Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - ML Transtrend DTP Enhanced FuturesAccess LLC | Financial_Report.xls |
| EX-32.02 - EX-32.02 - ML Transtrend DTP Enhanced FuturesAccess LLC | a14-13474_1ex32d02.htm |
| EX-31.02 - EX-31.02 - ML Transtrend DTP Enhanced FuturesAccess LLC | a14-13474_1ex31d02.htm |
| EX-31.01 - EX-31.01 - ML Transtrend DTP Enhanced FuturesAccess LLC | a14-13474_1ex31d01.htm |
| EX-32.01 - EX-32.01 - ML Transtrend DTP Enhanced FuturesAccess LLC | a14-13474_1ex32d01.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
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 0-52701
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(Exact Name of Registrant as
specified in its charter)
|
Delaware |
|
30-0408288 |
|
(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)
609-274-5838
(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 June 30, 2014, 52,820,804 units of limited liability company interest were outstanding.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
QUARTERLY REPORT FOR JUNE 30, 2014 ON FORM 10-Q
Table of Contents
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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 |
17 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
25 |
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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 |
33 |
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Item 4. |
Mine Safety Disclosures |
33 |
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Item 5. |
Other Information |
33 |
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Item 6. |
Exhibits |
33 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
|
|
|
June 30, |
|
December 31, |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
ASSETS: |
|
|
|
|
| ||
|
Equity in commodity trading accounts: |
|
|
|
|
| ||
|
Cash (including restricted cash of $12,208,556 for 2014 and $14,999,063 for 2013) |
|
$ |
67,974,074 |
|
$ |
91,648,859 |
|
|
Unrealized profit on open futures contracts |
|
3,025,284 |
|
5,348,804 |
| ||
|
Cash |
|
549,775 |
|
530,432 |
| ||
|
Other assets |
|
1,717 |
|
90 |
| ||
|
|
|
|
|
|
| ||
|
TOTAL ASSETS |
|
$ |
71,550,850 |
|
$ |
97,528,185 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND MEMBERS’ CAPITAL: |
|
|
|
|
| ||
|
LIABILITIES: |
|
|
|
|
| ||
|
Sponsor and Advisory fees payable |
|
$ |
115,647 |
|
$ |
182,957 |
|
|
Redemptions payable |
|
985,694 |
|
10,248,917 |
| ||
|
Unrealized loss on open futures contracts |
|
164,431 |
|
461,338 |
| ||
|
Other liabilities |
|
282,595 |
|
303,483 |
| ||
|
|
|
|
|
|
| ||
|
Total liabilities |
|
1,548,367 |
|
11,196,695 |
| ||
|
|
|
|
|
|
| ||
|
MEMBERS’ CAPITAL: |
|
|
|
|
| ||
|
Members’ Interest (52,820,804 Units and 66,052,414 Units outstanding; unlimited Units authorized) |
|
70,002,483 |
|
86,331,490 |
| ||
|
Total members’ capital |
|
70,002,483 |
|
86,331,490 |
| ||
|
|
|
|
|
|
| ||
|
TOTAL LIABILITIES AND MEMBERS’ CAPITAL |
|
$ |
71,550,850 |
|
$ |
97,528,185 |
|
|
|
|
|
|
|
| ||
|
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Class A |
|
$ |
1.1463 |
|
$ |
1.1143 |
|
|
Class C |
|
$ |
1.0352 |
|
$ |
1.0114 |
|
|
Class D |
|
$ |
0.9751 |
|
$ |
0.9409 |
|
|
Class I |
|
$ |
1.1600 |
|
$ |
1.1254 |
|
|
Class DS |
|
$ |
1.4939 |
|
$ |
1.4415 |
|
|
Class DT |
|
$ |
1.6267 |
|
$ |
1.5651 |
|
|
Class M |
|
$ |
0.9687 |
|
$ |
0.9347 |
|
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
For the three |
|
For the three |
|
For the six |
|
For the six |
| ||||
|
|
|
June 30, 2014 |
|
June 30, 2013 |
|
June 30, 2014 |
|
June 30, 2013 |
| ||||
|
TRADING PROFIT (LOSS): |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Realized, net |
|
$ |
4,838,217 |
|
$ |
(1,982,610 |
) |
$ |
5,425,197 |
|
$ |
(1,395,337 |
) |
|
Change in unrealized, net |
|
227,630 |
|
(1,447,389 |
) |
(2,026,613 |
) |
(629,571 |
) | ||||
|
Brokerage commissions |
|
(148,658 |
) |
(208,674 |
) |
(299,490 |
) |
(458,606 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total trading profit (loss), net |
|
4,917,189 |
|
(3,638,673 |
) |
3,099,094 |
|
(2,483,514 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
| ||||
|
Interest, net |
|
(472 |
) |
(2,610 |
) |
(1,098 |
) |
(1,654 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
|
Management fee |
|
260,730 |
|
613,928 |
|
576,606 |
|
1,283,293 |
| ||||
|
Sponsor fee |
|
92,713 |
|
139,337 |
|
188,747 |
|
283,214 |
| ||||
|
Other |
|
133,486 |
|
134,418 |
|
269,422 |
|
278,370 |
| ||||
|
Total expenses |
|
486,929 |
|
887,683 |
|
1,034,775 |
|
1,844,877 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET INVESTMENT INCOME (LOSS) |
|
(487,401 |
) |
(890,293 |
) |
(1,035,873 |
) |
(1,846,531 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET INCOME (LOSS) |
|
$ |
4,429,788 |
|
$ |
(4,528,966 |
) |
$ |
2,063,221 |
|
$ |
(4,330,045 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average number of Units outstanding |
|
|
|
|
|
|
|
|
| ||||
|
Class A |
|
5,053,538 |
|
8,736,214 |
|
5,348,669 |
|
9,007,493 |
| ||||
|
Class C |
|
10,747,426 |
|
15,186,205 |
|
11,164,599 |
|
15,358,465 |
| ||||
|
Class D |
|
2,008,269 |
|
7,086,623 |
|
1,981,453 |
|
7,068,921 |
| ||||
|
Class I |
|
1,069,346 |
|
1,450,215 |
|
1,113,907 |
|
1,437,653 |
| ||||
|
Class DS |
|
25,706,639 |
|
51,583,831 |
|
28,791,653 |
|
54,776,537 |
| ||||
|
Class DT |
|
7,867,028 |
|
13,664,132 |
|
8,349,446 |
|
14,384,518 |
| ||||
|
Class M |
|
4,238,331 |
|
3,831,377 |
|
3,976,562 |
|
4,021,948 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income (loss) per weighted average Unit |
|
|
|
|
|
|
|
|
| ||||
|
Class A |
|
$ |
0.0645 |
|
$ |
(0.0426 |
) |
$ |
0.0237 |
|
$ |
(0.0455 |
) |
|
Class C |
|
$ |
0.0563 |
|
$ |
(0.0411 |
) |
$ |
0.0206 |
|
$ |
(0.0457 |
) |
|
Class D |
|
$ |
0.0583 |
|
$ |
(0.0327 |
) |
$ |
0.0379 |
|
$ |
(0.0312 |
) |
|
Class I |
|
$ |
0.0666 |
|
$ |
(0.0488 |
) |
$ |
0.0292 |
|
$ |
(0.0500 |
) |
|
Class DS |
|
$ |
0.0888 |
|
$ |
(0.0481 |
) |
$ |
0.0347 |
|
$ |
(0.0413 |
) |
|
Class DT |
|
$ |
0.0994 |
|
$ |
(0.0470 |
) |
$ |
0.0524 |
|
$ |
(0.0391 |
) |
|
Class M |
|
$ |
0.0580 |
|
$ |
(0.0284 |
) |
$ |
0.0405 |
|
$ |
(0.0246 |
) |
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(unaudited) (in Units)
|
|
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Members’ Capital June 30, 2013 |
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Members’ Capital |
|
|
Class A |
|
9,473,298 |
|
70,834 |
|
(938,602 |
) |
8,605,530 |
|
5,826,089 |
|
— |
|
(942,191 |
) |
4,883,898 |
|
|
Class C |
|
15,352,391 |
|
2,359,624 |
|
(2,993,174 |
) |
14,718,841 |
|
11,546,887 |
|
868,789 |
|
(2,350,787 |
) |
10,064,889 |
|
|
Class D |
|
6,838,004 |
|
248,618 |
|
— |
|
7,086,622 |
|
1,847,373 |
|
160,897 |
|
— |
|
2,008,270 |
|
|
Class I |
|
1,390,934 |
|
311,628 |
|
(450,486 |
) |
1,252,076 |
|
1,188,118 |
|
25,881 |
|
(164,413 |
) |
1,049,586 |
|
|
Class DS |
|
59,889,179 |
|
1,649,241 |
|
(13,266,013 |
) |
48,272,407 |
|
33,027,431 |
|
153,276 |
|
(9,791,884 |
) |
23,388,823 |
|
|
Class DT |
|
15,166,653 |
|
115,978 |
|
(2,725,781 |
) |
12,556,850 |
|
9,016,617 |
|
— |
|
(1,721,890 |
) |
7,294,727 |
|
|
Class M |
|
3,691,820 |
|
1,056,293 |
|
(1,056,779 |
) |
3,691,334 |
|
3,599,899 |
|
930,857 |
|
(400,145 |
) |
4,130,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members’ Units |
|
111,802,279 |
|
5,812,216 |
|
(21,430,835 |
) |
96,183,660 |
|
66,052,414 |
|
2,139,700 |
|
(15,371,310 |
) |
52,820,804 |
|
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(unaudited)
|
|
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members’ Capital |
|
Members’ Capital |
|
Subscriptions |
|
Redemptions |
|
Net Income |
|
Members’ Capital |
| ||||||||||
|
Class A |
|
$ |
10,797,104 |
|
$ |
81,073 |
|
$ |
(1,054,138 |
) |
$ |
(410,166 |
) |
$ |
9,413,873 |
|
$ |
6,492,354 |
|
$ |
— |
|
$ |
(1,020,717 |
) |
$ |
126,661 |
|
$ |
5,598,298 |
|
|
Class C |
|
16,040,651 |
|
2,440,348 |
|
(3,092,460 |
) |
(701,601 |
) |
14,686,938 |
|
11,678,312 |
|
850,000 |
|
(2,339,265 |
) |
229,642 |
|
10,418,689 |
| ||||||||||
|
Class D |
|
6,482,616 |
|
235,000 |
|
— |
|
(220,770 |
) |
6,496,846 |
|
1,738,212 |
|
145,000 |
|
— |
|
75,148 |
|
1,958,360 |
| ||||||||||
|
Class I |
|
1,594,694 |
|
359,000 |
|
(501,263 |
) |
(71,881 |
) |
1,380,550 |
|
1,337,151 |
|
28,000 |
|
(180,199 |
) |
32,549 |
|
1,217,501 |
| ||||||||||
|
Class DS |
|
86,982,563 |
|
2,359,243 |
|
(19,279,057 |
) |
(2,263,463 |
) |
67,799,286 |
|
47,609,112 |
|
211,996 |
|
(13,879,895 |
) |
1,000,406 |
|
34,941,619 |
| ||||||||||
|
Class DT |
|
23,677,970 |
|
179,963 |
|
(4,242,444 |
) |
(563,051 |
) |
19,052,438 |
|
14,111,528 |
|
— |
|
(2,682,780 |
) |
437,892 |
|
11,866,640 |
| ||||||||||
|
Class M |
|
3,476,834 |
|
994,000 |
|
(1,009,967 |
) |
(99,113 |
) |
3,361,754 |
|
3,364,821 |
|
854,903 |
|
(379,271 |
) |
160,923 |
|
4,001,376 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Total Members’ Capital |
|
$ |
149,052,432 |
|
$ |
6,648,627 |
|
$ |
(29,179,329 |
) |
$ |
(4,330,045 |
) |
$ |
122,191,685 |
|
$ |
86,331,490 |
|
$ |
2,089,899 |
|
$ |
(20,482,127 |
) |
$ |
2,063,221 |
|
$ |
70,002,483 |
|
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED JUNE 30, 2014 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
Per Unit Operating Performance: |
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, beginning of period |
|
$ |
1.0818 |
|
$ |
0.9794 |
|
$ |
0.9169 |
|
$ |
1.0937 |
|
$ |
1.4047 |
|
$ |
1.5276 |
|
$ |
0.9108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net realized and net change in unrealized trading profit (loss) |
|
0.0772 |
|
0.0698 |
|
0.0655 |
|
0.0781 |
|
0.1004 |
|
0.1092 |
|
0.0651 |
| |||||||
|
Brokerage commissions |
|
(0.0023 |
) |
(0.0021 |
) |
(0.0019 |
) |
(0.0023 |
) |
(0.0030 |
) |
(0.0032 |
) |
(0.0019 |
) | |||||||
|
Interest income, net (c) |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
|
Expenses |
|
(0.0104 |
) |
(0.0119 |
) |
(0.0054 |
) |
(0.0095 |
) |
(0.0082 |
) |
(0.0069 |
) |
(0.0053 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, end of period |
|
$ |
1.1463 |
|
$ |
1.0352 |
|
$ |
0.9751 |
|
$ |
1.1600 |
|
$ |
1.4939 |
|
$ |
1.6267 |
|
$ |
0.9687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total Return: (a) (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total return before Performance fees |
|
5.96 |
% |
5.69 |
% |
6.36 |
% |
6.06 |
% |
6.36 |
% |
6.49 |
% |
6.36 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Total return after Performance fees |
|
5.96 |
% |
5.69 |
% |
6.36 |
% |
6.06 |
% |
6.36 |
% |
6.49 |
% |
6.36 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Ratios to Average Member’s Capital: (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Expenses (excluding Performance fees) (b) |
|
0.94 |
% |
1.19 |
% |
0.56 |
% |
0.84 |
% |
0.56 |
% |
0.44 |
% |
0.56 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Expenses (including Performance fees) |
|
0.94 |
% |
1.19 |
% |
0.56 |
% |
0.84 |
% |
0.56 |
% |
0.44 |
% |
0.56 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net investment income (loss) |
|
-0.94 |
% |
-1.19 |
% |
-0.56 |
% |
-0.84 |
% |
-0.56 |
% |
-0.43 |
% |
-0.56 |
% | |||||||
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The ratios are not annualized.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
Per Unit Operating Performance: |
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, beginning of period |
|
$ |
1.1143 |
|
$ |
1.0114 |
|
$ |
0.9409 |
|
$ |
1.1254 |
|
$ |
1.4415 |
|
$ |
1.5651 |
|
$ |
0.9347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net realized and net change in unrealized trading profit (loss) |
|
0.0569 |
|
0.0514 |
|
0.0485 |
|
0.0576 |
|
0.0742 |
|
0.0809 |
|
0.0481 |
| |||||||
|
Brokerage commissions |
|
(0.0043 |
) |
(0.0039 |
) |
(0.0036 |
) |
(0.0043 |
) |
(0.0056 |
) |
(0.0060 |
) |
(0.0036 |
) | |||||||
|
Interest income, net (c) |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
|
Expenses |
|
(0.0206 |
) |
(0.0237 |
) |
(0.0107 |
) |
(0.0187 |
) |
(0.0162 |
) |
(0.0133 |
) |
(0.0105 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, end of period |
|
$ |
1.1463 |
|
$ |
1.0352 |
|
$ |
0.9751 |
|
$ |
1.1600 |
|
$ |
1.4939 |
|
$ |
1.6267 |
|
$ |
0.9687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total Return: (a) (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total return before Performance fees |
|
2.86 |
% |
2.35 |
% |
3.64 |
% |
3.07 |
% |
3.64 |
% |
3.94 |
% |
3.64 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Total return after Performance fees |
|
2.86 |
% |
2.35 |
% |
3.64 |
% |
3.07 |
% |
3.64 |
% |
3.94 |
% |
3.64 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Ratios to Average Member’s Capital: (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Expenses (excluding Performance fees) (b) |
|
1.90 |
% |
2.40 |
% |
1.15 |
% |
1.70 |
% |
1.15 |
% |
0.85 |
% |
1.15 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Expenses (including Performance fees) |
|
1.90 |
% |
2.40 |
% |
1.15 |
% |
1.70 |
% |
1.15 |
% |
0.85 |
% |
1.15 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net investment income (loss) |
|
-1.90 |
% |
-2.40 |
% |
-1.14 |
% |
-1.70 |
% |
-1.14 |
% |
-0.85 |
% |
-1.14 |
% | |||||||
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The ratios are not annualized.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED JUNE 30, 2013 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
Per Unit Operating Performance: |
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, beginning of period |
|
$ |
1.1372 |
|
$ |
1.0399 |
|
$ |
0.9495 |
|
$ |
1.1451 |
|
$ |
1.4547 |
|
$ |
1.5675 |
|
$ |
0.9432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net realized and net change in unrealized trading profit (loss) |
|
(0.0305 |
) |
(0.0278 |
) |
(0.0256 |
) |
(0.0308 |
) |
(0.0392 |
) |
(0.0423 |
) |
(0.0254 |
) | |||||||
|
Brokerage commissions |
|
(0.0018 |
) |
(0.0016 |
) |
(0.0015 |
) |
(0.0018 |
) |
(0.0023 |
) |
(0.0024 |
) |
(0.0015 |
) | |||||||
|
Interest income, net (c) |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
|
Expenses |
|
(0.0110 |
) |
(0.0127 |
) |
(0.0056 |
) |
(0.0099 |
) |
(0.0087 |
) |
(0.0055 |
) |
(0.0056 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, end of period |
|
$ |
1.0939 |
|
$ |
0.9978 |
|
$ |
0.9168 |
|
$ |
1.1026 |
|
$ |
1.4045 |
|
$ |
1.5173 |
|
$ |
0.9107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total Return: (a) (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total return before Performance fees |
|
-3.81 |
% |
-4.05 |
% |
-3.45 |
% |
-3.71 |
% |
-3.45 |
% |
-3.21 |
% |
-3.45 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Total return after Performance fees |
|
-3.81 |
% |
-4.05 |
% |
-3.45 |
% |
-3.71 |
% |
-3.45 |
% |
-3.21 |
% |
-3.45 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Ratios to Average Member’s Capital: (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Expenses (excluding Performance fees) (b) |
|
0.97 |
% |
1.22 |
% |
0.60 |
% |
0.87 |
% |
0.60 |
% |
0.35 |
% |
0.60 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Expenses (including Performance fees) |
|
0.97 |
% |
1.22 |
% |
0.60 |
% |
0.87 |
% |
0.60 |
% |
0.35 |
% |
0.60 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net investment income (loss) |
|
-0.98 |
% |
-1.23 |
% |
-0.60 |
% |
-0.88 |
% |
-0.60 |
% |
-0.35 |
% |
-0.60 |
% | |||||||
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The ratios are not annualized.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(A Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
Per Unit Operating Performance: |
|
Class A |
|
Class C |
|
Class D |
|
Class I |
|
Class DS |
|
Class DT |
|
Class M |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, beginning of period |
|
$ |
1.1397 |
|
$ |
1.0448 |
|
$ |
0.9480 |
|
$ |
1.1465 |
|
$ |
1.4524 |
|
$ |
1.5612 |
|
$ |
0.9418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net realized and net change in unrealized trading profit (loss) |
|
(0.0201 |
) |
(0.0183 |
) |
(0.0168 |
) |
(0.0203 |
) |
(0.0258 |
) |
(0.0279 |
) |
(0.0167 |
) | |||||||
|
Brokerage commissions |
|
(0.0037 |
) |
(0.0034 |
) |
(0.0031 |
) |
(0.0037 |
) |
(0.0047 |
) |
(0.0051 |
) |
(0.0031 |
) | |||||||
|
Interest income, net (c) |
|
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) |
(0.0000 |
) | |||||||
|
Expenses |
|
(0.0220 |
) |
(0.0253 |
) |
(0.0113 |
) |
(0.0199 |
) |
(0.0174 |
) |
(0.0109 |
) |
(0.0113 |
) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net asset value, end of period |
|
$ |
1.0939 |
|
$ |
0.9978 |
|
$ |
0.9168 |
|
$ |
1.1026 |
|
$ |
1.4045 |
|
$ |
1.5173 |
|
$ |
0.9107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total Return: (a) (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total return before Performance fees |
|
-4.02 |
% |
-4.50 |
% |
-3.30 |
% |
-3.83 |
% |
-3.30 |
% |
-2.81 |
% |
-3.30 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Total return after Performance fees |
|
-4.02 |
% |
-4.50 |
% |
-3.30 |
% |
-3.83 |
% |
-3.30 |
% |
-2.81 |
% |
-3.30 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Ratios to Average Member’s Capital: (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Expenses (excluding Performance fees) (b) |
|
1.95 |
% |
2.45 |
% |
1.20 |
% |
1.75 |
% |
1.20 |
% |
0.70 |
% |
1.20 |
% | |||||||
|
Performance fees |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% | |||||||
|
Expenses (including Performance fees) |
|
1.95 |
% |
2.45 |
% |
1.20 |
% |
1.75 |
% |
1.20 |
% |
0.70 |
% |
1.20 |
% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net investment income (loss) |
|
-1.95 |
% |
-2.45 |
% |
-1.20 |
% |
-1.75 |
% |
-1.20 |
% |
-0.70 |
% |
-1.20 |
% | |||||||
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.
(b) The expense ratios do not include brokerage commissions.
(c) Interest income, net is less than $0.0001 per Unit.
(d) The ratios are not annualized.
See notes to financial statements.
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC
(a Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ML Transtrend DTP Enhanced FuturesAccess LLC (the “Fund”), a FuturesAccessSM Program (“FuturesAccess”) fund, which is an investment company as defined by Accounting Standards Codification (“ASC”) guidance, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund engages in the speculative trading of futures on a wide range of commodities. Transtrend B.V. (“Transtrend” or “Trading Advisor”) is the trading advisor of the Fund. The Trading Advisor utilizes the Transtrend Diversified Trend Program-Enhanced Risk Profile (the “Trading Program”) for the Fund.
Merrill Lynch Alternative Investments LLC (“MLAI”, the “Sponsor” or the “Managing Member”) is the sponsor and manager of the Fund. 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 Fund. The Sponsor may select other parties as clearing broker(s). Merrill Lynch International (“MLI”) is the primary foreign exchange (“F/X”) forward prime broker for the Fund. The Sponsor may select other parties as F/X or other over-the-counter (“OTC”) prime brokers. MLPF&S and MLI 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. Although redemption terms vary among FuturesAccess Funds, generally the same minimum investment amounts, fees and other operational criteria apply across all FuturesAccess Funds. Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading 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 June 30, 2014 and December 31, 2013 and the results of its operations for the three and six month periods ended June 30, 2014 and 2013. 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, 2013.
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. Certain prior year information has been reclassed to conform to current year presentation.
2. CONDENSED SCHEDULES OF INVESTMENTS
The Fund’s investments, defined as unrealized profit (loss) on open contracts on the Statements of Financial Condition, as of June 30, 2014 and December 31, 2013 are as follows:
June 30, 2014
|
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
|
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
|
Sector |
|
Contracts |
|
Profit (Loss) |
|
Members’ Capital |
|
Contracts |
|
Profit (Loss) |
|
Members’ Capital |
|
on Open Positions |
|
Members’ Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Agriculture |
|
599 |
|
$ |
(140,823 |
) |
-0.20 |
% |
(478 |
) |
$ |
395,541 |
|
0.57 |
% |
$ |
254,718 |
|
0.37 |
% |
July 2014 - June 2015 |
|
|
Currencies |
|
925 |
|
440,484 |
|
0.63 |
% |
(484 |
) |
(447,139 |
) |
-0.64 |
% |
(6,655 |
) |
-0.01 |
% |
August 2014 - September 2014 |
| |||
|
Energy |
|
548 |
|
1,052,929 |
|
1.50 |
% |
(76 |
) |
34,453 |
|
0.05 |
% |
1,087,382 |
|
1.55 |
% |
July 2014 - November 2015 |
| |||
|
Interest rates |
|
2,487 |
|
1,183,059 |
|
1.69 |
% |
(1,108 |
) |
(125,335 |
) |
-0.18 |
% |
1,057,724 |
|
1.51 |
% |
September 2014 - June 2018 |
| |||
|
Metals |
|
435 |
|
941,198 |
|
1.34 |
% |
(303 |
) |
(1,087,723 |
) |
-1.55 |
% |
(146,525 |
) |
-0.21 |
% |
July 2014 - November 2014 |
| |||
|
Stock indices |
|
892 |
|
285,896 |
|
0.41 |
% |
(363 |
) |
328,313 |
|
0.47 |
% |
614,209 |
|
0.88 |
% |
July 2014 - December 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
|
|
$ |
3,762,743 |
|
5.37 |
% |
|
|
$ |
(901,890 |
) |
-1.28 |
% |
$ |
2,860,853 |
|
4.09 |
% |
|
|
December 31, 2013
|
|
|
Long Positions |
|
Short Positions |
|
Net Unrealized |
|
|
|
|
| |||||||||||
|
Commodity Industry |
|
Number of |
|
Unrealized |
|
Percent of |
|
Number of |
|
Unrealized |
|
Percent of |
|
Profit (Loss) |
|
Percent of |
|
|
| |||
|
Sector |
|
Contracts |
|
Profit (Loss) |
|
Members’ Capital |
|
Contracts |
|
Profit (Loss) |
|
Members’ Capital |
|
on Open Positions |
|
Members’ Capital |
|
Maturity Dates |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Agriculture |
|
541 |
|
$ |
(109,641 |
) |
-0.13 |
% |
(1,296 |
) |
$ |
1,022,304 |
|
1.18 |
% |
$ |
912,663 |
|
1.05 |
% |
January 2014 - December 2014 |
|
|
Currencies |
|
655 |
|
1,056,453 |
|
1.22 |
% |
(507 |
) |
870,273 |
|
1.01 |
% |
1,926,726 |
|
2.23 |
% |
February 2014 - March 2014 |
| |||
|
Energy |
|
760 |
|
159,271 |
|
0.18 |
% |
(44 |
) |
20,151 |
|
0.02 |
% |
179,422 |
|
0.20 |
% |
January 2014 - December 2015 |
| |||
|
Interest rates |
|
1,161 |
|
(187,202 |
) |
-0.22 |
% |
(942 |
) |
572,202 |
|
0.66 |
% |
385,000 |
|
0.44 |
% |
March 2014 - December 2017 |
| |||
|
Metals |
|
518 |
|
385,034 |
|
0.45 |
% |
(828 |
) |
(295,853 |
) |
-0.34 |
% |
89,181 |
|
0.11 |
% |
January 2014 - October 2014 |
| |||
|
Stock indices |
|
848 |
|
1,235,820 |
|
1.43 |
% |
(466 |
) |
158,654 |
|
0.18 |
% |
1,394,474 |
|
1.61 |
% |
January 2014 - June 2014 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
|
|
$ |
2,539,735 |
|
2.93 |
% |
|
|
$ |
2,347,731 |
|
2.71 |
% |
$ |
4,887,466 |
|
5.64 |
% |
|
|
No individual contract’s unrealized profit or loss comprised greater than 5% of Members’ Capital as of June 30, 2014 and December 31, 2013. With respect to each commodity industry sector listed in the above chart, the net unrealized profit (loss) on open positions is the sum of the unrealized profits (loss) of long positions and short positions of the open contracts. Net unrealized profit and loss provides an approximate measure of the exposure of the Fund to the various sectors as of the date listed, although such exposure can change at any time.
3. FAIR VALUE OF 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 the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included in equity in commodity trading accounts on the Statements of Financial Condition. 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.
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.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where such investments are traded. These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into the process for determining fair values.
The Fund has determined that Level I investments would include its futures and options contracts where it believes that quoted prices are available in an active market.
Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using observable prices of investments with similar characteristics and these are generally classified as Level II investments. The Fund determined that Level II investments would include its forwards and certain futures contracts.
The Fund’s unrealized profit (loss) on open forwards and futures contracts, by the above fair value hierarchy levels, as of June 30, 2014 and December 31, 2013 are as follows:
|
Net unrealized profit (loss) |
|
|
|
|
|
|
|
|
| ||||
|
on open contracts |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Futures |
|
$ |
3,025,284 |
|
$ |
3,258,112 |
|
$ |
(232,828 |
) |
$ |
— |
|
|
Forwards |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
$ |
3,025,284 |
|
$ |
3,258,112 |
|
$ |
(232,828 |
) |
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Futures |
|
$ |
164,431 |
|
$ |
164,431 |
|
$ |
— |
|
$ |
— |
|
|
Forwards |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
$ |
164,431 |
|
$ |
164,431 |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
June 30, 2014 |
|
$ |
2,860,853 |
|
$ |
3,093,681 |
|
$ |
(232,828 |
) |
$ |
— |
|
|
Net unrealized profit (loss) |
|
|
|
|
|
|
|
|
| ||||
|
on open contracts |
|
Total |
|
Level I |
|
Level II |
|
Level III |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Futures |
|
$ |
5,348,804 |
|
$ |
5,348,804 |
|
$ |
— |
|
$ |
— |
|
|
Forwards |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
$ |
5,348,804 |
|
$ |
5,348,804 |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Futures |
|
$ |
461,338 |
|
$ |
(224,421 |
) |
$ |
685,759 |
|
$ |
— |
|
|
Forwards |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
$ |
461,338 |
|
$ |
(224,421 |
) |
$ |
685,759 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
December 31, 2013 |
|
$ |
4,887,466 |
|
$ |
5,573,225 |
|
$ |
(685,759 |
) |
$ |
— |
|
The Fund’s volume of trading forwards and futures as of the six month period ended June 30, 2014 and year ended December 31, 2013 are representative of the activity throughout these periods presented. There were no transfers to or from any level during the three or six month periods ended June 30, 2014 or the year ended December 31, 2013.
The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the ASC guidance for accounting for derivative and hedging activities. The fair value amounts of and the net profits and losses on derivative instruments is disclosed in the Statements of Financial Condition and Statements of Operations, respectively. There are no credit related contingent features embedded in these derivative contracts. The total notional, contract amount, or number of contracts and fair values of derivative instruments by contract type/commodity sector are disclosed in Note 2.
The Fund maintains margin deposits and cash collateral with its futures and forwards brokers, respectively, based on the greater of exchange margin or amounts determined by the respective broker. At June 30, 2014 and December 31, 2013, the initial margin deposits (cash) are used to satisfy the margin requirements to establish the futures or forward contracts and are presented on the Statements of Financial Condition in Cash in the Equity in commodity trading accounts. The variation margin on open contracts is presented on the Statements of Financial Condition in unrealized gain or loss on futures or forwards contracts, respectively.
The following table indicates the trading profits and losses before brokerage commissions, by type/commodity industry sector on derivative instruments for each of the three and six month periods ended June 30, 2014 and 2013:
|
|
|
For the three months ended |
|
For the six months ended |
| ||
|
|
|
June 30, 2014 |
|
June 30, 2014 |
| ||
|
Commodity Industry Sector |
|
profit (loss) from trading, net |
|
profit (loss) from trading, net |
| ||
|
|
|
|
|
|
| ||
|
Agriculture |
|
$ |
163,331 |
|
$ |
1,727,737 |
|
|
Currencies |
|
442,625 |
|
(1,141,304 |
) | ||
|
Energy |
|
1,086,203 |
|
(313,342 |
) | ||
|
Interest rates |
|
2,311,560 |
|
4,889,970 |
| ||
|
Metals |
|
(589,611 |
) |
(1,982,172 |
) | ||
|
Stock indices |
|
1,651,739 |
|
217,695 |
| ||
|
|
|
|
|
|
| ||
|
Total, net |
|
$ |
5,065,847 |
|
$ |
3,398,584 |
|
|
|
|
For the three months ended |
|
For the six months ended |
| ||
|
|
|
June 30, 2013 |
|
June 30, 2013 |
| ||
|
Commodity Industry Sector |
|
profit (loss) from trading, net |
|
profit (loss) from trading, net |
| ||
|
|
|
|
|
|
| ||
|
Agriculture |
|
$ |
551,140 |
|
$ |
(386,734 |
) |
|
Currencies |
|
(4,483,359 |
) |
(3,417,824 |
) | ||
|
Energy |
|
(3,912,342 |
) |
(6,140,728 |
) | ||
|
Interest rates |
|
(1,821,244 |
) |
(4,523,805 |
) | ||
|
Metals |
|
4,122,246 |
|
4,555,619 |
| ||
|
Stock indices |
|
2,113,560 |
|
7,888,564 |
| ||
|
|
|
|
|
|
| ||
|
Total, net |
|
$ |
(3,429,999 |
) |
$ |
(2,024,908 |
) |
The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse, MLPF&S or other BAC entities. Fund assets could be lost or impounded during lengthy bankruptcy proceedings. Were a substantial portion of the Fund’s capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities. There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.
4. MARKET AND CREDIT RISKS
The nature of this Fund has certain risks, which cannot all be presented in the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Fund’s net unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of
Financial Condition. The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that it will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of Transtrend, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge Transtrend 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 Trading Advisor monitoring, with the market risk controls being applied by Transtrend.
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 profit (loss) on open contracts, if any, included in the Statements of Financial Condition. MLAI, as sponsor of the Fund, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLI, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Fund.
The Fund, in its normal course of business, enters into various contracts, with MLPF&S acting as its futures clearing broker.
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 certain parties, including BAC affiliates. 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 expects 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 “Transfer Agent”), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The
fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the quarter ended June 30, 2014, the rate was 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each fund’s net assets. The Transfer Agent fee allocated to the Fund for the three month periods ended June 30, 2014, and 2013 amounted to $3,644 and $6,700, respectively. The Transfer Agent fee allocated to the Fund for the six month periods ended June 30, 2014 and 2013 amounted to $7,941 and $13,971, respectively, of which $2,365 and $3,262 was payable to the Transfer Agent as of June 30, 2014 and December 31, 2013, respectively.
Brokerage Commissions, Interest and Sponsor fees as presented on the Statements of Operations are all received from or paid to related parties. Equity in commodity trading accounts, including cash and net unrealized profit/loss, as presented on the Statements of Financial Condition are held with a related party.
6. SUBSEQUENT EVENTS
Management has evaluated the impact of subsequent events on the Fund through the date the financial statements were 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 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 the last calendar day of each month, the fifteenth calendar day of each month and 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. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
1.1068 |
|
$ |
1.1304 |
|
$ |
1.1540 |
|
$ |
1.1061 |
|
$ |
1.1249 |
|
$ |
1.1372 |
|
$ |
1.1522 |
|
$ |
1.1807 |
|
$ |
1.1463 |
|
$ |
1.1056 |
|
$ |
1.0849 |
|
$ |
1.0939 |
|
|
2014 |
|
$ |
1.0685 |
|
$ |
1.0659 |
|
$ |
1.0489 |
|
$ |
1.0787 |
|
$ |
1.0540 |
|
$ |
1.0818 |
|
$ |
1.0862 |
|
$ |
1.1002 |
|
$ |
1.1069 |
|
$ |
1.1329 |
|
$ |
1.1560 |
|
$ |
1.1463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
1.0142 |
|
$ |
1.0354 |
|
$ |
1.0566 |
|
$ |
1.0123 |
|
$ |
1.0291 |
|
$ |
1.0399 |
|
$ |
1.0532 |
|
$ |
1.0787 |
|
$ |
1.0469 |
|
$ |
1.0094 |
|
$ |
0.9900 |
|
$ |
0.9978 |
|
|
2014 |
|
$ |
0.9694 |
|
$ |
0.9666 |
|
$ |
0.9508 |
|
$ |
0.9774 |
|
$ |
0.9546 |
|
$ |
0.9794 |
|
$ |
0.9830 |
|
$ |
0.9952 |
|
$ |
1.0008 |
|
$ |
1.0239 |
|
$ |
1.0444 |
|
$ |
1.0352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
0.9212 |
|
$ |
0.9415 |
|
$ |
0.9617 |
|
$ |
0.9224 |
|
$ |
0.9386 |
|
$ |
0.9495 |
|
$ |
0.9626 |
|
$ |
0.9870 |
|
$ |
0.9588 |
|
$ |
0.9254 |
|
$ |
0.9087 |
|
$ |
0.9168 |
|
|
2014 |
|
$ |
0.9028 |
|
$ |
0.9012 |
|
$ |
0.8873 |
|
$ |
0.9131 |
|
$ |
0.8928 |
|
$ |
0.9169 |
|
$ |
0.9212 |
|
$ |
0.9337 |
|
$ |
0.9398 |
|
$ |
0.9625 |
|
$ |
0.9828 |
|
$ |
0.9751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
1.1135 |
|
$ |
1.1375 |
|
$ |
1.1614 |
|
$ |
1.1134 |
|
$ |
1.1325 |
|
$ |
1.1451 |
|
$ |
1.1604 |
|
$ |
1.1893 |
|
$ |
1.1548 |
|
$ |
1.1141 |
|
$ |
1.0934 |
|
$ |
1.1026 |
|
|
2014 |
|
$ |
1.0793 |
|
$ |
1.0769 |
|
$ |
1.0599 |
|
$ |
1.0902 |
|
$ |
1.0654 |
|
$ |
1.0937 |
|
$ |
1.0983 |
|
$ |
1.1127 |
|
$ |
1.1195 |
|
$ |
1.1460 |
|
$ |
1.1696 |
|
$ |
1.1600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
1.4113 |
|
$ |
1.4423 |
|
$ |
1.4733 |
|
$ |
1.4131 |
|
$ |
1.4380 |
|
$ |
1.4547 |
|
$ |
1.4748 |
|
$ |
1.5121 |
|
$ |
1.4690 |
|
$ |
1.4178 |
|
$ |
1.3921 |
|
$ |
1.4045 |
|
|
2014 |
|
$ |
1.3831 |
|
$ |
1.3806 |
|
$ |
1.3594 |
|
$ |
1.3989 |
|
$ |
1.3677 |
|
$ |
1.4047 |
|
$ |
1.4113 |
|
$ |
1.4304 |
|
$ |
1.4399 |
|
$ |
1.4746 |
|
$ |
1.5057 |
|
$ |
1.4939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
1.5176 |
|
$ |
1.5517 |
|
$ |
1.5857 |
|
$ |
1.5215 |
|
$ |
1.5489 |
|
$ |
1.5675 |
|
$ |
1.5899 |
|
$ |
1.6308 |
|
$ |
1.5849 |
|
$ |
1.5304 |
|
$ |
1.5033 |
|
$ |
1.5173 |
|
|
2014 |
|
$ |
1.5022 |
|
$ |
1.5002 |
|
$ |
1.4775 |
|
$ |
1.5207 |
|
$ |
1.4871 |
|
$ |
1.5276 |
|
$ |
1.5351 |
|
$ |
1.5562 |
|
$ |
1.5669 |
|
$ |
1.6051 |
|
$ |
1.6392 |
|
$ |
1.6267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS M | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Jan. 15th |
|
Jan. |
|
Feb. 15th |
|
Feb. |
|
Mar. 15th |
|
Mar. |
|
Apr. 15th |
|
Apr. |
|
May 15th |
|
May |
|
June 15th |
|
June |
| ||||||||||||
|
2013 |
|
$ |
0.9151 |
|
$ |
0.9353 |
|
$ |
0.9553 |
|
$ |
0.9163 |
|
$ |
0.9324 |
|
$ |
0.9432 |
|
$ |
0.9563 |
|
$ |
0.9805 |
|
$ |
0.9525 |
|
$ |
0.9193 |
|
$ |
0.9027 |
|
$ |
0.9107 |
|
|
2014 |
|
$ |
0.8968 |
|
$ |
0.8952 |
|
$ |
0.8815 |
|
$ |
0.9071 |
|
$ |
0.8869 |
|
$ |
0.9108 |
|
$ |
0.9151 |
|
$ |
0.9275 |
|
$ |
0.9336 |
|
$ |
0.9562 |
|
$ |
0.9763 |
|
$ |
0.9687 |
|
Liquidity and Capital Resources
The Fund borrows only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Fund’s U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.
Substantially all of the Fund’s assets are held in cash. The Net Asset Value of the Fund’s cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the Fund’s profit potential might increase. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow. The 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 typically permits the 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, in whole or fractional Units, 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 eight business days notice prior to the 1st and 16th 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. The Net Asset Value of redeemed Units is determined as of the Redemption Date. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash, which it must have available to post initial and variation margin on futures contracts. This cash is also used to fund redemptions. While the Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions. In the event that positions were liquidated to fund redemptions, MLAI, as the manager of the Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the Trading Advisor would determine in its discretion which investments should be liquidated.
For the six month period ended June 30, 2014, Fund capital decreased 18.91% from $86,331,490 to $70,002,483. This decrease was attributable to the net profit from operations of $2,063,221 coupled with the redemption of 15,371,310 Redeemable Units resulting in an outflow of $20,482,127. The cash outflow was offset with cash inflow of $2,089,899 due to subscriptions of 2,139,700 Units. Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.
Critical Accounting Policies
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Investments
All investments (including derivatives) are held for trading purposes. Investments are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Profits or losses are realized when contracts are liquidated. Unrealized profits or losses on open contracts are included as a component of equity in commodity trading accounts on the Statements of Financial Condition. Realized profits or losses and any change in net unrealized profits or losses from the preceding period are reported in 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 Financial Statements Note 3, Fair Value of Investments.
Futures Contracts
The Fund trades exchange listed futures contracts. A listed futures contract is a firm commitment to buy or sell a standardized quantity of an underlying asset over a specified duration. The Fund buys and sells contracts based on indices of financial assets such as stocks, domestic and global stock indices, as well as contracts on various physical commodities. Prices paid or received on these contracts are determined by the ask or bid provided by the exchanges on which they are traded. Contracts may be settled in physical form or
cash settled depending upon the contract. Upon the execution of a trade, margin requirements determine the amount of cash that must be on deposit to secure the transaction. These amounts are considered restricted cash on the Fund’s Statements of Financial Condition. Contracts are priced daily by the Fund and the profit or loss based on the daily mark to market are recorded as unrealized profits. When the contract is closed, the Fund records a realized profit or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited. Realized profits (losses), net and changes in unrealized profits (losses), net on futures contracts are included in the Statements of Operations. The Fund also trades futures contracts on the London Metals Exchange (LME). The valuation pricing for LME contracts is based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as supply and demand factors and bids and asks from open outcry sessions.
Forward Foreign Currency Contracts
Foreign currency contracts are those contracts where the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the Fund’s net equity therein, representing unrealized profit or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition. Realized profits (losses) and changes in unrealized profits (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Operations.
Interest Rates and Income
The Fund currently earns interest based on the prevailing federal funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such member’s share of the Fund’s income and expenses as reported for income tax purposes.
The Fund follows the ASC guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. 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 — 2010.
Reform Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the definition of “eligible contract participant,” and the Fund expects to meet the amended definition as it applies to trading in “retail forex” transactions so long as its total assets exceed $10 million. If the Fund does not meet the definition of “eligible contract participant” for purposes of trading in “retail forex” transactions,” it could lead to the Fund being unable to trade such transactions in the interbank market and bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees. “Retail forex” markets available to parties that do not meet the definition of “eligible contract participant” could also be significantly less liquid than the interbank market. Moreover, the creditworthiness of the counterparties with whom the Fund may be required to trade in such circumstances could be significantly weaker than the creditworthiness of MLI and the currency forward counterparties with which the Fund would otherwise engage for its currency forward transactions.
Results of Operations
January 1, 2014 to June 30, 2014
January 1, 2014 to March 31, 2014
The Fund experienced a net trading loss of $1,667,263 before brokerage commissions and related fees in the first quarter of 2014. The Fund’s profits were primarily attributable to the interest rates and agriculture sectors posting profits. The metals, energy, stock indices and currency sectors posted losses.
The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the first quarter due to the Fund’s long positions in this sector. Profits were posted to the Fund in the middle through the end of the quarter due to the Fund’s long bonds positions.
The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the first quarter due to the rising prices of milk and oats. Profits were posted to the Fund in the middle of the quarter. Profits were posted to the Fund at the end of the quarter due to the Fund’s long positions in some agricultural markets (especially soy markets). In March a drought in Brazil caused uptrends in soybeans and coffee.
The metals sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the first quarter due to the Fund’s short positions in gold. Losses were posted to the Fund in the middle of the quarter due to the Fund’s short positions in silver. Profits were posted to the Fund at the end of the quarter due to the Fund’s short positions in copper and silver.
The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the first quarter from the Fund’s long positions in oil markets only to be reversed in the middle of the quarter. Profits were posted to the Fund in the middle of the quarter from the Fund’s long positions in gas and oil. Losses posted to the Fund at the end of the quarter came from long positions in the oil markets.
The stock indices sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the first quarter. In January the losses came from long positions in Japanese, American and European equities.
Profits were posted to the Fund in the middle of the quarter from the Fund’s long positions in stocks only to be reversed at the end of the quarter with losses posted to the Fund.
The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the first quarter. The Fund, as intended, participated significantly in the weak Japanese yen and the rising Eastern European currencies, but remained too cautious on the “‘risk-off” side with regard to short positions in the currencies of the emerging economies and some other commodity-rich countries. Especially in the South African rand and the Canadian dollar, the Fund did not take advantage of the apparent potential for gains to the fullest extent. This was reflected by losses in the currency sector. Losses were posted to the Fund in the middle of the quarter only to be reversed at the end of the quarter. The largest profits in March came from the Fund’s long positions in emerging market currencies (especially the Indian rupee and the Brazilian real).
April 1, 2014 to June 30, 2014
The Fund experienced a net trading profit of $5,065,847 before brokerage commissions and related fees in the second quarter of 2014. The Fund’s profits were primarily attributable to the interest rates, stock indices, energy, currencies and agriculture sectors posting profits. The metals sector posted losses.
The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the second quarter due to the Fund’s exposure in the European interest rate markets. Profits were posted to the Fund in the middle of the quarter due to the Fund’s high trendpot number, which indicated a favorable trend in the interest rate market. Profits were posted to the Fund at the end of the quarter due to the European bond markets rising.
The stock indices sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the second quarter due to the Fund’s exposure in long equities. In April despite the unrest in Ukraine, the Fund expanded its already large risk concentration of ‘risk-on’ positions. At the beginning of April, the largest components of this concentration were ‘long stocks’, ‘long emerging markets’ and ‘long commodities’. During early April the Fund added ‘long Japanese QE’ (long Japanese stocks and short Japanese yen). The Fund suffered losses in mid-April as most equity long positions turned losing. In the U.S. this reaction was mainly led by weakness in the technology sector. The Fund lost most on European longs in stock markets that were impacted by concerns over Ukraine. Profits were posted to the Fund in the middle of the quarter from the Fund’s long positions in the Indian stock index. The stock markets in other emerging countries were generally strong as well, resulting most significantly in profits in Taiwan. In the developed markets the Fund profited from rising stock markets across most sectors, and in particular from the associated decline of the corresponding volatility index futures. Profits posted to the Fund at the end of the quarter came from strong equity markets in Japan and Taiwan as well as the stock markets, resulting in accumulating profits on the long side in the U.S.
The energy sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the second quarter. In April the Fund held its largest long positions in the energy markets. Losses were posted to the Fund in the middle of the quarter from the Fund’s long positions in gas and oil. In May the profits on the long oil positions could not fully compensate for the losses on the long gas positions. Profits posted to the Fund at the end of the quarter came from the Fund’s long positions in the oil markets. In June oil prices rallied to continue trading at higher levels.
The currency sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the second quarter. In April the largest losses in the currency markets were from short Japanese yen. Profits were posted to the Fund in the middle of the quarter. In May the Fund profited from the strength of the currencies of
India, Mexico, Turkey, Australia, South Korea, Poland, Russia and Norway. The long positions in these currencies turned out to be most profitable when traded against the euro. Losses were posted to the Fund at the end of the quarter due to the Fund’s long positions in the Turkish lira. In Hungary newly proposed laws for banks that impacted the currency, resulting in losses for the Fund.
The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the second quarter due to a large extent from soybeans, and also from cotton and cattle. Losses were posted to the Fund in the middle of the quarter due to corn, wheat, cotton and coffee markets turning downwards. Losses were posted to the Fund at the end of the quarter due to the severe drought in Brazil. In June, the Fund gave back some of the earlier gains in the existing positions in the soy markets. In sugar, the Fund turned to short positions in the first week of June; this turned out to be too fast, as these markets, shortly turned higher.
The metals sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the second quarter due to nickel responding bullish on the developments around Ukraine as well as on an export ban in Indonesia, while other metal markets like copper reacted to different market factors. The Fund kept its large short silver positions throughout April, which position proved to offer a nice smoothing counterbalance to the large ‘risk-on’ concentration, and posted some profits. Profits were posted to the Fund in the middle of the quarter due to the Fund’s short positions in silver. Losses were posted to the Fund at the end of the quarter due to the Fund’s short positions in gold and silver. Gold and silver rose too strongly, resulting in losses on the sizeable short positions in these metals.
January 1, 2013 to June 30, 2013
January 1, 2013 to March 31, 2013
The Fund experienced a net trading profit of $1,405,091 before brokerage commissions and related fees in the first quarter of 2013. The Fund’s profits were primarily attributable to the stock indices, currencies, and metals sectors posting profits. The agriculture, interest rates and energy sectors posted losses.
The stock indices sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. The market movement in the first few days of January broadly set the stage for the rest of the month. Equity markets were strong globally; positions anticipating this delivered the largest positive contribution to the monthly result. Profits were posted to the Fund in the middle of the quarter. Losses on the Trading Program’s long positions in markets that from the beginning of February reacted (such as those in China, Russia, the Netherlands and Mexico), were compensated by gains earned on rising stock markets (especially in Australia, Switzerland and the U.S.). Profits were posted to the Fund at the end of the quarter which was based on the strength in the United States. Although positions in Australia, Hong Kong, South Africa, and Greece and in European banks resulted in some losses, on balance the Trading Program did not score significantly negative in any time zone.
The currency sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Profits were earned in the carry trades with the high yielding currencies of New Zealand, Turkey, Romania, or Mexico on the long side and the low yielding currencies of Japan, Great Britain or the United States on the short side. Losing positions were those with the high yielding currency of South Africa on the long side and positions with the low yielding euro on the short side. This was taken advantage of with the Trading Program’s long positions versus the also low yielding currencies of Singapore, Hong Kong and Taiwan. Losses were posted to the Fund in the middle of the quarter. The carry trades resulted in losses posted to the Fund when anticipating a falling U.S. dollar relative to the high yielding currencies of India, Hungary, Poland, Romania and Colombia. Profits were posted to the Fund at the end of the quarter. The
Trading Program was correctly positioned to profit from the falling euro and Japanese yen, and the strength of the currencies of Mexico, the U.S., Australia, Israel and Turkey.
The metals sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter only to be reversed in the middle of the quarter. Profits were posted to the Fund in the middle of the quarter due to the Trading Program’s short positions in gold and silver. Profits were posted to the Fund at the end of the quarter.
The agriculture sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter only to be reversed in the middle of the quarter. Profits were posted to the Fund in the middle of the quarter by the Trading Program effectively anticipating the continuing fall of the prices of wheat and beef. Profits were posted to the Fund at the end of the quarter as the Trading Program anticipated further falling prices of coffee, sugar, wheat and meat.
The interest rate sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter due to the Trading Program’s long positions in European bond markets. Profits were posted to the Fund in the middle of the quarter due to the Trading Program’s long positions in Korea and Japan, as well as on the shorter end of the yield curve in Great Britain. Profits were posted to the Fund at the end of the quarter due to the Trading Program’s long positions in Korean and Japanese bonds. But most of the profits resulted from numerous, often hybrid, synthetic positions, of which a significant portion was “short euro” related.
The energy sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter when anticipating falling prices of electricity, coal and carbon emissions delivered positive results. Losses were posted to the Fund in the middle through the end of the quarter due to the oil markets.
April 1, 2013 to June 30, 2013
The Fund experienced a net trading loss of $3,429,999 before brokerage commissions and related fees in the second quarter of 2013. The Fund’s profits were primarily attributable to the metals, stock indices, and agriculture sectors posting profits. The interest rates, energy and currency sectors posted losses.
The metals sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter. Disappointing economic growth in China contributed to a major drop in metal prices benefitting the Trading Program. Profits were posted to the Fund in the middle of the quarter due to the Trading Program’s short positions. Profits were posted to the Fund at the end of the quarter due to the downward trends in metals.
The stock indices posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter resulting from stock markets driven by the low interest rate policy in the U.S. and Western Europe. Profits were posted to the Fund in the middle of the quarter. The largest gains (on the long side) in the stock markets came mainly from the United States and continental Europe. During the continued development of the Trading Program’s long equity positions, the Trading Program increasingly moved to emerging economies, resulting in profits in Malaysia and South Africa. Losses were posted to the Fund at the end of the quarter. Many stock markets in June reacted negatively to the approaching end of the quantitative easing program, and this was felt by the Trading Program especially on long positions in Western Europe. The Trading Program’s long positions in South Africa received relatively the biggest blow. Profits on the Trading Program’s short positions in other emerging economies (Brazil, China, Russia, Turkey), as well as positions anticipating increasing volatility in the U.S., were not sufficient to compensate for these losses.
The agriculture sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. The after-effects of a crop report from the end of March resulted in losses at the beginning of the month. Profits were posted to the Fund in the middle of the quarter. The sugar market experienced acceleration in its prevailing downward trend in May in which the Trading Program benefited from this development. The Trading Program benefitted from the rising price of soybeans due to the cold spring in the United States and delayed seeding of this crop.
The interest rate sector posted losses to the Fund. Profits were posted to the Fund at the beginning of the quarter. The upward trends of bonds in countries with a low interest rate policy resulted in profits to the Fund. Losses were posted to the Fund in the middle of the quarter, resulting from the Trading Program’s long positions in the United States and continental Europe. Profits were posted to the Fund at the end of the quarter from the Trading Program’s short positions, especially in the U.S., Canada, England, Germany and South Korea.
The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. Losses were posted to the Fund in the middle of the quarter resulting from the Trading Program’s long positions in both oil and gas. Losses were posted to the Fund at the end of the quarter due to oil markets.
The currency sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the quarter. The Trading Program lost in the risk concentration around “short euro” (not only directly though currency positions). These losses were partially, but not enough to offset the losses, compensated by gains on “long carry” positions, in particular those with a long position in the high yielding currencies of Mexico, New Zealand, China, India and Romania. Losses were posted to the Fund in the middle of the quarter. Significant movements in the currency markets were accelerating declines in the currencies of many emerging economies, such as those of Brazil, Chile, South Africa, Turkey and India; although the Chinese currency remained strong. The Trading Program suffered from its initially fairly large “long carry” and “short euro” positions. The Trading Program’s positions anticipating a further strengthening of currencies of resource-rich countries, such as Canada, Mexico, Russia, Australia and New Zealand, also suffered. Although most of these positions were phased out over the course of May, losses prevailed. Eventually, the biggest risk concentration in the currency markets became “long U.S. dollar”, both versus Europe and versus emerging countries. Losses were posted to the Fund at the end of the quarter. The “long carry” positions were largely phased out in May, so further losses on these positions remained limited in June. Greater were the losses due to a wide zigzag of the U.S. dollar versus the Western European currencies (euro, British pound, Swiss franc): from a stronger dollar to a weaker dollar and back to a stronger dollar again, the Trading Program that started at the beginning of June with a long dollar position was not unaffected. The weakness of the currencies of emerging economies (e.g. Brazil, Turkey, Russia, India and Thailand) and positions profiting from the falling exchange rates of the currencies of Australia and New Zealand was not enough to offset the losses in the other currency markets.
(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 Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes and all or substantially all of the Fund’s assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.
Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.
The Fund, under the direction of Transtrend, rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Fund’s losses in any market sector will be limited to Value at Risk or by the Fund’s attempts to manage its market risk.
Quantifying The Fund’s Trading Value At Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“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 Fund’s risk exposure in the various market sectors traded by the Fund is quantified below in terms of Value at Risk. Due to the Fund’s fair value accounting, any loss in the fair value of the Fund’s open positions is directly reflected in the Fund’s earnings (realized or unrealized) and cash flow (in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.
100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.
The Fund’s Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest trading Value at Risk associated with the Fund’s open positions by market category for the fiscal periods. For the six month periods ended June 30, 2014 and 2013 the Fund’s average Month-end Net Asset Value was approximately $76,380,042 and $137,882,182, respectively.
June 30, 2014
|
|
|
Average Value |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
at Risk |
|
Capitalization |
|
at Risk |
|
at Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
3,596,481 |
|
4.71 |
% |
$ |
5,165,177 |
|
$ |
2,459,456 |
|
|
Currencies |
|
2,849,592 |
|
3.73 |
% |
3,638,805 |
|
2,315,432 |
| |||
|
Energy |
|
2,435,808 |
|
3.19 |
% |
4,490,242 |
|
609,425 |
| |||
|
Interest Rates |
|
2,095,814 |
|
2.74 |
% |
3,116,899 |
|
1,346,781 |
| |||
|
Metals |
|
444,352 |
|
0.58 |
% |
713,650 |
|
202,084 |
| |||
|
Stock Indices |
|
1,202,686 |
|
1.57 |
% |
1,661,203 |
|
875,859 |
| |||
|
Total |
|
$ |
12,624,733 |
|
16.52 |
% |
$ |
18,785,976 |
|
$ |
7,809,037 |
|
June 30, 2013
|
|
|
Average Value |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
|
Market Sector |
|
at Risk |
|
Capitalization |
|
at Risk |
|
at Risk |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Agricultural Commodities |
|
$ |
804,153 |
|
0.58 |
% |
$ |
1,925,898 |
|
$ |
252,136 |
|
|
Currencies |
|
103,965 |
|
0.08 |
% |
256,119 |
|
27,755 |
| |||
|
Energy |
|
341,409 |
|
0.25 |
% |
544,357 |
|
235,840 |
| |||
|
Interest Rates |
|
10,674,894 |
|
7.74 |
% |
15,029,039 |
|
4,325,727 |
| |||
|
Metals |
|
2,220,038 |
|
1.61 |
% |
3,956,597 |
|
1,619,922 |
| |||
|
Stock Indices |
|
536,023 |
|
0.39 |
% |
717,587 |
|
239,128 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
$ |
14,680,482 |
|
10.65 |
% |
$ |
22,429,597 |
|
$ |
6,700,508 |
|
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund. The magnitude of the Fund’s open positions creates a “risk of ruin” not typically found in most other investment
vehicles. Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time. The foregoing Value at Risk table — as well as the past performance of the Fund — gives no indication of this “risk of ruin.”
Non-Trading Risk
Foreign Currency Balances; Cash on Deposit with MLPF&S and MLI
The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are typically immaterial.
The Fund also has non-trading market risk on approximately 90% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and Transtrend for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, 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 value of their investment in the Fund.
The following were the primary trading risk exposures of the Fund as of June 30, 2014, by market sector.
Interest Rates
Interest rate movements directly affect the price of derivative sovereign bond futures positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries can materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries. However, the Fund may also take futures positions in the government debt of smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.
Currencies
The Fund trades in a number of currencies. The Fund does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future. The currency trading Value at Risk figure includes
foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.
Stock Indices
The Fund’s primary equity exposure is to S&P 500, Nikkei and German DAX equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.
Metals
The Fund’s metals market exposure is to fluctuations in the price of precious and non-precious metals.
Agricultural Commodities
The Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, and livestock accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of June 30, 2014. However, it is anticipated that the Fund will maintain an emphasis on cotton, grains and sugar, in which the Fund has historically taken its largest positions.
Energy
The Fund’s primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Fund as of June 30, 2014.
Foreign Currency Balances
The Fund’s primary foreign currency balances are in British pounds, Japanese yen and Euros.
U.S. Dollar Cash Balance
The Fund holds the vast majority of its U.S. dollars in cash at MLPF&S and MLI. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Trading Risk
MLAI has procedures in place intended to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge Transtrend to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are unusual, except in cases in which it appears that Transtrend has begun to deviate from past practice and trading policies or to be trading erratically. MLAI’s basic control
procedures consist of the ongoing process of monitoring Transtrend with the market risk controls being applied by Transtrend.
Risk Management
Risk management plays a role in the Trading Advisor’s trading methodology. The Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance. Specific risk provisions are computed for each market exposure. Risk assessments are determined on the basis of evaluation of price behavior.
Non-Trading Risk
The Fund controls the non-trading exchange rate risk by regularly converting foreign balances back into U.S. dollars at least once per week, and more frequently if a particular foreign currency balance becomes unusually high.
The Fund has cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held by the Fund in order to facilitate margin payments and pay expenses and redemptions. MLAI does not take any steps to limit the cash flow risk on its cash held on deposit at MLPF&S.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
MLAI’s Chief Executive Officer and Chief Financial Officer, on behalf of the Fund, have evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act) with respect to the Fund as of and for the quarter which ended June 30, 2014, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Securities Exchange Act) occurred during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There are no material changes from risk factors as previously disclosed in the Fund’s report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on March 25, 2014.
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) |
| ||
|
1/01/2014 |
|
$ |
— |
|
— |
|
$ |
1.1143 |
|
|
1/16/2014 |
|
— |
|
— |
|
1.0685 |
| ||
|
2/01/2014 |
|
— |
|
— |
|
1.0659 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
1.0489 |
| ||
|
3/01/2014 |
|
— |
|
— |
|
1.0787 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
1.0540 |
| ||
|
4/01/2014 |
|
— |
|
— |
|
1.0818 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
1.0862 |
| ||
|
5/01/2014 |
|
— |
|
— |
|
1.1002 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
1.1069 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
1.1329 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
1.1560 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
1.1463 |
| ||
CLASS C
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
81,000 |
|
80,087 |
|
$ |
1.0114 |
|
|
1/16/2014 |
|
— |
|
— |
|
0.9694 |
| ||
|
2/01/2014 |
|
391,000 |
|
404,511 |
|
0.9666 |
| ||
|
2/16/2014 |
|
13,000 |
|
13,673 |
|
0.9508 |
| ||
|
3/01/2014 |
|
118,000 |
|
120,728 |
|
0.9774 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
0.9546 |
| ||
|
4/01/2014 |
|
88,000 |
|
89,851 |
|
0.9794 |
| ||
|
4/16/2014 |
|
59,000 |
|
60,020 |
|
0.9830 |
| ||
|
5/01/2014 |
|
80,000 |
|
80,386 |
|
0.9952 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
1.0008 |
| ||
|
6/01/2014 |
|
20,000 |
|
19,533 |
|
1.0239 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
1.0444 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
1.0352 |
| ||
CLASS D
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
— |
|
— |
|
$ |
0.9409 |
|
|
1/16/2014 |
|
— |
|
— |
|
0.9028 |
| ||
|
2/01/2014 |
|
145,000 |
|
160,897 |
|
0.9012 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
0.8873 |
| ||
|
3/01/2014 |
|
— |
|
— |
|
0.9131 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
0.8928 |
| ||
|
4/01/2014 |
|
— |
|
— |
|
0.9169 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
0.9212 |
| ||
|
5/01/2014 |
|
— |
|
— |
|
0.9337 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
0.9398 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
0.9625 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
0.9828 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
0.9751 |
| ||
CLASS I
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
3,000 |
|
2,666 |
|
$ |
1.1254 |
|
|
1/16/2014 |
|
— |
|
— |
|
1.0793 |
| ||
|
2/01/2014 |
|
25,000 |
|
23,215 |
|
1.0769 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
1.0599 |
| ||
|
3/01/2014 |
|
— |
|
— |
|
1.0902 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
1.0654 |
| ||
|
4/01/2014 |
|
— |
|
— |
|
1.0937 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
1.0983 |
| ||
|
5/01/2014 |
|
— |
|
— |
|
1.1127 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
1.1195 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
1.1460 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
1.1696 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
1.1600 |
| ||
CLASS DS
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
— |
|
— |
|
$ |
1.4415 |
|
|
1/16/2014 |
|
211,996 |
|
153,276 |
|
1.3831 |
| ||
|
2/01/2014 |
|
— |
|
— |
|
1.3806 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
1.3594 |
| ||
|
3/01/2014 |
|
— |
|
— |
|
1.3989 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
1.3677 |
| ||
|
4/01/2014 |
|
— |
|
— |
|
1.4047 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
1.4113 |
| ||
|
5/01/2014 |
|
— |
|
— |
|
1.4304 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
1.4399 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
1.4746 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
1.5057 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
1.4939 |
| ||
CLASS DT
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
— |
|
— |
|
$ |
1.5651 |
|
|
1/16/2014 |
|
— |
|
— |
|
1.5022 |
| ||
|
2/01/2014 |
|
— |
|
— |
|
1.5002 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
1.4775 |
| ||
|
3/01/2014 |
|
— |
|
— |
|
1.5207 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
1.4871 |
| ||
|
4/01/2014 |
|
— |
|
— |
|
1.5276 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
1.5351 |
| ||
|
5/01/2014 |
|
— |
|
— |
|
1.5562 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
1.5669 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
1.6051 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
1.6392 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
1.6267 |
| ||
CLASS M
|
|
|
Subscription |
|
|
| ||||
|
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
|
1/01/2014 |
|
$ |
— |
|
— |
|
$ |
0.9347 |
|
|
1/16/2014 |
|
— |
|
— |
|
0.8968 |
| ||
|
2/01/2014 |
|
51,000 |
|
56,971 |
|
0.8952 |
| ||
|
2/16/2014 |
|
— |
|
— |
|
0.8815 |
| ||
|
3/01/2014 |
|
253,903 |
|
279,906 |
|
0.9071 |
| ||
|
3/16/2014 |
|
— |
|
— |
|
0.8869 |
| ||
|
4/01/2014 |
|
50,000 |
|
54,897 |
|
0.9108 |
| ||
|
4/16/2014 |
|
— |
|
— |
|
0.9151 |
| ||
|
5/01/2014 |
|
500,000 |
|
539,083 |
|
0.9275 |
| ||
|
5/16/2014 |
|
— |
|
— |
|
0.9336 |
| ||
|
6/01/2014 |
|
— |
|
— |
|
0.9562 |
| ||
|
6/16/2014 |
|
— |
|
— |
|
0.9763 |
| ||
|
7/01/2014 |
|
— |
|
— |
|
0.9687 |
| ||
(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 2.5%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amounts. Class C Units, Class DS Units, Class DT 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.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:
31.01 and
31.02 Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 31.01
and 31.02 Are filed herewith.
32.01 and
32.02 Section 1350 Certifications
Exhibit 32.01
and 32.02 Are filed herewith.
Exhibit 101 Are filed herewith.
The following materials from the Fund’s quarterly Report on Form 10-Q for the three and six month periods ended June 30, 2014 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 Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC | ||
|
|
|
| |
|
|
|
| |
|
|
|
By: |
MERRILL LYNCH ALTERNATIVE |
|
|
|
|
INVESTMENTS LLC |
|
|
|
|
(Manager) |
|
|
|
|
|
|
|
|
|
|
|
Date: August 14, 2014 |
|
By: |
/s/ KEITH GLENFIELD |
|
|
|
|
Keith Glenfield |
|
|
|
|
Chief Executive Officer and President |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
Date August 14, 2014 |
|
By: |
/s/ BARBRA E. KOCSIS |
|
|
|
|
Barbra E. Kocsis |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(Principal Financial Officer) |