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EX-3.02 - EX-3.02 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex3d02.htm
EX-31.01 - EX-31.01 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex31d01.htm
EX-31.02 - EX-31.02 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex31d02.htm
EX-32.01 - EX-32.01 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex32d01.htm
EX-13.01 - EX-13.01 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex13d01.htm
EX-32.02 - EX-32.02 - ML Transtrend DTP Enhanced FuturesAccess LLCa10-3641_6ex32d02.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

 

x

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the fiscal year ended: December 31, 2009

 

or

 

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission file number: 0-52384

 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(Exact name of registrant as specified in its charter)

 

Delaware

 

30-0408288

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 6th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

 

212-449-3517

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Units of Limited Liability Company Interest

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o  No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o

 

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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Small reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes o  No x

 

The Units of the limited liability company interest of the registrant are not publicly traded. Accordingly, there is no aggregate market value for the registrant’s outstanding equity that is readily determinable.

 

As of February 28, 2010 Units of limited liability company interest with an aggregate net asset value of $238,561,566 were outstanding and held by non-affiliates.

 

Documents Incorporated by Reference

 

The registrant’s 2009 Annual Report and Reports of Independent Registered Public Accounting Firms, the annual report to security holders for the year ended December 31, 2009, is incorporated by reference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.

 

 

 



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

 

ANNUAL REPORT FOR 2009 ON FORM 10-K

 

Table of Contents

 

 

 

PAGE

PART I

 

 

 

 

Item 1.

Business

1

 

 

 

Item 1A.

Risk Factors

9

 

 

 

Item 1B.

Unresolved Staff Comments

10

 

 

 

Item 2.

Properties

10

 

 

 

Item 3.

Legal Proceedings

10

 

 

 

Item 4.

Reserved

11

 

 

 

PART II

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

11

 

 

 

Item 6.

Selected Financial Data

13

 

 

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

33

 

 

 

Item 8.

Financial Statements and Supplementary Data

37

 

 

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

37

 

 

 

Item 9AT.

Controls and Procedures

37

 

 

 

Item 9B.

Other Information

38

 

 

 

PART III

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

39

 

 

 

Item 11.

Executive Compensation

41

 

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

41

 

 

 

Item 13.

Certain Relationships and Related Transactions and Director Independence

41

 

 

 

Item 14.

Principal Accountant Fees and Services

42

 

 

PART IV

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

43

 



 

PART I

 

Item 1:   Business

 

(a)           General Development of Business:

 

ML Transtrend DTP Enhanced FuturesAccess LLC (the “Fund”) was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 6 for discussion of net asset value and net asset value per unit for subscriptions and redemptions purposes hereinafter referred to as Net Asset Value and Net Asset Value per Unit) as of the beginning of each calendar month. The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Transtrend B.V. (“Transtrend”) is the Trading Advisor of the Fund (“Trading Advisor”).

 

Merrill Lynch Alternative Investments LLC (“MLAI”) is the sponsor (“Sponsor”) and manager (“Manager”) of the Fund. MLAI is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch, is the Fund’s commodity broker. On September 15, 2008, Merrill Lynch (or the “Company”) entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 dated as of October 21, 2008, the “Merger Agreement”) with Bank of America Corporation (“Bank of America”). Pursuant to the Merger Agreement, on January 1, 2009, a wholly-owned subsidiary of Bank of America (“Merger Sub”) merged with and into Merrill Lynch, with Merrill Lynch continuing as the surviving corporation and a subsidiary of Bank of America (the “Merger”).

 

The Fund calculates the net asset value per unit of each class of units as of the close of business on the last business day of each calendar month and such other dates as MLAI may determine in its discretion. The Fund’s net asset value as of any calculation date will generally equal the value of the Fund’s account under the management of its trading advisor as of such date, plus any other assets held by the Fund, minus accrued brokerage commissions, sponsor’s, management and performance fees, organizational expense amortization and any operating costs and other liabilities of the Fund.  MLAI is authorized to make all net asset value determinations.

 

As of December 31, 2009, the Net Asset Value of the Fund was $235,900,686. As of December 31, 2009, the Net Asset Value per Unit was $1.1440 for Class A, $1.0807 for Class C, $0.9097 for Class D, $1.1369 for Class I, $1.3936 for Class DS and $1.4551 for Class DT.

 

Since the Fund began trading activities, the highest month-end Net Asset Value per Unit for Class A was $1.3886 (February 28, 2009) and the lowest was $1.0780 (September 30, 2007).  The highest month-end Net Asset Value per Unit for Class C was $1.3228 (February 28, 2009) and the lowest was $0.9228 (August 31, 2007).  The highest month-end Net Asset Value per Unit for Class D was $1.2380 (February 28, 2009) and the lowest was $0.9097 (December 31, 2009).  The highest month-end Net Asset Value per Unit for Class I was $1.3760 (February 28, 2009) and the lowest was $1.0475 (November 30, 2007). The highest month-end Net Asset Value per Unit for Class DS was $1.6705 (February 28, 2009) and the lowest was $1.0532 (April 30, 2007).  The highest month-end Net Asset Value per Unit for Class DT was $1.7296 (February 28, 2009) and the lowest was $1.0950 (August 31, 2007).

 

(b)           Financial Information about Segments:

 

The Fund’s business constitutes only one segment for financial reporting purposes, i.e., a speculative “commodity pool”. The Fund does not engage in sales of goods or services.

 

(c)           Narrative Description of Business:

 

General

 

The Fund trades in the futures and forward markets with the objective of achieving substantial capital appreciation.

 

1



 

The Fund and MLAI have entered into an Advisory Agreement with Transtrend whereby Transtrend trades the Fund’s assets through a managed account using the Transtrend DTP Enhanced Diversified Program.  Transtrend trades in the U.S. and international futures and forwards markets pursuant to the Transtrend DTP Enhanced Diversified Program. - Enhanced Risk Profile (USD) (the “Trading Program”).  The Diversified Trend Program has two risk profiles: the Standard Risk Profile and the Enhanced Risk Profile, investable in various currencies.  The Enhanced Risk Profile is approximately 1.5 times the leverage of the Standard Risk Profile.

 

The Trading Advisor trades the following instruments on U.S. and non-U.S. exchanges and markets: (a) futures, options, options on futures, and forward contracts on currencies, interest rates, interest rate instruments, commodities, individual stocks, stock indices and other indices; and (b) spot currencies, in all cases ((a) and (b)) traded on regulated markets and/or OTC markets.  The Trading Advisor does not, however, currently trade futures, options, options on futures or forward contracts on individual stocks for the Fund.  Over time, the underlying values of futures, options, options on futures and forward contracts traded may also include other economic variables which are now or may hereafter become the subject of organized futures, options or forward trading.  Over time, the instruments that the Trading Advisor trades may also include swaps or other derivative, margined instruments, in each case traded on regulated and/or OTC markets.

 

The applied principles of risk management play a dominant role in the Trading Advisor’s trading methodology.  The Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance.  The Trading Program is entirely based on quantitative analysis of signaled price behavior of outright markets and of intra-market and/or inter-market combinations of the instruments concerned, and therefore not on fundamental analysis.

 

The Trading Program may enter into both long and short positions in any of the instruments involved, or it may have no position.  Long and short positions are likely to be leveraged and unhedged and/or uncovered.  The degree of leverage is implicitly determined by the risk/reward profile selected by the Fund.  The degree of leverage can be expressed as the number of contracts traded or held in position per millions of U.S. dollars under management.  A higher degree of leverage represents a higher degree of risk as it goes hand in hand with a higher number of contracts held in a position for each U.S. dollar under management.  As such, a selected risk profile has a consequence for the number of contracts traded and/or held in a position for each U.S. dollar under management.

 

The Trading Program is systematic by nature and requires a consistent application.  Therefore, discretionary inputs are not essential to the effectiveness of the Trading Program.  Exceptional market circumstances of the observed past, both favorable and unfavorable, are integrally reflected in the presented performance profile of the Trading Program.  While the Trading Advisor generally will not use discretionary inputs in trading client accounts, in the event of exceptional market circumstances the Trading Advisor may use discretion in an attempt to limit risk to a position or an account.  The use of discretion by the Trading Advisor may have a positive or negative impact on performance of the Fund.

 

The portfolio composition and the relative weighting of instruments within each portfolio is defined irrespective of the outcome of historical trades.  The guiding principle is strategic diversification in pursuit of a maximum attainable risk spreading, taking correlation analysis and degrees of profit expectancy into account.

 

As the applied strategies require particular transaction sizes to allow for multiple entry and exit points and because certain minimum transaction sizes may be required or recommendable, the attainable degree of diversification is, among others, a function of the amount under management.  Generally, larger accounts have a higher degree of diversification.

 

Specific risk provisions are computed for each market exposure.  The risk provisions are designed to have a pre-defined reliability.  In all trading systems the assessment of price volatility plays a prominent role.  Risk assessments are determined on the basis of a regular or continuous evaluation of daily price behavior, possibly leading to regular adjustments during the lifetime of exposures.

 

The applied market approach does not forecast markets or price levels but participates in a systematic and dynamic way in signaled price patterns.  The Trading Program exploits directional price movement of outright prices, of time spreads in one or more time frames and of inter-market and -product combinations.

 

Although the Trading Advisor’s Trading Program is continually evolving, there were no fundamental or material changes to the Trading Program during the 2009 fiscal year.

 

2



 

Employees

 

The Fund has no employees.

 

Use of Proceeds and Cash Management Income

 

Subscription Proceeds

 

The Fund’s cash is used as security for and to pay the Fund’s trading losses as well as its expenses and redemptions. The primary use of the proceeds of the sale of the Units is to permit Transtrend to trade on a speculative basis in a wide range of different futures and forwards markets on behalf of the Fund.  While being used for this purpose, the Fund’s assets are also generally available for cash management, as more fully described below under “Cash Assets”.

 

Market Sectors

 

Transtrend applies its proprietary systems to a broadly-diversified portfolio of futures and forward markets pursuant to their Transtrend DTP Enhanced Diversified Program. The Transtrend DTP Enhanced Diversified Program may trade in the following markets:  CBOT, CME, EUREX, IME, LME, LIFFE, MATIF, ME, MEFF, NYMEX, NZFOE, SFE, SIMEX, TIFFE, TSE and may expand to include trading in other markets.

 

The Fund’s commitments to different types of markets — U.S. and non-U.S., regulated and non-regulated — differ substantially from time to time, as well as over time.  The Fund has no policy restricting its relative commitment to any of these different types of markets.

 

3



 

CONDENSED SCHEDULE OF INVESTMENTS

 

The Fund’s investments, defined as Net unrealized profit on open contracts in the Statements of   Financial Condition, as of December 31, 2009 and 2008 are as follows:

 

2009

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

675

 

$

512,058

 

0.22

%

(292

)

$

(132,212

)

-0.06

%

$

379,846

 

0.16

%

February 10 - December 10

 

Currencies

 

1,308

 

(670,422

)

-0.28

%

(854

)

1,521,277

 

0.64

%

850,855

 

0.36

%

April 10

 

Energy

 

494

 

(135,491

)

-0.06

%

(67

)

(277,177

)

-0.12

%

(412,668

)

-0.18

%

February 10 - December 10

 

Interest rates

 

4,183

 

(1,938,988

)

-0.82

%

(1,837

)

429,159

 

0.18

%

(1,509,829

)

-0.64

%

March 10 - December 12

 

Metals

 

759

 

3,324,393

 

1.41

%

(376

)

(3,024,951

)

-1.28

%

299,442

 

0.13

%

January 10 - April 10

 

Stock indices

 

2,214

 

1,538,851

 

0.65

%

 

 

0.00

%

1,538,851

 

0.65

%

January 10 - March 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

2,630,401

 

1.12

%

 

 

$

(1,483,904

)

-0.63

%

$

1,146,497

 

0.49

%

 

 

 

2008

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

90

 

$

151,485

 

0.07

%

(476

)

$

(432,610

)

-0.20

%

$

(281,125

)

-0.13

%

February 09 - December 09

 

Currencies

 

126

 

618,638

 

0.28

%

(192

)

(185,546

)

-0.09

%

433,092

 

0.19

%

March 09

 

Energy

 

 

 

0.00

%

(328

)

489,104

 

0.23

%

489,104

 

0.23

%

February 09 - December 09

 

Interest rates

 

4,057

 

4,178,934

 

1.92

%

(1,398

)

(913,221

)

-0.42

%

3,265,713

 

1.50

%

March 09 - December 11

 

Metals

 

305

 

(3,140,161

)

-1.44

%

(450

)

6,168,912

 

2.84

%

3,028,751

 

1.40

%

January 09 - May 09

 

Stock indices

 

 

 

0.00

%

(410

)

(195,006

)

-0.09

%

(195,006

)

-0.09

%

January 09 - March 09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

1,808,896

 

0.83

%

 

 

$

4,931,633

 

2.27

%

$

6,740,529

 

3.10

%

 

 

 

No individual contract’s unrealized profit or loss comprised greater than 5% of the Members’ Capital as of December 31, 2009 and 2008.

 

4



 

Market Types

 

The Fund trades on a variety of United States and foreign futures exchanges.  Substantially all of the Fund’s off-exchange trading takes place in the highly liquid, institutionally-based currency forward markets.

 

Many of the Fund’s currency trades are executed in the spot and forward foreign exchange markets (the “FX Markets”) where there are no direct execution costs.  Instead, the participants, banks and dealers in the FX Markets, take a “spread” between the prices at which they are prepared to buy and sell a particular currency and such spreads are built into the pricing of the spot or forward contracts with the Fund.

 

Custody of Assets

 

Substantially, all of the Fund’s assets are currently held in one or more Commodity Futures Trading Commission (“CFTC”) regulated customer accounts at MLPF&S.

 

Cash Assets

 

The Fund will generally earn interest, as described below, on its “Cash Assets”, which can be generally described as the cash actually held by the Fund plus its “open trade equity” (unrealized gain and loss marked to market daily on open positions).   Cash Assets are held primarily in U.S. dollars, and to a lesser extent in foreign currencies, and are comprised of the Fund’s cash balances held in the offset accounts (as described below) — which include “open trade equity” (unrealized gain and loss on open positions) on United States futures contracts, which is paid into or out of the Fund’s account on a daily basis; the Fund’s cash balance in foreign currencies derived from its trading in non-U.S. dollar denominated futures and options contracts, which includes open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions.  Cash Assets do not include, and the Fund does not earn interest income on the Fund’s gains or losses on its open forward, commodity option and certain foreign futures positions since such gains and losses are not collected or paid until such positions are closed out.

 

The Fund’s Cash Assets may be greater than, less than or equal to the Fund’s Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.

 

Interest Earned on the Fund’s U.S. Dollar Cash Assets

 

The Fund’s U.S. dollar Cash Assets are held in cash at MLPF&S, which utilizes offset accounts.

 

Certain of each FuturesAccess Fund’s U.S. dollar “Cash Assets” (as defined below) are held by MLPF&S in customer segregated accounts and primarily invested in CFTC-eligible investments (including, without limitation, commercial paper, U.S. government and government agency securities, prime non-U.S. government securities, corporate notes and money market funds). Cash Assets may also be maintained in “offset accounts” at major U.S. banks, interest bearing savings accounts maintained with major U.S. banks unaffiliated with Merrill Lynch and/or money market investment funds that are managed by third party managers, including affiliates of Merrill Lynch.

 

Offset accounts are non-interest bearing demand deposit accounts maintained with banks unaffiliated with Merrill Lynch. MLPF&S may in the future elect to maintain accounts of this nature with one or more of its affiliates. Offset account deposits reduce Merrill Lynch’s borrowing costs with such banks. An integral feature of the offset arrangements is that the participating banks specifically acknowledge that the offset accounts are for the benefit of MLPF&S’ customers, not subject to any Merrill Lynch liability.

 

To the extent that Cash Assets are placed with affiliates of Merrill Lynch, Merrill Lynch indirectly receives certain economic benefits and therefore has a conflict of interest in selecting such third parties. For example, Merrill Lynch may invest in money market funds managed by BlackRock, Inc. or its affiliates (“BlackRock”). Merrill Lynch is a substantial stockholder in BlackRock and, therefore, potentially benefits from its economic interest in BlackRock whenever BlackRock receives compensation for managing Cash Assets invested in money market investment funds managed by BlackRock.

 

5



 

Interest Paid by Merrill Lynch on the Fund’s Non-U.S. Dollar Cash Assets

 

Each FuturesAccess Fund will generally earn interest, as described below, on its Cash Assets, which can be generally described as the cash actually held by such FuturesAccess Fund, plus its “open trade equity” (unrealized gain and loss marked to market daily on open positions). Cash Assets are held primarily in U.S. dollars, and to a lesser extent in non-U.S. currencies, and comprise the following: (a) each FuturesAccess Fund’s cash balances, plus open trade equity on U.S. futures; and (b) each FuturesAccess Fund’s cash balances held in non-U.S. currencies as a result of realized profits and losses derived from its trading in non-U.S. dollar-denominated futures and options contracts, plus open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions. Cash Assets do not include, and the FuturesAccess Funds do not earn interest income on, the FuturesAccess Funds’ gains or losses on their open forward, commodity option and certain non-U.S. futures positions as such gains and losses are not collected or paid until such positions are closed out.

 

Each FuturesAccess Fund’s Cash Assets may be greater than, less than or equal to such FuturesAccess Fund’s Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.

 

MLPF&S intends to pay interest on the FuturesAccess Funds’ Cash Assets (irrespective of how such Cash Assets are held or invested) at the most favorable rate payable by MLPF&S to accounts of Merrill Lynch affiliates, from time to time, although the actual rate paid to FuturesAccess Funds may be lower. In no event, however, will the rate so paid on such Cash Assets be less than 75% of such prevailing rate. MLPF&S retains the additional economic benefit derived from possession of the FuturesAccess Funds’ Cash Assets.

 

MLPF&S, in the course of acting as commodity broker for the FuturesAccess Funds, lends certain currencies to, and borrows certain currencies from, the FuturesAccess Funds. In the course of doing so, MLPF&S both retains certain amounts of interest and receives other economic benefits. In doing so, MLPF&S follows its standard procedures (as such procedures may change over time) for paying interest on the assets of the commodity pools sponsored by MLAI and other MLPF&S affiliates and traded through MLPF&S.

 

Charges

 

The following table summarizes the charges incurred by the Fund for the years ended December 31, 2009 and 2008 and for the period April 2, 2007 (commencement of operations) to December 31, 2007.

 

 

 

2009

 

2008

 

2007

 

Charges

 

Dollar
Amount

 

% of Average
Month-End

Net Assets

 

Dollar
Amount

 

% of Average
Month-End

Net Assets (1)

 

Dollar
Amount

 

% of Average
Month-End
Net Assets (1)

 

Other Expenses

 

$

572,395

 

0.25

%

$

626,258

 

0.39

%

$

155,223

 

0.18

%

Sponsor fees

 

453,477

 

0.20

%

255,504

 

0.16

%

9,750

 

0.01

%

Management fees

 

3,904,212

 

1.70

%

2,462,288

 

1.56

%

862,994

 

1.00

%

Performance fees

 

326

 

0.00

%

14,415,123

 

9.12

%

5,282,368

 

6.13

%

Total

 

$

4,930,410

 

2.16

%

$

17,759,173

 

11.23

%

$

6,310,335

 

7.32

%

 


(1) Not annualized

 

The foregoing table does not reflect the bid-ask spreads paid by the Fund on its forward trading, or the benefits which may be derived by Merrill Lynch from the deposit of certain of the Fund’s U.S. dollar assets maintained at MLPF&S.

 

The Fund’s average month-end Net Asset Values during 2009, 2008 and 2007 equaled $229,728,184, $158,124,764 and $86,161,510, respectively.

 

During 2009, the Fund earned $17,531 in interest income, or approximately 0.01% of the Fund’s average month-end Net Asset Values. During 2008, the Fund earned $2,502,184 in interest income, or approximately 1.58% of the Fund’s average month-end Net Asset Values. During 2007, the Fund earned $3,463,933 in interest income, or approximately 4.02% of the Fund’s average month-end Net Asset Values.

 

6



 

Description of Current Charges

 

Recipient

 

Nature of Payment

 

Amount of Payment

 

 

 

 

 

MLPF&S

 

Brokerage Commissions

 

During 2009, 2008 and 2007 the round-turn (each purchase and sale or sale and purchase of a single futures contract) rate of the Fund’s flat-rate Brokerage Commissions were approximately $9.58, $10.37 and $9.57, respectively.

 

 

 

 

 

MLPF&S

 

Use of assets

 

Merrill Lynch may derive an economic benefit from the deposit of certain of the Fund’s U.S. dollar assets in accounts maintained at MLPF&S.

 

 

 

 

 

MLAI

 

Sponsor Fees

 

A flat-rate monthly charge of 0.125 of 1% (1.50% annual rate) on Class A units, flat-rate monthly charge of 0.2083 of 1% (2.50% annual rate) on Class C units, a flat-rate monthly charge of 0.0917 of 1% (1.10% annual rate) on Class I units (including the monthly interest credit and before reduction for accrued month-end redemptions, distributions, brokerage commissions, sponsor fees, management fees or performance fees, in each case as of the end of the month of determination). Class D, Class DS and Class DT do not pay sponsor fees.

 

 

 

 

 

MLPF&S

 

Sales Commissions

 

Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.5%. Sales commissions are deducted from proceeds prior to entering the fund. Shares purchased and reflected in the fund records are net of any commissions charged by MLPF&S. Class C, Class DS and Class DT Units are not subject to any sales commissions.

 

 

 

 

 

Merrill Lynch International Bank (“MLIB”) (or an affiliate); Other counterparties

 

Bid—ask spreads

 

Bid—ask spreads are not accounted for separately as an accounting item because bid-ask spreads are an integral part of the price paid or received on all contracts for generally accepted accounting principles.

 

 

 

 

 

MLIB (or an affiliate); Other counterparties

 

EFP differentials

 

Certain of the Fund’s currency trades may be executed in the form of “exchange of futures for physical” transactions, in which a counterparty (which may be MLIB or an affiliate) receives an additional “differential” spread for exchanging the Fund’s cash currency positions for equivalent futures positions.

 

 

 

 

 

TRANSTREND

 

Annual Performance Fees

 

25% of any New Trading Profits, as defined, generated by the Fund as a whole, as of the end of each calendar year. “New Trading Profits” equal any increase in the Net Asset Value of the Fund, prior to reduction for any accrued performance fee, as of the current performance fee calculation date over the Fund’s “High Water Mark.” The “High Water Mark” attributable to the Fund equals the highest Net Asset Value after reduction for the

 

7



 

 

 

 

 

performance fee then paid, as of any preceding performance fee calculation date. Net Asset Value, solely for purposes of calculating the performance fee, does not include any interest income earned by the Fund.

 

 

 

 

 

TRANSTREND and MLAI

 

Management fees

 

Class DT pays 1% while all other Classes pay a flat-rate monthly charge of 0.1667 of 1% of the Fund’s month-end assets (a 2.0% annual rate). MLAI receives 50% of the 2% annual rate.

 

 

 

 

 

Others

 

Operating expense of Fund including audit, legal and tax services

 

Actual payments to third parties.

 

 

 

 

 

MLAI; Others

 

Initial Offering Costs reimbursed

 

Actual costs incurred.

 

Regulation

 

The CFTC has delegated to the National Futures Association responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “introducing brokers” and their respective associated persons, and “floor brokers” and “floor traders.”  The Commodity Exchange Act requires commodity pool operators such as MLAI, commodity trading advisors such as the Trading Advisor and commodity brokers or futures commission merchants (“FCMs”) such as MLPF&S to be registered and to comply with various reporting and record keeping requirements.  CFTC regulations also require FCMs to maintain a minimum level of net capital.  In addition, the CFTC and certain commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  All accounts owned or managed by the Trading Advisor will be combined for position limit purposes.  The Trading Advisor could be required to liquidate positions in order to comply with such limits.  Any such liquidation could result in substantial costs to the Fund.  In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to reach its daily price limit for several days in a row, making it impossible for the Trading Advisor to liquidate a position and thereby experiencing dramatic losses.  Currency forward contracts are not currently subject to regulation by any U.S. government agency.

 

Other than in respect of the registration requirements pertaining to the Fund’s securities under Section 12(g) of the Securities Exchange Act of 1934, the Fund is generally not subject to regulation by the Securities and Exchange Commission (the “SEC”).  However, MLAI is registered as an “investment adviser” under the Investment Advisers Act of 1940.  MLPF&S is also regulated by the SEC and the Financial Industry Regulatory Authority (“FINRA”).

 

(d)           Financial Information about Geographic Areas

 

The Fund does not engage in material operations in foreign countries, nor is a material portion of the Fund’s revenue derived from customers in foreign countries.

 

The Fund trades on a number of foreign commodity exchanges.  The Fund does not engage in the sales of goods or services.

 

8



 

Item 1A:  Risk Factors

 

Past Performance Not Necessarily Indicative of Future Results

 

Past performance is not necessarily indicative of future results.  The trading advisor’s past performance may not be representative of how it may trade in the future for the Fund.

 

Volatile Markets; Highly Leveraged Trading

 

Futures and forward trading is highly leveraged, and market price levels are volatile and materially affected by unpredictable factors such as weather and governmental intervention.  The combination of leverage and volatility creates a high degree of risk.

 

Importance of General Market Conditions

 

Overall market or economic conditions — which neither MLAI nor the trading advisor can predict or control — have a material effect on the performance of any managed futures strategy.

 

Possibility of Additional Government or Market Regulation.

 

Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during recent years have led to increased governmental as well as self-regulatory scrutiny of the alternative investment funds industry in general.  In addition, certain legislation proposing greater regulation of the industry periodically is considered by the U.S. Congress, as well as the governing bodies of foreign jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Fund, its Manager (MLAI), the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future. Any such regulation could have a material adverse impact on the profit potential of the Fund, as well as require increased transparency as to the identity of the Fund’s members.

 

Forward Trading

 

The Fund will trade currencies in the forward markets in addition to trading in the future markets.  The forward markets are over-the-counter, non-exchange traded markets, and in trading in these markets, the Fund will be dependent on the credit standing of the counterparties with which they trade, without the financial support of any clearinghouse system.  In addition, the prices offered for the same forward contract may vary significantly among different forward market participants.  Forward markets counterparties are under no obligation to enter into forward transactions with the Fund, including transactions through which the Fund is attempting to liquidate open positions.

 

Effects of Speculative Position Limits

 

The CFTC and the U.S. commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  For example, the CFTC currently imposes speculative position limits on a number of agricultural commodities (e.g., corn, oats, wheat, soybeans and cotton). All commodity accounts controlled by the Trading Advisors and its principals and their affiliates are combined for speculative position limit purposes. The Trading Advisor could be required to liquidate positions held for the Fund, or may not be able to fully implement trading instructions generated by its trading models, in order to comply with such limits.  Any such liquidation or limited implementation could result in substantial costs to the Fund.

 

Increased Assets Under Management

 

There appears to be a tendency for the rates of return achieved by managed futures advisors to decline as assets under management increase.  The Trading Advisor has not agreed to limit the amount of additional equity which it may manage.

 

9



 

Trading Advisor Risk

 

The Fund is subject to the risk of the bad judgment, negligence or misconduct of its Trading Advisor.  There have been a number of instances in recent years in which private investment funds have incurred substantial losses due to Trading Advisor misconduct.

 

Changes in Trading Strategy

 

The Trading Advisor may make material changes in its trading strategies without the knowledge or seeking the approval of MLAI.

 

Illiquid Markets

 

Certain positions held by the Fund may become illiquid, preventing the Fund’s Trading Advisor from acquiring positions otherwise indicated by its strategy or making it impossible for the Trading Advisor to close out positions against which the market is moving.

 

Certain futures markets are subject to “daily price limits,” restricting the maximum amount by which the price of a particular contract can change during any given trading day.  Once a contract’s price has moved “the limit,” it may be impossible or economically non-viable to execute trades in such contract.  From time to time, prices have moved “the limit” for a number of consecutive days, making it impossible for traders against whose positions the market was moving to prevent large losses.

 

Trading on Non-U.S. Exchanges

 

The Trading Advisor may trade extensively on non-U.S. exchanges.  These exchanges are not regulated by any United States governmental agency.  The Fund could incur substantial losses trading on foreign exchanges to which it would not have been subject had its Trading Advisor limited its trading to U.S. markets.

 

The profits and losses derived from trading foreign futures and forwards will generally be denominated in foreign currencies; consequently, the Fund will be subject to a certain degree of exchange-rate risk in trading such contracts.

 

The Fund Could Lose Assets and Have Its Trading Disrupted Due to the Bankruptcy of One of the Parties

 

The Fund is subject to the risk of insolvency of its counterparties, an exchange, a clearinghouse or MLPF&S.  Fund assets could be lost or impounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Fund’s capital tied up in a bankruptcy, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

Item 1B: Unresolved Staff Comments

 

MLAI is currently responding to the SEC comment letter dated February 4, 2010.

 

Item 2:  Properties

 

The Fund does not use any physical properties in the conduct of its business.

 

The Fund’s sponsor offices are the administrative offices of MLAI (Merrill Lynch Alternative Investments LLC, Four World Financial Center, 6th Floor, 250 Vesey Street New York, New York 10080).  MLAI performs administrative services for the Fund from MLAI’s offices.

 

Item 3:  Legal Proceedings

 

None.

 

10



 

Item 4:  Reserved

 

PART II

 

Item 5:  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Item 5(a)

 

(a)           Market Information:

 

There is no established public trading market for the Units, and none is likely to develop.  Members may redeem Units on ten days written notice to MLAI as of the last day of each month at their Net Asset Value, subject to certain early redemption charges.

 

(b)           Holders:

 

As of December 31, 2009, there were 595 holders of Units including MLAI, none of whom owned 5% or more of the Fund’s Units.

 

(c)           Dividends:

 

MLAI has not made and does not contemplate making any distributions on the Units.

 

(d)           Securities Authorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

(e)           Performance Graph:

 

Not applicable.

 

11



 

(f)            Recent Sales of Unregistered Securities:

 

Issuance to accredited investors pursuant to Regulation D and Section 4(6) under the Securities Act.  The selling agent of the following Class of Units was MLPF&S.

 

CLASS A

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

$

1.3842

 

Feb-09

 

175,498

 

127,099

 

1.3808

 

Mar-09

 

66,296

 

47,743

 

1.3886

 

Apr-09

 

428,992

 

320,910

 

1.3368

 

May-09

 

460,194

 

344,328

 

1.3365

 

Jun-09

 

146,247

 

107,931

 

1.3550

 

Jul-09

 

221,319

 

166,393

 

1.3301

 

Aug-09

 

92,621

 

72,219

 

1.2825

 

Sep-09

 

120,835

 

93,729

 

1.2892

 

Oct-09

 

201,818

 

159,881

 

1.2623

 

Nov-09

 

34,124

 

28,458

 

1.1991

 

Dec-09

 

9,749

 

7,931

 

1.2292

 

Jan-10

 

48,749

 

42,613

 

1.1440

 

Feb-10

 

119,923

 

110,876

 

1.0816

 

 

CLASS C

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

842,986

 

638,239

 

$

1.3208

 

Feb-09

 

681,985

 

518,029

 

1.3165

 

Mar-09

 

904,982

 

684,141

 

1.3228

 

Apr-09

 

1,313,747

 

1,032,495

 

1.2724

 

May-09

 

261,991

 

206,130

 

1.2710

 

Jun-09

 

239,993

 

186,388

 

1.2876

 

Jul-09

 

1,827,473

 

1,447,045

 

1.2629

 

Aug-09

 

1,171,251

 

962,725

 

1.2166

 

Sep-09

 

637,003

 

521,321

 

1.2219

 

Oct-09

 

328,994

 

275,217

 

1.1954

 

Nov-09

 

395,995

 

349,017

 

1.1346

 

Dec-09

 

147,998

 

127,354

 

1.1621

 

Jan-10

 

343,994

 

318,307

 

1.0807

 

Feb-10

 

102,999

 

100,890

 

1.0209

 

 

CLASS D

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

$

1.2311

 

Feb-09

 

 

 

1.2296

 

Mar-09

 

 

 

1.2380

 

Apr-09

 

 

 

1.1935

 

May-09

 

 

 

1.1946

 

Jun-09

 

 

 

1.2127

 

Jul-09

 

 

 

1.1919

 

Aug-09

 

 

 

1.1507

 

Sep-09

 

 

 

1.1581

 

Oct-09

 

2,000,000

 

2,000,000

 

1.0000

 

Nov-09

 

 

 

0.9511

 

Dec-09

 

 

 

0.9762

 

Jan-10

 

 

 

0.9097

 

Feb-10

 

 

 

0.8612

 

 

CLASS I

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

24,874

 

18,147

 

$

1.3707

 

Feb-09

 

90,000

 

65,799

 

1.3678

 

Mar-09

 

114,996

 

83,573

 

1.3760

 

Apr-09

 

350,997

 

264,984

 

1.3246

 

May-09

 

 

 

1.3247

 

Jun-09

 

95,999

 

71,454

 

1.3435

 

Jul-09

 

956,494

 

725,001

 

1.3193

 

Aug-09

 

81,316

 

63,903

 

1.2725

 

Sep-09

 

33,830

 

26,440

 

1.2795

 

Oct-09

 

19,997

 

15,956

 

1.2533

 

Nov-09

 

 

 

1.1909

 

Dec-09

 

 

 

1.2212

 

Jan-10

 

 

 

1.1369

 

Feb-10

 

9,999

 

9,298

 

1.0754

 

 

CLASS DS

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

3,291,720

 

1,981,651

 

$

1.6611

 

Feb-09

 

3,857,424

 

2,325,010

 

1.6591

 

Mar-09

 

1,485,970

 

889,536

 

1.6705

 

Apr-09

 

5,356,769

 

3,326,566

 

1.6103

 

May-09

 

1,848,595

 

1,146,842

 

1.6119

 

Jun-09

 

15,719,439

 

9,606,697

 

1.6363

 

Jul-09

 

5,653,190

 

3,515,228

 

1.6082

 

Aug-09

 

6,623,065

 

4,265,790

 

1.5526

 

Sep-09

 

3,901,867

 

2,497,035

 

1.5626

 

Oct-09

 

7,929,462

 

5,175,889

 

1.5320

 

Nov-09

 

6,347,104

 

4,355,984

 

1.4571

 

Dec-09

 

4,261,434

 

2,849,505

 

1.4955

 

Jan-10

 

8,164,872

 

5,858,835

 

1.3936

 

Feb-10

 

5,399,875

 

4,092,985

 

1.3193

 

 

CLASS DT

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-09

 

$

 

 

$

1.7170

 

Feb-09

 

 

 

1.7163

 

Mar-09

 

 

 

1.7296

 

Apr-09

 

 

 

1.6688

 

May-09

 

 

 

1.6719

 

Jun-09

 

 

 

1.6986

 

Jul-09

 

 

 

1.6709

 

Aug-09

 

 

 

1.6144

 

Sep-09

 

 

 

1.6262

 

Oct-09

 

1,392,375

 

872,634

 

1.5956

 

Nov-09

 

 

 

1.5189

 

Dec-09

 

 

 

1.5602

 

Jan-10

 

 

 

1.4551

 

Feb-10

 

116,743

 

84,676

 

1.3787

 

 


(1) Beginning of the month Net Asset Value

 

Class A Units are subject to sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.50%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amount. Class C, Class DS and Class DT Units are not subject to any sales commissions.

 

Item 5(b)

 

Not applicable.

 

Item 5(c)

 

Not applicable.

 

12



 

Item 6:   Selected Financial Data

 

The following selected financial data has been derived from the financial statements of the Fund.

 

Statements of Operations

 

For the year
ended
December 31,
2009

 

For the year ended
December 31, 2008

 

For the period
April 2, 2007
(commencement of
operations) to

December 31,2007

 

 

 

 

 

 

 

 

 

Trading profit (loss)

 

 

 

 

 

 

 

Realized, net

 

$

(30,087,116

)

$

58,391,558

 

$

18,830,414

 

Change in unrealized, net

 

(5,594,032

)

2,997,703

 

3,742,826

 

Brokerage commissions

 

(1,209,739

)

(642,724

)

(580,731

)

Total trading profit (loss)

 

(36,890,887

)

60,746,537

 

21,992,509

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

Interest

 

17,531

 

2,502,184

 

3,463,933

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

Management fees

 

3,904,212

 

2,462,288

 

862,994

 

Performance fees

 

326

 

14,415,123

 

5,282,368

 

Sponsor fees

 

453,477

 

255,504

 

9,750

 

Other

 

572,395

 

626,258

 

155,223

 

Total Expenses

 

4,930,410

 

17,759,173

 

6,310,335

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(4,912,879

)

(15,256,989

)

(2,846,402

)

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(41,803,766

)

$

45,489,548

 

$

19,146,107

 

 

Balance Sheet Data

 

December 31,
2009

 

December 31, 2008

 

December 31, 2007

 

 

 

 

 

 

 

 

 

Members’ Capital

 

$

235,900,686

 

$

217,335,124

 

$

112,656,278

 

Net Asset Value per Series A Unit**

 

1.1440

 

1.3842

 

1.0998

 

Net Asset Value per Series C Unit***

 

1.0807

 

1.3209

 

1.0608

 

Net Asset Value per Series D Unit****

 

0.9097

 

1.2310

 

0.9354

 

Net Asset Value per Series I Unit******

 

1.1369

 

1.3707

 

1.0609

 

Net Asset Value per Series DS Unit

 

1.3936

 

1.6610

 

1.3022

 

Net Asset Value per Series DT Unit*

 

1.4551

 

1.7165

 

1.2896

 

 


*Class DT commenced on June 1, 2007

**Class A commenced on September 1, 2007

***Class C commenced on July 1, 2007

****Class D commenced on November 1, 2007

*****Class I commenced on October 1, 2007

 

13



 

As of December 31, 2009 and 2008 the Net Asset Value per Unit of the different Classes are as follows:

 

December 31, 2009

 

 

 

 

Net Asset Value

 

Class A

 

$

1.1440

 

Class C

 

1.0807

 

Class D

 

0.9097

 

Class I

 

1.1369

 

Class DS

 

1.3936

 

Class DT

 

1.4551

 

 

December 31, 2008

 

 

 

 

Net Asset Value

 

Class A

 

$

1.3842

 

Class C

 

1.3209

 

Class D

 

1.2310

 

Class I

 

1.3707

 

Class DS

 

1.6610

 

Class DT

 

1.7165

 

 

14



 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and report performance to investors throughout the year is the most valuable financial information to the Members of the Fund.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.0780

 

$

1.1716

 

$

1.1141

 

$

1.0999

 

2008

 

$

1.0964

 

$

1.1567

 

$

1.1632

 

$

1.1633

 

$

1.1945

 

$

1.2163

 

$

1.1875

 

$

1.1684

 

$

1.2284

 

$

1.3201

 

$

1.3532

 

$

1.3842

 

2009

 

$

1.3808

 

$

1.3886

 

$

1.3368

 

$

1.3365

 

$

1.3550

 

$

1.3301

 

$

1.2825

 

$

1.2892

 

$

1.2623

 

$

1.1991

 

$

1.2292

 

$

1.1440

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

0.9522

 

$

0.9228

 

$

0.9940

 

$

1.0795

 

$

1.0530

 

$

1.0610

 

2008

 

$

1.0567

 

$

1.1139

 

$

1.1208

 

$

1.1141

 

$

1.1465

 

$

1.1724

 

$

1.1390

 

$

1.1189

 

$

1.1751

 

$

1.2616

 

$

1.2923

 

$

1.3208

 

2009

 

$

1.3165

 

$

1.3228

 

$

1.2724

 

$

1.2710

 

$

1.2876

 

$

1.2629

 

$

1.2166

 

$

1.2219

 

$

1.1954

 

$

1.1346

 

$

1.1621

 

$

1.0807

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

0.9391

 

$

0.9355

 

2008

 

$

0.9336

 

$

0.9862

 

$

0.9960

 

$

1.0015

 

$

1.0470

 

$

1.0743

 

$

1.0468

 

$

1.0313

 

$

1.0859

 

$

1.1684

 

$

1.2020

 

$

1.2311

 

2009

 

$

1.2296

 

$

1.2380

 

$

1.1935

 

$

1.1946

 

$

1.2127

 

$

1.1919

 

$

1.1507

 

$

1.1581

 

$

1.0000

 

$

0.9511

 

$

0.9762

 

$

0.9097

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.0691

 

$

1.0475

 

$

1.0610

 

2008

 

$

1.0579

 

$

1.1165

 

$

1.1325

 

$

1.1384

 

$

1.1761

 

$

1.2054

 

$

1.1727

 

$

1.1542

 

$

1.2143

 

$

1.3061

 

$

1.3396

 

$

1.3707

 

2009

 

$

1.3678

 

$

1.3760

 

$

1.3246

 

$

1.3247

 

$

1.3435

 

$

1.3193

 

$

1.2725

 

$

1.2795

 

$

1.2533

 

$

1.1909

 

$

1.2212

 

$

1.1369

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

$

1.0532

 

$

1.1117

 

$

1.1922

 

$

1.1542

 

$

1.1218

 

$

1.2109

 

$

1.3177

 

$

1.2928

 

$

1.3023

 

2008

 

$

1.2998

 

$

1.3730

 

$

1.3922

 

$

1.3951

 

$

1.4378

 

$

1.4701

 

$

1.4266

 

$

1.4021

 

$

1.4726

 

$

1.5798

 

$

1.6218

 

$

1.6611

 

2009

 

$

1.6591

 

$

1.6705

 

$

1.6103

 

$

1.6119

 

$

1.6363

 

$

1.6082

 

$

1.5526

 

$

1.5626

 

$

1.5320

 

$

1.4571

 

$

1.4955

 

$

1.3936

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.1598

 

$

1.1255

 

$

1.0950

 

$

1.1829

 

$

1.2891

 

$

1.2678

 

$

1.2900

 

2008

 

$

1.2885

 

$

1.3623

 

$

1.3854

 

$

1.3980

 

$

1.4479

 

$

1.4882

 

$

1.4508

 

$

1.4320

 

$

1.5102

 

$

1.6300

 

$

1.6749

 

$

1.7170

 

2009

 

$

1.7163

 

$

1.7296

 

$

1.6688

 

$

1.6719

 

$

1.6986

 

$

1.6709

 

$

1.6144

 

$

1.6262

 

$

1.5956

 

$

1.5189

 

$

1.5602

 

$

1.4551

 

 

15



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS A UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected” (1)

Inception of Trading: September 1, 2007

Aggregate Subscriptions: $3,229,797

Current Capitalization:   $2,598,931

Worst Monthly Drawdown (2):  (6.93)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (17.63)%  ( March 2009 - December 2009)

 

Net Asset Value per Unit for Class A, December 31, 2009:   $1.1440

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.25

)%

-0.32

%

 

February

 

0.56

 

5.50

 

 

March

 

(3.73

)

0.56

 

 

April

 

(0.02

)

0.01

 

 

May

 

1.38

 

2.68

 

 

June

 

(1.84

)

1.83

 

 

July

 

(3.58

)

(2.37

)

 

August

 

0.52

 

(1.61

)

 

September

 

(2.09

)

5.14

 

7.80

%

October

 

(5.01

)

7.46

 

8.68

 

November

 

2.51

 

2.51

 

(4.91

)

December

 

(6.93

)

2.29

 

(1.27

)

Compound Annual Rate of Return

 

(17.37

)%

25.85

%

9.99

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since September 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since September 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 14.40%.

 

16



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS C UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected” (1)

Inception of Trading: July 1, 2007

Aggregate Subscriptions:  $21,662,641

Current Capitalization:  $15,651,574

Worst Monthly Drawdown (2):  (7.00)% (December 2009)

Worst Peak-to-Valley Drawdown (3):  (18.30)%  (March -December 2009)

 

Net Asset Value per Unit for Class C, December 31, 2009:   $1.0807

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.33

)%

-0.41

%

 

February

 

0.48

 

5.41

 

 

March

 

(3.81

)

0.62

 

 

April

 

(0.11

)

(0.60

)

 

May

 

1.31

 

2.91

 

 

June

 

(1.92

)

2.26

 

 

July

 

(3.67

)

(2.85

)

-4.78

%

August

 

0.44

 

(1.76

)

(3.09

)

September

 

(2.17

)

5.02

 

7.71

 

October

 

(5.09

)

7.36

 

8.60

 

November

 

2.42

 

2.43

 

(2.45

)

December

 

(7.00

)

2.21

 

0.76

 

Compound Annual Rate of Return

 

(18.19

)%

24.49

%

6.10

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since July 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since July 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 8.07%.

 

17



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS D UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected” (1)

Inception of Trading: November 1, 2007

Aggregate Subscriptions:  $6,224,999

Current Capitalization:  $1,819,381

Worst Monthly Drawdown (2):  (6.81)% (December 2009)

Worst Peak-to-Valley Drawdown (3):  (14.90)%  ( March -December 2009)

 

Net Asset Value per Unit for Class D, December 31, 2009:  $0.9097

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.12

)%

-0.19

%

 

February

 

0.68

 

5.63

 

 

March

 

(3.59

)

0.99

 

 

April

 

0.09

 

0.55

 

 

May

 

1.52

 

4.54

 

 

June

 

(1.72

)

2.61

 

 

July

 

(3.46

)

(2.56

)

 

August

 

0.64

 

(1.48

)

 

September

 

 

5.29

 

 

October

 

(4.89

)

7.60

 

 

November

 

2.64

 

2.88

 

-6.09

%

December

 

(6.81

)

2.42

 

(0.39

)

Compound Annual Rate of Return

 

(14.43

)%

31.61

%

-6.46

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since November 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since November 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is (9.04)%.

 

18



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS I UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected” (1)

Inception of Trading: October 1, 2007

Aggregate Subscriptions:  $2,589,561

Current Capitalization:  $570,784

Worst Monthly Drawdown (2):  (6.90)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (17.38)%  ( March-December 2009)

 

Net Asset Value per Unit for Class I, December 31, 2009:  1.1369

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.21

)%

-0.29

%

 

February

 

0.60

 

5.54

 

 

March

 

(3.74

)

1.43

 

 

April

 

0.01

 

0.52

 

 

May

 

1.42

 

3.31

 

 

June

 

(1.80

)

2.49

 

 

July

 

(3.55

)

(2.71

)

 

August

 

0.55

 

(1.58

)

 

September

 

(2.05

)

5.21

 

 

October

 

(4.98

)

7.56

 

6.91

%

November

 

2.54

 

2.56

 

(2.03

)

December

 

(6.90

)

2.32

 

1.29

 

Compound Annual Rate of Return

 

(17.07

)%

29.18

%

6.10

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since October 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since October 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 13.69%.

 

19



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS DS UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected” (1)

Inception of Trading: April 2, 2007

Aggregate Subscriptions:  $163,267,212

Current Capitalization:  $152,211,382

Worst Monthly Drawdown (2):  (6.81)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (16.58)%  ( March - December 2009)

 

Net Asset Value per Unit for Class DS, December 31, 2009:  1.3936

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.12

)%

-0.19

%

 

February

 

0.69

 

5.63

 

 

March

 

(3.60

)

1.40

 

 

April

 

0.10

 

0.21

 

5.32

%

May

 

1.51

 

3.06

 

5.56

 

June

 

(1.72

)

2.25

 

7.24

 

July

 

(3.46

)

(2.96

)

(3.19

)

August

 

0.64

 

(1.72

)

(2.80

)

September

 

(1.96

)

5.03

 

7.94

 

October

 

(4.89

)

7.28

 

8.83

 

November

 

2.64

 

2.66

 

(1.89

)

December

 

(6.81

)

2.42

 

0.74

 

Compound Annual Rate of Return

 

(16.11

)%

27.55

%

30.23

%


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since April 2, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since April 2, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 39.39%.

 

20



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS DT UNITS) (5)

December 31, 2009

 

Type of Pool:  Single Advisor Non-”Principal Protected”(1)

Inception of Trading: June 1, 2007

Aggregate Subscriptions:  $120,436,032

Current Capitalization:  $63,048,635

Worst Monthly Drawdown (2):  (6.74)% (December 2009)

Worst Peak-to-Valley Drawdown (3):  (15.87)% ( March - December 2009)

 

Net Asset Value per Unit for Class DT, December 31, 2009:  1.4551

 

Monthly Rates of Return (4)

 

Month

 

2009

 

2008

 

2007

 

January

 

(.04

)%

-0.12

%

 

February

 

0.77

 

5.73

 

 

March

 

(3.52

)

1.70

 

 

April

 

0.19

 

0.91

 

 

May

 

1.60

 

3.57

 

 

June

 

(1.63

)

2.78

 

4.33

%

July

 

(3.38

)

(2.51

)

(2.96

)

August

 

0.73

 

(1.30

)

(2.70

)

September

 

(1.88

)

5.46

 

8.03

 

October

 

(4.81

)

7.93

 

8.97

 

November

 

2.72

 

2.75

 

(1.65

)

December

 

(6.74

)

2.51

 

1.75

 

Compound Annual Rate of Return

 

(15.26

)%

33.08

%

16.04

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since June 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since June 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 45.45%.

 

21



 

Item 7:             Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Operational Overview

 

This performance summary is an outline description of how the Fund performed in the past, not necessarily any indication of how it will perform in the future.  In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply occurred at or about the same time.

 

The Fund is unlikely to be profitable in markets in which such trends do not occur.  Static or erratic prices are likely to result in losses.  Similarly, unexpected events (for example, a political upheaval, natural disaster or governmental intervention) can lead to major short-term losses, as well as gains.

 

While there can be no assurance that the Fund will be profitable under any given market condition, markets in which substantial and sustained price movements occur typically offer the best profit potential for the Fund.

 

Results of Operations

 

General

 

Transtrend’s objective in providing trading management services is to effect appreciation of the assets of its clients through the speculative trading of financial instruments of any kind, which includes without limitation: (i) futures contracts that are now traded, or may be traded in the future, on exchanges located in the United States and abroad and options on such futures contracts and (ii) foreign currencies, foreign currency futures contracts, foreign currency forward contracts, foreign currency forward contracts and options relating thereto.

 

Performance Summary

 

This performance summary is an outline description of how the Fund performed in the past, not necessarily any indication of how it will perform in the future.  In addition, the general causes to which certain price movements are attributed may or may not have caused such movements, but simply occurred at or about the same time.

 

 

 

Total Trading

 

Year ended December 31, 2009

 

Profit (Loss)

 

Stock Indices

 

$

2,771,674

 

Metals

 

1,294,047

 

Agricultural Commodities

 

(1,089,234

)

Currencies

 

(2,785,506

)

Energy

 

(22,155,899

)

Interest Rates

 

(13,716,230

)

Subtotal

 

(35,681,148

)

Change in Brokerage Commissions Payable

 

(1,209,739

)

Total

 

$

(36,890,887

)

 

The Fund experienced a net trading loss before brokerage commissions and related fees for the year ended December 31, 2009 of $36,890,887.  The Fund’s stock indices and the metals sector posted gains, while the agriculture, currencies, interest rates and energy sectors posted losses.

 

Profits were posted to the Fund in stock indices at the beginning of the first quarter. New optimism almost let the stock markets stage a recovery, but too much doubt still persisted. These mixed sentiments and its translation to the markets was not an ideal environment for clear trends to flourish. Many existing positions remained short but, along with some new short positions, did not produce any noteworthy results. Profits were posted to the Fund in the middle of the first quarter due to various short positions, especially in Europe. The main contributions came from Spain, Italy and Poland. Due to volatility in the markets losses were posted to the Fund at the end of the first quarter. A sale in the pan-European utilities index added to the gains, while a losing position in Sweden was the only exception in Europe. Losses in Taiwan were more

 

22



 

than compensated by profits in Australia and South Africa. After reaching new lows during the first few days of March, the stock markets showed a strong recovery. Sales in both geographic and industry orientated indices lost money. The poorest performers were China, South Korea, South Africa and Australia. Profits were posted to the Fund at the beginning of the second quarter as equity prices continued their course of recovery from the previous month. Long positions in Asia and North America, especially in Taiwan and South Korea generated profits to the Fund while short positions in Europe, mostly limited in size, posted losses to the Fund. Profits were posted to the Fund in the middle of the second quarter due to the majority of indices worldwide ended the month higher. In Asia, long positions in Taiwan and China made the highest contributions to the profit earned. Purchases of the Indian index also did well, partially due to the positive sentiment following the election results. In Europe, profits being posted to the Fund were achieved by purchases in the Netherlands and in the pan-European raw material sector index. Losses were posted to the Fund at the end of the second quarter. In Asia, long positions in Hong Kong and China earned gains and short positions in Taiwan suffered losses. Losses were also posted to the Fund due to purchases of German indices and in the pan-European oil and gas sector indices. Profits were posted to the Fund at the beginning of the third quarter due to the Fund’s existing and new long positions in the Asian markets such as China, Taiwan and South Korea. Positions in Canada and Sweden also contributed to profits being posted to the Fund. Profits continued to be posted to the Fund in the middle of the third quarter as almost all stock indices continued forth with their rising trends. Profits were posted to the Fund due to purchases in Australia, France and the United Kingdom. Success was also achieved with a pan-European insurance sector position. Losses were felt on long positions in Taiwan and China as a consequence of Chinese Central Bank monetary tightening fears. The third quarter ended with profits being posted to the Fund.  Just a few Asian countries, such as Japan and China, went against the trend, partly caused by an appreciating Japanese yen. This was not favorable for long positions. These losses were however more than made up for through long positions in various European countries, Australia, Taiwan and Canada. Losses were posted to the Fund at the beginning of the fourth quarter. Although the month of October started positively for positions, the sharp reactions on the stock markets pulled the month into the red. Long positions in stock indices worldwide suffered. The heaviest losses were felt in Germany, the United Kingdom and in the base metals pan-European sector index. The Japanese and Canadian markets also generated a notable negative contribution to the losing month. Losses were posted to the Fund in the middle of the fourth quarter. The positions in the stock markets, comprising mainly of purchases, suffered from the returning cautiousness. The falling stock prices caused losses in Hong Kong, Taiwan, Italy and Germany. Doubts regarding future economic developments could not prevent most stock indices from ending the month of December in higher territory. Long positions in Asia, namely in South Korea, Taiwan and Singapore, posted profits to the Fund while short positions in Japan suffered losses. Purchases in the Netherlands, France and Germany, along with a pan-European basic resources index, posted profits to the Fund. Positions in various U.S. stock indices also performed well. The fourth quarter ended with profits being posted to the Fund.

 

Sales in precious and base metals were basically uneventful except for aluminum which returned profits for the Fund at the beginning of the first quarter. Profits were posted to the Fund in the middle of the first quarter due to long positions in gold as investors were buying gold in mass due to their waning confidence in the financial system pushing prices upwards. The first quarter ended with losses being posted to the Fund as previous sales of lead and zinc had negative results. Also, the price of gold could not hold its upward trend which led to additional losses. Losses were posted to the Fund at the beginning of the second quarter.  Short positions in aluminum and nickel as well as a long position in silver produced losses. Profits were posted to the Fund in the middle of the second quarter due to long positions in gold, tin and zinc. The second quarter ended with losses being posted to the Fund due to gold purchases and aluminum sales both led to losses. Losses were posted to the Fund at the beginning of the third quarter due to gold prices being inconsistent and led to losses on purchases and sales. Profits were posted to the Fund in the middle of the third quarter. Gold and silver buying created losses but were outweighed by the positive results earned with purchases of copper and tin. The third quarter ended with profits being posted to the Fund due to rising prices of silver. Profits were posted to the Fund at the beginning of the third quarter through gold and silver purchases, while short aluminum positions led to a loss.  Profits were posted to the Fund in the beginning of the fourth quarter as the gold price continued its upward trend. Purchases of silver and copper also contributed to profits being posted to the Fund. Profits were posted to the Fund at the end of the fourth quarter due to long positions in aluminum and, copper.

 

Losses were posted to the Fund in the agriculture sector at the beginning of the first quarter due to volatility in the markets. The Fund profited from the downward trends in wheat and soybeans resulting in profits being posted to the Fund in the middle of the first quarter.  Sugar was one of the few commodities which ended the month of January higher which played out well for purchased positions. The first quarter ended with losses being posted to the Fund. The financial market recovery, the weakening U.S. dollar and unrest amongst farmers in Argentina, an important agro-exporter, were the right ingredients for a turnaround in grain prices. Short positions in soybeans, soybean meal, corn and wheat suffered losses. Prices of gold and sugar could not hold their upward trend which led to additional losses being posted to the Fund. Profits were posted to the Fund at the beginning of the second quarter. Short positions in corn turned negative when the market price reversed after Russia and China declared an import stop for American pig meat. However, these losses were more than compensated for through profits from purchases in the soy complex and sales in hogs. Profits continued to be posted to the

 

23



 

Fund in the middle of the second quarter as sugar buying delivered profits. Corn sales caused losses but were more than made up for with purchases in soybeans and soybean meal. Profits continued to be posted to the Fund at the end of the second quarter as long coffee positions experienced losses but were later compensated with gains achieved with short corn and wheat positions. Cattle sales experienced losses which were made up for through short positions in the lean hog markets. Profits were posted to the Fund at the beginning of the third quarter due to the downward trends in corn and wheat prices resulting from favorable harvest expectations. Profits continued to be posted to the Fund in the middle of the third quarter as sugar prices exploded upward following bad harvest expectations. Profits were also earned with sales of corn and wheat. Profits made from rising prices in cacao as well as falling wheat prices produced profits however, could not overcome the losses from the short positions in corn, coffee and lean hog resulting in losses being posted to the Fund at the end of the third quarter. Sales in the soybean and wheat and purchases of sugar suffered losses resulting in losses being posted to the Fund at the beginning of the fourth quarter. Losses were posted to the Fund in the middle of the fourth quarter due to volatility in the global markets. Due to sharp falls seen in the beginning of December existing long positions in the soybean complex suffered losses resulting in losses being posted to the Fund at the end of the fourth quarter.

 

Losses were posted to the Fund in the currency sector at the beginning of the first quarter. Shortly after the year started, several trend reversals were seen as the U.S. dollar strengthened against various currencies. Some of these movements hurt existing positions, such as long positions in South African rand versus the U.S. dollar and the euro plus a long position in the Turkish lira against the U.S. dollar.  The Canadian dollar showed some extra strength in the beginning of January as it followed crude oil prices upwards. This had a negative impact on Canadian dollar sales versus the U.S. dollar and the euro. The Russian government tried to control the ruble’s depreciation in January by expanding its basket trading band but the currency still fell faster than desired. Therefore, ruble sales and also Hungarian forint sales, due to the Eastern European currencies still being associated with Russia, earned profits versus the euro.  Profits were posted to the Fund in the middle of the first quarter. The weakness of the Swedish crown was taken advantage of through sales versus the Norwegian crown and the U.S. dollar. Emerging market currencies also felt pressure as sales in the Taiwan and Singapore dollars and the Colombian peso were also profitable for the Fund. The U.S. dollar appreciated against the currencies of the more developed countries with various positions earning gains as a consequence. The announced quantitative easing in the United States abruptly ended the upward march of the U.S. dollar. This movement was the most important cause of the losses being posted to the Fund at the end of the first quarter. Purchases of U.S. dollars versus various emerging and developed currencies suddenly dropped. Euros sold against Hong Kong dollars did not deliver the desired result posting losses for the Fund. Sales of Turkish lira against Euros, together with purchases of South African rand versus various other currencies proved to be the top positive exceptions which were not enough to offset the losses posted to the Fund. Profits were posted to the Fund at the beginning of the second quarter due to currencies of various commodity rich countries as a rising trend in positions in South Africa, Russia, Australia, Brazil and Colombia against major currencies profited from this move. Purchases of Mexican pesos were initially beneficial however, at the end of April the pesos was strongly affected due to the fear of the Swine Flu outbreak. Also long positions in the Swiss franc and short positions in the Canadian dollar versus the euro proved unprofitable. Profits continued to be posted to the Fund in the middle of the second quarter. Many currencies appreciated versus the U.S. dollar mainly caused by the increasing amount of debt of the U.S. government. In South America, buying of Colombian pesos, Brazilian real and Mexican pesos against the U.S. dollar posted profits for the Fund. The best earnings within the currency sector were achieved through the buying of “commodity” currencies such as the South African rand and Australian dollars versus various other currencies. Furthermore, long positions in the Russian ruble, the Swiss franc and the Hungarian forint also did well. The only significant loss felt was Turkish liras purchased with euros. The trend where emerging market currencies were appreciating against Western currencies continued its course at the end of the quarter. Profits were posted to the Fund at the end of the second quarter with purchases of the Czech koruna, the Hungarian forint and the South African rand. The Swiss central bank intervention led to a sharp fall in the value of the Swiss franc, which was unfavorable for positions versus the U.S. dollar but favorable for short positions against other European currencies. British pounds bought with U.S. and Canadian dollars were also profitable for the Fund. Profits were posted to the Fund at the beginning of the third quarter with purchases of Turkish lira and various Eastern European currencies plus long positions in Brazil and Colombia. In August, the upward trend of emerging market currencies halted. Purchases of the Mexican peso, Turkish lira, Russian ruble and South African rand posted losses to the Fund. Losses were posted to the Fund in the middle of the third quarter due to Euros purchased with the United States dollar, Japanese yen and Swiss francs and the Canadian dollar purchases versus Japanese yen sales. The United States dollar fell against several other currencies such as purchases of Japanese yen, Australian and Canadian dollars producing profits to the Fund in September. Profits were posted to the Fund through currencies from emerging markets such as Russia, South Africa and South Korea at the end of the third quarter. One of the few major currencies performing weaker than the U.S. dollar was the British pound, primarily due to the central bank wanting to keep a weaker pound for competitive purposes. Sales of British pounds versus the euro and South African rand also produced profits to the Fund. Losses were posted to the Fund at the beginning of the fourth quarter. In the carry trades, where high yielding currencies are financed by low interest-bearing currencies, sharp reactions were experienced. This led to a portion of built up profits being eaten into and resulting in losses posted to the Fund.  The purchases of the Australian dollar, Mexican peso and the euro versus the Japanese yen suffered from these reactions. Long positions in the Hungarian forint,

 

24



 

Turkish lira, South Africa rand and the Canadian dollar also posted losses for the Fund. Losses were posted to the Fund in the middle of the fourth quarter. The Japanese yen appreciated at the end of November due to the increasing aversion to risk. The Japanese yen sales versus the Australian dollar and the euro suffered losses. The U.S. dollar gained some value in relation to several currencies in December. Purchases of currencies from Japan, Poland, Czech Republic, Hungary and Russia all financed with the U.S. dollar lost money. Profits posted to the Fund were achieved with long positions in the Mexican peso, Australian and New Zealand dollar versus the euro. British pounds purchased with Swiss francs suffered losses while Turkish lira bought with euros earned profits. Overall, the sector closed the end of the fourth quarter with losses being posted to the Fund.

 

Losses were posted for the Fund at the beginning of the first quarter. The interest rate markets looked to be following on from last year with their upward trends. However, considerations that the crisis was perhaps moving a step closer to being under control reversed these movements. Long capital market positions in Japan, United Kingdom, United States and Canada all suffered losses. Short positions in Europe also failed to add gains. Losses were posted to the Fund in the middle of the first quarter. Downward pressure was placed on rates due to the somber outlook of the economy. On the other hand, upward pressure was put on rates due to serious questions being asked about the expensive financing plans of governments and their negative implications. A purchase of South Korean government debt generated a loss plus various positions in the British money market also did not bring the desired result. Losses were posted to the Fund at the end of the first quarter. Although the market had considered that the announcement of the U.S. Federal Reserve to use quantitative easing was still a surprise when they announced it. Interest rate markets reacted heavily whereby positions counting on lower rates in Europe than in the U.S. suffered losses. Purchases of government debt in Germany, Japan and South Korea booked a negative result and positions in Australia also posted losses for the Fund. Losses were posted to the Fund at the beginning of the second quarter. The expectation of further buying of debt by the U.S. Federal Government could not outweigh the increasing strength shown in the equity markets. As such, various interest rate markets kept losing ground and this led to losses in long positions in the U.S. money and capital market products. South Korean government bonds however showed an uptrend, which resulted in profits being posted to the Fund. This uptrend could not outweigh the losses being posted to the Fund. Profits were posted to the Fund in the middle of the second quarter. An improved economic outlook and doubts regarding the credit ratings of the United States and the United Kingdom governments both led to a steepening of the interest rate curve. Various positions in the U.S. money markets played out successfully on this development. Purchases of South Korean and German long term government debt were therefore loss-makers. These losses were however more than compensated for by sales in Australian, U.S. and United Kingdom debt. Losses were posted to the Fund at the end of the second quarter. The steepening trend of the interest rate curve accelerated during the first few days of June. Doubts over the economic situation however abruptly broke this trend. European positions anticipating a flattening of the curve were unfortunately not able to perform well. Purchases of American, British and German government bonds were loss-making. In the Pacific region, sales of Australian state bonds and later buying of Japanese obligations resulted in profits being posted to the Fund. Due in part to doubts regarding the credit-worthiness of the American government, profits were earned with the relative weakness of the U.S. treasuries. However, this was not enough to outweigh the losses being posted to the Fund as the second quarter ended. Losses were posted to the Fund at the beginning of the third quarter. Most positions in the interest rate markets were loss making as they mainly anticipated lower rates. Positions put on to follow trends in trans-Atlantic rate differences also posted losses for the Fund. However, the anticipated lower interest rates positions proved profitable for Fund in the middle of the third quarter as profits were posted to the Fund. The third quarter ended with profits being posted to the Fund as most positions anticipated declining interest rates resulting in profits. Positions in Europe prepared for falling interest rates which generated losses being posted to the Fund at the beginning of the fourth quarter. These were partially compensated by positions anticipating a change in the difference in trans-Atlantic rates and long positions in American government debt. In the markets, confidence was growing that the leading central banks would be leaving their base rates at their current low levels far into 2010. Question marks regarding the condition of the apparent economic recovery and the worrisome developments in Dubai pushed interest rates lower. Several positions in various money markets and purchases of state debt in Germany, the US, Canada and South Korea resulted in profits being posted to the Fund in the middle of the fourth quarter. The lack of interest shown during the United States bond auctions and rising doubt about the creditworthiness of various countries led to increasing interest rates. Most positions were anticipating falling yields and thus suffered losses. Unfavorable results were also felt with trans-Atlantic interest rate positions resulting in losses being posted to the Fund at the end of the fourth quarter.

 

Natural gas prices trended downwards at the beginning of the quarter which the Fund took advantage of through various short positions resulting in profits being posted for the Fund in energies.  Profits continued to be posted to the Fund in the middle of the first quarter mainly earned by natural gas and heating oil sales. Disappointing results from heating oil sales were more than compensated for through profits being posted to Fund at the end of the first quarter resulting from natural gas sales. Profits were posted to the Fund at the beginning of the second quarter resulting from sales of natural gas. Losses were posted to the Fund in the middle of the quarter. Various fossil fuel prices rose as the U.S. dollar weakened and the economic outlook was perceived to be improving. Sales in natural gas and heating oil therefore suffered significant losses but were partially compensated with gasoline and crude oil buying. The quarter ended with losses being posted to the Fund

 

25



 

due to sales in natural gas. Losses were posted to the Fund at the beginning of the third quarter. Large supplies and low expected sales of natural gas pushed prices to lower levels which were advantageous for short positions. Sharp price swing in crude oil prices produced losses for the Fund on both long and short positions in various oil related products. Profits were posted to the Fund in the middle of the third quarter as prices found a new multi year low which outweighed the losses form the purchases of crude oil and gasoline. The sudden break in the downward trend of natural gas prices was not favorable for existing short positions resulting in losses being posted to the Fund at the end of the third quarter. Also, the crude oil market did not show any distinct trends so both buys and sells suffered posting losses for the Fund. The losses felt in the oil markets originated from short positions from the beginning of October. Long purchases in crude oil and its derivatives later in the month overall resulted in profits but not enough to offset the losses being posted to the Fund at the beginning of the fourth quarter. Profits were posted to the Fund in the middle of the fourth quarter. The best performer was short positions in natural gas, which heavily lost its value due to large winter supplies and relatively high temperatures. An abrupt trend reversal in natural gas prices was unfavorable for short positions and led to serious losses.  Due to sharp falls seen in the beginning of December existing long positions in crude oil suffered resulting in losses being posted to the Fund at the end of the fourth quarter.

 

 

 

Total Trading

 

Year ended December 31, 2008

 

Profit (Loss)

 

 

 

 

 

Stock Indices

 

$

12,297,042

 

Metals

 

2,372,411

 

Agricultural Commodities

 

7,255,358

 

Currencies

 

1,202,685

 

Energy

 

19,926,122

 

Interest Rates

 

17,684,856

 

Subtotal

 

60,738,474

 

Change in Brokerage Commissions Payable

 

8,063

 

Total

 

$

60,746,537

 

 

The Fund experienced a net trading profit before brokerage commissions and related fees for the year ended December 31, 2008 of $60,746,537.  Profits were attributable to all of the Fund’s sectors which include the following: energy, interest rates, stock indices, agriculture, metals, and currencies.

 

The energy sector posted profits for the year.  The first quarter started with energy contracts distinguished by choppy prices which resulted in losses being posted to the Fund. Purchased crude oil, heating oil and gasoline dropped in price while natural gas contracts rose in price. The energy markets contributed to excellent results in the middle of the quarter due to an upward trend in natural gas prices and new record prices for crude oil and its derived products. As the first quarter ended as listed products in the energy markets showed sharp falls but recovered due to profits earned with purchases of natural gas and heating oil. The upward trend of energy prices continued strongly at the beginning of the second quarter as profits were posted to the Fund. The exceptionally favorable results on long positions were the most important determinants of the overall profits. Profits continued to be posted to the Fund mid-quarter as the energy markets reached new high levels especially positions in crude oil and gasoline. Profits continued to be posted to the Fund at the end of the second quarter as prices continued to rise. Purchases of Brent crude oil and gasoline were particularly profitable. Quickly sinking energy prices changed existing purchases of crude oil, and natural gas into losses being posted to the Fund at the beginning of the third quarter. The energy prices continued to fall in August and the sector posted profits to the Fund due to sales in natural gas and heating oil. Sales of various energy products posted profits to the Fund at the end of the third quarter due to energy prices continuing on a downward spin. Profits were posted to the Fund throughout the fourth quarter due to the short positions in the energy markets.

 

The interest rate sector posted profits for the year.  In order to support the troubled banking sector and to stimulate economic growth, the U.S. Federal Reserve Bank substantially reduced the American base rate twice during the second half of January. This move caused profits being posted to the Fund throughout the first quarter due to the positive results on various short and long term interest rate positions anticipating a stronger divergence between American and European rates. The expectation that various European central banks would have to lower their base rates sooner or later led to a more inverse looking yield curve in the money markets. This development was advantageous for existing positions. In March, the financial world was stunned by the demise of the U.S. investment bank Bear Stearns. Due to various liquidity

 

26



 

expanding measures by the U.S. Federal Reserve and other leading central banks, the negative impact was limited and profits were posted to the Fund. Losses were posted to the Fund at the beginning of the second quarter. The interest rate markets were mainly driven by increased attention to inflationary risks. More market participants were of the opinion that the interest rate cut by the U.S. Federal Reserve on April 30, 2008 could be the last one for the time being. The interest allowance on British pound deposits surged after the news that the daily United Kingdom interest rate fixing has possibly been manipulated by involved banks which influenced several related positions negatively. Long positions in Japanese government bonds also generated losses. Inflation figures released in the middle of the quarter in various countries and regions raised concerns causing interest rates to rise quickly. Various positions in the money and capital markets of Australia and the United Kingdom profited from the rising rates. A steepening of the yield curve in the United States also had a positive effect as profits were posted to the Fund in the middle of the second quarter.  While the United States Federal Reserve kept the official base rate unchanged at its June meeting, most market participants started to take into account a rate rise by the European Central Bank in July. The underlying money and capital markets reflected this difference of monetary policy. Interest rates on the European mainland and in the United Kingdom rose at a much faster pace than rates in the United States. Diverse positions took advantage of this development and the second quarter ended with profits being posted to the Fund. Losses were posted to the Fund at the beginning of the third quarter as inflation fears diminished as commodity prices started to decrease. Declining European interest rates also generated losses to the Fund on various positions. However, the convergence of short term interest rates between the United Kingdom and mainland Europe was profitable but not enough to offset losses. A slowing world economy and commodities halting their price increase spawned the hope that inflation would start to come down. Government bond prices went up as a result of these developments with purchases in the United States, Canada and Australia which generated profits to the Fund in the middle of the third quarter. A disappointing economic performance and a weakening housing market in the United Kingdom exerted its influence in falling money market rates and strengthening the inversion of the yield curve. This process worked well for existing positions as profits continued to be posted to the Fund in the middle of the third quarter. The American rescue plan for the plagued banking sector (Troubled Assets Relief Program) caused strong movements in the interest rate markets against the existing trends was profitable for the Fund at the beginning of the third quarter. Long positions held in anticipating a future drop in the American Federal Fund interest rate also earned excellent profits for the Fund. Purchases in the Canadian bond markets suffered losses while comparable positions in the United States and Australia posted profits to the Fund as the third quarter ended. Profits were posted to the Fund in the fourth quarter. The British Finance Minister openly admitted that he had serious worries about the fate of the United Kingdom economy which helped fears grow about an impending United Kingdom recession. British money market rates reacted strongly and due to the Fund’s earlier taken positions profits were posted to the Fund. Also the Fund’s positions in anticipation of lower official United States interest rates were profitable for the Fund. Positions in all the principal money markets profited from the sharp interest rate falls and profits were posted to the Fund in the middle of the quarter.  The sharp interest rate cuts by the central banks of Europe, the United Kingdom, and the United States had a profound effect on the money markets as profits were posted to the Fund at the end of the year. Especially in the United States where the official target rate approached zero and the not so modest upward price movements of German, British, Canadian and South Korean state Bonds were even surpassed by American government paper.

 

The stock indices sector posted profits for the year.  The perception of the credit crisis having its toll on the real economy sent stock markets spiraling lower. Sentiment was further worsened after a massive forced liquidation of an allegedly fraudulent stock indices position by the number two French bank Société Générale. Profits were posted to the Fund on sales of Italian and American blue-chip indices while small losses were felt in the German market.  Profits continued to be posted to the Fund from the middle through the end of the quarter as a result of the short sales in Australia, the United States and a long position in the Canadian index. Several short positions, such as the Nasdaq-100 index ended the month of April with losses being posted to the Fund. Although investors had to contend with various uncertainties, many stock exchanges showed certain resilience. Long positions in Canada, the United States and Brazil were profitable for the Fund in the middle of the second quarter. Despite the civil unrest in South Africa, stocks in this country still proved to be desirable. Purchases in the South African stock index added to the profits being posted to the Fund in the middle of the second quarter. A wave of sell swept over the stock markets all over the world at the end of the second quarter. Short positions on various European exchanges also posted profits to the Fund at the end of the second quarter with the biggest profits from Italy, Spain, Turkey and Sweden. Short sales in Hong Kong, Poland and the United States generated losses being posted to the Fund at the beginning of the third quarter. The stock market indices of Hong Kong and Singapore ended the month at lower levels. The profits and losses earned in the rest of Europe and the United States balanced each other out with losses being posted to the Fund in the middle of the third quarter. The continuation of the downward trend in several stock indices had a positive effect on existing positions. The biggest contribution came from Europe with Italy, Sweden and Poland being the leaders. The third quarter ended with profits posted to the Fund due to positions in Asia, South Africa and North America. The persistent selling in the stock markets pushed down stock indices even further worldwide. Various positions contributed to profits being posted to the Fund in October. Just as in September, results achieved in Italy, Poland and South Africa stood out. Additionally, profits were also earned in Australia, Hong Kong, Singapore and Canada, as well as in a European mid-cap index. Many stock markets found new lows during the month of November. The Standard & Poors 500 index reached levels not seen since 1997.

 

27



 

Positions in North America and Europe, modest in size, posted profits to the Fund in the middle of the fourth quarter. The year ended with losses being posted to the Fund.

 

The agriculture sector posted profits for the year. Notwithstanding the jumpy nature of the commodity markets profits were posted to the Fund from the beginning through the middle of the first quarter. Long positions in coffee, cocoa and cotton posted profits to the Fund. Purchases of agricultural goods such as corn, wheat and soybeans not only profited from a weaker U.S. dollar but also from an increasing worldwide scarcity of supplies. At the end of the first quarter, purchases of coffee, soybeans and soybean oil suffered with losses being posted to the Fund. Losses were posted to the Fund. at the beginning of the second quarter. The relative weakness of wheat prices against the price of soybeans generated gains being posted to the Fund. However, this was not enough to offset the losses being posted to the Fund from the falling prices of lean hogs and live cattle reversed resulting in losses on short positions. Favorable expectations for the upcoming wheat harvest put wheat prices under pressure which led to profits being posted to the Fund as a result of short positions in wheat. Rising soybean prices and falling sugar prices were also profitable for the Fund in the middle of the second quarter. Heavy rainfall and flooding in the United States formed a threat for the upcoming corn and soybean harvest. Rapidly rising prices helped existing long positions post profits to the Fund at the end of the second quarter. At the beginning of the third quarter various commodity markets saw price decreases of many percentages resulting in losses begin posted to the Fund.  The declining prices of soy, corn, sugar, coffee and cocoa also added to the losses being posted to the Fund. Losses continued to be posted to the Fund in the middle of the third quarter due to sales of wheat, soybeans and coffee not producing the desired results for the Fund.  The consistent erosion of price levels in wheat, soybeans, soybean oil, cotton and meats were the cause of profits being posted to the Fund at the end of the third quarter. Agricultural products saw their prices drop on the exchanges at the beginning of the fourth quarter as downward trends in wheat, corn and soybean oil delivered profits being posted to the Fund. Similar returns were also achieved with short positions in coffee, cotton and the lean hogs which also added to profits being posted to the Fund.  Unfavorable weather and fungus threatening the crops in important cacao-growing regions caused a trend reversal in cacao prices which pushed short positions into the red. However, this was offset by profits being posted to the Fund in the middle of the fourth quarter due to gains in the short positions in corn, cotton and cattle. The direction of prices in the grain markets was less clear in December.  Sales of corn and soybeans suffered losses as the year ended with losses being posted to the Fund.

 

The metals sector posted profits to the Fund. The metals sector posted losses to the Fund at the beginning of the first quarter.  Trends in gold and silver continued, albeit with some dips, which helped long positions gain profit.  Profits were posted to the Fund in the middle of the first quarter due to higher prices for precious metals such as silver and platinum and base metals such as copper and lead. A short position in nickel did however need to be liquidated with a loss. At the end of the first quarter, a sharp correction led to negative results on long positions of various base and precious metals posting losses to the Fund. Base metal positions added profits being posted to the Fund at the beginning of the second quarter as a result of rising copper prices and a slipping zinc price. The inconsistent direction of gold and silver prices led to losses on purchased contracts and long positions in copper also suffered resulting in losses being posted to the Fund in the middle of the second. Gains on zinc sales and losses on aluminum sales balanced each other out posting profits for the Fund at the end of the second quarter. Losses were posted to the Fund at the beginning of the third quarter due to losses in long positions in platinum, silver, copper and aluminum. Losses on nickel sales were more than compensated by gains on aluminum and copper sales. However, choppy gold prices led to losses on both long and short positions in the middle of the third quarter posting losses to the Fund. The prices of virtually every commodity traded dropped heavily in September. Short positions in base metals, silver and platinum posted profits to the Fund. The price of gold did jump up at one point, due to investors losing faith in the continued functioning of the financial system. The third quarter ended with profits being posted to the Fund.  Base metal prices of aluminum, copper and zinc suffered from the worsening economic conditions. Sales of these metals, as well as short positions in gold, generated profits being posted to the Fund at the beginning of the fourth quarter. Losses were posted to the Fund in the middle of the quarter due to short positions in gold and also losses in zinc. Profits were posted to the Fund at the end of the quarter due to short positions in copper and aluminum.

 

The currency sector posted profits to the Fund. The currency sector posted losses for the first quarter. At the beginning of the first quarter, increasing fears in the market led to a flight out of high interest currencies, such as the Turkish lira. The U.S. dollar and the Euro also dropped against the Japanese yen which resulted in losses for short Japanese yen positions. Due to a lack of a clear trend for the U.S. dollar against the Australian dollar, the British pound and the Hungarian forint, small losses were suffered.  A seriously slowing economy in the middle of the first quarter, a generous monetary policy and increasing inflation did not do the U.S. dollar any favors. Some of the losses experienced early in the quarter were reversed but not enough to offset losses, therefore the sector posted a loss for the first quarter. Profits were posted to the Fund at the beginning of the second quarter though the U.S. dollar, after reaching new record lows against several currencies recovered strongly. Short sales against the Euro, Swiss franc and the Australian dollar resulted in profits for the Fund. Long positions in the Australian dollar and the Mexican peso against the U.S. dollar also generated profits being posted for the Fund. Purchases of Australian dollars against various other currencies posted profits for the Fund in the middle

 

28



 

of second quarter. Many emerging currencies saw their relative values rise in the middle of the second quarter with long positions in the Hungarian forint; Polish zloty, Turkish lira and the Mexican pesos all profited resulting in profits posted to the Fund. Purchases of New Zealand dollars financed with euros and U.S. dollars led to losses being posted to the Fund at the end of the second quarter as did sales of Swiss francs versus the euro and British pound. The lack of trend shown by the Canadian dollar against the U.S. dollar and the Japanese yen also led to losses being posted to the Fund.   A favorable verdict by the Turkish Constitutional Court for the ruling AK party pushed the value of the Turkish lira against the Euro and the U.S. dollar higher, resulting in profits being posted to the Fund at the beginning of the third quarter.  Purchases of Mexican pesos, South African rands, Polish zlotys and Rumanian leis also contributed to profits being posted to the Fund along with a weakening Japanese yen versus the Australian dollar, the Euro and the British pound. However, many emerging market currencies lost serious terrain against the U.S. dollar causing losses to be posted to the Fund in the middle of the third quarter.  The purchases of the Eastern European currencies, the South African rand and the Brazilian real also suffered losses. Other contributing factors for losses being posted to the Fund in the middle of the third quarter was the strong Japanese yen against various currencies as well as purchases of Euros against the Swiss franc, purchases of British pounds versus the Swiss franc and the Canadian dollar. The U.S. dollar continued its upward course in September due to U.S. dollar purchases against the Australian and New Zealand dollars and various European currencies posting profits to the Fund in the middle of the third quarter. The depreciation of the Taiwanese dollar, which suffered from a flight of capital from emerging markets posted profits to the Fund as the third quarter ended. In these uncertain times, the Japanese yen and the U.S. dollar gained some favor among investors. Purchases of these currencies against various others were profitable for the Fund. The Swiss franc’s strengthening against the Euro led to profits being posted to the Fund at the beginning of the fourth quarter. A depreciation of the Norwegian and Swedish crowns versus the Euro generated profits being posted to the Fund in the middle of the fourth quarter. The rise of the U.S. dollar against the Swiss franc also returned profits being posted to the Fund. Profits were posted to the Fund due to Euros bought with Czech crowns, British pounds and Canadian dollars.

 

 

 

Total Trading

 

Period ended December 31, 2007

 

Profit (Loss)

 

 

 

 

 

Metals

 

$

1,126,158

 

Agricultural Commodities

 

3,148,480

 

Currencies

 

(1,433,674

)

Energy

 

16,870,834

 

Interest Rates

 

10,066,046

 

Stock Indicies

 

(7,739,787

)

Subtotal

 

22,038,057

 

Change in Brokerage Commissions Payable

 

(45,548

)

Total

 

$

21,992,509

 

 

The Fund experienced a net trading profit before brokerage commissions and related fees for the period ended December 31, 2007 of $21,992,509. Profits were primarily attributable to the Fund’s energy, interest rates, agriculture, and the metals sector posting gains while the currency and stock indices posted losses. The Fund commenced operations on April 2, 2007.

 

The energy sector posted profits for the Fund. The price development of various energy products showed a choppy course with losses posted to the Fund at the beginning through the middle of the second quarter. However, profits were posted at the quarter end in spite of a difficult trading environment due to weather conditions and geopolitical pressure. While crude oil prices steadily rose, natural gas prices reached new lows and profits were made with both developments at the beginning of the third quarter. Losses posted to the Fund mid-quarter were offset at the end of the third quarter due to the strong march upwards in energy prices translated into excellent profits posted to the Fund on purchases of crude oil and its derived fuels. Sales of natural gas suffered losses at the end of the year to be offset by crude oil. The price of crude oil reached its highest level for the year due to excellent profits achieved on purchases of oil and other energy derivatives. Therefore, the year ended with profits being posted to the Fund.

 

The interest rates sector posted profits for the Fund. Positive indications regarding the economic recovery in Europe led to rising interest rates at the beginning of the second quarter in both the short and long term segments. Various short positions in several money and capital markets profited from this development. Also, a steepening yield curve in the euro and the diminishing difference between euro and the U.S. dollar deposits were successfully exploited. After the Bank of England was called to answer to the British Parliament in April regarding the high level of inflation, a rate hike was seen mid-

 

29



 

quarter. Other major countries also experienced rising money and capital market rates on the basis of robust economic growth expectations combined with increased inflationary pressures. Various short positions in money and capital market products were therefore very profitable. Sales in government bond contracts in Australia, Germany, the United Kingdom and the United States all achieved good results at the quarter’s end. Profits were also earned with rising money market rates in Europe. Losses were posted to the Fund at the beginning of the third quarter as interest rate markets were primarily focused on the worsening conditions of the sub-prime mortgage sector and its follow-on effect to other credit markets. Furthermore, doubts were raised about the attainability of sharply priced takeovers. This all led to a flight to safe government bonds, which in turn brought down money market rates. The situation regarding the American housing market strongly influenced the turnaround seen from a rising to a falling long term interest rate. The back end of the curve in the U.S. declined in a stronger fashion than seen in the United Kingdom and Europe. This development was profitable for British and European capital and money market sales versus purchased American equivalents was the determinate for gains being posted to the Fund the middle of the third quarter. The aggressive cut of the U.S. federal fund rate led to a strong reduction of the rate difference between the United States and continental Europe. This convergence was taken advantage of through the capital markets as well as the money markets as profits were posted to the Fund at the end of the third quarter. Half way through October, the U.S. Fed Chairman Bernanke released comments tempering runaway inflation concerns due to the weakening dollar. This was a turning point for the rising interest rates seen in the U.S. and Europe. Long German bond positions profited while short positions in comparable South Korean bond contracts showed losses. U.S. and European deposit contracts suffered minor losses. Both short and long term interest rates in continental Europe rose in relation to rates in the United States. A persistent inflation rate in Europe and disappointing American figures, which further exposed the weakness of the U.S. economy, formed the basis for this development. Various positions took advantage of this situation. Respective positions anticipating a similar divergence between the United Kingdom and the United States however, did not bring the desired results. This was partially caused by increasing expectations that the Bank of England would reduce the base rate in 2008. The year ended with profits being posted to the Fund.

 

The agriculture sector posted profits for the Fund. More than usual rain and frost in North America and extreme drought in Europe brought an abrupt end to falling wheat prices at the beginning of the second quarter which did not offset short sales that closed out with losses being post to the Fund. Soybean purchases did return a profit mid-quarter due to rising prices after lower than expected crop prospects. Meat and hog purchases did not fare as well. Losses on corn purchases were partially offset by long positions in soybeans and wheat as the second quarter ended with profits being posted to the Fund. Due to promising prospects for the upcoming corn harvest, corn prices fell which favored short positions in grain posting profits to the Fund at the beginning of the third quarter. In contrast to many other markets, fundamental reasons did play an important role in the world markets for wheat. Lower harvest expectations resulted in profits to the Fund mid-quarter. Wheat purchases also scored well when prices sharply rose after news released on low supply figures and difficult weather conditions in important wheat growing areas. Further expected scarcity in various commodities forced wheat, soybean, and soybean meal and soybean oil prices upwards resulting in gains posted to the Fund at the end of the third quarter. The prices of corn, soybeans, soybean meal, and soybean oil continued their upward trend with strength. Long positions in these products therefore delivered good results. Sales of wheat and sugar produced losses which were partially offset by profits earned on coffee purchases as the year ended with profits being posted to the Fund.

 

The metals sector posted profits for the Fund. The metals markets at the beginning of the second quarter achieved positive results with purchases of platinum, nickel and zinc which could not offset losses suffered on silver purchases. Purchases of metal contracts were closed with losses due to earlier rising trends not continuing in May. The purchases of gold and silver, as well as copper and nickel were however loss-making which produced losses being posted to the Fund at quarters end. Copper and lead purchases posted profits to the Fund which was not enough to offset losses in purchases of gold and silver. Long positions in aluminum also posted losses to the Fund at the beginning of the third quarter. The commodity markets were in general defined by a massive liquidation of positions leading to the breaking of existing trends.  Even a safe haven such as gold was sold “en masse” as fears had reached their peak posting losses to the Fund. The third quarter ended with small profits being posted to the Fund due to the rising trend of gold and copper prices as well as the falling price of aluminum. Besides purchases of the precious metals gold and silver producing gains, sales of base metals such as aluminum, copper, nickel and zinc produced profits to the Fund as the year ended.

 

The currency sector posted losses for the fund. A slower growing pace of the economy in the United States pushed the U.S. dollar to a historic low against the euro at the beginning of the second quarter. Purchases of euros, British pounds, Australian and New Zealand dollars versus the U.S. dollar produced excellent profits. The currencies of emerging economies such as the Hungarian forint, Turkish lira and Israel shekel also generated healthy profits due to their appreciation against the U.S. dollar. Sales of the Japanese yen, which again weakened in relation to other important currencies, also appeared to be highly profitable. In relation to the euro, gains were earned on long positions in the Polish zloty. The weaker Japanese yen and the stronger Canadian dollar formed the basis of profits being posted to the Fund mid-quarter. Profits were also earned on short positions in the Japanese yen against the U.S. dollar and Mexican Nuevo peso.

 

30



 

Profits were posted to the Fund at the end of the second quarter due to the weakness of the Japanese yen, which reached new historical lows versus various currencies. An unexpected rate hike from the Central Bank of New Zealand caused an appreciation of the local currency as well as bringing up the Australian dollar. The appreciation of the British pound against the Swiss franc and the euro also generated profits to the Fund. The third quarter began with losses as being posted to the Fund due to the unwinding of the Japanese yen financed loans, so called “carry trades”, the value of the Japanese yen shot up against the other important currencies. Losses continued to be posted to the Fund mid-quarter as the currency markets were also scathed by the increased uncertainties. The U.S. dollar appreciated against many other currencies with losses on purchases of the Australian and New Zealand dollars; Euros and the British pound as a consequence. The British pound also weakened against sold Swiss francs, however, the British pound proved profitable versus purchases of Canadian dollars. The U.S. dollar footed the bill at the end of the third quarter with the American housing and mortgage market, a forceful rate cut and increasing fear for inflation. Terrain was lost not just against the main G7 Currencies but especially in relation to emerging markets currencies. Purchases of South African rand, the Hungarian forint, the Czech crown and the Indian rupee all scored excellently against the U.S. dollar. Furthermore, profits were earned on various purchases of a strengthening Canadian dollar as it reached parity versus the U.S. dollar for the first time in 31 years. The appreciation of the Turkish lira versus the Euro and the U.S. dollar also generated a positive contribution.  The weakening U.S. dollar, the Canadian dollar, often perceived by the market as an energy currency experienced a very robust appreciation against many other currencies. The unexpected revival of the U.S. dollar in the first half of December forced short U.S. dollar positions against several European currencies, the Mexican peso and the South African rand into the red. Various sales of the Japanese yen were affected by its choppy character so sizable losses were suffered. The euro currency purchased with Canadian dollars also booked a negative result. Despite tensions along the Turkish Iraqi border, the Turkish lira still appreciated versus the euro and the U.S. dollar. This produced profits but not enough to keep the losses being posted to the Fund as the year ended.

 

Stock indices posted losses for the Fund. Profits were posted to the Fund at the beginning of the second quarter with purchases of various index futures, especially in Europe and the United States. Within Europe, positions in Germany, Switzerland and Sweden were the lead performers. A climate of heightened merger and acquisition activity and a still relatively low interest rate perception gave enough impetus for further rises in stock market levels mid-quarter. Exceptional results were achieved through purchases of broad-based indices in South Korea, as well as Canada, the UK and the US. Chinese government officials hinted at the possibility to introduce various new regulations in June which could ease cross-border investment and at the same time narrow the gap between respectively higher mainland China and lower Hong Kong equity valuations. The local Chinese stock market fell harshly while a euphoric mood reigned over the Hong Kong stock market, which led to existing long positions delivering profits to the Fund. However, various stock markets in Europe and North America suffered under the weight of higher interest rates and worries regarding the housing and mortgage market in the United States. As a consequence, the second quarter ended with losses being posted to the Fund. The sudden change of investor sentiment took its toll at the beginning of the third quarter especially in the United States where many indices earlier in the year reached new contract highs and in Europe losses were felt. The stock markets in Australia and Japan also put in a disappointing performance. Positive exceptions were the purchases in Hong Kong and South Korea which limited the losses to the Fund. The stock market was distinguished by an increasing risk awareness and aversion. Financial stocks had an especially difficult time due to uncertainties of potential sub-prime related losses mid-quarter. Purchases in Hong Kong experienced a significant loss while profits were recorded on sales in Japan. Despite investor concern, most stock indices worldwide, partly due to the confidence instilled by the central banks, ended the third quarter with profits being posted to the Fund. This development produced a positive result for various long positions. Positions in technology and telecom related stock indices did especially well. Other over-achievers were purchases of Chinese, South African and Canadian stock indices. The stock markets showed a mixed picture at the beginning of the fourth quarter. Chinese shares listed in Hong Kong reached new highs which led to gains on long positions. Purchases of blue chip indices in the U.S. and Sweden suffered losses while similar positions in Australia and Canada were profitable. Technology and telecom stocks were very much in demand in Europe and the U.S. which translated in profits being posted to the Fund. Increased insecurity and suspicions regarding future yet to be released losses on sub-prime portfolios held by major financial institutions caused many investors to adjust their trust levels, thus pushing the stock markets lower. Very few clear directions were experienced in the stock markets. Purchases in Japan, Australia, the United Kingdom, and Spain let to disappointing results. Losses were felt in North and South America on both long and short positions ending the year with losses.

 

31



 

Variables Affecting Performance

 

The principal variables that determine the net performance of the Fund are gross profitability from the Fund’s trading activities and interest income.

 

The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions.  The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.

 

During the period set forth above in “Selected Financial Data”, the interest rates in many countries were at unusually low levels. In addition, low interest rates are frequently associated with reduced fixed income market volatility, and in static markets the Fund’s profit potential generally tends to be diminished.  On the other hand, during periods of higher interest rates, the relative attractiveness of a high risk investment such as the Fund may be reduced as compared to high yielding and much lower risk fixed-income investments.

 

The Fund’s Management Fees and Sponsor Fees are a constant percentage of the Fund’s assets.  Brokerage Commissions, which are not based on a percentage of the Fund’s assets, are based on actual round turns.  The Performance Fees payable to Transtrend are based on the new Trading Profits generated by the Fund excluding interest and after reduction of the Brokerage Commissions.

 

Unlike many investment fields, there is no meaningful distinction in the operation of the Fund between realized and unrealized profits.  Most of the contracts traded by the Fund are highly liquid and can be closed out at any time.

 

Except in unusual circumstances, factors—regulatory approvals, cost of goods sold, employee relations and the like—which often materially affect an operating business, have no material impact on the Fund.

 

Liquidity; Capital Resources

 

The Fund borrows only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Fund’s U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.

 

Substantially all of the Fund’s assets are held in cash. The Net Asset Value of the Fund’s cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the Fund’s profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow.

 

Because substantially all of the Fund’s assets are held in cash, the Fund should be able to close out any or all of its open trading positions and liquidate any or all of its securities holdings quickly and at market prices, except in very unusual circumstances. This permits the Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so. In addition, because there is a readily available market value for the Fund’s positions and assets, the Fund’s monthly Net Asset Value calculations are precise, and investors need to provide ten business days notice to receive the full redemption proceeds of their Units on the last business day of any month.

 

As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash, which it must have available to post initial and variation margin on futures contracts.  This cash is also used to fund redemptions.  While the Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions.  In the event that positions were liquidated to fund redemptions, MLAI, as the Manager of the Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the Trading Advisor would determine in its discretion which investments should be liquidated.

 

(The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 3.03(a)(4) and 3.03(a)(5) of Regulation S-K.)

 

32



 

Recent Accounting Developments

 

Recent accounting developments are discussed in Exhibit 13.01.

 

Item 7A: Quantitative and Qualitative Disclosures About Market Risks

 

Introduction

 

The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes and all or substantially all of the Fund’s assets are subject to the risk of trading loss.  Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.

 

Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.

 

The Fund, under the direction of Transtrend, rapidly acquires and liquidates both long and short positions in currency markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Fund’s losses in any market sector will be limited to Value at Risk or by the Fund’s attempts to manage its market risk.

 

Quantifying The Fund’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statement” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

 

The Fund’s risk exposure in the various market sectors traded by the Fund is quantified below in terms of Value at Risk.  Due to the Fund’s fair value accounting, any loss in the fair value of the Fund’s open positions is directly reflected in the Fund’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

 

Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels.  The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

 

In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk.  In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

 

33



 

100% positive correlation in the different positions held in each market risk category has been assumed.  Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk.  The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.

 

The Fund’s Trading Value at Risk in Different Market Sectors

 

The following table indicates the average, highest and lowest trading Value at Risk associated with the Fund’s open positions by market category for the fiscal periods. During the periods ended December 31, 2009 and December 31, 2008, the Fund’s average month-end Net Asset Value was approximately $229,728,184, $158,124,764, respectively.

 

December 31, 2009

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

445,250

 

0.19

%

1,936,252

 

40,239

 

Currencies

 

854,921

 

0.37

%

3,001,183

 

98,339

 

Energy

 

734,207

 

0.32

%

2,739,637

 

13,404

 

Interest Rates

 

18,130,578

 

7.89

%

27,308,328

 

9,699,195

 

Metals

 

285,261

 

0.12

%

881,067

 

4,430

 

Stock Indices

 

1,090,761

 

0.47

%

2,917,929

 

54,488

 

 

 

 

 

 

 

 

 

 

 

Total

 

21,540,978

 

9.36

%

38,784,396

 

9,910,095

 

 

December 31, 2008

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

449,202

 

0.28

%

$

1,434,454

 

$

22,634

 

Currencies

 

1,632,608

 

1.03

%

4,641,576

 

54,768

 

Energy

 

703,533

 

0.44

%

2,117,492

 

14,776

 

Interest Rates

 

8,174,383

 

5.17

%

11,633,999

 

2,635,987

 

Metals

 

333,939

 

0.21

%

903,788

 

13,098

 

Stock Indices

 

662,688

 

0.42

%

1,378,418

 

182,470

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

11,956,353

 

7.55

%

$

22,109,727

 

$

2,923,733

 

 

Material Limitations on Value at Risk as an Assessment of Market Risk.

 

The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund.  The magnitude of the Fund’s open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time.   The foregoing Value at Risk table — as well as the past performance of the Fund — gives no indication of this “risk of ruin.”

 

34



 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial.

 

The Fund also has non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S or BlackRock. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and Transtrend for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, and an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.

 

The following were the primary trading risk exposures of the Fund as of December 31, 2009, by market sector.

 

Interest Rates.

 

Interest rate movements directly affect the price of derivative sovereign bond positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries.  However, the Fund also takes positions in the government debt of smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.

 

Currencies.

 

The Fund trades in a number of currencies. The Fund does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.

 

Metals.

 

The Fund’s metals market exposure is to fluctuations in the price of precious and non-precious metals.

 

Agricultural Commodities

 

The Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, and livestock accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of December 31, 2009. However, it is anticipated that the Fund will maintain an emphasis on cotton, grains and sugar, in which the Fund has historically taken its largest positions.

 

Energy.

 

The Fund’s primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

 

35



 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Fund as of December 31, 2009.

 

Foreign Currency Balances.

 

The Fund’s primary foreign currency balances are in Japanese Yen, Swedish Krona and Euros.

 

U.S. Dollar Cash Balance.

 

The Fund holds U.S. dollars only in cash at MLPF&S or BlackRock. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.

 

Qualitative Disclosures Regarding Means of Managing Risk Exposure

 

Trading Risk

 

MLAI has procedures in place intended to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge Transtrend to reallocate positions in an attempt to avoid over-concentrations.  However, such interventions are unusual, except in cases in which it appears that Transtrend has begun to deviate from past practice and trading policies or to be trading erratically, MLAI’s basic control procedures consist of simply of the ongoing process of monitoring Transtrend with the market risk controls being applied by Transtrend itself.

 

Risk Management

 

Transtrend attempts to control risk in all aspects of the investment process — from confirmation of a trend to determining the optimal exposure in a given market, and to money management issues such as the startup or upgrade of investor accounts.  Transtrend double checks the accuracy of market data, and will not trade a market without multiple price sources for analytical input.  In constructing a portfolio, Transtrend seeks to control overall risk as well as the risk of any one position, and Transtrend trades only markets that have been identified as having positive performance characteristics.  Trading discipline requires plans for the exit of a market as well as for entry.  Transtrend factors the point of exit into the decision to enter (stop loss).  The size of the Funds’ positions in a particular market is not a matter of how large a return can be generated but of how much risk it is willing to take relative to that expected return.

 

To attempt to reduce the risk of volatility while maintaining the potential for excellent performance, proprietary research is conducted on an ongoing basis to refine the Transtrend investment strategies.  Research may suggest substitution of alternative investment methodologies with respect to particular contracts; this may occur, for example, when the testing of a new methodology has indicated that its use might have resulted in different historical performance.  In addition, risk management research and analysis may suggest modifications regarding the relative weighting among various contracts, the addition or deletion of particular contracts for a program, or a change in position size in relation to account equity.  The weighting of capital committed to various markets in the investment programs is dynamic, and Transtrend may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors warrant.

 

Transtrend may determine that risks arise when markets are illiquid or erratic, which may occur cyclically during holiday seasons, or on the basis of irregularly occurring market events.  In such cases, Transtrend at its sole discretion may override computer-generated signals and may at times use discretion in the application of its quantitative models, which may affect performance positively or negatively.

 

Adjustments in position size in relation to account equity have been and continue to be an integral part of Transtrend’s investment strategy.  At its discretion, Transtrend may adjust the size of a position in relation to equity in certain markets or entire programs.  Such adjustments may be made at certain times for some programs but not for others.

 

Factors which may affect the decision to adjust the size of a position in relation to account equity include ongoing research, program volatility, assessments of current market volatility and risk exposure, subjective judgment, and evaluation of these and other general market conditions

 

36



 

Non-Trading Risk

 

The Fund controls the non-trading exchange rate risk by regularly converting foreign balances back into U.S. dollars at least once per week, and more frequently if a particular foreign currency balance becomes unusually high.

 

The Fund has cash flow interest rate risk on its cash on deposit with MLPF&S and in the BlackRock sponsored money market mutual fund in that declining interest rates would cause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held by the Fund in order to facilitate margin payments and pay expenses and redemptions. MLAI does not take any steps to limit the cash flow risk on its cash held on deposit at MLPF&S and in the BlackRock sponsored money market mutual fund.

 

Item 8: Financial Statements and Supplementary Data

 

Net Income(Loss) by Quarter

Eight Quarters through December 31, 2009

 

 

 

Fourth
Quarter

 

Third
Quarter

 

Second
Quarter

 

First
Quarter

 

Fourth
Quarter

 

Third
Quarter

 

Second
Quarter

 

First
Quarter

 

 

 

2009

 

2009

 

2009

 

2009

 

2008

 

2008

 

2008

 

2008

 

Total Income (Loss)

 

$

(21,820,418

)

$

(10,270,862

)

$

797,813

 

$

(5,579,889

)

$

34,256,182

 

$

3,330,005

 

$

13,890,096

 

$

11,772,438

 

Total Expenses

 

1,346,225

 

1,288,444

 

1,176,888

 

1,118,853

 

9,537,340

 

1,316,140

 

3,835,935

 

3,069,758

 

Net Income (Loss)

 

$

(23,166,643

)

$

(11,559,306

)

$

(379,075

)

$

(6,698,742

)

$

24,718,842

 

$

2,013,865

 

$

10,054,161

 

$

8,702,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) per weighted average Unit (1)

 

$

(0.1360

)

$

(0.0740

)

$

(0.0027

)

$

(0.0496

)

$

0.1914

 

$

0.0164

 

$

0.0916

 

$

0.0927

 

 


(1) The net income per weighted average unit is based on the weighted average of the total units for each quarter.

 

The financial statements required by this Item are included in Exhibit 13.01.

 

The supplementary financial information (“information about oil and gas producing activities”) specified by Item 302(b) of Regulation S-K is not applicable.

 

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

The Board of Managers of MLAI, the Manager of the Fund, dismissed Deloitte & Touche as the independent registered public accounting firm for the Fund, effective April 20, 2009. The Board of Managers of the Manager, on behalf of the Fund, approved the engagement of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Fund effective April 20, 2009.

 

There were no disagreements with the respective independent registered public accounting firms on accounting and financial disclosure.

 

Item 9A (T): Controls and Procedures

 

MLAI’s Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Fund as of and for the year which ended December 31, 2009, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective.

 

Changes in Internal Control over Financial Reporting

 

No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended December 31, 2009 that has materially affected, or is reasonable likely to materially affect, the Fund’s internal control, over financial reporting.

 

37



 

Management’s Report on Internal Control over Financial Reporting:

 

The Fund’s management is responsible for establishing and maintaining adequate internal control over financial reporting.  The Fund’s internal control over financial reporting is a process designed under the supervision of MLAI’s Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund and is effected by management, other personnel and service providers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and included those policy and procedures that:

 

·                  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Fund.

 

·                  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that  receipts and expenditures of the Fund are being made only in accordance with authorizations of management and directors of the Fund; and

 

·                  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Fund’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation.  Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.

 

The Fund’s management assessed the effectiveness of the Funds’ internal control over financial reporting as of December 31, 2009.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework”.

 

Based on its assessment the Fund’s management concluded that at December 31, 2009, the Fund’s internal control over financial reporting was effective.

 

This annual report does not include an attestation report of the Fund’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Fund’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Fund to provide only management’s report for this annual report.

 

Item 9B:  Other Information

 

Not applicable.

 

38



 

PART III

 

Item 10: Directors, Executive Officers and Corporate Governance

 

10(a) and 10(b)      Identification of Directors and Executive Officers:

 

The managers and executive officers of MLAI and their respective business backgrounds are as follows:

 

Justin C. Ferri

 

Chief Executive Officer, President and Manager

 

 

 

Barbra E. Kocsis

 

Chief Financial Officer

 

 

 

Deann Morgan

 

Vice President and Manager

 

Justin C. Ferri is the Chief Executive Officer, President and Manager of MLAI. Mr. Ferri, 34 years old, has been the Chief Executive Officer and President of MLAI since August 2009. Mr. Ferri has been a Manager of MLAI and has been listed as a principal of MLAI since July 29, 2008. He has been registered with NFA as an associated person of MLAI since September 11, 2009. He also serves as Managing Director within the Merrill Lynch Global Wealth & Investment Management group and the Global Investments Solutions group (“GWIM” and “GIS,” respectively), responsible for heading GWIM’s Alternative Investments business. In addition, Mr. Ferri serves as Vice President of IQ Investment Advisors LLC (“IQ”), an indirect, wholly-owned investment adviser subsidiary of Merrill Lynch & Co., and serves as President of each of IQ’s publicly traded closed-end mutual fund companies. Prior to his role in GIS, Mr. Ferri was a Director in the MLPF&S Global Private Client Market Investments & Origination group, and before that, he served as a Vice President and head of the MLPF&S Global Private Client Rampart Equity Derivatives team. Prior to joining Merrill Lynch in 2002, Mr. Ferri was a Vice President within the Quantitative Development group of mPower Advisors LLC from 1999 to 2002, and prior to that, he worked in the Private Client division of J.P. Morgan & Co. He holds a B.A. degree from Loyola College in Maryland.

 

Barbra E. Kocsis is the Chief Financial Officer for MLAI. Ms. Kocsis, 43 years old, has been the Chief Financial Officer of MLAI since October 2006. Ms. Kocsis has been listed with the NFA as a principal of MLAI since May 21, 2007 and is a Director within the Merrill Lynch Global Wealth Management Investment Services group, positions she has held since October 2006. Prior to serving in her current roles, she was the Fund Controller of MLAI from May 1999 to September 2006. Before joining MLAI, Ms. Kocsis held various accounting and tax positions at Derivatives Portfolio Management LLC from May 1992 until May 1999, at which time she held the position of accounting director. Prior to that, she was an associate at Coopers & Lybrand in both the audit and tax practices from September 1988 to February 1992. She graduated cum laude from Monmouth College with a Bachelor of Science in Business Administration - Accounting.

 

Deann Morgan is a Vice President and Manager of MLAI. Ms. Morgan, 40 years old, has been a Vice President of MLAI and Managing Director of GIS since March 2008. As Managing Director of GIS, Ms. Morgan heads Alternative Investments Origination. From April 2006 until March 2008, Ms. Morgan was a Director for Merrill Lynch’s Investments, Wealth Management & Insurance group, where she was responsible for origination of private equity and listed alternative investments. Between August 2004 and April 2006, Ms. Morgan worked for Merrill Lynch’s Investment Banking Group covering Asian corporate clients. She received her M.B.A. from University of Chicago and her B.B.A. from University of Michigan. Ms. Morgan has been registered with NFA as an associated person and listed as a principal of MLAI since August 21, 2009. Ms. Morgan has also been registered with NFA as an associated person of MLPF&S since April 13, 2009.

 

39



 

MLAI acts as the sponsor, general partner or manager to seven public futures funds whose units of limited partner or member interests are registered under the Securities Exchange Act of 1934: ML Aspect Futures Access LLC, ML  BlueTrend FuturesAccess LLC, ML Select Futures I L.P., ML Systematic Momentum FuturesAccess LLC, ML Transtrend DTP Enhanced FuturesAccess LLC, ML Trend-Following Futures Fund L.P, and ML Winton FuturesAccess LLC. Because MLAI serves as the sole sponsor, general partner or manager of each of these Funds, the officers and managers of MLAI effectively manage them as officers and directors of such funds.

 

(c)           Identification of Certain Significant Employees:

 

None.

 

(d)           Family Relationships:

 

None.

 

(e)           Business Experience:

 

See Item 10(a) and (b) above.

 

(f)            Involvement in Certain Legal Proceedings:

 

None.

 

(g)           Promoters and Control Persons:

 

Not applicable.

 

(h)           Section 16(a) Beneficial Ownership Reporting Compliance:

 

Not applicable.

 

Code of Ethics:

 

MLAI and Merrill Lynch have adopted a code of ethics which applies to the Fund’s (MLAI’s) principal executive officer and principal financial officer or persons performing similar functions on behalf of the Fund.  A copy of the code of ethics is available to any person, without charge, upon request by calling 1-866-MER-ALTS.

 

Nominating Committee:

 

Not applicable. (Neither the Fund nor MLAI has a nominating committee.)

 

Audit Committee: Audit Committee Financial Expert:

 

Not applicable. (Neither the Fund nor MLAI has an audit committee.  There are no listed shares of the Fund or MLAI.)

 

40



 

Item 11: Executive Compensation

 

The managers and officers of MLAI are remunerated by Merrill Lynch in their respective positions. The Fund does not have any officers, managers or employees.  The Fund pays Brokerage Commissions to an affiliate of MLAI and Sponsor Fees to MLAI.  MLAI or its affiliates may also receive certain economic benefits from possession of the Fund’s U.S. dollar assets.  The managers and officers receive no “other compensation” from the Fund, and the managers receive no compensation for serving as managers of MLAI.  There are no compensation plans or arrangements relating to a change in control of either the Fund or MLAI.

 

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

(a)           Security Ownership of Certain Beneficial Owners:

 

Not applicable. (The Units represent limited liability company interests. The Fund is managed by its Manager, MLAI.)

 

(b)          Security Ownership of Management:

 

As of December 31, 2009, MLAI owned no Unit-equivalent Member interests. The principals of MLAI did not own any Units, and Transtrend did not own any Units.

 

(c)           Changes in Control:

 

None.

 

(d)          Securities Authorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

Item 13: Certain Relationships and Related Transactions, and Director Independence

 

(a)           Transactions between Merrill Lynch and the Fund

 

Some of the service providers to the Fund are affiliates of Merrill Lynch. However, none of the fees paid by the Fund to such Merrill Lynch affiliates were negotiated and such fees charged to the Fund might be higher

than would have been obtained in arms-length negotiations.

 

The Fund pays indirectly Merrill Lynch through MLPF&S and MLAI substantial Brokerage Commissions and Sponsor Fees as well as bid-ask spreads on forward currency trades.  The Fund also pays MLPF&S interest on short-term loans extended by MLPF&S to cover losses on foreign currency positions.

 

Within the Merrill Lynch organization, MLAI is the beneficiary of the revenues received by different Merrill Lynch entities from the Fund.  MLAI controls the management of the Fund and serves as its promoter.  Although MLAI has not sold any assets, directly or indirectly, to the Fund, MLAI makes substantial profits from the Fund due to the foregoing revenues.

 

No loans have been, are, or will be outstanding between MLAI or any of its principals and the Fund.

 

MLAI pays substantial selling commissions and trailing commissions to MLPF&S for distributing the Units.  MLAI is ultimately paid back for these expenditures from the revenues it receives from the Fund.

 

(b)          Certain Business Relationships:

 

MLPF&S, an affiliate of MLAI, acts as the principal commodity broker for the Fund.

 

In 2009, the Fund expensed:  (i) Brokerage Commissions of $1,209,739 to MLPF&S and $3,904,212 in management fees earned by Transtrend and MLAI, (ii) Sponsor Fees of $453,477 to MLAI. In addition, MLAI and its

 

41



 

affiliates may have derived certain economic benefits from possession of a portion of the Fund’s assets, as well as from foreign exchange and EFP trading.

 

See Item 1(c), “Narrative Description of Business — Charges” and “— Description of Current Charges” for a discussion of other business dealings between MLAI affiliates and the Fund.

 

(c)          Indebtedness of Management:

 

None.

 

(d)          Transactions with Promoters:

 

Not applicable.

 

(e)          Director Independence:

 

No person who served as a manger of MLAI would be considered independent (based on the definition of an independent director under NASDAQ rules).

 

Item 14: Principal Accountant Fees and Services

 

(a)           Audit Fees

 

Aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP in connection with the audit of the Fund’s financial statements as of and for the year ended December 31, 2009 were $91,000.

 

Aggregate fees billed for professional services rendered by Deloitte & Touche LLP in connection with the audit of the Fund’s financial statements as of and for the year ended December 31, 2008 was $91,000.

 

(b)          Audit-Related Fees

 

There were no other audit-related fees billed for the year ended December 31, 2009, related to the Fund.

 

(c)           Tax Fees

 

No fees were billed by PricewaterhouseCoopers LLP or any member firms of PricewaterhouseCoopers and their respective affiliates for the year ended December 31, 2009 for professional services rendered to the Fund in connection with tax compliance, tax advice and tax planning.

 

Aggregate fees billed for professional services rendered by Deloitte Tax LLP in connection with the tax compliance, advice and preparation of the Fund’s tax returns for the years ended December 31, 2009 and 2008 were $61,200 and $72,000 for each period, respectively.

 

(d)          All Other Fees

 

No fees were billed by PricewaterhouseCoopers LLP or any member firms of PricewaterhouseCoopers and their respective affiliates for the year ended December 31, 2009 and for any other professional services in relation to the Fund.

 

No fees were billed by Deloitte & Touche LLP, Deloitte Tax LLP, or any member firms of Deloitte Touche Tohmatsu and their respective affiliates during the year ended December 31, 2008 for any other professional services in relation to the Fund.

 

Neither the Fund nor MLAI has an audit committee to pre-approve principal accountant fees and services.  In lieu of an audit committee, the managers and the principal financial officer pre-approve all billings prior to the commencement of services.

 

42



 

PART IV

 

Item 15: Exhibits and Financial Statement Schedules

 

 

 

Page:

 

1.

Financial Statements (found in Exhibit 13.01):

 

 

 

 

 

 

 

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

1

 

 

 

 

 

 

Statements of Financial Condition as of December 31, 2009 and 2008

3

 

 

 

 

 

 

Statements of Operations for the years ended December 31, 2009 and 2008 and for the period April 2, 2007 (commencement of operations) to December 31, 2007

4

 

 

 

 

 

 

Statements of Changes in Member’s Capital for the year ended December 31, 2009 and 2008 and for the period April 2, 2007 (commencement of operations) to December 31, 2007

5

 

 

 

 

 

 

Financial Data Highlights for the year ended December 31, 2009, 2008 and for the period April 2, 2007 (commencement of operations) to December 31, 2007

7

 

 

 

 

 

 

Notes to Financial Statements

10

 

 

2.

Financial Statement Schedules:

 

 

 

Financial statement schedules not included in this Form 10-K have been omitted for the reason that they are not required or are not applicable or that equivalent information has been included in the financial statements or notes thereto.

 

 

3.

Exhibits:

 

 

 

The following exhibits are incorporated by reference or are filed herewith to this Annual Report on Form 10-K:

 

Designation

 

Description

 

 

 

3.01

 

Certificate of Formation of ML Enhanced FuturesAccess LLC.

 

 

 

Exhibit 3.01:

 

Is incorporated by reference from Exhibit 3.1 contained in the Registrant’s Registration Statement (File No. 000-52701) filed on June 25, 2007, on Form 10 under the Securities Exchange Act of 1934.

 

 

 

3.02

 

Amended and Restated Limited Liability Company Operating Agreement of ML Transtrend DTP Enhanced FuturesAccess LLC.

 

 

 

Exhibit 3.02

 

Is filed herewith.

 

 

 

10.01

 

Institutional Futures Client Account between ML Transtrend DTP Enhanced FuturesAccess LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

 

43



 

Exhibit 10.01:

 

Is incorporated by reference from Exhibit 10.1 contained in the Registrant’s Registration Statement (File No. 000-52701) filed on November 13, 2007, on Form 10 under the Securities Exchange Act of 1934.

 

 

 

10.02

 

Advisory Agreement by and among ML Transtrend DTP Enhanced FuturesAccess LLC, Merrill Lynch Alternative Investments LLC and Transtrend B.V.

 

 

 

Exhibit 10.02:

 

Is incorporated by reference from Exhibit 10.02 contained in the Registrant’s Form 10-K filed on March 31, 2009.

 

 

 

13.01

 

2009 Annual Report and Report of Independent Registered Public Accounting Firm.

 

 

 

Exhibit 13.01:

 

Is filed herewith.

 

 

 

31.01 and 31.02

 

Rule 13a-14(a)/15d-14(a) Certifications

 

 

 

Exhibit 31.01 and 31.02:

 

Are filed herewith.

 

 

 

32.01 and 32.02

 

Section 1350 Certifications

 

 

 

Exhibit 32.01 and 32.02:

 

Are filed herewith.

 

44



 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ML

TRANSTREND DTP ENHANCED FUTURESACCESS LLC

By:

MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC, Manager

By:

/s/Justin C. Ferri

 

Justin C. Ferri

 

Chief Executive Officer, President and Manager

 

(Principal Executive Officer)

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed on March 31, 2010 by the following persons on behalf of the Registrant and in the capacities indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Justin C. Ferri

 

Chief Executive Officer, President and Manager

 

March 31, 2010

Justin C. Ferri

 

 

 

 

 

 

 

 

 

/s/ Barbra E. Kocsis

 

Chief Financial Officer

 

March 31, 2010

Barbra E. Kocsis

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

s/ Deann Morgan

 

Vice President and Manager

 

March 31, 2010

Deann Morgan

 

 

 

 

 

(Being the principal executive officer, the principal financial and accounting officer and a majority of the managers of Merrill Lynch Alternative Investments LLC)

 

45



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

 

2009 FORM 10-K

 

INDEX TO EXHIBITS

 

 

 

 

Exhibit

 

 

 

Exhibit  3.02

 

Amended and Restated Limited Liability Company Operating Agreement of ML Transtrend DTP Enhanced FuturesAccess LLC.

 

 

 

Exhibit 13.01

 

2009 Annual Report and Report of Independent Registered Public Accounting Firm

 

 

 

Exhibit 31.01 and 31.02

 

Rule 13a - 14(a) / 15d - 14(a) Certifications

 

 

 

Exhibit 32.01 and 32.02

 

Sections 1350 Certifications

 

46