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EX-32.1 - AlphaMetrix Managed Futures III LLCc73033_ex32-1.htm
EX-99.1 - AlphaMetrix Managed Futures III LLCc73033_ex99-1.htm
EX-32.2 - AlphaMetrix Managed Futures III LLCc73033_ex32-2.htm
EX-31.1 - AlphaMetrix Managed Futures III LLCc73033_ex31-1.htm
EX-31.2 - AlphaMetrix Managed Futures III LLCc73033_ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - AlphaMetrix Managed Futures III LLCFinancial_Report.xls

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

FORM 10-K

 

 

 

(Mark One)
S ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
  For the fiscal year ended December 31, 2012
   
  or
   
£ 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: 000-52192

 

 

 

ALPHAMETRIX MANAGED FUTURES III LLC

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   27-1248567
(State or other jurisdiction
of incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

c/o ALPHAMETRIX, LLC
181 West Madison
34th Floor
Chicago, Illinois 60602

(Address of principal executive offices)

 

(312)267-8400

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes £ No S

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes £ No S

 

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 S No £

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes S No £

 

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer £ Accelerated filer £
Non-accelerated filer £ (Do not check if a smaller reporting company) Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes £ No S

 

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

 

As of December 31, 2012 and 2011, units of limited liability company interest of the registrant with an aggregate net asset value of $93,930,301 and $68,405,126 were outstanding and held by non-affiliates; units of limited liability company interest of the registrant with an aggregate net asset value of $10,072 and $10,860 were outstanding and held by AlphaMetrix, LLC, the sponsor of the registrant.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The Financial Statements and Report of Independent Registered Public Accounting Firm for the registrant’s master fund (the “Master Fund”) for the years ended December 31, 2012 and December 31, 2011 are incorporated by reference and filed as Exhibit 99.1 herewith.

 

ii

ALPHAMETRIX FUTURES III LLC

 

ANNUAL REPORT FOR 2012 ON FORM 10-K

 

Table of Contents

 

  Page
PART I    
     
Item 1. BUSINESS 1  
Item 1A. RISK FACTORS 8  
Item 1B. UNRESOLVED STAFF COMMENTS 8  
Item 2. PROPERTIES 8  
Item 3. LEGAL PROCEEDINGS 8  
Item 4. MINE SAFETY DISCLOSURES 8  
       
PART II    
     
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 8  
Item 6. SELECTED FINANCIAL DATA 10  
Item 7. MANAGEMENT’s DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14  
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 27
Item 8. Financial Statements and Supplementary Data 27  
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 44  
Item 9A. Controls and Procedures 44  
Item 9B. Other Information 44  
     
PART III    
     
Item 10. Directors, Executive Officers AND CORPORATE GOVERNANCE 45  
Item 11. Executive Compensation 47  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 47  
Item 13. Certain Relationships and Related Transactions, AND DIRECTOR INDEPENDENCE 48  
Item 14. Principal AccountING Fees and Services 48  
     
PART IV    
     
Item 15. Exhibits, Financial Statement Schedules 49  
       
SIGNATURES   51  
iii

PART I

 

Item 1: Business

 

(a)General Development of Business

 

AlphaMetrix Managed Futures III LLC (the “Platform”) is sponsored by AlphaMetrix, LLC (the “Sponsor” or “AlphaMetrix”). The Platform was formed on September 10, 2009 as a Delaware series limited liability company pursuant to the Delaware Limited Liability Company Act. AlphaMetrix Managed Futures III LLC (AlphaMetrix WC Diversified Series) (the “Series” or “WC Diversified Series”) is currently the only “segregated series” of the Platform. Since the Series is the Platform’s only segregated series, references to the Series also include the Platform unless otherwise noted. The Series invests a portion of its assets in AlphaMetrix WC Diversified Fund – MT0041 (the “Master Fund”) which is advised by Winton Capital Management Ltd. (the “Trading Advisor”). The Master Fund is systematically trading over numerous futures markets including grains, metals, softs, energies, meats, and financials. Trend-following in nature, the Trading Advisor’s system uses technical analysis to identify market trends. The strategy consists of a multiple of systems – four long-term models and one short-term model. NewEdge USA, LLC and J.P. Morgan Futures Inc. are the Master Fund’s futures Clearing Brokers (the “Clearing Brokers”) and NewEdge Alternative Strategies Inc. is the foreign exchange Clearing Broker of the Master Fund, although the Master Fund may execute foreign exchange trades through another foreign exchange Clearing Brokers at any time. The Sponsor, over time, intends to offer investors a selection of different trading advisors, each managing a different segregated series of the Platform. There can be no assurance, however, that any series other than the Series will be offered or that the Series will continue to be offered. The Series was organized on September 11, 2009. The Series issued units and commenced trading on January 1, 2010. The Series filed a Form 10, under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (“SEC”) to register the units of limited liability company interest (“Units”), and such registration became effective March 1, 2010.

 

The Series issues two sub-series (“Sub-Series”), B-0 and B-2. These sub-series are subject to different fees as described in the Confidential Disclosure Document (the “Disclosure Document”). The financial statements presented herein include the combined results of both sub-series. On January 1, 2010, the Series issued 10.00 Units of the B-2 sub-series to the Sponsor for $10,000. The Sponsor serves as the Series’ tax matters partner.

 

The Sponsor was formed in May 2005, and its main office is located in Chicago, Illinois. The Sponsor is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and commodity trading advisor, with the SEC as a Registered Investment Advisor (“RIA”) and registered transfer agent (“RTA”), and is a member of the National Futures Association (“NFA”).

 

At the sole discretion of the Sponsor, the Series may terminate for any reason (for the avoidance of doubt, the Sponsor shall be entitled, without any violation of any contractual or fiduciary obligation to any investor in the Series (a “Member”), to dissolve the Series at any time).

 

(b)Financial Information about Segments

 

The Series’ business constitutes only one segment for financial reporting purposes, i.e. a speculative “commodity pool.” The Series does not engage in sales of goods or services. Financial information regarding the Series’ business is set forth in Item 6 “Selected Financial Data” and incorporated into Part II, Item 8.

 

(c)Narrative Description of Business

 

General

1

The Series invests a portion of its assets in the Master Fund. The Trading Advisor manages the assets of the Master Fund pursuant to its Diversified Program (the “Program”). The Program is systematically trading over numerous futures markets including grains, metals, softs, energies, meats, and financials. Trend-following in nature, the Trading Advisor’s system uses technical analysis to identify market trends. The strategy consists of a multiple of systems – four long-term models and one short-term model.

 

The Program seeks to combine highly liquid financial instruments offering positive but low Sharpe ratios (which is designed to measure return relative to risk) and generally low correlation over the long term to other markets such as equities and fixed income.

 

The Master Fund’s account traded pursuant to the Program may experience returns that differ from other Trading Advisor accounts traded pursuant to the same Program due to, among other factors: (a) regulatory constraints on the ability of the Series to have exposure to certain contracts; (b) the Sponsor’s selection of the Clearing Brokers, which affects access to markets; (c) the effect of intra-month adjustments to the trading level of the account; (d) the manner in which the account’s cash reserves are invested; (e) the size of the Series’ account; (f) the Series’ functional currency, the U.S. dollar; (g) the particular futures contracts traded by the Series’ account; (h) the leverage implemented; and (i) the interest rate earned on invested cash. Additionally, certain markets may not be liquid enough to be traded for the Series’ account.

 

The investment approach that underpins the Program is proprietary. The Trading Advisor’s investment philosophy has remained consistent and involves a scientific approach to investment driven by the Trading Advisor’s belief that market behavior is not random but rather contains statistically measurable and predictable price movements and anomalies which, through sophisticated quantitative research and a disciplined approach, can be successfully identified and exploited for profit.

 

Allocation Methodology

 

Allocations to the strategy, markets and asset classes traded by the Program are reviewed on a regular basis using a robust and stable quantitative methodology which takes into account a range of factors that may include liquidity, risk and expected returns. The Program, subject to applicable investment policies, does not have any inherent preference for, or bias towards, any market, asset class or instrument but rather aims to maximize returns within liquidity constraints, such as speculative position limits or market disruptions.

 

Market Access and Trading Costs

 

The Trading Advisor appreciates the importance of executing trades in a cost efficient manner and the significance of market impact and trading costs on the Series’ performance. The Trading Advisor takes into account the liquidity of the markets in which it executes trades so as to endeavor to provide optimal market execution results (including executing electronically wherever beneficial).

 

Risk Management

 

A fundamental principle of the Trading Advisor’s investment approach is the importance of a robust risk management framework. The Trading Advisor employs a value-at-risk methodology and other risk management procedures to monitor the risk of the Program within pre-defined guidelines. Additionally, the Trading Advisor has developed mechanisms to control risk at both an individual market and portfolio level. In order to monitor and respond to changes in the trading conditions in a market at all times, the Trading Advisor believes a high level of transparency is required. This transparency is achieved by generally investing in liquid instruments with real time pricing, although this may not be possible in all markets or for all instruments.

 

The Master Fund engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively “derivatives”). These derivatives include both financial and non-financial contracts held as part of a diversified trading strategy. The Master Fund and the Series, via its investment in the Master Fund, are exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk with the Clearing Brokers, the risk of failure by another party to perform according to the terms of a contract. Market risk is the potential for changes in the value of derivatives due to market changes, including interest and foreign exchange

2

rate movements and fluctuations in commodity and security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The market risk of the Master Fund is managed by the Trading Advisor according to its trading program. Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk due to exchange traded financial instruments is significantly reduced by the regulatory requirements of the individual exchanges on which the instruments are traded.

 

The purchase and sale of futures contracts are executed on an exchange and requires margin deposits with a Futures Commission Merchant (“FCM”). Additional deposits may be necessary for any loss on contract value. The U.S. Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM’s proprietary activities. A customer’s cash and other property, such as U.S. Treasury Bills, deposited with an FCM are considered commingled with all other customer funds subject to the FCM’s segregation requirements. In the event of an FCM’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited. The Clearing Brokers are FCMs.

 

Due to forward currency contracts being traded in unregulated markets between principals, the Master Fund and the Series, via its investment in the Master Fund, also assume a credit risk and the risk of loss from counterparty non-performance with respect to its currency trading. Funds and property deposited as margin in connection with the transactions are not required to be, and typically are not, segregated. Accordingly, the Master Fund and the Series are exposed to the creditworthiness of the Clearing Brokers on these trades facilitated by the Clearing Brokers. In the event of a Clearing Broker’s bankruptcy, the Master Fund and the Series could lose all or substantially all assets not located in segregated funds. The Series exposure to credit risk is limited to its investment in the Master Fund.

 

To evaluate and monitor counterparty risk of the Clearing Brokers or any trading counterparty, the AlphaMetrix Risk Department initially evaluates their credit ratings from the major agencies: Moody’s, Standard & Poor’s and Fitch Ratings. Credit ratings and outlooks are monitored daily for downgrades and an investigation is initiated upon any adverse change. Further, any large decline in the daily stock price also triggers an investigation. Lastly, quarterly reports on earnings and future outlooks from counterparties are reviewed and analyzed by the AlphaMetrix Risk Department for unfavorable results.

 

For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Master Fund is exposed to market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short. The Series exposure to market risk is limited to its investment in the Master Fund.

 

The Series, via its investment in the Master Fund, is designed to take on market risk on a systematic basis across a broad portfolio of liquid markets and to monitor and minimize exposure to all other risks, such as credit and liquidity risks. The trading systems used by the Master Fund’s Trading Advisor include various proprietary systems that are designed to control the risk taken at the individual position level as well as at the overall portfolio level. The Trading Advisor monitors and controls market risk within limits at both sector and portfolio levels.

 

Net trading results arising from the Master Fund’s speculative trading of derivatives for the year ended December 31, 2012 are reflected in the Master Fund’s Statements of Operations and equals net realized and unrealized gain/(loss) on investments and foreign currency less the trading costs.

 

The Members bear the risk of loss only to the extent of the fair value of their respective investment in the Series.

 

Research Commitment and Program Development

 

The Trading Advisor retains the right to develop and make changes to the Program at its sole discretion, including (without limitation) the incorporation of new markets, instruments, strategies and asset classes into the Program. The Master Fund will be notified of such changes only if they amount to material changes to the investment objective or investment policy of the Program.

 

The Program is proprietary and highly confidential to the Trading Advisor. Accordingly, the description of the Program as contained herein is general only and is not intended to be exhaustive or absolute.

3

Custody of Assets

 

The Series invests a portion of its assets in the Master Fund, approximately 32% and 28% at December 31, 2012 and 2011. A substantial amount of the Master Fund’s assets are held either with OPCA, a related party, or in customer accounts at the Clearing Brokers, although they may be held at other affiliates of the Clearing Brokers or other third-party Clearing Brokers selected by the Sponsor. For a discussion on the OPCA, refer to Note 5 to the Master Fund’s financial statements, attached as Exhibit 99.1.

 

Only assets held to margin CFTC-regulated futures contracts may be held in CFTC-regulated “segregated funds” accounts. “Segregated funds” accounts are insulated from liability for any claims against a broker other than those of other customers. As of December 31, 2012 and 2011, 72.11% and 32.66% of the net assets of the Master Fund was held in cash, of which 47.03% and 64.12% of the cash is restricted cash for margin requirements. As of December 31, 2012 and 2011, 3.31% and 6.55% of net assets, representing the fair value of futures, options on futures contracts, and forward currency contracts, was held at the Clearing Brokers. Some of the Series’ capital is not held in segregation, but rather in custody or other client accounts maintained by affiliates of the Clearing Brokers. Subject to any applicable regulatory restrictions, these affiliates may make use of such capital, which is treated as a liability or deposit owed by such affiliates to the Series. However, if such an affiliate were to incur financial difficulties, the Series’ assets could be lost (the Series becoming only a general creditor of such affiliate) and, even if not lost, could be unavailable to the Series for an extended period.

 

The Sponsor considers the Clearing Brokers’ policies regarding the safekeeping of the Series’ assets to be fully consistent with industry practices.

 

Interest Income/Expense

 

Interest income and expense is recognized on an accrual basis. Interest income or expense may include (1) the Master Fund’s interest income/expense from its broker or interest income from the Master Fund’s investment in the OPCA, and allocated by the Master Fund to the Series or (2) interest income from the Series’ bank account.

 

Interest

 

The Series generally earns interest on its cash at a bank and on the proportionate share of the cash actually held by the Master Fund, (the “Cash Assets”). The Master Fund does not earn interest income on the Master Fund’s gains or losses on open forward, commodity option and certain non-U.S. futures positions because such gains and losses are not collected or paid until such positions are closed out. Interest is earned only on funds actually held in the Master Fund’s account. The Master Fund also earns interest from its investment in the OPCA.

 

The Master Fund will receive interest income on the cash held on deposit as margin with each Clearing Brokers as of the end of each month currently at a rate equal to a certain percentage of U.S. Treasury bill rates; with the remaining portion retained by the relevant Clearing Brokers. In the case of trading non-U.S. futures, the Clearing Brokers lend to the Master Fund any non-U.S. currency it requires, charging interest at a local short-term rate. The Clearing Brokers will receive and/or retain certain interest and other economic benefits from possession of the Master Fund’s assets.

 

The Clearing Brokers, in the course of acting as commodity broker for the Master Fund, lend certain currencies to, and hold certain non-U.S. currency balances. If, for example, the Master Fund needed to make a margin deposit in Swiss Francs, the Clearing Brokers would lend the Master Fund the Swiss Francs, charging a local short-term rate plus a spread of up to 1.0% per annum (at current rates). Should the Master Fund hold Swiss Franc balances in its account, the Clearing Brokers will credit the Master Fund with interest at the same local short-term rate less a spread of up to 2.0% per annum (at current rates).

 

The Clearing Brokers follow their standard procedures for crediting and charging interest to the Master Fund. The Clearing Brokers are able to generate significant economic benefit from doing so, especially as the Clearing Brokers are able to meet the margin requirements imposed on customers as a group, whereas each customer must margin its account on a stand-alone basis with the Clearing Brokers. Consequently, the Clearing Brokers may record a loan of Swiss Francs (in the above example) to the Master Fund’s account which the Clearing Brokers charge interest even though the Clearing Brokers do not have to deposit any Swiss Francs at the applicable clearinghouse.

4

Description of Current Expenses

 

The Trading Advisor is entitled to a management fee which is calculated and paid at the Series level. The management fee is based on the net asset value of each Sub-Series. For purposes of calculating the management fee payable to the Trading Advisor, the net asset value of each Sub-Series is determined before reduction for any management fees, performance fees, service provider fees, sponsor fees, ongoing sales commissions or extraordinary fees accrued, including performance fees accrued in a prior month, and before giving effect to any capital contributions made as of the beginning of the month immediately following such month-end and before any distributions or redemptions accrued during or as of such month-end, but after all other expenses as of such month-end.

 

The B-2 and B-0 Units are subject to a management fee (“Management Fee”) of 2.25%. Certain affiliates of the selling agent will receive a portion of the Management Fee from the Sponsor for services rendered, pursuant to a letter agreement between them. The Sponsor, in consultation with the Trading Advisor, may waive, rebate or reduce the Management Fee for certain members without entitling any other member to any such waiver, rebate or reduction.

 

The Trading Advisor also will receive a performance fee (“Performance Fee”) equal to 20% of the Series’ pro rata share of the Master Fund’s new net trading profits for each quarter. New net trading profits during each quarter refers to the excess, if any, of the cumulative level of net trading profits attributable to the Series at the end of such quarter over the highest level of cumulative net trading profits as of the end of any preceding quarter (the “High Water Mark”). Performance Fees do not, while losses do, reduce cumulative net trading profits. New net trading profits do not include interest income. To the extent that any redemption is made from the Series, the High Water Mark is proportionately reduced and a proportionate Performance Fee paid (if accrued).

 

The Sponsor pays the Trading Advisor’s management and performance fees out of the Management Fees and Performance Fees that the Series pays to the Sponsor.

 

The Sponsor receives a monthly sponsor fee (“Sponsor Fee”) of 0.042 of 1% (a 0.50% annual rate) of the Series’ month-end net asset value for all other purposes, as defined below, which takes into account interest income, of each Member’s investment in the Series for such month.

 

AlphaMetrix360, LLC (the “Administrator”), a related party to the Sponsor, receives a monthly fee as to be determined by the Sponsor and the Administrator, of up to 0.0142% (a 0.17% annual rate) of each Series’ net asset value for all other purposes as of the beginning of each month (a 0.10% annual rate), subject to a monthly minimum of $3,300, provided that if the assets of all pools for which the Sponsor acts as sponsor, measured at the segregated series level only, exceed $1.5 billion, the administration fee on assets above $1.5 billion but below $2.5 billion will be 0.01% (a 0.12% annual rate), and provided further that if the assets of all pools for which the Sponsor acts as sponsor, measured at the segregated series level only, exceed $2.5 billion, the administration fee on assets above $2.5 billion will be 0.0083% (a 0.10% annual rate).

 

The Administrator is responsible for certain clerical and administrative functions of the Series, including acting as registrar and transfer agent, calculation of NAV based on valuations provided by the Trading Advisor and the Sponsor (although the Sponsor is ultimately responsible for determining the Net Asset Value of the Series).

 

Each Member or Member-related account may be subject to an ongoing sales commission (the “Sales Commission”).

 

B-2 Units are subject to an ongoing Sales Commission equal to 2% per annum of the month-end net asset value, including interest income, of the outstanding B-2 Units after deducting the Management Fee and accrued Performance Fee, if any, but before deducting the Sales Commission and Sponsor Fee for such month. Each month that B-2 Units are sold, a Sales Commission equal to 2% of the aggregate subscriptions for B-2 Units is paid by the Sub-Series to the selling agent (the “Initial Sales Commission” or “Placement Fee”). The amount of the Initial Sales Commission will then be amortized against the Net Asset Value of the B-2 Units equally each month over the first 12 months. Thereafter, a Sales Commission equal to 0.17% of the Net Asset Value (equivalent to an annual rate of

5

approximately 2.0%) of the B-2 Units sold on the relevant subscription date that remain outstanding is charged each month and is paid to the selling agents.

 

The Sales Commission may be greater or less than 2% of the current Net Asset Value of the B-2 Units. The Sales Commission charged against the Net Asset Value of the B-2 Units each month is equal to the total of the amortized Sales Commission for all B-2 Units that have been outstanding for twelve months or less, plus 0.17% (equivalent to an annual rate of approximately 2%) per month of the Net Asset Value of the B-2 Units that have been outstanding for more than twelve months. For example, if 40% of the B-2 Units’ had been outstanding for more than twelve months, the total Sales Commission would equal the sum of all of the amortized portions for that month plus 0.17% (equivalent to an annual rate of approximately 2%) times the Net Asset Value of the B-2 Units times 0.4. All B-2 Unit holders would then be charged their pro rata portion of such amount. In general, if the Net Asset Value of the B-2 Units is increasing, the amount paid will generally be less than 2% of their Net Asset Value, and if the Net Asset Value of the B-2 Units is decreasing, the amount paid will generally be greater than 2% of their Net Asset Value.

 

The B-0 Units are not subject to a Sales Commission.

 

The selling agents, in consultation with the Sponsor, may waive or reduce the Sales Commission for certain Members without entitling any other Member to any such waiver or reduction.

 

The Master Fund’s brokerage commissions are paid upon completion or liquidation of one-half of a trade and are referred to as “per side” commissions, which cover either the initial purchase (or sale) or the subsequent offsetting sale (or purchase) of a single commodity futures contract. The principal operating costs of the Master Fund are the per side brokerage commissions paid to the Clearing Brokers (a portion of which is paid to the Master Fund’s executing brokers, which may or may not include the Clearing Brokers, as commissions for their execution services) and the currency forward contract (“F/X”) dealer spreads paid to the Clearing Brokers and others. The “per side” commissions for U.S. markets paid by the Master Fund are approximately $2.00 per side plus fees (except in the case of certain non-U.S. contracts on which the rates may be as high as $50 per side plus fees due, in part, to the large size of the contracts traded).

 

Many of the Master Fund’s currency trades are executed in the spot and forward non-U.S. exchange markets (the “F/X Markets”) in which there are no direct execution costs. Instead, the banks and dealers in the F/X Markets, including the Clearing Brokers, take a “spread” between the prices at which they are prepared to buy and sell a particular currency, and such spreads are built into the pricing of the spot or forward contracts with the Master Fund. In general, the Sponsor estimates that aggregate brokerage commission charges (including F/X spreads) will not exceed 3.5%, and should range between approximately 0.5% and 3% per annum of the Series’ average month-end assets (meaning the average month-end net asset value for all other purposes for the then-current fiscal year).

 

The Sponsor receives a monthly Service Provider Fee equal to 0.025 of 1% (equivalent to an annual rate of approximately 0.30%) of the month-end Net Asset Value of the Series, including interest income, after deducting the Management Fee and accrued Performance Fee, if any, but before deducting the Sales Commission, Service Provider Fee and Sponsor Fee for such month. Operating costs paid for by the Sponsor out of the Service Provider Fee generally include: expenses and costs associated with periodic filing requirements under the Exchange Act; ongoing offering expenses; administrative, transfer, exchange and redemption processing costs; legal, regulatory, reporting, filing, tax, audit, escrow and accounting; the fees of the Master Fund’s directors; and any other operating or administrative expenses related to accounting, research, due diligence or reporting. The Service Provider Fee is charged at the Series level.

 

Operating costs not covered by the Service Provider Fee and paid for by the Series (including those allocated to the Series by the Master Fund) generally include: execution and Clearing Brokerage commissions; forward and other over-the-counter trading spreads; bank wire fees; insurance; and extraordinary expenses such as litigation and indemnification.

6

Redemption Fee

 

If a Member redeems his or her investment in the B-2 Units before the end of the sixth calendar month following such Member’s initial investment in the B-2 Units (the “Initial Investment”), such Redemption will be subject to a Redemption Fee (the “Redemption Fee”) equal to 2% of such Member’s Initial Investment. If a Member Redeems his or her investment in the B-2 Units following the sixth month-end after the date of his or her Initial Investment but prior to the twelfth month-end after the date of such Member’s Initial Investment, such Redemption will be subject to a Redemption Fee equal to 1% of such Member’s Initial Investment in the B-2 Units. The Redemption Fee will be pro-rated for partial redemptions prior to the twelfth month-end following such Member’s Initial Investment, i.e. if the Member withdraws 50% of his or her current investment in the B-2 Units, 50% of the Redemption Fee will be due upon Redemption. In no case will the sum of all Redemption Fees paid by a Member be greater than the Initial Sales Commission paid by such Member. Redemption fees amounted to $4,390 and $2,075 for the years ended December 31, 2012 and 2011, respectively.

 

The following table summarizes the expenses incurred by the Series for the years ended December 31, 2012 and 2011:

 

   2012   2011 
Expenses  Dollar Amount   % of Average
Month-End
Net Asset
Value for
Financial
Reporting
   Dollar Amount   % of Average
Month-End
Net Asset
Value for
Financial
Reporting
 
                     
Performance fees  $327    0.00%  $518,353    1.23%
Management fees   1,986,850    2.32    1,007,121    2.38 
Sales Commissions   342,630    0.40    72,389    0.17 
Allocated trading costs   86,705    0.10    41,142    0.10 
Placement fees   325,534    0.38    318,148    0.75 
Sponsor fees    440,227    0.51    190,081    0.45 
Operating expense   317,811    0.37    152,694    0.36 
Organizational costs        0.00        0.00 
Allocated cash manager and sponsor fee       0.00    39,546    0.09 
Total  $3,500,084    4.08%  $2,339,474    5.53%

 

The Series’ average month-end net asset value for financial reporting during 2012 and 2011 equaled $85,863,736 and $42,254,706, respectively.

 

During 2012 and 2011 the Series had $5,581 and $0 in net interest expense or approximately 0.01 % of the Series’ average month-end net asset value for financial reporting.

 

Regulation

 

The Sponsor and the Trading Advisor are registered with the CFTC as commodity pool operators and commodity trading advisors (“CTAs”) and are members of the National Futures Association (“NFA”) in such capacities. The CFTC may suspend a commodity pool operator’s or trading advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the Sponsor or of the Trading Advisor as a commodity pool operator or a commodity trading advisor were terminated or suspended, the Sponsor or Trading Advisor, as applicable, would be unable to continue to manage the business of the Series or the trading of its assets. Should the Sponsor’s or Trading Advisor’s registration be suspended, termination of the Series might result. In addition to such registration requirements, the CFTC and certain

7

commodity exchanges have established limits on the maximum net long or net short positions that any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day. Forward currency contracts are not subject to regulation by any U.S. government agency.

 

Other than in respect of the registration requirements pertaining to the Series’ securities under Section 12(g) of the Securities Exchange Act of 1934, as amended, the Platform and the Series are generally not subject to regulation by the Securities and Exchange Commission. The Trading Advisor is also regulated by the Financial Service Authority of the United Kingdom.

 

(i) through (xii) – not applicable.

 

(xiii) the Series has no employees.

 

(d)Financial Information About Geographic Areas

 

Neither the Master Fund nor the Series engage in material operations in foreign countries, nor is a material portion of the Series’ revenue derived from customers in foreign countries. The Master Fund will trade on a number of U.S. and non-U.S. commodities exchanges. The Master Fund will not engage in the sales of goods or services.

 

Item 1A: Risk Factors

 

Not applicable

 

Item 1B: Unresolved Staff Comments

 

Not applicable

 

Item 2: Properties

 

The Master Fund and the Series do not own or use any physical properties in the conduct of their businesses.

 

The Master Fund and the Series’ administrative office is the administrative office of the Sponsor (181 West Madison, 34th Floor, Chicago, IL 60602). The Sponsor performs administrative services for the Series from the Sponsor’s offices.

 

Item 3: Legal Proceedings

 

The Sponsor is not aware of any pending legal proceedings to which either the Master Fund or the Series is a party or to which any of its assets are subject.

 

Item 4: Mine Safety Disclosures

 

Not applicable.

 

PART II

 

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

 

(a)Market Information

 

There is no trading market for the Units, and none is likely to develop. Units may be redeemed at the net asset value per Unit for all other purposes as of the end of any calendar month. Redemption requests must be submitted on or prior to the 15th day of the calendar month (or the following business day) in which such Units are to be redeemed.

 

(b)Holders

 

As of December 31, 2012 and 2011, there were 1,150 and 886 holders of Units, including the Sponsor.

8
(c)Dividends

 

No distributions or dividends have been made on the Units, and the Sponsor has no present intentions to make any.

 

(d)Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

(e)Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

The Series did not sell any unregistered securities since it commenced operations on January 1, 2010 that have not previously been included in the Series’ Quarterly Reports on Form 10-Q or in a Current Report on Form 8-K.

 

(f)Issuer Purchases of Equity Securities

 

Pursuant to the Platform’s Amended and Restated Limited Liability Company Agreement and the Series’ Amended and Restated Separate Series Agreement, Members may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit for all other purposes, i.e. reflecting the amortization of organizational and initial offering costs. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed. The following table summarizes the redemptions by Members during the fourth quarter of 2012 and 2011:

 

B-0

 

Month  Units
Redeemed
   Redemption Date Net Asset Value per Unit for All Other
Purposes
 
October 31, 2012   306.75   $1,037.399 
November 30, 2012   325.32   $1,048.234 
December 31, 2012   537.09   $1,062.610 
Total   1,169.16      

 

B-2

 

Month  Units
Redeemed
   Redemption Date Net Asset Value per Unit for All Other
Purposes
 
October 31, 2012   880.98   $987.409 
November 30, 2012   416.76   $995.957 
December 31, 2012   633.89   $1,007.915 
Total   1,931.63      

 

B-0

 

Month  Units
Redeemed
   Redemption Date Net Asset Value per Unit for All Other
Purposes
 
October 31, 2011   0.00   $1,098.808 
November 30, 2011   0.00   $1,107.170 
December 31, 2011   117.64   $1,123.309 
Total   117.64      

 

B-2

 

Month  Units
Redeemed
   Redemption Date Net Asset Value per Unit for All Other
Purposes
 
October 31, 2011   88.14   $1,067.149 
November 30, 2011   0.00   $1,073.477 
December 31, 2011   66.07   $1,087.324 
Total   154.21      

9

Item 6: Selected Financial Data

 

The following selected data has been derived from the audited Financial Statements of the Series.

 

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Financial Condition

 

   AlphaMetrix Managed Futures   AlphaMetrix Managed   AlphaMetrix Managed Futures   AlphaMetrix Managed 
   III LLC (WC Diversified Series)   Futures III LLC   III LLC (WC Diversified Series)   Futures III LLC 
   December 31, 2012   December 31, 2012   December 31, 2011   December 31, 2011 
ASSETS                    
Investment in AlphaMetrix WC Diversified Fund - MT0041, at fair value  $30,769,148   $30,769,148   $22,107,621   $22,107,621 
Receivable from AlphaMetrix WC Diversified Fund - MT0041   153,600    153,600           
Cash at bank   64,990,938    64,990,938    55,372,644    55,372,644 
Prepaid assets   110,883    110,883    178,731    178,731 
Total Assets  $96,024,569   $96,024,569   $77,658,996   $77,658,996 
LIABILITIES                    
SUBSCRIPTIONS RECEIVED IN ADVANCE  $753,000   $753,000   $8,257,000   $8,257,000 
PAYABLES:                    
Accrued sponsor fee    13,344    13,344    8,523    8,523 
Accrued management fee   60,158    60,158    43,828    43,828 
Accrued sales commission   38,489    38,489    14,163    14,163 
Accrued operating costs   9,582    9,582    8,210    8,210 
Payable to AlphaMetrix WC Diversified Fund - MT0041           707,300    707,300 
Redemptions payable   1,209,623    1,209,623    203,986    203,986 
 Total Liabilities   2,084,196    2,084,196    9,243,010    9,243,010 
MEMBERS’ CAPITAL                    
B0 Members (55,603.78 and 35,445.16 units outstanding at December 31, 2012 and 2011, unlimited units authorized)           59,061,278               59,061,278               39,780,045               39,780,045    
B2 Members (34,618.87 and 26,359.10 units outstanding at December 31, 2012 and 2011, unlimited units authorized)           34,869,023               34,869,023               28,625,081               28,625,081    
Sponsor (10 units outstanding at December 31, 2011 and 2010, unlimited units authorized)           10,072               10,072               10,860               10,860    
Total Members’ Capital   93,940,373    93,940,373    68,415,986    68,415,986 
TOTAL LIABILITIES AND MEMBERS’ CAPITAL  $96,024,569   $96,024,569   $77,658,996   $77,658,996 

 

See financial statements of AlphaMetrix WC Diversified Fund - MT0041 attached as Exhibit 99.1 and Series financial statements incorporated into Part II, Item 8.

10

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Operations

For the years ended December 31, 2012 and 2011

 

   AlphaMetrix Managed    AlphaMetrix Managed   AlphaMetrix Managed    AlphaMetrix Managed 
   Futures III LLC (WC Diversified   Futures III LLC   Futures III LLC (WC Diversified   Futures III LLC 
   Series ) 2012   2012   Series ) 2011   2011 
NET INVESTMENT INCOME/(LOSS) ALLOCATED FROM ALPHAMETRIX WC DIVERSIFIED FUND - MT0041:                                                
Interest income  $7,567   $7,567   $49,145   $49,145 
Interest expense   (5,581)   (5,581)   (41,142)   (41,142)
Trading cost   (86,705)   (86,705)   (4)   (4)
Cash manager and sponsor fees           (39,546)   (39,546)
Net investment income/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041           (84,719 )           (84,719 )           (31,547 )           (31,547 )
FUND NET INVESTMENT INCOME/(LOSS):                    
Placement fee   (325,534)   (325,534)   (318,148)   (318,148)
Operating expenses   (317,811)   (317,811)   (152,694)   (152,694)
Management fee   (1,986,850)   (1,986,850)   (1,007,121)   (1,007,121)
Performance fee   (327)   (327)   (518,353)   (518,353)
Sales commission   (342,630)   (342,630)   (72,389)   (72,389)
Sponsor fee    (440,227)   (440,227)   (190,081)   (190,081)
                     
Net investment income/(loss)   (3,413,379)   (3,413,379)   (2,258,786)   (2,258,786)
Total net investment income/(loss)   (3,498,098)   (3,498,098)   (2,290,333)   (2,290,333)
NET REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM ALPHAMETRIX WC DIVERSIFIED FUND - MT0041:                                                
Net realized gain/(loss)   (1,205,999)   (1,205,999)   3,444,090    3,444,090 
Net increase/(decrease) in unrealized appreciation/(depreciation)   (928,522)   (928,522)   106,470    106,470 
Total net realized and unrealized gain (loss) allocated from AlphaMetrix WC Diversified Fund - MT0041           (2,134,521 )           (2,134,521 )           3,550,560             3,550,560  
                     
Net increase/(decrease) in net assets resulting from operations  $(5,632,619)  $(5,632,619)  $1,260,227   $1,260,227 
Weighted average number of WC Diversified Series units outstanding   80,343    80,343    38,641    38,641 
Net income/(loss) per weighted average unit  $(70.11)  $(70.11)  $32.61   $32.61 

 

 

See financial statements of AlphaMetrix WC Diversified Fund - MT0041 attached as Exhibit 99.1 and Series financial statements incorporated into Part II, Item 8.

11

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Changes in Members’ Capital

For the year ended December 31, 2012

 

For the year ended December 31, 2012  AlphaMetrix Managed Futures III LLC (WC Diversified Series)   AlphaMetrix Managed 
   B-0 Members   B-2 Members   Sponsor (B-2)   Total   Futures III LLC 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2012  $39,780,045    35,445.16   $28,625,081    26,359.10   $10,860    10.00   $68,415,986    61,814.26   $68,415,986    61,814.26 
Members’ subscriptions   26,320,815    23,832.79    13,226,228    12,580.00            39,547,043    36,412.79    39,547,043    36,412.79 
Members’ redemptions   (3,958,103)   (3,674.17)   (4,431,934)   (4,320.23)           (8,390,037)   (7,994.40)   (8,390,037)   (7,994.40)
Net investment loss   (1,761,201)       (1,736,354)       (543)       (3,498,098)       (3,498,098)    
Total net realized and unrealized gain/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041        (1,320,278 )        —           (813,998 )        —           (245 )        —           (2,134,521 )        —           (2,134,521 )        —   
Members’ capital at December 31, 2012  $59,061,278    55,603.78   $34,869,023    34,618.87   $10,072    10.00   $93,940,373    90,232.65   $93,940,373    90,232.65 
                                                   
Net asset value per unit at January 1, 2012  $1,122.299        $1,085.966        $1,085.966                          
Change in net asset value per unit   (60.118)        (78.740)        (78.740)                         
Net asset value per unit at December 31, 2012  $1,062.181        $1,007.226        $1,007.226                          

 

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Changes in Members’ Capital

For the year ended December 31, 2011

 

For the year ended December 31, 2011  AlphaMetrix Managed Futures III LLC (WC Diversified Series)   AlphaMetrix Managed 
   B-0 Members   B-2 Members   Sponsor (B-2)   Total    Futures III LLC 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2011  $7,562,143    7,030.08   $8,628,060    8,120.00   $10,626    10.00   $16,200,829    15,160.08   $16,200,829    15,160.08 
Members’ subscriptions   32,040,734    29,101.52    20,042,738    18,576.12            52,083,472    47,677.64    52,083,472    47,677.64 
Members’ redemptions   (761,952)   (686.44)   (366,590)   (337.02)           (1,128,542)   (1,023.46)   (1,128,542)   (1,023.46)
Net investment loss   (1,062,758)       (1,226,923)       (652)       (2,290,333)       (2,290,333)    
Total net realized and unrealized gain/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041   2,001,878        1,547,796        886        3,550,560        3,550,560     
Members’ capital at December 31, 2011  $39,780,045    35,445.16   $28,625,081    26,359.10   $10,860    10.00   $68,415,986    61,814.26   $68,415,986    61,814.26 
                                                   
Net asset value per unit at January 1, 2011  $1,075.684        $1,062.568        $1,062.568                          
Change in net asset value per unit   46.615         23.398         23.398                          
Net asset value per unit at December 31, 2011  $1,122.299        $1,085.966        $1,085.966                          
12

The Series will bear all expenses incurred in connection with the organizational and initial offering of the Units at the Series level. For financial reporting purposes in conformity with U.S. generally accepted accounting principles (“GAAP”), the Series expensed the organizational costs of $119,362 (“net asset value for financial reporting” or the “net asset value per Unit for financial reporting”). For all other purposes, including determining the net asset value per Unit for subscription and redemption purposes, the Series amortizes organizational and initial offering costs over a 60 month period (“net asset value for all other purposes” or the “net asset value per Unit for all other purposes”).

 

B-0

 

   Net Asset Value       Net Asset Value per Unit 
   All Other
Purposes
   Financial
Reporting
   Number of
Units
   All Other
Purposes
   Financial
Reporting
 
Price at Commencement*                 $1,000.000   $1,000.000 
March 31, 2010  $204,747   $170,129    201.42    1,016.543    844.668 
June 30, 2010   1,552,311    1,498,597    1,514.35    1,025.067    989.597 
September 30, 2010   3,449,930    3,399,202    3,299.18    1,045.693    1,030.317 
December 31, 2010   7,609,887    7,562,143    7,030.08    1,082.475    1,075.684 
March 31, 2011   14,437,218    14,392,458    13,168.12    1,096.377    1,092.977 
June 30, 2011   21,259,372    21,217,596    19,929.06    1,066.753    1,064.656 
September 30, 2011   33,859,556    33,820,763    29,987.57    1,129.120    1,127.826 
December 31, 2011   39,815,854    39,780,045    35,445.16    1,123.309    1,122.299 
March 31, 2012   50,681,169    50,648,343    45,726.34    1,108.358    1,107.640 
June 30, 2012   54,723,265    54,693,424    51,399.89    1,064.657    1,064.077 
September 30, 2012   57,230,448    57,203,593    53,663.40    1,066.471    1,065.970 
December 31, 2012   59,085,151    59,061,278    55,603.78    1,062.610    1,062.181 
                          
Total return after performance fee, from the commencement of operations through the
period ended December 31, 2012
      6.26 %     6.22 %

 

B-2

 

                     
   Net Asset Value       Net Asset Value per Unit 
   All Other
Purposes
   Financial
Reporting
   Number of
Units
   All Other
Purposes
   Financial
Reporting
 
Price at Commencement*                 $1,000.000   $1,000.000 
March 31, 2010  $711,568   $676,950    702.56    1,012.822    963.548 
June 30, 2010   3,545,196    3,491,483    3,473.46    1,020.653    1,005.189 
September 30, 2010   4,167,206    4,116,477    4,017.54    1,037.254    1,024.627 
December 31, 2010   8,686,430    8,638,686    8,130.00    1,068.441    1,062.568 
March 31, 2011   11,718,602    11,673,842    10,882.20    1,076.859    1,072.746 
June 30, 2011   18,552,025    18,510,249    17,801.65    1,042.152    1,039.805 
September 30, 2011   25,506,034    25,467,241    23,220.46    1,098.429    1,096.758 
December 31, 2011   28,671,748    28,635,941    26,369.10    1,087.324    1,085.966 
March 31, 2012   30,271,135    30,238,312    28,356.74    1,067.511    1,066.354 
June 30, 2012   31,902,551    31,872,713    31,268.81    1,020.267    1,019.313 
September 30, 2012   35,467,117    35,440,260    34,881.13    1,016.800    1,016.030 
December 31, 2012   34,902,966    34,879,095    34,628.87    1,007.915    1,007.226 
                          
Total return after performance fee, from the commencement of operations through the
period ended December 31, 2012
   0.79%   0.72%

 

*Commencement of operations of the series was January 1, 2010.

13

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 

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

 

Reference is made to Item 6 “Selected Financial Data” and Item 8 “Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.

 

All figures and performance returns noted in this Item 7 are based on the net asset value and/or the net asset value per Unit for all other purposes, which complies with U.S. GAAP, except with respect to organizational and initial offering costs (which are being amortized over 60 months) as described in Item 6 “Selected Financial Data.” All figures and performance returns communicated to Members are based on the net asset value and/or the net asset value per Unit for all other purposes.

 

Operational Overview

 

This performance summary describes the manner in which the Series has performed in the past and is not an indication of future performance. While certain market movements are attributable to various market factors, such factors may or may not have caused such movements but they may have simply occurred at or about the same time.

 

The Series is unlikely to be profitable in markets in which trends do not occur. Static or erratic prices are likely to result in losses. Similarly, sharp trend reversals, which can be caused by many unexpected events, can lead to major short-term losses, as well as gains.

 

While there is no assurance the Series will profit in any market condition, markets having substantial and sustainable price movements offer the best profit potential for the Series.

 

Liquidity

 

The Series invests a portion of its assets in the Master Fund. Virtually all of the Master Fund’s capital is held in cash, cash equivalents, or the OPCA and may be used to margin the Master Fund’s futures and forward currency positions and is withdrawn, as necessary, to pay redemptions and expenses. The Master Fund does not maintain any sources of financing other than that made available by the Clearing Brokers to fund foreign currency settlements for those instruments transacted and settled in foreign currencies. The Master Fund pays prevailing market rates for such borrowings.

 

A portion of the assets maintained at the Master Fund’s Clearing Brokers are restricted cash required to meet maintenance margin requirements. Included in cash deposits with the Clearing Brokers as of December 31, 2012 and 2011 was restricted cash for margin requirements of $34,058,099 and $22,216,652. This cash becomes unrestricted if the underlying positions it supports are liquidated.

 

Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures and forward currency trading, the Master Fund’s and the Series’ assets are highly liquid and are expected to remain so. Because the Master Fund’s assets are held in cash or in the OPCA, it expects to be able to liquidate all of its open positions or holdings quickly and at prevailing market prices, except in unusual circumstances. This generally permits the Trading Advisor to enter and exit markets, leverage and deleverage in accordance with its strategy. From its commencement of operations on December 22, 2008 through December 31, 2012, the Master Fund experienced no meaningful periods of illiquidity in any of the markets in which it traded.

 

The Series processes redemptions on a monthly basis, with approximately corresponding redemptions out of the Master Fund. The Series incurred redemptions of $8,390,037 (7,994.40 Units) and $1,128,542 (1,023.46 Units) for the years ended December 31, 2012 and 2011 and accrued $1,209,623 and $203,986 in redemptions payable to Members at December 31, 2012 and 2011.

14

Capital Resources

 

The Series’ Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.

 

The amount of capital raised for the Series is not expected to have a significant impact on its operations, as the Series has no significant capital expenditure or working capital requirements other than for investment in the Master Fund and Member redemptions. The amount of capital invested in the Master Fund is not expected to have a significant impact on the Master Fund’s operations, as the Master Fund has no significant capital expenditure or working capital requirements other than for monies to pay trading losses, trading costs and expenses. Within broad ranges of capitalization, the Master Fund’s trading positions should increase or decrease in approximate proportion to the size of the Series’ investment in the Master Fund.

 

The Series raises additional capital only through the sale of Units and capital is increased through the Series’ pro rata share of the Master Fund’s trading profits (if any). The Series does not maintain any sources of financing. The Master Fund does not maintain any sources of financing other than that made available by the Clearing Brokers to fund foreign currency settlements for those instruments transacted and settled in foreign currencies.

 

The Master Fund may trade a variety of futures-related instruments, including (but not limited to) instruments related to bonds, currencies, interest rates, equities, equity indices, debt securities and selected physical commodities and derivatives. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally to be measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions (“OTC”), because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange 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 that may be subject to loss in the event of a default are generally required in exchange trading, and counterparties may require margin or collateral in the OTC markets.

 

The Trading Advisor attempts to control risk in all aspects of the investment process, although there can be no assurance that it will, in fact, succeed in doing so. The Master Fund is designed to take market risk on a systematic basis across a broad portfolio of liquid markets and to monitor and minimize exposure to all other risks, such as credit and liquidity risks. The trading systems used include various proprietary systems that are designed to control the risk taken at the individual position level as well as at the overall portfolio level. The Trading Advisor monitors and controls market risk within limits at both sector and portfolio levels.

 

The financial instruments traded by the Master Fund contain varying degrees of risk whereby changes in the market values of the futures and forward contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.

 

Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash and U.S. government obligations, while the Master Fund maintains its market exposure through open futures and forward contract positions.

 

The Master Fund’s futures contracts are settled by offset and are generally cleared by the exchange clearinghouse function. Open futures positions are marked to market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.

 

The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of the debt securities to decline, but only to a limited extent. More importantly, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Funds profit potential generally increases. However, inflation

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can also give rise to markets which have numerous short price trends followed by rapid reversals, in which the Master Fund is likely to suffer losses.

 

Results of Operations

 

General

 

The Trading Advisor manages the assets of the Master Fund pursuant to the Program (see Item 1(c) “Narrative Description of Business”).

 

The Trading Advisor was established in 1997 by David Winton Harding, Martin Hunt, and Osman Murgian. The Diversified Program rests on the premise that rigorous statistical and scientific research generates the most reliable source of information on market behavior. The Trading Advisor seeks to apply statistical and scientific methods to a diverse range of futures and forward markets in order to predict future asset returns. The strategy monitors 100+ futures and forwards markets and invokes multiple model types, primarily technical, in order to exploit price patterns, with a principal focus on price trends. In addition, the Trading Advisor utilizes sophisticated trading technologies, advance execution algorithms, and a research team composed of highly educated and specialized pure and applied researchers. The culture of the firm is founded on merit-based incentive systems, including ownership stakes in the firm, which rewards employees who contribute to the firm’s long-term vision.

 

Mr. Harding has over 25 years’ experience trading futures markets and running two of the largest and most successful commodity trading advisors (“CTA”) in existence. His experience provides him with an array of knowledge of the behavior of various futures markets, the type and rigor of empirical research necessary to develop profitable and sustainable trading systems, and a firm understanding of the operational infrastructure required to run a large and profitable CTA. Mr. Harding co-founded AHL (Adam, Harding and Lueck), now part of Man Group plc, which advanced the application of systematic quantitative techniques in managed futures investment. The Trading Advisor has grown to a team of over 271 employees and manages approximately $25.6 billion as of December 31, 2012. The Trading Advisor is a limited liability company registered in England and Wales, which is regulated in the United Kingdom by the Financial Services Authority. Since January 1998, the Trading Advisor has been a member of NFA and has been registered with the CFTC as a commodity trading advisor and commodity pool operator. On July 31, 2007, a company affiliated with Goldman Sachs International purchased a 9.99 percent shareholder interest in the Trading Advisor. This shareholding is currently held by Goldman Sachs Petershill Non-U.S. Master Fund, L.P., a fund managed by Goldman Sachs Asset Management International. This investor is not involved in the day-to-day management of the Trading Advisor but, pursuant to a shareholders agreement, has the right to approve certain limited matters relating to Trading Advisor’s operations.

 

The Series commenced trading activities January 1, 2010 with an initial capitalization of $232,500, none of which was contributed by the Trading Advisor as seed capital. As of December 31, 2012, the Series had a capitalization of $93,988,117 based on the net asset value for all other purposes.

 

Performance Summary

 

Quarter ended December 31, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended December 31, 2012, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the twelve months ended December 31, 2012 the B-2 and B-0 Sub-Series had year-to-date losses of (7.30%) and (5.40%), respectively, based on the net asset value for all other purposes (see “Notes to Financial Statements – (3) Related Party Transactions”).

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

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October1, 2012 to December 31, 2012

 

The B-2 Subseries posted a 1.20% gain for the month ended December 31, 2012, a loss of (0.87%) and (7.30%) for the three and twelve months ended December 31, 2012 and an overall gain of 0.79% for the Series from the inception of trading on January 1, 2010 through December 31, 2012 (not annualized). The B-0 Sub-Series posted a 1.37% gain for the month ended December 31, 2012, a loss of (0.36%) and (5.40%) loss for the three and nine months ended December 31, 2012 and an overall gain of 6.26% for the Series from the inception of trading on January 1, 2010 through December 31, 2012 (not annualized).

 

The Series experienced a positive December 2012 return. The B-2 Sub-Series posted a 1.20% gain, while the B-0 Sub-Series posted a gain of 1.37%. Sectors the experienced the best performances were Currencies and Equity Indices, while the poorest performing sectors were Precious Metals, Long-term Rates, and Agricultural Grains. Economic data indicated further signs of recovery in December with US employment, Chinese economic activity and ECB balance of payments lifting investor sentiment. Global Equity markets traded higher, making a significant contribution to December performance. US markets faced a head-wind in the final two weeks of the month as Congress and President Obama struggled to negotiate an alternative to the “Fiscal Cliff”. Further monetary easing and adjustments to the inflation target in Japan look increasingly likely under the new LDP government. A consequence of which has been an extension of the recent Yen sell off which helped the currency portfolio put in a strong monthly performance. Gains in stock indices and currencies were partly offset by a small pull back in US fixed income and a fall in the precious metal complex which left gold trading at its lowest level since August.

 

The B-2 Sub-Series posted a 0.87% gain for the month ended November 30, 2012, a (8.40%) loss for the year to date as of November 30, 2012 and an overall loss of (0.40%) for the Series from the inception of trading on January 1, 2010 to November 30, 2012 (not annualized). The B-0 Sub-Series posted a 1.04% gain for the month ended November 30, 2012, a (6.68%) loss for the year to date as of August 31, 2012 and an overall gain of 4.82% for the Series from the inception of trading on January 1, 2010 to August 31, 2012 (not annualized).

 

The Series experienced a positive November 2012 return. The B-2 Sub-Series posted a 0.87% gain, while the B-0 Sub-Series posted a gain of 1.04%. The best performing sectors in descending order were Bonds, Interest Rates, Equity Indices and Currencies. The worst performing sectors in ascending order were Agricultural Grains, Softs, Livestock, Metals and Energies. Equity markets initially sold off in November but buoyed by a series of global developments perceived to encourage market stability recovered in the last two weeks, all of which left the indices broadly unchanged on the month. Greece simultaneously secured their next bailout installment and improved the terms of existing loans from their international creditors. In the USA, Obama extended his presidential tenure and positive economic data has, for now, allayed fears of a hard landing in China. Central banks, with their various forms of monetary easing, remain in focus and bonds continued to trade higher, which made the most significant contribution to performance. Some radical suggestions from the LDP party in Japan, who are favorites to win the December election, subsequently saw the Yen trade at its lowest level for over six months, resulting in the portfolio’s position posting strong profits.

 

The B-2 Sub-Series posted a (2.89%) loss for the month ended October 31, 2012, a (9.19%) loss for the year to date as of July 31, 2012 and an overall loss of (1.26%) for the Series from the inception of trading on January 1, 2010 to October 31, 2012 (not annualized). The B-0 Sub-Series posted a (2.73%) loss for the month ended October 31, 2012, a (7.65%) loss for the year to date as of October 31, 2012 and an overall gain of 3.74% for the Series from the inception of trading on January 1, 2010 to October 31, 2012 (not annualized).

 

The Series experienced a negative October 2012 return. The B-2 Sub-Series posted a (2.89%) loss, while the B-0 Sub-Series posted a (2.73%) loss. The Series suffered losses that were spread fairly evenly across the portfolio, with one exception in base metals and a profitable aluminum position. Losses were experienced in agricultural markets, energies, precious metals, equity indices, currencies, bonds and short-term interest rates. The major markets in the portfolio generally closed the month not far from where they started, albeit with some intra-month twists and turns. The S&P 500, the Euro US Dollar exchange rate, US 10 year bonds, brent crude and corn all fell into this category. This served as further evidence of the lack of available diversification in the world’s major markets. Despite the

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twists and turns, daily price volatility has in fact been rather low and characterized as mean reverting, which is not profitable for any strategy betting on trends.

 

Quarter ended September 30, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended September 30, 2012, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the nine months ended September 30, 2012 the B-2 and B-0 Sub-Series had year-to-date losses of (6.49%) and (5.06%), respectively, based on the net asset value for all other purposes (see “Notes to Financial Statements – (3) Related Party Transactions”).

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

July 1, 2012 to September 30, 2012

 

The B-2 Subseries posted a (2.62%) loss for the month ended September 30, 2012, a loss of (0.34%) and (6.49%) for the three and nine months ended September 30, 2012 and an overall gain of 1.68% for the Series from the inception of trading on January 1, 2010 through September 30, 2012 (not annualized). The B-0 Sub-Series posted a (2.45%) loss for the month ended September 30, 2012, a 0.17% gain and (5.06%) loss for the three and nine months ended September 30, 2012 and an overall gain of 6.65% for the Series from the inception of trading on January 1, 2010 through September 30, 2012 (not annualized).

 

The Series experienced a negative September 2012 return. The B-2 Sub-Series posted a (2.62%) loss, while the B-0 Sub-Series posted a loss of (2.45%). The Euro rallied around 5% against the US dollar during the first half of the month before promptly reversing to give back half of these gains. Movements in global financial markets continue to be heavily dominated by sentiment about Europe. This month, profits in stock index trading were insufficient to offset the losses elsewhere which were spread between currencies, fixed income and commodities including agricultural products, metals and energies. The losses in the currency sector were a direct result of being short the Euro. Despite buying back some of the position the Series remains short. Long positions in stock indices benefited from the upward movements during the month, and provided some diversification to the portfolio. There was a decent rally in aluminium this month, to the detriment of the short position the Series has been holding. Losses in the commodity sector were made worse by drops in the prices of corn and soybeans, in a reversal of the moves that had caused the Series to hold long positions.

 

The B-2 Sub-Series posted a (1.57%) loss for the month ended August 31, 2012, a (3.97%) loss for the year to date as of August 31, 2012 and an overall gain of 4.42% for the Series from the inception of trading on January 1, 2010 to August 31, 2012 (not annualized). The B-0 Sub-Series posted a (1.41%) loss for the month ended August 31, 2012, a (2.68%) loss for the year to date as of August 31, 2012 and an overall gain of 9.32% for the Series from the inception of trading on January 1, 2010 to August 31, 2012 (not annualized).

 

The Series experienced a negative August 2012 return. The B-2 Sub-Series posted a (1.57%) loss, while the B-0 Sub-Series posted a loss of (1.41%). Global stock indices continued their rally last month as summer optimism descended on the markets. Since the time of the ECB’s statement at the start of the month, the Euro staged a partial recovery of its July fall and the more indebted European countries’ bond yields fell. The Series suffered losses mainly in currencies, thanks to the Euro, with additional losses in base and precious metals. The Series made small gains in agricultural markets and livestock, energies and global equity indices.

 

The B-2 Sub-Series posted a 3.98% gain for the month ended July 31, 2012, a (2.44%) loss for the year to date as of July 31, 2012 and an overall gain of 6.08% for the Series from the inception of trading on January 1, 2010 to July 31, 2012 (not annualized). The B-0 Sub-Series posted a 4.15% gain for the month ended July 31, 2012, a (1.29%)

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loss for the year to date as of July 31, 2012 and an overall gain of 10.88% for the Series from the inception of trading on January 1, 2010 to July 31, 2012 (not annualized).

 

The Series experienced a positive July 2012 return. The B-2 Sub-Series posted a 3.98% gain, while the B-0 Sub-Series posted a gain of 4.15%. Attention in the Eurozone focused on Spain, with the latest development being a number of the Spanish regions asking the central government for bailouts. The continued grey clouds over the European economy led Spanish and Italian regulators to reintroduce short selling bans on their domestic equity markets, with the effect that the Series was no longer able to take new short positions in the related futures markets. As the month drew to a close the European Central Bank President made a statement that he would do “whatever it takes” to save the Euro, but until the ECB’s next meeting, the market has been left guessing as to the form this support might take.

 

On the back of the continued pessimistic sentiment, the Euro ended the month lower helping the Series’ profitability as currencies were the best performing asset class in July. The Series also performed well in bonds and interest rates. As London was experiencing one of the wettest Julys on record, the US Midwest continued to experience a drought-inducing heat wave. This has led to worsening reports of the quality of this year’s corn harvest, with the consequence of substantial rises in grain prices. The Series benefited from this upward price trend and traded agricultural markets profitably. The Series suffered relatively small losses in the energy sector as crude oil reversed its downward trend and rallied throughout the month.

 

Quarter ended June 30, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended June 30, 2012, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the six months ended June 30, 2012 the B-2 and B-0 Sub-Series had year-to-date losses of (6.17%) and (5.22%), respectively, based on the net asset value for all other purposes (see “Notes to Financial Statements – (3) Related Party Transactions”).

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

April 1, 2012 to June 30, 2012

 

The B-2 Sub-Series posted a (3.71%) loss for the month ended June 30, 2012, a loss of (4.43%) and (6.17%) for the three and six months ended June 30, 2012 and an overall gain of 2.03% for the Series from the inception of trading on January 1, 2010 through June 30, 2012 (not annualized). The B-0 Sub-Series posted a (3.55%) loss for the month ended June 30, 2012, a loss of (3.94%) and (5.22%) for the three and six months ended June 30, 2012 and an overall gain of 6.47% for the Series from the inception of trading on January 1, 2010 through June 30, 2012 (not annualized).

 

The Series experienced a negative return in June 2012. The B-2 Sub-Series posted a (3.71%) loss, while the B-0 Sub-Series posted a loss of (3.55%). Most significant market moves were reactions to news concerning the Euro Crisis. June saw an agreement to bail out indebted Spanish Banks, a narrow victory in the Greek elections for pro-austerity parties and Cyprus joining the list of countries that have asked the European Union for a bailout. As the month drew to a close, European leaders agreed that the European Financial Stability Fund could give assistance directly to Spanish banks, rather having to go via the Spanish Government’s balance sheet. The market voiced an initial response to the decision on Spanish Bank debt on the final day of the month in the form of strong gains for the Euro and world stock indices. As a result, the Fund experienced a loss, mainly from bonds, currencies and stock indices, smaller losses in metals and energy, and negligible profits made in agricultural commodities.

 

The B-2 Sub-Series posted a (0.46%) loss for the month ended May 31, 2012, a (2.55%) loss for the year to date as of May 31, 2012 and an overall gain of 5.96% for the Series from the inception of trading on January 1, 2010 to May 31, 2012 (not annualized). The B-0 Sub-Series posted a (0.30%) loss for the month ended May 31, 2012, a

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(1.73%) loss for the year to date as of May 31, 2012 and an overall gain of 10.38% for the Series from the inception of trading on January 1, 2010 to May 31, 2012 (not annualized).

 

The Series experienced a negative return in May 2012. The B-2 Sub-Series posted a (0.46%) loss, while the B-0 Sub-Series posted a loss of (0.30%). May saw falls in global stock markets and a continuation of April’s rally in German and US government bonds. The elections in Greece failed to produce a government, leading to anxieties about its future in the European single currency. These concerns had a direct impact on the value of the Euro, which fell 6% against the US dollar. Such anxieties, coupled with more general concerns about economic growth, provided the backdrop for a $15 fall in the price of a barrel of crude oil. The gains were mainly focused in government bonds, with a position in the Euro also making a meaningful contribution. Losses were focused in energies and stock indices, with the market moves in both sectors resulting in substantial reductions in positions.

 

The B-2 Sub-Series posted a (0.28%) loss for the month ended April 30, 2012, a (2.10%) loss for the year to date as of April 30, 2012 and an overall gain of 6.45% for the Series from the inception of trading on January 1, 2010 to April 30, 2012 (not annualized). The B-0 Sub-Series posted a (0.11%) loss for the month ended April 30, 2012, a (1.44%) loss for the year to date as of April 30, 2012 and an overall gain of 10.71% for the Series from the inception of trading on January 1, 2010 to April 30, 2012 (not annualized).

 

The Series experienced a negative return in April 2012. The B-2 Sub-Series posted a (0.28%) loss, while the B-0 Sub-Series posted a loss of (0.11%). The U.S. equity market rally reversed in April, with European markets leading the way. The global risk-off trade drove yields lower in Government Bonds, offsetting losses in equity indices. The Series ended the month down, with gains in bonds offsetting losses in equity indices. The Series’ other losing positions were in currencies, energies and metals. The Series had achieved some positive contribution from its crops, livestock and interest rates positions, but like its bonds positions, these gains were not enough to offset the Series’ losses.

 

Quarter ended March 31, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended March 31, 2012, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the three months ended March 31, 2012 the B-2 and B-0 Sub-Series had year-to-date returns of (1.82%) and (1.33%), respectively, based on the net asset value for all other purposes (see “Notes to Financial Statements – (3) Related Party Transactions”).

 

January 1, 2012 to March 31, 2012

 

The B-2 Sub-Series posted a (1.02%) loss for the month ended March 31, 2012, a loss of (1.82%) for the three months ended March 31, 2012 and an overall gain of 6.75% for the Series from the inception of trading on January 1, 2010 through March 31, 2012 (not annualized). The B-0 Sub-Series posted a (0.85%) loss for the month ended March 31, 2012, a loss of (1.33%) for the three months ended March 31, 2012 and an overall gain of 10.84% for the Series from the inception of trading on January 1, 2010 through March 31, 2012 (not annualized).

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

The Series experienced a negative return in March 2012. The B-2 Sub-Series posted a loss of (1.02%), while the B-0 Sub-Series posted a loss of (0.85%). The U.S. equity market rally continued into March, while European markets lagged. Encouraging macroeconomic data drove yields higher in Government Bonds, with U.S. 10 year notes reaching levels not seen since October of 2011. The Series ended the month down, with gains in equity indices offsetting larger losses in bonds. The Series’ other losing positions were in currencies, precious metals and interest rates. The Series had achieved some positive contribution from its crops and base metal positions, but like its equity indices positions, these gains were not enough to offset the Series’ losses.

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The B-2 Sub-Series posted a (1.12%) loss for the month ended February 29, 2012, a (0.82%) loss for the year to date as of February 29, 2012 and an overall gain of 7.85% for the Series from the inception of trading on January 1, 2010 to February 29, 2012 (not annualized). The B-0 Sub-Series posted a (0.95%) loss for the month ended February 29, 2012, a (0.49%) loss for the year to date as of February 29, 2012 and an overall gain of 11.79% for the Series from the inception of trading on January 1, 2010 to February 29, 2012 (not annualized).

 

The Series experienced a negative return in February 2012. The B-2 Sub-Series posted a loss of (1.12%), while the B-0 Sub-Series posted a loss of (0.95%). The equity market rally continued into February, sending the S&P 500 Index to the highs of the previous year. Europe featured heavily in the news, with a 130 billion Euro “bailout” of Greece agreed to, and speculation the EU would extend its embargo on oil imports from Iran. The Greek “bailout” spurred the Euro higher against the US Dollar, and crude oil spiked about $10 a barrel higher over the course of the month. The Series benefited from its long equity indices and energies exposures, but the gains experienced in these positions were not great enough to offset the losses experienced in the Series short Euro, long Yen and bonds and crops exposures.

 

The B-2 Sub-Series posted a 0.31% gain for the month of January 2012 and an overall gain of 9.07% for the Series from the inception of trading on January 1, 2010 to January 31, 2012 (not annualized). The B-0 Sub-Series posted a 0.46% gain for the month of January 2012 and an overall gain of 12.85% for the Series from the inception of trading on January 1, 2010 to January 31, 2012 (not annualized).

 

The Series experienced a positive return in January 2012. The B-2 Sub-Series posted a gain of 0.31%, while the B-0 Sub-Series posted a gain of 0.46%. The year began with a rally in global stock markets, as concerns over Europe seemed to abate somewhat. Accordingly, the Euro reversed its two month downward trend, while government bonds rallied into the end of the month. The Series experienced gains in stock indices, short term rates, bonds and precious metals positions. Interest rates and precious metals were the largest contributors to performance, with equity indices and bonds closely following. The Series gains were offset by losses in base metals, currencies and crops positions.

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Quarter ended December 31, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended December 31, 2011, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the twelve months ended December 31, 2011 the B-2 and B-0 Sub-Series had year-to-date gains of 1.77% and 3.77%, respectively, based on the net asset value for all other purposes.

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

October 1, 2011 to December 30, 2011

 

The B-2 Sub-Series posted a 1.29% gain for the month ended December 31, 2011, a gain/(loss) of (1.01%) and 1.77% for the three and twelve months ended December 31, 2011 and an overall gain of 8.73% for the Series from the inception of trading on January 1, 2010 through December 31, 2011 (not annualized). The B-0 Sub-Series posted a 1.46% gain for the month ended December 31, 2011, a gain/(loss) of (0.51%) and 3.77% for the three and twelve months ended December 31, 2011 and an overall gain of 12.33% for the Series from the inception of trading on January 1, 2010 through December 31, 2011 (not annualized).

 

The Series experienced positive returns in December 2011. The B-2 Sub-Series posted a return of 1.29% for the month and 1.77% for the year. The B-0 Sub-Series posted a return of 1.46% for the month and 3.77% for the year. December saw the dominant trends of 2011 persist into the final month of the year. Choppy equity markets failed to produce consistently exploitable trends, which led the Series to underperform in equity indices for the month, and caused equity indices to be the Series’ worst performing sector for the year. On the other side of the coin, the Series’ bond positions stayed true to their yearly trend, contributing the most to the Series’ monthly performance. The Series also benefitted from its recent long U.S. dollar position, as the currency rallied into the end of the year, leading it to be the Series’ second best contributor to the month’s performance. Both gold and silver sold off over the course of December, and the Series’ long positions were the largest negative contributor for the month.

 

The B-2 Sub-Series posted a 0.59% gain for the month ended November 30, 2011, a 0.47% gain for the year to date as of November 30, 2011 and an overall gain of 7.35% for the Series from the inception of trading on January 1, 2010 to November 30, 2011 (not annualized). The B-0 Sub-Series posted a 0.76% gain for the month ended November 30, 2011, a 2.28% gain for the year to date as of November 30, 2011 and an overall gain of 10.72% for the Series from the inception of trading on January 1, 2010 to November 30, 2011 (not annualized).

 

The Series experienced positive returns in November 2011. The B-2 Sub-Series posted a return of 0.59%, while the B-0 Sub-Series posted a return of 0.76%. November saw three new European governments formed in Spain, Italy and Greece. While Greece’s was due to a planned election, Spain and Italy’s were installed as direct consequence of the continent’s continued financial struggles. The strength of the European System of Financial Supervisors was called into doubt, and yields on Greek, Spanish and Italian debt all ended the month at higher levels. The Series closed the month with risk concentrated in fixed income and currency sectors, with relatively little exposure to equities. Crop holdings were the strongest contributor to performance for the month, with currencies being the second strongest contributor. Equity indices, base metals, bonds and energies all contributed positively as well. Interest rates were the primary drag on the Series performance, with the Series holdings in precious metals and livestock remaining relatively flat.

 

The B-2 Sub-Series posted a (2.85%) loss for the month ended October 31, 2011, a (0.12%) loss for the year to date as of October 31, 2011 and an overall gain of 6.71% for the Series from the inception of trading on January 1, 2010 to October 31, 2011 (not annualized). The B-0 Sub-Series posted a (2.68%) loss for the month ended October 31, 2011, a 1.51% gain for the year to date as of October 31, 2011 and an overall gain of 9.88% for the Series from the inception of trading on January 1, 2010 to October 31, 2011 (not annualized).

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The Series experienced negative returns in October 2011. The B-2 Sub-Series posted a (2.85%) loss and the B-0 Sub-Series posted a (2.68%) loss. While concerns over the Eurozone debt crisis persisted, hope of a “rescue package” sent equity markets rallying strongly into the end of the month. As a result, the Series’ short positions in equities suffered losses. The “risk on” rally spread to other asset classes as well, causing the Series long bond and short interest rates positions to suffer losses as well. Most positions in the portfolio were negative contributors to performance, with currencies being the worst performer. The Series’ only positive holding for the month was in precious metals. The broad reduction in position sizing mentioned in September’s commentary helped to somewhat mitigate the scale of the trend reversals the Series experienced in October.

 

Quarter ended September 30, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended September 30, 2011, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the nine months ended September 30, 2011 the B-2 and B-0 Sub-Series had year-to-date gains of 2.81% and 4.31%, respectively, based on the net asset value for all other purposes.

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

July 1, 2011 to September 30, 2011

 

The B-2 Sub-Series posted a (0.21%) loss for the month ended September 30, 2011, a gain of 5.40% and 2.81% for the three and nine months ended September 30, 2011 and an overall gain of 9.84% for the Series from the inception of trading on January 1, 2010 through September 30, 2011 (not annualized). The B-0 Sub-Series posted a (0.04%) loss for the month ended September 30, 2011, a gain of 5.85% and 4.31% for the three and nine months ended September 30, 2011 and an overall gain of 12.91% for the Series from the inception of trading on January 1, 2010 through September 30, 2011 (not annualized).

 

The Series experienced a negative return in September 2011. The B-2 Sub-Series posted a (0.21%) loss and the B-0 Sub-Series posted a (0.04%) loss. Concerns over a Greek sovereign debt default lingered into September and contributed to market participants’ continued flight to safety. As a result, bonds produced further gains in the Series’ portfolio, as did short positions in stock index futures and base metals. The Series experienced the greatest losses in its currencies and precious metals positions, with volatility in the latter being exemplified by silver’s 35% drop over three trading sessions ending September 26th. The general rise in market volatility has resulted in a broad reduction in position sizing, with one notable change of now being net long the U.S. dollar.

 

The B-2 Sub-Series posted a 1.09% gain for the month ended August 31, 2011, a 3.02% gain for the year to date as of August 31, 2011 and an overall gain of 10.07% for the Series from the inception of trading on January 1, 2010 to August 31, 2011 (not annualized). The B-0 Sub-Series posted a 1.26% gain for the month ended August 31, 2011, a 4.35% gain for the year to date as of August 31, 2011 and an overall gain of 12.96% for the Series from the inception of trading on January 1, 2010 to August 31, 2011 (not annualized).

 

The Series experienced a positive return in August 2011. The B-2 Sub-Series posted a return of 1.09% and the B-2 Sub-Series posted a return of 1.26%. Global stock markets experienced sharp drops, as continued concerns over sovereign debt and conflicting economic data drove investors to “safe havens” of precious metals and fixed income. Unsurprisingly, the Series’ gains were concentrated in these two assets. Long holdings in bonds were the largest contributor to Series performance, with precious metals and interest rates following. Positions in equities were the largest drag on performance, with currencies, energies and base metals also in the red. The short selling ban in Europe has meant that Winton cannot take on any further short positions in the CAC 40, MIB, IBEX 35 or Dow Jones Euro Stoxx. The Series is still able to continue holding existing short positions, however.

 

The B-2 Sub-Series posted a 4.48% return for the month ended July 31, 2011, a 1.91% gain for the year to date as of July 31, 2011 and an overall gain of 8.88% for the Series from the inception of trading on January 1, 2010 to July

23

31, 2011 (not annualized). The B-0 Sub-Series posted a 4.58% return for the month ended July 31, 2011, a 3.06% gain for the year to date as of July 31, 2011 and an overall gain of 11.56% for the Series from the inception of trading on January 1, 2010 to July 31, 2011 (not annualized).

 

The Series experienced a positive return in July 2011. The B-2 Sub-Series posted a return of 4.48% and the B-0 Sub-Series posted a return of 4.58%. July experienced a resumption of the major trends the Series had been participating in. The disproportionately largest positive contributor to the Series’ performance was its fixed income positions. Long holdings benefited from the broad rally in global government bond markets. Precious metals were the second largest positive Series contributor as gold and silver both resumed their climbs. Currencies, interest rates and crops futures also contributed positively to Series performance, though in a more muted fashion. Equity indices were the Series’ greatest underperformer, with livestock and cash equity positions also contributing negatively.

 

Quarter ended June 30, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended June 30, 2011, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the six months ended June 30, 2011 the B-2 and B-0 Sub-Series had year-to-date losses of (2.46%) and (1.45%), respectively, based on the net asset value for all other purposes.

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

April 1, 2011 to June 30, 2011

 

The B-2 Sub-Series posted a (3.05%) loss for the month ended June 30, 2011, a loss of (3.22%) and (2.46%) for the three and six months ended June 30, 2011 and an overall gain of 4.22% for the Series from the inception of trading on January 1, 2010 through June 30, 2011 (not annualized). The B-0 Sub-Series posted a (2.88%) loss for the month ended June 30, 2011, a loss of (2.70%) and (1.45%) for the three and six months ended June 30, 2011 and an overall gain of 6.68% for the Series from the inception of trading on January 1, 2010 through June 30, 2011 (not annualized).

 

The Series experienced a negative return in June 2011. The B-2 Sub-Series posted a (3.05%) loss and the B-0 Sub-Series posted a (2.88%) loss. The negative trends that characterized May tended to continue into June. It appears there might have been some major inflection points in trends the Series has been participating in this year. Equity indices, energies and agricultural holdings were the largest negative contributors to the Series’ performance. Positions in precious metals, base metals and bond also negatively impacted performance. Currencies contributed modest gains.

 

The B-2 Sub-Series posted a (2.64%) loss for the month ended May 31, 2011, a 0.60% gain for the year to date as of May 31, 2011 and an overall gain of 7.49% for the Series from the inception of trading on January 1, 2010 to May 31, 2011 (not annualized). The B-0 Sub-Series posted a (2.43%) loss for the month ended May 31, 2011, a 1.47% gain for the year to date as of May 31, 2011 and an overall gain of 9.84% for the Series from the inception of trading on January 1, 2010 to May 31, 2011 (not annualized).

 

The Series experienced a negative return in May 2011. The B-2 Sub-Series posted a (2.64%) loss and the B-0 Sub-Series posted a (2.43%) loss. Many of the featured market trends in April sharply reversed themselves in May. Commodities, base metals and oil suffered especially sharp reversals. Accordingly, currencies and energy positions were the largest negative contributors to the Series’ performance. Positions in equities indices, precious metals, base metals and crops performed negatively as well. The only sector with continued moves from April was in fixed income, which contributed modest gains to the Series.

 

The B-2 Sub-Series posted a 2.52% return for the month ended April 30, 2011, a 3.33% gain for the year to date as of April 30, 2011 and an overall gain of 10.40% for the Series from the inception of trading on January 1, 2010 to

24

April 30, 2011 (not annualized). The B-0 Sub-Series posted a 2.68% return for the month ended April 30, 2011, a 4.00% gain for the year to date as of April 30, 2011 and an overall gain of 12.58% for the Series from the inception of trading on January 1, 2010 to April 30, 2011 (not annualized).

 

The Series experienced a positive return in April 2011. The B-2 Sub-Series posted a 2.52% return, while the B-0 Sub-Series posted a 2.68% return. Sovereign credit concerns strongly influenced the direction of many markets. The ECB benchmark rate hike sent the Euro higher, overshadowing the growing uncertainty around Greek and Portuguese fiscal troubles. The U.S. Dollar came under pressure with Standard and Poor’s reduction of the long-term credit outlook of the United States. Gold and oil rallied into the end of the month in response. Accordingly, currencies were the top performer for the month, driven mainly by long positions in the Euro. Energies, precious metals and equity indices positions likewise contributed strong positive results to the portfolio. The Series suffered slight losses in its bond holdings.

 

Quarter ended March 31, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended March 31, 2011, based on the underlying performance of the Master Fund in which the Series invests, and is not necessarily an indication of how the Series will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

For the three months ended March 31, 2011 the B-2 and B-0 Sub-Series had year-to-date returns of 0.79% and 1.28%, respectively, based on the net asset value for all other purposes.

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

January 1, 2011 to March 31, 2011

 

The B-2 Sub-Series posted a (0.21%) loss for the month ended March 31, 2011, a gain of 0.79% for the three months ended March 31, 2011 and an overall gain of 7.69% for the Series from the inception of trading on January 1, 2010 through March 31, 2011 (not annualized). The B-0 Sub-Series posted a (0.05%) loss for the month ended March 31, 2011, a gain of 1.28% for the three months ended March 31, 2011 and an overall gain of 9.64% for the Series from the inception of trading on January 1, 2010 through March 31, 2011 (not annualized).

 

The Series experienced a negative return in March 2011. The B-2 Sub-Series posted a loss of (0.21%), while the B-0 Sub-Series posted a loss of (0.05%). The Master Fund weathered March’s turbulent markets reasonably well. The program responded in line with stress-test expectations after the Japanese earthquake shock. Positions directly exposed to the natural disaster were limited in scope, and only contributed minor harm to the portfolio. Petroleum holdings saw the largest gains over the course of the month, followed closely by a positive performance in the currencies sector. As assets now exceed US$20 billion, concerns about system capacity have arisen. However internal research indicates that the current asset levels are not expected to materially impact performance.

 

The B-2 Sub-Series posted a 1.21% return for the month ended February 28, 2011, a 1.00% gain for the year to date as of February 28, 2011 and an overall gain of 7.92% for the Series from the inception of trading on January 1, 2010 to February 28, 2011 (not annualized). The B-0 Sub-Series posted a 1.37% return for the month ended February 28, 2011, a 1.33% gain for the year to date as of February 28, 2011 and an overall gain of 9.69% for the Series from the inception of trading on January 1, 2010 to February 28, 2011 (not annualized).

 

The Series experienced a positive return in February 2011. The B-2 Sub-Series posted a gain of 1.21%, while the B-0 Sub-Series posted a 1.37% gain. Social unrest in petroleum exporting countries captured headlines and influenced the movement of financial markets. As conflicts developed in Egypt and Libya, the price of crude oil surged and the program profited as fears mounted that the contagion would spread from North Africa to the Middle East. Accordingly, energy was the top performing sector in February, followed closely by precious metals positions in gold and silver. Soft agricultural commodities rose on record cotton highs, but these gains were offset with reversals in wheat and soybeans. The Series suffered its largest losses in government bond holdings across Asia, Europe and North America.

25

The B-2 Sub-Series posted a (0.20%) loss for the month of January 2011 and an overall gain of 6.63% for the Series from the inception of trading on January 1, 2010 to January 31, 2011 (not annualized). The B-0 Sub-Series posted a (0.04%) loss for the month of January 2011 and an overall gain of 8.20% for the Series from the inception of trading on January 1, 2010 to January 31, 2011 (not annualized).

 

The Series experienced a slight loss in January 2011. The B-2 Sub-Series posted a loss of (0.20%), while the B-0 Sub-Series posted a (0.04%) loss. Gains were concentrated in agricultural commodities and stock market indices, while losses stemmed from foreign exchange and precious metal exposure. Rapidly rising food prices have contributed to an unstable Middle Eastern economic climate, and worry over the balance of power in Egypt has catapulted Brent Crude over the $100/barrel price point. However, calm settled in over the Eurozone at month’s end in reaction to a phenomenally successful bond issuance by the European Financial Stability Facility. Stock markets lifted in reaction to the generally optimistic outlook – flare-ups of civil unrest notwithstanding. Gold and other precious metals that have served as indicators of market fear fell, in a symbolic vote of confidence for global growth. With renewed optimism the fund has increased its research effort, led-off by the implementation of weekly research meetings attended by David Harding.

 

For additional information, please refer to the 2012 Master Fund financial statements which are attached as Exhibit 99.1 and Series financial statements incorporated into Part II, Item 8.

 

Variables Affecting Performance

 

The principal variables that determine the net performance of the Series are gross profitability from the Series’ investment in the Master Fund.

 

The Master Fund’s assets are maintained at the Clearing Brokers. The Master Fund will receive interest income on the cash held on deposit as margin with each Clearing Broker as of the end of each month currently at a rate equal to a certain percentage of U.S. Treasury bill rates; with the remaining portion retained by the relevant Clearing Broker. In the case of trading non-U.S. futures, the Clearing Brokers lend to the Master Fund any non-U.S. currency it requires, charging interest at a local short-term rate; on non-U.S. currencies held in the Master Fund’s account, the Master Fund is credited with the same local short-term rate. The Clearing Brokers will receive and/or retain certain interest and other economic benefits from possession of the Master Fund’s assets.

 

The Series’ Management, Sponsor and operating fees and the Sales Commissions are a constant percentage of the Series’ net asset value for all other purposes. Trading costs allocated from the Master Fund (based on the Series pro rata investment in the Master Fund), which are not based on a percentage of the Series’ net assets, are based on the volume of trades executed and cleared on behalf of the Master Fund. Brokerage commissions are based on the actual number of contracts traded. The Performance Fees payable to the Trading Advisor are based on the new net trading profits, if any, generated by the Master Fund and allocated to the Series based on the Series pro rata investment in the Master Fund, excluding interest income and after reduction for brokerage commissions and certain other fees and expenses.

 

For the Series, there is generally no meaningful distinction between realized and unrealized profits. Most of the instruments traded on behalf of the Series by the Master Fund are highly liquid and can be closed out immediately.

 

Off-balance Sheet Arrangements

 

The Series has no applicable off-balance sheet arrangements of the type described in Items 3.03(a)(4) of Regulation S-K.

 

Contractual Obligations

 

The Series does not enter into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Series’ sole business is trading futures and forward currency contracts, both long (contracts to buy) and short

26

(contracts to sell) through its investment in the Master Fund. All such contracts are settled by offset, not delivery. The Master Fund’s Financial Statements filed as Exhibit 99.1 herewith present a Condensed Schedule of Investments setting forth net unrealized appreciation (depreciation) of the Master Fund’s open future and forward currency contracts, both long and short, at December 31, 2012 and 2011.

 

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable; the Series is a smaller reporting company

 

Item 8: Financial Statements and Supplementary Data

 

Supplementary Data

Net Income by Quarter (unaudited)

Four Quarters through December 31, 2012

 

   First
Quarter
2012
   Second
Quarter
2012
   Third
Quarter
2012
   Fourth
Quarter
2012
   Total 
                          
Total Income (Loss)  $(454,527)  $(2,861,995)  $773,787   $415,781   $(2,126,954)
Total Expenses   (787,401)   (852,031)   (928,017)   (938,216)   (3,505,665)
Net Income (Loss)  $(1,241,928)  $(3,714,026)  $(154,230)  $(522,435)  $(5,632,619)
                          
Net Income (Loss) per Unit1  $(17.99)  $(47.37)  $(1.78)  $(5.79)  $(70.11)

 

1 Based on average number of Units for the year.

 

Net Income by Quarter (unaudited)

Four Quarters through December 31, 2011

 

   First
Quarter
2011
   Second
Quarter
2011
   Third
Quarter
2011
   Fourth
Quarter
2011
   Total 
                          
Total Income (Loss)  $571,096   $(1,011,768)  $3,714,641   $325,736   $3,599,705 
Total Expenses   (325,244)   (372,851)   (987,997)   (653,386)   (2,339,478)
Net Income (Loss)  $245,852   $(1,384,619)  $2,726,644   $(327,650)  $1,260,227 
                          
Net Income (Loss) per Unit1  $12.30   $(45.00)  $59.26   $(5.69)  $32.61 

 

1 Based on average number of Units for the year.

 

As the Platform is classified as a Smaller Reporting Company, as defined by Rule 229.10(f)(1) of Regulation S-K, the supplementary financial information required by Item 302 of Regulation S-K is not applicable.

27

 

ALPHAMETRIX MANAGED FUTURES III LLC

(A Limited Liability Company)

 

Financial Statements as of December 31, 2012 and 2011

 and for Each of the Two Years Ended December 31, 2012

and 2011, and Report of

Independent Registered Public Accounting Firm

28

AFFIRMATION OF ALPHAMETRIX, LLC

 

In compliance with the Commodity Futures Trading Commission’s regulations, I hereby affirm that to the best of my knowledge and belief, the information contained in the statements of financial condition of AlphaMetrix Managed Futures III LLC as of December 31, 2012 and 2011, including the related statements of operations and changes in members’ capital for the years then ended, is accurate and complete.

 

/s/ Aleks Kins  
Aleks Kins  
President and Chief Executive Officer  
AlphaMetrix, LLC  
Sponsor of AlphaMetrix Managed Futures III LLC  
29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Members of AlphaMetrix Managed Futures III LLC:

 

We have audited the accompanying statements of financial condition of AlphaMetrix Managed Futures III LLC, comprising of AlphaMetrix Managed Futures III LLC (WC Diversified Series), (a series of a Delaware Series Limited Liability Company) (collectively the “Platform”), as of December 31, 2012 and 2011, and the related statements of operations and changes in members’ capital for the years then ended. These financial statements are the responsibility of the Platform’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The platform is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Platform’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of the Platform at December 31, 2012 and 2011, and the results of its operations and the changes in its members’ capital for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ DELOITTE & TOUCHE, LLP

 

Chicago, Illinois

April 11, 2013 

30

ALPHAMETRIX MANAGED FUTURES III LLC 

Statements of Financial Condition

 

   AlphaMetrix Managed
Futures III LLC
(WC Diversified Series)
December 31, 2012
   AlphaMetrix Managed
Futures III LLC
December 31, 2012
   AlphaMetrix Managed
Futures III LLC
(WC Diversified Series)
December 31, 2011
   AlphaMetrix Managed
Futures III LLC
December 31, 2011
 
ASSETS                    
Investment in AlphaMetrix WC Diversified Fund - MT0041, at fair value  $30,769,148   $30,769,148   $22,107,621   $22,107,621 
Receivable from AlphaMetrix WC Diversified Fund - MT0041   153,600    153,600         
Cash at bank   64,990,938    64,990,938    55,372,644    55,372,644 
Prepaid assets   110,883    110,883    178,731    178,731 
                     
Total Assets  $96,024,569   $96,024,569   $77,658,996   $77,658,996 
                     
LIABILITIES                    
                     
SUBSCRIPTIONS RECEIVED IN ADVANCE  $753,000   $753,000   $8,257,000   $8,257,000 
                     
PAYABLES:                    
Accrued sponsor fee   13,344    13,344    8,523    8,523 
Accrued management fee   60,158    60,158    43,828    43,828 
Accrued sales commission   38,489    38,489    14,163    14,163 
Accrued operating costs   9,582    9,582    8,210    8,210 
Payable to AlphaMetrix WC Diversified Fund - MT0041           707,300    707,300 
Redemptions payable   1,209,623    1,209,623    203,986    203,986 
                     
Total Liabilities   2,084,196    2,084,196    9,243,010    9,243,010 
                     
MEMBERS’ CAPITAL                    
B0 Members (55,603.78 and 35,445.16 units outstanding at December 31, 2012 and 2011, unlimited units authorized)   59,061,278    59,061,278    39,780,045    39,780,045 
B2 Members (34,618.87 and 26,359.10 units outstanding at December 31, 2012 and 2011, unlimited units authorized)   34,869,023    34,869,023    28,625,081    28,625,081 
Sponsor (10 units outstanding at December 31, 2012 and 2011, unlimited units authorized)   10,072    10,072    10,860    10,860 
Total Members’ Capital   93,940,373    93,940,373    68,415,986    68,415,986 
                     
TOTAL LIABILITIES AND MEMBERS’ CAPITAL  $96,024,569   $96,024,569   $77,658,996   $77,658,996 

 

See notes to financial statements. 

31

ALPHAMETRIX MANAGED FUTURES III LLC 

Statements of Operations

For the years ended December 31, 2012 and 2011

 

   AlphaMetrix Managed
Futures III LLC
(WC Diversified Series)
2012
   AlphaMetrix Managed
Futures III LLC
2012
   AlphaMetrix Managed
Futures III LLC
(WC Diversified Series)
2011
   AlphaMetrix Managed
Futures III LLC
2011
 
NET INVESTMENT INCOME/(LOSS) ALLOCATED FROM ALPHAMETRIX WC DIVERSIFIED FUND - MT0041:                    
Interest income  $7,567   $7,567   $49,145   $49,145 
Interest expense   (5,581)   (5,581)        
Trading costs   (86,705)   (86,705)   (41,142)   (41,142)
Bank fee           (4)   (4)
Cash manager and sponsor fees           (39,546)   (39,546)
                     
Net investment income/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041   (84,719)   (84,719)   (31,547)   (31,547)
                     
FUND NET INVESTMENT INCOME/(LOSS):                    
Placement fee   (325,534)   (325,534)   (318,148)   (318,148)
Operating expenses   (317,811)   (317,811)   (152,694)   (152,694)
Management fee   (1,986,850)   (1,986,850)   (1,007,121)   (1,007,121)
Performance fee   (327)   (327)   (518,353)   (518,353)
Sales commission   (342,630)   (342,630)   (72,389)   (72,389)
Sponsor fee   (440,227)   (440,227)   (190,081)   (190,081)
                     
Net investment income/(loss)   (3,413,379)   (3,413,379)   (2,258,786)   (2,258,786)
                     
Total net investment income/(loss)   (3,498,098)   (3,498,098)   (2,290,333)   (2,290,333)
                     
NET REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM ALPHAMETRIX WC DIVERSIFIED FUND - MT0041:                    
Net realized gain/(loss)   (1,205,999)   (1,205,999)   3,444,090    3,444,090 
Net increase/(decrease) in unrealized appreciation/(depreciation)   (928,522)   (928,522)   106,470    106,470 
                     
Total net realized and unrealized gain (loss) allocated from AlphaMetrix WC Diversified Fund - MT0041   (2,134,521)   (2,134,521)   3,550,560    3,550,560 
                     
Net increase/(decrease) in net assets resulting from operations  $(5,632,619)  $(5,632,619)  $1,260,227   $1,260,227 
                     
Weighted average number of WC Diversified Series units outstanding   80,343    80,343    38,641    38,641 
                     
Net income/(loss) per weighted average unit  $(70.11)  $(70.11)  $32.61   $32.61 

 

See notes to financial statements.

32

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Changes in Members’ Capital 

For the year ended December 31, 2012

 

For the year ended December 31, 2012  AlphaMetrix Managed Futures III LLC (WC Diversified Series)   AlphaMetrix Managed 
   B-0 Members   B-2 Members   Sponsor (B-2)   Total   Futures III LLC 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2012  $39,780,045    35,445.16   $28,625,081    26,359.10   $10,860    10.00   $68,415,986    61,814.26   $68,415,986    61,814.26 
Members’ subscriptions   26,320,815    23,832.79    13,226,228    12,580.00            39,547,043    36,412.79    39,547,043    36,412.79 
Members’ redemptions   (3,958,103)   (3,674.17)   (4,431,934)   (4,320.23)           (8,390,037)   (7,994.40)   (8,390,037)   (7,994.40)
Net investment loss   (1,761,201)        (1,736,354)        (543)       (3,498,098)       (3,498,098)    
Total net realized and unrealized gain/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041   (1,320,278)       (813,998)       (245)       (2,134,521)       (2,134,521)    
Members’ capital at December 31, 2012  $59,061,278    55,603.78   $34,869,023    34,618.87   $10,072    10.00   $93,940,373    90,232.65   $93,940,373    90,232.65 
                                                   
Net asset value per unit at January 1, 2012  $1,122.299        $1,085.966        $1,085.966                          
Change in net asset value per unit   (60.118)        (78.740)        (78.740)                         
Net asset value per unit at December 31, 2012  $1,062.181        $1,007.226        $1,007.226                          

 

ALPHAMETRIX MANAGED FUTURES III LLC

Statements of Changes in Members’ Capital

For the year ended December 31, 2011

 

For the year ended December 31, 2011  AlphaMetrix Managed Futures III LLC (WC Diversified Series)   AlphaMetrix Managed 
   B-0 Members   B-2 Members   Sponsor (B-2)   Total   Futures III LLC 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2011  $7,562,143    7,030.08   $8,628,060    8,120.00   $10,626    10.00   $16,200,829    15,160.08   $16,200,829    15,160.08 
Members’ subscriptions   32,040,734    29,101.52    20,042,738    18,576.12            52,083,472    47,677.64    52,083,472    47,677.64 
Members’ redemptions   (761,952)   (686.44)   (366,590)   (337.02)           (1,128,542)   (1,023.46)   (1,128,542)   (1,023.46)
Net investment loss   (1,062,758)       (1,226,923)       (652)       (2,290,333)       (2,290,333)    
Total net realized and unrealized gain/(loss) allocated from AlphaMetrix WC Diversified Fund - MT0041   2,001,878        1,547,796        886        3,550,560        3,550,560     
Members’ capital at December 31, 2011  $39,780,045    35,445.16   $28,625,081    26,359.10   $10,860    10.00   $68,415,986    61,814.26   $68,415,986    61,814.26 
                                                   
Net asset value per unit at January 1, 2011  $1,075.684        $1,062.568        $1,062.568                          
Change in net asset value per unit   46.615         23.398         23.398                          
Net asset value per unit at December 31, 2011  $1,122.299        $1,085.966        $1,085.966                          

 

See notes to financial statements.

 

33

ALPHAMETRIX MANAGED FUTURES III LLC

 

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

 

(1) Organization

 

AlphaMetrix Managed Futures III LLC (the “Platform”) is sponsored by AlphaMetrix, LLC (the “Sponsor” or “AlphaMetrix”). The Platform was formed on September 10, 2009 as a Delaware series limited liability company pursuant to the Delaware Limited Liability Company Act. AlphaMetrix Managed Futures III LLC (AlphaMetrix WC Diversified Series) (the “Series” or “WC Diversified Series”) is currently the only “segregated series” of the Platform. Since the Series is the Platform’s only segregated series, references to the Series also include the Platform unless otherwise noted. The Series invests a portion of its assets in AlphaMetrix WC Diversified Fund – MT0041 (the “Master Fund”) which is advised by Winton Capital Management Ltd. (the “Trading Advisor”). The Master Fund is systematically trading over numerous futures markets including grains, metals, softs, energies, meats, and financials. Trend-following in nature, the Trading Advisor’s system uses technical analysis to identify market trends. The strategy consists of a multiple of systems – four long-term models and one short-term model. NewEdge USA, LLC and J.P. Morgan Futures Inc. are the Master Fund’s futures clearing brokers (the “Clearing Broker”) and NewEdge Alternative Strategies Inc. is the foreign exchange clearing broker of the Master Fund, although the Master Fund may execute foreign exchange trades through another foreign exchange clearing broker at any time. The Sponsor, over time, intends to offer investors a selection of different trading advisors, each managing a different segregated series of the Platform. There can be no assurance, however, that any series other than the Series will be offered or that the Series will continue to be offered. The Series was organized on September 11, 2009. The Series issued units and commenced trading on January 1, 2010. The Series filed a Form 10, under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (“SEC”) to register the units of limited liability company interest (“Units”), and such registration became effective March 1, 2010.

 

The Series issues two sub-series (each a “Sub-Series), B-0 and B-2. These sub-series are subject to different fees as described in the Confidential Disclosure Document (the “Disclosure Document”). The financial statements presented herein include the combined results of both Sub-Series. On January 1, 2010, the Series issued 10.00 Units of the B-2 sub-series to the Sponsor for $10,000. The Sponsor serves as the Series’ tax matters partner. All capitalized terms used herein are defined in the Disclosure Document.

 

The Sponsor was formed in May 2005, and its main office is located in Chicago, Illinois. The Sponsor is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and commodity trading advisor, with the SEC as a Registered Investment Advisor (“RIA”) and registered transfer agent (“RTA”), and is a member of the National Futures Association (“NFA”).

 

At the sole discretion of the Sponsor, the Series may terminate for any reason (for the avoidance of doubt, the Sponsor shall be entitled, without any violation of any contractual or fiduciary obligation to any investor in the Series (a “Member”), to dissolve the Series at any time).

 

(2) Summary of Significant Accounting Policies

 

The accounting records for the Platform and Series are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Following is a summary of significant accounting policies consistently followed in the preparation of the financial statements.

34

Investment

 

The Series invests in the Master Fund. The Series’ investment in the Master Fund is carried at fair value and represents the Series’ pro rata interest in the net assets of the Master Fund as of the close of business on the relevant valuation date. At December 31, 2012 and 2011, the Series’ investment in the Master Fund was $30,769,148 and $22,107,621, approximately 30.64% and 20.84% of the Master Fund’s net assets. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies, the Series and the Master Fund are not consolidated. The Master Fund’s assets are carried at fair value. At each valuation date, the Master Fund’s income, expenses, net realized gain/(loss) and net increase /(decrease) in unrealized appreciation/(depreciation) are allocated to the Series based on the Series’ pro rata interest in the net assets of the Master Fund, and recorded in the Series’ Statements of Operations. The Master Fund provides the Series with daily estimated net asset valuations. The financial statements of the Master Fund are attached to this report and should be read in conjunction with the Series’ financial statements.

 

Basis of Presentation

 

Pursuant to rules and regulations of the SEC, financial statements are presented for the Platform as a whole and for the WC Diversified Series. The accompanying financial statements and notes thereto include financial statements and footnote totals for the Platform as a whole. For the avoidance of doubt, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular segregated series shall be enforceable only against the assets of such series and not against the assets of the Platform generally or any other segregated series. Accordingly, the assets of one segregated series of the Platform include only those funds and other assets that are paid to, held by or distributed to the Platform on account of and for the benefit of that segregated series, including, without limitation, funds delivered to the Platform for the purchase of Units in that segregated series. As of December 31, 2012 and 2011, the WC Diversified Series exists as the only segregated series on the Platform.

 

Use of Estimates

 

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash

 

Cash is maintained in the custody of commercial banks and includes cash received related to subscriptions received in advance. The Master Fund traded on a leverage basis of approximately: (a) two to one from January 1, 2010 through January 18, 2010; (b) two and a half to one from January 19, 2010 through October 31, 2011; (c) three to one from November 1, 2011 through December 31, 2012. In order to maintain the Series’ overall portfolio at a leverage of approximately one, the Series’ capital not needed at the Master Fund to maintain a leverage of one will be held in the cash account maintained by the Series as opposed to being invested into the Master Fund. The Sponsor will rebalance the amounts held as it deems necessary to keep the Series’ capital leverage factor at approximately one.

 

Prepaid assets

 

Prepaid assets represent insurance contracts that are maintained by the Series as well as the ongoing sales commissions (the “Sales Commission”, “Initial Sales Commission” or “Placement Fee”). Insurance premiums paid are capitalized and expensed over the term of the contract. Refer to below section “Sales Commission”.

 

Subscriptions received in advance

 

Subscriptions received in advance are subscriptions received for the purchase of units effective subsequent to year end.

35

Redemptions payable

 

Redemptions payable are share redemptions effective December 31, 2012 and 2011 but paid subsequent to year - end.

 

Fair Value of Investments

 

FASB ASC 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in an active market. Under ASC 820, fair value measurements are disclosed by level within that hierarchy, as follows:

 

Level 1 — Values for investments classified as Level 1 are based on unadjusted quoted prices for identical investments in an active market. Since valuations are based on quoted prices that are readily accessible at the measurement date, valuation of these investments does not entail a significant degree of judgment.

 

Level 2 — Values for investments classified as Level 2 are based on quoted prices for similar investments in an active or non-active markets for which all significant inputs are observable either directly or indirectly. Level 2 inputs may also include discounts related to restrictions on the investments.

 

Level 3 — Values for investments categorized as Level 3 are based on prices or valuation techniques that require inputs that are both significant to the fair value and unobservable, including valuations by the Sponsor in the absence of readily ascertainable fair values.

 

The Series invests a portion of its assets in the Master Fund. The classification of the Master Fund’s investments in accordance with ASC 820 is discussed in the notes to the attached financial statements of the Master Fund.

 

Derivative Instruments

 

FASB ASC 815, Derivatives and Hedging (“ASC 815”) requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The Series invests substantially all of its assets in the Master Fund which engages in the speculative trading of approximately 120 instruments including international futures, options on futures contracts and forward currency contracts (collectively, “Derivatives”). The Master Fund may also trade cash equities and contracts for difference (“CFDs”). The disclosures required by ASC 815 for the Master Fund are discussed in the notes to the attached financial statements of the Master Fund. The Series does not directly trade derivatives.

 

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for recognized derivative instruments and financial instruments that are either offset in the Statement of Financial Condition or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Sponsor is currently evaluating the impact of the ASU’s adoption on the Master Fund’s financial statement disclosures.

36

Interest Income/Expense

 

Interest income and expense is recognized on an accrual basis. Interest income or expense may include (1) the allocation from the Master Fund of the Master Fund’s interest income/expense from its broker or (2) interest income from the Series’ bank account.

 

Sales Commissions

 

Each Member or Member-related account may be subject to an ongoing sales commission.

 

B-2 Units are subject to an ongoing Sales Commission equal to 2% per annum of the month-end net asset value, including interest income, of the outstanding B-2 Units after deducting the Management Fee (as discussed in Note 4) and accrued Performance Fee (as discussed in Note 4), if any, but before deducting the Sales Commission and Sponsor Fee (as discussed in Note 3) for such month. Each month that B-2 Units are sold, a Sales Commission equal to 2% of the aggregate subscriptions for B-2 Units is paid by the Sub-Series to the selling agent (the “Initial Sales Commission” or “Placement Fee”). The amount of the Initial Sales Commission will then be amortized against the Net Asset Value of the B-2 Units equally each month over the first 12 months. Thereafter, a Sales Commission equal to 0.17% of the Net Asset Value (equivalent to an annual rate of approximately 2.0%) of the B-2 Units sold on the relevant subscription date that remain outstanding is charged each month and is paid to the selling agents.

 

The Sales Commission may be greater or less than 2% of the current Net Asset Value of the B-2 Units. The Sales Commission charged against the Net Asset Value of the B-2 Units each month is equal to the total of the amortized Sales Commission for all B-2 Units that have been outstanding for twelve months or less, plus 0.17% (equivalent to an annual rate of approximately 2%) per month of the Net Asset Value of the B-2 Units that have been outstanding for more than twelve months. For example, if 40% of the B-2 Units’ had been outstanding for more than twelve months, the total Sales Commission would equal the sum of all of the amortized portions for that month plus 0.17% (equivalent to an annual rate of approximately 2%) times the Net Asset Value of the B-2 Units times 0.4. All B-2 Unit holders would then be charged their pro rata portion of such amount. In general, if the Net Asset Value of the B-2 Units is increasing, the amount paid will generally be less than 2% of their Net Asset Value, and if the Net Asset Value of the B-2 Units is decreasing, the amount paid will generally be greater than 2% of their Net Asset Value.

 

The B-0 Units are not subject to a Sales Commission.

 

The selling agents, in consultation with the Sponsor, may waive or reduce the Sales Commission for certain Members without entitling any other Member to any such waiver or reduction.

 

Income Taxes

 

The Platform follows the provisions of FASB ASC Topic 740, Income Taxes (“ASC 740”), related to accounting for uncertainty in income taxes. ASC 740 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. ASC 740 requires the evaluation of tax positions taken in the course of preparing the tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. As of December 31, 2012 and 2011, no liability was recognized in connection with ASC 740. The Platform is subject to income tax examinations by tax authorities for all tax years since its respective inception date.

 

As the Series is a partnership for tax purposes, the Series’ Members are individually responsible for reporting income or loss based on such Member’s share of the Series’ income and expenses as reported for income tax purposes.

37

Distributions

 

The Sponsor does not currently intend to make any distributions. Consequently, in order to pay the taxes attributable to their investment in the Series, Members must either redeem Units or pay such taxes from other sources.

 

Subscriptions

 

Units are purchased generally at the beginning of each calendar month based on the net asset value per Unit for all other purposes (see Note 3) calculated for the prior month-end.

 

Completed Subscription Agreements relative to each Series must be received by the appropriate selling agent no later than seven calendar days prior to the first day of any month in which a Member intends to invest. Members are initially issued units at $1,000 per unit as of the date of the commencement of operations and at the current Net Asset Value (“NAV”) for all dates thereafter.

 

Existing Members may make an additional investment by completing, and submitting to the selling agents, a short-form Subscription Agreement, as provided by the Sponsor.

 

The Sponsor, in its sole discretion and for any reason, may decline to accept the subscription of any prospective Member.

 

Redemptions

 

Units may be redeemed as of the end of any calendar month (each, a “Redemption Date”) at the Net Asset Value per Unit at such Redemption Date. Redemption requests must be received by the 15th day of the calendar month of such Redemption Date or the following business day if the 15th is not a business day. The Sponsor may permit redemptions at other times and on shorter notice.

 

The Net Asset Value of redeemed Units is determined as of the Redemption Date for purposes of determining the redemption proceeds due to Members. Members will remain subject to fluctuations in such Net Asset Value during the period between submission of their redemption requests and the applicable Redemption Date. The Net Asset Value of Units on the designated Redemption Date may differ materially from the Net Asset Value of such Units as of the date on which an irrevocable redemption request must be submitted.

 

When Units are redeemed (or exchanged), any accrued fees (including Performance Fees) and brokerage commissions reduce the redemption proceeds paid to members.

 

Redemption Fee

 

If a Member redeems his or her investment in the B-2 Units before the end of the sixth calendar month following such Member’s initial investment in the B-2 Units (the “Initial Investment”), such Redemption will be subject to a Redemption Fee (the “Redemption Fee”) equal to 2% of such Member’s Initial Investment. If a Member Redeems his or her investment in the B-2 Units following the sixth month-end after the date of his or her Initial Investment but prior to the twelfth month-end after the date of such Member’s Initial Investment, such Redemption will be subject to a Redemption Fee equal to 1% of such Member’s Initial Investment in the B-2 Units. The Redemption Fee will be pro-rated for partial redemptions prior to the twelfth month-end following such Member’s Initial Investment, i.e. if the Member withdraws 50% of his or her current investment in the B-2 Units, 50% of the Redemption Fee will be due upon Redemption. In no case will the sum of all Redemption Fees paid by a Member be greater than the Initial Sales Commission paid by such Member. Redemption fees amounted to $4,390 and $2,075 for the years ended December 31, 2012 and 2011, respectively.

38

Indemnifications

 

In the normal course of business, the Series enters into contracts and agreements that contain a variety of representations and warranties and which would provide general indemnifications. The maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Series that have not yet occurred. However, the Series expects the risk of any future obligation under these indemnifications to be remote.

 

(3) Related Party Transactions

 

At December 31, 2011, a substantial amount of the Master Fund’s assets were held within the Offshore Platform Cash Account (“OPCA”), a related party. For a discussion on the OPCA, refer to Note 5 in the attached Master Fund’s financial statements. At December 31, 2012, the Master Fund held no investment in the OPCA.

 

The Sponsor will receive a flat-rate monthly sponsor fee (the “Sponsor Fee”) of 0.042 of 1% (a 0.50% annual rate) of the Series’ Net Asset Value after deducting the Management Fee and accrued Performance Fee, if any, from the Series’ month-end net asset value for all other purposes, including interest income, of a Member’s investment in the Series for such month. The Sponsor reserves the right to waive or reduce the fee in its sole discretion. The Series incurred Sponsor’s fees of $440,227 and $190,081 for the years ended December 31, 2012 and 2011, of which $13,344 and $8,523 is owed to the Sponsor at December 31, 2012 and 2011, respectively.

 

The Sponsor will receive a monthly service provider fee (the “Service Provider Fee”) equal to 0.025% of 1% (equivalent to an annual rate of approximately 0.30%) of the Net Asset Value of the Series and is reflected on the statements of operations as operating expenses. Operating costs paid for by the Sponsor out of the Service Provider Fee generally include: certain ongoing offering expenses; administrative, transfer, exchange and redemption processing costs; legal, regulatory, reporting, filing, tax, audit, escrow and accounting; the fees of the Master Fund’s directors; and any other operating or administrative expenses related to accounting, research, due diligence or reporting. The Service Provider Fee is charged at the Series level.

 

Operating costs not covered by the Service Provider Fee and paid for by the Series (including those allocated to the Series by the Master Fund) generally include: execution and clearing brokerage commissions; forward and other over-the-counter (“OTC”) trading spreads; bank wire fees; insurance; and extraordinary expenses such as litigation and indemnification.

 

The Series will bear all expenses incurred in connection with the organizational and initial offering of the Units at the Series level. For financial reporting purposes in conformity with GAAP, the Series expensed the organizational costs of $119,362 (“net asset value for financial reporting” or the “net asset value per Unit for financial reporting”). For all other purposes, including determining the net asset value per Unit for subscription and redemption purposes, the Series amortizes organizational and initial offering costs over a 60 month period (“net asset value for all other purposes” or the “net asset value per Unit for all other purposes”).

 

WC Diversified Series Net Asset Values

 

The quarterly net asset value and net asset value per Unit since commencement of operations are as follows:

39

B-0 Sub-series

 

   Net Asset Value       Net Asset Value per Unit 
   All Other Purposes   Financial Reporting   Number of Units   All Other Purposes   Financial Reporting 
Price at Commencement*                 $1,000.000   $1,000.000 
March 31, 2010  $204,747   $170,129    201.42    1,016.543    844.668 
June 30, 2010   1,552,311    1,498,597    1,514.35    1,025.067    989.597 
September 30, 2010   3,449,930    3,399,202    3,299.18    1,045.693    1,030.317 
December 31, 2010   7,609,887    7,562,143    7,030.08    1,082.475    1,075.684 
March 31, 2011   14,437,218    14,392,458    13,168.12    1,096.377    1,092.977 
June 30, 2011   21,259,372    21,217,596    19,929.06    1,066.753    1,064.656 
September 30, 2011   33,859,556    33,820,763    29,987.57    1,129.120    1,127.826 
December 31, 2011   39,815,854    39,780,045    35,445.16    1,123.309    1,122.299 
March 31, 2012   50,681,169    50,648,343    45,726.34    1,108.358    1,107.640 
June 30, 2012   54,723,265    54,693,424    51,399.89    1,064.657    1,064.077 
September 30, 2012   57,230,448    57,203,593    53,663.40    1,066.471    1,065.970 
December 31, 2012   59,085,151    59,061,278    55,603.78    1,062.610    1,062.181 
                          
Total return after performance fee, from the commencement of operations through the year ended December 31, 2012    6.26%   6.22%

 

B-2 Sub-series

 

   Net Asset Value       Net Asset Value per Unit 
   All Other Purposes   Financial Reporting   Number of Units   All Other Purposes   Financial Reporting 
Price at Commencement*                 $1,000.000   $1,000.000 
March 31, 2010  $711,568   $676,948    702.56    1,012.822    963.546 
June 30, 2010   3,545,196    3,491,483    3,473.46    1,020.653    1,005.189 
September 30, 2010   4,167,206    4,116,477    4,017.54    1,037.254    1,024.627 
December 31, 2010   8,686,430    8,638,686    8,130.00    1,068.441    1,062.568 
March 31, 2011   11,718,602    11,673,842    10,882.20    1,076.859    1,072.746 
June 30, 2011   18,552,025    18,510,249    17,801.65    1,042.152    1,039.805 
September 30, 2011   25,506,034    25,467,241    23,220.46    1,098.429    1,096.758 
December 31, 2011   28,671,748    28,635,941    26,369.10    1,087.324    1,085.966 
March 31, 2012   30,271,135    30,238,312    28,356.74    1,067.511    1,066.354 
June 30, 2012   31,902,551    31,872,713    31,268.81    1,020.267    1,019.313 
September 30, 2012   35,467,117    35,440,260    34,881.13    1,016.800    1,016.030 
December 31, 2012   34,902,966    34,879,095    34,628.87    1,007.915    1,007.226 
                          
Total return after performance fee, from the commencement of operations through the year ended December 31, 2012    0.79%   0.72%

 

*Commencement of operations of the Series was January 1, 2010.

40

(4) Management and Performance Fees

 

The Series is subject to a monthly management fee at the rate of 0.1875% (a 2.25% annual rate) of the Series’ month-end net asset value for all other purposes (see Note 3) calculated before reduction for any Management Fees, Performance Fees, Service Provider Fees, Sponsor Fees, Sales Commission or extraordinary fees accrued (including performance fees accrued in a prior month) as of such month-end and before giving effect to any capital subscriptions made as of the beginning of the month immediately following such month-end and before any redemptions accrued during or as of such month-end, but after all expenses as of such month-end. The Series incurred management fees of $1,986,850 and $1,007,121 for the years ended December 31, 2012 and 2011, of which $60,158 and $43,828 is payable at December 31, 2012 and 2011, respectively.

 

The Series is subject to a quarterly Performance Fee equal to 20% which is paid at the Series level but is calculated based on the Series’ share of the Master Fund’s new Net Trading Profits as defined by the excess, if any, of the cumulative level of Net Trading Profits attributable to the Series at the end of such quarter over the highest level of cumulative Net Trading Profits as of the end of any preceding quarter (the “High Water Mark”). The Series incurred Performance Fees of $327 and $518,353 for the years ended December 31, 2012 and 2011, of which $0 was payable at December 31, 2012 and 2011.

 

The Sponsor will receive the Management Fee and the Performance Fee, and will remit such fees to the Trading Advisor, although the selling agents or an Affiliate may receive a portion of such fees not paid over to the Trading Advisor.

 

The Trading Advisor has entered into a Trading Agreement with the Master Fund.

 

The Sponsor, in consultation with the Trading Advisor, may waive, rebate or reduce Management and/or Performance Fees for certain Members without entitling other Members to such waiver, rebate or reduction.

 

(5) Financial Instruments with Off-balance sheet and Concentration of Credit Risk

 

The Series, via its investment in the Master Fund engages in the speculative trading of derivatives. The Series does not have any direct commitments to buy or sell financial instruments, including derivatives. The Series has indirect commitments that arise through positions held by the Master Fund in which the Series invests. However, as an investor in a Master Fund, the Series’ risk at December 31, 2012 and 2011 is limited to the fair value of its investment in the Master Fund.

 

(6) NAV Verification Agent

 

Beginning in November 2011, Custom House Fund Services (Chicago) LLC (“Custom House”), was retained by the Platform to serve as a NAV Verification Agent and perform certain net asset value verification procedures for the Master Fund and the Series pursuant to a NAV Verification Agreement (the “Custom House Agreement”), entered into by Custom House, the Sponsor, the Platform and the Administrator.

 

(7) Administration

 

AlphaMetrix360, LLC (“AlphaMetrix360”), a related party to the Sponsor, serves as Administrator (the “Administrator”) for the Platform. The Administrator is responsible for certain clerical and administrative functions of the Platform, including acting as registrar and transfer agent, calculation of NAV based on valuations provided by the Trading Advisors and the Sponsor (although the Sponsor is ultimately responsible for determining the NAV of each Fund).

 

(8) Financial Highlights

 

The following financial highlights in the table below show the Series’ financial performance for the years ended December 31, 2012 and 2011 for B-0 and B-2 Sub-Series units. All performance returns noted are calculated based on the net asset value per Unit for financial reporting, with estimated organizational costs incurred prior to issuance of Units being expensed at the commencement of the operations of the Series.

41

Total return is calculated as the change in a theoretical Member’s investment over the entire year - a percentage change in the Member’s capital value for the year. The information has been derived from information presented in the financial statements.

 

Regarding the information shown in the table below:

 

·Per unit operating performance is computed based upon the weighted-average net units for the years ended December 31, 2012 and 2011. Total return is calculated as the change in the net asset value per unit for the years ended December 31, 2012 and 2011.

 

·The net investment loss and total expense ratios are computed based upon the weighted average net assets for the years ended December 31, 2012 and 2011. Weighted average net assets include the performance fee and are computed using month-end net assets. Net investment loss and expenses include the Series’ proportionate share of the Master Fund’s investment income (loss) and expenses, respectively.

 

An individual Member’s total return and ratios may vary from those below based on the timing of capital transactions.

 

   AlphaMetrix Managed Futures III LLC
(WC Diversified Series)
 
   Year Ended
December 31, 2012
   Year Ended
December 31, 2012
 
   B-0 Sub-Series   B-2 Sub-Series 
Members’ capital per unit at January 1, 2012  $1,122.30   $1,085.97 
           
Per unit data (for a unit outstanding throughout the year):          
Net investment loss   (35.67)   (54.99)
Net realized and unrealized loss allocated from AlphaMetrix WC Diversified Fund - MT0041   (24.45)   (23.75)
Total from investment operations   (60.12)   (78.74)
           
Members’ capital per Unit at December 31, 2012  $1,062.18   $1,007.23 
           
Total return:          
Total return before performance fee   (5.36%)   (7.25%)
Performance fee   0.00%   0.00%
Total return after performance fee   (5.36%)   (7.25%)
           
Ratios to average members’ capital          
Net investment loss   (3.29%)   (5.28%)
           
Expenses:          
Expenses   3.29%   5.29%
Performance fee   0.00%   0.00%
Total expenses   3.29%   5.29%

42

   AlphaMetrix Managed Futures III LLC
(WC Diversified Series)
 
   Year Ended
December 31, 2011
   Year Ended
December 31, 2011
 
   B-0 Sub-Series   B-2 Sub-Series 
Members’ capital per unit at January 1, 2011  $1,075.68   $1,062.57 
           
Per unit data (for a unit outstanding throughout the year):          
Net investment loss   (50.06)   (70.21)
Net realized and unrealized gain allocated from AlphaMetrix WC Diversified Fund - MT0041   96.68    93.61 
Total from investment operations   46.62    23.40 
           
Members’ capital per Unit at December 31, 2011  $1,122.30   $1,085.97 
           
Total return:          
Total return before performance fee   5.61%   3.42%
Performance fee   (1.28%)   (1.22%)
Total return after performance fee   4.33%   2.20%
           
Ratios to average members’ capital          
Net investment loss   (4.52%)   (6.52%)
           
Expenses:          
Expenses   3.39%   5.43%
Performance fee   1.25%   1.20%
Total expenses   4.64%   6.63%

 

(9) Subsequent Events

 

In accordance with FASB ASC 855, Subsequent Events, the Sponsor has evaluated all subsequent events requiring recognition and disclosure in the financial statements through the date the financial statements were issued. The Sponsor has determined that there are no material events that would require recognition or disclosure in the financial statements.

43

 

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

 

None.

 

Item 9A(T): Controls and Procedures

 

The Sponsor, with the participation of the Sponsor’s principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Platform and Series as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the Sponsor’s internal controls with respect to the Platform or Series or in other factors applicable to the Platform or Series that could materially affect these controls subsequent to the date of their evaluation.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The Sponsor is responsible for establishing and maintaining adequate internal control over the financial reporting of the Master Fund and the Series. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Sponsor’s internal control over financial reporting includes those policies and procedures that:

 

·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Master Fund and the Series; 
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements of the Master Fund and the Series in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Master Fund and the Series are being made only in accordance with authorizations of management and directors of the Sponsor; and 
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Master Fund’s and the Series’ assets that could have a material effect on their respective financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The principal executive and financial officers of the Sponsor assessed the effectiveness of its internal control over financial reporting with respect to the Master Fund and the Series as of December 31, 2012. In making this assessment, the principal executive and financial officers used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its assessment, they have concluded that, as of December 31, 2012, the Sponsor’s internal control over financial reporting with respect to the Series is effective based on those criteria.

 

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

 

Item 9B: Other Information

 

None.

44

PART III

 

Item 10: Directors, Executive Officers and Corporate Governance

 

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

 

The Series is a segregated series of a limited liability company, and the Master Fund and the Series themselves have no officers or directors and are managed by the Sponsor.

 

The following are the principal officers and managers of the Sponsor.

 

Aleks Kins. Mr. Kins founded AlphaMetrix in May 2005, became listed as a principal and licensed as an associated person on July 6, 2005, and is currently its President and Chief Executive Officer. In such capacity, Mr. Kins has overseen the development of AlphaMetrix’s proprietary software and electronic managed account platforms that provide transparency, advanced risk monitoring and efficient access to professional futures and derivatives traders. On July 21, 2008, Mr. Kins founded AlphaMetrix360, LLC, which registered with the CFTC as a CTA and became a member of NFA in August 2008. AlphaMetrix360, LLC did not conduct any business as a CTA and subsequently terminated its registration and membership on December 18, 2008. AlphaMetrix360, LLC subsequently changed its name to AlphaMetrix Financial Investigations, LLC and currently conducts business as a licensed private detective agency. On September 30, 2010, Mr. Kins founded a new limited liability company named AM 360°, LLC, of which he is its Chief Executive Officer. In October 2010, AM 360°, LLC changed its name to AlphaMetrix 360°, LLC. AlphaMetrix 360°, LLC acquired the assets of Spectrum Global Fund Administration in December 9, 2010. In February 2011, AlphaMetrix 360°, LLC changed its name to AlphaMetrix360, LLC. AlphaMetrix360, LLC has been retained by the Platform to perform administrative services for the Platform, the Series, the Underlying Funds and the Master Funds, among other funds sponsored by the Sponsor. Mr. Kins is also the founder of AlphaMetrix Alternative Investment Advisors, LLC (“AlphaMetrix AIA”), an independent research affiliate of AlphaMetrix. Mr. Kins was approved as a principal and associated person of AlphaMetrix AIA in November 2007. AlphaMetrix AIA is a registered CTA that performs research, trading advisor due diligence and certain investment management and portfolio services. Mr. Kins was a principal and an associated person of Dekla Financial, LLC (“Dekla”), an affiliate of AlphaMetrix AIA from September 2005 and December 2005, respectively, until October 2010. Dekla was registered with the NFA as an Introducing Broker on December 7, 2005, and as a Notice Broker-Dealer on January 17, 2007. Dekla recently de-registered as an Introducing Broker and Notice Broker-Dealer, which became effective as of October 16, 2010. Dekla served as the introducing broker for various commodity pools sponsored by AlphaMetrix AIA and other futures trading accounts until its de-registration as an Introducing Broker and Notice Broker-Dealer. Dekla is not currently serving as an Introducing Broker or a Notice Broker-Dealer since it withdrew its registration with CFTC.

 

Prior to founding AlphaMetrix and its affiliates, Mr. Kins was the President and co-founder of Access Asset Management, a registered CPO and CTA, from its formation in November 2000 through April 2005. Access Asset Management became RQSI/Access, a Chicago-based division of Ramsey Quantitative Systems, in August 2002. Initially, Mr. Kins’ primary focus at RQSI/Access was the creation and development of the Emerging CTA Index (“ECI”). The ECI allocated several hundred million dollars to over 100 CTAs and developed a reputation as a major incubator for commodity traders. In addition, Mr. Kins was instrumental in the development of customized alternative investment cells for several institutional investors as well as providing research and analysis to several fund of funds’ investment committees regarding the allocation of capital among commodity trading advisors. Mr. Kins is frequently cited in industry publications as an authority in the realm of alternative investments and is regularly invited to speak at conferences on the subject of alternative investments. Mr. Kins received a B.A. in Economics from Brown University in 1993.

 

David Young. Mr. Young joined AlphaMetrix in March 2010 as its Chief Operations Officer and was approved as a principal of AlphaMetrix on March 19, 2010. Mr. Young previously held the position of President at Spectrum Global Fund Administration from March 2002 through March 2010. Spectrum Global Fund Administration provides middle and back office outsourcing and administration services to hedge funds and funds of funds through its proprietary technology platform. He was also the President and COO of Midland Trading, LLC, an options specialist firm trading at the Chicago Board of Options Exchange, from March 2000 until March 2002. Midland Trading, LLC was formed in March of 2000 through a restructuring of The Arbitrage Group, LLC, an

45

options specialist firm trading at the Chicago Board of Options Exchange. Mr. Young was the Chief Financial Officer of The Arbitrage Group, LLC from August 1998 until March 2000. Prior to working at Midland Trading, LLC, Mr. Young was the Chief Financial Officer of Fenchurch Capital Management, LLC, a hedge fund in Chicago trading in fixed income arbitrage, from August of 1989 until August of 1998. From August of 1987 until August of 1989, Mr. Young was a Senior Accountant with First Options of Chicago, an options trading firm. Mr. Young received a Bachelor of Science degree in Accounting from North Central College, Naperville, Illinois, in 1987.

 

George Brown. Mr. Brown joined AlphaMetrix in March 2008, was approved as a principal on July 14, 2008, and is its Chief Financial Officer. In December 2010, Mr. Brown was elected as the Chief Financial Officer of AlphaMetrix360, LLC. Mr. Brown served as a consultant for Nature’s Best, a sports nutrition and protein beverages producer, from December 2007 to February 2008, as Chief Financial Officer of Ultraguard Corporation, a manufacturer of dual smoke/carbon monoxide detectors and wireless monitor systems, from September 2005 to August 2007 and as Chief Financial Officer for Old London Foods, Inc., a producer of branded crackers and co-packed private label bread crumbs, from July 1997 until August 2007. From September 2007 to December 2007, Mr. Brown was self-employed as a financial consultant. He possesses a broad range of expertise in financial areas including control, planning, treasury, tax and audit and is a seasoned, entrepreneurial senior financial executive with experience including private equity, leveraged buy-outs and start-ups. Mr. Brown received an M.B.A. in Finance from the University of Chicago in 1979 and a B.A. in Economics (Morehead Scholarship) from the University of North Carolina in 1977.

 

Victoria L. Adams. Ms. Adams joined AlphaMetrix in December 2010 and is AlphaMetrix Chief Compliance Officer and Chief of Staff. In those capacities, she reports directly to AlphaMetrix Chief Operating Officer. Ms. Adams has been an NFA-approved principal of AlphaMetrix from November 21, 2011 to the present. As Chief Compliance Officer, she is responsible for overseeing and managing compliance within AlphaMetrix, ensuring that AlphaMetrix and its employees comply with applicable regulatory requirements and AlphaMetrix internal policies. She is also responsible for establishing standards and procedures that are effective in detecting, preventing, and correcting noncompliance with applicable rules and regulations and the company’s policies. As Chief of Staff, Ms. Adams is also responsible for staffing and other human resources related functions as well as the management of special projects. Before joining AlphaMetrix, from December 2006 to December 2010, Ms. Adams was the Vice President of Human Resources and Director of Organizational Development for Spectrum Global Fund Administration, a fund administrator. In this capacity, Ms. Adams was responsible for all human resources related duties, including recruiting, retention, performance management, compensation, employee relations, disciplinary and corrective measures, employee training, as well as the development of all human resources policies and procedures. Additionally, she was responsible for developing and circulating all corporate communications, as well as benefits administration, commercial insurance renewals and real estate management for all office locations of the company. Ms. Adams is a graduate of DePaul University, Chicago, having earned a Bachelor of Arts degree in Business in 2002. She also earned a Master’s Degree in Business Law from Loyola University Chicago School of Law in 2008.

 

Franz Gildemeister. Mr. Gildemeister joined AlphaMetrix in July 2010, was approved as a Principal on June 22, 2011, and is currently its Chief Fund Accountant and Controller. In such capacity, Mr. Gildemeister oversees the accounting for AlphaMetrix’s fund structures, including the semimonthly net asset values for the funds, audited annual financial statements, any required financial filings with the SEC, and K-1s for all U.S. clients. From July 2010 to June 24, 2011 Mr. Gildemeister held the position of Director of Fund Accounting and, in such capacity he acted as liaison between AlphaMetrix and their fund administrator to ensure the timely and accurate calculation of the semi-monthly nets asset values for the funds. Prior to joining AlphaMetrix, Mr. Gildemeister was the Controller for Sky Road LLC, a front-office solutions provider for hedge funds from November 2008 through June 2010. His primary responsibilities were maintaining the books and records for the company and assisting in the preparation of the company’s foreign and domestic tax filings. From August 2006 through October 2008, Mr. Gildemeister was the Director of Accounting for VARA Capital Management, LLC, a hedge fund manager, employing a global macro strategy. His primary responsibilities were to prepare the monthly and year-end financial statements under U.S. GAAP for the hedge funds managed by the company. Prior to joining VARA Capital Management, LLC, Mr. Gildemeister was a Senior Client Relationship Manager at Spectrum Global Fund Administration from July 2003 through August 2006. He managed the day to day back office operations for hedge fund clients employing a variety of strategies including, fixed income arbitrage, distressed debt, global macro and

46

emerging markets. Mr. Gildemeister received a B.S. degree in Accounting from Hartwick College, Oneonta, New York in 1997 and is a registered CPA in the state of Vermont.

 

(c)Identification of Certain Significant Employees

 

None.

 

(d)Family Relationships

 

Mr. Kins and Mr. Brown are brothers-in-law.

 

(e)Business Experience

 

See Item 10(a) and (b) above.

 

(f)Involvement in Certain Legal Proceedings

 

None.

 

(g)Section 16(a) Beneficial Ownership Reporting Compliance

 

None

 

(h)Code of Ethics

 

The Master Fund and the Series have no employees, or officers and are managed by the Sponsor. The Sponsor has adopted an Executive Code of Ethics that applies to its principal executive officers, principal financial officer and principal accounting officer. A copy of this Executive Code of Ethics may be obtained at no charge by written request to AlphaMetrix, LLC, 181 West Madison, 34th floor, Chicago, Illinois 60602.

 

(i)Audit Committee Financial Expert

 

Because the Master Fund and the Series have no employees, or officers, the Master Fund and the Series have no audit committee. The Master Fund and the Series is managed by the Sponsor. George Brown serves as the Sponsor’s “audit committee financial expert.”  George Brown is not independent of the management of the Sponsor. The Sponsor is a privately owned limited liability company. It has no independent directors.

 

Item 11: Executive Compensation

 

The Series has no directors, officers or employees. None of the officers or employees of the Sponsor receive compensation from the Series. The Sponsor receives a monthly sponsor fee of 0.042 of 1% (a 0.50% annual rate) of the Series’ month-end net asset value for all other purposes, taking into account interest income, of each Member’s investment in the Series for such month. The officers of the Sponsor receive no “other compensation” from the Series. There are no compensation plans or arrangements relating to a change in control of any of the Series, the Platform or the Sponsor.

 

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

 

(a)Security Ownership of Certain Beneficial Owners

 

Not applicable. All of the Platform’s manager interest is held by the Sponsor.

 

(b)Security Ownership of Management

47

As of December 31, 2012, the Trading Advisor and the executive officers and the principals of the Sponsor did not own directly or indirectly any Units. As of December 31, 2012, the Sponsor owned directly 10.00 Units, which constituted 0.07% of the total Units outstanding, and did not own any Units indirectly.

 

(c)Changes in Control

 

None.

 

(d)Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

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

 

(a)Transactions With Related Persons

 

See Item 11 “Executive Compensation,” Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” and “Item 1(c) “Narrative Description of Business.”  As of December 31, 2012 and 2011, the Series had incurred the following: Sponsor fees of $440,227 and $190,081 to the Sponsor;

 

(b)Review, Approval or Ratification of Transactions with Related Persons

 

None.

 

(c)Director Independence

 

The Master Fund has two directors, both of whom are independent. The Series does not have any directors. None of the directors of the Sponsor are independent. See Item 10(a) and (b) “Identification of Directors and Executive Officers.”

 

Item 14: Principal Accounting Fees and Services

 

(1)Audit Fees

 

Aggregate fees billed for professional services rendered by Deloitte & Touche, LLP (“D&T”) in connection with the audit of the Series’ financial statements and reviews of financial statements included in the Series’ Form 10-Q or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements as of and for the years ended December 31, 2012 and 2011 were $166,200 and $161,100.

 

(2)Audit-Related Fees

 

There were no fees for audit related services rendered by D&T for the years ended December 31, 2012 and 2011 related to the Series.

 

(3)Tax Fees

 

Aggregate fees billed for professional services rendered by Arthur F. Bell, Jr & Associates, L.L.C. in connection with tax compliance, tax advice and tax planning for the years ended December 31, 2012 and 2011 were approximately $10,367 and $6,176. This fee is not passed through to the Series, but rather, is included within the Service Provider Fee.

48
(4)All Other Fees

 

No fees were incurred by D&T, or any member firms of D&T and their respective affiliates, during the years ended December 31, 2012 and 2011 for any other professional services in relation to the Series.

 

(5)Pre-Approval Policies

 

The Sponsor’s principal executive and financial officers review the estimated audit and tax fees prior to engaging an auditor or tax services for the Series.

 

PART IV

 

Item 15: Exhibits, Financial Statement Schedules

 

(a)(1)Financial Statements

 

See Financial Statements for the Master Fund filed herewith as Exhibit 99.1 and Financial Statements for the Series incorporated into Part II, Item 8.

 

Affirmation of AlphaMetrix, LLC

Report of Independent Registered Public Accounting Firm

Statements of Financial Condition

Statements of Operations

Statements of Changes in Members’ Capital

Condensed Schedules of Investments (Master Fund Financial Statements only)

Notes to Financial Statements

 

(a)(2)Financial Statement Schedules

 

Financial statement schedules not included in this Form 10-K have been omitted because they are not required or are not applicable or because equivalent information has been included in the Financial Statements filed herewith as Exhibit 99.1 and incorporated into Part II, Item 8.

 

(a)(3)Exhibits Required by Item 601 of Regulation S-K

 

The following exhibits are included herewith.

 

Exhibit Number   Description of Document
     
1.1*   Selling Agreement.
     
3.1*   Certificate of Formation of AlphaMetrix Managed Futures III LLC.
     
4.1*   Limited Liability Company Operating Agreement of AlphaMetrix Managed Futures III LLC.
     
4.2*   Separate Series Agreement for the Series.
     
10.1*  

Trading Management Agreement.

     
10.2*   Assignment of Trading Management Agreement
     
10.3*   Amendment of Trading Management Agreement
     
10.4*   Administrative Services Agreement

49
Exhibit Number   Description of Document
     
21.1*   List of Subsidiaries.
     
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
     
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
     
32.1   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
99.1   Financial Statements of Master Fund for the years ended December 31, 2012 and 2011
     
**101.INS   XBRL Instance Document
     
**101.SCH   XBRL Taxonomy Extension Schema
     
**101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
**101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
**101.LAB   XBRL Taxonomy Extension Label Linkbase
     
**101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

* Incorporated by reference to the Series’ Form 10 filed on December 31, 2009.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

50

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 11th day of April, 2013.

 

Dated: April 11, 2013

 

ALPHAMETRIX MANAGED FUTURES III LLC

 

By: AlphaMetrix, LLC

Sponsor

 

By: /s/ Aleks Kins      

Name: Aleks Kins

Title: President and Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Sponsor of the registrant in the capacities and on the date indicated.

 

Signature   Title with Managing Owner   Date
         
/s/ George Brown   Chief Financial Officer   April 11, 2013
George Brown        
         
/s/ David Young   Chief Operations Officer   April 11, 2013
David Young        

 

AlphaMetrix, LLC

Sponsor of Registrant

April 11, 2013

51