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EX-32.02 - EX-32.02 - ML BlueTrend FuturesAccess LLCa11-26134_1ex32d02.htm
EX-32.01 - EX-32.01 - ML BlueTrend FuturesAccess LLCa11-26134_1ex32d01.htm

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2011

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  to                 

 

Commission File Number 0-53794

 

ML BLUETREND FUTURESACCESS LLC

(Exact Name of Registrant as specified in its charter)

 

Delaware

 

26-2581977

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 10th 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)

 

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 x  No o

 

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 Exchange Act).  Yes o  No x

 

As of September 30, 2011 198,225,916 units of limited liability company interest were outstanding.

 

 

 



 

ML BLUETREND FUTURESACCESS LLC

 

QUARTERLY REPORT FOR SEPTEMBER 30, 2011 ON FORM 10-Q

 

Table of Contents

 

 

 

PAGE

PART I—FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

Item 4.

Controls and Procedures

32

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

 

 

 

Item 3.

Defaults Upon Senior Securities

33

 

 

 

Item 4.

(Removed and Reserved)

34

 

 

 

Item 5.

Other Information

34

 

 

 

Item 6.

Exhibits

34

 



 

PART I - FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

ML BLUETREND FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

 

 

September 30,

 

December 31 ,

 

 

 

2011

 

2010

 

ASSETS:

 

 

 

 

 

Equity in commodity trading accounts:

 

 

 

 

 

Cash (including restricted cash of $21,066,737 for 2011 and $27,101,098 for 2010)

 

$

266,647,600

 

$

263,142,606

 

Net unrealized profit on open futures contracts

 

5,827,581

 

8,372,030

 

Net unrealized profit on open forwards contracts

 

6,181,588

 

6,292,330

 

Cash and cash equivalents

 

217,722

 

200,000

 

Other assets

 

10,024

 

10,600

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

278,884,515

 

$

278,017,566

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Brokerage commissions payable

 

$

10,126

 

$

6,783

 

Sponsor and Advisory fees payable

 

2,359,141

 

11,174,911

 

Redemptions payable

 

1,019,033

 

1,259,957

 

Net unrealized loss on open futures contracts

 

1,502,036

 

780,850

 

Net unrealized loss on open forwards contracts

 

7,145,409

 

3,230,066

 

Other liabilities

 

286,327

 

231,051

 

 

 

 

 

 

 

Total liabilities

 

12,322,072

 

16,683,618

 

 

 

 

 

 

 

MEMBERS’ CAPITAL:

 

 

 

 

 

Members’ Interest (Units 198,225,916 and 199,711,080 Units outstanding; unlimited Units authorized)

 

266,562,443

 

261,333,948

 

Total members’ capital

 

266,562,443

 

261,333,948

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS’ CAPITAL

 

$

278,884,515

 

$

278,017,566

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

1.1893

 

$

1.1785

 

Class C

 

$

1.1658

 

$

1.1639

 

Class D

 

$

1.2239

 

$

1.1993

 

Class I

 

$

1.2049

 

$

1.1904

 

Class DS

 

$

1.4419

 

$

1.4128

 

Class DT

 

$

1.1958

 

$

1.1650

 

 

See notes to financial statements.

 

1



 

ML BLUETREND FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three
months ended

 

For the three
months ended

 

For the nine months
ended

 

For the nine months
ended

 

 

 

September 30, 2011

 

September 30, 2010

 

September 30, 2011

 

September 30, 2010

 

TRADING PROFIT (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized, net

 

$

1,091,468

 

$

1,048,694

 

$

19,813,936

 

$

10,672,566

 

Change in unrealized, net

 

3,011,350

 

12,579,179

 

(7,291,720

)

15,910,822

 

Brokerage commissions

 

(221,187

)

(254,073

)

(727,674

)

(621,245

)

 

 

 

 

 

 

 

 

 

 

Total trading profit (loss)

 

3,881,631

 

13,373,800

 

11,794,542

 

25,962,143

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME (LOSS)

 

 

 

 

 

 

 

 

 

Interest

 

17,392

 

687

 

16,215

 

(748

)

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Management fee

 

1,262,405

 

1,104,940

 

3,803,869

 

3,037,665

 

Sponsor fee

 

197,767

 

201,499

 

614,503

 

543,241

 

Performance fee

 

620,207

 

3,031,767

 

1,878,168

 

5,642,313

 

Other

 

138,395

 

141,794

 

478,000

 

355,227

 

Total expenses

 

2,218,774

 

4,480,000

 

6,774,540

 

9,578,446

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT LOSS

 

(2,201,382

)

(4,479,313

)

(6,758,325

)

(9,579,194

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

1,680,249

 

$

8,894,487

 

$

5,036,217

 

$

16,382,949

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding

 

 

 

 

 

 

 

 

 

Class A*

 

3,885,042

 

4,353,327

 

4,051,431

 

3,736,827

 

Class C*

 

20,544,718

 

23,317,825

 

21,067,434

 

20,787,208

 

Class D*

 

12,285,319

 

12,285,319

 

12,285,319

 

11,881,301

 

Class I*

 

8,622,031

 

8,487,149

 

8,622,031

 

7,992,372

 

Class DS

 

120,690,663

 

107,015,907

 

118,458,585

 

96,137,026

 

Class DT**

 

33,083,939

 

46,613,590

 

35,108,682

 

53,392,215

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per weighted average Unit

 

 

 

 

 

 

 

 

 

Class A*

 

$

0.0044

 

$

0.0365

 

$

0.0150

 

$

0.0338

 

Class C*

 

$

0.0007

 

$

0.0334

 

$

0.0058

 

$

0.0345

 

Class D*

 

$

0.0082

 

$

0.0411

 

$

0.0247

 

$

0.0593

 

Class I*

 

$

0.0048

 

$

0.0373

 

$

0.0145

 

$

0.0541

 

Class DS

 

$

0.0096

 

$

0.0493

 

$

0.0262

 

$

0.0964

 

Class DT**

 

$

0.0105

 

$

0.0399

 

$

0.0376

 

$

0.0962

 

 


*Units issued on August 1, 2009.

**Units issued on February 1, 2010.

 

See notes to financial statements.

 

2


 


 

ML BLUETREND FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 and 2010

(unaudited) (in Units)

 

 

 

Members’ Capital
December 31, 2009

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2010

 

Members’ Capital
December 31, 2010

 

Subscriptions

 

Redemptions

 

Members’ Capital
September 30, 2011

 

Class A*

 

1,510,078

 

2,843,249

 

 

4,353,327

 

4,266,016

 

 

(613,029

)

3,652,987

 

Class C*

 

9,725,362

 

14,066,831

 

(563,384

)

23,228,809

 

22,460,685

 

 

(1,979,388

)

20,481,297

 

Class D*

 

10,234,679

 

2,050,640

 

 

12,285,319

 

12,285,319

 

 

(82,000

)

12,203,319

 

Class I*

 

4,622,411

 

3,948,545

 

(217,008

)

8,353,948

 

8,622,031

 

 

(70,000

)

8,552,031

 

Class DS

 

48,153,652

 

64,489,770

 

(2,668,473

)

109,974,949

 

112,965,644

 

7,888,201

 

 

120,853,845

 

Class DT**

 

 

60,851,604

 

(19,177,491

)

41,674,113

 

39,111,385

 

104,871

 

(6,733,819

)

32,482,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Units

 

74,246,182

 

148,250,639

 

(22,626,356

)

199,870,465

 

199,711,080

 

7,993,072

 

(9,478,236

)

198,225,916

 

 


*Units issued on August 1, 2009.

**Units issued on February 1, 2010.

 

See notes to financial statements.

 

3


 


 

ML BLUETREND FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 and 2010

(unaudited)

 

 

 

Members’ Capital
December 31, 2009

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
September 30, 2010

 

Members’ Capital
December 31, 2010

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
September 30, 2011

 

Class A*

 

$

1,619,480

 

$

3,109,070

 

$

 

$

126,239

 

$

4,854,789

 

$

5,027,628

 

 

$

(743,757

)

$

60,680

 

$

4,344,551

 

Class C*

 

10,404,329

 

15,150,516

 

(623,812

)

717,026

 

25,648,059

 

26,142,926

 

 

(2,388,738

)

122,970

 

23,877,158

 

Class D*

 

11,002,450

 

2,182,138

 

 

704,612

 

13,889,200

 

14,733,244

 

 

(100,360

)

303,135

 

14,936,019

 

Class I*

 

4,987,007

 

4,217,095

 

(235,954

)

432,536

 

9,400,684

 

10,263,653

 

 

(84,343

)

125,072

 

10,304,382

 

Class DS

 

60,984,933

 

79,646,568

 

(3,423,232

)

9,265,054

 

146,473,323

 

159,599,857

 

11,554,135

 

 

3,103,588

 

174,257,580

 

Class DT**

 

 

60,908,672

 

(20,363,942

)

5,137,482

 

45,682,212

 

45,566,640

 

125,206

 

(8,169,865

)

1,320,772

 

38,842,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Capital

 

$

88,998,199

 

$

165,214,059

 

$

(24,646,940

)

$

16,382,949

 

$

245,948,267

 

$

261,333,948

 

$

11,679,341

 

$

(11,487,063

)

$

5,036,217

 

$

266,562,443

 

 


*Units issued on August 1, 2009.

**Units issued on February 1, 2010.

 

See notes to financial statements.

 

4


 


 

ML BLUETREND FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.1858

 

$

1.1652

 

$

1.2157

 

$

1.2001

 

$

1.4322

 

$

1.1855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

0.0183

 

0.0180

 

0.0187

 

0.0185

 

0.0221

 

0.0183

 

Brokerage commissions

 

(0.0010

)

(0.0010

)

(0.0010

)

(0.0010

)

(0.0012

)

(0.0010

)

Interest income

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

Expenses

 

(0.0139

)

(0.0165

)

(0.0096

)

(0.0128

)

(0.0113

)

(0.0071

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1893

 

$

1.1658

 

$

1.2239

 

$

1.2049

 

$

1.4419

 

$

1.1958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

0.49

%

0.24

%

0.87

%

0.59

%

0.87

%

1.13

%

Performance fees

 

-0.25

%

-0.25

%

-0.25

%

-0.25

%

-0.25

%

-0.32

%

Total return after Performance fees

 

0.24

%

-0.01

%

0.62

%

0.34

%

0.62

%

0.81

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

0.93

%

1.18

%

0.56

%

0.83

%

0.56

%

0.30

%

Performance fees

 

0.22

%

0.22

%

0.22

%

0.22

%

0.22

%

0.29

%

Expenses (including Performance fees)

 

1.15

%

1.40

%

0.78

%

1.05

%

0.78

%

0.59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-1.15

%

-1.40

%

-0.77

%

-1.05

%

-0.77

%

-0.58

%

 


(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

5



 

ML BLUETREND FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.1785

 

$

1.1639

 

$

1.1993

 

$

1.1904

 

$

1.4128

 

$

1.1650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

0.0563

 

0.0557

 

0.0571

 

0.0568

 

0.0674

 

0.0555

 

Brokerage commissions

 

(0.0033

)

(0.0032

)

(0.0033

)

(0.0033

)

(0.0039

)

(0.0032

)

Interest income

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

Expenses

 

(0.0423

)

(0.0507

)

(0.0293

)

(0.0391

)

(0.0345

)

(0.0216

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1893

 

$

1.1658

 

$

1.2239

 

$

1.2049

 

$

1.4419

 

$

1.1958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

1.42

%

0.66

%

2.57

%

1.73

%

2.57

%

3.35

%

Performance fees

 

-0.85

%

-0.85

%

-0.85

%

-0.85

%

-0.85

%

-1.04

%

Total return after Performance fees

 

0.57

%

-0.19

%

1.72

%

0.88

%

1.72

%

2.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

2.83

%

3.58

%

1.70

%

2.52

%

1.70

%

0.94

%

Performance fees

 

0.68

%

0.68

%

0.68

%

0.68

%

0.68

%

0.87

%

Expenses (including Performance fees)

 

3.51

%

4.26

%

2.38

%

3.20

%

2.38

%

1.81

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-3.50

%

-4.25

%

-2.37

%

-3.20

%

-2.37

%

-1.80

%

 


(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

6



 

ML BLUETREND FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT*

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.0787

 

$

1.0707

 

$

1.0895

 

$

1.0874

 

$

1.2835

 

$

1.0543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

0.0614

 

0.0609

 

0.0622

 

0.0620

 

0.0733

 

0.0603

 

Brokerage commissions

 

(0.0011

)

(0.0011

)

(0.0012

)

(0.0012

)

(0.0014

)

(0.0011

)

Interest income

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

0.0000

 

Expenses

 

(0.0238

)

(0.0264

)

(0.0199

)

(0.0229

)

(0.0235

)

(0.0173

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1152

 

$

1.1041

 

$

1.1306

 

$

1.1253

 

$

1.3319

 

$

1.0962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

4.64

%

4.38

%

5.03

%

4.74

%

5.03

%

5.30

%

Performance fees

 

-1.26

%

-1.26

%

-1.26

%

-1.26

%

-1.26

%

-1.32

%

Total return after Performance fees

 

3.38

%

3.12

%

3.77

%

3.48

%

3.77

%

3.98

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

0.95

%

1.20

%

0.57

%

0.85

%

0.57

%

0.31

%

Performance fees

 

1.23

%

1.23

%

1.23

%

1.23

%

1.23

%

1.30

%

Expenses (including Performance fees)

 

2.18

%

2.43

%

1.80

%

2.08

%

1.80

%

1.61

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-2.18

%

-2.44

%

-1.80

%

-2.08

%

-1.80

%

-1.61

%

 


(a) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

*Units issued on February 1, 2010.

 

See notes to financial statements.

 

7



 

ML BLUETREND FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT*

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.0724

 

$

1.0698

 

$

1.0750

 

$

1.0789

 

$

1.2665

 

$

1.0000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

0.1022

 

0.1016

 

0.1030

 

0.1030

 

0.1214

 

0.1345

 

Brokerage commissions

 

(0.0029

)

(0.0029

)

(0.0029

)

(0.0029

)

(0.0035

)

(0.0027

)

Interest income

 

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

Expenses

 

(0.0565

)

(0.0644

)

(0.0445

)

(0.0537

)

(0.0525

)

(0.0356

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1152

 

$

1.1041

 

$

1.1306

 

$

1.1253

 

$

1.3319

 

$

1.0962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

6.24

%

5.45

%

7.44

%

6.56

%

7.44

%

12.18

%

Performance fees

 

-2.59

%

-2.59

%

-2.59

%

-2.59

%

-2.59

%

-2.76

%

Total return after Performance fees

 

3.65

%

2.86

%

4.85

%

3.97

%

4.85

%

9.42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Member’s Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

2.83

%

3.58

%

1.70

%

2.53

%

1.70

%

0.82

%

Performance fees

 

2.39

%

2.39

%

2.38

%

2.38

%

2.38

%

2.55

%

Expenses (including Performance fees)

 

5.22

%

5.97

%

4.08

%

4.91

%

4.08

%

3.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-5.21

%

-5.97

%

-4.08

%

-4.91

%

-4.08

%

-3.37

%

 


(a) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

*Units issued on February 1, 2010.

 

See notes to financial statements.

 

8



 

ML BLUETREND FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML BlueTrend FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccess Program (the “Program”) fund, was organized under the Delaware Limited Liability Company Act on May 8, 2008 and commenced trading activities on September 1, 2008. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 2 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. BlueCrest Capital Management L.P. (“BlueCrest” or “trading advisor”) is the trading advisor of the Fund.

 

Merrill Lynch Alternative Investments LLC (“MLAI” or the “Sponsor”) is the Sponsor 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. Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.

 

The Program is a group of commodity pools sponsored by MLAI (each pool is a “Program Fund” or collectively, “Program Funds”) each of which places substantially all of its assets in a managed futures or forward trading account managed by a single or multiple commodity trading advisors. Each Program Fund is generally similar in terms of fees, Classes of Units and redemption rights.  Each of the Program Funds implements a different trading strategy.

 

As of September 30, 2011 the Fund offers six Classes of Units:  Class A, Class C, Class D, Class DS, Class DT and Class I.  Each Class of Units was offered at $1.00 per Unit during the initial offering period and subsequently is offered at Net Asset Value per Unit.  The six Classes of Units are subject to different sponsor fees.

 

Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority.  Interests are not deposits or other obligations of, and are not guaranteed by, Bank of America Corporation or any of its affiliates or by any bank.  Interests are subject to investment risks, including the possible loss of the full amount invested.

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of September 30, 2011 and the results of its operations for the three and nine months ended September 30, 2011 and 2010. However, the operating results for the interim periods may not be indicative of the results for the full year.

 

9



 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2010.

 

Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.

 

Initial Offering and Organizational Costs

 

Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance and initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units.

 

10


 


 

2.  CONDENSED SCHEDULE OF INVESTMENTS

 

The Fund’s investments, defined as Net unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of September 30, 2011 and December 31, 2010 are as follows:

 

September 30, 2011

 

 

 

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

 

 

$

 

0.00

%

(394

)

$

1,647,883

 

0.62

%

$

1,647,883

 

0.62

%

November 11 - December 11

 

Currencies

 

3,438,152,019

 

(7,145,409

)

-2.68

%

(2,766,123,530

)

6,181,588

 

2.32

%

(963,821

)

-0.36

%

December 11

 

Energy

 

215

 

(779,814

)

-0.29

%

(313

)

914,480

 

0.34

%

134,666

 

0.05

%

October 11 - January 12

 

Interest rates

 

7,247

 

(285,216

)

-0.11

%

 

 

0.00

%

(285,216

)

-0.11

%

December 11 - September 15

 

Metals

 

588

 

(12,870,695

)

-4.83

%

(851

)

14,883,374

 

5.58

%

2,012,679

 

0.75

%

October 11 - January 12

 

Stock indices

 

109

 

234,050

 

0.09

%

(1,371

)

581,483

 

0.22

%

815,533

 

0.31

%

October 11 - January 12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

(20,847,084

)

-7.82

%

 

 

$

24,208,808

 

9.08

%

$

3,361,724

 

1.26

%

 

 

 

December 31, 2010

 

 

 

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

 

330

 

$

586,527

 

0.22

%

 

$

 

0.00

%

$

586,527

 

0.22

%

March 11

 

Currencies

 

2,852,187,119

 

6,292,330

 

2.41

%

(1,929,042,262

)

(3,230,067

)

-1.24

%

3,062,263

 

1.17

%

March 11

 

Energy

 

1,501

 

4,746,214

 

1.82

%

 

 

0.00

%

4,746,214

 

1.82

%

January 11 - April 11

 

Interest rates

 

3,883

 

382,086

 

0.15

%

(600

)

(37,834

)

-0.01

%

344,252

 

0.14

%

March 11 - June 13

 

Metals

 

525

 

5,470,493

 

2.09

%

(279

)

(3,554,866

)

-1.36

%

1,915,627

 

0.73

%

January 11 - April 11

 

Stock indices

 

3,492

 

(1,439

)

0.00

%

 

 

0.00

%

(1,439

)

0.00

%

January 11 - March 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

17,476,211

 

6.69

%

 

 

$

(6,822,767

)

-2.61

%

$

10,653,444

 

4.08

%

 

 

 

No individual contract’s unrealized profit or loss comprised greater than 5% of the Members’ Capital as of September 30, 2011 and December 31, 2010.

 

11


 


 

3. FAIR VALUE OF INVESTMENTS

 

The Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”) which provides authoritative guidance on fair value measurement. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes.  The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included in Equity in a commodity trading account.  Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Operations.

 

The fair value measurement guidance established a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

 

Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.

 

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.

 

Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level

 

12



 

of input that is significant to the Fair Value Measurement. MLAI’s assessment of the significance of a particular input to the Fair Value Measurement in its entirety requires judgment, and considers factors specific to the investment.

 

Following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.

 

Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where it trades such investments.  These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used by the Fund as inputs into its process for determining fair values.

 

The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.

 

The Fund has determined that Level I securities would include most of its futures and options contracts where it believes that quoted prices are available in an active market.

 

Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of securities with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II securities. The Fund determined that Level II securities would include its forward and certain futures contracts.

 

The Fund’s net unrealized profit (loss) on open forward and futures contracts by the above fair value hierarchy levels as of September 30, 2011 and December 31, 2010 are as follows:

 

Net unrealized profit (loss) 

 

 

 

 

 

 

 

 

 

on open contracts

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

Futures

 

 

 

 

 

 

 

 

 

Long

 

$

(13,701,675

)

$

(830,981

)

$

(12,870,694

)

$

 

Short

 

$

18,027,220

 

$

4,147,773

 

$

13,879,447

 

$

 

 

 

$

4,325,545

 

$

3,316,792

 

$

1,008,753

 

$

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

 

 

 

 

 

 

 

 

Long

 

$

(7,145,409

)

$

 

$

(7,145,409

)

$

 

Short

 

$

6,181,588

 

$

 

$

6,181,588

 

$

 

 

 

$

(963,821

)

$

 

$

(963,821

)

$

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

$

3,361,724

 

$

3,316,792

 

$

44,932

 

$

 

 

13



 

Net unrealized profit (loss) 

 

 

 

 

 

 

 

 

 

on open contracts

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

Futures

 

 

 

 

 

 

 

 

 

Long

 

$

11,183,881

 

$

7,332,217

 

$

3,851,664

 

$

 

Short

 

$

(3,592,701

)

$

(37,835

)

$

(3,554,866

)

$

 

 

 

$

7,591,180

 

$

7,294,382

 

$

296,798

 

$

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

 

 

 

 

 

 

 

 

Long

 

$

6,292,330

 

$

 

$

6,292,330

 

$

 

Short

 

$

(3,230,066

)

$

 

$

(3,230,066

)

$

 

 

 

$

3,062,264

 

$

 

$

3,062,264

 

$

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

$

10,653,444

 

$

7,294,382

 

$

3,359,062

 

$

 

 

The Fund’s volume of trading forwards and futures as of the period and year ended September 30, 2011 and December 31, 2010, respectively, are representative of the activity throughout these periods. There were no transfers to or from Level I or II during the quarter ended September 30, 2011.

 

The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the guidance for accounting for derivative and hedging activities. The fair value amounts of and the gains and losses on derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations respectively. There are no credit related contingent features embedded in these derivative contracts.

 

The following table indicates the trading gains and losses, by commodity industry sector, on derivative instruments for each of the three and nine month periods ended September 30, 2011 and 2010:

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2011

 

September 30, 2011

 

Commodity Industry Sector

 

Gain (loss) from trading

 

Gain (loss) from trading

 

 

 

 

 

 

 

Agriculture

 

$

590,134

 

$

130,090

 

Currencies

 

(2,578,984

)

(1,128,671

)

Energy

 

(12,506,256

)

(6,794,343

)

Interest rates

 

28,110,429

 

41,345,314

 

Metals

 

3,415,413

 

1,304,344

 

Stock indices

 

(12,927,918

)

(22,334,518

)

 

 

 

 

 

 

Total

 

$

4,102,818

 

$

12,522,216

 

 

14



 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2010

 

September 30, 2010

 

Commodity Industry Sector

 

Gain (loss) from trading

 

Gain (loss) from trading

 

 

 

 

 

 

 

Agriculture

 

$

399,184

 

$

(261,508

)

Currencies

 

626,783

 

1,194,308

 

Energy

 

(501,214

)

(12,149,593

)

Interest rates

 

12,671,706

 

47,591,519

 

Metals

 

477,946

 

(178,884

)

Stock indices

 

(46,532

)

(9,612,454

)

 

 

 

 

 

 

Total

 

$

13,627,873

 

$

26,583,388

 

 

The Fund is subject to the risk of insolvency of a counterparty, 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 or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

4.  MARKET AND CREDIT RISKS

 

The nature of this Fund has certain risks, which cannot be presented on the financial statements.  The following summarizes some of those risks.

 

Market Risk

 

Derivative instruments involve varying degrees of market risk.  Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Fund’s Net unrealized profit (loss) on such derivative instruments as reflected in the Statements of Financial Condition.  The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.

 

MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily on monitoring the trading of BlueCrest, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations.  While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge BlueCrest to reallocate

 

15



 

positions in an attempt to avoid over-concentrations.  However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk control procedures which consist of the ongoing process of advisor monitoring, along with monitoring the market risk controls being applied by BlueCrest is sufficient to detect if any such intervention is needed.

 

Credit Risk

 

The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange.  In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may also require margin in the over-the-counter markets.

 

The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit on open contracts, if any, included in the Statements of Financial Condition. The Fund attempts to mitigate this risk by dealing exclusively with Merrill Lynch entities as clearing brokers.

 

The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its commodity broker.  Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable and included in Equity in commodity trading accounts in the Statements of Financial Condition.

 

Indemnifications

 

In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify third parties, including affiliates of the Fund, for breach of certain representations and warranties made by the Fund. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Fund’s experience, MLAI expected the risk of loss to be remote and, therefore, no provision has been recorded.

 

5. RELATED PARTY TRANSACTIONS

 

Starting in June of 2010, the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Transfer Agent”), a related party of Merrill Lynch through MLAI. The agreement calls for a fee to be paid based on the collective net assets of funds managed or sponsored by MLAI with a minimum annual fee of $2,700, 000. The fee rate ranges from 0.016% to 0.02% based on aggregate net assets. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed/sponsored funds on a monthly basis based on the Fund’s net assets. The Transfer Agent fee, which was determined at 0.02% of aggregate asset level, allocated to the Fund for the quarter ended September 30, 2011 amounted to $13,385 of which $9,059 was payable to the Transfer Agent as of September 30, 2011.

 

16



 

6.  RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2011, the FASB issued an update to requirements relating to Fair Value Measurement which represents amendments to achieve common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards. The amendments are of two types: (i) those that clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.

 

The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii) additional disclosures about fair value measurements. The update is effective for annual periods beginning after December 15, 2011. MLAI does not believe the adoption of this update will have a material impact on the Fund’s financial statements.

 

7. SUBSEQUENT EVENTS

 

Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.

 

17


 


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

MONTH-END NET ASSET VALUE PER UNIT

 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to report performance to investors throughout the period is a useful performance measure for the investors of the Fund. Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting.

 

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, and any operating costs and other liabilities of the Fund. MLAI is authorized to make all Net Asset Value determinations.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

$

1.0328

 

$

1.0669

 

$

1.1277

 

$

1.1575

 

$

1.0771

 

$

1.0787

 

$

1.0816

 

$

1.0775

 

$

1.1152

 

2011

 

$

1.1843

 

$

1.2257

 

$

1.2100

 

$

1.2738

 

$

1.2297

 

$

1.1858

 

$

1.2197

 

$

1.1897

 

$

1.1893

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

$

1.0294

 

$

1.0625

 

$

1.1222

 

$

1.1508

 

$

1.0700

 

$

1.0707

 

$

1.0727

 

$

1.0677

 

$

1.1041

 

2011

 

$

1.1687

 

$

1.2085

 

$

1.1920

 

$

1.2538

 

$

1.2095

 

$

1.1652

 

$

1.1976

 

$

1.1671

 

$

1.1658

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

$

1.0366

 

$

1.0722

 

$

1.1347

 

$

1.1661

 

$

1.0864

 

$

1.0895

 

$

1.0938

 

$

1.0910

 

$

1.1306

 

2011

 

$

1.2067

 

$

1.2504

 

$

1.2359

 

$

1.3027

 

$

1.2592

 

$

1.2157

 

$

1.2521

 

$

1.2228

 

$

1.2239

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

$

1.0394

 

$

1.0741

 

$

1.1357

 

$

1.1660

 

$

1.0854

 

$

1.0874

 

$

1.0907

 

$

1.0869

 

$

1.1253

 

2011

 

$

1.1967

 

$

1.2389

 

$

1.2234

 

$

1.2883

 

$

1.2442

 

$

1.2001

 

$

1.2349

 

$

1.2049

 

$

1.2049

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

$

1.2212

 

$

1.2631

 

$

1.3368

 

$

1.3738

 

$

1.2799

 

$

1.2835

 

$

1.2885

 

$

1.2852

 

$

1.3319

 

2011

 

$

1.4216

 

$

1.4731

 

$

1.4560

 

$

1.5347

 

$

1.4834

 

$

1.4322

 

$

1.4750

 

$

1.4405

 

$

1.4419

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

August

 

September

 

2010

 

n/a

 

$

1.0350

 

$

1.0960

 

$

1.1271

 

$

1.0508

 

$

1.0543

 

$

1.0592

 

$

1.0571

 

$

1.0962

 

2011

 

$

1.1730

 

$

1.2163

 

$

1.2029

 

$

1.2688

 

$

1.2272

 

$

1.1855

 

$

1.2217

 

$

1.1939

 

$

1.1958

 

 

Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods or services.  The Fund’s assets are its (i) equity in its trading account, consisting of cash including restricted cash, and unrealized gain net of unrealized losses and (ii)

 

18



 

interest receivable. Because of the low margin deposits normally required in commodity futures trading relatively small price movements may result in substantial losses to the Fund.  While substantial losses could lead to a material decrease in liquidity, no such material losses occurred during the third quarter of 2011 and there was no impact on the Fund’s liquidity.

 

The Fund’s capital consists of the capital contributions of the members as increased or decreased by gains or losses on trading, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the nine months ended September 30, 2011, Fund capital increased 2.00% from $261,333,948 to $266,562,443.  This increase was attributable to the net gain from operations of $5,036,217, coupled with the redemption of 9,478,236 Redeemable Units resulting in an outflow of $11,487,063.  The cash outflow was offset with cash inflow of $11,679,341 due to subscriptions of 7,993,072 units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

The Fund is not required to provide a Statement of Cash Flows.

 

Investments

 

All investments (including derivatives) are held for trading purposes.  Investments are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date.  Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included as a component of equity in a commodity trading account on the Statements of Financial Condition.  Realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Operations.

 

Cash and Cash Equivalents

 

The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. Cash equivalents were recorded at amortized cost, as provided by the investment manager of the cash equivalent, which approximated fair value (Level II see Note 3).  Cash was held at a nationally recognized financial institution.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For more information on our fair value, see Note 3, Fair Value of Investments.

 

19



 

Futures Contracts

 

The Fund trades listed futures contracts.  A listed futures contract is a firm commitment to buy or sell a standardized quantity of an underlying asset over a specified duration.  The Fund buys and sells contracts based on indexes of financial assets such as stocks, domestic and global stock indexes, as well as contracts on various physical commodities. Prices paid or received on these contracts are determined by the ask or bid provided by the exchanges on which they are traded.   Contracts may be settled in physical form or cash settled depending upon the contract.  Upon the execution of a trade, margin requirements determine the amount of cash that must be on deposit to secure the transaction.  These amounts are considered restricted cash on the Fund’s balance sheet.  Contracts are priced daily by the Fund and the gain or loss based on the daily mark to market are recorded as unrealized gains.  When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.  Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited.  Realized gains (losses) and changes in unrealized gains (losses) on futures contracts are included in the Statements of Operations.  The Fund also trades futures contracts on the London Metals Exchange (LME).  The valuation pricing for LME contracts is based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as supply and demand factors and bid and asks from open outcry sessions.

 

Forward Foreign Currency Contracts

 

Foreign currency contracts are those contracts where the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date.  Foreign currency contracts are valued daily, and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition.  Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Operations.

 

Interest Rates and 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.

 

Income Taxes

 

No provision for income taxes has been made in the accompanying financial statements as the Member is individually responsible for reporting income or loss based on such Member’s share of the Fund’s income and expenses as reported for income tax purposes.

 

The Fund follows the ASC guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax

 

20



 

is required in the Fund’s financial statements. The following are the major tax jurisdictions for the Fund and the earliest tax year subject to examination: United States — 2008.

 

Reform Act

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was signed into law on July 21, 2010. The Reform Act enacts financial regulatory reform, and may alter the way in which the Fund conducts certain trading activities.   The Reform Act includes measures to broaden the scope of derivative instruments subject to regulation, including by requiring clearing and exchange trading of certain derivatives, imposing new capital and margin reporting, registration and business conduct requirements for certain market participants and imposing position limits on certain over-the-counter derivatives. The Reform Act grants the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission substantial new authority and requires numerous rulemakings by these agencies. The ultimate impact of these derivatives regulations, and the time it will take to comply, remains uncertain. The final regulations may impose additional operational and compliance costs on the Fund.

 

Results of Operations

 

January 1, 2011 to September 30, 2011

 

January 1, 2011 to March 31, 2011

 

The Fund experienced a net profit of $12,482,261 before brokerage commissions and related fees in the first quarter of 2011. The Fund’s profits were primarily attributed to energy, stock indices, and the agriculture sectors posting profits. The currencies, metals and interest rates sectors posted losses.

 

The energy sector posted profits to the Fund.  Profits were posted to the Fund at the beginning of the quarter.  Fears of a shortfall in oil supply in connection with the unrest in the Middle East and North Africa contributed to Brent oil climbing over 6% and tipping $100 a barrel for the first time since 2008. Gas oil and heating oil followed suit, rising over 6% in January. Profits continued to be posted in the middle of the quarter. In February, the market continued feeling pressure in connection with the unrest in the Middle East and North Africa. The main impact was felt by the spiraling price of oil as West Texas Intermediate rose above $100 a barrel while Brent crude oil traded $119.79, up over 12% on the month and its highest level in over 2 years. The unrest supported oil prices along with risk aversion as the market remained wary of rising oil prices impacting global growth resulting in profits posted to the Fund at the end of the quarter.

 

The stock indices sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Over the course of the month of January the trading program trimmed risk in equities. Profits continued to be posted to the Fund in the middle of the quarter. Prior to the Libyan unrest, equities markets were bid as the conflict in Egypt subsided following the announcement that President Mubarak was to step down. FTSE (Financial Times and London Stock Exchange) futures traded above 6000 for the first time since 2008 while ESTOXX (European Stock Exchange) traded above 3000. Profits were posted to the Fund at the end of the quarter as the trading program reduced risk in equities early in March but reestablished equity risk as markets settled into month’s end.

 

21



 

The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter only to be reversed at the end of the quarter due to global volatility.

 

The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter due to global market volatility. Profits were posted to the Fund in the middle through the end of the quarter. The Japanese yen repatriation pushed the currency to record highs in March before the G7 (Canada, France, Germany, Italy, Japan, United Kingdom and the United States) agreed to coordinate intervention for the first time in over a decade to weaken the Japanese yen.

 

The metals sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter due to unrest in the global markets as the end of January saw a significant shock to risk following geo-political unrest in Egypt which could spread to nearby Middle Eastern countries. Profits were posted to the Fund in the middle of the quarter only to be reversed at quarter’s end. Instability in the Middle East and North Africa intensified in Libya during March.

 

The interest rate sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. Eurozone fears moderately subsided following increased speculation of an expansion to the European Financial Stability Facility but there remains an underlying detrimental current with Portuguese 10 year yields remaining at high levels despite a well received bond auction mid month. European inflationary concerns have remained while the United Kingdom experienced a surprisingly weak gross domestic product figure. Losses were posted to the Fund in the middle of the quarter. Aside from events in the Middle East and North Africa, the earthquake which hit Christchurch diminished expectations of further rate hikes from the RBNZ (Reserve Bank of New Zealand) as prospects for the economy looked bleak. Losses continued to be posted to the Fund at the end of the quarter. March evolved into one of the most challenging months in recent times as events dominated financial markets. Instability in the Middle East and North Africa intensified in Libya, and Japan suffered a devastating earthquake and tsunami.

 

April 1, 2011 to June 30, 2011

 

The Fund experienced a net trading loss of $4,062,863 before brokerage commissions and related fees in the second quarter of 2011. The Fund’s profits were primarily attributed to the interest rates and the currency sectors posting profits. The agriculture, metals, stock indices and energy sectors posted losses.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as inflation concerns resulted in much anticipated rate hikes from the European Central Bank and Riksbank. The Bank of England decided against a hike in rates even though there was continuing growth concerns but with inflation remaining at uneasy levels, speculation remained with regards to when the Bank of England would hike rates. Profits continued to be posted to the Fund in the middle of the quarter with positive returns in fixed income. As the month progressed, softness in U.S. jobless claims, the highest recorded in 8 months and regional manufacturing indices outweighed stronger payroll numbers. In Europe it was the same story with weak economic indicators and sentiment hitting the wires. During June positive returns in bonds and short rates resulted in profits posted to the Fund at the end of the quarter.

 

The currency sector posted profits to the Fund.  Profits were posted to the Fund at the beginning of the quarter. The U.S. dollar suffered in connection with the Standard & Poor’s decision to downgrade the U.S. credit outlook to negative while the U.S. Federal Reserve kept rates on hold which highlighted the markets willingness to play the interest rate differential to the detriment of the U.S. dollar with the

 

22



 

Australian dollar as a beneficiary. Losses were posted to the Fund in the middle through the end of the quarter. During the middle of the quarter, the fall in the Euro was driven by the European Central Bank’s diminishing expectations of aggressive rate hikes along with continuing speculation of supplementary aid requirements in Greece which intensified following German reports of an impasse at aid talks for Greece.  Eurozone worries and the standing of the U.S. economy enabled the Swiss franc to climb to a record high against the Euro and the U.S. dollar. The Fund reduced its risk in equities at the end of the quarter with risk aversion weighing heavily on market conviction.

 

The agriculture sector posted losses to the Fund. Losses were posted to the Fund throughout the quarter due to global market volatility.

 

The metals sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter only to be offset in the middle through the end of the quarter as the Fund decreased their metals exposure resulting in losses.

 

The stock indices sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter as U.S. housing data came in better than expected. Losses were posted to the Fund in the middle of the quarter as concern relating to economic growth and monetary tightening negatively impacted global markets and risk aversion was the prominent theme. Losses were posted to the Fund at the end of the quarter. June was influenced by continuing concerns regarding European sovereign debt and a financial stimulus for Greece. Headline and event risk arose on a continual basis as members of the Greek Parliament expressed conflicting views on restructuring and the cause of Greece’s failings but finally with repayment deadlines looming, an agreement was reached on the 24th of June for a new 120 billion Euro bailout for Greece.

 

The energy sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter as the Fund trimmed some risk in Energies following a sell off in West Texas Intermediate Crude. Losses were posted to the Fund in the middle of the quarter as the month started with the assassination of Osama Bin Laden which provided the catalyst for a four day rout in oil prices, with Brent falling 10% in one day, making it the biggest weekly drop in two and half years. Losses were posted to the Fund at the end of the quarter as the International Energy Agency made a surprise announcement to release 60 million barrels of oil in an attempt to lower energy prices and aid economic expectations in the U.S.

 

July 1, 2011 to September 30, 2011

 

The Fund experienced a net trading profit of $ 4,102,818 before brokerage commissions and related fees in the third quarter of 2011. The Fund’s profits were primarily attributed to the interest rates, metals and the agriculture sectors posting profits. The currencies, energy and the stock indices sectors posted losses.

 

The interest rate sector posted profits to the Fund.  Profits were posted to the Fund at the beginning through the middle of the quarter as U.S. and German bonds were the notable gainers. The quarter ended with profits posted to the Fund due to increasing positions in bonds.

 

The metals sector posted profits to the Fund.  Profits were posted to the Fund at the beginning of the quarter as gold reached an all-time high at the end of the month.  As gold reached a new record in the in middle of the quarter this was not enough to offset losses posted to the Fund. Profits were posted to the Fund at the end of the quarter as gold and silver prices reversed.

 

23



 

The agriculture sector posted profits to the Fund.  Losses were posted to the Fund at the beginning of the quarter due to global volatility. Profits were posted to the Fund in the middle through the end of the quarter.

 

The currency sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter only to be offset in the middle of the quarter as the Swiss franc was close to parity with the euro.      Losses were posted to the Fund at the end of the quarter as the U.S. dollar had a strong month, rising significantly against all other G10 currencies as a flight to liquidity reaffirmed the U.S. dollar as the safe-haven currency of choice.

 

The energy sector posted losses to the Fund.   Profits were posted to the Fund at the beginning of the quarter only to be reversed in the middle of the quarter as oils sold off for most of the month. Losses were posted to the Fund at the end of the quarter as the Fund reduced its energy risk over the course of the month.

 

The stock indices sector posted losses to the Fund.  Losses were posted to the Fund at the beginning of the quarter as the Fund reduced its risk in equities. Losses continued to be posted to the Fund in the middle of the quarter as European regulators coordinated a short-selling ban on certain financials stocks and index futures in a move to combat the spike in volatility. The quarter ended with profits being posted to the Fund due to the Fund increasing its positions in equities.

 

January 1, 2010 to September 30, 2010

 

January 1, 2010 to March 31, 2010

 

The Fund experienced a net trading profit before brokerage commissions and related fees of $24,641,361 in the first quarter of 2010.  Profits were primarily attributable to the interest rates, stock indices, energy, currencies and agriculture sectors posting gains. The metals sector posted losses.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Fixed income benefitted from the risk off theme and fears that the pace of the global recovery may not be as fast as previously thought. Short interest rates were the first to react with the three major strips all printing contract highs. As the month and equity weakness progressed, the rally further out the curve gathered momentum culminating in U.S. Ten Year Treasury Note trading at a one and a half month high on the final day of January. Profits continued to be posted to the Fund in the middle of the quarter. Of the Fixed Income block, the highlight contributors were the program’s long positions in the short rate contracts (Euribor, Eurodollar and Short Sterling). The underperformance in the bonds sector was predominantly due to exposure to the U.S. Ten Year Treasury Note and long positions in U.S. bonds where stronger than expected resulting in losses being posted to the Fund at the end of the quarter.

 

The stock indices posted profits to the Fund. Losses were initially posted to the Fund due to continued rumors of the Chinese tightening lending and comments from the Obama administration about risks and banking practices. The S&P500 Index fell to trade at a two and a half month low while Eurostoxx and the Nikkei also fell in January. Losses were posted to the Fund in the middle of the quarter as equities continued to post losses. Equity strength was sustained through the month of March as the S&P500 broke key upper resistance levels amid more upbeat language from the Federal Open Market Committee, stating on March 16th that the labor market is “stabilizing”. The quarter ended with profits being posted to the Fund.

 

24



 

The energy sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Energies started the month of January strongly with pent up demand spilling over from the holiday period. However, the rally in energies that began in the second half of December started to look increasingly out of step with fundamentals, West Texas Intermediate crude oil ended January down from the previous month. Profits were posted to the Fund in the middle through the end of the quarter. Risk levels in the program remain above average with the margin to equity ratio increasing concordant with an expanding opportunity set. With a significant component of the portfolio’s VaR in energies, the volatile path of oil as it approached year-to-date highs has been responsible for this risk.

 

The currency sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Trend went into the month long high beta currencies. Despite the Fund largely reducing its long positions in the New Zealand dollar versus the U.S. dollar, the pair still ended the month of January posting losses to the Fund. The Fund held short conviction in the euro and the British pound as the region suffered with the Greek sovereign debt situation aggravating an already bleak economic outlook resulting in profits being posted to the Fund. The focus of broad macroeconomic concern remains the consequences of a cross the curve and the consequences of a strong U.S. dollar on commodities positioning and the market reversal triggered by monetary policy “exit strategy”.  The quarter ended with profits being posted to the Fund.

 

The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter due to the fall in corn after a very bearish United States Department of Agriculture report and extended a short bias across all agricultural products as South American production continued to put pressure on U.S. crops. Losses were posted to the Fund in the middle of the quarter due to volatility in global markets. The commodity markets experienced a variety of different trends with cattle prices increasing while the grain markets weakened. Through this mixture of trends and their diversifying character, the agriculture sector posted profits to the Fund at the end of the quarter.

 

April 1, 2010 to June 30, 2010

 

The Fund experienced a net trading loss of $11,685,846 before brokerage commissions and related fees in the second quarter of 2010. The Fund’s profits were primarily attributable to the interest rate sector posting profits. The agriculture, stock indices, metals, currency and energy sectors posted losses.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter as the burgeoning European debt crisis increased demand for fixed income in all parts of the curve. Profits were also posted to the Fund as a bid for ex-region debt also accrued profit from the Japanese Government bond positions. The trading program’s short positions also posted profits to the Fund due to a flattening of the Euribor curve. Profits continued to be posted to the Fund in the middle of the quarter due to the trading program’s stable bid in the bonds sector. Sovereign debt issues in Europe focused market sentiment into a wave of risk aversion which saw the Chicago Board Options Exchange Volatility Index spike to a 13 month high on May 5th.   Profits continued to be posted to the Fund due to the trading program’s fixed income allocation yielding positive returns in the bonds sectors and short positions in interest rates. Profits were posted to the Fund at the end of the quarter as sovereign debt fears in Europe added to persistent volatility as governments began to consolidate fiscal policies, with the G20 talks doing little to coordinate strategy.

 

The agriculture sector posted losses to the Fund. Losses were posted to the Fund at the beginning and end of the quarter due to volatility in global markets. Profits were posted to the Fund in the middle of the quarter as grains continued its slide from the previous month.

 

25



 

The stock indices posted losses to the Fund. Losses were posted to the Fund throughout the quarter. Losses were posted to the Fund at the beginning of the quarter with the losses hedged in part by the trading programs bid in the short end of the fixed income curve. Losses continued to be posted to the Fund in the middle of the quarter as returns had been adversely affected by a period of high volatility as global macroeconomic uncertainty dominated the financial markets. In addition, the “flash-crash” event of May 6th added further to market volatility as the S&P500 dropped significantly in one session. The Dow Jones Industrial Average and the Dow Jones Eurostoxx dropped over the month of May due to considerable volatility causing losses in the equities sector. Losses were posted to the Fund at the end of the quarter as macroeconomic data through June was generally weak due to a bearish non farm payroll figure on June 4th setting the tone for the month of June. Equities were equally range bound, with the Dow Jones Eurostoxx trading up and ending the month down which adversely affected the trading program’s predominantly long exposure to equity indices.

 

The metals sector posted overall losses to the Fund throughout the quarter due to volatility in global markets.

 

The currency sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter amidst considerable macroeconomic instability. Losses were posted to the Fund in the middle of the quarter as the euro was heavily sold against the U.S. dollar as market participants reduced exposure to the PIGS crisis (Portugal, Ireland, Greece and Spain).  Losses continued to be posted to the Fund at the end of the quarter due to the effect of a sharp market reversal caused by abrupt shifts in monetary policy and the effect of a stronger U.S. dollar on the trading program’s long positioning in dollar denominated risky assets.

 

The energy sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter as bullish non-farm-payroll data sent oil to an18 month high and the West Texas Intermediate crude oil at more than $87 per barrel. Losses were posted to the Fund in the middle of the quarter due to the West Texas Intermediate crude oil dropping to $22 per barrel through to May 25th and all other energies were similarly affected, causing a drop in the energies sector.  Losses were posted to the Fund at the end of the quarter as risk levels steadily increased through the month of June most notably in the Energies sector.  West Texas Intermediate crude oil traded within a $10 range as the BP oil spill and Hurricane Alex sparked rallies to retest the $80 per barrel level but ultimately ended the month where it began, around $76 per barrel and other energies followed a similar path, culminating in a loss in this sector.

 

July 1, 2010 to September 30, 2010

 

The Fund experienced a net trading profit of $13,687,873 before brokerage commissions and related fees in the third quarter of 2010. The Fund’s profits were primarily attributable to interest rates, currencies, metals and the agriculture sectors posting profits. The stock indices and the energy sectors posted losses. The positive returns in certain sectors may be attributed to shifts in policy by central banks with price action dictated by the Federal Reserve as expectations intensified of further quantitative easing being the most likely option for the Federal Reserve.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. The majority of the positive performance resulted from a month end rally in the short interest rate sector positions, with those who participated in the risky asset rally ready to book profits after a weak U.S. quarter on quarter gross domestic product figures in the final session forced many contracts to

 

26



 

new life highs. Profits continued to be posted to the Fund in the middle of the quarter. The closest watched events were the Federal Open Market Committee (“FOMC”) rate decision on August 10th along with the United States Federal Reserve Chairman’s speech at the annual Jackson Hole symposium on August 27th. Weakening data had led to talk of more easing but the FOMC elected to keep the balance sheet elevated as opposed to introducing new measures with the U.S. Federal Reserve appearing to offer stimulus if the economic picture deteriorated. The quarter ended with losses being posted to the Fund.

 

The currency sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Underperformance came from short positions in the euro as it strengthened against the U.S. dollar with the disparity between U.S. macro weakness and burgeoning Eurozone stability forcing a rally over the month. Profits were posted to the Fund in the middle of the quarter as returns remained constant after a period of global economic uncertainty prevailed. Profits were posted to the Fund at the end of the quarter due to the much publicized Bank of Japan intervention which may herald other central bank intervention, while the U.S. Congress passed the Currency Reform for Fair Trades Act, a signal to China on its exchange rate policies.

 

The metals sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Long gold positions suffered as it fell by month’s end as large speculative long positions were unwound. Profits were posted to the Fund in the middle through the end of the quarter in lieu of market volatility.

 

The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter due to volatility in global markets only to be offset at the end of the quarter with profits being posted to the Fund.

 

The stock indices posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The month of July began with weak macroeconomic data in Europe, Asia and the U.S. with initial jobless claims on July 1st setting the tone. As the month progressed, healthy second quarter earnings in the U.S. and fading concern of a persistent banking crisis in Europe saw equity indices rise steadily along with the Fund’s risk allocation. Infrequent surprises to the downside via weak macro prints ended up yielding losses as the main indices reacted accordingly. Losses were posted to the Fund in the middle of the quarter. Positive data surprises were relatively few in August while there were several disappointments in U.S. housing related data, an up trend in jobless claims, and private payrolls did not increase as much as was hoped for. A more robust September saw performance in the Fund’s trading program led by significant returns in equities resulting in profits being posted to the Fund.

 

The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The refined energy products rallied against a weak U.S. dollar and managed to hold flat on average across all regions. Losses continued to be posted to the Fund in the middle of the quarter as the model trimmed risky assets over the course of the month with exposure comprehensively cut in energies. Therefore, the quarter ended with profits posted to the Fund.

 

The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 303(a)(4) and 303(a)(5) of Regulation S-K.

 

27



 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

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 BlueCrest, rapidly acquires and liquidates both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the 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 BlueCrest 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

 

28



 

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.

 

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 period. For the nine months ended September 30, 2011 and 2010 the Fund’s average Month-end Net Asset Value was $269,331,913 and $196,288,346, respectively.

 

September 30, 2011

 

 

 

Average Value

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

at Risk

 

Capitalization

 

at Risk

 

at Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

1,800,749

 

0.67

%

$

5,636,681

 

$

62,670

 

Currencies

 

2,858,071

 

1.06

%

4,839,819

 

1,314,460

 

Energy

 

6,156,018

 

2.29

%

9,948,030

 

697,631

 

Interest Rates

 

1,250,566

 

0.46

%

2,202,564

 

628,854

 

Metals

 

5,252,916

 

1.95

%

15,064,014

 

37,124

 

Stock Indices

 

7,802,925

 

2.90

%

13,097,303

 

1,821,601

 

Total

 

$

25,121,245

 

9.33

%

$

50,788,411

 

$

4,562,340

 

 

September 30, 2010

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

775,533

 

0.37

%

$

1,471,254

 

$

373,259

 

Currencies

 

1,525,173

 

0.73

%

4,118,807

 

147,501

 

Energy

 

8,350,627

 

4.01

%

12,600,870

 

4,370,752

 

Interest Rates

 

5,910,736

 

2.84

%

10,459,661

 

3,352,084

 

Metals

 

1,378,676

 

0.66

%

2,855,932

 

432,204

 

Stock Indices

 

6,000,646

 

2.88

%

9,520,869

 

2,199,496

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

23,941,391

 

11.49

%

$

41,027,393

 

$

10,875,296

 

 

29



 

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.”

 

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 Bluetrend 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 September 30, 2011 by market sector.

 

Interest Rates

 

Interest rate risk is the principal market exposure of the Fund.  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

 

30



 

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.

 

Stock Indices

 

The Fund’s primary equity exposure is to S&P 500, Russell, Nikkei and German DAX equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.

 

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 corn accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of September 30, 2011.

 

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.

 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Fund as of September 30, 2011.

 

Foreign Currency Balances

 

The Fund’s primary foreign currency balances are in Japanese yen, South African rand 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.

 

31



 

Item 4. Controls and Procedures

 

MLAI, the Sponsor of ML Bluetrend FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Act Exchange of 1934) with respect to the Fund as of the end of the period covered by this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective.  No change in internal control over financial reporting (in connection with the evaluation required by paragraph (d) or Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934) occurred during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.          Legal Proceedings

 

None.

 

Item 1A.  Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 15, 2011.

 

32



 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

(a)  Units are privately offered and sold to “accredited investors” (as defined in Rule 501(a) under the Securities Act in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 thereunder.  The selling of the Units was MLPF&S.

 

CLASS A

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

$

 

 

$

1.1785

 

Feb-11

 

 

 

1.1843

 

Mar-11

 

 

 

1.2257

 

Apr-11

 

 

 

1.2100

 

May-11

 

 

 

1.2738

 

Jun-11

 

 

 

1.2297

 

Jul-11

 

 

 

1.1858

 

Aug-11

 

 

 

1.2197

 

Sep-11

 

 

 

1.1897

 

Oct-11

 

 

 

1.1893

 

 

CLASS C

 

 

 

 

 

 

 

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

$

 

 

$

1.1639

 

Feb-11

 

 

 

1.1687

 

Mar-11

 

 

 

1.2085

 

Apr-11

 

 

 

1.1920

 

May-11

 

 

 

1.2538

 

Jun-11

 

 

 

1.2095

 

Jul-11

 

 

 

1.1652

 

Aug-11

 

 

 

1.1976

 

Sep-11

 

 

 

1.1671

 

Oct-11

 

 

 

1.1658

 

 

CLASS D

 

 

 

 

 

 

 

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

$

 

 

$

1.1993

 

Feb-11

 

 

 

1.2067

 

Mar-11

 

 

 

1.2504

 

Apr-11

 

 

 

1.2359

 

May-11

 

 

 

1.3027

 

Jun-11

 

 

 

1.2592

 

Jul-11

 

 

 

1.2157

 

Aug-11

 

 

 

1.2521

 

Sep-11

 

 

 

1.2228

 

Oct-11

 

 

 

1.2239

 

 

CLASS I

 

 

 

 

 

 

 

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

$

 

 

$

1.1904

 

Feb-11

 

 

 

1.1967

 

Mar-11

 

 

 

1.2389

 

Apr-11

 

 

 

1.2234

 

May-11

 

 

 

1.2883

 

Jun-11

 

 

 

1.2442

 

Jul-11

 

 

 

1.2001

 

Aug-11

 

 

 

1.2349

 

Sep-11

 

 

 

1.2049

 

Oct-11

 

 

 

1.2049

 

 

 

 

 

 

 

 

 

 

CLASS DS

 

 

 

 

 

 

 

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

$

1,259,955

 

891,814

 

$

1.4128

 

Feb-11

 

1,567,614

 

1,102,711

 

1.4216

 

Mar-11

 

3,639,208

 

2,470,442

 

1.4731

 

Apr-11

 

1,253,696

 

861,055

 

1.4560

 

May-11

 

1,597,202

 

1,040,726

 

1.5347

 

Jun-11

 

1,261,759

 

850,586

 

1.4834

 

Jul-11

 

390,628

 

272,747

 

1.4322

 

Aug-11

 

452,374

 

306,694

 

1.4750

 

Sep-11

 

131,699

 

91,426

 

1.4405

 

Oct-11

 

1,019,031

 

706,728

 

1.4419

 

 

CLASS DT

 

 

 

 

 

 

 

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-11

 

 

 

$

1.1650

 

Feb-11

 

 

 

1.1730

 

Mar-11

 

 

 

1.2163

 

Apr-11

 

 

 

1.2029

 

May-11

 

 

 

1.2688

 

Jun-11

 

 

 

1.2272

 

Jul-11

 

 

 

1.1855

 

Aug-11

 

 

 

1.2217

 

Sep-11

 

125,206

 

104,871

 

1.1939

 

Oct-11

 

 

 

1.1958

 

 


(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.

 

 

(b)  Not applicable.

 

(c)  Not applicable.

 

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

33



 

Item 4.

(Removed and Reserved)

 

 

Item 5.

Other Information

 

None.

 

 

Item 6.

Exhibits

 

 

 

The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:

 

 

 

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.

 

 

 

Exhibit 101  Are filed herewith.

 

The following materials from the Fund’s quarterly Report on Form 10-Q for the three and nine month periods ended September 30, 2011 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. (1)

 


(1)  These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

 

34



 

SIGNATURES

 

Pursuant to the requirements 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 BLUETREND FUTURESACCESS LLC

 

 

.

 

 

By:

MERRILL LYNCH ALTERNATIVE

 

 

INVESTMENTS LLC

 

 

(Manager)

 

 

 

 

 

 

Date: November 10, 2011

By:

/s/ JUSTIN C. FERRI

 

 

Justin C. Ferri

 

 

Chief Executive Officer, President and Manager

 

 

(Principal Executive Officer)

 

 

 

 

 

 

Date: November 10, 2011

By:

/s/ BARBRA E. KOCSIS

 

 

Barbra E. Kocsis

 

 

Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

35