Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - MAN FRM MANAGED FUTURES STRATEGIES LLC | Financial_Report.xls |
| EX-31.01 - EX-31.01 - MAN FRM MANAGED FUTURES STRATEGIES LLC | a13-8586_1ex31d01.htm |
| EX-32.01 - EX-32.01 - MAN FRM MANAGED FUTURES STRATEGIES LLC | a13-8586_1ex32d01.htm |
| EX-32.02 - EX-32.02 - MAN FRM MANAGED FUTURES STRATEGIES LLC | a13-8586_1ex32d02.htm |
| EX-31.02 - EX-31.02 - MAN FRM MANAGED FUTURES STRATEGIES LLC | a13-8586_1ex31d02.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-52505
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(Exact Name of Registrant as
specified in its charter)
|
Delaware |
|
30-0408280 |
|
(State or other jurisdiction of |
|
(IRS Employer Identification No.) |
|
incorporation or organization) |
|
|
c/o Merrill Lynch Alternative Investments LLC
Four World Financial Center, 11th Floor
250 Vesey Street
New York, New York 10080
(Address of principal executive offices)
(Zip Code)
212-449-3517
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer o |
|
Accelerated filer o |
|
|
|
|
|
Non-accelerated filer x |
|
Smaller reporting company o |
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of March 31, 2013, 449,594,893 units of limited liability company interest were outstanding.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
QUARTERLY REPORT FOR MARCH 31, 2013 ON FORM 10-Q
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PAGE |
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PART I—FINANCIAL INFORMATION | ||
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Item 1. |
Financial Statements |
1 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
19 |
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Item 4. |
Controls and Procedures |
30 |
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PART II—OTHER INFORMATION | ||
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Item 1. |
Legal Proceedings |
31 |
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Item 1A. |
Risk Factors |
31 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
31 |
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Item 3. |
Defaults Upon Senior Securities |
32 |
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Item 4. |
Mine Safety Disclosures |
32 |
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Item 5. |
Other Information |
32 |
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Item 6. |
Exhibits |
32 |
PART I - FINANCIAL INFORMATION
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
|
|
|
March 31, |
|
December 31, |
| ||
|
|
|
2013 |
|
2012 |
| ||
|
ASSETS: |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Cash |
|
$ |
395,519 |
|
$ |
351,777 |
|
|
Investment in Portfolio Funds (Cost $496,832,433 at 2013 and $565,995,535 at 2012) |
|
490,847,035 |
|
543,641,020 |
| ||
|
Receivable from Portfolio Fund |
|
7,693,639 |
|
16,572,631 |
| ||
|
|
|
|
|
|
| ||
|
TOTAL ASSETS |
|
$ |
498,936,193 |
|
$ |
560,565,428 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND MEMBERS’ CAPITAL: |
|
|
|
|
| ||
|
LIABILITIES: |
|
|
|
|
| ||
|
Sponsor fee payable |
|
$ |
846,905 |
|
$ |
933,374 |
|
|
Redemptions payable |
|
6,490,312 |
|
16,058,487 |
| ||
|
Other liabilities |
|
578,460 |
|
503,803 |
| ||
|
|
|
|
|
|
| ||
|
Total liabilities |
|
7,915,677 |
|
17,495,664 |
| ||
|
|
|
|
|
|
| ||
|
MEMBERS’ CAPITAL: |
|
|
|
|
| ||
|
Members’ Interest (449,594,893 Units and 505,619,472 Units outstanding; unlimited Units authorized) |
|
491,020,516 |
|
543,069,764 |
| ||
|
Total members’ capital |
|
491,020,516 |
|
543,069,764 |
| ||
|
|
|
|
|
|
| ||
|
TOTAL LIABILITIES AND MEMBERS’ CAPITAL |
|
$ |
498,936,193 |
|
$ |
560,565,428 |
|
|
|
|
|
|
|
| ||
|
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Class A |
|
$ |
1.0917 |
|
$ |
1.0689 |
|
|
Class C |
|
$ |
1.0752 |
|
$ |
1.0554 |
|
|
Class D |
|
$ |
1.3336 |
|
$ |
1.3008 |
|
|
Class I |
|
$ |
1.1668 |
|
$ |
1.1413 |
|
|
Class D1 |
|
$ |
1.1902 |
|
$ |
1.1609 |
|
|
Class M |
|
$ |
0.9852 |
|
$ |
0.9610 |
|
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
(unaudited)
|
|
|
For the three |
|
For the three |
| ||
|
|
|
months ended |
|
months ended |
| ||
|
|
|
March 31, 2013 |
|
March 31, 2012 |
| ||
|
TRADING PROFIT (LOSS): |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Realized, net |
|
$ |
(2,565,171 |
) |
$ |
6,315,046 |
|
|
Change in unrealized, net |
|
16,369,117 |
|
(8,630,073 |
) | ||
|
|
|
|
|
|
| ||
|
Total trading profit (loss), net |
|
13,803,946 |
|
(2,315,027 |
) | ||
|
|
|
|
|
|
| ||
|
EXPENSES: |
|
|
|
|
| ||
|
Sponsor fee |
|
2,629,730 |
|
4,527,844 |
| ||
|
Other |
|
330,899 |
|
356,999 |
| ||
|
Total expenses |
|
2,960,629 |
|
4,884,843 |
| ||
|
|
|
|
|
|
| ||
|
NET INVESTMENT INCOME (LOSS) |
|
(2,960,629 |
) |
(4,884,843 |
) | ||
|
|
|
|
|
|
| ||
|
NET INCOME (LOSS) |
|
$ |
10,843,317 |
|
$ |
(7,199,870 |
) |
|
|
|
|
|
|
| ||
|
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Weighted average number of Units outstanding |
|
|
|
|
| ||
|
Class A |
|
76,308,210 |
|
117,664,413 |
| ||
|
Class C |
|
328,271,330 |
|
529,285,356 |
| ||
|
Class D |
|
16,064,653 |
|
32,978,505 |
| ||
|
Class I |
|
36,212,849 |
|
67,656,553 |
| ||
|
Class D1 |
|
11,222,132 |
|
19,538,871 |
| ||
|
Class M |
|
12,210,582 |
|
554,219 |
| ||
|
|
|
|
|
|
| ||
|
Net income (loss) per weighted average Unit |
|
|
|
|
| ||
|
Class A |
|
$ |
0.0237 |
|
$ |
(0.0084 |
) |
|
Class C |
|
$ |
0.0205 |
|
$ |
(0.0105 |
) |
|
Class D |
|
$ |
0.0441 |
|
$ |
(0.0040 |
) |
|
Class I |
|
$ |
0.0268 |
|
$ |
(0.0070 |
) |
|
Class D1 |
|
$ |
0.0289 |
|
$ |
(0.0030 |
) |
|
Class M |
|
$ |
0.0250 |
|
$ |
(0.0041 |
) |
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(unaudited) (in Units)
|
|
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Members’ Capital |
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Members’ Capital |
|
|
Class A |
|
118,415,228 |
|
1,844,516 |
|
(7,878,720 |
) |
112,381,024 |
|
79,916,267 |
|
659,266 |
|
(9,055,101 |
) |
71,520,432 |
|
|
Class C |
|
541,061,830 |
|
7,246,190 |
|
(58,962,027 |
) |
489,345,993 |
|
343,220,887 |
|
3,011,353 |
|
(36,274,861 |
) |
309,957,379 |
|
|
Class D |
|
32,964,610 |
|
1,088,534 |
|
(5,251,303 |
) |
28,801,841 |
|
20,632,689 |
|
— |
|
(7,879,397 |
) |
12,753,292 |
|
|
Class I |
|
69,895,943 |
|
193,425 |
|
(8,897,804 |
) |
61,191,564 |
|
37,664,971 |
|
121,363 |
|
(4,814,356 |
) |
32,971,978 |
|
|
Class D1 |
|
20,409,402 |
|
— |
|
(2,493,811 |
) |
17,915,591 |
|
11,727,979 |
|
— |
|
(1,306,512 |
) |
10,421,467 |
|
|
Class M |
|
150,000 |
|
404,219 |
|
— |
|
554,219 |
|
12,456,679 |
|
118,366 |
|
(604,700 |
) |
11,970,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members’ Units |
|
782,897,013 |
|
10,776,884 |
|
(83,483,665 |
) |
710,190,232 |
|
505,619,472 |
|
3,910,348 |
|
(59,934,927 |
) |
449,594,893 |
|
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(unaudited)
|
|
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members’ Capital |
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income (Loss) |
|
Members’ Capital |
| ||||||||||
|
Class A |
|
$ |
135,614,804 |
|
$ |
2,126,041 |
|
$ |
(9,042,122 |
) |
$ |
(991,890 |
) |
$ |
127,706,833 |
|
$ |
85,424,977 |
|
$ |
711,750 |
|
$ |
(9,861,476 |
) |
$ |
1,805,171 |
|
$ |
78,080,422 |
|
|
Class C |
|
617,955,947 |
|
8,306,385 |
|
(67,547,339 |
) |
(5,541,252 |
) |
553,173,741 |
|
362,231,029 |
|
3,234,999 |
|
(38,932,836 |
) |
6,731,000 |
|
333,264,192 |
| ||||||||||
|
Class D |
|
45,258,044 |
|
1,500,000 |
|
(7,243,626 |
) |
(130,432 |
) |
39,383,986 |
|
26,839,468 |
|
— |
|
(10,541,314 |
) |
709,142 |
|
17,007,296 |
| ||||||||||
|
Class I |
|
85,127,204 |
|
237,112 |
|
(10,866,465 |
) |
(475,377 |
) |
74,022,474 |
|
42,987,295 |
|
140,000 |
|
(5,624,454 |
) |
969,129 |
|
38,471,970 |
| ||||||||||
|
Class D1 |
|
25,007,612 |
|
— |
|
(3,085,266 |
) |
(58,660 |
) |
21,863,686 |
|
13,615,676 |
|
— |
|
(1,536,251 |
) |
323,851 |
|
12,403,276 |
| ||||||||||
|
Class M |
|
152,151 |
|
409,999 |
|
— |
|
(2,259 |
) |
559,891 |
|
11,971,319 |
|
117,000 |
|
(599,983 |
) |
305,024 |
|
11,793,360 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Total Members’ Interest |
|
$ |
909,115,762 |
|
$ |
12,579,537 |
|
$ |
(97,784,818 |
) |
$ |
(7,199,870 |
) |
$ |
816,710,611 |
|
$ |
543,069,764 |
|
$ |
4,203,749 |
|
$ |
(67,096,314 |
) |
$ |
10,843,317 |
|
$ |
491,020,516 |
|
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class D1 |
|
Class M |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net asset value, beginning of period |
|
$ |
1.0689 |
|
$ |
1.0554 |
|
$ |
1.3008 |
|
$ |
1.1413 |
|
$ |
1.1609 |
|
$ |
0.9610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net realized and net change in unrealized trading profit (loss) |
|
0.0276 |
|
0.0272 |
|
0.0336 |
|
0.0294 |
|
0.0300 |
|
0.0248 |
| ||||||
|
Interest Income, net (b) |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
| ||||||
|
Expenses |
|
(0.0048 |
) |
(0.0074 |
) |
(0.0008 |
) |
(0.0039 |
) |
(0.0007 |
) |
(0.0006 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net asset value, end of period |
|
$ |
1.0917 |
|
$ |
1.0752 |
|
$ |
1.3336 |
|
$ |
1.1668 |
|
$ |
1.1902 |
|
$ |
0.9852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Total return |
|
2.13 |
% |
1.88 |
% |
2.52 |
% |
2.23 |
% |
2.52 |
% |
2.52 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Ratios to Average Members’ Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Expenses |
|
0.44 |
% |
0.69 |
% |
0.06 |
% |
0.34 |
% |
0.06 |
% |
0.06 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net investment income (loss) |
|
-0.44 |
% |
-0.69 |
% |
-0.06 |
% |
-0.34 |
% |
-0.06 |
% |
-0.06 |
% | ||||||
(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) Interest income, net is less than $0.0001 per Unit
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
|
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class D1 |
|
Class M |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net asset value, beginning of period |
|
$ |
1.1452 |
|
$ |
1.1421 |
|
$ |
1.3729 |
|
$ |
1.2179 |
|
$ |
1.2253 |
|
$ |
1.0143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net Realized and net change in unrealized trading profit (loss) |
|
(0.0041 |
) |
(0.0041 |
) |
(0.0050 |
) |
(0.0044 |
) |
(0.0044 |
) |
(0.0037 |
) | ||||||
|
Interest Income, net (b) |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
|
0.0000 |
| ||||||
|
Expenses |
|
(0.0047 |
) |
(0.0076 |
) |
(0.0005 |
) |
(0.0038 |
) |
(0.0005 |
) |
(0.0004 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net asset value, end of period |
|
$ |
1.1364 |
|
$ |
1.1304 |
|
$ |
1.3674 |
|
$ |
1.2097 |
|
$ |
1.2204 |
|
$ |
1.0102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Total Return: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Total return |
|
-0.77 |
% |
-1.02 |
% |
-0.40 |
% |
-0.68 |
% |
-0.40 |
% |
-0.40 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Ratios to Average Members’ Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Expenses |
|
0.41 |
% |
0.67 |
% |
0.04 |
% |
0.31 |
% |
0.04 |
% |
0.04 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net investment income (loss) |
|
-0.41 |
% |
-0.67 |
% |
-0.04 |
% |
-0.31 |
% |
-0.04 |
% |
-0.04 |
% | ||||||
(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) Interest income, net is less than $0.0001 per Unit
See notes to financial statements.
SYSTEMATIC MOMENTUM FUTURESACCESS LLC
(a Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Systematic Momentum FuturesAccess LLC (formerly ML Systematic Momentum FuturesAccess LLC) (the “Fund”), a Merrill Lynch FuturesAccessSM Program (the “FuturesAccess”) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced operations on April 2, 2007. The Fund operates as a “fund of funds”, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (“MLAI” or the “Sponsor”), the Sponsor of the Fund, among underlying FuturesAccess Funds (each a “Portfolio Fund”, and collectively the “Portfolio Funds”) (See Note 2). Presently there are eight Portfolio Funds. MLAI is the sponsor and manager of the Portfolio Funds.
MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as “BAC”. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) is currently the exclusive clearing broker for the Portfolio Funds. MLAI may select other parties as clearing broker(s). Merrill Lynch International Bank, Ltd. (“MLIB”) is the primary foreign exchange (“F/X”) forward prime broker for the Portfolio Funds. MLAI may select other parties as F/X or other over-the-counter (“OTC”) prime brokers, including Bank of America N.A. (“BANA”). MLPF&S, MLIB and BANA are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (“FuturesAccess Funds”). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Each FuturesAccess Fund is generally similar in terms of fees, although redemption terms vary among FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of March 31, 2013 and December 31, 2012 and the results of its operations for the three months ended March 31, 2013 and 2012. However, the operating results for the interim periods may not be indicative of the results for the full year.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2012.
Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Initial Offering and Organizational Costs
Organization and Offering costs are amortized against the net asset value over 60 months, beginning with the first month-end after the initial issuance of Units for operational and investor trading purposes. However, for financial reporting purposes, organizational costs, to the extent material, will be shown as deducted from net asset value as of the date of such initial issuance. Initial offering costs, to the extent material, will be amortized over a 12-month period after the initial issuance of Units.
2. INVESTMENTS IN PORTFOLIO FUNDS
The eight funds in which the Fund is invested as of March 31, 2013 are: Altis FuturesAccess LLC (“Altis”) (formerly ML Altis FuturesAccess LLC), Aspect FuturesAccess LLC (“Aspect”) (formerly ML Aspect FuturesAccess LLC), ML BlueTrend FuturesAccess LLC (“BlueTrend”), John Locke FuturesAccess LLC (“John Locke”) (formerly ML John Locke FuturesAccess LLC), Lynx FuturesAccess LLC (“Lynx”), ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”), Tudor Tensor FuturesAccess LLC (“Tudor Tensor”) and ML Winton FuturesAccess LLC (“Winton”). MLAI, in its discretion, may change the Portfolio Funds at any time. MLAI, also at its discretion, may vary the percentage of the Fund’s total portfolio allocated to the different Portfolio Funds. There is no pre-established range for the minimum and maximum allocations that may be made to any individual Portfolio Fund.
The investment transactions were accounted for on trade date. The investments in the Portfolio Funds are valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, MLAI utilized the net asset value of the underlying Portfolio Funds which approximates fair value. The fair value was net of all fees relating to the Portfolio Funds, paid or accrued. Additionally, MLAI monitored the performance of the Portfolio Funds. Such monitoring procedures included, but were not limited to: monitoring market movements in Portfolio Funds’ investments, comparing performance to industry benchmarks, and in-depth conference calls and site visits with the Portfolio Funds’ trading advisors.
The details of investments in Portfolio Funds at and for the three month period ended March 31, 2013, are as follows:
|
|
|
Percentage of |
|
Fair Value |
|
Profit (Loss) |
|
Cost @ |
|
Management |
|
Performance |
|
Redemptions Permitted |
| |||||
|
Transtrend |
|
16.01 |
% |
$ |
78,615,275 |
|
$ |
215,309 |
|
$ |
81,803,731 |
|
$ |
(417,385 |
) |
$ |
— |
|
Semi -Monthly |
|
|
Altis |
|
9.91 |
% |
48,636,121 |
|
1,494,525 |
|
64,973,760 |
|
(262,000 |
) |
— |
|
Semi -Monthly |
| |||||
|
Winton |
|
17.01 |
% |
83,528,728 |
|
3,537,285 |
|
72,582,582 |
|
(446,231 |
) |
— |
|
Semi -Monthly |
| |||||
|
Aspect |
|
10.01 |
% |
49,134,545 |
|
1,062,594 |
|
46,349,709 |
|
(261,640 |
) |
— |
|
Semi -Monthly |
| |||||
|
John Locke |
|
10.01 |
% |
49,134,547 |
|
(345,735 |
) |
53,495,312 |
|
(260,465 |
) |
— |
|
Semi -Monthly |
| |||||
|
BlueTrend |
|
17.01 |
% |
83,528,727 |
|
3,960,799 |
|
74,866,412 |
|
(455,702 |
) |
(732,966 |
) |
Monthly |
| |||||
|
Tudor |
|
10.01 |
% |
49,134,546 |
|
2,480,381 |
|
50,925,966 |
|
(262,822 |
) |
— |
|
Semi -Monthly |
| |||||
|
Lynx |
|
10.01 |
% |
49,134,546 |
|
1,398,788 |
|
51,834,961 |
|
(261,920 |
) |
— |
|
Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
99.98 |
% |
$ |
490,847,035 |
|
$ |
13,803,946 |
|
$ |
496,832,433 |
|
$ |
(2,628,165 |
) |
$ |
(732,966 |
) |
|
|
The details of investments in Portfolio Funds at and for the year ended December 31, 2012, are as follows:
|
|
|
Percentage of |
|
Fair Value |
|
Profit (Loss) |
|
Cost @ 12/31/12 |
|
Management |
|
Performance |
|
Redemptions Permitted |
| |||||
|
Transtrend |
|
16.02 |
% |
$ |
86,982,563 |
|
$ |
1,952,715 |
|
$ |
91,506,604 |
|
$ |
(2,486,864 |
) |
$ |
(120,573 |
) |
Semi -Monthly |
|
|
Altis |
|
10.01 |
% |
54,364,101 |
|
(7,127,827 |
) |
75,847,367 |
|
(1,677,763 |
) |
— |
|
Semi -Monthly |
| |||||
|
Winton |
|
17.02 |
% |
92,418,972 |
|
(6,017,214 |
) |
83,860,910 |
|
(2,533,168 |
) |
(5,246 |
) |
Semi -Monthly |
| |||||
|
Aspect |
|
10.01 |
% |
54,364,101 |
|
(6,877,343 |
) |
52,085,229 |
|
(1,443,377 |
) |
(87,941 |
) |
Semi -Monthly |
| |||||
|
John Locke |
|
10.01 |
% |
54,364,106 |
|
(3,772,153 |
) |
58,936,300 |
|
(1,761,077 |
) |
— |
|
Semi -Monthly |
| |||||
|
BlueTrend |
|
17.02 |
% |
92,418,971 |
|
(1,622,871 |
) |
85,857,589 |
|
(2,835,668 |
) |
(63,100 |
) |
Monthly |
| |||||
|
Tudor |
|
10.01 |
% |
54,364,104 |
|
(2,593,904 |
) |
59,046,955 |
|
(1,683,773 |
) |
— |
|
Semi -Monthly |
| |||||
|
Lynx* |
|
10.01 |
% |
54,364,102 |
|
(4,993,636 |
) |
58,854,581 |
|
(327,449 |
) |
(21,511 |
) |
Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
100.11 |
% |
$ |
543,641,020 |
|
$ |
(31,052,233 |
) |
$ |
565,995,535 |
|
$ |
(14,749,139 |
) |
$ |
(298,371 |
) |
|
|
* Issued July 1, 2012
These investments are recorded at fair value. In accordance with Regulation S-X, a prescribed regulation by the Securities and Exchange Commission, there are specific formats and contents of financial reports. The following is summarized financial information for each of the Portfolio Funds:
|
|
|
As of March 31, 2013 |
| |||||||
|
|
|
Total Assets |
|
Total Liabilities |
|
Total Capital |
| |||
|
Tudor |
|
$ |
49,933,143 |
|
$ |
798,597 |
|
$ |
49,134,546 |
|
|
BlueTrend |
|
172,441,981 |
|
5,858,614 |
|
166,583,367 |
| |||
|
Winton |
|
1,125,138,224 |
|
17,503,069 |
|
1,107,635,155 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total |
|
$ |
1,347,513,348 |
|
$ |
24,160,280 |
|
$ |
1,323,353,068 |
|
|
|
|
As of December 31, 2012 |
| |||||||
|
|
|
Total Assets |
|
Total Liabilities |
|
Total Capital |
| |||
|
Altis |
|
$ |
56,323,395 |
|
$ |
1,959,294 |
|
$ |
54,364,101 |
|
|
Aspect |
|
279,441,442 |
|
7,200,449 |
|
272,240,993 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total |
|
$ |
335,764,837 |
|
$ |
9,159,743 |
|
$ |
326,605,094 |
|
|
|
|
For the three months ended March 31, 2013 |
| ||||||||||
|
|
|
|
|
|
|
|
|
Net |
| ||||
|
|
|
Income (Loss) |
|
Commissions |
|
Other |
|
Income (Loss) |
| ||||
|
Tudor |
|
$ |
3,171,262 |
|
$ |
(389,923 |
) |
$ |
(300,958 |
) |
$ |
2,480,381 |
|
|
BlueTrend |
|
5,307,923 |
|
(97,024 |
) |
(1,250,100 |
) |
3,960,799 |
| ||||
|
Winton |
|
4,063,349 |
|
(31,116 |
) |
(494,948 |
) |
3,537,285 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total |
|
$ |
12,542,534 |
|
$ |
(518,063 |
) |
$ |
(2,046,006 |
) |
$ |
9,978,465 |
|
|
|
|
For the three months ended March 31, 2012 |
| ||||||||||
|
|
|
|
|
|
|
|
|
Net |
| ||||
|
|
|
Income (Loss) |
|
Commissions |
|
Other |
|
Income (Loss) |
| ||||
|
John Locke |
|
$ |
(2,311,735 |
) |
$ |
(217,383 |
) |
$ |
(630,437 |
) |
$ |
(3,159,555 |
) |
|
Transtrend |
|
5,520,947 |
|
(196,285 |
) |
(867,635 |
) |
4,457,027 |
| ||||
|
BlueTrend |
|
(1,591,688 |
) |
(172,938 |
) |
(952,271 |
) |
(2,716,897 |
) | ||||
|
Winton |
|
(937,355 |
) |
(44,992 |
) |
(811,343 |
) |
(1,793,690 |
) | ||||
|
Altis |
|
(902,398 |
) |
(81,434 |
) |
(588,438 |
) |
(1,572,270 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total |
|
$ |
(222,229 |
) |
$ |
(713,032 |
) |
$ |
(3,850,124 |
) |
$ |
(4,785,385 |
) |
3. FAIR VALUE OF INVESTMENTS
The Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”) which provides authoritative guidance on fair value measurement. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at measurement date (i.e. the exit price). Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices
or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.
Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
Following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Investments in Portfolio Funds are valued using the net asset value reported by the Portfolio Funds, which management believes approximates fair value. These net asset values are the prices used to execute trades with these Portfolio Funds.
Although there are monthly transactions in these Portfolio Funds, the Net Asset Value’s (“NAV’s”) are materially based on portfolios of Level I and Level II assets and liabilities for which the Fund has transparency. As such, the Fund determined that its investments in these Portfolio Funds in this case, would be classified as Level II. There were no transfers to or from Level II during 2013 and 2012. There were no transfers to or from any level during each of the three months ended March 31, 2013 and 2012.
The following table summarizes the valuation of the Fund’s investment by the above fair value hierarchy levels as of March 31, 2013 and December 31, 2012:
|
Investment in |
|
|
|
|
|
|
|
|
| ||||
|
Portfolio Funds |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
March 31, 2013 |
|
$ |
490,847,035 |
|
$ |
— |
|
$ |
490,847,035 |
|
$ |
— |
|
|
December 31, 2012 |
|
$ |
543,641,020 |
|
$ |
— |
|
$ |
543,641,020 |
|
$ |
— |
|
4. MARKET, CREDIT AND CONCENTRATION RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Portfolio Funds’ net unrealized profits (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition of the Portfolio Funds. The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Portfolio Funds as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Portfolio Funds, calculating the Net Asset Value of the Fund and the Portfolio Funds as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds’ market exposure, MLAI may urge the respective trading advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAI’s basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by respective trading advisors.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (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/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the Net unrealized profits on open contracts, if any, included in the Statements of Financial Condition.
MLAI, as sponsor of the Portfolio Funds, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Portfolio Funds.
The Portfolio Funds, in their normal course of business, enter into various contracts, with MLPF&S acting as their clearing broker. Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), MLPF&S has the right to net receivables and payables.
Indemnifications
In the normal course of business the Fund has entered, or may in the future enter, into agreements that obligate the Fund to indemnify third parties, including affiliates of the Fund, for breach of certain representations and warranties made by the Fund. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Fund’s experience, MLAI expected the risk of loss to be remote and, therefore, no provision has been recorded.
5. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Registrar and Transfer Agent”), wholly-owned subsidiary of BAC and affiliate of MLAI. The agreement calls for a fee to be paid based on the collective net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% based on aggregate net assets. During the quarter ended March 31, 2013, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Registrar and Transfer Agent fees to each of the managed/sponsored funds on a monthly basis based on the Fund’s net assets. The Registrar and Transfer Agent fee allocated to the Fund for the periods ended March 31, 2013 and 2012 amounted to $26,102 and $44,803, respectively, of which $13,431 and $44,346 was payable to the Registrar and Transfer Agent as of March 31, 2013 and December 31, 2012, respectively.
Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties.
6. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund through the date the financials were able to be issued and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MONTH-END NET ASSET VALUE PER UNIT
MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to report performance to investors throughout the period is a useful performance measure for the investors of the Fund. Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes.
The Fund calculates the Net Asset Value per Unit of each Class of Units as of as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month and as of any other dates MLAI may determine in its discretion (each, a “Calculation Date”). The Fund’s “Net Asset Value” as of any Calculation Date generally equals the value of the Fund’s account under the management of the Trading Advisor as of that date, plus any other assets held by the Fund, minus accrued Sponsor’s, management and performance fees, trading liabilities, including brokerage commissions, any offering or operating costs, amortized organizational and initial offering costs and all other liabilities of the Fund. MLAI or its delegates are authorized to make all Net Asset Value determinations.
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.1480 |
|
n/a |
|
$ |
1.1623 |
|
n/a |
|
$ |
1.1364 |
| |||
|
2013 |
|
$ |
1.0725 |
|
$ |
1.0934 |
|
$ |
1.1015 |
|
$ |
1.0729 |
|
$ |
1.0948 |
|
$ |
1.0917 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.1439 |
|
n/a |
|
$ |
1.1572 |
|
n/a |
|
$ |
1.1304 |
| |||
|
2013 |
|
$ |
1.0585 |
|
$ |
1.0786 |
|
$ |
1.0862 |
|
$ |
1.0576 |
|
$ |
1.0787 |
|
$ |
1.0752 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.3780 |
|
n/a |
|
$ |
1.3969 |
|
n/a |
|
$ |
1.3674 |
| |||
|
2013 |
|
$ |
1.3060 |
|
$ |
1.3322 |
|
$ |
1.3430 |
|
$ |
1.3090 |
|
$ |
1.3365 |
|
$ |
1.3336 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.2213 |
|
n/a |
|
$ |
1.2369 |
|
n/a |
|
$ |
1.2097 |
| |||
|
2013 |
|
$ |
1.1453 |
|
$ |
1.1678 |
|
$ |
1.1767 |
|
$ |
1.1463 |
|
$ |
1.1699 |
|
$ |
1.1668 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D1
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.2298 |
|
n/a |
|
$ |
1.2467 |
|
n/a |
|
$ |
1.2204 |
| |||
|
2013 |
|
$ |
1.1656 |
|
$ |
1.1890 |
|
$ |
1.1986 |
|
$ |
1.1682 |
|
$ |
1.1928 |
|
$ |
1.1902 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS M
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
| ||||||
|
2012 |
|
n/a |
|
$ |
1.0180 |
|
n/a |
|
$ |
1.0320 |
|
n/a |
|
$ |
1.0102 |
| |||
|
2013 |
|
$ |
0.9648 |
|
$ |
0.9842 |
|
$ |
0.9922 |
|
$ |
0.9670 |
|
$ |
0.9874 |
|
$ |
0.9852 |
|
Liquidity and Capital Resources
The Portfolio Funds borrow only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.
Substantially all of the Portfolio Funds’ assets are held in cash. The net asset value of the Portfolio Funds’ cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow. A Portfolio Fund should be able to close out its open trading positions and liquidate its holdings relatively quickly and at market prices, except in unusual circumstances. This permits the Portfolio Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so.
Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a “Redemption Date”), upon providing notice eight business days prior to the 1st and 16th day of the month. MLAI, at any time in its discretion, may discontinue allowing redemptions as of the 15th calendar day of each month on a going forward basis. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption requests and the applicable Redemption Date.
For the three months ended March 31, 2013 the fund’s capital decreased 9.58% from $543,069,764 to $491,020,516. This decrease was attributable to the net profit from operations of $10,843,317, coupled with the redemption of 59,934,927 Redeemable Units resulting in an outflow of $67,096,314. The cash outflow was offset with cash inflow of $4,203,749 due to subscriptions of 3,910,348 Units. Future redemptions could impact the amount of funds available for investment in the Portfolio Funds in subsequent months.
Critical Accounting Policies
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Investments
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at measurement date (i.e. the exit price). Purchase and sale of investments is recorded on a trade date basis. Realized profits and losses on investments is recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period is reported on the Statements of Operations.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For more information on the Fund’s treatment of fair value, see Note 3, Fair Value of Investments.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such member’s respective share of the Fund’s income and expenses as reported for income tax purposes.
The Fund follows the ASC’s guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-
than-not” threshold would be recorded as a tax benefit or expense in the current year. MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States — 2009.
Reform Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was signed into law on July 21, 2010. The Reform Act enacts financial regulatory reform, and may alter the way in which the Fund conducts certain trading activities. The Reform Act includes measures to broaden the scope of derivative instruments subject to regulation, including requiring clearing and exchange trading of certain derivatives, imposing new capital and margin reporting, registration and business conduct requirements for certain market participants and imposing position limits on certain over-the-counter derivatives. The Reform Act grants the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission substantial new authority and requires numerous rulemakings by these agencies. The ultimate impact of these derivatives regulations, and the time it will take to comply, remains uncertain. The final regulations may impose additional operational and compliance costs on the Fund.
Results of Operations
January 1, 2013 to March 31, 2013
January 1, 2013 to March 31, 2013
The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of March 31, 2013:
March 31, 2013
|
|
|
|
|
Percent of |
| |
|
|
|
Net Unrealized |
|
Net Unrealized |
| |
|
Commodity Industry |
|
Profit (Loss) |
|
Profit (Loss) |
| |
|
Sector |
|
on Open Positions |
|
on Open Positions |
| |
|
|
|
|
|
|
| |
|
Agriculture |
|
1,349,564 |
|
17.51 |
% | |
|
Currencies |
|
(1,098,087 |
) |
-14.25 |
% | |
|
Energy |
|
221,595 |
|
2.88 |
% | |
|
Interest rates |
|
6,897,606 |
|
89.50 |
% | |
|
Metals |
|
(86,731 |
) |
-1.13 |
% | |
|
Stock indices |
|
423,517 |
|
5.49 |
% | |
|
|
|
|
|
|
| |
|
Total |
|
$ |
7,707,464 |
|
100.00 |
% |
The Fund experienced a net trading profit for the first quarter ended March 31, 2013 of $13,803,946.
References herein to the Fund’s trading and portfolio refer to such trading conducted, and portfolio held, through the Fund’s Portfolio Funds. References herein to the trading and portfolio of the Portfolio Funds refer to such trading and portfolios generally.
The Fund started the year with a long bias in both risk assets and fixed income. The only meaningful short exposures were in the Japanese yen, natural gas, grains and soft commodities. This posture shifted
partially over the course of the first quarter. The biggest changes took place in currencies and commodities. These two asset classes were most affected by rising risk aversion in February and March. The Portfolio Funds got short many foreign currencies as well as metals and livestock. The only market where the shift went the other way was natural gas, as the Portfolio Funds adopted a long posture as prices rose sharply in March.
Equity indices drove performance. The Portfolio Funds came into the year with long positions across geographies given that stock prices have generally been rising since the summer of 2012. With the fiscal cliff issue resolved in the early days of the first quarter, markets continued to rise, even picking up some momentum. Gains came from diverse positions during January. In February and March, there was some divergence in markets, with U.S. and Japanese equities continuing to rise while those in Europe and China saw some downward moves due to inconclusive elections in Italy, a banking crisis in Cyprus and signs of slowing growth in China. Despite this divergence, the asset class was positive each month of the quarter.
Currencies also contributed positively to performance over the first quarter. At the start of the year, the Portfolio Funds had long positions in most foreign currencies, balanced by significant short exposure in the Japanese yen. This positioning performed positively in January given a pro-risk investment environment. In February, risk aversion returned to markets to some extent. A contracting euro-zone economy coupled with Italian elections where no single group of parties won enough votes to form a coalition government disrupted the stability for the continent. Many foreign currencies depreciated against the U.S. dollar and the Portfolio Funds generally adopted a short posture. The general trend of a strong U.S. dollar continued into March. At this point, The Portfolio Funds were decidedly long the U.S. dollar and generally made back the February losses. Overall, the asset class was positive for the quarter. Short yen positions performed best, generating gains each month of the quarter.
In fixed income, the Portfolio Funds had long positions throughout the first quarter resulting in losses. In January, these positions lost money. Risk assets were rallying while fixed income was selling off. Many even questioned whether a new period of rising interest rates was already upon us. These worries turned out to be premature as problems in Europe led to a renewed push into fixed income. Yields came back down and the Portfolio Funds made back some, though not all, of their January losses during February and March.
Commodities also performed poorly. Coming into the first quarter, the Portfolio Funds had long exposure in the oil complex and metals coupled with short exposure in natural gas and agricultural markets. Many commodities initially rallied, generating some gains. That changed in February as markets generally fell due to slowing growth and the potential for less demand from China as well as from a contracting Europe. These moves hurt the Portfolio Funds. The Portfolio Funds generally adopted a short posture in all sectors except for oil.
January 1, 2012 to March 31, 2012
January 1, 2012 to March 31, 2012
The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of March 31, 2012:
March 31, 2012
|
|
|
|
|
Percent of |
| |
|
|
|
Net Unrealized |
|
Net Unrealized |
| |
|
Commodity Industry |
|
Profit (Loss) |
|
Profit (Loss) |
| |
|
Sector |
|
on Open Positions |
|
on Open Positions |
| |
|
|
|
|
|
|
| |
|
Agriculture |
|
$ |
3,339,558 |
|
127.92 |
% |
|
Currencies |
|
(2,644,596 |
) |
-101.30 |
% | |
|
Energy |
|
1,159,328 |
|
44.41 |
% | |
|
Interest rates |
|
101,467 |
|
3.89 |
% | |
|
Metals |
|
(1,424,076 |
) |
-54.55 |
% | |
|
Stock indices |
|
2,078,931 |
|
79.63 |
% | |
|
|
|
|
|
|
| |
|
Total |
|
$ |
2,610,612 |
|
100.00 |
% |
The Fund experienced a net trading loss for the first quarter ended March 31, 2012 of $2,315,027.
In the first two months of 2012, the investment environment was one of risk seeking. Equities and commodities generally rallied and the U.S. dollar was down. Despite a bias towards risk, fixed income did not sell off in any significant way. The Portfolio Fund trading advisors generally spent part of January adjusting to this environment. By February, their portfolios were well positioned to take advantage of these trends. The Fund was up 1.3% in these two months. At the start of March, the Fund continued to be long risk assets and long fixed income. The only exceptions to the rule were short positions in natural gas, the euro, and some industrial metal and agricultural markets. This positioning suffered losses in March due to reversals.
The most significant reversal in March was seen in fixed income, at the longer end of the curve. Yields on notes and bonds jumped higher in the middle of the month and given that most of the Portfolio Funds had sizeable positions resulted in losses. While yields backed down towards month end, the damage was done as many Portfolio Funds trading advisors had already reduced positions, failing to benefit from the latter moves. Currencies also saw some reversals as the U.S. dollar generally strengthened, in particular against commodity currencies such as the Australian dollar and the Canadian dollar. With Portfolio Funds typically holding long positions in these currencies, losses were posted to the Fund. Short positions in the euro were generally unprofitable as the currency ended relatively flat against the U.S. dollar despite poor economic performance in the Eurozone.
Many commodities joined the reversal theme. Following two good months, commodity markets fell in March. These included many oil markets and precious metals, two sectors where the Portfolio Funds trading advisors had built up long positions, as a result, the reversals posted losses. In other sectors, trends seem to continue. Natural gas, where the Portfolio Funds trading advisors have been short for a while, had another very big leg down. For many of the Portfolio Funds trading advisors, this was the best performing market. Some industrial metal and agricultural markets also experienced profits from short positions due to falling prices.
Equity indices generally saw positive performance. The Portfolio Funds trading advisors tended to be long, with the largest allocations to the U.S. and European indices. U.S. equity prices were up for the quarter, continuing the trend and producing gains. But equity prices in Europe were not able to keep up the momentum and fell, posting losses. The Portfolio Funds trading advisors also saw some profits from long positions in Japan and Asia.
The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 303(a)(4) and 303(a)(5) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Introduction
The Portfolio Funds are speculative commodity pools. The market sensitive instruments held by the Portfolio Funds are acquired for speculative trading purposes and all or substantially all of the Fund’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.
Market movements result in frequent changes in the fair market value of the Portfolio Fund’s open positions and, consequently, in its earnings and cash flow. The Portfolio Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Portfolio Fund’s open positions and the liquidity of the markets in which it trades.
The Portfolio Funds, under the direction of their respective trading advisors, rapidly acquire and liquidate both long and short positions in currency markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Portfolio Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Portfolio Funds’ speculative trading and the recurrence in the markets traded by the Portfolio Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Portfolio Funds’ losses in any market sector will be limited to Value at Risk or by each Portfolio Funds’ attempts to manage its market risk. Quantifying the Fund’s Trading Value At Risk
Quantitative Forward Looking Statements
The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statement” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Portfolio Fund’s risk exposure in the various market sectors traded by the advisors is quantified below in terms of Value at Risk. Due to the Portfolio Fund’s fair value accounting, any loss in the fair value of the Portfolio Fund’s open positions is directly reflected in the Portfolio Fund’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements of the Portfolio Funds have been used as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the
options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Portfolio Funds), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.
100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.
The following information with respect to Value at Risk (VAR) is set forth in respect of the Portfolio Funds separately rather than for the Fund on a standalone basis.
The Portfolio Funds’ Trading Value at Risk in Different Market Sectors
The following tables indicate the average, highest, and lowest trading Value at Risk associated with the Portfolio Funds’ open positions by market category for the three months ended March 31, 2013 and 2012.
Altis Class DS (1)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
2,869,960 |
|
5.59 |
% |
$ |
3,174,791 |
|
$ |
2,692,926 |
|
|
Energy |
|
479,430 |
|
0.93 |
% |
530,352 |
|
449,856 |
| |||
|
Interest Rates |
|
302,412 |
|
0.59 |
% |
334,533 |
|
283,758 |
| |||
|
Metals |
|
1,050,631 |
|
2.05 |
% |
1,162,223 |
|
985,823 |
| |||
|
Stock Indices |
|
1,458,128 |
|
2.84 |
% |
1,613,002 |
|
1,368,183 |
| |||
|
Currencies |
|
922,077 |
|
1.80 |
% |
1,020,015 |
|
865,198 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
7,082,638 |
|
13.80 |
% |
$ |
7,834,916 |
|
$ |
6,645,744 |
|
(1) Average capitalization of Altis Class DS is $51,342,485.
Altis Class DS (1)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
3,450,725 |
|
3.26 |
% |
$ |
3,511,512 |
|
$ |
3,418,566 |
|
|
Energy |
|
3,959,863 |
|
3.74 |
% |
4,029,618 |
|
3,922,958 |
| |||
|
Interest Rates |
|
428,908 |
|
0.40 |
% |
436,463 |
|
424,911 |
| |||
|
Metals |
|
1,442,302 |
|
1.36 |
% |
1,467,709 |
|
1,428,860 |
| |||
|
Stock Indices |
|
178,441 |
|
0.17 |
% |
181,585 |
|
176,778 |
| |||
|
Currencies |
|
1,695,804 |
|
1.60 |
% |
1,725,677 |
|
1,680,000 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
11,156,043 |
|
10.53 |
% |
$ |
11,352,564 |
|
$ |
11,052,073 |
|
(1) Average capitalization of Altis Class DS is $105,933,391.
Transtrend Class DS (2)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
147,147 |
|
0.18 |
% |
$ |
154,010 |
|
$ |
142,741 |
|
|
Energy |
|
170,798 |
|
0.21 |
% |
178,764 |
|
165,683 |
| |||
|
Interest Rates |
|
8,129,185 |
|
9.86 |
% |
8,508,342 |
|
7,885,761 |
| |||
|
Metals |
|
945,391 |
|
1.15 |
% |
989,485 |
|
917,081 |
| |||
|
Stock Indices |
|
388,142 |
|
0.47 |
% |
406,245 |
|
376,519 |
| |||
|
Currencies |
|
16,198 |
|
0.02 |
% |
16,953 |
|
15,713 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
9,796,861 |
|
11.89 |
% |
$ |
10,253,799 |
|
$ |
9,503,498 |
|
(2) Average capitalization of Transtrend Class DS is $82,469,455.
Transtrend Class DS (2)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
3,099,393 |
|
2.11 |
% |
$ |
3,358,122 |
|
$ |
2,810,777 |
|
|
Energy |
|
6,571,540 |
|
4.48 |
% |
7,120,114 |
|
5,959,596 |
| |||
|
Interest Rates |
|
842,185 |
|
0.57 |
% |
912,489 |
|
763,761 |
| |||
|
Metals |
|
1,256,364 |
|
0.86 |
% |
1,361,242 |
|
1,139,371 |
| |||
|
Stock Indices |
|
2,031,097 |
|
1.38 |
% |
2,200,647 |
|
1,841,960 |
| |||
|
Currencies |
|
1,901,979 |
|
1.30 |
% |
2,060,751 |
|
1,724,866 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
15,702,558 |
|
10.70 |
% |
$ |
17,013,365 |
|
$ |
14,240,331 |
|
(2) Average capitalization of Transtrend Class DS is $146,677,002.
Aspect Class DS (3)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
958,365 |
|
1.86 |
% |
$ |
1,117,298 |
|
$ |
847,233 |
|
|
Energy |
|
521,041 |
|
1.01 |
% |
607,450 |
|
460,622 |
| |||
|
Interest Rates |
|
910,760 |
|
1.76 |
% |
1,061,799 |
|
805,149 |
| |||
|
Metals |
|
916,977 |
|
1.78 |
% |
1,069,048 |
|
810,645 |
| |||
|
Stock Indices |
|
338,194 |
|
0.66 |
% |
394,279 |
|
298,977 |
| |||
|
Currencies |
|
1,122,961 |
|
2.18 |
% |
1,309,191 |
|
992,743 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
4,768,298 |
|
9.25 |
% |
$ |
5,559,065 |
|
$ |
4,215,369 |
|
(3) Average Capitalization of Aspect Class DS is $51,615,976.
Aspect Class DS (3)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
2,037,214 |
|
2.50 |
% |
$ |
2,156,802 |
|
$ |
1,869,294 |
|
|
Energy |
|
1,374,215 |
|
1.69 |
% |
1,454,884 |
|
1,260,944 |
| |||
|
Interest Rates |
|
1,069,517 |
|
1.31 |
% |
1,132,300 |
|
981,361 |
| |||
|
Metals |
|
196,863 |
|
0.24 |
% |
208,419 |
|
180,636 |
| |||
|
Stock Indices |
|
2,468,842 |
|
3.03 |
% |
2,613,768 |
|
2,265,345 |
| |||
|
Currencies |
|
114,687 |
|
0.14 |
% |
121,420 |
|
105,234 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
7,261,338 |
|
8.91 |
% |
$ |
7,687,593 |
|
$ |
6,662,814 |
|
(3) Average Capitalization of Aspect Class DS is $81,487,367.
Winton Class DS (4)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
1,065,517 |
|
1.21 |
% |
$ |
1,148,612 |
|
$ |
989,691 |
|
|
Energy |
|
444,667 |
|
0.51 |
% |
479,344 |
|
413,023 |
| |||
|
Interest Rates |
|
1,927,777 |
|
2.19 |
% |
2,078,116 |
|
1,790,591 |
| |||
|
Metals |
|
55,078 |
|
0.06 |
% |
59,373 |
|
51,158 |
| |||
|
Stock Indices |
|
377,831 |
|
0.43 |
% |
407,296 |
|
350,943 |
| |||
|
Currencies |
|
1,612,767 |
|
1.84 |
% |
1,738,539 |
|
1,497,997 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
5,483,637 |
|
6.24 |
% |
$ |
5,911,280 |
|
$ |
5,093,403 |
|
(4) Average capitalization of Winton Class DS is $87,860,419.
Winton Class DS (4)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
1,132,244 |
|
0.77 |
% |
$ |
1,212,062 |
|
$ |
1,074,550 |
|
|
Energy |
|
1,155,612 |
|
0.79 |
% |
1,237,077 |
|
1,096,726 |
| |||
|
Interest Rates |
|
425,361 |
|
0.29 |
% |
455,347 |
|
403,687 |
| |||
|
Metals |
|
1,403,885 |
|
0.96 |
% |
1,502,852 |
|
1,332,349 |
| |||
|
Stock Indices |
|
2,427,780 |
|
1.66 |
% |
2,598,927 |
|
2,304,071 |
| |||
|
Currencies |
|
2,425,180 |
|
1.65 |
% |
2,596,143 |
|
2,301,603 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
8,970,062 |
|
6.12 |
% |
$ |
9,602,408 |
|
$ |
8,512,986 |
|
(4) Average capitalization of Winton Class DS is $146,676,932.
John Locke Class DS (5)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
187,968 |
|
0.36 |
% |
$ |
200,141 |
|
$ |
172,907 |
|
|
Energy |
|
55,436 |
|
0.11 |
% |
59,026 |
|
50,994 |
| |||
|
Interest Rates |
|
3,137,922 |
|
6.08 |
% |
3,341,143 |
|
2,886,506 |
| |||
|
Metals |
|
244,760 |
|
0.47 |
% |
260,612 |
|
225,150 |
| |||
|
Stock Indices |
|
1,410,105 |
|
2.73 |
% |
1,501,428 |
|
1,297,125 |
| |||
|
Currencies |
|
1,363,092 |
|
2.64 |
% |
1,451,370 |
|
1,253,879 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
6,399,283 |
|
12.39 |
% |
$ |
6,813,720 |
|
$ |
5,886,561 |
|
(5) Average capitalization of John Locke Class DS is $51,626,385.
John Locke Class DS (5)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
4,426,109 |
|
3.88 |
% |
$ |
4,796,195 |
|
$ |
3,967,808 |
|
|
Energy |
|
581,498 |
|
0.51 |
% |
630,119 |
|
521,287 |
| |||
|
Interest Rates |
|
1,523,634 |
|
1.34 |
% |
1,651,032 |
|
1,365,870 |
| |||
|
Metals |
|
1,759,043 |
|
1.54 |
% |
1,906,125 |
|
1,576,903 |
| |||
|
Stock Indices |
|
3,604,378 |
|
3.16 |
% |
3,905,755 |
|
3,231,163 |
| |||
|
Currencies |
|
371,497 |
|
0.33 |
% |
402,560 |
|
333,031 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
12,266,159 |
|
10.76 |
% |
$ |
13,291,786 |
|
$ |
10,996,062 |
|
(5) Average capitalization of John Locke Class DS is $114,082,113.
BlueTrend Class DS (6)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
225,786 |
|
0.26 |
% |
$ |
249,751 |
|
$ |
199,038 |
|
|
Energy |
|
866,278 |
|
0.99 |
% |
958,224 |
|
763,653 |
| |||
|
Interest Rates |
|
6,140,951 |
|
6.99 |
% |
6,792,741 |
|
5,413,450 |
| |||
|
Metals |
|
144,949 |
|
0.17 |
% |
160,334 |
|
127,777 |
| |||
|
Stock Indices |
|
1,637,137 |
|
1.86 |
% |
1,810,900 |
|
1,443,190 |
| |||
|
Currencies |
|
557,821 |
|
0.64 |
% |
617,028 |
|
491,738 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
9,572,922 |
|
10.91 |
% |
$ |
10,588,978 |
|
$ |
8,438,846 |
|
(6) Average capitalization of BlueTrend Class DS is $87,794,191.
BlueTrend Class DS (6)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
2,413,940 |
|
1.38 |
% |
$ |
2,583,165 |
|
$ |
2,304,931 |
|
|
Energy |
|
4,759,559 |
|
2.72 |
% |
5,093,219 |
|
4,544,626 |
| |||
|
Interest Rates |
|
363,975 |
|
0.21 |
% |
389,490 |
|
347,538 |
| |||
|
Metals |
|
2,397,500 |
|
1.37 |
% |
2,565,572 |
|
2,289,233 |
| |||
|
Stock Indices |
|
53,521 |
|
0.03 |
% |
57,273 |
|
51,104 |
| |||
|
Currencies |
|
7,929,860 |
|
4.53 |
% |
8,485,768 |
|
7,571,761 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
17,918,355 |
|
10.25 |
% |
$ |
19,174,487 |
|
$ |
17,109,193 |
|
(6) Average capitalization of BlueTrend Class DS is $174,896,546.
Tudor Tensor Class DS (7)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
814,448 |
|
1.58 |
% |
$ |
882,779 |
|
$ |
746,992 |
|
|
Energy |
|
406,246 |
|
0.79 |
% |
440,330 |
|
372,599 |
| |||
|
Interest Rates |
|
653,259 |
|
1.26 |
% |
708,067 |
|
599,154 |
| |||
|
Metals |
|
2,111,392 |
|
4.09 |
% |
2,288,537 |
|
1,936,519 |
| |||
|
Stock Indices |
|
1,094,609 |
|
2.12 |
% |
1,186,446 |
|
1,003,949 |
| |||
|
Currencies |
|
118,664 |
|
0.23 |
% |
128,620 |
|
108,836 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
5,198,618 |
|
10.07 |
% |
$ |
5,634,779 |
|
$ |
4,768,049 |
|
(7) Average capitalization of Tudor Tensor Class DS is $51,682,600.
Tudor Tensor Class DS (7)
March 31, 2012
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
330,103 |
|
0.31 |
% |
$ |
379,870 |
|
$ |
286,960 |
|
|
Energy |
|
1,983,017 |
|
1.87 |
% |
2,281,980 |
|
1,723,844 |
| |||
|
Interest Rates |
|
2,182,009 |
|
2.06 |
% |
2,510,971 |
|
1,896,828 |
| |||
|
Metals |
|
2,663,509 |
|
2.51 |
% |
3,065,063 |
|
2,315,397 |
| |||
|
Stock Indices |
|
1,665,404 |
|
1.57 |
% |
1,916,483 |
|
1,447,742 |
| |||
|
Currencies |
|
2,099,451 |
|
1.98 |
% |
2,415,967 |
|
1,825,060 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
10,923,493 |
|
10.30 |
% |
$ |
12,570,334 |
|
$ |
9,495,831 |
|
(7) Average capitalization of Tudor Tensor Class DS is $105,933,934.
Lynx Class DS (4)
March 31, 2013
|
|
|
Average |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
Value at Risk |
|
Capitalization |
|
At Risk |
|
At Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
359,299 |
|
0.70 |
% |
$ |
391,192 |
|
305,349 |
| |
|
Energy |
|
165,199 |
|
0.32 |
% |
179,863 |
|
140,394 |
| |||
|
Interest Rates |
|
3,620,775 |
|
7.01 |
% |
3,942,167 |
|
3,077,104 |
| |||
|
Metals |
|
885,533 |
|
1.71 |
% |
964,136 |
|
752,567 |
| |||
|
Stock Indices |
|
1,278,010 |
|
2.47 |
% |
1,391,451 |
|
1,086,113 |
| |||
|
Currencies |
|
635,738 |
|
1.23 |
% |
692,168 |
|
540,280 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
TOTAL |
|
$ |
6,944,554 |
|
13.44 |
% |
$ |
7,560,977 |
|
$ |
5,901,807 |
|
(4) Average capitalization of Lynx Class DS is $51,682,600.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Portfolio Funds are typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Portfolio Funds. The magnitude of the Portfolio Funds’ open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Portfolio Funds to incur severe losses over a short period of time. The foregoing Value at Risk table — as well as the past performance of the Portfolio Funds — gives no indication of this “risk of ruin.”
Non-Trading Risk
The Portfolio Funds have non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are generally immaterial.
The Portfolio Funds also have non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S and MLIB. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and the Portfolio Funds’ advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There
can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Trading Risk
MLAI has procedures in place intended to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. While MLAI does not itself intervene in the markets to hedge or diversify the Portfolio Funds’ market exposure, MLAI may urge the Portfolio Funds’ Trading Advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are unusual, except in cases in which it appears that the advisors have begun to deviate from past practice and trading policies or to be trading erratically, MLAI’s basic control procedures consist of simply of the ongoing process of monitoring the advisors with the market risk controls being applied by the advisors themselves.
Risk Management
Portfolio Funds attempt to control risk in all aspects of the investment process — from confirmation of a trend to determining the optimal exposure in a given market, and to money management issues such as the startup or upgrade of investor accounts. Portfolio Funds double check the accuracy of market data, and will not trade a market without multiple price sources for analytical input. In constructing a portfolio, Portfolio Funds seek to control overall risk as well as the risk of any one position, and Portfolio Funds trade only markets that have been identified as having positive performance characteristics. Trading discipline requires plans for the exit of a market as well as for entry. Portfolio Funds factor the point of exit into the decision to enter (stop loss). The size of Portfolio Fund’s positions in a particular market is not a matter of how large a return can be generated but of how much risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the potential for excellent performance, proprietary research is conducted on an ongoing basis to refine the Portfolio Funds investment strategies. Research may suggest substitution of alternative investment methodologies with respect to particular contracts; this may occur, for example, when the testing of a new methodology has indicated that its use might have resulted in different historical performance. In addition, risk management research and analysis may suggest modifications regarding the relative weighting among various contracts, the addition or deletion of particular contracts for a program, or a change in position size in relation to account equity. The weighting of capital committed to various markets in the investment programs is dynamic, and Portfolio Funds may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors warrant.
Portfolio Funds may determine that risks arise when markets are illiquid or erratic, which may occur cyclically during holiday seasons, or on the basis of irregularly occurring market events. In such cases, Portfolio Funds at its sole discretion may override computer-generated signals and may at times use discretion in the application of its quantitative models, which may affect performance positively or negatively.
Adjustments in position size in relation to account equity have been and continue to be an integral part of Portfolio Fund’s investment strategy. At its discretion, Portfolio Funds may adjust the size of a position in relation to equity in certain markets or entire programs. Such adjustments may be made at certain times for some programs but not for others. Factors which may affect the decision to adjust the size of a
position in relation to account equity include ongoing research, program volatility, assessments of current market volatility and risk exposure, subjective judgment, and evaluation of these and other general market conditions.
Non-Trading Risk
The Fund and the Portfolio Funds control the non-trading exchange rate risk by regularly converting foreign currency balances back into U.S. dollars at least once per week and more frequently if a particular foreign currency balance becomes unusually high.
The Fund and the Portfolio Funds have cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held by the Fund in order to facilitate margin payments and pay expenses and redemptions. MLAI does not take any steps to limit the cash flow risk on the cash held on deposit at MLPF&S.
Item 4. Controls and Procedures
MLAI, the Sponsor of Systematic Momentum FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13(a) -15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934) with respect to the Fund as of the end of the period covered by this quarterly report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. No change in internal control over financial reporting (in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934) occurred during the quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
None.
There are no material changes from risk factors as previously disclosed in the report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on March 27, 2013.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Units are privately offered and sold to “accredited investors” (as defined in Rule 501(a) under the Securities Act) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 thereunder. The selling agent of the Units was MLPF&S.
CLASS A
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
186,225 |
|
174,221 |
|
$ |
1.0689 |
|
|
1/16/2013 |
|
97,500 |
|
90,909 |
|
1.0725 |
| ||
|
2/01/2013 |
|
68,250 |
|
62,420 |
|
1.0934 |
| ||
|
2/16/2013 |
|
97,500 |
|
88,516 |
|
1.1015 |
| ||
|
3/01/2013 |
|
195,000 |
|
181,750 |
|
1.0729 |
| ||
|
3/16/2013 |
|
67,275 |
|
61,450 |
|
1.0948 |
| ||
|
4/01/2013 |
|
— |
|
— |
|
1.0917 |
| ||
CLASS C
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
383,000 |
|
362,896 |
|
$ |
1.0554 |
|
|
1/16/2013 |
|
104,000 |
|
98,252 |
|
1.0585 |
| ||
|
2/01/2013 |
|
1,181,000 |
|
1,094,938 |
|
1.0786 |
| ||
|
2/16/2013 |
|
768,000 |
|
707,052 |
|
1.0862 |
| ||
|
3/01/2013 |
|
406,000 |
|
383,888 |
|
1.0576 |
| ||
|
3/16/2013 |
|
392,999 |
|
364,327 |
|
1.0787 |
| ||
|
4/01/2013 |
|
226,000 |
|
210,193 |
|
1.0752 |
| ||
CLASS D
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
— |
|
— |
|
$ |
1.3008 |
|
|
1/16/2013 |
|
— |
|
— |
|
1.3060 |
| ||
|
2/01/2013 |
|
— |
|
— |
|
1.3322 |
| ||
|
2/16/2013 |
|
— |
|
— |
|
1.3430 |
| ||
|
3/01/2013 |
|
— |
|
— |
|
1.3090 |
| ||
|
3/16/2013 |
|
— |
|
— |
|
1.3365 |
| ||
|
4/01/2013 |
|
— |
|
— |
|
1.3336 |
| ||
CLASS I
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
— |
|
— |
|
$ |
1.1413 |
|
|
1/16/2013 |
|
10,000 |
|
8,731 |
|
1.1453 |
| ||
|
2/01/2013 |
|
10,000 |
|
8,563 |
|
1.1678 |
| ||
|
2/16/2013 |
|
— |
|
— |
|
1.1767 |
| ||
|
3/01/2013 |
|
85,000 |
|
74,152 |
|
1.1463 |
| ||
|
3/16/2013 |
|
35,000 |
|
29,917 |
|
1.1699 |
| ||
|
4/01/2013 |
|
16,000 |
|
13,713 |
|
1.1668 |
| ||
CLASS D1
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
— |
|
— |
|
$ |
1.1610 |
|
|
1/16/2013 |
|
— |
|
— |
|
1.1656 |
| ||
|
2/01/2013 |
|
— |
|
— |
|
1.1890 |
| ||
|
2/16/2013 |
|
— |
|
— |
|
1.1986 |
| ||
|
3/01/2013 |
|
— |
|
— |
|
1.1682 |
| ||
|
3/16/2013 |
|
— |
|
— |
|
1.1928 |
| ||
|
4/01/2013 |
|
— |
|
— |
|
1.1902 |
| ||
CLASS M
|
|
|
Subscription |
| ||||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2013 |
|
$ |
— |
|
— |
|
$ |
0.9610 |
|
|
1/16/2013 |
|
— |
|
— |
|
0.9648 |
| ||
|
2/01/2013 |
|
— |
|
— |
|
0.9842 |
| ||
|
2/16/2013 |
|
100,000 |
|
100,786 |
|
0.9922 |
| ||
|
3/01/2013 |
|
17,000 |
|
17,580 |
|
0.9670 |
| ||
|
3/16/2013 |
|
— |
|
— |
|
0.9874 |
| ||
|
4/01/2013 |
|
— |
|
— |
|
0.9852 |
| ||
(1) Beginning of the period Net Asset Value
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D Units and Class I Units are subject to sales commissions paid to MLPF&S up to 0.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units and Class M Units are not subject to any sales commissions.
(b) Not applicable.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:
31.01 and
31.02 Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 31.01
and 31.02: Are filed herewith.
32.01 and
32.02 Section 1350 Certifications
Exhibit 32.01
and 32.02 Are filed herewith.
Exhibit 101 Are filed herewith.
The following materials from the Fund’s quarterly Report on Form 10-Q for the three month period ended March 31, 2013 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text. (1)
(1) These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
SYSTEMATIC MOMENTUM FUTURESACCESS LLC | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
MERRILL LYNCH ALTERNATIVE |
|
|
|
|
INVESTMENTS LLC |
|
|
|
|
(Manager) |
|
|
|
|
|
|
|
|
|
|
|
Date: May 15, 2013 |
|
By: |
/s/ DEANN MORGAN |
|
|
|
|
Deann Morgan |
|
|
|
|
Chief Executive Officer and President |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
Date: May 15, 2013 |
|
By: |
/s/ BARBRA E. KOCSIS |
|
|
|
|
Barbra E. Kocsis |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(Principal Financial Officer) |