representation of any introducing firm, commodity trading advisor, investment adviser or third party vendor selected by Client to give Client research or advice, to electronically route orders to Merrill Lynch or to provide like services to Client.
 
9.
SECURITY AND LENDING
 
All monies, securities, Futures Contracts or other property which Merrill Lynch may at any time be carrying for Client or which may at any time be in Merrill Lynch’s possession, including safekeeping, in each case solely in connection with this Agreement, shall be subject to a general lien, security interest and right of setoff and recoupment in Merrill Lynch’s favor to discharge all obligations of Client to Merrill Lynch in connection with this Agreement, irrespective of whether or not Merrill Lynch may have made advances in connection with such securities, Futures Contracts or other property, and irrespective of the number of accounts Client may have with Merrill Lynch.  Merrill Lynch may apply or transfer such funds or other property of Client between any of Client’s accounts for the purposes of margin or reduction or satisfaction of any net debit balance.  Client will not cause or allow any of the collateral held in the Account, whether now owned or hereafter acquired, to be or become subject to any liens, security interests or encumbrances of any nature without the prior written consent of Merrill Lynch, and in no event shall the collateral held in Client’s Account be subject to a lien or security interest superior to that of Merrill Lynch.
 
In accordance with the terms and limitations of the Commodity Exchange Act regarding investment and pledging of Client assets, Client grants to Merrill Lynch the right to carry in its general loans, and to pledge, re-pledge, hypothecate, re-hypothecate, invest or loan, either separately or with the property of other clients, to either itself as broker or to others, any securities or other property held by Merrill Lynch on margin for the Account of Client or as collateral therefore.
 
10.
FEES AND COMMISSIONS
 
Client shall be charged exchange and regulatory fees as determined by the relevant exchange and/or regulator.  If Client is a member of any U.S. exchange, Client must advise Merrill Lynch accordingly if Client may avail itself of any reduced fee at such exchange.  In addition, Client must notify Merrill Lynch if it ceases to be a member of any such exchange.  Client shall be liable for all fees (including any fines) owed to the exchange if Client fails to give such notice to Merrill Lynch, Merrill Lynch may pay interest to Client on any available margin excess as agreed to from time to time between Merrill Lynch and Client.  Merrill Lynch may charge interest upon Client’s Account in accordance with Merrill Lynch’s customary charges, as determined by Merrill Lynch, at the time of the acceptance of this Agreement and thereafter, Client agrees to pay all such commissions as agreed to from time to time between Merrill Lynch and Client.
 
11.
LIQUIDATION
 
(A)           If any of the following events shall occur, Merrill Lynch may proceed in accordance with the following paragraph; (a) Client shall be dissolved or in any other way terminated other than a bona fide restructuring (with prior notice to Merrill Lynch) that results in a successor entity with materially lesser credit
 
 
\
 
7

 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
 
quality than the original entity; (b) Client shall fail to timely deposit or maintain initial or original margin, or make timely payment of additional or variation margin as requested in Section 12 below; (c) Client shall fail to pay the premium on any option purchased by Client; (d) a proceeding under any applicable bankruptcy or insolvency law, an assignment for the benefit of creditors or an application for a receiver, custodian, conservator, administrator, liquidator or trustee shall be filed or applied for, by or against Client (or if Client is a trust, its trustee), or an order shall be made or a resolution shall be passed for the winding up, liquidation or administration of Client (or, If Client is a trust, its trustee); (e) the property deposited in Client’s Account shall be determined by Merrill Lynch, in its commercially reasonable discretion, to be inadequate to secure the Account or Client has suffered a material change in its financial condition and is unable to provide Merrill Lynch, upon request, with such margin amounts or collateral reasonably required by Merrill Lynch in accordance with Section 12 of this Agreement; (f) Client’s Account shall incur a deficit balance which is not satisfied in a timely basis; (g) Merrill Lynch shall determine that any material representation or warranty made by Client to Merrill Lynch is untrue or inaccurate and Client is unable to prove otherwise; (h) if Client is an investment company, commodity pool or other form of collective investment vehicle, proceedings for the revocation or suspension of any registration of any public offering of interests in Client or of any person or entity required to be registered in connection with Clients activities have been instituted or are pending or threatened by any governmental agency or self-regulatory organization.
 
In each event specified above, and subject to notice from Merrill Lynch and one (1) business day opportunity for Client to cure such event, Merrill Lynch may liquidate Client’s open positions in whole or in part, sell or otherwise dispose of, realize, set off or apply any or all of the property represented by an entity on or standing to the credit of Client’s Account or held by, to the order or under the direction or control of Merrill Lynch or any exchange or clearing organization through which transactions on Client’s behalf are executed or cleared, buy any property for Client’s Account, and/or cancel any outstanding orders and commitments made by Merrill Lynch on Client’s behalf.  Without prejudice to the foregoing, Merrill Lynch shall have (to the greatest extent permitted by applicable law) all of the rights of a secured party with respect to the property referred to above, and any rights, powers and remedies provided herein shall operate as a variation and extension of any statutory power of sale, application or realization available to Merrill Lynch as a secured party.
 
Any such liquidation, sale, purchase and/or cancellation may be made at Merrill Lynch’s discretion on any exchange or other market or through any clearing organization where such business is transacted, at public auction or at private sale, upon prior notice to Client if reasonable under the circumstances, without advertising the same and without prior tender, demand or call upon Client, provided that any private sale must be conducted in a commercially reasonable manner.  No prior tender, demand or call from Merrill Lynch of the time and place of such liquidation, sale, purchase and/or cancellation shall be deemed to be a waiver of Merrill Lynch’s right to liquidate, sell, purchase and/or cancel as provided herein.
 
In any transaction described above, Merrill Lynch may sell any property to itself or its affiliates or buy any property from itself or its affiliates in an arms-length transaction.  Merrill Lynch may, to the extent permitted by law, purchase the whole or any part thereof free from any right of redemption.  In all cases, Client shall remain liable for, and shall pay to Merrill Lynch the amount of, any deficiency in Client’s Account with Merrill Lynch resulting from any transaction described herein above.
 
(B)           If any of the following events shall occur, the Client may proceed in accordance with the following paragraph:  (i) Merrill Lynch is subject to a “Bankruptcy” (as defined below); (ii) Merrill Lynch shall fail to make timely return margin amounts, as required in section 12 below, after notice from the Client; (iii) any material representation or warranty made by Merrill Lynch to Client herein is untrue or inaccurate at the time given or deemed repeated.
 
In the case of each event specified in “(b)” above, and in the case of an event described in sub-part (ii) above subject to notice from Client and one (1) business day opportunity to cure, Client shall have the right by notice to Merrill Lynch to terminate this Agreement with immediate effect, and Merrill Lynch will be liable to Client for Client’s “Economic Loss (as defined below) in respect of this Agreement.
 
 
 
 
8

 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
As used in the foregoing, “Bankruptcy” shall mean that Merrill Lynch (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement, or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted against it such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within thirty (30) days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.
 
As used in the foregoing, “Economic Loss” shall mean the amount of Client’s total losses and costs in connection with the termination of this Agreement, including any loss of bargain or cost of funding, calculated as of the effective date of such termination.  Economic Loss shall be determined by Client reasonably and in good faith and may (but need not) include the use of reference quotations from one or more leading dealers in the market in respect of the cost of entering into replacement transactions.
 
12.
MARGIN
 
Client will at all times maintain such margins or collateral for said Account, as are reasonably required by Merrill Lynch and notified in advance to Client or as required by a relevant exchange, and will, not later than the Required Delivery Time (as defined below), discharge margin obligations of Client to Merrill Lynch.  It is further agreed that if Merrill Lynch fails to receive sufficient funds to pay for any Futures Contracts and/or initial or variation margin by the Required Delivery Time, Client shall be deemed in breach of this Agreement and Merrill Lynch may take the actions set forth in the Liquidation provisions stated above.  Merrill Lynch will cause any excess margin or collateral held by it to be returned to Client not later than the Required Delivery Time subject, in all cases, to a minimum transfer amount of $250,000 (or its equivalent in any other currency(ies)).
 
As used in the foregoing, “Required Delivery Time” shall mean:  (a) close of business on the same local business day if demand for delivery is received from the other party not later than 10:00 a.m. New York time, and (b) close of business on the next local business day if demand for delivery is received from the other party after 10:00 a.m. New York time.
 
13.
CURRENCY FLUCTUATION RISK/PAYMENT OBLIGATIONS
 
All initial and subsequent deposits for margin purposes shall be made in U.S. Dollars unless otherwise agreed by Merrill Lynch and Client.  By placing an order for a Futures Contract that settles in a currency other than US, dollars, Client agrees that Merrill Lynch may convert to the appropriate currency funds sufficient to meet the applicable margin requirement at the rate of exchange at which Merrill Lynch would be able, acting in a commercially reasonable manner and in good faith, to purchase the relevant amount of such currency.  Client understands and agrees that if Client trades in such Futures Contracts, the margin for and accruals from such trading may be held in the applicable currency outside of the U.S., a money center country or the country of origin of such currency and that accounts held outside of the U.S. may not be afforded the bankruptcy protections of the U.S. bankruptcy code.
 
Client shall bear all risk and cost in respect to the conversion of currencies incurred relative to transactions
 
 
 
 
9

 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
effected on behalf of Client pursuant hereto.  In no event shall Merrill Lynch be required to effect or be responsible for the conversion of funds in anticipation of changes in prevailing rates of exchange.
 
With  respect to all securities, Futures Contracts and other property purchased or sold for Clients Account, Client agrees to pay Merrill Lynch promptly upon demand, upon expiration or liquidation of any such Futures Contract or other property purchased or sold for Client’s Account:  (a) any tax imposed on such transactions by any competent authority; (b) the amount of any trading losses in Client’s Account and (c) any debit balance or deficiency remaining in Client’s Account.
 
14.
DELIVERY INSTRUCTIONS FOR PHYSICAL SETTLEMENT/OPTIONS EXERCISE
 
Client understands that, if Client maintains an account for speculation, liquidating instructions on open futures positions maturing in a current month must be given to Merrill Lynch at least three (3) business days prior to the first notice day or last trading day, whichever is earlier.  If Client maintains an account for hedging, Client understands that liquidating instructions on open futures positions maturing in a current month must be given to Merrill Lynch at least one (1) business day prior to the first notice day in the case of long positions and, in the case of short positions, at least one (1) business day prior to the last trading day.  Alternatively, sufficient funds to take delivery or necessary delivery documents to make delivery must be delivered to Merrill Lynch within the same period(s) described above, as applicable, Client understands and acknowledges that option positions may be subject to automatic exercise procedures.  Merrill Lynch will exercise all in-the-money option positions that are subject to automatic exercise unless Client advises Merrill Lynch to the contrary.  If Client fails to comply with any of the foregoing obligations, Merrill Lynch may, at its discretion and in any commercially reasonable manner, liquidate any open positions, make or receive delivery of any securities, commodities or instruments, or exercise or allow the expiration of any option.  Client shall remain fully liable for all costs, expenses and liabilities incurred by Merrill Lynch in connection with such transactions and for any remaining debit balance.
 
In the event Merrill Lynch has requested from Client instructions, funds or documents and none are received by Merrill Lynch within the applicable time frame above and such failure continues for one (1) business day after Merrill Lynch provides notice of such failure to Client, Merrill Lynch without any further notice or requests, may either liquidate the Clients positions, or make or receive delivery on Client’s behalf upon such terms and by such methods which Merrill Lynch deems to be feasible.  In all cases, if any exchange or self-regulatory organization requests delivery intention instructions from Merrill Lynch, Client shall provide such instructions promptly without regard to the above time frames.
 
In the case of Merrill Lynch’s inability to deliver any security, commodity or other property to the purchaser by reason of failure of Client to supply Merrill Lynch therewith, then and in such event, Client authorizes Merrill Lynch to borrow any security, commodity or other property necessary to make delivery thereof.  Client agrees to be responsible for any premiums which Merrill Lynch may be required to pay thereon or any cost which Merrill Lynch may sustain by reason of Merrill Lynch’s inability to borrow the security, commodity or other property sold.
 
Notwithstanding the foregoing, any time that Client fails to make or take delivery, Client agrees that it shall be responsible for any debit, loss, exchange or clearing corporation fine or other assessment or penalty levied against Merrill Lynch as a result of Client’s failed delivery.
 
15.
VERIFICATION OF INFORMATION
 
Federal law requires all financial institutions to obtain, verify, and record information that identifies each client who opens an account and, therefore, in order to open an account, Merrill Lynch will request Client’s name, address and, for individuals, date of birth, as well as other information necessary to verify identity.  Further, Client understands that an investigation may be conducted at banks, financial institutions and credit agencies pertaining to Client’s identity, credit standing and its business, Client agrees to notify Merrill Lynch if the financial information provided to Merrill Lynch by Client changes in any material respect.
 
 
 
10

 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
If more than one person or entity owns an interest in the Account, all such persons and entitles shall execute this Agreement and each shall be deemed to be Client.
 
16.
CONFIRMATIONS AND STATEMENTS
 
Reports of the execution of orders, purchase and sale notices, correction notices and statements of Client’s Account shall be conclusive (absent manifest error) if not objected to promptly by oral notification upon receipt of such notice or statement and in writing in no event later than one (1) business day after receipt of such notice or statement by Client.  Communications will be sent to Client via mail, electronic transmission or facsimile at Client’s request, at the address of record on the Account application submitted by Client or at such other address as Client may hereafter give Merrill Lynch in writing.  Client must notify Merrill Lynch if it is not receiving its statements in a timely manner.
 
All oral objections should be directed to Merrill Lynch’s Futures Operations Division at 312.442.5555.  All subsequent written notices to Merrill Lynch shall be delivered to Merrill Lynch, Pierce, Fenner & Smith, Futures Compliance Department, World Financial Center, North Tower, 12th Floor, New York, NY, 10080, facsimile number 212.738.2788.
 
17.
GOVERNING LAW, JURISDICTION, SUCCESSORS AND BINDING EFFECT
 
This Agreement and its enforcement shall be governed by the laws of the State of New York without regard to conflicts of law principles.  Client submits to the non-exclusive jurisdiction of the courts of the State of New York and of the Federal Courts in the Southern District of New York with respect to any claim arising out of or involving this Agreement.  Client agrees that any claim, action or proceeding arising under or in any way relating to this Agreement must be brought, if at all, within one year of the date of the event(s) giving rise thereto.  Client and Merrill Lynch hereby waive a trial by jury in any action arising out of or relating to this Agreement or any transaction in connection therewith.
 
All provisions shall be continuous, and shall cover the Account which Client opens with Merrill Lynch, and shall inure to the benefit of Merrill Lynch’s parent firm or any successor organization, and shall be binding upon Client, its successors and assigns.
 
In accordance with CFTC Regulation 1.65, Merrill Lynch may assign Client’s Account and this Agreement to another registered Futures Commission Merchant (“FCM”) by notifying Client of the date and name of the intended assignee FCM, which notice shall be provided to Client at least ten (10) business days prior to the date of the intended assignment.  Unless Client objects to the assignment prior to the scheduled date for the assignment, the assignment will be binding on Client.  Client may not assign this Agreement without Merrill Lynch’s prior consent, which shall not be unreasonably withheld.
 
18.
HEDGE ACCOUNT DESIGNATION
 
If this Account is designated as a hedge Account in a relevant Merrill Lynch Futures Client Account Application, all orders which Client gives for the purchase or sale of futures or options contracts for Client’s Account will represent bona fide hedges in accordance with accepted definitions of hedge transactions as that term is defined in Regulation 1.3(z) under the Commodity Exchange Act, if applicable, and any amendments or interpretations thereto which may be made in the future by the Commodity Futures Trading Commission.  Client acknowledges that it is required to complete the Hedge Agreement in the Client Account Application, Risk Disclosure and Statements Booklet and notify Merrill Lynch if any transactions in Futures Contracts should no longer be designated as hedged Futures Contracts.
 
19.
INDEMNIFICATION
 
Client agrees to indemnify and hold Merrill Lynch, its affiliates, employees, agents, successors and assigns, harmless from and against any and all liabilities, losses, damages, costs and expenses, including reasonable attorney’s fees, incurred by Merrill Lynch and arising out of Client’s breach or default of this Agreement, Client’s failure to fully and timely perform Client’s duties under this Agreement, any actions of any third party selected by Client which affect the Account, or should any of Client’s representations and warranties fail to be true and correct in any material respect.  Client also agrees to pay promptly to Merrill
 
 
 
11

 
 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
Lynch all reasonable attorney’s fees, incurred by Merrill Lynch in the enforcement of any of the provisions of this Agreement or in any action, claim or demand filed by Client arising out of this Agreement and any other Agreements between Merrill Lynch and Client where Merrill Lynch is found not to be liable or responsible.  Merrill Lynch shall be liable to Client for any breach of this Agreement by Merrill Lynch and the conduct of its employees and agents which constitutes negligence or willful misconduct.
 
If Client is a trust, then specifically, without limiting the generality of the prior paragraph, Client agrees to hold harmless and indemnify Merrill Lynch, its affiliates, agents, employees, successors and assigns, from and against any and all claims, losses, damages, costs, and expenses, including reasonable attorneys’ fees, incurred by Merrill Lynch arising out of any claim by the trust against Merrill Lynch as a result of Merrill Lynch’s compliance with Trustee’s instructions.
 
20.
RECORDING
 
Each party understands that the other party, in its discretion, may record on tape or otherwise, any telephone conversation between the operations, trading and other non-legal personnel of the parties, although neither party assumes responsibility to do such or to retain such recordings.  Each party hereby agrees and consents to such recording and, subject to applicable rules of evidence and discovery, waives any right it may have to object to the admissibility into evidence of such recording in any legal proceeding between them or in any other proceeding in which the other party is involved or in which its records are subpoenaed.
 
21.
ELIGIBLE CONTRACT PARTICIPANT
 
Client agrees that it qualifies as an eligible contract participant (“ECP”) as that term is defined in Section 1(a)(12) of the Commodity Exchange Act as Client is one of the following types of entities:  (a) bank; (b) insurance company; (c) corporation, partnership, trust or limited liability company with total assets in excess of 10 million dollars or net worth of 1 million dollars; (d) government entity which owns and invests assets in excess of 25 million dollars; (e) broker/dealer; (f) futures commission merchant; (g) a regulated commodity pool, hedge fund, mutual fund or other collective investment vehicle with greater than 5 million dollars in assets; (h) employee benefit plan with assets greater than 5 million dollars of (i) a natural person with total assets exceeding 10 million dollars.  NOTE:  ECP clients are permitted to engage in certain activities pursuant to the Commodity Exchange Act.  If Client is not one of the above entities, please strike this paragraph in its entirety.
 
22.
RECEIPT OF CLIENT ACKNOWLEDGMENTS
 
By checking the boxes below, Client hereby expressly acknowledges and agrees that Client has received, read and understood and has retained a copy of the “Risk Disclosure Statement for Futures and Options” which includes the disclosures required by CFTC Rules 1.55, 30.6, 33.7 and 190.10(c), the specific disclosure statements below and other disclosure and risk statements applicable to Client’s Account as set forth in this Agreement and the “Client Account Application, Disclosure Statements and Notices”.  Please check all boxes.
 
  x  Risk Disclosure Statement for Futures and Options
  x  Authorization to Transfer Client Funds
  x  Singapore Risk Disclosure Statement
 
Client hereby acknowledges that Client has read and understands all the disclosures provided and agrees to be bound by all of the terms contained in this Agreement.  Client agrees to immediately notify Merrill Lynch of any material changes to the information contained herein.  Merrill Lynch and Client agree that this Agreement may be executed in counterparts.
 
PLEASE NOTE:  If this Agreement is executed on behalf of a corporation, a copy of a corporate resolution authorizing the signature(s) below must be attached.  If this Agreement is executed on behalf of a partnership, then the signature(s) below is/are that of all of the General Partners and the partnership agreement must be attached.  If this Agreement is executed on behalf of a Trust,
 
 
 
 
12

 
 
 
 
 
 MERRILL LYNCH   
 
   
 
 
 
the Trustee signature block below must be signed and a copy of the trust agreement provided.  If this Agreement is executed on behalf of a limited liability company or a non-US limited company, a copy of the operating agreement or a copy of a resolution authorizing the signature(s) below must be attached.  Persons signing this Agreement must provide proof of identity.  Additional documentation may be requested in accordance with applicable anti-money laundering policies.
 
Please indicate your understanding and agreement of these terms by signing below.
 
Highbridge Commodities FuturesAccess Master Fund Ltd.  
Account Name
     

By:
/s/ Justin Ferri   8-25-2011
 
Authorized Signature
 
Date
       
  Justin Ferri   Director
 
Print Name
 
Title
       
       
       
By:
     
 
Authorized Signature
 
Date
       
       
 
Print Name
 
Title


 
 
13

EX-10.02 5 efc11-708_ex1002.htm efc11-708_ex1002.htm
Exhibit 10.02

 
 
ML FUTURESACCESSsm
 
AMENDED AND RESTATED ADVISORY AGREEMENT
 
among
 
HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD.
 

 
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC
 
and
 
HIGHBRIDGE CAPITAL MANAGEMENT, LLC
 




 
Dated as of October 31, 2011
 
 
 
 
 

 
 
 
ML FUTURESACCESSsm
AMENDED AND RESTATED ADVISORY AGREEMENT
 
 

 
Table of Contents

SectionPage
 
 
Section Page
     
1.
Undertakings of the Trading Advisor in Connection with Offering
2
2.
Duties of the Trading Advisor
4
3.
Trading Advisor Independent
9
4.
Commodity Broker; Floor Brokers
9
5.
Management Fee
11
6.
Incentive Fee
11
7.
Term and Termination
12
8.
Right to Advise Others; Uniformity of Acts and Practices
13
9.
Additional Undertakings by the Trading Advisor
14
10.
Representations and Warranties
14
11.
Entire Agreement; Amendment and Restatement
18
12.
Indemnification
18
13.
Assignment
20
14.
Amendment
20
15.
Severability
20
16.
Notices
20
17.
Governing Law
21
18.
Consent to Jurisdiction
21
19.
Remedies
21
20.
Survival
22
21.
Counterparts
22
22.
No Waiver
22
23.
Rules of Interpretation
22
24.
Binding Effect; Benefit
23
25.
Confidentiality
23
26.
Advisers Act Compliance
24
27.
Limitation of Scope
24
     

 
Appendix A — List of Commodity Interests Traded by Trading Advisor A-1
Appendix B — Commodity Trading Authority  B-1
 

 
 

 


 

 
ML FUTURESACCESSsm
 
AMENDED AND RESTATED ADVISORY AGREEMENT
 
THIS AMENDED AND RESTATED ADVISORY AGREEMENT (the “Agreement”), made as of this 31st day of October, 2011, among HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD., a Cayman Islands exempted company (the “Master Fund”), MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC, a Delaware limited liability company (the “Manager”), and HIGHBRIDGE CAPITAL MANAGEMENT, LLC (the “Trading Advisor”).
 
W I T N E S S E T H:
 
WHEREAS, HIGHBRIDGE COMMODITIES FUTURESACCESSSM LLC, HIGHBRIDGE COMMODITIES FUTURESACCESSSM LTD. (the “Offshore Fund” and together with the Onshore Funds (as defined below), the “Feeder Funds”) and the Master Fund are part of a “family” of privately-offered managed futures funds sponsored by the Manager as part of the “ML FuturesAccessSM Program,” which provides for investors to invest in, and exchange their investments among, different funds in the ML FuturesAccessSM Program, as well as among the various “hedge funds” in the ML HedgeAccess® Program (the ML FuturesAccessSM Program and the ML HedgeAccess® Program being collectively referred to as the “Program”);
 
WHEREAS, it is anticipated that BA HIGHBRIDGE COMMODITIES FUND LLC (together with HIGHBRIDGE COMMODITIES FUTURESACCESSSM LLC, the “Onshore Funds”) will be formed and marketed and sold to clients of U.S. Trust, an affiliate of the Manager, and will not be part of the Program;
 
WHEREAS, the Master Fund, the Manager and the Trading Advisor entered into that certain ML FuturesAccessSM Advisory Agreement dated September 16, 2011 (the “Current Agreement”) and now wish to amend and restate the Current Agreement in its entirety;
 
WHEREAS, the Master Fund (together with the Onshore Funds and the Offshore Fund, the “Funds”) has been formed in order to trade, buy, sell or otherwise acquire, hold or dispose of forward contracts, futures contracts for commodities, financial instruments and currencies, rights pertaining thereto and options thereon or on physical commodities and engage in all activities incident thereto (the foregoing forms of investment being collectively referred to herein as “commodity interests”) under the direction of the Trading Advisor;
 
WHEREAS, the Onshore Funds will invest substantially all of their respective assets in the Master Fund and intend, subject to the terms and conditions set forth herein, to offer units of limited liability company interests (“Units”) for sale to investors in an offering exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”), as described in the Onshore Funds’ Confidential Program Disclosure Documents, as updated or supplemented from time to time (the “Onshore Memoranda”), which will be filed with the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”) pursuant to the Commodity Exchange Act, as amended (the “CEA”), the commodity pool operator and
 
 
 
 

 
 
commodity trading advisor regulations promulgated under the CEA by the CFTC (the “Commodity Regulations”), and the NFA rules promulgated under the CEA (the “NFA Rules”);
 
WHEREAS, the Offshore Fund will invest substantially all of its assets in the Master Fund and intends, subject to the terms and conditions set forth herein, to offer redeemable participating shares (“Shares” and collectively with the Units, “Interests”) for sale exclusively to Non-“United States persons,” pursuant to Regulation S under the 1933 Act, as described in the Offshore Fund’s Confidential Program Disclosure Document, as updated or supplemented from time to time (the “Offshore Memorandum,” and collectively, with the Onshore Memoranda, the “Memorandum”).  The Manager will file a Form 18-96 Notice with the NFA exempting the Manager from the requirement of filing the Offshore Memorandum with the NFA;
 
WHEREAS, the Manager acts as manager and sponsor of the Onshore Funds and sponsor of the Offshore Fund;
 
WHEREAS, the Trading Advisor is engaged in the business of, among other things, making trading decisions on behalf of investors in the purchase and sale of certain commodity interests;
 
WHEREAS, the Manager has sponsored the Master Fund in order that the Trading Advisor, upon the terms and conditions set forth herein, act as the exclusive commodity trading advisor for the Master Fund, making commodity interests investment decisions for the Master Fund on a discretionary basis; and
 
WHEREAS, the Trading Advisor has agreed to manage the Master Fund’s commodity interests trading.
 
NOW, THEREFORE, the parties hereto do hereby agree as follows, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in entering into this Agreement the parties intend to be legally bound:
 
1.   Undertakings of the Trading Advisor in Connection with Offering.
 
(a)   Trading Advisor to Provide Current Information.  The Trading Advisor agrees to use its reasonable best efforts to cooperate with the Funds and the Manager in preparing the sections in the Memorandum relating to the Trading Advisor and any Securities and Exchange Commission (“SEC”) filings of the Onshore Funds made pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”), including by providing, as promptly as may be reasonably practicable, all information (if any) regarding the Trading Advisor, its “principals,” “trading principals,” and “trading program” (each of the foregoing as defined in Section 4.10 of the Commodity Regulations) and its “affiliates” (as defined in Rule 405 promulgated under the 1933 Act) that the Manager reasonably believes to be necessary or advisable to include in the Memorandum or in any SEC filings made pursuant to the 1934 Act and hereby consents to the disclosure of such information in the Memorandum or such filings.  At all times, the Manager must obtain the prior written approval of the Trading Advisor to use any materials mentioning the Trading Advisor and/or its principals or affiliates (including the names “HCM” or “Highbridge”) and the Trading Program (defined below), provided that (i) if the Trading Advisor does not provide an affirmative written approval or disapproval within ten
 
 
 
 
2

 
business days of the date in which the material in question is provided to the Trading Advisor, the Manager shall have the right to use such information without receiving the prior written approval of the Trading Advisor, unless the Manager knows or has reason to believe that such information is not accurate, (ii) if the Trading Advisor provides comments to the Manager after the ten-business-day comment period, the Manager will take such comments into consideration either before distributing the materials, if it has not already done so, or for the next revision of the materials, if such materials have already been distributed, and (iii) notwithstanding the foregoing, the Manager may make non-material changes to such information to conform the format of such information to the format of the Memorandum and/or to comply with Commodity Regulations without prior written approval of the Trading Advisor; provided, however, the Manager or the Funds agree to notify the Trading Advisor of any non-material changes to such information at least one complete business day and at least 24 hours prior to the distribution of such information.
 
(b)   Solicitation Material.  The Trading Advisor shall not use, publish, circulate or distribute, or permit to be used, published, circulated or distributed, the Memorandum or any related solicitation material nor shall the Trading Advisor engage, or permit any other person to engage, in any marketing, sales or promotional activities in connection with the offering of Interests, except as may be requested by the Manager or as may be required by the Commodity Regulations or the NFA Rules.
 
(c)   “Roadshow” Participation.  The Trading Advisor will, to the extent reasonably requested by the Manager, participate in “road shows,” seminars, presentations and other marketing activities relating to the Funds, such participation to be at the sole expense of the Trading Advisor.
 
(d)   Performance Information; Monthly Commentary.  While any of the Interests continue to be offered, upon request from the Manager or the Funds, the Trading Advisor, at its own expense, shall promptly provide the Funds and the Manager with complete and accurate performance information (in form and substance consistent with Sections 4.25 and 4.35 of the Commodity Regulations and with the NFA Rules) reflecting the actual performance of the accounts directed by the Trading Advisor (other than the performance of the Funds) up to the latest practicable date (consistent with Sections 4.25 and 4.35 of the Commodity Regulations), together with any reports or letters relating to such performance data received from accountants and in the possession of the Trading Advisor.  The Trading Advisor shall also provide the Funds and the Manager with commentary pertaining to the performance of the Master Fund for each month no later than the tenth business day of the following month and hereby consents to the use of such commentary, as may be modified by the Manager in any non-material way, in any reports or marketing materials produced by the Funds or the Manager with respect to the Funds.
 
(e)   Access to Books and Records.  Upon reasonable notice to the Trading Advisor, the Manager and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) shall be permitted to access the Trading Advisor’s offices during normal business hours in order to inspect and copy such books and records related to the performance of the Trading Advisor’s duties as contemplated by this Agreement and as Merrill Lynch may reasonably deem necessary in connection with the transactions contemplated hereby (in each case, subject to such
 
 
 
 
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restrictions as the Trading Advisor may reasonably deem necessary or advisable so as to preserve the confidentiality of such information).  For the avoidance of doubt, nothing contained herein shall be construed to give the Manager or any of its affiliates any rights with respect to the code or model outputs of the Trading Program, or any other intellectual property owned by the Trading Advisor.
 
(f)   General Assistance.
 
(i)   The Trading Advisor agrees to provide a minimum level of reasonable support to Merrill Lynch with respect to the distribution of the Funds as agreed to by the Trading Advisor and Merrill Lynch from time to time.  For the avoidance of doubt, any individuals providing support on behalf of the Trading Advisor will not be compensated by Merrill Lynch for the sale of Interests.  Nothing in this Agreement shall obligate the Trading Advisor to meet with any investor or prospective investor of any Feeder Fund.
 
(ii)   The Trading Advisor agrees promptly to notify the Manager in the event that the Trading Advisor has become, or has a reasonable belief that it will become, unable or unwilling to continue to manage the Master Fund to the full extent set forth herein.
 
(iii)   The Trading Advisor agrees not to accept other client capital or accounts if doing so would increase the amount of capital managed pursuant to the Trading Program or any substantially identical trading strategy to a level that would materially impair the Trading Advisor’s ability to reasonably implement the Trading Program on behalf of the Master Fund as contemplated by the Memorandum.  Notwithstanding the foregoing, the Manager and the Funds each acknowledge and agree that the Trading Advisor intends to accept other client capital and accounts as described in the Trading Advisor Disclosure Document (as defined below), and that the resulting reduction of any allocations of investments to the Master Fund shall not by itself constitute a material impairment of the Trading Advisor’s ability to so implement the Trading Program.  “Trading Advisor Disclosure Document” means the Confidential Memorandum of Highbridge Quantitative Commodities Fund, L.P. dated June 2011, and any updates or supplements thereto.
 
(iv)   The Trading Advisor acknowledges that the Manager is registered as an investment adviser with the SEC and agrees to take such steps as the Manager may reasonably request to maintain compliance by the Trading Advisor with the Investment Advisers Act of 1940, as amended (the “Advisers Act”), to the extent applicable.
 
2.   Duties of the Trading Advisor.
 
(a)   Trading for the Fund.  The Trading Advisor shall act as the exclusive commodity trading advisor for the Master Fund.  The Manager, and not the Trading Advisor, shall be responsible for the management of any of the Master Fund’s excess cash.  Subject to
 
 
 
 
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Sections 2(b)(i), 2(b)(ii) and 2(b)(iii) and any other restrictions on trading set forth herein, the Trading Advisor, the Manager and the Master Fund agree that in managing the Master Fund, the Trading Advisor shall implement the trading program and strategies presently employed by Highbridge Quantitative Commodities Master Fund, L.P. (the “Highbridge Fund”) as described in the disclosure provided by the Trading Advisor for incorporation into the Memorandum (the “Trading Program”). The Trading Advisor shall have sole and exclusive authority and responsibility for directing the Master Fund’s commodities trading, subject to the Manager’s fiduciary authority to trade the Master Fund’s portfolio or otherwise intervene to effectively overrule trades, by causing the Master Fund to take positions opposite of existing positions, or unwind trades if the Manager deems that doing so is necessary or advisable for the protection of the Funds.  The Master Fund or the Manager may also liquidate trading positions or instruct the Trading Advisor to cause the Master Fund to liquidate trading positions to the extent necessary to:  (i) fund any distributions or redemptions of Interests to be made by the Master Fund; (ii) pay the Master Fund’s expenses; and/or (iii) comply with speculative position limits which may apply to the Trading Advisor and/or the Manager and subject to applicable rules requiring the aggregation of positions; provided that the Master Fund and the Manager shall permit the Trading Advisor three days in which to liquidate positions for the purposes set forth in clauses (i) and (ii) above, and as set forth in clause (iii) above if such liquidation is being done solely to comply with speculative position limits applicable to the Trading Advisor, prior to exercising its authority to liquidate positions.  Subject to Section 12, the Trading Advisor shall have no liability for the results of any action or non-action of the Manager or Master Fund in liquidating Master Fund positions pursuant to clauses (i)-(iii); provided that, if action was taken pursuant to (iii) above in order to comply with speculative position limits applicable to the Trading Advisor, the Trading Advisor shall have no liability only if the Manager’s intervention is proven to be an error and the Trading Advisor was in fact in compliance with all speculative position limits applicable to the Trading Advisor.
 
The Trading Advisor shall not change in any material way its Trading Program or the manner in which trading decisions are to be made or implemented as described in the Trading Advisor Disclosure Document and as applied to the Master Fund without using its commercially reasonable efforts to give at least 30 days’ prior written notice to the Master Fund and the Manager; provided that any such material change necessary to address extreme market conditions or other change in circumstances that was not reasonably foreseeable by the Trading Advisor may be made on shorter notice or no prior notice if prior notice is not reasonably practicable; provided further that in all cases the Trading Advisor shall provide notice as soon as practicable following such change.  The inclusion or exclusion of particular commodity interests from the Master Fund’s portfolio managed by the Trading Advisor shall not be deemed a change in the Trading Advisor’s trading approach and prior written notice to the Master Fund or the Manager shall not be required therefor, except as set forth in Section 2(b) below.
 
(b)   List of Commodity Interests Traded by the Trading Advisor.
 
(i)   The Trading Advisor shall be permitted to trade all commodity interests for the Master Fund’s portfolio that are consistent with the Trading Program and are listed on Appendix A to this Agreement.  Commodity interests may be added to Appendix A from time-to-time after prior written notice to and prior written approval of the Manager (which may be by e-mail to the product
 
 
 
 
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management team of the Manager) and, if such approval is granted, upon execution of an amendment to Appendix A.  The Manager may subject the trading of any commodity interest by the Master Fund to such written conditions or parameters as it reasonably believes may be necessary for the proper management of the Master Fund and the Feeder Funds, and such parameters shall be set forth in Appendix A.  The Manager may also, with prior written notice to the Trading Advisor (which may be by e-mail to the trading principals of the Trading Advisor), remove a commodity interest from Appendix A or set forth in Appendix A new or modified conditions or parameters to the trading of a commodity interest; provided that the Trading Advisor shall not be required to liquidate any existing positions as a result of any such changes to Appendix A subject to Section 2(a) above.  For the avoidance of doubt, only those commodity interests listed on Appendix A may be traded on behalf of the Master Fund notwithstanding any commodity interests listed on or purportedly authorized by documents entered into with brokers or counterparties on behalf of the Master Fund by the Trading Advisor, the Manager or Merrill Lynch.
 
(ii)   The Trading Advisor acknowledges that:  (A) U.S. investors are prohibited under CFTC regulations from trading in certain instruments — for example, certain “contracts for differences,” futures on certain non-U.S. sovereign debt, and certain non-U.S. stock index futures and related options; and (B) the trading of any instrument that is a “security” as defined under either the Investment Company Act of 1940, as amended (the “Investment Company Act”), or the 1933 Act may cause the Master Fund to be an “investment company” as defined in the Investment Company Act; and that in respect of clauses (A) and (B) above, the mechanism for enforcement of these limits on the Master Fund will be the procedure in the prior paragraph. 
 
(iii)   The Trading Advisor acknowledges that accepting physical delivery of a commodity interest could cause the Master Fund to be treated as a dealer in such commodity interest under U.S. tax law and thereby subject the Master Fund or investors in the Funds to adverse tax consequences.  The Trading Advisor agrees not to trade any such instruments discussed in Section 2(b)(ii), nor accept physical delivery of any commodity interest, for the Master Fund without at least 30 days’ prior written notice to and agreement of the Manager, except to the extent that written notice is not practicable due to market events that are not reasonably foreseeable by the Trading Advisor.
 
(iv)   The Manager understands that if it does not, in a timely manner, approve the addition of commodity interests as described in Section 2(b)(i), or if, as a result of any trading restriction set forth herein, including, but not limited to, those set forth in Section 2(a), Section 2(b)(i), Section 2(b)(ii), Section 2(b)(iii), Section 2(k) and/or Section 4, the Trading Manager is restricted from trading certain instruments for the Master Fund’s portfolio, the Master Fund’s investments, and therefore, its performance, may deviate from those of the Highbridge Fund.
 
 
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(c)   Initial Master Fund Capitalization; Capacity; Speculative Position Limits; Additions and Withdrawals.
 
(i)   The Master Fund will commence trading activities with a minimum of $25 million and the Trading Advisor acknowledges that a portion of the initial Master Fund capitalization may be provided by the Manager or one or more of its affiliates, provided that any initial subscription amounts provided by the Manager or one or more of its affiliates may be redeemed in accordance with the redemption terms set forth in the Memorandum and that the Manager or one or more of its affiliates have not committed to continue its investment in the Master Fund for any specified period of time.
 
(ii)   If the Trading Advisor (either alone or aggregated with the positions of any other person, if such aggregation shall be required under the CEA, or by the CFTC or any other regulatory authority having jurisdiction) shall knowingly exceed or expects to exceed applicable limits in any commodity interest traded for the Master Fund, the Trading Advisor shall promptly provide notice to the Manager that such limits have been, or are expected to be, exceeded and shall promptly take such action as the Trading Advisor may deem fair and equitable to comply with such limits, and shall deliver to the Master Fund a written explanation of the action taken to comply with such limits promptly after such action has been taken.  If such limits are exceeded by the Master Fund, the Manager may require the Trading Advisor to liquidate positions as required.
 
(iii)   The Manager shall be permitted to direct the increase or decrease of assets under management in the Master Fund as of the first business day of each month (each, an “Asset Adjustment Date”) by providing (i) notice to the Trading Advisor of maximum expected decreases, which shall be based on the actual client redemption orders received for the Feeder Funds (the “Maximum Redemption”), at least 30 days prior to the Asset Adjustment Date, (ii) prior notice of the estimated net increase or decrease of assets as a single estimated total asset level of the Master Fund, which shall be based on the actual net client redemption and subscription orders received for the Feeder Funds and any net decrease in no event being greater than the Maximum Redemption (the “Estimated Total Asset Level”), at least three business days prior to the Asset Adjustment Date, and (iii) prior notice of the actual net increase or decrease of assets as a single total asset level of the Master Fund, which shall be based on the actual net client redemption and subscription orders received and processed for the Feeder Funds (the “Actual Total Asset Level”), no later than the 3rd business day after the Asset Adjustment Date.  In anticipation of the increase or decrease of assets under management in the Master Fund, the Trading Advisor will seek to invest the assets of the Master Fund in an effort to effect appropriate exposure to the Trading Program.  If the Trading Advisor does not intend to accept new allocations or subscriptions into the Master Fund for a particular month pursuant to Section 10 of the Letter Agreement (defined below), the Trading Advisor must provide written notice to the Manager 15 calendar days prior to end of the
 
 
 
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preceding month.  Capital withdrawals from the Master Fund’s account may be made as of the end of any month upon 30 days’ prior written notice.
 
(d)   No Authority to Invest Assets Other Than in Commodity Interests.  The Master Fund and the Manager, and not the Trading Advisor, shall have the sole and exclusive authority and responsibility with regard to the investment, maintenance and management of the Master Fund’s assets other than in respect of the Trading Advisor’s trading of the Master Fund’s assets in commodity interests.
 
(e)   Trading Authorization.  Prior to the Master Fund’s commencing operations, the Master Fund shall deliver to the Trading Advisor a trading authorization in the form of Appendix B hereto appointing the Trading Advisor as an agent of the Master Fund and attorney-in-fact for such purpose.
 
(f)   Delivery of Disclosure Documents and Reports.  The Trading Advisor shall, during the term of this Agreement, deliver to the Funds copies of all disclosure documents and reports to investors in investment vehicles sponsored or advised by the Trading Advisor (other than the Funds and investment vehicles formed or created for investment by employees, directors or principals of the Trading Advisor) that trade the Trading Program, if any, prepared by the Trading Advisor promptly following preparation of such disclosure documents or reports; provided that during the Performance Disclosure Period (as defined below) the Trading Advisor shall also deliver such information with respect to such investment vehicles that trade a Substantially Similar Trading Strategy (as defined below).  “Performance Disclosure Period” means the period during which the performance of any investment vehicle or managed account operated or advised by the Trading Advisor other than the Funds is required by Commodity Regulations or the NFA Rules to be disclosed in the Disclosure Document.  “Substantially Similar Trading Strategy” means any trading strategy which utilizes the quantitative economics-based model described in the Trading Advisor Disclosure Document and has, without giving effect to temporary fluctuations, a substantially similar exposure to commodity-related assets.  In addition, with respect to managed accounts advised by the Trading Advisor that utilize the Trading Program, or, during the Performance Disclosure Period, a Substantially Similar Trading Strategy, the Trading Advisor shall only be required to deliver to the Funds copies of only those disclosure documents that are filed or required to be filed by the Trading Advisor with the NFA.  For the avoidance of doubt, this provision does not obligate the Trading Advisor to deliver disclosure documents and reports to investors in the Funds.
 
(g)   Trade Reconciliations.  The Trading Advisor acknowledges its obligation to review its commodity interest positions on a daily basis and to notify the Master Fund and the Manager promptly of any errors committed by the Trading Advisor or any trade which the Trading Advisor believes was not executed in accordance with its instructions and which cannot be promptly resolved.
 
(h)   Trade Information.  The Trading Advisor shall use reasonable efforts to provide trade information to the Master Fund’s administrator in the form and at the designated time as agreed to from time to time by the Manager and the Trading Advisor on the date of any trade made on behalf of the Master Fund.  Such reports may be provided directly by the Trading Advisor.
 
 
 
 
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(i)   Letter Agreement.  As of the date hereof, the Manager, Merrill Lynch and the Trading Advisor, inter alia, are entering into a Letter Agreement (the “Letter Agreement”) setting forth the legally binding agreements with respect to certain matters relating to the organization and marketing of the Funds.  This Agreement, which deals primarily with the Trading Advisor’s management of the Master Fund’s trading, is to be read and interpreted in conjunction with the Letter Agreement, and vice versa.  In the event of any inconsistency between this Agreement and the Letter Agreement, this Agreement shall control.
 
(j)   No Guarantee of Profits.  The Master Fund and the Manager both specifically acknowledge that in agreeing to manage the Master Fund, the Trading Advisor is in no respects making any guarantee of profits or of protections against loss.
 
(k)   Investment Activities; Trade or Business.  The Trading Advisor will use reasonable best efforts to conduct its investment activities on behalf of the Master Fund in a manner such that, based solely on such activities, (i) the Master Fund is not a dealer in commodities and does not regularly offer to enter into, assume, offset, assign or otherwise terminate positions in derivatives with customers, and (ii) the Master Fund’s U.S. activities (if any) consist solely of investing in and/or trading commodities of a kind customarily dealt in on an organized commodity exchange (if the transaction is of a kind customarily consummated at such place) and derivatives for its own account.  If at any time the Trading Advisor has any reason to believe these conditions have not been met with regard to the Trading Advisor’s trading of the Master Fund, the Trading Advisor will promptly so inform the Master Fund in writing.
 
3.   Trading Advisor Independent.  For all purposes of this Agreement, the Trading Advisor shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Master Fund from time to time, have no authority to act for or represent the Master Fund in any way and shall not otherwise be deemed to be an agent of the Master Fund.  Nothing contained herein shall (i) create, nor constitute the Trading Advisor, the Master Fund or the Manager as a member of, any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, or (ii) be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of any other; provided that the Trading Advisor may incur obligations and liabilities on behalf of the Master Fund in conjunction with implementing the Trading Program subject to the terms hereof.  The parties acknowledge that the Trading Advisor has not been an organizer or promoter of the Master Fund.
 
4.   Commodity Broker; Floor Brokers
 
(a)   (i)  Clearing of All Trades.  The Trading Advisor shall clear orders for all commodity interest transactions for the Master Fund through such commodity broker or brokers as the Manager shall designate from time to time in its sole discretion (the Master Fund currently so designating Merrill Lynch).  The Trading Advisor will not, without the consent of the Manager, trade on a “give up” basis through floor brokers, give-up brokers, prime brokers, dealers or other executing entities or facilities (collectively, “executing brokers”) not affiliated with Merrill Lynch.  The Manager will review and approve or disapprove all executing brokers proposed by the Trading Advisor for the Master Fund’s account.  If an executing broker is
 
 
 
 
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approved, neither the Manager nor the Master Fund will hold the Trading Advisor liable for any action, inaction, error or breach of contract by any such executing broker, subject to Section 12.  Irrespective of whether floor executing brokers unaffiliated with Merrill Lynch receive the Manager’s consent to execute trades on behalf of the Master Fund, all such trades will be “given-up” to be carried by Merrill Lynch.  The Trading Advisor shall receive electronic copies of all daily and monthly brokerage statements for the Master Fund directly from Merrill Lynch.
 
(ii)   The Master Fund will be subject to round-turn commission rates as determined from time to time by Merrill Lynch and consistent with disclosures made to investors in the Funds.
 
(b)   Over-the-Counter Trading.
 
(i)   All over-the-counter (“OTC”) trades referencing commodity interests, including trades involving swaps, forwards and other derivative instruments, for the Master Fund shall be executed through the OTC dealer(s) (which may be affiliates of the Manager) designated by the Manager, provided that at the request of the Trading Advisor, the Manager may consent to other OTC trading arrangements, which consent shall not be unreasonably withheld.  If an OTC dealer is approved, neither the Manager nor the Master Fund will hold the Trading Advisor liable for any action, inaction, error or breach of contract by any such dealer, subject to Section 12.
 
(ii)   If necessary for the Trading Advisor to trade pursuant to the Trading Program, the Master Fund shall provide reasonable dealing lines of credit for the Trading Advisor to place orders for OTC contracts on behalf of the Master Fund.
 
(iii)   With respect to OTC FX contracts, the Trading Advisor hereby confirms and acknowledges that:
 
A.   it has reviewed the Master Confirmation Agreement for Non-Deliverable Forward FX Transactions provided by the Master Fund (the “Master Confirmation”) and the terms of the NDF Transactions (as defined in the Master Confirmation) that will be entered into by the Master Fund under the Master Confirmation;
 
B.   the NDF Transactions that will be entered into under the Master Confirmation will be those non-deliverable forward FX transactions included in Appendix A, each subject to the market standard terms for such transaction, as determined by the Trading Advisor in its sole discretion from time to time; and
 
C.   the NDF Transactions to be entered into under the Master Confirmation are “FX Transactions” as defined in the Agreement Regarding Confirmation of FX Transactions provided by the Manager, and are subject to the operational procedures regarding confirmation described therein.
 
 
 
 
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(iv)   The “OTC prime brokerage” arrangements for the Master Fund shall be established for the Master Fund by or subject to the approval of the Manager.
 
(c)   The Trading Advisor acknowledges that the Master Fund shall be subject to the brokerage commissions and administrative fees and costs specified in the Memorandum.
 
(d)   Floor Brokerage and Other Costs.  The “floor brokerage,” “give-up” fees and other transaction costs charged by any floor broker or any OTC dealer, other than Merrill Lynch, to effect Master Fund transactions shall be subject to the approval of Merrill Lynch, which costs shall be paid by the Master Fund, such approval not to be unreasonably withheld provided that such fees and transaction costs are competitive with Merrill Lynch’s standard rates.
 
5.   Management Fee.  As of the last business day of each calendar month, the Master Fund shall pay the Trading Advisor a management fee equal to 1/12 of 1.50% (a 1.50% annual rate) of the month-end net asset value of the Master Fund, prior to reduction for any accrued Incentive Fees or for the management fee being calculated (the “Management Fee”).
 
6.   Incentive Fee.
 
(a)   The Master Fund will pay to the Trading Advisor, as of each December 31 (“Incentive Fee Calculation Date”), an incentive fee equal to 15% of any New Trading Profit (defined below) attributable to the Class DA, Class DU and Class DI shares of the Master Fund (“Class DA,” “Class DU” and “Class DI,” respectively) in which Highbridge Commodities FuturesAccessSM LLC, BA Highbridge Commodities Fund LLC and the Offshore Fund invest, respectively, each as of such Incentive Fee Calculation Date (each, an “Incentive Fee,” and collectively, the “Incentive Fees”).  Incentive Fees shall be calculated with respect to Class DA, Class DU and Class DI separately, irrespective of the performance experienced by different investors in each of the Feeder Funds.
 
(b)   “New Trading Profit” shall be calculated separately with respect to Class DA, Class DU and Class DI and equals any increase in the net asset value, subject to Section 6(e), of Class DA, Class DU or Class DI, as applicable, as of the current Incentive Fee Calculation Date over the High Water Mark attributable to the relevant Class.
 
(c)   (i)           The High Water Mark attributable to Class DA, Class DU and Class DI shall be equal to the highest net asset value attributable to Class DA, Class DU and Class DI, respectively, after reduction for the Incentive Fee then paid, as of any preceding Incentive Fee Calculation Date.  The High Water Mark shall be increased dollar-for-dollar by new subscriptions and decreased proportionately when capital withdrawals from the Master Fund’s account with the Trading Advisor (“Capital Withdrawals”) are made and attributable to Class DA, Class DU or Class DI.  The proportionate High Water Mark reduction made as a result of Capital Withdrawals shall be calculated by multiplying the High Water Mark in effect immediately prior to such Capital Withdrawal by the fraction the numerator of which is the net asset value attributable to Class DA, Class DU or Class DI, as applicable, immediately following such Capital Withdrawal and the denominator of which is the net asset value attributable to the
 
 
 
 
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relevant Class immediately before such Capital Withdrawal, in each case prior to reduction for any accrued Incentive Fee.
 
(ii)   If an Incentive Fee is owing with respect to Class DA, Class DU or Class DI as of an Incentive Fee Calculation Date, the relevant High Water Mark shall be reset to the aggregate net asset value of Class DA, Class DU or Class DI, as applicable, as of such date following the accrual of the Incentive Fee and the Management Fee charged to such Class.
 
(iii)   For the avoidance of doubt, the High Water Mark shall be separately determined on the basis of Class DA, Class DU and Class DI and not on the basis of any individual investors or group of investors in the Feeder Funds.
 
(d)   When there is an accrued Incentive Fee at the time any net Capital Withdrawal is made from Class DA, Class DU or Class DI, the Incentive Fee attributable to such Capital Withdrawal will be paid.  Such Incentive Fee shall be determined by multiplying the Incentive Fee that would have been paid had the date of the Capital Withdrawal been an Incentive Fee Calculation Date by the fraction the numerator of which is the amount of the Capital Withdrawal attributable to Class DA, Class DU or Class DI, as applicable, and the denominator of which is the aggregate net asset value attributable to the relevant Class immediately prior to the Capital Withdrawal, in each case prior to reduction for the accrued Incentive Fee.  Such Incentive Fee will be paid from and reduce the amount of the Capital Withdrawal.
 
(e)   Net asset value, solely for purposes of calculating the Incentive Fee, shall not include any interest income earned by the Master Fund and shall not be reduced by the Sponsor’s Fees although such interest income shall increase, and such Sponsor’s Fees shall decrease, net asset value for purposes of determining the value of the Interests.  For the avoidance of doubt, no Incentive Fee shall be payable on any interest income earned by the Master Fund.
 
(f)   The termination date of this Agreement shall be treated as an Incentive Fee Calculation Date.
 
(g)   The Trading Advisor will receive the Incentive Fee as a fee and not as a profit allocation.
 
7.   Term and Termination.
 
(a)   Term and Renewal.  This Agreement shall continue in effect until October 1, 2013.  Thereafter, this Agreement shall be automatically renewed for three successive one-year periods, on the same terms, unless terminated by either the Trading Advisor or the Master Fund upon notice to the other party no later than 90 days before the expiration of the then-current term.
 
(b)   Termination.  Notwithstanding Section 7(a) hereof:
 
 
 
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(i)   This Agreement shall terminate immediately in the event that the Master Fund shall terminate and be dissolved as determined by the Manager.
 
(ii)   In its discretion, the Manager may terminate this Agreement at the end of any month upon 30 days’ notice.
 
(iii)   The Trading Advisor may terminate this Agreement at any time the net assets of the Master Fund are less than $30 million.
 
(iv)   The Trading Advisor may terminate this Agreement as of any month-end following the two-year anniversary of the execution date of this Agreement if the average net assets of the Master Fund over the immediately preceding six-month period as calculated at such month-end are less than $75 million.
 
(v)   The Master Fund and/or the Manager, on the one hand, or the Trading Advisor, on the other, may terminate this Agreement as a result of a material breach hereof by the other party, after due notice and a reasonable opportunity to cure.
 
Upon termination of this Agreement, the Trading Advisor shall continue to trade the Master Fund’s account, for liquidation only, and shall close all open commodity interest positions in an orderly manner as expeditiously as is commercially practicable; provided, however, that if the Trading Advisor is unable or unwilling to liquidate the Master Fund’s account, the Manager and the Trading Advisor shall negotiate in good faith to agree upon a mutually acceptable liquidation agent.
 
8.   Right to Advise Others; Uniformity of Acts and Practices.  During the term of this Agreement, the Trading Advisor shall, subject to the capacity, exclusivity and most favored nations undertakings of the Letter Agreement, be free to advise other investors as to the purchase and sale of commodity interests, to manage and trade other investors’ commodity interests accounts and to trade for and on behalf of its own proprietary commodity interests accounts.  However, under no circumstances shall the Trading Advisor intentionally favor any commodity interests account directed by it (regardless of the date on which it began or shall begin to direct such account) over the Master Fund’s account, giving due consideration to the Trading Program.
 
At the request of the Master Fund, the Trading Advisor shall promptly deliver to the Master Fund a satisfactory written explanation, in the reasonable judgment of the Master Fund, of the differences, if any, in the performance between the Master Fund’s account and such other commodity interest accounts traded utilizing the Trading Program or a substantially identical trading strategy (subject to the need to preserve the confidentiality of proprietary information concerning the Trading Advisor’s trading systems, methods, models, strategies and formulas and the identity of the Trading Advisor’s clients); provided that during the Performance Disclosure Period the Trading Advisor shall also deliver any such written explanation with respect to any other commodity interest accounts traded utilizing a Substantially Similar Trading Strategy.
 
 
 
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9.   Additional Undertakings by the Trading Advisor.  Neither the Trading Advisor nor any of its employees, agents, subsidiaries or respective successors or assigns shall:  (i) knowingly use or distribute for any purpose the names and/or any other information about any of the investors in the Feeder Funds that are derived from activities under this Agreement; (ii) knowingly solicit (which shall not include responding to inquires initiated by potential investors and not resulting from any other solicitation activities of the Trading Advisor nor any of its employees, agents, subsidiaries or respective successors or assigns) other than through Merrill Lynch any investor or prospective investor in the Feeder Funds, known to the Trading Advisor to have an interest in commodities-related investments as a result of an introduction of such investor to the Trading Advisor by Merrill Lynch in connection with the offering of the Interests or other related marketing activities, for investment in the Trading Advisor’s other investment products in the United States having a Substantially Similar Trading Strategy (unless such investor is already a client of the Trading Advisor or its subsidiaries); or (iii) knowingly accept as a client or investor for investment in the Trading Advisor’s other investment products in the United States having a substantially identical trading strategy (unless such investor is already a client of the Trading Advisor or its subsidiaries), other than through Merrill Lynch, any person known to the Trading Advisor to have an interest in commodities-related investments as a result of an introduction of such person to the Trading Advisor by Merrill Lynch in connection with the offering of the Interests or through other related marketing activities who has been an investor in any FuturesAccess Fund at any time during the six calendar months prior to such acceptance; or (iv) use any of the non-public marketing or business information developed by the Manager and disclosed to the Trading Advisor in conjunction with the marketing of the Funds or the performance of the Trading Advisor’s duties as contemplated hereby, or any other non-public information that the Trading Advisor receives from the Manager, to market the Trading Advisor’s products; provided, however, that such restriction shall not apply to the Trading Advisor’s use of any non-public information disclosed by the Manager to the Trading Advisor if (a) such information becomes publicly known through no disclosure or fault of the Trading Advisor, (b) such information was previously known to or independently developed by the Trading Advisor, or (c) the Trading Advisor did not agree to receive such non-public information from the Manager prior to the Manager disclosing the information to the Trading Advisor.  For purposes of this Section 9, the strategies utilized by the Trading Advisor on behalf of the JP Morgan Funds – Highbridge Diversified Commodities Fund and/or the Highbridge Dynamic Commodities Strategy Fund are not substantially identical to the trading strategy utilized by the Trading Advisor on behalf of the Funds.
 
10.   Representations and Warranties.
 
(a)   The Trading Advisor hereby represents and warrants to the other parties as follows:
 
(i)   The Trading Advisor is an entity duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization and in good standing in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to be duly qualified would materially affect the Trading Advisor’s ability to perform its obligations under this Agreement.  The Trading Advisor has full limited liability company power and authority to perform its obligations under this Agreement and it has the
 
 
 
 
14

 
requisite power and authority to own property, perform its obligations and conduct its business in the manner described in the description of the Trading Program, or other materials relating to the Trading Advisor, approved by the Trading Advisor and provided to the Master Fund or Manager and as otherwise contemplated herein.
 
(ii)   This Agreement has been duly and validly authorized, executed and delivered by the Trading Advisor and constitutes a legal, valid and binding agreement of the Trading Advisor enforceable in accordance with its terms.
 
(iii)   The Trading Advisor has all necessary federal and state governmental, regulatory and commodity exchange licenses and approvals, is and will continue to be operated in compliance in all material respects with all applicable laws, rules, and regulations, the violation of which would or could have a material adverse effect on the Trading Advisor’s ability to comply with and perform its obligations under this Agreement, and has effected all filings and registrations with federal and state governmental and regulatory agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder (including, without limitation, registration with the CFTC as a commodity trading advisor under the CEA and membership with the NFA), and the performance of such obligation will not materially violate or result in a material breach of any provision of the Trading Advisor’s certificate of formation or operating agreement.  The principals of the Trading Advisor are duly listed as such on its commodity trading advisor Form 7-R registration.  The Trading Advisor is registered as an “investment adviser” with the Securities and Exchange Commission.
 
(iv)   The Trading Advisor’s implementation of its Trading Program will not infringe on any other person’s copyrights, trademark or other intellectual property rights.
 
(v)   The execution and delivery of this Agreement, the incurrence of the obligations herein set forth and the consummation of the transactions contemplated herein will not constitute a material breach of, or material default under, any instrument by which the Trading Advisor is bound or any order, rule or regulation applicable to the Trading Advisor of any court or any governmental body or administrative agency having jurisdiction over the Trading Advisor.
 
(vi)   Other than as may have been disclosed in writing to the Manager by the Trading Advisor, there is not pending, or to the best of the Trading Advisor’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Trading Advisor is a party, or to which any of the assets of the Trading Advisor are subject, which would reasonably be expected to have a material adverse effect on the Trading Advisor’s ability to perform its obligations under this Agreement.  The Trading Advisor has not received any notice of an investigation or warning letter from the NFA or the
 
 
 
15

 
CFTC regarding material non-compliance by the Trading Advisor with the CEA or the regulations thereunder.
 
(b)   The Manager hereby represents and warrants to the other parties as follows:
 
(i)   The Manager is duly organized and validly existing and in good standing under the laws of its jurisdiction of formation and in good standing under the laws of each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would materially adversely affect the Manager’s ability to perform its obligations hereunder.  The Manager has full limited liability company power and authority to perform its obligations under this Agreement and it has the requisite power and authority to own property, perform its obligations and conduct its business in the manner described herein.
 
(ii)   This Agreement has been duly and validly authorized, executed and delivered by the Manager and constitutes a legal, valid and binding agreement of the Manager enforceable in accordance with its terms.
 
(iii)   The Manager has all necessary federal and state governmental, regulatory and commodity exchange licenses and approvals, is and will continue to be operated in compliance in all material respects with all applicable laws, rules, and regulations, the violation of which would or could have a material adverse effect on the Manager’s ability to comply with and perform its obligations under this Agreement, and has effected all filings and registrations with federal and state governmental and regulatory agencies required to conduct its business and to act as described herein or required to perform its obligations hereunder (including, without limitation, registration with the CFTC as a commodity pool operator under the CEA and membership with the NFA, or qualification for an exemption therefrom), and the performance of such obligation will not materially violate or result in a material breach of any provision of the Manager’s certificate of formation or operating agreement.  The principals of the Manager are duly listed as such on its commodity pool operator Form 7-R registration.
 
(iv)   The execution and delivery of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein will not constitute a material breach of, or material default under, any instrument by which the Manager is bound or any order, rule or regulation applicable to the Manager of any court or any governmental body or administrative agency having jurisdiction over the Manager.
 
(v)   Other than as may have been disclosed in writing to the Trading Advisor by the Manager, there is not pending, or to the best of the Manager’s knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Manager is a party, or to which any of the assets of the Manager is subject, which would reasonably be expected to have a
 
 
 
 
16

 
material adverse effect on the Manager’s ability to perform its obligations under this Agreement.  The Manager has not received any notice of an investigation or warning letter from the NFA or the CFTC regarding material non-compliance by the Manager with the CEA or the regulations thereunder.
 
(vi)   The Manager acknowledges receipt, on behalf of both itself and the Funds, of all disclosure documents required to be delivered by the Trading Advisor pursuant to applicable Commodity Regulations or the NFA Rules and of the Trading Advisor’s Form ADV Part 2.
 
(vii)   The Manager represents and warrants that the assets of each Fund are not intended to constitute “plan assets” pursuant to 29 CFR § 2510.3-101 of the regulations of the U.S. Department of Labor as amended by Section 3(42) of ERISA.
 
(c)   The Master Fund represents and warrants to the other parties as follows:
 
(i)   The Master Fund is duly organized and validly existing and in good standing under the laws of the jurisdiction of its formation and in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would materially adversely affect the Master Fund’s ability to perform its obligations hereunder.  The Master Fund has full power and authority under applicable law to perform its obligations hereunder.
 
(ii)   This Agreement has been duly and validly authorized, executed and delivered by the Master Fund and constitutes a legal, valid and binding agreement of the Master Fund enforceable in accordance with its terms.
 
(iii)   The Master Fund has all necessary governmental, regulatory and commodity exchange approvals and licenses, and has effected all filings and registrations with U.S. federal and state and Cayman Islands governmental agencies, required to conduct its business and to act as described herein or required to perform its obligations hereunder and the performance of such obligations will not materially violate or result in a material breach of any provision of its certificate of incorporation or memorandum or articles of association.
 
(iv)   The execution and delivery of this Agreement, the incurrence of the obligations set forth herein and the consummation of the transactions contemplated herein will not constitute a material breach of, or material default under, any instrument by which the Master Fund is bound or any order, rule or regulation applicable to the Master Fund of any court or any governmental body or administrative agency having jurisdiction over the Master Fund.
 
(v)   Other than as may have been disclosed in writing to the Manager by the Master Fund, there is not pending, or, to the best of the Master Fund’s knowledge threatened, any action, suit or proceeding before or by any court or
 
 
 
 
17

 
other governmental body to which the Master Fund is a party, or to which any of the assets of the Master Fund is subject, which would reasonably be expected to have a material adverse effect on the Manager’s ability to perform its obligations under this Agreement.  The Master Fund has not received any notice of an investigation or warning letter from the NFA or the CFTC regarding material non-compliance by the Master Fund with the CEA or the regulations thereunder.
 
(vi)   The Master Fund is a “qualified eligible person” under Section 4.7 of the Commodity Regulations.
 
(d)   The foregoing representations and warranties shall be continuing during the entire term of this Agreement and, if at any time, any event shall occur which would make any of the foregoing representations and warranties of any party no longer true and accurate, such party shall promptly notify the other parties.
 
General
 
11.   Entire Agreement; Amendment and Restatement.  This Agreement, together with the Letter Agreement, constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as between the parties unless it shall be in writing and signed by the party against whom enforcement is sought.  This Agreement amends and restates the Current Agreement in its entirety.
 
12.   Indemnification.  The Funds shall indemnify, defend and hold harmless the Trading Advisor from and against any and all Losses (as defined below) incurred by the Trading Advisor (“Trading Advisor Losses”), resulting from a demand, claim, lawsuit, action or proceeding relating to, based upon or arising out of this Agreement or the advisory services rendered by the Trading Advisor or its affiliates or their respective owners, principals, directors, officers, employees, representatives or controlling persons (“Trading Advisor Parties”) with respect to the Master Fund pursuant to this Agreement; provided that the conduct of the Trading Advisor Party that is the subject of the demand, claim, lawsuit, action or proceeding did not constitute negligence, intentional misconduct or a material breach of this Agreement or of any fiduciary obligation to the Funds and was done in good faith and in a manner such Trading Advisor Party reasonably believed to be in, or not opposed to, the best interests of the Funds.  For the avoidance of doubt, Trading Advisor Losses shall include amounts incurred or paid by the Trading Advisor with respect to other Trading Advisor Parties as a result of indemnification by the Trading Advisor against Losses incurred by such Trading Advisor Parties to the extent the Trading Advisor would be entitled to indemnification against such Losses pursuant to this Section 12 if such Losses had been such incurred directly by the Trading Advisor.  “Losses” shall mean losses, claims, damages, liabilities (joint and several), costs and expenses (including any reasonable investigatory, legal and other expenses incurred in connection with, and any amounts paid in, any settlement, provided that the indemnifying party shall have approved such settlement).  The termination of any demand, claim, lawsuit, action or proceeding by settlement shall not, in itself, create a presumption that the conduct in question was not undertaken in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Master Fund.
 
 
 
18

 
The Trading Advisor shall indemnify, defend and hold harmless the Funds from and against any and all Losses incurred by the Funds (“Fund Losses”), resulting from a demand, claim, lawsuit, action or proceeding relating to, based upon or arising out of this Agreement or the advisory services rendered by the Trading Advisor Parties with respect to the Master Fund pursuant to this Agreement; provided that the conduct of the Trading Advisor Party which was the subject of the demand, claim, lawsuit, action or proceeding constituted negligence, intentional misconduct or a material breach of this Agreement or was an action or omission taken otherwise than in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Master Fund.  For the avoidance of doubt, Fund Losses shall include amounts incurred or paid by the Funds with respect to its affiliates or the Manager or their respective directors, officers, employees, representatives and controlling persons (“Merrill Lynch Parties”) as a result of indemnification by the Funds against Losses incurred by such Merrill Lynch Parties to the extent the Funds would be entitled to indemnification against such Losses pursuant to this Section 12 if such Losses had been such incurred directly by the Funds.
 
The foregoing agreements of indemnity shall be in addition to, and shall in no respect limit or restrict, any other remedies which may be available to an indemnified party.
 
In the event that a person entitled to indemnification under this Section 12 is made a party to an action, suit or proceeding alleging both matters for which indemnification may be due hereunder and matters for which indemnification may not be due hereunder, such person shall be indemnified only in respect of the former matters.  Promptly after receipt by any of the indemnified parties under this Agreement of notice of demand, claim, lawsuit, action or proceeding, the indemnified party shall notify the indemnifying party in writing of the commencement thereof if a claim in respect thereof is to be made under this Agreement.  Except to the extent that the indemnifying party is not materially prejudiced thereby, the omission so to notify shall relieve the indemnifying party from any obligation or liability which it may have to such indemnified party under this Section 12.
 
In the case of any proceeding subject to possible indemnification hereunder, the indemnifying party shall be entitled to participate, at its own expense, in the defense or to assume the defense of any suit or action brought giving rise to a possible obligation of indemnity hereunder, which defense shall be conducted by counsel chosen by it and reasonably satisfactory to the indemnified party or parties, defendant or defendants therein, provided that the indemnified party shall at all times have the right, at its own option and expense, to participate fully therein (without controlling such action) and to select, at its own expense, separate counsel of its own choosing.
 
If the indemnifying party shall fail to notify the indemnified party that it shall undertake to defend any claim within a reasonable time after its receipt of written notice of such claim, the indemnified party will have the right to undertake the defense, compromise or settlement of such claim on behalf of, and for the account and at the risk of, the indemnifying party, provided that the indemnified party will not, without the prior written consent of the indemnifying party (such consent not being unreasonably withheld), settle or compromise any claim or consent to entry of any judgment relating to any such claim.
 
 
 
19

 
If there is a reasonable probability in the indemnified party’s reasonable judgment that a claim may materially and adversely affect the indemnified party, other than as a result of money damages or other money payments against which it is indemnified hereunder, then (i) the indemnified party will have the right to co-defend such claim and (ii) the indemnifying party will not, without the prior written consent of the indemnified party (such consent not being unreasonably withheld), settle or compromise any claim or consent to entry of any judgment relating to any such claim, which settlement, compromise or judgment does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party a release from all liabilities in respect to such claim.
 
The indemnifying party and the indemnified party will provide each other with reasonable access to all records and documents (other than proprietary trading information) within their possession, custody or control relating to any claim under this Section 12, subject to customary assurances of confidentiality.
 
In the event that indemnification otherwise due hereunder by its terms is held to be unenforceable, the Manager and the Trading Advisor shall contribute to the payment of the related claim in a manner which reflects the relative fault and ability to have prevented such claim as well as the relative benefit received from the offering of the Interests— i.e., the relative amount of fees received by each from the proceeds of the Interests to which such claim relates.
 
13.   Assignment.  This Agreement shall not be assigned by any of the parties hereto without the prior express written consent of the other parties hereto.
 
14.   Amendment.  This Agreement shall not be amended except by a writing signed by the parties hereto.
 
15.   Severability.  If any provision of this Agreement, or the application of any provision to any person or circumstance, shall be held to be inconsistent with any present or future law, ruling, rule or regulation of any court or governmental or regulatory authority having jurisdiction over the subject matter hereof, such provision shall be deemed to be rescinded or modified in accordance with such law, ruling, rule or regulation, and the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it shall be held inconsistent, shall not be affected thereby.
 
16.   Notices.  Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered by courier service, facsimile, e-mail, any form of electronic file transfer, mail, postage prepaid mail or other similar means and shall be effective upon actual receipt by the party to which such notice shall be directed, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):
 
if to the Master Fund:
 
HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD.
c/o Merrill Lynch Alternative Investments LLC
4 World Financial Center
10th Floor
 
 
 
 
20

 
 
New York, NY 10080
Facsimile:
E-mail:
Attn:  Craig Deardorff, MLAI Legal Counsel
 
if to the Manager:
 
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC

4 World Financial Center
10th Floor
New York, NY 10080
Facsimile:
E-mail:
Attn:  Craig Deardorff, MLAI Legal Counsel
 
if to the Trading Advisor:
 
HIGHBRIDGE CAPITAL MANAGEMENT, LLC

40 West 57th Street
33rd Floor
New York, NY 10019
Facsimile:
E-mail:
Attn:  Noah Greenhill, General Counsel
 
17.   Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law.
 
18.   Consent to Jurisdiction.  The parties hereto agree that any action or proceeding arising directly, indirectly or otherwise in connection with, out of, related to or from this Agreement, any breach hereof or any transaction covered hereby, shall be resolved, whether by arbitration or otherwise, within the County of New York, City of New York, and State of New York.  Accordingly, the parties consent and submit to the jurisdiction of the federal and state courts and any applicable arbitral body located within the County of  New York, City of New York, and State of New York.  The parties further agree that any such action or proceeding brought by a party to enforce any right, assert any claim, or obtain any relief whatsoever in connection with this Agreement shall be brought by such party exclusively in federal or state courts, or if appropriate before any applicable arbitral body, located within the County of New York, City of New York and State of  New York.
 
19.   Remedies.  In any action or proceeding arising out of any of the provisions of this Agreement, the Trading Advisor, the Manager and the Master Fund agree that they shall not seek any prejudgment equitable or ancillary relief.  Such parties also agree that their sole remedy in any such action or proceeding shall be to seek actual monetary damages for any
 
 
 
 
21

 
breach of this Agreement; provided, however, that the Master Fund agrees that the Trading Advisor and the Manager may seek declaratory judgment with respect to the indemnification provisions of this Agreement.
 
20.   Survival.  The provisions of this Agreement shall survive the termination hereof with respect to any matter arising while this Agreement shall be in effect.
 
21.   Counterparts.  This Agreement may be executed in one or more counterparts (including by electronic means or by facsimile), each of which shall, however, together constitute one and the same document.  Facsimile signature pages or other electronic signature pages shall have the same binding force and effect as original copies.
 
22.   No Waiver.
 
(a)   No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  Failure on the part of a party to complain of any act of another party or to declare the other party in default under this Agreement, irrespective of how long such failure continues, shall not constitute a waiver by the former party of its rights with respect to such default until the applicable statute-of-limitations period has run.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by a party hereto to assert its rights hereunder on any occasion or series of occasions.
 
(b)   Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given.
 
23.   Rules of Interpretation.  In this Agreement, unless inconsistent with the context or the contrary intention appears, a reference to:
 
(a)   “May” shall be construed as permissive;
 
(b)   A “notice” means written notice unless otherwise stated;
 
(c)   “Shall” shall be construed as imperative;
 
(d)   The singular includes the plural and vice versa;
 
(e)   The masculine includes the feminine and neuter respectively;
 
(f)   Writing includes typewriting, printing, lithography, photography, electronic mail and other modes of representing or reproducing words in a legible and non-transitory form;
 
(g)   Any reference to a law, agreement or a document shall be deemed also to refer to any amendment, supplement or replacement thereof;
 
 
 
22

 
(h)   Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless such reference specifies business days;
 
(i)   The term “and/or” is used herein to mean both “and” as well as “or.”  The use of “and/or” in certain contexts in no respects qualifies or modifies the use of the terms “and” or “or” in others.  “Or” shall not be interpreted to be exclusive, and “and” shall not be interpreted to require the conjunctive — in each case, unless the context otherwise requires;
 
(j)   The terms “include” and “including” are to be construed as non-exclusive (so that, by way of example and for the avoidance of doubt, “including” shall mean “including without limitation”);
 
(k)   Whenever it is provided or contemplated herein that the Manager is to determine or decide any matter, the Manager (on its own behalf as well as on behalf of the Master Fund) shall do so in its sole and absolute discretion, unless otherwise expressly provided herein;
 
(l)   In addition to the authority granted to the Manager pursuant to this Agreement, the Manager may, but shall have no obligation to, take any action that the Manager deems necessary or advisable to ensure that the Master Fund is not in violation of law or in breach of any contractual provisions;
 
(m)   The table of contents to and the headings in this Agreement are for convenience of reference only and are to be ignored in construing this Agreement;
 
(n)   No provision of this Agreement shall be construed in favor of or against any person by reason of the extent to which any such person, its affiliates, or their respective employees or counsel participated in the drafting thereof; and
 
(o)   In the event of any inconsistency between the provisions of this Agreement and of the Master Fund’s constituent documents, the parties shall determine on a commercially reasonable basis which provisions shall control.
 
24.   Binding Effect; Benefit.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, all persons indemnified hereunder and their respective estates, permitted successors, transferees, custodians, executors, administrators, legal representatives, heirs and permitted assigns.
 
25. Confidentiality.
 
(a)   The parties hereto each acknowledge that the business and assets of the Merrill Lynch Parties and of the Trading Advisor are confidential and involve a wide range of proprietary information, including trade secrets and financial or commercial information.
 
(b)   All information with respect to the Funds’ activities (including investment and trading) and assets shall be presumed confidential and proprietary unless the Manager otherwise so indicates in writing.  Likewise, all information with respect to the Trading Advisor’s Trading Program shall be presumed confidential and proprietary unless the Trading Advisor
 
 
 
 
23

 
otherwise so indicates in writing.  For the avoidance of doubt, no information, including any trade data or management commentary, included in any 1934 Act filing shall be deemed information with respect to the Trading Advisor’s Trading Program subject to the terms of the preceding sentence.  The Manager and its affiliates agree that they shall not use any Trading Advisor information in order to replicate the trades, in whole or in part, created by the Trading Advisor for the Master Fund in any funds or accounts advised, managed or sponsored by the Manager or its affiliates.
 
(c)   Each party covenants that it has and it shall at all times keep confidential and not, directly or indirectly (i) disclose, divulge, furnish or make accessible to anyone, or (ii) use in any manner that would be adverse to the interests of any other party, any confidential or proprietary information to which the former party has been or shall become privy relating to the business or assets of any of such other parties except with the prior written approval of such other party or except for information that is otherwise publicly available, other than information made publicly available by breach of this contract, or required to be disclosed by law.  Each party may, however, share such information with such party’s service providers, accountants and attorneys (“Permitted Confidants”); provided, that the parties’ Permitted Confidants undertake in writing (if relevant professional ethical obligations do not apply) to hold such information strictly confidential to the same extent set forth herein, and not in any manner or respect to use any of such information for their personal gain.  For the avoidance of doubt, such Permitted Confidants shall include third parties contracted by the Manager (“Risk Assessors”) which may receive the Master Fund’s trade information in order to provide risk management portfolio analysis for the Manager or one of its affiliates.  However, in no case shall any Risk Assessor be provided information identifying the trade information with the Master Fund, i.e., the trade information shall be provided “blind.”
 
26.   Advisers Act Compliance.  Any provisions of this Agreement which are construed to violate the Advisers Act shall be deemed null and void ab initio.  For the avoidance of doubt, no provision of this Agreement shall be deemed to constitute a waiver of any person’s rights or claims under any federal or state securities laws.
 
27.   Limitation of Scope.  For the avoidance of doubt, all representations, warranties, liabilities, indemnifications, and other obligations of the Trading Advisor arising under or pursuant to this Agreement are limited in scope in that they apply with respect to only those assets of the Master Fund advised by the Trading Advisor, and not to any cash management transactions or positions managed by the Manager or its affiliates.
 
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24

 

PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION.  THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE.  CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
 
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned on the day and year first written above.
 
HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD.

By: /s/ Justin C. Ferri                                            
Name: Justin C. Ferri
Title:
 
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC
 
By: /s/ Justin C. Ferri                                            
Name: Justin C. Ferri
Title:
 
HIGHBRIDGE CAPITAL MANAGEMENT, LLC
 
By: /s/ Sebastian Echavarria                                
Name: Sebastian Echavarria
Title:   Managing Director
 
With respect to Section 12 only:
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LLC
 
By: /s/ Justin C. Ferri                                              
Name: Justin C. Ferri
Title:
 

 
 

 
 
HIGHBRIDGE COMMODITIES FUTURESACCESS LTD.
 
By: /s/ Justin C. Ferri                                             
Name: Justin C. Ferri
Title:   Director
 
BA HIGHBRIDGE COMMODITIES FUND LLC

By: /s/ Justin C. Ferri                                             
Name: Justin C. Ferri
Title:
 

 

 


 
APPENDIX A
 

 
COMMODITY INTERESTS TRADED BY
HIGHBRIDGE CAPITAL MANAGEMENT, LLC

The undersigned represents that it trades the following commodity interest futures contracts and options on such futures contracts on behalf of HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD., and that each such instrument represents a regulated futures contract or an option thereon traded on a qualified board of trade or exchange:
 
Name of Futures Contract
 
 
Bloomberg Active Futures Ticker
 
Name of Futures Contract
 
 
Bloomberg Active Futures Ticker
             
Aluminum
 
LAA CMDTY
 
Nickel
 
LNA CMDTY
Australian Dollar
 
ADA CMDTY
 
Platinum
 
PLA CMDTY
Brent Crude Oil
 
COA CMDTY
 
Silver
 
SIA CMDTY
Cocoa
 
CCA CMDTY
 
Soybean Meal
 
SMA CMDTY
Cocoa (LIFFE)
 
QCA CMDTY
 
Soybean Oil
 
BOA CMDTY
Coffee
 
KCA CMDTY
 
Soybeans
 
S A CMDTY
Coffee Robusta (LIFFE)
 
DFA CMDTY
 
Sugar
 
SBA CMDTY
Copper-High Grade (COMEX)
 
HGA CMDTY
 
Sugar (LIFFE)
 
QWA CMDTY
Copper (LME)
 
LPA CMDTY
 
Tin
 
LTA CMDTY
Corn
 
C A CMDTY
 
Wheat
 
W A CMDTY
Cotton
 
CTA CMDTY
 
WTI Crude Oil
 
CLA CMDTY
Feeder Cattle
 
FCA CMDTY
 
Zinc
 
LXA CMDTY
Gasoil
 
QSA CMDTY
 
Canadian Dollar
 
DCAA CRNCY
Gasoline
 
XBA CMDTY
 
New Zealand Dollar
 
NVA CRNCY
Gold
 
GCA CMDTY
 
South African Rand
 
DRAA CRNCY
Heating Oil
 
HOA CMDTY
 
Brazilian Real
 
BRA CRNCY
Kansas Wheat
 
KWA CMDTY
 
Ultra-low-sulfur Diesel
 
LHAA CMDTY
Lead
 
LLA CMDTY
 
Canola Oil
 
RSA CMDTY
Lean Hogs
 
LHA CMDTY
 
Orange Juice
 
JOA CMDTY
Live Cattle
 
LCA CMDTY
 
Palladium
 
PAA CMDTY
Nat Gas
 
NGA CMDTY
       
             
             
 
 
 
 
 

 
HIGHBRIDGE CAPITAL MANAGEMENT, LLC
 
 
By:___________________________
Name:
Title:
 
Dated as of October 31, 2011
 


 
 

 
 
COMMODITY TRADING AUTHORITY
 

HIGHBRIDGE CAPITAL MANAGEMENT, LLC
40 West 557th Street
33rd Floor
New York, NY 10019
Facsimile:
E-mail:
Attn: Noah Greenhill, General Counsel


Dear Advisor:
 
HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD. does hereby make, constitute and appoint you as its attorney-in-fact to buy and sell commodity interests as defined in and in accordance with the ML FuturesAccessSM Amended and Restated Advisory Agreement among us and certain others.
 
 
 
 
 
 
 

 
 

 


 
Very truly yours,
 
HIGHBRIDGE COMMODITIES FUTURESACCESSSM MASTER FUND LTD.
 
 
By: /s/ Deann D. Morgan                    
Name: Deann D. Morgan
Title:   Director
 
 
Dated as of November 1, 2011
 
 
 
By: /s/ Sebastian Echavarria                
Name: Sebastian Echavarria
Title:   Managing Director
 
 
 
 
 
 
 
B-1 

EX-99.1 6 efc11-708_ex991.htm efc11-708_ex991.htm
Exhibit 99.1

 
 
THE MERRILL LYNCH FuturesAccessSM PROGRAM






 
 
AMENDED AND RESTATED SELLING AGREEMENT

 
 
Private Placement of Limited Liability Company Units

 
Effective as of July 8, 2011

 
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC
Sponsor
 
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Selling Agent
 

 
 

 


 
THE MERRILL LYNCH FuturesAccessSM PROGRAM
 
 
SELLING AGREEMENT
 
TABLE OF CONTENTS
 
 
 Section   Page
SECTION 1.
REPRESENTATIONS AND WARRANTIES OF THE SPONSOR
2
SECTION 2.
OFFERING AND SALE OF UNITS
4
SECTION 3.
COVENANTS OF THE SPONSOR
7
SECTION 4.
OFFERING MATERIALS
7
SECTION 5.
CONDITIONS OF CLOSING
7
SECTION 6.
INDEMNIFICATION AND EXCULPATION
8
SECTION 7.
STATUS OF PARTIES
10
SECTION 8.
REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY
10
SECTION 9.
TERMINATION
10
SECTION 10.
NOTICES AND AUTHORITY TO ACT
10
SECTION 11.
PARTIES
10
SECTION 12.
GOVERNING LAW
10
SECTION 13.
REQUIREMENTS OF LAW
11
     
     
 

APPENDIX:                      SCHEDULE OF FUTURESACCESS FUNDS dated as of July 8, 2011
 
 
 
 

 

 
 

 


 
THE MERRILL LYNCH FuturesAccessSM PROGRAM
 
 
Private Placement of Limited Liability Company Units

 
 
AMENDED AND RESTATED SELLING AGREEMENT
 
as of July 8, 2011


MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
4 World Financial Center
250 Vesey Street, 10th Floor
New York, NY 10080

Dear Sirs:
 
Your affiliate, Merrill Lynch Alternative Investments LLC, a Delaware limited liability company (referred to herein in its individual capacity and as sponsor as the “Sponsor” or “MLAI”), has caused the formation of a group of managed futures funds comprising the Merrill Lynch FuturesAccessSM Program (the “Program”) which, at the effective date hereof, consist of the limited liability companies formed pursuant to the Limited Liability Company Act of the State of Delaware (the “DLLCA”) and the limited partnership formed pursuant to the Revised Uniform Limited Partnership Act of the State of Delaware (“DRULPA”) listed in the Schedule of FuturesAccess Funds (the “Schedule”) attached hereto as the Appendix.  Each company within the Program is hereinafter referred to as a “FuturesAccess Fund.”  It is intended that the terms and conditions of this Amended and Restated Selling Agreement (the “Agreement”) shall apply to and be binding upon any company which subsequently becomes a FuturesAccess Fund and, likewise, shall cease to apply to any company which ceases, for whatever reason, to be a FuturesAccess Fund.  It is hereby agreed therefore that, in the event of any FuturesAccess Fund’s joining or leaving the Program as the case may be, the Schedule shall be amended accordingly with the intent and effect that (from the effective date on which such Schedule is acknowledged and accepted on behalf of the FuturesAccess Funds specified therein, the Sponsor and Merrill Lynch, Pierce, Fenner & Smith Incorporated) any FuturesAccess Fund joining the Program shall become, and any FuturesAccess Fund leaving the Program shall cease to be, a party to this Agreement.  Upon becoming a party hereto, a FuturesAccess Fund shall agree to observe, perform and be bound by all the terms of this Agreement which are capable of applying to it and which have not been performed as at that time.  This Agreement amends and restates in its entirety the Selling Agreement between the parties hereto dated as of October 31, 2004 on the terms set forth herein.
 
The FuturesAccess Funds will operate as managed futures funds to which professional trading advisors (“Trading Advisors”) unaffiliated with MLAI will provide trading advice on an independent contractor basis.
 
 
 
 

 
Capitalized terms used herein, unless otherwise indicated, shall have the meanings attributed to them in the Program’s “Part One (A) Confidential Program Disclosure Document:  FuturesAccessSM Program General Information,” “Part One (B) Confidential Program Disclosure Document:  Trading Advisor Information” and the “Part Two Confidential Program Disclosure Document: Statement of Additional Information,” as amended or supplemented from time to time (collectively, the “Disclosure Document”).  Defined terms used herein shall have the meaning of both the singular and the plural unless otherwise specified.
 
Section 1.   Representations and Warranties of the Sponsor.  The Sponsor represents and warrants to Merrill Lynch, Pierce, Fenner & Smith Incorporated, the selling agent for the FuturesAccess Funds (the “Selling Agent”) as follows:
 
(a)   Each FuturesAccess Fund has been formed pursuant to a Certificate of Formation or Certificate of Limited Partnership (each a “Certificate”) and a Limited Liability Company Operating Agreement or Limited Partnership Agreement (each a “Governing Agreement”) which provide for the subscription for and sale of each FuturesAccess Fund’s units of limited liability company or limited partnership interest (“Units”) in classes; all action required to be taken by the Sponsor and each FuturesAccess Fund as a condition to the sale of the Units to subscribers who qualify as “Accredited Investors” within the meaning of the  Securities Act of 1933, as amended (the “1933 Act”), has been, or prior to the Initial and each Additional Closing Time (as defined in Section 2 hereof) will have been taken, and, upon payment of the consideration therefor specified in all accepted FuturesAccess Program Subscription and Exchange Agreements and Signature Pages thereto (collectively, the “Subscription Agreements”), the Units will constitute valid limited liability company or limited partnership interests, as applicable, in a FuturesAccess Fund.
 
(b)   Each FuturesAccess Fund is a limited liability company or limited partnership duly organized pursuant to a Certificate and the DLLCA or DRULPA, as applicable, and validly existing under the laws of the State of Delaware with full power and authority to conduct its business and operations, as described in the Disclosure Document; each FuturesAccess Fund has received (or will receive prior to the Initial Closing Time) a certificate of authority to do business in the State of New Jersey.
 
(c)   The Sponsor is duly organized and validly existing and in good standing as a limited liability company under the laws of the State of Delaware and in good standing as a foreign limited liability company under the laws of the State of New Jersey and in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would materially adversely affect the FuturesAccess Funds’ or the Sponsor’s ability to perform its obligations hereunder.
 
 
 

 
(d)   Each FuturesAccess Fund and the Sponsor have full power and authority under applicable law to perform their respective obligations under the applicable Governing Agreement, the Customer Agreement (“Customer Agreement”) and the Advisory Agreement (“Advisory Agreement”) relating to the trading of commodity interests and this Agreement, as described in the Disclosure Document.
 
(e)   The Disclosure Document as of its date of issue, the Initial Closing Time and at each Additional Closing Time will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading.  This representation and warranty shall not, however, apply to any statement or omission in the Disclosure Document made in reliance upon and in conformity with information relating to the Trading Advisors or the Selling Agent and furnished or approved in writing by the Trading Advisors or the Selling Agent; it being acknowledged that each of the Trading Advisors or the Selling Agent have approved the information relating to such party or its principals, as set forth in the Disclosure Document.
 
(f)   Since the respective dates as of which information is given in the Disclosure Document, there has not been any material adverse change in the condition (financial or otherwise), business or prospects of the Sponsor or the FuturesAccess Funds, whether or not arising in the ordinary course of business.
 
(g)   A Governing Agreement, a Customer Agreement, an Advisory Agreement and this Agreement have each been duly and validly authorized, executed and delivered by the Sponsor on behalf of each FuturesAccess Fund, and each constitutes a valid, binding and enforceable agreement of each FuturesAccess Fund, in accordance with its terms.
 
(h)   The execution and delivery of the Governing Agreements, the Customer Agreements, the Advisory Agreements and this Agreement, the incurrence of the obligations set forth in each of such agreements and the consummation of the transactions contemplated therein and in the Disclosure Document will not constitute a breach of, or default under, any instrument by which either the Sponsor or a FuturesAccess Fund is bound or any order, rule or regulation applicable to the Sponsor or a FuturesAccess Fund of any court or any governmental body or administrative agency having jurisdiction over the Sponsor or a FuturesAccess Fund.
 
(i)   There is not pending, or, to the best of the Sponsor’s knowledge, threatened, any action, suit or proceeding before or by any court or other governmental body to which the Sponsor or a FuturesAccess Fund is a party, or to which any of the assets of the Sponsor or a FuturesAccess Fund is subject, which is not referred to in the Disclosure Document and which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Sponsor or the FuturesAccess Fund.
 
 
 

 
(j)   The Sponsor has all federal and state governmental and regulatory approvals and licenses, and has effected all filings and registrations with federal and state governmental agencies required to conduct its business and to act as described in the Disclosure Document or required to perform its obligations as described under the Governing Agreements and this Agreement, and the performance of such obligations will not contravene or result in a breach of any provision of its certificate of formation, operating agreement or any agreement, order, law or regulation binding upon it.
 
(k)   The FuturesAccess Funds do not require any federal or state governmental or regulatory approvals or licenses, or need to effect any filings or registrations with any federal or state governmental agencies in order to conduct their business, to act as contemplated by the Disclosure Document and to issue and sell Units (other than filings relating solely to the offering of the Units).
 
(l)   The Sponsor’s and FuturesAccess Funds’ auditors are independent public accountants within the meaning of the 1933 Act and the regulations of the Securities and Exchange Commission (“SEC”).
 
(m)   The offer and sale of the Units in the manner contemplated by this Agreement will be exempt from the registration requirements of the 1933 Act by reason of Regulation D promulgated thereunder.
 
Section 2.   Offering and Sale of Units.
 
(a)   The Selling Agent and its affiliates are hereby granted the exclusive right to distribute Units.  Subject to the performance by the Sponsor of all its obligations to be performed hereunder, and to the completeness and accuracy in all material respects of all the representations and warranties of the Sponsor contained herein, the Selling Agent hereby accepts such agency and agrees on the terms and conditions herein set forth to use its best efforts to find acceptable subscribers for the Units as of the beginning of each calendar month.
 
It is understood that the Selling Agent’s agreement to use its best efforts to find acceptable subscribers for the Units shall not prevent it from acting as a selling agent or underwriter for the securities of other issuers which may be offered or sold during the term of this Agreement.  The agency of the Selling Agent hereunder shall continue until this Agreement is terminated in accordance with the provisions of this Section or Section 9.
 
(b)   In the event insufficient subscriptions (as described in the Disclosure Document) are received prior to the intended close of the initial offering period, all funds received from subscribers shall be returned in full, with any interest payable thereon (irrespective of amount) and without deduction for any fee or expense; and thereupon the Selling Agent’s duties as agent and this Agreement shall terminate without further obligation hereunder on the part of the Selling Agent, the Sponsor or the FuturesAccess Fund.
 
 
 

 
(c)   The Sponsor shall notify the Selling Agent of the aggregate number of Units in each FuturesAccess Fund for which the Sponsor has received acceptable subscriptions, and payment of the purchase price for the Units of such FuturesAccess Fund may, if the Sponsor so elects, be made at the office of the Sponsor, 4 World Financial Center, 250 Vesey Street, 10th Floor, New York, NY 10080, or at such other place as shall be agreed upon between the Selling Agent and the Sponsor, at 10:00 A.M., New York time, on the fifth full business day after the day on which the Sponsor notifies the Selling Agent of the Units for which subscriptions have been accepted or such other day and time as shall be agreed upon between the Selling Agent and the Sponsor (the “Initial Closing Time”).
 
At the Initial Closing Time, all interest earned on subscriptions will be credited to the relevant FuturesAccess Fund.
 
(d)   After the Initial Closing Time, the Sponsor shall notify the Selling Agent of the aggregate value of Units in each FuturesAccess Fund for which the Sponsor has accepted subscriptions for purchase as of the beginning of each month for which sufficient subscriptions (as described in the Disclosure Document) are received (each additional sale of Units hereinafter referred to as an “Additional Closing Time”).
 
(e)   Initial sales commissions of 1.0% – 2.5% of the amount of each FuturesAccess Fund’s Class A Unit subscription, and up to 0.50% of each FuturesAccess Fund’s Class I and Class D Unit subscription, shall be deducted from the subscription amount.  No initial sales commissions will be paid on a FuturesAccess Fund’s Class C Units.  The Units of ML Trend-Following Fund L.P. (the “Trend-Following Fund”) currently are not divided into Classes, and are subject to an initial sales commission of 0.50% of each subscription and certain other fees which are part of a single per annum “wrap fee.”
 
MLAI will pay to the Selling Agent, at no additional cost to the FuturesAccess Funds or their investors, ongoing compensation on the Units for as long as such Units remain outstanding.  Such ongoing compensation will equal 1.0%, 0.80%, 2.00% and 0.30% per annum of the average month-end Net Asset Value per Unit of the Class A, Class I, Class C and Class D Units, respectively, of each FuturesAccess Fund that offers multiple Classes of Units.  Such ongoing compensation equals 2.00% per annum of the average month-end Net Asset Value per Unit (after reduction for all accrued fees and costs) for the Units offered by the Trend-Following Fund, subject to any limitations imposed by Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 2310 on the aggregate compensation which may be received by the Selling Agent.
 
Ongoing compensation in respect of each FuturesAccess Fund’s Class A Units and the Units offered by the Trend-Following Fund will begin in the thirteenth month, and in the case of all other Units, immediately after their issuance.  Units are issued for such purposes when they begin to participate in the
 
 
 
 

 
profits and losses of a FuturesAccess Fund, not when the related Subscription Agreements are accepted.
 
(f)   The Selling Agent will use its best efforts to find eligible persons to purchase the Units as of the intended close of the initial offering period (as described in the Disclosure Document) and thereafter on the terms stated herein and in the Disclosure Document.  It is understood that the Selling Agent has no commitment with regard to the sale of the Units other than to use its reasonable efforts.  In connection with the offer and sale of the Units, the Selling Agent represents that it will not violate applicable laws, and the rules of FINRA (or its predecessor, the National Association of Securities Dealers, Inc.), Commodity Futures Trading Commission (“CFTC”), the National Futures Association (“NFA”), the SEC, state securities administrators and any other regulatory body.  The Selling Agent further represents that it has not and will not offer and sell, or arrange any commitments to purchase, any Units by any form of general solicitation or general advertising (as those terms are used in Regulation D promulgated under the 1933 Act) or in any manner involving a public offering (within the meaning of Section 4(2) of the 1933 Act), or offer and sell or otherwise negotiate in respect of any security the offering which is or could be integrated with the sale of Units in a manner that would require registration of the Units under 1933 Act.  The Selling Agent shall not execute any sales of Units from a discretionary account over which it has control without prior written approval of the customer in whose name such discretionary account is maintained.
 
The Selling Agent agrees not to recommend the purchase of Units to any subscriber unless the Selling Agent shall have reasonable grounds to believe, on the basis of information obtained from the subscriber concerning, among other things, the subscriber’s investment objectives, other investments, financial situation and needs, that the subscriber is or will be in a financial position appropriate to enable the subscriber to realize to a significant extent the benefits of a FuturesAccess Fund, including tax benefits described in the Disclosure Document; the subscriber has a fair-market net worth sufficient to sustain the risks inherent in participating in the FuturesAccess Funds, including loss of investment and lack of liquidity; the Units are otherwise a suitable investment for the subscriber; and the subscriber is qualified to purchase Units as described in the Disclosure Document.
 
(g)   None of the Selling Agent, the FuturesAccess Funds or the Sponsor shall, directly or indirectly, pay or award any finder’s fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Units; provided, however, the normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Units shall not be prohibited hereby.
 
 
 

 
(h)   All payments for subscriptions shall be made by debiting subscribers’ customer securities accounts maintained with the Selling Agent as described in the Disclosure Document.
 
(i)   In connection with the offer and sale of the Units, the Sponsor will not knowingly violate applicable laws and the rules of the SEC, the CFTC, the NFA, state securities administrators and any other regulatory body.
 
Section 3.   Covenants of the Sponsor.
 
(a)   The Sponsor will notify the Selling Agent immediately and confirm such notification in writing of the issuance by the SEC or any other federal or state regulatory body of any order or decree enjoining the offering or the use of the then current Disclosure Document or of the institution, or notice of the intended institution, of any action or proceeding for that purpose.
 
(b)   Until termination of this Agreement, the Sponsor will take all necessary regulatory steps, make all necessary ongoing regulatory filings and obtain all necessary regulatory approvals to maintain the ongoing offering of the Units.
 
(c)   If any event relating to or affecting the Sponsor or a FuturesAccess Fund shall occur as a result of which it is necessary to amend or supplement a FuturesAccess Fund’s Disclosure Document in order to make the Disclosure Document not materially misleading in light of the circumstances existing at the time it is delivered to a subscriber, MLAI and the FuturesAccess Fund will forthwith prepare and furnish to the Selling Agent, at the expense of MLAI, a reasonable number of copies of an amendment or amendments of, or a supplement or supplements to, the Disclosure Document which will amend or supplement the Disclosure Document so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Disclosure Document is delivered to a subscriber, not misleading.
 
Section 4.   Offering Materials.  The Sponsor will ensure the printing and delivery to the Selling Agent of a reasonable number of copies of the Disclosure Document and any supplements or amendments thereto, and of any supplemental sales materials, as necessary from time to time.
 
Section 5.   Conditions of Closing.  The obligations of each of the parties hereunder are subject to the accuracy of the representations and warranties of the other parties hereto, to the performance by such other parties of their respective obligations hereunder and to the following further conditions:
 
(a)   If requested by the Selling Agent, MLAI shall deliver a certificate to the effect that:  (i) the representations and warranties of MLAI contained herein are true and correct with the same effect as though expressly made at the Initial
 
 
 
 

 
Closing Time and in respect of the Disclosure Document as in effect at the Initial Closing Time; and (ii) MLAI has performed all covenants and agreements herein contained to be performed on its part as of or prior to the Initial Closing Time.
 
(b)   The parties hereto shall have been furnished with such additional information, opinions, certificates and documents, including supporting documents relating to parties described in the Disclosure Document and letters of representation signed by such parties with regard to information relating to them and included in the Disclosure Document as they may reasonably require for the purpose of enabling them to pass upon the sale of the Units as herein contemplated and related proceedings, in order to evidence the accuracy or completeness of any of the representations or warranties or the fulfillment of any of the conditions herein contained.
 
(c)   As of each Additional Closing Time, the parties hereto shall have been furnished with such information, opinions and certified documents as the Sponsor and the Selling Agent may deem to be necessary or appropriate.
 
If any of the conditions specified in this Section 5 shall not have been fulfilled when and as required by this Agreement to be fulfilled, this Agreement and all obligations hereunder may be canceled by any party hereto by notifying the other parties hereto of such cancellation in writing or by telegram at any time at or prior to the Initial Closing Time, and any such cancellation or termination shall be without liability of any party to any other party except as otherwise provided in Section 6.
 
Section 6.   Indemnification and Exculpation.
 
(a)   Indemnification by the Sponsor.  The Sponsor agrees to indemnify and hold harmless the Selling Agent and each person, if any, who controls the Selling Agent within the meaning of Section 15 of the 1933 Act, as follows:
 
(i)   against any and all loss, liability, claim, damage and expense whatsoever arising out of (A) any breach by the Sponsor of its representations and warranties or failure of the Sponsor to comply with any of its agreements contained herein or any act, omission, activity or conduct undertaken in connection with this Agreement by or on behalf of the Sponsor, except to the extent such loss results from the negligence or willful misconduct of the Selling Agent or (B) any untrue statement or alleged untrue statement of a material fact contained in the Disclosure Document (or any amendment thereto) or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Disclosure Document (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, unless such
 
 
 
 

 
untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information relating to the Selling Agent or a Trading Advisor or furnished or approved by the Selling Agent or Trading Advisor as the case may be;
 
(ii)   against any and all loss, liability, claim, damage and expense whatsoever with respect to each FuturesAccess Fund to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission (any settlement to be subject to indemnity hereunder only if effected with the written consent of the Sponsor); and
 
(iii)   against any and all expense whatsoever with respect to each FuturesAccess Fund (including the fees and disbursements of counsel) reasonably incurred in investigating, preparing or defending against litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clauses (i) or (ii) above.
 
In no case shall the Sponsor be liable under this indemnity agreement with respect to any claim made against any indemnified party unless the Sponsor shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure to so notify the Sponsor shall not relieve the Sponsor from any liability which it may have otherwise than on account of this indemnity agreement.  The Sponsor shall be entitled to participate at its own expense in the defense or, if it so elects within a reasonable time after receipt of such notice, to assume the defense of that portion of any suit so brought relating to the Sponsor’s indemnification obligations hereunder, which defense shall be conducted by counsel chosen by it and satisfactory to the indemnified party or parties, defendant or defendants therein.  In the event that the Sponsor elects to assume the defense of any such suit and retain such counsel, the indemnified party or parties, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel thereafter retained by it or them; provided, however, that the Sponsor may, upon the mutual agreement of the Sponsor and the indemnified party or parties, bear the fees and expenses of additional counsel retained by an indemnified party if the named parties in such suit include both the Sponsor and the indemnified party and representation of both the Sponsor and the indemnified party would be inappropriate due to actual or potential differing interests between them or there are defenses available to the indemnified party that are or would not be available to the Sponsor.  In the event the Sponsor assumes the defense of the portion of a suit relating to the Sponsor’s indemnification obligations hereunder, the Sponsor will not, without the prior written consent of the indemnified party,
 
 
 
 
 

 
effect any settlement of such suit, unless such settlement includes a release of the indemnified party from all liability or claims that are the subject of such suit.
 
The Sponsor agrees to notify the Selling Agent within a reasonable time of the assertion of any claim in connection with the sale of the Units against it or any of its officers or directors or any person who controls the Sponsor within the meaning of Section 15 of the 1933 Act.
 
Section 7.   Status of Parties.  In selling the Units for the FuturesAccess Funds, the Selling Agent is acting solely as an agent for the FuturesAccess Funds and not as a principal.  The Selling Agent will use its best efforts to assist the FuturesAccess Funds in obtaining performance by each purchaser whose offer to purchase Units from a FuturesAccess Fund has been accepted on behalf of a FuturesAccess Fund, but the Selling Agent shall not have any liability to a FuturesAccess Fund in the event that any such purchase is not consummated for any reason.
 
Section 8.   Representations, Warranties and Agreements to Survive Delivery.  All representations, warranties and agreements contained in this Agreement or contained in certificates of any party hereto submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by, or on behalf of, the Selling Agent, the Sponsor or any person who controls any of the foregoing and shall survive the Initial and each Additional Closing Time in the form restated and reaffirmed as of each such closing time.
 
Section 9.   Termination.  The Sponsor shall have the right to terminate this Agreement at any time by giving notice to the Selling Agent, and the Selling Agent has the right to do so upon 30 calendar days’ notice to the Sponsor.
 
Section 10.   Notices and Authority to Act.  All communications hereunder shall be in writing and, if sent to the Selling Agent, shall be mailed, delivered or faxed and confirmed to it at:  4 World Financial Center, 250 Vesey Street, 10th Floor, New York, NY 10080, Attention:  Legal Department, Fax: 212-669-0759; if sent to the Sponsor or a FuturesAccess Fund shall be mailed, delivered or faxed and confirmed to it at 4 World Financial Center, 250 Vesey Street, 10th Floor, New York, NY 10080, Attention:  Legal Department, Fax: 212-669-0759.
 
Section 11.   Parties.  This Agreement shall inure to the benefit of and be binding upon the Selling Agent, the FuturesAccess Funds, the Sponsor and such parties’ respective successors to the extent provided herein.  This Agreement and the conditions and provisions hereof are intended to be and are for the sole and exclusive benefit of the parties hereto and their respective successors, assigns and controlling persons and parties indemnified hereunder, and for the benefit of no other person, firm or corporation.  No purchaser of a Unit shall be considered to be a successor or assign solely on the basis of such purchase.
 
Section 12.   GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
 
 
 
10 

 
Section 13.   Requirements of Law.  Whenever in this Agreement it is stated that a party will take or refrain from taking a particular action, such party may nevertheless refrain from taking or take such action if advised by counsel that doing so is required by law or advisable to ensure compliance with law, and shall not be subject to any liability hereunder for doing so, although such action shall permit termination of this Agreement by the other parties hereto.
 
If the foregoing is in accordance with each party’s understanding of its agreement, each party is requested to sign and return to the Sponsor a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement among them in accordance with its terms effective as of the date first above written.
 
 
 
Very truly yours,
 
     
 
Signed for and on behalf of:
The FuturesAccess Funds
 
       
 
By:
Merrill Lynch Alternative Investments LLC
   Sponsor
 
       
  By:  /s/ Justin Ferri  
    Name:  Justin Ferri  
    Title:    CEO  
       
 
 
 
MERRILL LYNCH ALTERNATIVE
INVESTMENT LLC
 
       
       
  By:  /s/ Justin Ferri  
    Name:  Justin Ferri  
    Title:    CEO  
       
 
Confirmed and accepted as of
the date first above written:
 
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
 
Selling Agent
   
   
By:
/s/ Justin C. Ferri      
 
Name:  Justin C. Ferri
Title: Authorized Signatory
 
 
 
 

 
11 

 
 
APPENDIX
 

 
SCHEDULE OF FUTURESACCESS FUNDS
(Dated as of December 7, 2011)
 
ML Aspect FuturesAccess LLC
 
ML Winton FuturesAccess LLC
 
ML Trend-Following Futures Fund L.P.
 
ML Systematic Momentum FuturesAccess LLC
 
ML Transtrend DTP Enhanced FuturesAccess LLC
 
ML BlueTrend FuturesAccess LLC
 
Man AHL FuturesAccess LLC
 
Highbridge Commodities FuturesAccess LLC
 
Ortus Currency FuturesAccess LLC
 

 

 

 

 
Acknowledgement of Amended Schedule:
 

 
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC
 
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Manager
 
Selling Agent
     
 
By:           /s/ Justin C. Ferri
 
 
By:           /s/ Justin C. Ferri
Name:  Justin C. Ferri
 
Name:  Justin C. Ferri
Title:   Chief Executive Officer
 
Title:    Authorized Signatory

 
 
 
 
 

Amended and Restated Selling Agreement
Amended Schedule of FuturesAccess Funds dated as of December 7, 2011
 

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