SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 2001
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to _______________
Commission file number 0-49767
MLM INDEX FUND
(Exact name of registrant as specified in its charter)
Delaware Unleveraged Series: 22-2897229
Enhanced Series: 22-372268322
(State of Incorporation) (I.R.S. Employer Identification No.)
47 Hulfish Street
Suite 510
Princeton, New Jersey 08542
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 924-8868
---------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Business Trust Interests - Unleveraged Series
Business Trust Interests - Enhanced Series
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |x| No|_|.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |x|
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes |_| No |x|.
As of March 28, 2003 the aggregate market value of the business trust
units of the Unleveraged Series of the registrant held by non-affiliates of
the registrant was approximately $82,058,712.16 and the aggregate market value
of the business trust units of the Enhanced Series of the registrant held by
non-affiliates of the registrant was approximately $135,445,974.43.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business 1
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters 15
Item 6. Financial Information 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 19
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 20
PART III
Item 10. Directors and Executive Officers 21
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management 22
Item 13. Certain Relationships and Related Transactions 22
Item 14. Controls and Procedures 22
PART IV
Item 15. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 22
PART I
ITEM 1. Business.
General
MLM Index(TM) Fund is a business trust organized under the laws of
Delaware. The Trust engages primarily in the speculative trading of a
diversified portfolio of futures contracts traded on U.S. exchanges using the
MLM Index(TM) Trading Program. Futures contracts are standardized contracts
made on or through a commodity exchange and provide for future delivery of
commodities, precious metals, foreign currencies or financial instruments and,
in the case of certain contracts such as stock index futures contracts and
Eurodollar futures contracts, provide for cash settlement. The Trust's
objective is the appreciation of its assets through speculative trading. The
Trust began trading on January 4, 1999.
Mount Lucas Management Corporation, a Delaware corporation, acts as the
manager and trading advisor of the Trust. The Manager was formed in 1986 to
act as an investment manager. As part of a planned merger in October 1999, the
Manager combined operations with Mount Lucas Index Management Corporation (the
former manager of the Trust), CA Partners, Inc. and Little Brook Corporation
of New Jersey. The purpose of the merger was to streamline and consolidate the
operations of the affiliated entities. As of December 31, 2002, the Manager
had approximately $642.91 million of assets under advisement. The Manager is a
registered investment adviser under the Investment Advisers Act of 1940 and is
a registered commodity trading advisor and commodity pool operator with the
Commodity Futures Trading Commission (the "CFTC") and a member of the National
Futures Association (the "NFA"). The Manager may from time to time operate
other investment vehicles.
The Trust and the Manager maintain their principal business office at 47
Hulfish Street, Suite 510, Princeton, New Jersey 08542 and their telephone
number is (609) 924-8868.
Wilmington Trust Company, a Delaware banking corporation, acts as trustee
for the Trust. The Trustee's office is located at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890. The Trustee is unaffiliated
with the Manager. The Trustees duties and liabilities are limited to its
express obligations under the Amended and Restated Declaration of Trust and
Trust Agreement, dated as of August 31, 1998, among the Trustee, the Manager
and the Interest Holders from time to time there under, as amended (the "Trust
Agreement").
Refco, LLC currently acts as clearing broker for the Trust. A clearing
broker accepts orders to trade futures on behalf of another party and accepts
money to support such orders. The clearing broker is a futures commission
merchant registered with the CFTC and is a member of the NFA. Aspen Partners,
Ltd. acts as introducing broker for the Trust. An introducing broker accepts
orders to trade futures, but does not accept the funds to support such orders.
Aspen Partners, Ltd. is a guaranteed introducing broker of the clearing broker
and is registered with the CFTC and a member of the NFA. A guaranteed
introducing broker is an introducing broker whose operations are guaranteed by
a futures commission merchant.
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Trading Program
The Trust trades speculatively in a wide range of futures contracts
traded on U.S. exchanges using the MLM Index(TM) Trading Program, which is
based upon the MLM Index(TM). The MLM Index(TM) and the MLM Index(TM) Trading
Program are both proprietary products of the Manager. The MLM Index(TM)
Trading Program attempts to replicate the MLM Index(TM), before fees and
expenses. Currently the Trust has two series of interests; the Unleveraged
Series and the Enhanced Series. The Unleveraged Series attempts to replicate
the MLM Index(TM) without any leverage, while the Enhanced Series trades the
MLM Index(TM) Trading Program at three times leverage. Leverage is the ability
to control large dollar amounts of a commodity with a comparatively small
amount of capital. The Enhanced Series purchases or sells $3 market value of
contracts for every $1 invested in the Series.
In attempting to replicate the MLM Index(TM), the Manager will invest in the
same markets as the MLM Index(TM); use the same algorithm to determine long
versus short positions; make the same allocations to each market; and
generally execute positions at almost the same time. The Manager may also use
swaps in attempting to replicate the MLM Index(TM). These swaps would be
agreements with dealers to provide the returns which are the same as holding a
specific number of futures contracts in a specific market, without holding the
actual contracts. The economic effect on the Trust would be identical to
holding futures contracts. However, since the holder of swaps assumes
additional counterparty risk, swaps would only be held infrequently. As of
this time, the Trust holds no swap positions.
The MLM Index (TM)
In 1988, Mount Lucas Management created the MLM Index (TM) as a benchmark
of the returns to speculation in futures markets. Broadly speaking, the
futures markets have two classes of participants, hedgers and speculators.
Hedgers are the commercial businesses that use the futures markets to transfer
unwanted or excessive price risk to those more willing to absorb that risk.
Speculators are position holders who absorb this price risk. In essence, they
provide "insurance" to the commercial interest so that the commercial
interests can focus on their basic business while being protected from
unforeseen changes in commodity prices, interest rates or foreign exchange
rates. Basic finance theory argues that the reduction in risk experienced by
the hedgers exacts a cost, or risk premium, that is earned by those holding
the risk. The intent of the MLM Index (TM) is to measure this risk premium. In
this general sense it is analogous to an index of stocks, that measures the
premium to holding equity risk.
Price risk in futures markets exists when markets rise and when they
fall. For example, an operator of a wheat storage facility is damaged by a
fall in the price of wheat in that the value of the inventory in her facility
falls. On the other hand, a consumer of wheat, like a baker, incurs financial
risk if the price of wheat rises, as the cost of future operations increases.
In both cases, steady prices are favorable. Thus, an index designed to capture
the risk premium earned must capture returns as markets move up and move down,
yet suffer when markets are stable. The MLM Index (TM) is designed to measure
this effect by taking long and short positions in the constituent markets. The
existence of the long and short positions in the construction of the MLM Index
(TM) is a significant innovation and important difference from other risk
premium measurements.
The MLM Index(TM) currently invests in futures contracts on the
following: Chicago corn, Chicago soybeans, Chicago soybean meal, Chicago
soybean oil, Chicago wheat, 5-year T-Notes, 10-year T-Notes, Treasury bonds,
heating oil, natural gas, crude oil, unleaded gasoline, live cattle, New York
gold, New York copper, New York silver, Australian Dollar, British Pound,
Canadian Dollar, Swiss Franc, Japanese Yen, Euro Currency, New York coffee,
New York cotton and New York sugar. The selection of the markets in the MLM
Index (TM) is made by Mount Lucas Management Corporation. The selection is
2
based on a variety of factors, including liquidity of the underlying futures
contract, the relationship with the other markets in the MLM Index(TM), and
the reasonableness of including the market in the MLM Index(TM). The choice of
markets for a calendar year is made in the December preceding the start of the
year, and, except in unusual circumstances, markets are not normally added to
or deleted from the MLM Index(TM) during a year. An extraordinary event that
may lead to the removal of a contract during the year might be the permanent
suspension of normal trading or an abrupt permanent change in the liquidity of
the contract. For example, the Chicago Mercantile Exchange suspended floor
trading of the Deutsche Mark contract in August of 2000, ahead of the
announced schedule. If a commodity is traded on more than one futures
exchange, only the one with the largest open interest is included in the MLM
Index(TM). The open interest is the number of all long or short futures
contracts in one delivery month for one market that have been entered into and
not yet liquidated by an offsetting transaction or fulfilled by delivery. For
example, Chicago Board of Trade wheat has larger open interest than Kansas
City Board of Trade wheat; consequently, Chicago Board of Trade wheat is
included in the MLM Index(TM) but Kansas City wheat is not.
In addition to the markets in the MLM Index(TM), Mount Lucas
Management determines which delivery months will be traded for each market in
the MLM Index(TM). For each market, 4 deliveries are chosen that are both
liquid and spaced throughout the calendar year. For example, for the Wheat
market, the deliveries traded are March, May, July and December. The choice of
deliveries is set for each calendar year, but can change due to similar
extraordinary circumstances as with the market selection.
The calculation of the MLM Index(TM) is explained below. It is
important to point out, however, that the markets in the MLM Index(TM) are
equally weighted, based on the face value of the contracts. For example, if
corn is $2.00 per bushel, and there are 5000 bushels in each contract, the
face value of the contract is $10,000. In the case of Treasury bonds, if the
price is par, and the contract is for $100,000 in bonds, the value is
$100,000. When the Manager replicates the MLM Index(TM), it must trade the
appropriate number of futures contracts based on the value of each contract
and the capital base. For example, in a two market index, corn and bonds, with
$1,000,000 in capital, the Manager would have position of 50 contracts of corn
10 contracts of bonds.
Calculation of the MLM Index(TM)
1. Determination of long or short futures position for each market.
The rate of return of an individual market depends on whether the
market position is long or short. Since a futures contract eventually expires,
the MLM Index(TM) is based on the unit asset value of a market, rather than on
the actual futures price. This month's unit asset value of a futures market is
determined by multiplying last month's value by 1 plus the percentage change
in this month's nearby futures price. The market position is long during the
current month if the market's closing value on the next-to-last trading day of
the prior month is greater than or equal to the market's 12-month moving
average of closing values; otherwise, the market position is short.
A market's 12-month moving average of closing values is defined as
the average of the 12 closing unit asset values for the next-to-last day of
the 12 months immediately preceding the beginning of the current calendar
month. For example, to find the 12-month moving average for June 1992, first
find the unit asset value for the next-to-last trading day of each of the
prior 12 months, June 1991 through May 1992. The average of those 12 values
equals the 12-month moving average.
3
2. Calculation of the monthly rate of return for each market.
If the market position is long, then the market monthly rate of
return equals the percentage change in the market price during the month,
i.e., the market monthly rate of return (%) equals the closing price of the
current month divided by the closing price of the prior month, minus 1, times
100. If the market position is short, then the market monthly rate of return
(%) equals -1 (minus one) times the percentage change in the market price
during the month, i.e., the market monthly rate of return equals the closing
price of the current month divided by the closing price of the prior month,
minus 1, times -100 (minus 100).
3. Calculation of the monthly rate of return for the MLM Index(TM)(TM).
The monthly rate of return of the MLM Index(TM) equals the simple
average of the individual market monthly rates of return plus the T-Bill rate
of return.
4. Determination of the MLM Index(TM) value.
The value of the MLM Index(TM) is computed by compounding the Index
monthly rates of return. The beginning value of the MLM Index(TM) is defined
to be 1000 in January 1961. Each month thereafter, the Index is changed by the
monthly rate of return. That is, each month's MLM Index (TM) value is
determined by multiplying the prior month's value by 1 plus the current
percentage monthly rate of return.
The annual performance of the MLM Index for each of the past ten years is set
forth below.
Year Annual Return
1993 9.49
1994 11.34
1995 11.16
1996 10.93
1997 7.5
1998 16.74
1999 0.39
2000 16.20
2001 3.64
2002 -1.63
The MLM Index(TM) is published daily on the Bloomberg system and is
available from the manager. Since the development of the MLM Index(TM), other
firms have computed similar indices, including the CMI of AssetSight
Corporation and an index computed by SAIS in Switzerland. Both indices are
variations on the construction of the MLM Index(TM), either in the derivation
of the long and short positions or the relative weights of the markets. In
addition, there are many "commodity" indexes, such as the GSCI from Goldman
Sachs and AIG Commodity Index. These indexes are long all markets all the
time, and do not include currencies or financial instruments.
Fees and Expenses
Set forth below is a table which sets forth the basic fees that the each of
the Series and Classes is subject to.
Brokerage Management Organizational Operating Selling Total
Fee Fee Expense Expenses Commission (Assuming maximum
charged for Organizational
and Operating Expenses and
Selling Commissions)
Unleveraged, Class A .85% 1.5% .5% .5% 4% 7.35%
Unleveraged, Class B .85% 0.5% .5% .5% NA 2.35%
Unleveraged, Class C .85% 1.0% .5% .5% NA 2.85%
Enhanced, Class A 1.85% 2.8% .5% .5% 4% 9.65%
Enhanced, Class B 1.85% 1.3% .5% .5% NA 4.15%
Enhanced, Class C 1.85% 2.05% .5% .5% NA 4.9%
4
Brokerage Fee
Each series of the Trust pays the introducing broker a brokerage fee at the
annual rates set forth below.
Unleveraged Series .85% of net asset value
Enhanced Series 1.85% of net asset value
The brokerage fee is based on net asset value as of the first day of each
month and reflects profits and losses from trading activities. The net asset
value of the Trust equals the sum of all cash, the liquidating value (or cost
of liquidation) of all futures positions and the fair market value of all
other assets of Trust, less all liabilities of the Trust (including accrued
liabilities, irrespective of whether such liabilities may in fact ever be
paid), in each case determined per series by the Manager in accordance with
generally accepted accounting principles. For purposes of determining the
brokerage fee, there is be no reduction for:
o the accrued brokerage or management fees,
o any allocation or reallocation of assets effective as of the day
the brokerage fee is being calculated, or
o any distributions or redemptions as of the day the brokerage
fee is being calculated.
The brokerage fee is paid as of the first day of each calendar month. No
assurance can be given that the brokerage fee will be competitive with the
charges of other brokerage firms or that the introducing broker will not
charge certain customers lower commission rates for comparable services.
The introducing broker is responsible for paying all of the Trust's costs
of executing and clearing futures trades, including floor brokerage expenses
and give-up charges, as well as the NFA, exchange and clearing fees incurred
in connection with the Trust's futures trading activities. The introducing
broker may also pay from this amount custody fees or amounts necessary for
certain administrative and marketing assistance provided by broker/dealers who
are also authorized selling agents. NFA fees equal $0.12 per round-turn trade
of a futures contract.
Management Fee
Each Series is divided into Class A Interests, Class B Interests and
Class C Interests. Class A Interests are generally sold through registered
broker-dealers and Class B Interests are generally offered through fee-only
advisors. Class C Interests are offered on a very limited basis through
registered broker-dealers and fee-only advisors. The Trust pays the Manager a
monthly management fee at the annual rates set forth below.
Unleveraged Series
Class A 1.5% of net asset value
Class B 0.5% of net asset value
Class C 1.0% of net asset value
Enhanced Series
Class A 2.8% of net asset value
Class B 1.3% of net asset value
Class C 2.05% of net asset value
5
The management fee is determined and paid as of the first day of each
calendar month. The amounts determined reflect profits and losses from trading
activities. For purposes of determining the management fee, there is no
reduction for:
(1) accrued management fees,
(2) any allocation or reallocation of assets effective as of the day the
management fee is being calculated, or (3) any distributions or
redemptions as of the day the management fee is being calculated.
The Manager pays from the management fee an annual fee for interests sold
by authorized selling agents appointed by the Manager for the Class A Series,
in the amount of 100 basis points for the Unleveraged Series and 150 basis
points for the Enhanced Series of the Trust's net asset value for each
respective series; and for the Class C Series, in the amount of 50 basis
points for the Unleveraged Series and 75 basis points for the Enhanced Series
of the Trust's net asset value for each respective series.
Organizational Fee
You will pay an organizational fee of .5% of your initial and any
subsequent investment (excluding exchanges) to the Manager to cover expenses
associated with the organization of the Trust and the offering of interests.
This fee will be deducted from your initial investment in determining the
number of interests you have purchased. You will not be charged an
organizational fee once you have invested $1,000,000 in the Trust. If the
organizational expenses exceed the organizational fees collected by the
Manager, the Manager will pay any costs above the collected fees. If the
organizational fees paid to the Manager exceed actual organizational expenses,
any excess will be retained by the Manager and may be shared with consultants
that the Manager may engage from time to time. Specifically, consultants who
assist the Trust in distributing the interests may be paid a share of the
organizational fees. Excess fees are not returned to the Trust, but the
Manager absorbs costs in excess of the fees.
Operating and Administrative Expenses
The Trust pays its legal, accounting and other routine administrative
expenses and fees, including fees to the Trustee. The Trustee is paid an
annual fee and reimbursed for out-of-pocket expenses. The Manager reimburses a
series of the Trust if the aggregate amount paid for administrative expenses
exceeds .5% of the average net assets of the series in any fiscal year. Any
such reimbursement is made upon completion of the Trust's annual audit. The
relevant series generally pays any extraordinary expenses, including legal
claims and liabilities and litigation costs and any indemnification related
thereto. To the extent
the extraordinary expenses arise as a result of the gross negligence or
willful misconduct of the Manager, the Manager may be deemed responsible to
pay the extraordinary expenses to that extent.
Selling Commission
Investors who subscribe for Class A Interests will be charged a sales
commission of up to 4% of the subscription amount, payable to the selling
agent from the investor's investment. The amount of the sales commission is
determined by the selling agent. Investors who subscribe for Class B Interests
and Class C Interests will generally not be charged a sales commission.
6
Futures Trading
Futures Contracts
Futures contracts are contracts made on or through a commodity exchange
and provide for future delivery of agricultural and industrial commodities,
precious metals, foreign currencies or financial instruments and, in the case
of certain contracts such as stock index futures contracts and Eurodollar
futures contracts, provide for cash settlement. Futures contracts are uniform
for each commodity on each exchange and vary only with respect to price and
delivery time. A contract to buy or sell may be satisfied either by making or
taking delivery of the commodity and payment or acceptance of the entire
purchase price thereof, or by offsetting the obligation with a contract
containing a matching contractual obligation on the same (or a linked)
exchange prior to delivery. United States commodity exchanges individually or,
in certain limited situations, in conjunction with certain foreign exchanges,
provide a clearing mechanism to facilitate the matching of offsetting trades.
Once trades made between members of an exchange have been confirmed, the
clearinghouse becomes substituted for the clearing member acting on behalf of
each buyer and each seller of contracts traded on the exchange and in effect
becomes the other party to the trade. Thereafter, each clearing member firm
party to the trade looks only to the clearinghouse for performance.
Clearinghouses do not deal with customers, but only with member firms, and the
guarantee of performance under open positions provided by the clearinghouse
does not run to customers. If a customer's commodity broker becomes bankrupt
or insolvent, or otherwise defaults on such brokers obligations to such
customer, the customer in question may not receive all amounts owed to such
customer in respect of his trading, despite the clearinghouse fully
discharging all of its obligations.
Hedgers and Speculators
Two broad classifications of persons who trade in commodity futures are
(1) hedgers and (2) speculators. Commercial interests, including banks and
other financial institutions, and farmers, who market or process commodities,
use the futures markets for hedging. Hedging is a protective procedure
designed to minimize losses which may occur because of price fluctuations. The
commodity markets enable the hedger to shift the risk of price fluctuations to
the speculator. The usual objective of the hedger is to protect the expected
profit from financial or other commercial operations, rather than to profit
strictly from futures trading.
The speculator, such as the Trust, risks its capital with the expectation
of making profits from the price fluctuations in futures contracts. The hedger
seeks to offset any potential loss (measured as the difference between the
price at which he had expected to buy or sell and the price at which he is
eventually able to buy or sell) in the purchase or sale of the commodity
hedged. Likewise, losses in futures trading might be offset by unexpected
gains on transactions in the actual commodity. The speculator assumes the
risks which the hedger seeks to avoid.
Speculators rarely expect to take or make delivery of the cash or actual
physical commodity in the futures market. Rather, they generally close out
their futures positions by entering into offsetting purchases or sales of
futures contracts. Because the speculator may take either a long or short
position in the futures markets, it is possible for the speculator to earn
profits or incur losses regardless of the direction of price trends.
Trading Approaches
Commodity traders generally may be classified as either systematic or
discretionary. A systematic trader will rely primarily on trading programs or
models to generate trading signals. A systematic trader will also will rely,
to some degree, on judgmental decisions concerning, for example, what markets
to follow and commodities to trade, when to liquidate a position in a contract
month which is about to expire and how large a position to take in a
particular commodity. The systems utilized to generate trading signals are
changed from time to time, but the trading instructions generated by the
then-current systems are generally followed without significant additional
analysis or interpretation.
7
In contrast, discretionary traders, while sometimes utilizing a variety
of price charts and computer programs to assist them in making trading
decisions, make these decisions on the basis of their own judgment. It is
possible to describe a discretionary trader's experience, the type of
information which he consults, the number of commodities he follows or trades
and the degree to which he leverages his accounts. However, in assessing the
potential for future profitability in the case of a discretionary trader, the
talents and abilities of the individual, rather than the profitability of any
particular system or identifiable method, must be evaluated.
Margins
Margins are good faith deposits which must be made with a commodity
broker in order to initiate or maintain an open position in a futures
contract. When futures contracts are traded in the United States and on most
exchanges abroad, both buyer and seller are required to post margins with the
broker handling their trades as security for the performance of their buying
and selling undertakings, and to offset losses on their trades due to daily
fluctuations in the markets. Minimum margins usually are set by the exchanges.
A customer's margin deposit is treated as equity in his account. A change
in the market price of the futures contract will increase or decrease the
equity. If this equity decreases below the maintenance margin amount
(generally 75% of the initial margin requirement), the broker will issue a
margin call requiring the customer to increase the account's equity to the
initial margin. Failure to honor such a margin call generally will result in
the closing out of the open position. If, at the time such open position is
closed, the account equity is negative, then the equity in the customer's
remaining open positions, if any, in excess of the required margins, as well
as the customer's cash reserves will be used to offset such debit balance, and
if such equities and reserves are not sufficient the customer will be liable
for the remaining unpaid balance.
United States Regulations
Commodity Exchange Act. The United States Congress enacted the CE Act to
regulate trading in commodities, the exchanges on which they are traded, the
individual brokers who are members of the exchanges, and commodity
professionals and commodity brokerage houses that trade in these commodities
in the United States.
Commodity Futures Trading Commission. The CFTC is an independent
governmental agency which administers the CE Act and is authorized to
promulgate rules thereunder. A function of the CFTC is to implement the
objectives of the CE Act in preventing price manipulation and excessive
speculation and promoting orderly and efficient commodity futures markets. The
CFTC has adopted regulations covering, among other things:
o the designation of contract markets;
o the monitoring of United States commodity exchange rules;
o the establishment of speculative position limits;
o the registration of commodity brokers and brokerage houses,
floor brokers, introducing brokers, leverage transaction
merchants, commodity trading advisors, commodity pool operators
and their principal employees engaged in non-clerical
commodities activities (associated persons); and
o the segregation of customers funds and record keeping by, and
minimum financial requirements and periodic audits of, such
registered commodity brokerage houses and professionals.
Under the CE Act, the CFTC is empowered, among other things, to:
o hear and adjudicate complaints of any person (e.g., an Interest
Holder) against all individuals and firms registered or subject
to registration under the CE Act (reparations),
o seek injunctions and restraining orders,
o issue orders to cease and desist,
o initiate disciplinary proceedings,
o revoke, suspend or not renew registrations and
o levy substantial fines.
The CE Act also provides for certain other private rights of action and
the possibility of imprisonment for certain violations.
8
The CFTC has adopted extensive regulations affecting commodity pool
operators and commodity trading advisors such as the Manager and their
associated persons. These regulations, among other things, require the giving
of disclosure documents to new customers and the retention of current trading
and other records, prohibit pool operators from commingling pool assets with
those of the operators or their other customers and require pool operators to
provide their customers with periodic account statements and an annual report.
Upon request by the CFTC, the Manager will also furnish the CFTC with the
names and addresses of the interest holders, along with copies of all
transactions with, and reports and other communications to, the interest
holders.
United States Commodity Exchanges. United States commodity exchanges are
given certain latitude in promulgating rules and regulations to control and
regulate their members and clearing houses, as well as the trading conducted
on their floors. Examples of current regulations by an exchange include
establishment of initial and maintenance margin levels, size of trading units,
daily price fluctuation limits and other contract specifications. Except for
those rules relating to margins, all exchange rules and regulations relating
to terms and conditions of contracts of sale or to other trading requirements
currently must be reviewed and approved by the CFTC.
National Futures Association. Substantially all commodity pool operators,
commodity trading advisors, futures commission merchants, introducing brokers
and their associated persons are members or associated members of the NFA. The
NFA's principal regulatory operations include:
o auditing the financial condition of futures commission merchants,
introducing brokers, commodity pool operators and commodity
trading advisors;
o arbitrating commodity futures disputes between customers and NFA
members;
o conducting disciplinary proceedings; and
o registering futures commission merchants, commodity pool
operators, commodity trading advisors, introducing brokers and
their respective associated persons, and floor brokers.
The regulation of commodities transactions in the United States is a
rapidly changing area of law and the various regulatory procedures described
herein are subject to modification by United States congressional action,
changes in CFTC rules and amendments to exchange regulations and NFA
regulations.
Risk Factors
Historical Results of the MLM Index(TM) may not be indicative of future results
The MLM Index(TM) historical results may not be indicative of future
results. The MLM Index(TM) results are based on the analysis of a particular
period of time. The future performance of the MLM Index(TM) is entirely
unpredictable.
Performance of the Trust May be Different than the MLM Index(TM)
The Trust attempts to replicate the MLM Index(TM). In doing so, the
Trust will establish positions in the futures markets. The prices at which the
Trust executes these positions may be significantly different than the prices
used to calculate the MLM Index(TM). In addition, the Trust charges various
fees and commissions which will lower the return of the MLM Index(TM). All
these factors mean that the Trust performance will be different and in all
likelihood lower than the results of the MLM Index(TM).
Three Losing Years in Four Years of Operation.
The Trust has been in operation since January, 1999, and has
experienced losses in three of the four calendar years of operation.
9
Futures Trading Involves Substantial Leverage
Futures contracts are typically traded on margin. This means that a small
amount of capital can be used to invest in contracts of much greater total
value. The resulting leverage means that a relatively small change in the
market price of a futures contract can produce a substantial profit or loss.
Leverage enhances the Trust's sensitivity to market movements that can result
in greater profits when the MLM Index(TM) Trading Program anticipates the
direction of the move correctly, or greater losses when the MLM Index(TM)
Trading Program is incorrect. The Unleveraged Series attempts to replicate the
MLM Index(TM) without leverage and the Enhanced Series trades the MLM
Index(TM) at three times leverage.
Futures Trading Is Speculative, Highly Volatile and Can Result in Large Losses
A principal risk in futures trading is the rapid fluctuation in the
market prices of futures contracts. The Trust's profitability depends greatly
on the MLM Index(TM) Trading Program correctly anticipating trends in market
prices. If the MLM Index(TM) Trading Program incorrectly predicts the movement
of futures prices, large losses could result. Price movements of futures
contracts are influenced by such factors as: changing supply and demand
relationships; government trade, fiscal, monetary and exchange control
programs and policies; national and international political and economic
events; and speculative frenzy and the emotions of the market place. The
Manager has no control over these factors.
Illiquid Markets Could Make It Impossible for the Trust to Realize Profits or
Limit Losses
Although the Trust trades in ordinarily highly liquid markets, there may
be circumstances in which It is not possible to execute a buy or sell order at
the desired price, or to close out an open position, due to market conditions.
Daily price fluctuation limits are established by the exchanges and approved
by the CFTC. When the market price of a futures contract reaches its daily
price fluctuation limit, no trades can be executed at prices outside such
limit. The holder of a commodity futures contract (including the Trust) may be
locked into an adverse price movement for several days or more and lose
considerably more than the initial margin put up to establish the position.
Another possibility is the unforeseen closure of an exchange due to accident
or government intervention.
Speculative Position Limits May Require the Manager to Modify Its Trading to
the Detriment of the Trust
The exchanges have established and the CFTC has approved speculative
position limits (referred to as position limits) on the maximum futures
position which any person, or group of persons acting in concert, may hold or
control in particular futures contracts. In addition, certain exchanges, in
lieu of speculative position limits, have adopted position accountability
requirements that could require a person whose positions in a contract exceed
a specified level to provide information to the exchange relating to the
nature of such person's trading strategy. The Manager may be required to
reduce the size of the future positions which would otherwise be taken to
avoid exceeding such limits or requirements. Such modification of the Trust's
trades, if required, could adversely affect the operations and profitability
of the Trust.
Trading of Swaps could Subject the Trust to Substantial Losses
The Trust may enter into swap and similar transactions. Swap contracts
are not traded on exchanges and are not subject to the same type of government
regulation as exchange markets. As a result, many of the protections afforded
to participants on organized exchanges and in a regulated environment are not
available in connection with these transactions. The swap markets are
"principals' markets," in which performance with respect to a swap contract is
the responsibility only of the counterparty which the participant has entered
into a contract, and not of any exchange or clearinghouse. As a result, the
Trust is subject to the risk of the inability or refusal to perform with
respect to such contracts on the part of the counterparties with which the
Trust trades. Any such failure or refusal, whether due to insolvency,
bankruptcy, default, or other cause, could subject the Trust to substantial
losses. There are no limitations on daily price movements in swap
10
transactions. Speculative position limits do not apply to swap transactions,
although the counterparties with which the Trust deals may limit the size or
duration of positions available to the Trust as a consequence of credit
considerations. Participants in the swap markets are not required to make
continuous markets in the swap contracts they trade. Participants could refuse
to quote prices for swap contracts or quote prices with an unusually wide
spread between the price at which they are prepared to buy and the price at
which they are prepared to sell.
Substantial Expenses Will Cause Losses for the Trust Unless Offset by Profits
and Interest Income
The Trust is subject to substantial fees and expenses, including
brokerage fees, management fees and operating and administrative expenses. In
addition, certain investors are subject to an organizational charge and/or a
selling commission. Set forth below is a table which sets forth the basic fees
that each of the Series and Classes is subject to.
Brokerage Management Organizational Operating Selling Total
Fee Fee Expense Expenses Commission (Assuming maximum
charged for Organizational
and Operating Expenses and
Selling Commissions)
Unleveraged, Class A .85% 1.5% .5% .5% 4% 7.35%
Unleveraged, Class B .85% 0.5% .5% .5% NA 2.35%
Unleveraged, Class C .85% 1.0% .5% .5% NA 2.85%
Enhanced, Class A 1.85% 2.8% .5% .5% 4% 9.65%
Enhanced, Class B 1.85% 1.3% .5% .5% NA 4.15%
Enhanced, Class C 1.85% 2.05% .5% .5% NA 4.9%
The Brokerage Fee, the Management Fee and the Organizational Fee shall be paid
to the Manager. It will be necessary for the Trust to achieve gains from
trading and interest income in excess of its charges for investors to realize
increases in the net asset value of their interests. The Trust may not be able
to achieve any appreciation of its assets.
The Manager Alone Makes the Trust's Trading Decisions
The MLM Index(TM) Trading Program makes all commodity trading decisions
for the Trust and, accordingly, the success of the Trust largely depends upon
the Manager's judgment and abilities to make the necessary adjustments to the
MLM Index(TM) Trading Program. There is no guarantee that the MLM Index(TM)
Trading Program's trading on behalf of the Trust will prove successful under
all or any market conditions. The performance record of the MLM Index(TM)
Trading Program also reflects significant variations in profitability from
period to period.
You Have No Right to Remove the Manager.
Under the Trust Agreement, interest holders have no right to remove the
Manager as manager of the Trust for cause or for any other reason.
The Manager Advises Other Clients
The Manager may be managing and advising large amounts of other funds for
other clients at the same time as it is managing Trust assets and, as a
result, the Trust may experience increased competition for the same contracts.
Limited Ability To Liquidate Investment In Interests
You can only redeem your interests at month-end upon 10 business days
advance notice. The net asset value per interest may vary significantly from
month-to-month. You will not know at the time you submit a redemption request
what the redemption value of your interests will be. The restrictions imposed
on redemptions limit your ability to protect yourself against major losses by
redeeming part or all of your interests.
The Manager must consent before you can transfer or assign your interests
and the securities laws provide additional restrictions on the transferability
of interests. There will not be a secondary market for interests.
11
You Have No Rights Of Control
You will be unable to exercise any control over the business of the
Trust. In addition, the Manager can cause the Trust to redeem your interests
upon 10 business days prior written notice for any reason in the Manager's
sole discretion. The Manager may elect to cause the Trust to redeem your
interests when your continued holding of interests would or might violate any
law or constitute a prohibited transaction under ERISA or the Internal Revenue
Code and a statutory, class or individual exemption from the prohibited
transaction provisions of ERISA for such transaction or transactions does not
apply or cannot be obtained from the Department of Labor (or the Manager
determines not to seek such an exemption).
You Have Limited Rights to Inspect Books and Records
You will have only limited rights to inspect the books and records of the
Trust and the Manager. You will generally only have the right to inspect the
books and records of the Trust and the Manager as are specifically granted
under the Delaware Business Trust Act. In particular, information regarding
positions held by a Series, to the extent deemed proprietary or confidential
by the Manager, will not be made available to you except as required by law.
Limited Arms-Length Negotiation
The initial offering price per interest was established arbitrarily.
Except for the agreements with the Trustee, the terms of this offering and the
structure of the Trust have not been established as the result of arms-length
negotiation.
The Trust Could Lose Assets and Have Its Trading Disrupted Due to the
Bankruptcy of its Clearing Broker or Others
The Trust is subject to the risk of clearing broker, exchange or
clearinghouse insolvency. Trust assets could be lost or impounded in such an
insolvency during lengthy bankruptcy proceedings. Were a substantial portion
of the Trust's capital tied up in a bankruptcy, the Manager might suspend or
limit trading, perhaps causing the Trust to miss significant profit
opportunities.
The Trust Is Subject to Certain Conflicts of Interest
The Manager, the introducing broker and the clearing broker are subject
to certain actual and potential conflicts of interests.
Although the Manager is not affiliated with a commodity broker, the
Manager may have a conflict of interest in selecting brokers because of
long-standing business dealings with certain brokers. In addition, the
Manager, its principals and affiliates may have commodity accounts at the same
brokerage firms as the Trust, and, because of the amount traded through such
brokerage firms, may pay lower commissions than the Trust.
The Manager, the introducing broker, the clearing broker, their
respective affiliates and each of their principals, directors, officers,
employees and families may be trading and directing other futures accounts,
including their own accounts. Each will not be aware of what others are doing
on behalf of the Trust, and they may take positions similar or opposite to
those of the Trust or in competition with the Trust. Generally, the Trust will
enter orders only once a month. The Manager will allocate transactions among
the Company and other clients in a manner believed by the Manager to be
equitable to each.
In certain instances, the introducing broker or the clearing broker may
have orders for trades from the Trust and orders from their own employees and
they might be deemed to have a conflict of interest between the sequence in
which such orders are transmitted to the trading floor.
The Manager and its principals are engaged in substantial activities,
including managing other accounts not involving the Trust, and will devote to
the Trust such amount of their time as they determine reasonable and
necessary. The compensation received by the Manager and its principals from
such other accounts and entities may differ from the compensation it receives
from the Trust.
Investment advisers and broker-dealers receiving continuing compensation
from the Manager on interests sold by them will have a financial incentive to
encourage investors to purchase and not to redeem their interests.
12
The Trust could be Taxed as a Corporation
In the opinion of the Trust's counsel, under current federal income tax
law, the Unleveraged Series and the Enhanced Series each will be classified as
a partnership and not as an association taxable as a corporation for federal
income tax purposes, and each such series should not be subject to federal
income taxation as a corporation under the provisions applicable to so-called
publicly traded partnerships. However, you should note that the Trust has not
and will not request a ruling from the Internal Revenue Service to this
effect. If the Trust or a series were taxed as a corporation for federal
income tax purposes, the net income of the Trust or a series would be taxed to
the Trust or a series at corporate income tax rates, no losses of the Trust or
a series would be allowable as deductions to the interest holders, and all or
a portion of any distributions by the Trust or a series to the interest
holders, other than liquidating distributions, would constitute dividends to
the extent of the Trust's or a series' current or accumulated earnings and
profits and would be taxable as such.
You Are Taxed Every Year on Your Share of a Series' Profits Not Only When You
Redeem as Would Be the Case if You Held Stocks or Bonds
You will be taxed each year on your investment in a series, irrespective
of whether you receive distributions or redeem any interests. In contrast, an
investor holding stocks or bonds generally pays no tax on their capital
appreciation until the securities are sold. Over time, the deferral of tax on
stock and bond appreciation has a compounding effect.
Deductibility of Expenses May be Limited
You could be required to treat the management fees, as well as certain
other expenses of a series, as investment advisory fees, which are subject to
substantial restrictions on deductibility for individual taxpayers. The
Manager has not, to date, been classifying the management fee or such expenses
as investment advisory fees, a position to which the Internal Revenue Service
might object. Should the Internal Revenue Service recharacterize the
management fee or other expenses as investment advisory fees, you may be
required to pay additional taxes, interest and penalties.
The Series' Trading Gains May Be Taxed at Higher Rates
You will be taxed on your share of any trading profits of a Series at
both short- and long-term capital gain rates. These tax rates are determined
irrespective of how long you hold Interests. Consequently, the tax rate on a
series' trading gains may be higher than those applicable to other investments
you hold for a comparable period.
Tax Could Be Due from You on Your Share of a Series' Interest Income Despite
Overall Losses
You may be required to pay tax on your allocable share of a series'
interest income, even though the series incurs overall losses. Trading losses
can only be used by individuals to offset trading gains and $3,000 of interest
income each year. Consequently, if you were allocated $5,000 of interest
income net of expenses and $10,000 of net trading losses, you would owe tax on
$2,000 of interest income even though you would have a $5,000 loss for the
year. The $7,000 capital loss would carry forward, but subject to the same
limitation on its deductibility against interest income.
Possibility of Tax Audit
There can be no assurance that tax returns of a series will not be
audited by the Internal Revenue Service or that such audits will not result in
adjustments to such returns. If an audit results in an adjustment, you may be
required to file amended returns and to pay additional taxes plus interest.
Employee Benefit Plan Considerations
Although the Manager will be a fiduciary to the ERISA investors with
respect to the assets of such investors invested in the Trust, neither the
Manager, nor the Trustee, nor any of their affiliates, agents, or employees
will act as a fiduciary to any ERISA investor with respect to the ERISA
investor's decision to invest assets in the Trust. Fiduciaries of prospective
ERISA investors, in consultation with their advisors, should carefully
consider the application of ERISA and the regulations issued there under on an
investment in the Trust.
13
Absence of Certain Statutory Registrations
The Trust is not registered as an investment company or mutual fund,
which would subject it to extensive regulation under the Investment Company
Act of 1940, as amended. If the Trust were required to register as an
investment company, it would be subject to additional regulatory restrictions.
Some of these restrictions would be fundamentally inconsistent with the
operation of the Trust, including among other things, restrictions relating to
the liquidity of portfolio investments, to the use of leverage, to custody
requirements, and to the issuance of senior securities. As a result, it would
be impractical for the Trust to continue its current operations. Consequently,
you will not benefit from certain of the protections afforded by the
Investment Company Act of 1940, as amended. However, the Manager is registered
with the Securities and Exchange Commission under the Investment Advisers Act
of 1940, as amended, and thus is an investment manager for purposes of ERISA.
In addition, the Manager is registered as a commodity pool operator and a
commodity trading advisor with the CFTC, is a member of the NFA and is subject
to extensive regulation under the Commodity Exchange Act.
No Independent Counsel
No independent counsel has been selected to represent the interests of
the interest holders and there have been no negotiations between the Manager
and any interest holders in connection with the terms of the offering or the
terms of the Trust Agreement.
Item 2. Properties
The Trust does not own or lease any physical properties. The Trust's
office is located within the office of the Manager at 47 Hulfish Street, Suite
510, Princeton, New Jersey 08542.
ITEM 3. Legal Proceedings.
There are no pending legal proceedings to which the Trust or the
Manager is a party or to which any of their assets are subject.
ITEM 4. Submission of Matters to Vote of Security Holders.
Not applicable.
14
PART II
ITEM 5. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters
There currently is no established public trading market for the
interests. As of December 31, 2002, approximately 2,015,261.47 interests were
held by 1,795 owners.
The majority of the interests are "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and may not be sold unless registered under the
Securities Act or sold in accordance with an exemption therefrom, such as Rule
144. The Trust has no plans to register any of the interests for resale.
Interests which have been held by non-affiliates of the Manager for one year
are tradable under Rule 144 subject to certain volume and manner of sale
limitations and freely tradable without such limitations after two years. In
addition the Trust Agreement provides that an interest holder may transfer its
interests only upon the approval of the Manager in the Manager's sole and
absolute discretion.
Pursuant to the Trust Agreement, the Manager has the sole discretion to
determine whether distributions (other than on redemption of interests), if
any, will be made to interest holders. The Trust has never paid any
distribution and does not anticipate paying any distributions of interest
holders in the foreseeable future.
Recent Sales of Unregistered Securities
From October 1, 2002 to December 31, 2002, a total of 159,699 interests
were sold for the aggregate net subscription amount of $(2,877,392.21). Total
number of purchasers was 239. There were no non-accredited investors during
this period. Details of the sale of these interests are as follows:
Series Date Subscriptions Units Price # of Purchasers
Enhanced A2 Units 10/31/02 577,721.66 6,524 88.55 15
Enhanced B2 Units 10/31/02 1,474,552.71 15,947 92.46 27
Unleveraged A1 Units 10/31/02 53,742.77 499 107.69 1
Unleveraged A2 Units 10/31/02 571,793.85 5,481 104.31 10
Unleveraged B2 Units 10/31/02 4,528,887.68 41,873 108.16 38
Enhanced A2 Units 11/30/02 227,663.75 2,584 88.09 4
Enhanced B2 Units 11/30/02 1,399,044.53 15,190 92.10 25
Unleveraged A2 Units 11/30/02 730,563.75 7,018 104.10 11
Unleveraged B2 Units 11/30/02 717,615.85 6,643 108.03 15
Enhanced A2 Units 12/31/02 459,160.29 4,886 93.97 11
Enhanced B2 Units 12/31/02 2,631,311.14 26,750 98.37 27
Unleveraged A2 Units 12/31/02 548,062.50 5,147 106.46 12
Unleveraged B2 Units 12/31/02 2,338,974.12 21,154 110.57 43
The price of the interests in the Class reflects the net asset value of
interests in the Class. The interests were sold pursuant to Rule 506 of
Regulation D and the sales were exempt from registration under the Securities
Act of 1933. Purchasers of the interests completed subscription documents in
which they represented that they were accredited investors as
defined in Regulation D and a Form D was filed with the Securities and
Exchange Commission in the time periods prescribed by Regulation D.
15
Item 6. Selected Financial Data
The Trust began trading on January 4, 1999. Set forth below is certain
selected historical data for the Trust as of and for the years ended December
31, 2002, 2001, 2000, 1999. The selected historical financial data were
derived from the financial statements of the Trust, which were audited by
Ernst & Young LLP. The information set forth below should be read in
conjunction with the Financial Statements and notes thereto contained
elsewhere in this Registration Statement.
- ---------------------------------------------------------------------------------------------
Year Ended December 31,
2002 2001 2000 1999
Operations Data:
Realized Gains (Losses) $(27,250,523) $(1,782,272) $10,979,358 $(3,703,768)
Net Change in Unrealized
Gains (Losses) 10,793,154 754,588 4,249,238 2,068,296
Interest Income 3,412,276 5,140,993 3,471,048 1,133,335
Brokerage Commissions 2,842,588 2,032,721 905,304 292,743
Management Fees 2,455,153 1,693,359 766,332 216,625
Operating Expenses 944,454 839,741 321,746 117,905
Net Income (Loss) (19,287,288) (452,512) 16,706,262 (1,129,410)
Financial Condition Data
Investors' Interest $203,994,413 $197,206,677 $82,233,913 $45,214,754
Total Assets 212,016,757 201,133,787 82,937,503 50,271,694
Net Asset Value Per Class A-1
Enhanced Series Interest 106.35 123.84 124.74 90.23
Net Asset Value Per Class A
Enhanced Series Interest 93.97 110.72 112.76 85.72
Net Asset Value Per Class B-1
Enhanced Series Interest 107.78 123.65 122.69 90.66
Net Asset Value Per Class B
Enhanced Series Interest 98.37 114.22 114.59 85.82
Net Asset Value Per Class C
Enhanced Series Interest 81.12 94.87 NA NA
Net Asset Value Per Class A-1
Unleveraged Series Interest 109.99 114.19 112.40 99.31
Net Asset Value Per Class A
Unleveraged Series Interest 106.46 111.00 109.74 97.39
Net Asset Value Per Class B-1
Unleveraged Series Interest 114.37 117.66 114.67 100.31
Net Asset Value Per Class B
Unleveraged Series Interest 110.57 114.28 111.87 98.29
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The purpose of the Trust is to replicate the results of the MLM Index, an
index designed to measure the risk premium available to futures traders.
Designed as such, the results of the Trust depend on two factors, the results
of the MLM Index itself, and the Manager's ability to replicate that Index. It
is important to note that the Manager, Mount Lucas Management, also calculates
the results of the MLM Index. Thus, their role is twofold - to calculate the
results of the MLM Index, and to replicate the results of the MLM Index for
the Trust. Any changes made to the composition of the MLM Index by the Index
Committee of the Manager will effect the trading of the Trust, since the
object of the Trust is to replicate the MLM Index as published.
Results of the MLM Index - The MLM Index is calculated from the prices of
25 liquid futures markets. These markets are traded on domestic exchanges,
regulated by the Commodity Futures Trading Commission. For each market, the
MLM Index uses the price of 4 different delivery months each year. For
example, in the Japanese Yen futures market, the MLM Index uses the March,
June, September and December delivery months. At the end of each month, the
MLM Index determines whether to hold a long or short position in each
constituent contract based on the calculation methodology of the MLM Index.
Once established, that position is held for the subsequent month, at which
time it is re-evaluated. The monthly results of each constituent market are
then averaged to calculate the MLM Index return. The objective of the Trust is
to replicate this monthly return.
16
Clearly, the volatility of the constituent markets in the MLM Index can
affect the results of the Trust. The influences on this volatility are varied
and unpredictable. However, since the object of the Trust is to replicate the
MLM Index, the Manager takes no unusual action to mitigate this volatility.
The role of the Manager is to buy or sell the appropriate number of futures
contracts in each constituent market such that the aggregate return of those
positions replicates as closely as possible the results of the MLM Index.
In order to accomplish this objective, the Manager must calculate the
number of contracts based on both the assets in the Trust and the distribution
of the assets between the Unleveraged and Enhanced (3 times leverage) series
of the Trust. Since the MLM Index rebalances positions at the end of each
month, at that time the Manager must ascertain the asset level and execute
orders to achieve the desired allocations. This is achieved by adding the
performance results of the Trust for the month to the assets at the beginning
of the month, and adding additions of capital from new subscriptions and
subtracting redemptions in order to determine the asset level at the end of
the month.
Summary of Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reports in the financial
statements and accompanying notes. Management believes that the estimates
utilized in preparing the financial statements are reasonable and prudent;
however, actual results could differ from those estimates. The Trust's
significant accounting policies are described in detail in Note 1 of the Notes
to Financial Statements.
The Trust records all investments at fair value in its financial
statements, with changes in fair value reported as a component of realized and
unrealized gain (loss) on investments in the Statements of Operations.
Generally, fair values are based on market prices; however, in certain
circumstances, significant judgments and estimates are involved in determining
fair value in the absence of an active market closing price.
Financial Condition
To replicate the results of the MLM Index, the Trust must effect trades
on domestic futures exchanges. Since the beginning of operations the Trust has
used Refco, LLC as its futures commission merchant. The Manager deposits a
percentage of the assets of the Trust in two separate accounts at Refco, one
for the Unleveraged Series and one for the Enhanced Series. The amount
deposited is determined by the margin requirement established by the exchanges
to hold the positions in the Trust. That margin requirement varies, but is
generally about 4.5% of assets for the Unleveraged Series and 13.5 % of assets
for the Enhanced Series. The Trust pays the broker a flat rate of 0.85% of the
assets in the Unleveraged Series and 1.85% in the Enhanced Series to execute
and clear the trades of the Trust.
The balance of the assets of the Trust is held in two separate custodial
accounts at Pershing, a division of DLJ Securities Corp.. The Trust has
contracted with Credit Suisse Asset Management (CSAM) to manage the money in
these accounts so as to maximize the interest income which accrues to the
Trust, while maintaining strict credit controls as determined by the Commodity
Exchange Act. When Refco requires additional assets to maintain the positions
for the Trust, Pershing makes a wire transfer to Refco. If Refco has surplus
assets in the accounts, Refco makes a wire transfer to the accounts at
Pershing.
The Trust owns no capital assets and does not borrow money. Since the
objective of the Trust is to replicate the results of the MLM Index, its
entire asset base participates in the speculative trading of futures
contracts. As such, all the assets of the Trust are at risk. The level of
assets will be determined by the results of the Trust, and the effect of
addition of capital and the redemption of Trust interests. These variables are
impossible to predict with any certainty.
17
Liquidity
The majority of the Trust's assets are held in liquid short term interest
rate instruments. The Trust takes substantial exposure in futures markets,
which require relatively small deposits, called margin, to hold the positions.
In general, the Trust will have about 10% of its assets of deposit with
brokers as margin, with the balance held in accounts with major financial
institutional.
A holder of interests in the Trust may liquidate that holding at the end
of any month at the net asset value of the interests, upon 10 days written
notice to the Manager. While the Manager generally must honor all requests for
redemption if presented in proper form, the Manager may suspend temporarily
any redemption if the effect of such redemption, either alone or in
conjunction with other redemptions, would impair the relevant Series' ability
to operate if the impairment would be caused by a third party other than the
Manager. Further, the right to obtain redemption is contingent upon the
relevant Series having property sufficient to discharge its liabilities on the
date of redemption. Under certain circumstances, the Manager may find it
advisable to establish a reserve for contingent liabilities. In such event,
the amount receivable by a redeeming holder of interests will be reduced by
his proportionate share of the reserve. There is no secondary market for
interests in the Trust, and none is anticipated. There are restrictions for
transfer of interests.
Although the Trust trades in futures contracts which are in general
liquid, the exchanges impose daily trading limits, which act to suspend
trading when a particular market or contract trades up or down to a
pre-determined price level. Should this happen, and the Trust was attempting
to execute trades in that situation, the Trust may not be able to accurately
replicate the results of the MLM Index. These rules have not had a material
impact on the operation of the Trust to date.
Market and Credit Risks
The nature of the Trust is such that it undertakes substantial market
risk in following its mandate to replicate the MLM Index. Although the Manager
monitors the intraday and daily valuation of the portfolio, no extraordinary
measures are taken to reduce market risk. Specifically, the Manager maintains
positions required to match, as closely as possible, the return of the MLM
Index. One could imagine certain circumstances where the Manager might be
called upon to make a change to this policy, such as the closing of an
exchange or some other emergency situation. In such case, management would use
its best efforts to respond to such circumstances with the interests of the
investors in mind.
The table below summarizes the performance of the Trust by major market
segment for the year 2002 and the previous three years. The results are
presented in dollars, and as such are affected by subscriptions and
redemptions in the Trust. In addition, the balance between the various Series
of the Trust will impact the results.
MLM INDEX TRUST
CURRENCIES ENERGY FINANCIALS GRAINS MEATS METALS TROPICALS TOTAL
1999 (211,537.15) 209,109.67 320,046.77 1,595,592.06 (25,222.00) (1,532,157.68) (2,037,603.10) ($1,681,771.43)
2000 400,195.00 15,207,386.66 550,383.29 (1,282,475.03) 87,279.98 (1,165,552.35) 1,433,660.45 $15,230,878.00
2001 (1,167,780.03) 372,162.37 570,234.68 (6,073,194.34) (1,650,106.87) (538,702.50) 7,390,343.90 ($1,097,042.79)
2002 5,869,390.63 (9,043,712.27) 3,224,750.58 756,912.51 (396,725.06) (8,149,430.29) (9,875,654.10) ($17,614,468.20)
TOTAL
During calendar year 2002, the most profitable sector for the Trust was
Tropicals, which include the cotton, coffee and sugar markets. Profits in this
sector were driven by declines in coffee and cotton prices. The least
profitable sector were the grains, which were relatively stable in price. As
described above the MLM Index requires trends in prices, either up or down, to
be profitable. Relative stability is not generally positive. From year to year
the sectors that drive the performance of the Trust may change. In the table
above one can see that the best performing sector in each of the last 3 years
was different, as was the worst.
18
The Trust incurs various kinds of credit risk in its operations. In
order to facilitate the trading of the Trust, assets must be placed with both
Futures Commission Merchants and Broker/Dealers. Management of the Trust deals
only with established registered firms in both capacities, and monitors their
financial condition on an ongoing basis. In addition, if the Trust were to
enter into over the counter transactions, additional counterparty risk would
be incurred. At this time, the Trust has no OTC transactions.
Results of Operations
For the Fiscal Year ending 12/31/2002, the Trust had assets of
$212,016,757, compared with assets of $201,133,787 on 12/31/2001, assets of
$82,937,503 on 12/31/2000 and assets of $50,271,694 as of 12/31/99.
Liabilities of the Trust totaled $8,022,344 in the 2002 fiscal year, compared
with $3,927,110 for the 2001 fiscal year and $703,590 for the 2000 fiscal
year and $5,056,940 for the 1999 fiscal year. Net Income from operations was
$(19,287,288), compared with $(452,512) in 2001, $16,706,262 in 2000 and
$(1,1129,410) in 1999.
The Fund net income is directly related to the performance of the MLM
Index, which the Trust is designed to replicate. For the 12 months ending
12/31/02, MLM Index performance was -1.63%, lower than the +3.64% recorded in
2001, substantially lower than the +16.20% recorded in 2000, and lower than
the +0.39% result in 1999. Fund performance may be negative in years when the
Index is positive due to the timing of subscriptions and redemptions, the fees
charged, and the allocation of assets between the Unleveraged and Enhanced
series of the Fund. Since inception of the Trust, the correlation of monthly
results between the Unleveraged Series of the Fund and the MLM Index adjusted
for fees is 0.99. The correlation between the Enhanced Series of the fund
and the MLM Index adjusted for leverage and fees is .99.
The components of the return of the MLM Index are the capital gains
earned from the changes in futures market prices, and the interest income
earned on cash balances. The mechanics and rules of futures markets allow the
Trust to earn interest on approximately 100% of the assets in the Trust. The
interest income takes two forms, directly from the Trust's futures broker paid
on the margin deposits held by them, and excess cash. During 2001, management
altered the method of earning interest on the excess cash. Previously, excess
cash was placed in a money market mutual fund. Larger asset size permitted the
Trust to retain the services of a professional money manager to invest the
Trust's cash assets without the expenses associated with money market mutual
funds.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The following is a discussion of the quantification of market risk for
the Trust. Such calculations are often referred to as Value-at-Risk, or VAR.
The method used here may or may not differ from other methods used for VAR
calculations by other firms. There is no one fixed method of VAR calculation,
and this method may not be comparable to other methods.
The market risk, or VAR of the Trust is directly related to the composition of
the MLM Index. The MLM Index consists of 25 liquid US futures markets. Each
month, the position of the MLM Index can be either long or short based on a 12
month moving average rule. Since positions can be offset inside of sectors
(one contract long in a particular commodity and one contract short in a
related commodity), specific sector risk is less relevant than the historical
risk of the MLM Index as a whole. Since the object of the Trust is to
replicate the MLM Index, it is reasonable to use the historic values of that
Index to estimate market risk.
19
The VAR of the Trust is calculated as follows: The standard deviation of daily
returns of the MLM Index is estimated to be 0.39%. However, it is well known
that standard deviation underestimates the magnitude of possible changes,
certainly in a portfolio with a relatively small number of instruments. The
VAR calculation uses the standard deviation of returns of the MLM Index over
the last 10 years, multiplied by 2.35 for the normal 99% confidence interval
and by 1.5 to account for the statistical nature of the distribution. Given
that, management estimates that the Trust as a whole could reasonably expect
to lose $6,271,339 on a daily basis, and $26,050,178 on a monthly basis,
assuming 12/31/2002 asset levels. It is important to note that this
calculation is only an estimate. Furthermore, the Manager does not use the VAR
calculation in its trading operations. The purpose of the Trust is to
replicate the MLM Index, thus the Manager has a very limited mandate and does
not adjust trading away from the MLM Index based on the then current market
environment.
Since the calculation of the VAR does not look at the specific
instrument risks, but rather the results of the MLM Index as a whole, risks
related to actual execution are not included in the calculation. For example,
counter-party risks from OTC transactions are not factored into the
calculation.
Additional market risk may be attributed to the actual execution of the
orders for the Trust. The Trust executes the majority of its orders on the
last day of each month. As assets of the Trust grow, large orders may be
placed in periods of reduced liquidity. Such orders may move the markets in
which they are executed, adversely affecting the performance of the Trust. The
Manager makes every effort to execute all orders efficiently, but general
levels of liquidity are beyond the control of management. In certain
circumstances, markets may move to the daily trading limits imposed by the
exchanges, and the Trust may be unable to execute the necessary orders to
replicate the MLM Index, causing extensive slippage.
Non-Market Risk
Risk from Brokers - The Trust's futures commission merchant, Refco, LLC.,
holds some portion of the assets of the Trust as margin deposits for futures
trading. A failure of the FCM could cause the portion of the Trusts assets
held at the FCM to be at risk or unavailable for an undetermined period of
time.
Speculative Limits - Certain futures exchanges require that positions
deemed speculative in nature (as opposed to commercial hedge positions) cannot
exceed certain pre-defined levels. All positions in the control of the Manager
must be aggregated to determine compliance with these rules. Should the assets
of the Manager reach a level such that positions may be capped, accurate
replication of the MLM Index for the Trust may be difficult or impossible. The
Manager may also use certain "Over The Counter" derivatives to achieve the
same exposure without exceeding speculative limits. These OTC products would
involve taking additional counter-party risk for the Trust in order to achieve
accurate replication of the MLM Index. For example, if it was determined that
the Trust must hold 10 contracts of Soybeans for a specific delivery, the
Trust could execute the appropriate futures contracts on the appropriate
futures exchange. Also, the Manager of the Trust may choose to enter into a
swap agreement, which would have the same economic effect of the futures
position, but would be executed in the over-the-counter market. The swap
contract would change the nature of the counter-party from an organized
exchange to a single dealer, and would materially increase the non-market risk
of holding the position. The Trust has not yet utilized OTC swap contracts.
Item 8. Financial Statements and Supplementary Data
The Partnership's financial statements, together with the auditors'
report thereon, appear on pages F-1 through F-xx hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable
20
PART III
Item 10. Directors and Executive Officers
The Trust has no directors or officers. The Manager, Mount Lucas
Management Corporation, manages and conducts the business of the Trust.
The principals of the Manager are Roger E. Alcaly, Paul R. DeRosa,
Raymond E. Ix, Jr., James A. Mehling, John R. Oberkofler, Timothy J. Rudderow
and Frank L. Vannerson.
Roger E. Alcaly, age 60, became a principal and Director of the Manager
when it merged with CA Partners, Inc., a company he formed with Messrs.
Rudderow and Vannerson in 1990 which engaged primarily in convertible
arbitrage trading. Prior to helping form CA Partners, Mr. Alcaly was active in
leveraged acquisitions, merger arbitrage and value-oriented equity investing,
first as a partner of Kellner DiLeo & Co. and KD Equities, each of which
engaged in risk-arbitrage trading, and then at Riverside Capital, a company he
formed after leaving those firms in May 1987 which engaged in risk-arbitrage
trading. Before joining Kellner DiLeo, Mr. Alcaly served as Assistant Director
of the Council on Wage and Price Stability and as a Senior Economist at the
Federal Reserve Bank of New York, and taught Economics at Columbia University.
Mr. Alcaly holds a B.A. from Amherst College and a Ph.D. in Economics from
Princeton University.
Paul R. DeRosa, age 60, became a principal and Director of the Manager
when it merged with CA Partners, Inc., which he joined in January 1999. Mr.
DeRosa began his career in the securities industry as the money market
economist in Citibank's bond trading division. He later became the bank's
chief proprietary bond trader and subsequently head of Citibank's financial
derivative and capital markets businesses in North America. In 1986 Mr. DeRosa
joined E.F. Hutton Co. as co-head of bond trading with particular
responsibility for mortgage trading and finance. In 1989 he helped to
establish Eastbridge Holdings Inc., a bond and currency trading company in New
York, and served as President and CEO from June 1995 to June 1998. Mr. DeRosa
holds a Ph.D. in Economics from Columbia University.
Raymond E. Ix, Jr., age 38, is a Senior Vice President and a Director of
the Manager. Mr. Ix joined Mount Lucas in 1992 and is responsible for
institutional marketing and client service. From 1989 to 1992, Mr. Ix was
employed by Little Brook Corporation of New Jersey, a commodity trading
advisor, where he was involved in implementing the firm's technical trading
systems. Before joining Little Brook, Mr. Ix was the Fixed Income
Administrative Manager at Delaware Management Company, a company which advised
institutional and individual investors. Mr. Ix received a B.S. in accounting
from Saint Joseph's University in 1986.
James A. Mehling, age 52, is a Vice President and Chief Operating Officer
of the Manager. Before joining Mount Lucas in June 1999, Mr. Mehling had
served as President and Chief Investment Officer of Monitor Capital Advisors,
a company which managed institutional stock and bond portfolios and mutual
funds, beginning in 1991. Mr. Mehling started his career in financial services
with Merrill Lynch in 1976 and eventually managed a trading desk for Merrill
Lynch Government Securities. He is a CFA charter holder and has served as a
volunteer on the CFA examination grading committee. Mr. Mehling received a
B.S. in Aviation Engineering from Western Michigan University in 1970.
John R. Oberkofler, age 41, is a Vice President and Director of Trading
for the Manager since 1999. From 1986 to 1999, he
was employed as Senior Trader by Little Brook Corporation of New Jersey. Mr.
Oberkofler received a B.S. in Finance from Seton Hall University in 1982.
Timothy J. Rudderow, age 46, is President and a Director of the Manager,
which he helped to establish in 1986. Prior to the mergers that took place in
October 1999, Mr. Rudderow was also a principal of Little Brook Corporation of
New Jersey, which he joined in 1983 as Director of Research and Development,
and of CA Partners, Inc., a company he helped form in 1990. Prior to joining
Little Brook, Mr. Rudderow was employed by Commodities Corporation, a company
which was a commodity trading advisor, with responsibilities for the design
and management of technical trading systems. Before joining Commodities
Corporation, Mr. Rudderow taught Economics at Drexel University. Mr. Rudderow
received a B.A. in Mathematics from Rutgers University in 1977 and an M.B.A.
in Management Analysis from Drexel University in 1979.
21
Frank L. Vannerson, age 63, is Chairman, a Director and a founder of the
Manager. He also helped form two other companies that merged with the Manager
in October 1999, Little Brook Corporation of New Jersey in 1980 and CA
Partners, Inc. in 1990. In 1969, Mr. Vannerson co-founded Commodities
Corporation and served that company as Senior Vice President and a member of
the Management Policy Committee from 1975 to 1980. From 1984 to 1989, he was a
member of Commodities Corporation's Board of Directors and a consultant to the
Management Policy Committee. Before joining Commodities Corporation, Mr.
Vannerson was a commodity economist with Nabisco Inc. and an economic
consultant with Mathematica Inc. He holds a B.S. in Economics from Wichita
State University and a Ph.D. in Economics from Princeton University where he
was a member of the faculty in the Department of Economics from 1965 to 1966.
He currently serves on the Advisory Council to the Princeton University
Department of Economics.
Item 11. Executive Compensation
The Trust has no directors or executive officers. The Manager receives
management and other fees from the Trust as described in Item 1 - Fees and
Expenses.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Trust has no directors or officers. The Manager manages and conducts
the business of the Trust. As of December 31, 2002, the Manager owned
approximately $1,157,12 of interests in the Unleveraged Series and $1,235.24
of interests in the Enhanced Series.
Item 13. Certain Relationships and Related Transactions
The Manager manages and conducts the business of the Trust. The Manager
receives management and other fees from the Trust as described in Item 1 -
Fees and Expenses.
For the years ended December 31, 2002, 2001, 2000 and 1999, the Manager
received from the Trust:
(1) management fees in the amount of $2,455,153, $1,693,359, $766,332
and $216,625 respectively;
(2) administrative charges in the amounts of $944,454, $839,741,
$321,746 and $117,905 respectively
(3) organizational fees in the amounts of $317,677.88, $353,721,
$86,043 and $85,883 respectively.
ITEM 14. Controls and Procedures.
Within ninety days prior to the filing of this Report, the President
and the Chief Operating Officer of the Manager evaluated the effectiveness of
the design and operation of the Trust's disclosure controls and procedures,
which are designed to insure that the Trust's records, processes, summarizes
and reports in a timely and effective manner the information required to be
disclosed in the reports filed with or submitted to the Securities and
Exchange Commission. Based upon this evaluation, they concluded that, as of
the date of the evaluation, the Trust's disclosure controls are effective.
Since the date of this evaluation, there have been no significant changes in
the Trust's internal controls or in other factors that could significantly
affect those controls.
PART IV
ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
(a) Documents Filed as a Part of This Report.
1. See the Table of Contents to Financial Statements on page
F-3, which is incorporated herein by reference.
2. See the Index to Exhibits, which is incorporated herein by
reference.
(b) Reports on Form 8-K.
Not Applicable.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MLM Index Fund has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MLM INDEX FUND
By: Mount Lucas Management Corporation
Its: Manager
By: /s/ Timothy J. Rudderow
-------------------------------
Timothy J. Rudderow, President
Date: March 31, 2003
23
MLM INDEX FUND
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Timothy J. Rudderow, certify that:
1) I have reviewed this annual report on Form 10-K of MLM Index Fund.
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date") and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of registrant
and in the capacities and on the dates indicated.
By: /s/ Timothy J. Rudderow
-------------------------------
Timothy J. Rudderow, President of
Mount Lucas Management Corporation
Date: March 31, 2003
24
MLM INDEX FUND
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, James A. Mehling, certify that:
1) I have reviewed this annual report on Form 10-K of MLM Index Fund.
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date") and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of registrant
and in the capacities and on the dates indicated.
By: /s/ James A. Mehling
-------------------------------
James A. Mehling, Vice President and
Chief Operating Officer of
Mount Lucas Management Corporation
Date: March 31, 2003
25
Financial Statements
MLM Index Fund
Years ended December 31, 2002 and 2001
with Report of Independent Auditors
F-1
I affirm that, to the best of my knowledge and belief, the information
contained in the attached financial statements of MLM Index Fund for the years
ended December 31, 2002 and 2001 is accurate and complete.
Timothy J. Rudderow
President
Mount Lucas Management Corporation
General Partner
MLM Index Fund
F-2
MLM Index Fund
Financial Statements
Years ended December 31, 2002 and 2001
Contents
Report of Independent Auditors............................................ F-4
Statements of Financial Condition......................................... F-5
Condensed Schedule of Investments......................................... F-6
Statements of Operations.................................................. F-8
Statements of Changes in Investors' Interest.............................. F-9
Statements of Cash Flows.................................................. F-13
Notes to Financial Statements............................................. F-14
F-3
Ernst & Young LLP Phone: (212) 773-3000
5 Times Square www.ey.com
New York, New York 10036-6530
Report of Independent Auditors
The Interest Holders of
MLM Index Fund
We have audited the accompanying statements of financial condition, including
the condensed schedules of investments, of MLM Index Fund (the "Fund") as of
December 31, 2002 and 2001, and the related statements of operations, changes
in investors' interest and cash flows for the years then ended. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MLM Index Fund at December
31, 2002 and 2001, and the results of its operations, changes in its
investors' interest, and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
January 15, 2003
F-4
MLM Index Fund
Statements of Financial Condition
December 31
2002 2001
------------------------------------------
Assets
Cash and cash equivalents $ 195,744,016 $ 169,990,375
Due from broker 16,239,584 26,142,375
Certificate of deposit, at value (cost $4,501,775) - 4,502,290
Interest receivable 33,157 498,747
------------------------------------------
Total assets $ 212,016,757 $ 201,133,787
==========================================
Liabilities and investors' interest
Redemptions payable $ 7,377,075 $ 3,163,339
Brokerage commission payable 237,304 257,122
Management fee payable 263,552 255,466
Accrued expenses 144,413 251,183
------------------------------------------
Total liabilities 8,022,344 3,927,110
Investors' interest 203,994,413 197,206,677
------------------------------------------
Total liabilities and investors' interest $ 212,016,757 $ 201,133,787
==========================================
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-5
MLM Index Fund
Condensed Schedule of Investments
December 31, 2002
Percentage of
Number of Investors'
Security Description Contracts Market Value Interest
- ---------------------------------------------------------------------------------------------
Futures
Long futures contracts:
Financial 1,512 $ 5,116,842 2.51%
Commodity 10,884 12,715,841 6.23
-------------------------------
17,832,683 8.74
Short futures contracts:
Financial 290 (3,250) (0.00)*
Commodity 3,711 274,500 0.13
-------------------------------
271,250 0.13
-------------------------------
Net unrealized gain on open contracts $ 18,103,933 8.87%
===============================
* Less than a one-tenth of 1%
F-6
MLM Index Fund
Condensed Schedule of Investments (continued)
December 31, 2001
Percentage of
Number of Investors'
Security Description Contracts Market Value Interest
- ---------------------------------------------------------------------------------------------
Futures
Long futures contracts:
Financial 1,122 $ (1,779,634) (0.90%)
Commodity 1,427 89,375 0.04
--------------------------------
(1,690,259) (0.86)
Short futures contracts:
Financial 806 1,387,270 0.70
Commodity 15,658 7,306,830 3.71
--------------------------------
8,694,100 4.41
--------------------------------
Net unrealized gain on open contracts $ 7,003,841 3.55%
================================
Short-term Investment
Certificate of deposit $ 4,502,290 2.28%
================================
F-7
MLM Index Fund
Statements of Operations
Years ended December 31
2002 2001
-------------------------------------
Investment income
Interest $ 3,412,276 $ 5,140,993
Expenses
Brokerage commissions 2,842,588 2,032,721
Management fee 2,455,153 1,693,359
Operating expenses 944,454 839,741
-------------------------------------
Total expenses 6,242,195 4,565,821
Net investment income (loss) (2,829,919) 575,172
Realized and unrealized gain (loss) on investments
Net realized loss (27,250,523) (1,782,272)
Net change in unrealized gain 10,793,154 754,588
-------------------------------------
Net realized and unrealized loss on investments (16,457,369) (1,027,684)
-------------------------------------
Net loss $ (19,287,288) $ (452,512)
=====================================
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-8
MLM Index Fund
Statements of Changes in Investors' Interest
Year ended December 31, 2002
Enhanced Series
-------------------------------------------------------------------------------
Total
Class A-1 Class A Class B-1 Class B Class C Enhanced
Shares Shares Shares Shares Shares Series
-------------------------------------------------------------------------------
Investors' interest at
December 31, 2001 $153,689 $26,820,513 $4,193,995 $91,711,548 $4,024,210 $126,903,955
Subscriptions - 8,413,427 24,875 30,330,410 2,495,000 41,263,712
Redemptions (19,733) (2,915,007) (1,205,857) (15,209,311) - (19,349,908)
Transfers 54,045 (715,360) (704,143) (3,903,454) - (5,268,912)
Other (Selling commissions) - (74,963) - - (37,250) (112,213)
Net loss (21,261) (3,861,745) (488,600) (12,561,181) (410,888) (17,343,675)
-------------------------------------------------------------------------------
Investors' interest at
December 31, 2002 $166,740 $27,666,865 $1,820,270 $90,368,012 $6,071,072 $126,092,959
===============================================================================
Shares at December 31, 2001 1,240.99 242,231.27 33,918.00 802,953.00 42,419.00 1,122,762.26
Subscriptions 90,974.41 197.24 313,223.04 32,419.78 436,814.47
Redemptions (199.00) (30,517.08) (10,694.11) (157,164.08) - (198,574.27)
Transfers 525.82 (8,255.93) (6,532.65) (40,321.75) 0.21 (54,584.30)
Other - - - - - -
-------------------------------------------------------------------------------
Shares at December 31, 2002 1,567.81 294,432.67 16,888.48 918,690.21 74,838.99 1,306,418.16
===============================================================================
Net asset value per share:
December 31, 2002 $106.35 $93.97 $107.78 $98.37 $81.12
================================================================
The accompanying notes are an integral part of the financial statements and should be read in conjunction therewith.
F-9
MLM Index Fund
Statements of Changes in Investors' Interest
Year ended December 31, 2002
Unleveraged Series
-----------------------------------------------------------------------------------
Total
Investors'
Total Interest
Class A-1 Class A Class B-1 Class B Unleveraged ($100 Par
Shares Shares Shares Shares Series Value/Share)
-----------------------------------------------------------------------------------
Investors' interest at
December 31, 2001 $ 910,801 $8,248,822 $1,985,391 $59,157,708 $70,302,722 $197,206,677
Subscriptions - 8,258,851 - 19,739,299 27,998,150 69,261,862
Redemptions (21,267) (2,666,621) (713,431) (20,253,781) (23,655,100) (43,005,008)
Transfers (54,044) (185,926) 1 5,508,881 5,268,912 -
Other (Selling commissions) - (69,617) - - (69,617) (181,830)
Net loss (35,241) (331,924) (38,645) (1,537,803) (1,943,613) (19,287,288)
-----------------------------------------------------------------------------------
Investors' interest at
December 31, 2002 $800,249 $13,253,585 $1,233,316 $62,614,304 $77,901,454 $203,994,413
===================================================================================
Shares at December 31, 2001 7,975.90 74,313.00 16,874.00 517,660.26 616,823.16 1,739,585.42
Subscriptions - 77,152.56 - 181,449.52 258,602.08 695,416.55
Redemptions (199.00) (25,225.45) (6,089.43) (183,401.96) (214,915.84) (413,490.11)
Transfers (501.14) (1,748.33) 0.65 50,584.03 48,333.91 (6,250.39)
Other - - - - - -
-----------------------------------------------------------------------------------
Shares at December 31, 2002 7,275.76 124,491.78 10,783.92 566,291.85 708,843.31 2,015,261.47
===================================================================================
Net asset value per share:
December 31, 2002 $109.99 $106.46 $114.37 $110.57
====================================================
The accompanying notes are an integral part of the financial statements and should be read in conjunction therewith.
F-10
MLM Index Fund
Statements of Changes in Investors' Interest
Year ended December 31, 2001
Enhanced Series
-------------------------------------------------------------------------------
Total
Class A-1 Class A Class B-1 Class B Class C Enhanced
Shares Shares Shares Shares Shares Series
-------------------------------------------------------------------------------
Investors' interest at
December 31, 2000 $154,798 $13,081,512 $4,828,988 $48,129,532 $ - $66,194,830
Subscriptions - 17,668,132 - 52,771,425 2,305,950 72,745,507
Redemptions - (3,814,322) (667,310) (8,115,176) - (12,596,808)
Transfers - 558,824 - (561,535) 1,689,199 1,686,488
Net income (loss) (1,109) (673,633) 32,317 (512,698) 29,061 (1,126,062)
-------------------------------------------------------------------------------
Investors' interest at
December 31, 2001 $153,689 $26,820,513 $4,193,995 $91,711,548 $4,024,210 $126,903,955
===============================================================================
Shares at December 31, 2000 1,240.99 116,013.61 39,358.00 420,014.00 - 576,626.60
Subscriptions - 156,513.68 - 456,871.00 24,250.00 637,634.68
Redemptions - (35,243.01) (5,440.00) (68,226.00) - (108,909.01)
Transfers - 4,946.99 - (5,706.00) 18,169.00 17,409.99
-------------------------------------------------------------------------------
Shares at December 31, 2001 1,240.99 242,231.27 33,918.00 802,953.00 42,419.00 1,122,762.26
===============================================================================
Net asset value per share:
December 31, 2001 123.84 110.72 123.65 114.22 94.87
================================================================
The accompanying notes are an integral part of the financial statements and should be read in conjunction therewith.
F-11
MLM Index Fund
Statements of Changes in Investors' Interest
Year ended December 31, 2001
Unleveraged Series
-----------------------------------------------------------------------------------
Total
Investors'
Total Interest
Class A-1 Class A Class B-1 Class B Unleveraged ($100 Par
Shares Shares Shares Shares Series Value/Share)
-----------------------------------------------------------------------------------
Investors' interest at
December 31, 2000 $896,523 $2,202,280 $2,076,846 $10,863,434 $16,039,083 $82,233,913
Subscriptions - 7,040,026 - 52,982,902 60,022,928 132,768,435
Redemptions - (354,237) (143,909) (4,248,205) (4,746,351) (17,343,159)
Transfers - (663,666) - (1,022,822) (1,686,488) -
Net income (loss) 14,278 24,419 52,454 582,399 673,550 (452,512)
-----------------------------------------------------------------------------------
Investors' interest at
December 31, 2001 $910,801 $8,248,822 $1,985,391 $59,157,708 $70,302,722 $197,206,677
===================================================================================
Shares at December 31, 2000 7,975.90 20,068.00 18,112.00 97,105.11 143,261.01 719,887.61
Subscriptions - 63,418.00 - 466,542.29 529,960.29 1,167,594.97
Redemptions - (3,212.00) (1,238.00) (36,992.12) (41,442.12) (150,351.13)
Transfers - (5,961.00) - (8,995.02) (14,956.02) 2,453.97
-----------------------------------------------------------------------------------
Shares at December 31, 2001 7,975.90 74,313.00 16,874.00 517,660.26 616,823.16 1,739,585.42
===================================================================================
Net asset value per share:
December 31, 2001 114.19 111.00 117.66 114.28
====================================================
The accompanying notes are an integral part of the financial statements and should be read in conjunction therewith.
F-12
MLM Index Fund
Statements of Cash Flows
Years ended December 31, 2002 and 2001
2002 2001
-----------------------------------
Cash flows from operating activities
Net loss $ (19,287,288) $ (452,512)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities:
Net change in operating assets and liabilities:
Due from broker 9,902,791 (14,191,397)
Certificate of deposit 4,502,290 (4,502,290)
Interest receivable 465,589 (460,211)
Brokerage commission payable (19,818) 150,446
Management fee payable 8,086 178,629
Accrued expenses (106,769) 170,431
----------------------------------
Net cash and cash equivalents used in operating activities (4,535,119) (19,106,904)
----------------------------------
Cash flows from financing activities
Subscriptions received, net of selling commissions 69,080,032 132,718,435
Redemptions paid (38,791,272) (14,569,145)
----------------------------------
Net cash and cash equivalents provided by financing activities 30,288,760 118,149,290
Net increase in cash and cash equivalents 25,753,641 99,042,386
Cash and cash equivalents at beginning of year 169,990,375 70,947,989
----------------------------------
Cash and cash equivalents at end of year $195,744,016 $ 169,990,375
==================================
The accompanying notes are an integral part of the financial statements and
should be read in conjunction therewith.
F-13
MLM Index Fund
Notes to Financial Statements
December 31, 2002
1. Significant Accounting Policies
Organization and Basis of Financial Statements
MLM Index Fund (the "Fund") was formed under the Business Trust Statute of the
State of Delaware as a business trust in December 1997 and commenced
operations on January 4, 1999. The Fund was organized for the primary purpose
of seeking capital appreciation through the speculative trading of a
diversified portfolio of futures contracts traded on U.S. exchanges using the
MLM Index Trading Program, which is based upon the MLM Index. The MLM Index is
a benchmark of the hypothetical returns available to a futures investor. The
Index is comprised of a diverse portfolio of futures markets, including both
financial and tangible markets. Only highly liquid U.S. futures markets are
currently included in the MLM Index.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the estimates
utilized in preparing the financial statements are reasonable and prudent;
however, actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market investments,
commercial paper, and certificates of deposit, having a maturity of less than
six months. These investments are carried at cost plus accrued interest, which
approximates market value. At December 31, 2002 and 2001, the Fund had
approximately $35,161,000 and $5,967,000, respectively, in overnight funds
with one major domestic bank and $158,778,566 and $162,340,000, respectively,
invested in money market securities held at a custodian.
Valuation of Trading Positions
The Fund's trading positions are valued at market value, including accrued
interest where applicable, and are included in amounts due from broker. Market
value is principally based on listed market prices or broker or dealer price
quotations. The resulting change in unrealized profit or loss is reflected in
trading results for the period.
F-14
MLM Index Fund
Notes to Financial Statements (continued)
1. Significant Accounting Policies (continued)
Income Taxes
The Unleveraged Series and the Enhanced Series each will be classified for
federal income tax purposes as a separate partnership. Interest Holders of a
Series will reflect their proportionate share of realized profit or loss on
their separate tax returns. Accordingly, no provisions for income taxes are
required for the Fund.
2. Investors' Interest
The Fund is comprised of two series: the Unleveraged Series, which attempts to
replicate the MLM Index without leverage, and the Enhanced Series, which
trades the MLM Index at three times leverage. Each Series has five classes of
shares: Class A-1, Class A, Class B-1, Class B, and Class C. Class A-1 and
Class B-1 Interests are no longer offered. As of December 31, 2002, Class C
Interest of the Unleveraged Series did not issue any shares. Class A, Class B
and Class C Interests are sold by authorized selling agents appointed by Mount
Lucas Management Corporation (the "Manager") to accredited investors at a
price equal to such Class' net asset value. Interests may be redeemed at net
asset value as of the last day of any month upon at least ten-business days
written notice to the Manager.
The Manager allocates profits and losses among the investors of a Series based
on the balance in each investor's capital account.
The Manager paid all of the expenses associated with the organization of the
Fund and the offered interests. As a result, each investor pays the Manager an
organizational fee in the amount of 0.5% of their initial investment (net of
any selling commission) in any Series and any subsequent investment. The
organizational fee is not charged once an investor has invested $1,000,000 or
more.
The Class A and Class C Interests of the Unleveraged and Enhanced Series are
subject to a sales commission of up to 4% of the subscription amount, payable
to the selling agent from the investor's investment for each series. The
amount of the sales commission will be determined by the selling agent.
As of December 31, 2002, the Manager of the Fund had contributed $1,000 to
each Series of the Fund.
F-15
3. Margin Requirements
The Fund had margin requirements of approximately $23,884,268 and $24,020,446
at December 31, 2002 and 2001, respectively, which were satisfied by net
unrealized profits and cash at the brokers.
4. Management Fee, Administrative Services and Other Transactions
The Fund pays the Manager a management fee and the introducing broker a
brokerage fee as a percentage of net assets, as of the first day of each month
at the annualized rates as follows:
Enhanced Series Unleveraged Series
------------------------------ -------------------------------
Management Brokerage Management Brokerage
Fee Fee Fee Fee
---------------------------------------------------------------
Class A-1 2.15% 1.35% 1.25% 0.65%
Class A 2.80 1.85 1.50 0.85
Class B-1 0.65 1.35 0.25 0.65
Class B 1.30 1.85 0.50 0.85
Class C 2.05 1.85 1.00 0.85
The Fund pays its legal, accounting, auditing and other operating expenses and
fees. The manager will reimburse any Series for these expenses to the extent
that they exceed 0.5% of the average net assets of such Series of the Fund in
any calendar year. There were no reimbursements for the year ended
December 31, 2002.
5. Derivative Financial Instruments
Derivatives are financial instruments whose values are based upon an
underlying asset (e.g., Treasury Bond), index (e.g., S&P 500) or reference
rate (e.g., LIBOR). Over-the-counter ("OTC") derivative products are privately
negotiated contractual agreements that can be tailored to meet individual
client needs, and include forwards, swaps and certain options. Exchange traded
derivative products are standardized contracts transacted through regulated
exchanges and include futures, and certain option contracts listed on an
exchange.
F-16
5. Derivative Financial Instruments (continued)
Derivatives are subject to various risks similar to non-derivative financial
instruments including market, credit, liquidity and operational risk. The risk
of derivatives should not be viewed in isolation but rather should be
considered on an aggregate basis along with the Fund's other trading related
activities.
The Fund purchases and sells futures in financial instruments and commodities.
The Fund records its derivative activities on a mark-to-market basis with
realized and unrealized gains (losses) recognized currently in the statements
of operations and in due from brokers on the statements of financial
condition.
The following table reflects the fair value of the Fund's derivative financial
instruments.
Fair Value at December 31
2002 2001
---------------------------------------------------------
Assets Liabilities Assets Liabilities
---------------------------------------------------------
Commodity Futures $15,872,442 $2,882,101 $10,080,167 $2,683,961
Financial Futures 5,116,842 3,250 1,409,545 1,801,910
---------------------------------------------------------
$20,989,284 $2,885,351 $11,489,712 $4,485,871
=========================================================
F-17
6. Financial Highlights
The following represents the per share operating performance ratios to average
investors' interest and other supplemental information for the year ended
December 31, 2002:
Enhanced Series
------------------------------------------------------------
Class A-1 Class A Class B-1 Class B Class C
Shares Shares Shares Shares Shares
------------------------------------------------------------
Per share operating performance:
Net asset value per share,
December 31, 2001 $123.84 $110.72 $123.65 $114.22 $94.87
Income from investment operations:
Net investment income (loss) (2.36) (3.20) (0.77) (1.84) (2.15)
Net realized and unrealized gain
(loss) on Investment
transactions (15.13) (13.55) (15.10) (14.01) (11.60)
-------------------------------------------------------------
Total from investment operations (17.49) (16.75) (15.87) (15.85) (13.75)
-------------------------------------------------------------
Net asset value per share, $106.35 $93.97 $107.78 $98.37 $81.12
December 31, 2002
=============================================================
Total Return (14.14%) (15.13%) (12.83%) (13.84%) (14.49%)
Ratio to Average Net Assets:
Net investment income (loss) (2.21%) (3.38%) (0.72%) (1.88%) (2.66%)
Expenses (3.98%) (5.13%) (2.48%) (3.63%) (4.38%)
Total return is calculated as the change in the net asset value per share for
the year. The per share operating performance and ratios are computed based
upon the weighted average shares outstanding and weighted average net assets,
respectively, for each class, for the year ended December 31, 2002.
F-18
Unleveraged Series
-------------------------------------------------
Class A-1 Class A Class B-1 Class B
Shares Shares Shares Shares
-------------------------------------------------
Per share operating performance:
Net asset value per share,
December 31, 2001 $114.19 $111.00 $117.66 $114.28
Income from investment operations:
Net investment income (loss) (0.70) (1.07) 0.33 (0.10)
Net realized and unrealized gain
(loss) on Investment
transactions (3.50) (3.47) (3.62) (3.61)
-------------------------------------------------
Total from investment operations (4.20) (4.54) (3.29) (3.71)
-------------------------------------------------
Net asset value per share, $109.99 $106.46 $114.37 $110.57
December 31, 2002
=================================================
Total Return (3.69%) (4.09%) (2.80%) (3.25%)
Ratio to Average Net Assets:
Net investment income (loss) (0.64%) (1.04%) 0.30% (0.10%)
Expenses (2.40%) (2.84%) (1.40%) (1.84%)
Total return is calculated as the change in the net asset value per share for
the year. The per share operating performance and ratios are computed based
upon the weighted average shares outstanding and weighted average net assets,
respectively, for each class, for the year ended December 31, 2002.
F-19
6. Financial Highlights (continued)
The following represents the per share operating performance ratios to average
investors' interest and other supplemental information for the year ended
December 31, 2001:
Enhanced Series
------------------------------------------------------------------
Class A-1 Class A Class B-1 Class B Class C
Shares Shares Shares Shares Shares
------------------------------------------------------------------
Per share operating performance:
Net asset value per share,
December 31, 2000 $124.76 $112.76 $122.69 $114.59 $100.00
Income from investment operations:
Net investment income (loss) (1.29) (1.33) 1.38 0.41 (0.29)
Net realized and unrealized gain
(loss) on investment
transactions 0.37 (0.71) (0.42) (0.78) (4.84)
------------------------------------------------------------------
Total from investment operations (0.92) (2.04) 0.96 (0.37) (5.13)
------------------------------------------------------------------
Net asset value per share, $123.84 $110.72 $123.65 $114.22 $94.87
December 31, 2001
==================================================================
Total Return (0.74%) (1.81%) 0.78% (0.32%) (5.41%)
Ratio to Average Net Assets:
Net investment income (loss) (1.03%) (1.50%) 1.15% 0.07% (1.11%)
Expenses (4.10%) (5.26%) (2.60%) (3.76%) (4.53%)
Total return is calculated as the change in the net asset value per share for
the year. The per share operating performance and ratios are computed based
upon the weighted average shares outstanding and weighted average net assets,
respectively, for each class, for the year ended December 31, 2001.
F-20
Unleveraged Series
-------------------------------------------------
Class A-1 Class A Class B-1 Class B
Shares Shares Shares Shares
-------------------------------------------------
Per share operating performance:
Net asset value per share,
December 31, 2000 $112.41 $109.75 $114.67 $111.87
Income from investment operations:
Net investment income (loss) 1.45 1.29 2.66 2.44
Net realized and unrealized gain
(loss) on investment
transactions 0.33 (0.04) 0.33 (0.03)
-------------------------------------------------
Total from investment operations 1.78 1.25 2.99 2.41
-------------------------------------------------
Net asset value per share, $114.19 $111.00 $117.66 $114.28
December 31, 2001
=================================================
Total Return 1.56% 1.13% 2.54% 2.11%
Ratio to Average Net Assets:
Net investment income (loss) 1.29% 0.70% 2.31% 1.69%
Expenses (2.50%) (2.97%) (1.50%) (1.98%)
Total return is calculated as the change in the net asset value per share for
the year. The per share operating performance and ratios are computed based
upon the weighted average shares outstanding and weighted average net assets,
respectively, for each class, for the year ended December 31, 2001.
F-21
INDEX TO EXHIBITS
Exhibit
Number Item Description
- ------- ----------------
3.1 Restated Certificate of Trust for MLM Index Trust, filed
1/14/98 (Filed as Exhibit 3.1 to the Registrant's Form
10 and incorporated by reference
herein.)
3.2 Amended and Restated Declaration of Trust and Trust
Agreement of MLM Index Fund (Filed as Exhibit 3.1 to the
Registrant's Form 10 and incorporated by reference
herein.)
3.3 Amendment No. 1 to the Amended and Restated Declaration
of Trust and Trust Agreement of MLM Index Fund (Filed as
Exhibit 3.1 to the Registrant's Form 10 and incorporated by
reference herein.)
3.4 Amendment No. 2 to the Amended and Restated Declaration
of Trust and Trust Agreement of MLM Index Fund (Filed as
Exhibit 3.1 to the Registrant's Form 10 and incorporated by
reference herein.)
3.5 Amendment No. 3 to the Amended and Restated Declaration
of Trust and Trust Agreement of MLM Index Fund (Filed as
Exhibit 3.1 to the Registrant's Form 10 and incorporated by
reference herein.)
3.6 Amendment No. 4 to the Amended and Restated Declaration
of Trust and Trust Agreement of MLM Index Fund (Filed as
Exhibit 3.1 to the Registrant's Form 10 and incorporated by
reference herein.)
99.1 Section 906 Certification
99.2 Section 906 Certification