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EX-32.2 - EX-32.2 - Cavendish Futures Fund LLCa15-12138_1ex32d2.htm
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EX-31.2 - EX-31.2 - Cavendish Futures Fund LLCa15-12138_1ex31d2.htm
EX-32.1 - EX-32.1 - Cavendish Futures Fund LLCa15-12138_1ex32d1.htm
EX-10.4(B) - EX-10.4(B) - Cavendish Futures Fund LLCa15-12138_1ex10d4b.htm

Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2015

 

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 000-55213

 

CAVENDISH FUTURES FUND LLC

(Exact name of registrant as specified in its charter)

 

Delaware

 

38-3849454

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

c/o UBS Alternatives LLC

1285 Avenue of the Americas, 20th Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

 

(212) 713-3234

(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 the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

 

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

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

 

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 July 31, 2015, 135,932.815 Limited Liability Company Redeemable Units were outstanding.

 

 

 



Table of Contents

 

CAVENDISH FUTURES FUND LLC

 

Form 10-Q

 

Index

 

 

 

Page

 

 

Number

 

 

 

PART I — Financial Information:

 

Item 1.

Financial Statements:

 

 

 

 

 

Statements of Financial Condition at June 30, 2015 (unaudited) and December 31, 2014

3

 

 

 

 

Statements of Operations and Changes in Members’ Capital for the three and six months ended June 30, 2015 and 2014 (unaudited)

4

 

 

 

 

Notes to Financial Statements, including the Financial
Statements of Sydling WNT Master Fund LLC (unaudited)

5 – 16

 

 

 

Item 2.

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

17 – 19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

20 – 21

 

 

 

Item 4.

Controls and Procedures

21

 

 

 

PART II — Other Information

22 – 23

 

 

 

Exhibits

 

 

Exhibit 31.1 — Certification

 

Exhibit 31.2 — Certification

 

Exhibit 32.1 — Certification

 

Exhibit 32.2 — Certification

 

Exhibit 101.INS — XBRL Instance Document

 

Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.

 

Exhibit 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document.

 

Exhibit 101.LAB — XBRL Taxonomy Extension Label Linkbase Document.

 

Exhibit 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document.

 

Exhibit 101.DEF — XBRL Taxonomy Extension Definition Document.

 



Table of Contents

 

PART I

 

Item 1.  Financial Statements

 

Cavendish Futures Fund LLC

Statements of Financial Condition

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investment in Sydling WNT Master Fund LLC, at fair value (cost $135,830,348 and $83,859,327, respectively)

 

$

151,652,425

 

$

105,608,724

 

Cash

 

5,387,021

 

5,973,766

 

Receivable from Sydling WNT Master Fund LLC

 

440,860

 

3,381,488

 

Total Assets

 

$

157,480,306

 

$

114,963,978

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Subscriptions received in advance

 

$

5,218,500

 

$

5,911,500

 

Redemptions payable

 

150,000

 

58,880

 

Incentive fee payable

 

 

3,027,080

 

Accrued expenses:

 

 

 

 

 

Advisory fees

 

190,070

 

136,095

 

Administrative fees

 

63,357

 

45,365

 

Professional fees and other expenses

 

184,056

 

168,768

 

Organizational costs

 

21,898

 

15,131

 

Total Liabilities

 

5,827,881

 

9,362,819

 

 

 

 

 

 

 

MEMBERS’ CAPITAL

 

 

 

 

 

 

 

 

 

 

 

Member Designee (25.000 Redeemable Units)

 

28,783

 

30,159

 

Non-Managing Members (131,695.835 and 87,511.813 Redeemable Units)

 

151,623,642

 

105,571,000

 

 

 

 

 

 

 

Total Members’ Capital

 

151,652,425

 

105,601,159

 

Total Liabilities and Members’ Capital

 

$

157,480,306

 

$

114,963,978

 

Members’ Capital per Redeemable Unit (based on 131,720.835 and 87,536.813 Redeemable Units)

 

$

1,151.32

 

$

1,206.36

 

 

See accompanying notes to financial statements.

 

3



Table of Contents

 

Cavendish Futures Fund LLC

Statements of Operations and Changes in Members’ Capital

(Unaudited)

 

 

 

Three Months Ended

 

Three Months Ended

 

Six Months Ended

 

Six Months Ended

 

 

 

June 30, 2015

 

June 30, 2014

 

June 30, 2015

 

June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest allocated from Sydling WNT Master Fund LLC

 

$

3,751

 

$

5,704

 

$

8,620

 

$

11,058

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses allocated from Sydling WNT Master Fund LLC

 

1,350,510

 

669,850

 

2,540,637

 

1,182,810

 

Incentive fees

 

 

724,094

 

2,112,137

 

724,094

 

Advisory fees

 

548,211

 

270,264

 

1,033,878

 

474,685

 

Administrative fees

 

182,737

 

90,088

 

344,626

 

158,228

 

Professional fees and other expenses

 

112,300

 

64,125

 

224,600

 

122,250

 

Total Expenses

 

2,193,758

 

1,818,421

 

6,255,878

 

2,662,067

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT (LOSS)

 

(2,190,007

)

(1,812,717

)

(6,247,258

)

(2,651,009

)

 

 

 

 

 

 

 

 

 

 

TRADING RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain/(loss) allocated from Sydling WNT Master Fund LLC

 

(8,540,442

)

3,809,836

 

3,864,539

 

4,957,233

 

Net change in unrealized appreciation/(depreciation) allocated from Sydling WNT Master Fund LLC

 

(5,153,667

)

715,198

 

(6,015,820

)

(306,026

)

Total Trading Results

 

(13,694,109

)

4,525,034

 

(2,151,281

)

4,651,207

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

(15,884,116

)

2,712,317

 

(8,398,539

)

2,000,198

 

 

 

 

 

 

 

 

 

 

 

Subscriptions — Non-managing Members

 

29,784,994

 

8,896,270

 

54,911,084

 

25,777,250

 

Redemptions — Non-managing Members

 

(287,267

)

(1,235,550

)

(461,279

)

(1,684,536

)

 

 

 

 

 

 

 

 

 

 

Net increase in Members’ Capital

 

13,613,611

 

10,373,037

 

46,051,266

 

26,092,912

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital, beginning of period

 

$

138,038,814

 

$

62,655,303

 

$

105,601,159

 

$

46,935,428

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital, end of period

 

$

151,652,425

 

$

73,028,340

 

$

151,652,425

 

$

73,028,340

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss) per Redeemable Unit

 

$

(129.49

)

$

40.56

 

$

(55.04

)

$

29.75

 

 

 

 

 

 

 

 

 

 

 

Weighted average Redeemable Units outstanding

 

119,896.617

 

66,680.998

 

106,082.880

 

56,484.481

 

 

See accompanying notes to financial statements.

 

4



Table of Contents

 

Cavendish Futures Fund LLC

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

1.  General

 

Cavendish Futures Fund LLC (the “Fund”) is a Delaware limited liability company formed on August 7, 2012.  Trading operations of the Fund commenced on February 19, 2013.  The Fund’s investment objective is to achieve capital appreciation through speculative trading in U.S. and international futures, options on futures and forward markets.  The Fund may also engage in swap and other derivative transactions upon approval of Sydling Futures Management LLC (“Sydling”).  The Fund privately and continually offers redeemable units of limited liability company interest in the Fund (“Redeemable Units”) to qualified investors and subscriptions are generally accepted monthly.  There is no maximum number of Redeemable Units that may be sold by the Fund.  The Fund invests substantially all of its assets in the Sydling WNT Master Fund LLC (“Master Fund”), also a Delaware limited liability company, which has the same investment objective as the Fund.  The Master Fund’s Statements of Financial Condition, including Condensed Schedules of Investments and Statement of Operations and Changes in Members’ Capital are included herein.  The percentage of the Master Fund’s capital owned by the Fund at June 30, 2015 and December 31, 2014 was 100%.  The performance of the Fund is directly affected by the performance of the Master Fund.

 

The Fund is member managed for purposes of Delaware law.  Pursuant to the Fund’s limited liability company agreement, as may be amended from time to time (the “LLC Agreement”), the members of the Fund (each, a “Member” and collectively, the “Members”) have appointed Sydling to act as the Fund’s commodity pool operator and trading manager.  Sydling is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and a commodity trading advisor and is a member of the National Futures Association (“NFA”) effective August 10, 2011.  Sydling, a wholly owned subsidiary of UBS Alternatives LLC, was formed on August 4, 2011.  UBS Alternatives LLC is a wholly owned subsidiary of UBS Americas Inc. which ultimately is a wholly owned subsidiary of UBS AG.

 

BNY Mellon Investment Servicing (US) Inc. serves as administrator of the Fund.

 

Winton Capital Management Limited (the “Advisor”) serves as the trading advisor to the Fund and the Master Fund.

 

Sydling and each Member share in the profits and losses of the Fund in proportion to the amount of limited liability company interest owned by each except that no Member shall be liable for obligations of the Fund in excess of such member’s capital contribution and profits, if any, net of distributions and losses, if any.

 

The accompanying financial statements and notes are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read in conjunction with the financial statements and notes included in the Fund’s Form 10 filed with the Securities and Exchange Commission (the “SEC”).

 

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in financial statements and accompanying notes. As a result, actual results could differ from these estimates.

 

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

 

The Master Fund’s Statement of Financial Condition and Condensed Schedules of Investments as of June 30, 2015 and December 31, 2014 and Statement of Operations and Changes in Members’ Capital for the three and six months ended June 30, 2015 and 2014 are presented below:

 

5



Table of Contents

 

Sydling WNT Master Fund LLC

Statements of Financial Condition

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash (including restricted cash of $15,377,794 and $10,545,800, respectively)

 

$

153,623,209

 

$

104,413,436

 

Net unrealized appreciation on open futures contracts

 

 

4,991,562

 

Interest receivable

 

866

 

3,879

 

Total Assets

 

$

153,624,075

 

$

109,408,877

 

 

 

 

 

 

 

LIABILITIES AND MEMBER’S CAPITAL

 

 

 

 

 

 

 

 

 

 

 

Net unrealized depreciation on open futures contracts

 

$

1,024,258

 

$

 

Redemptions payable

 

440,860

 

3,381,488

 

Accrued expenses:

 

 

 

 

 

Brokerage fees

 

444,903

 

318,818

 

Professional fees and other expenses

 

61,629

 

99,847

 

Total Liabilities

 

1,971,650

 

3,800,153

 

 

 

 

 

 

 

MEMBER’S CAPITAL

 

 

 

 

 

 

 

 

 

 

 

Non-Managing Members

 

151,652,425

 

105,608,724

 

Total Member’s Capital

 

151,652,425

 

105,608,724

 

Total Liabilities and Member’s Capital

 

$

153,624,075

 

$

109,408,877

 

 

6



Table of Contents

 

Sydling WNT Master Fund LLC

Condensed Schedule of Investments

June 30, 2015

(Unaudited)

 

 

 

 

 

 

 

Percent of

 

Number of

 

 

 

 

 

Member’s

 

Contracts

 

 

 

Fair Value

 

Capital

 

 

 

FUTURES CONTRACTS OWNED

 

 

 

 

 

295

 

CURRENCIES

 

$

317,640

 

0.21

%

129

 

ENERGY

 

(53,768

)

(0.04

)%

5,285

 

FINANCIALS

 

404,206

 

0.27

%

250

 

GRAINS

 

443,057

 

0.29

%

997

 

INDEX

 

(1,464,462

)

(0.97

)%

15

 

MATERIALS

 

19,855

 

0.01

%

32

 

METALS

 

(229,267

)

(0.15

)%

 

 

TOTAL FUTURES CONTRACTS OWNED

 

(562,739

)

(0.38

)%

 

 

 

 

 

 

 

 

 

 

FUTURES CONTRACTS SOLD

 

 

 

 

 

(902)

 

CURRENCIES

 

298,545

 

0.20

%

(275)

 

ENERGY

 

105,760

 

0.07

%

(212)

 

FINANCIALS

 

(313,814

)

(0.21

)%

(623)

 

GRAINS

 

(1,296,371

)

(0.85

)%

(72)

 

INDEX

 

(13,556

)

(0.01

)%

(3)

 

INDUSTRIALS

 

2,079

 

0.00

%

(105)

 

MEATS

 

57,200

 

0.04

%

(371)

 

METALS

 

698,638

 

0.46

%

 

 

TOTAL FUTURES CONTRACTS SOLD

 

(461,519

)

(0.30

)%

 

 

TOTAL FUTURES CONTRACTS

 

(1,024,258

)

(0.68

)%

 

 

OTHER ASSETS IN EXCESS OF OTHER LIABILITIES

 

152,676,683

 

100.68

%

 

 

TOTAL MEMBER’S CAPITAL

 

$

151,652,425

 

100.00

%

 

Percentages shown represent a percentage of member’s capital as of June 30, 2015.

 

7



Table of Contents

 

Sydling WNT Master Fund LLC

Condensed Schedule of Investments

December 31, 2014

 

 

 

 

 

 

 

Percent of

 

Number of

 

 

 

 

 

Member’s

 

Contracts

 

 

 

Fair Value

 

Capital

 

 

 

FUTURES CONTRACTS OWNED

 

 

 

 

 

7

 

CURRENCIES

 

$

13,550

 

0.01

%

53

 

ENERGY

 

(485,510

)

(0.46

)%

4,186

 

FINANCIALS

 

2,088,606

 

1.98

%

210

 

GRAINS

 

(67,454

)

(0.06

)%

684

 

INDEX

 

1,106,120

 

1.05

%

23

 

MEATS

 

(63,853

)

(0.06

)%

55

 

METALS

 

(255,118

)

(0.25

)%

 

 

TOTAL FUTURES CONTRACTS OWNED

 

2,336,341

 

2.21

%

 

 

 

 

 

 

 

 

 

 

FUTURES CONTRACTS SOLD

 

 

 

 

 

(779)

 

CURRENCIES

 

1,134,845

 

1.08

%

(142)

 

ENERGY

 

1,058,034

 

1.00

%

(31)

 

FINANCIALS

 

(2,701

)

(0.00

)%

(139)

 

GRAINS

 

142,842

 

0.14

%

(48)

 

INDEX

 

(79,855

)

(0.08

)%

(1)

 

INDUSTRIALS

 

693

 

0.00

%

(17)

 

MATERIALS

 

1,055

 

0.00

%

(36)

 

MEATS

 

72,730

 

0.07

%

(135)

 

METALS

 

327,578

 

0.31

%

 

 

TOTAL FUTURES CONTRACTS SOLD

 

2,655,221

 

2.52

%

 

 

TOTAL FUTURES CONTRACTS

 

4,991,562

 

4.73

%

 

 

OTHER ASSETS IN EXCESS OF OTHER LIABILITIES

 

100,617,162

 

95.27

%

 

 

TOTAL MEMBER’S CAPITAL

 

$

105,608,724

 

100.00

%

 

Percentages shown represent a percentage of member’s capital as of December 31, 2014.

 

8



Table of Contents

 

Sydling WNT Master Fund LLC

Statements of Operations and Changes in Member’s Capital

(Unaudited)

 

 

 

Three Months Ended

 

Three Months Ended

 

Six Months Ended

 

Six Months Ended

 

 

 

June 30, 2015

 

June 30, 2014

 

June 30, 2015

 

June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

3,751

 

$

5,704

 

$

8,620

 

$

11,058

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokerage, clearing and transaction fees

 

1,325,385

 

649,600

 

2,490,387

 

1,142,310

 

Professional fees

 

25,125

 

20,250

 

50,250

 

40,500

 

Total Expenses

 

1,350,510

 

669,850

 

2,540,637

 

1,182,810

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT (LOSS)

 

(1,346,759

)

(664,146

)

(2,532,017

)

(1,171,752

)

 

 

 

 

 

 

 

 

 

 

NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM DERIVATIVE INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain/(loss) from futures

 

(8,540,442

)

3,809,836

 

3,864,539

 

4,957,233

 

Net change in unrealized appreciation/(depreciation) on futures

 

(5,153,667

)

715,198

 

(6,015,820

)

(306,026

)

Net Realized and Unrealized Gain/(Loss) from Derivative Instruments

 

(13,694,109

)

4,525,034

 

(2,151,281

)

4,651,207

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

(15,040,868

)

3,860,888

 

(4,683,298

)

3,479,455

 

 

 

 

 

 

 

 

 

 

 

INCREASE/(DECREASE) IN MEMBER’S CAPITAL FROM CAPITAL TRANSACTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriptions

 

29,784,994

 

8,896,270

 

54,911,084

 

25,777,250

 

Redemptions

 

(1,130,515

)

(2,406,817

)

(4,184,085

)

(3,209,185

)

 

 

 

 

 

 

 

 

 

 

Net Increase in Member’s Capital Derived from Capital Transactions

 

28,654,479

 

6,489,453

 

50,726,999

 

22,568,065

 

Net Increase in Member’s Capital

 

13,613,611

 

10,350,341

 

46,043,701

 

26,047,520

 

Member’s Capital, Beginning of Period

 

138,038,814

 

62,730,956

 

105,608,724

 

47,033,777

 

Member’s Capital, End of Period

 

$

151,652,425

 

$

73,081,297

 

$

151,652,425

 

$

73,081,297

 

 

9



Table of Contents

 

2.              Financial Highlights

 

Changes in the net asset value per Redeemable Unit for the three and six months ended June 30, 2015 and 2014 are as follows:

 

 

 

Three
Months Ended
June 30, 2015

 

Three
Months Ended
June 30, 2014

 

Six
Months Ended
June 30, 2015

 

Six
Months Ended
June 30, 2014

 

Per share operating performance: (a)

 

 

 

 

 

 

 

 

 

Members’ capital per Redeemable Unit, beginning of period

 

$

1,280.81

 

$

1,017.76

 

$

1,206.36

 

$

1,028.57

 

Income/(loss) from investment operations:

 

 

 

 

 

 

 

 

 

Net investment (loss) including incentive fee

 

(17.86

)

(26.79

)

(58.00

)

(42.83

)

Net realized and unrealized gain/(loss) from investment activities (b)

 

(111.63

)

67.35

 

2.96

 

72.58

 

Total from investment operations

 

(129.49

)

40.56

 

(55.04

)

29.75

 

Members’ capital per Redeemable Unit, end of period

 

$

1,151.32

 

$

1,058.32

 

$

1,151.32

 

$

1,058.32

 

 

 

 

 

 

 

 

 

 

 

Ratio/Supplemental Data: (c)

 

 

 

 

 

 

 

 

 

Ratio of net investment loss to average Members’ capital

 

(6.09

)%

(10.53

)%

(9.44

)%

(8.79

)%

Ratio of total expenses to average Members’ capital

 

6.10

%

6.36

%

6.26

%

6.43

%

Ratio of incentive fee to average Members’ capital

 

%

4.21

%

3.19

%

2.40

%

Ratio of total expenses and incentive fee to average Members’ capital

 

6.10

%

10.57

%

9.45

%

8.83

%

 

 

 

 

 

 

 

 

 

 

Total return before incentive fee

 

(10.11

)%

5.04

%

(2.96

)%

4.09

%

Incentive fee

 

 

(1.05

)

(1.60

)

(1.20

)%

Total return after incentive fee

 

(10.11

)%

3.99

%

(4.56

)%

2.89

%

 

 

 

 

 

 

 

 

 

 

Members’ capital at end of period

 

$

151,652,425

 

$

73,028,340

 

$

151,652,425

 

$

73,028,340

 

 

The computation of ratios to average Members’ capital and total return based on the amount of expenses and incentive fee assessed to an individual Member’s capital may vary from these ratios and total return based on the timing of capital transactions.

 


(a)         Per share operating performance is calculated on a monthly basis by dividing each line item by the outstanding units at month-end prior to the reduction of redeemed units.

(b)         Net realized and unrealized gain/(loss) from investment activities has been adjusted to reflect organization costs amortized over 24 months for the purpose of subscriptions and redemptions.

(c)          The ratios to average Members’ capital are annualized.  The average Members’ capital used in the above ratios is an average of each month-end Members’ capital during the period.

 

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Table of Contents

 

Financial Highlights of the Master Fund:

 

 

 

Three
Months Ended
June 30, 2015

 

Three
Months Ended
June 30, 2014

 

Six
Months Ended
June 30, 2015

 

Six
Months Ended
June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

Ratio/Supplemental Data: (a)

 

 

 

 

 

 

 

 

 

Ratio of net investment loss to average member’s capital

 

(3.74

)%

(3.84

)%

(3.82

)%

(3.87

)%

Ratio of total expenses to average member’s capital

 

3.75

%

3.87

%

3.83

%

3.91

%

Total return

 

(9.59

)%

5.64

%

(1.86

)%

5.15

%

Member’s capital at end of period

 

$

151,652,425

 

$

73,081,297

 

$

151,652,425

 

$

73,081,297

 

 

Total return and the ratios to average Member’s capital are calculated for investor’s capital taken as a whole.  An individual investor’s capital may vary from these ratios and total return based on the timing of capital transactions.

 


(a)                                 The ratios to average Member’s capital are annualized.  The average Member’s capital used in the above ratios is an average of each month-end member’s capital during the period.

 

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Table of Contents

 

3.              Trading Activities

 

The Fund was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments.   The Fund invests substantially all of its assets through a “master/feeder” structure. The Fund’s pro rata share of the results of the Master Fund’s trading activities is shown in the Fund’s Statements of Operations and Changes in Members’ Capital.

 

The Customer Agreement between the Master Fund and UBS Securities LLC (“UBS Securities”), the Master Fund’s commodity broker, gives the Master Fund the legal right to net unrealized gains and losses on open futures contracts.  Futures contracts are executed on exchanges and are typically liquidated by entering into offsetting contracts.  The Master Fund nets, for financial reporting purposes, the unrealized gains and losses on open futures contracts on the Master Fund’s Statements of Financial Condition.

 

All of the commodity interests owned by the Master Fund are held for trading purposes.  The average number of futures contracts traded for the three months ended June 30, 2015 and 2014, based on a monthly calculation, was 6,278 and 2,115, respectively.  The average number of futures contracts traded for the six months ended June 30, 2015 and 2014, based on a monthly calculation, was 5,200 and 2,175, respectively.

 

The following tables indicate the gross fair values of derivative instruments of futures contracts as separate assets and liabilities as of June 30, 2015 and December 31, 2014.

 

 

 

June 30, 2015

 

December 31, 2014

 

ASSETS

 

 

 

 

 

Futures Contracts

 

 

 

 

 

Currencies

 

$

954,254

 

$

1,153,935

 

Energy

 

116,942

 

1,058,034

 

Financials

 

713,949

 

2,418,331

 

Grains

 

493,230

 

191,418

 

Index

 

10,986

 

1,337,472

 

Industrials

 

2,079

 

693

 

Materials

 

19,855

 

1,385

 

Meats

 

67,500

 

72,730

 

Metals

 

840,728

 

329,744

 

Total unrealized appreciation on open futures contracts

 

$

3,219,523

 

$

6,563,742

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Futures Contracts

 

 

 

 

 

Currencies

 

$

(338,069

)

$

(5,540

)

Energy

 

(64,950

)

(485,510

)

Financials

 

(623,557

)

(332,427

)

Grains

 

(1,346,543

)

(116,030

)

Index

 

(1,489,005

)

(311,207

)

Materials

 

 

(330

)

Meats

 

(10,300

)

(63,853

)

Metals

 

(371,357

)

(257,283

)

Total unrealized (depreciation) on open futures contracts

 

$

(4,243,781

)

$

(1,572,180

)

 

 

 

 

 

 

Net unrealized appreciation/(depreciation) on open futures contracts *

 

$

(1,024,258

)

$

4,991,562

 

 


* These amounts are presented as “Net unrealized appreciation/(depreciation) on open futures contracts” on the Master Fund’s Statements of Financial Condition.

 

12



Table of Contents

 

The following table indicates the trading gains and losses, by market sector, on derivative instruments for the three and six months ended June 30, 2015 and 2014.

 

 

 

Three months ended
June 30, 2015

 

Three months ended
June 30, 2014

 

Six months ended
June 30, 2015

 

Six months ended
June 30, 2014

 

Sector

 

Gain/(loss) from
trading

 

Gain/(loss) from
trading

 

Gain/(loss) from
trading

 

Gain/(loss) from
trading

 

 

 

 

 

 

 

 

 

 

 

Currencies

 

$

(3,092,715

)

$

(58,822

)

$

624,428

 

$

46,986

 

Energy

 

(2,722,325

)

62,453

 

(2,462,422

)

62,180

 

Financials

 

(4,543,342

)

3,923,471

 

(71,578

)

4,749,287

 

Grains

 

(939,653

)

(1,031,948

)

(561,908

)

(1,056,030

)

Index

 

(2,492,953

)

2,013,658

 

1,176,234

 

1,357,870

 

Industrials

 

(1,826

)

(1,188

)

5,555

 

(2,629

)

Materials

 

(22,450

)

(107,915

)

(80,380

)

(69,310

)

Meats

 

(1,333

)

288,691

 

111,833

 

650,541

 

Metals

 

122,488

 

(563,366

)

(893,043

)

(1,087,688

)

 

 

$

(13,694,109

)**

$

4,525,034

**

$

(2,151,281

)**

$

4,651,207

**

 


** These amounts are presented as “Net Realized and Unrealized Gain/(Loss) from Derivative Instruments” on the Master Fund’s Statements of Operations and Changes in Members’ Capital.

 

The volume of activity of futures that are presented in the Master Fund’s Condensed Schedule of Investments is consistent with the average monthly activity during the periods ended June 30, 2015 and 2014.

 

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Table of Contents

 

4.              Fair Value Measurements

 

Fund Fair Value Measurements.  The Fund values its investments at fair value, in accordance with U.S. GAAP, which is 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. The Master Fund uses the trade date to record purchases and sales of futures contracts.

 

Various inputs are used in determining the fair value of the Fund’s investments which are summarized in the three broad levels listed below.

 

Level 1 — quoted prices (unadjusted) in active markets for identical securities

 

Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.)

 

Level 3 — significant unobservable inputs (including Sydling’s own assumptions and indicative non-binding broker quotes)

 

Fair value measurement disclosure for each class of assets and liabilities requires greater disaggregation than the Fund’s line items in its Statements of Financial Condition.  The Fund determines the appropriate classes for those disclosures on the basis of the nature and risks of the assets and liabilities and their classification in the fair value hierarchy (i.e., Level 1, Level 2, and Level 3).

 

The Fund values investments in the Master Fund, where there are no other rights or obligations inherent within the ownership interest held by the Fund, based on the end of the day net asset value of the Master Fund (Level 2).  The value of the Fund’s investment in the Master Fund reflects its proportional interest in the Master Fund.  As of and for the periods ended June 30, 2015 and December 31, 2014, the Fund did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets (Level 1) or priced at fair value using unobservable inputs through the application of Sydling’s assumptions and internal valuation pricing models (Level 3).

 

The Fund recognizes transfers into and out of the levels indicated above at the end of the reporting period.  During the periods ended June 30, 2015 and December 31, 2014, there were no transfers amongst Levels 1, 2 and 3 of the valuation hierarchy.

 

Master Fund Fair Value Measurements.  For assets and liabilities measured at fair value on a recurring basis during the period, the Master Fund provides quantitative disclosures about the fair value measurements separately for each class of assets and liabilities, as well as a reconciliation of beginning and ending balances of Level 3 assets and liabilities broken down by class.

 

The Master Fund considers prices for exchange-traded commodity futures and option contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1).  As of and for the periods ended June 30, 2015 and December 31, 2014, the Master Fund did not hold any derivative instruments for which market quotations were not readily available and which were priced by broker-dealers who derive fair values for these assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of Sydling’s assumptions and internal valuation pricing models (Level 3).  The gross presentation of the fair value of the Master Fund’s derivatives by instrument type is shown in Note 3, “Trading Activities.”

 

The Master Fund recognizes transfers into and out of the levels indicated above at the end of the reporting period.  During the periods ended June 30, 2015 and December 31, 2014, there were no transfers amongst Levels 1, 2 and 3 of the valuation hierarchy.

 

14



Table of Contents

 

The following is a summary of the Master Fund’s investments at fair value.  The inputs or methodology used for valuing derivative instruments are not necessarily an indication of the risk associated with investing in those derivative instruments.

 

ASSET TABLE (Unaudited)

 

Description

 

Total Fair Value at
June 30, 2015

 

Level 1

 

Level 2

 

Level 3

 

Future Contracts

 

$

 

$

 

$

 

$

 

Total Assets

 

$

 

$

 

$

 

$

 

 

LIABILITIES TABLE (Unaudited)

 

Description

 

Total Fair Value at
June 30, 2015

 

Level 1

 

Level 2

 

Level 3

 

Future Contracts

 

$

1,024,258

 

$

1,024,258

 

$

 

$

 

Total Liabilities

 

$

1,024,258

 

$

1,024,258

 

$

 

$

 

 

ASSET TABLE

 

Description

 

Total Fair Value at
December 31, 2014

 

Level 1

 

Level 2

 

Level 3

 

Futures Contracts

 

$

4,991,562

 

$

4,991,562

 

$

 

$

 

Total Assets

 

$

4,991,562

 

$

4,991,562

 

$

 

$

 

 

5.              Financial Instrument Risks

 

In the normal course of business, the Master Fund, is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments.  These financial instruments may include futures, forwards and options on futures whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument.  These instruments may be traded on an exchange, a swap execution facility (“SEF”), or over-the-counter (“OTC”).  Exchange-traded instruments are standardized and include futures and certain forward and options contracts.  OTC contracts are negotiated between contracting parties and include certain forward, option and swap contracts.  Certain swap contracts may also be traded on a SEF. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted.  The purchaser of an option may lose the entire premium paid for the option.  The writer, or seller, of an option has unlimited risk.  Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk.  In general, the risks associated with OTC contracts are greater than those associated with exchange-traded or SEF traded instruments because of the greater risk of default by the counterparty to an OTC contract.  For the six months ended June 30, 2015 and 2014 the Master Fund traded futures contracts only.

 

The risk to the members that have purchased interests in the Master Fund is limited to the amount of their capital contributions to the Master Fund and their share of the Master Fund’s assets and undistributed profits.  This limited liability is a consequence of the organization of the Master Fund as a limited liability company under applicable law.

 

Market risk is the potential for changes in the value of the financial instruments traded by the Master Fund due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices.  Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded.  The Master Fund is exposed to a market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short.

 

15



Table of Contents

 

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract.  The Master Fund’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statement of Financial Condition and not represented by the contract or notional amounts of the instruments.  The Master Fund has credit risk and concentration risk because the sole counterparty or broker with respect to the Master Fund’s assets is UBS or a UBS affiliate.  Credit risk with respect to exchange-traded instruments is reduced to the extent that through UBS, the Master Fund’s counterparty is an exchange or clearing organization.  Futures contracts are conducted through regulated exchanges which have margin requirements, and are settled in cash on a daily basis, thereby minimizing credit risk.

 

6.              Significant Accounting Policies

 

The Fund’s and the Master Fund’s accounting policies are the same and are consistent with the accounting policies in the Fund’s financial statements on Form 10-K for the year ended December 31, 2014.

 

The Master Fund is an investment company and applies specialized accounting and reporting guidance as outlined in Financial Standard Accounting Board Update 2013-08, Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”).

 

Statement of Cash Flows. The Fund is not required to provide a Statement of Cash Flows in accordance with Accounting Standards Codification (“ASC”) 230.

 

Investment in Master Fund. The Fund records its investment in the Master Fund at fair value and is represented by the Fund’s proportionate interest in the capital of the Master Fund at June 30, 2015 and December 31, 2014.  Valuation of securities held by the Master Fund is discussed in the Notes to the Master Fund’s financial statements.  The Fund records its pro rata share of the Master Fund’s income, expenses and realized and unrealized gains and losses.  The performance of the Fund is directly attributable to the performance of the Master Fund.  The Fund records its subscription and withdrawal of the capital account related to its investment in the Master Fund on the transaction date.   The Master Fund will adjust the capital account of the Fund.  Brokerage, clearing and transaction fees are incurred by the Master Fund and are reflected in the pro rata allocation received by the Fund from the Master Fund.

 

Subscriptions Received in Advance. Subscriptions received in advance represent amounts paid by the non-managing Members for a percentage ownership into the Fund which have not yet been added as Members’ capital as of June 30, 2015 and December 31, 2014. The amount paid is held as cash in the Fund’s escrow account and represents the cash on the Fund’s Statements of Financial Condition.

 

Redemptions Payable.  Pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, capital withdrawals effective June 30, 2015 and December 31, 2014 have been reflected as redemptions payable in the Statements of Financial Condition.

 

Income Taxes. The Fund is classified as a partnership for U.S. federal income tax purposes, and the Fund will not pay U.S. federal income tax.  As a result, no income tax liability or expense has been recorded in the financial statements.

 

Sydling has analyzed the Master Fund’s tax positions for the open tax period and has concluded that no provision is required in the Master Fund’s financial statements.  The Master Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in its Statements of Income.  For the periods ended June 30, 2015 and December 31, 2014, the Master Fund did not incur any interest or penalties.

 

7.              Organization Costs

 

In 2013, organization costs of $181,566 relating to the issuance and marketing of the Fund’s units offered were initially paid by UBS Financial Services Inc. (“UBSFSI”).  These costs have been recorded as organization costs in the Statement of Financial Condition and represent the amount due to UBSFSI.  These costs are being reimbursed to UBSFSI by the Fund in 24 monthly installments.  The monthly installments reduced the members’ capital for the purpose of calculating administrative and advisory fees and the incentive fee.

 

All of these costs have been reimbursed to UBSFSI by the Fund.

 

8.              Subsequent Events

 

Sydling has evaluated the impact of all subsequent events on the Fund through the date of the filing.  Subsequent to June 30, 2015, additional subscriptions were received from the non-managing Members totaling $1,598,000.  Subsequent to June 30, 2015, redemptions

 

16



Table of Contents

 

of $390,407 will be paid to the non-managing Members.  Sydling has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements.

 

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

 

Liquidity and Capital Resources

 

The Fund does not engage in sales of goods or services. Its only assets are its investment in the Master Fund, cash and receivables from the Master Fund. The Master Fund does not engage in the sale of goods or services. The Master Fund’s only assets are its equity in its trading accounts, consisting of cash, net unrealized appreciation on open futures contracts and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Fund, through its investment in the Master Fund. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the second quarter of 2015.

 

For the six months ended June 30, 2015 and 2014, the Master Fund’s average margin to equity ratio was 11.42% and 12.41%, respectively.

 

The Fund’s capital consists of the capital contributions of the Members as increased or decreased by income/(loss) from its investment in the Master Fund and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the six months ended June 30, 2015, the Fund’s capital increased 43.6% from $105,601,159 to $151,652,425. This increase was attributable to subscriptions for Redeemable Units totaling $54,911,084, which was partially offset by a net loss from operations of $8,398,539 and redemptions of Redeemable Units resulting in an outflow of $461,279. Future redemptions from the Fund could impact the amount of funds available for investment in the Master Fund in subsequent periods.

 

The Master Fund’s capital consists of the capital contributions of the investors of the Master Fund as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, withdrawals of interest from the Master Fund and distributions of profits, if any.

 

For the six months ended June 30, 2015, the Master Fund’s capital increased 43.6% from $105,608,724 to $151,652,425. This increase was attributable to subscriptions for interest in the Master Fund totaling $54,911,084, which was partially offset by a net loss from operations of $4,683,298 and the withdrawal of interest in the Master Fund resulting in an outflow of $4,184,085. Future withdrawals from the Master Fund can impact the amount of funds available for investments in commodity contract positions in subsequent periods.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Sydling believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Fund’s significant accounting policies are described in detail in Note 6. “Significant Accounting Polices.”

 

The Fund records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains/(losses) and change in net unrealized gains/(losses) in the Statements of Operations and Changes in Members’ Capital.

 

Results of Operations

 

During the Fund’s second quarter of 2015, the net asset value per Redeemable Unit decreased -10.1% from $1,280.81 to $1,151.32. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading loss before brokerage fees and related fees in the second quarter of 2015 of $13,694,109. Losses were primarily attributable to the Master Fund’s trading of commodity futures in currencies, U.S. and non-U.S. interest rates, energy, indices, grains and industrials and were partially offset by gains in metals.

 

Second quarter of 2015 was unprofitable for the Fund due to market reversals in April and June. Among the trading strategies, carry based strategies were notable detractors while trend following also contributed to some losses. Most losses came from fixed income, foreign exchange and stock indices sectors. The Fund had small gains from markets, such as gold, which were not large enough to offset losses elsewhere.

 

17



Table of Contents

 

In the last few trading sessions of April, there were strong market moves against the Fund’s positions due to a decent selloff in stocks, bonds and the Dollar, along with a rally in crude oil. Weaker economic data saw sentiment around the US economy drop, while the statement from the Federal Reserve’s April meeting did not give any real clues as to when rates might rise. In Europe, Euro Bund yields went up dramatically from 7 basis points as of April 20th to 76 basis points by the end of June.

 

Fixed income positions did suffer in June, particularly short term interest rates, though small gains were made in long term US bond contracts. Heavy rains in the US Midwest hampered crop prospects, providing discomfort to the Fund’s short grain positions. Profits from short positions in gold and energy markets provided some relief towards the end of June.

 

By the end of the quarter, most of the risk in the Fund was in currencies, equity indices, and short term interest rates sectors. Risk allocation to long term bonds came down dramatically, while risk allocation to energy sector came down marginally compared to the previous quarter end. Among notable market positions, by the end of the second quarter, the Fund had short Euro, long British Pound and short Japanese Yen exposure vs the US Dollar. Among other notable positions, the Fund had short corn, long S&P 500, long Euribor, short gold and short sugar positions.

 

During the Fund’s second quarter of 2014, the net asset value per Redeemable Unit increased 3.99% from $1,017.76 to $1,058.32. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading gain before brokerage fees and related fees in the second quarter of 2014 of $4,525,034. Gains were primarily attributable to the Master Fund’s trading of commodity futures in non-U.S. interest rates, livestock and indices and were partially offset by losses in grains, metals, energy, softs and U.S. interest rates.

 

The Cavendish Fund delivered strong returns as most global equity markets made new highs and bond spreads grinded tighter. Janet Yellen, Chair of the US Federal Reserve Board, continued to maintain a willingness toward accommodative policy as the US Federal Reserve are now expecting the US economy to expand at a slower rate than previously anticipated. The European Central Bank opened the door to potential large-scale asset purchases in an effort to battle below target inflation. Additionally, Mario Draghi, President of the European Central Bank, cut all key interest rates including the bold move of negative deposit rates. Significant long exposure to European and US equity markets contributed to the gains as a number of US equity indices printed record highs. Long fixed income positions profited where the German Bunds provided significant contribution. Continued momentum for sterling which reached its highest exchange value against the dollar for over five years also helped the Fund’s long S&P, bund and pound positions.

 

Regional instability contributed to rising precious metal values and subsequent losses for the Fund’s short positions in this sector while conflicts threatening refinery output supported oil prices and benefited a long crude position. Grain markets retreated as recent trends reversed by the middle of the quarter. Improving weather conditions in the US and Russia led to double digit declines in the price of wheat and corn, which adversely affected the Fund’s performance. Towards quarter end, corn prices continued their recent fall with high inventory levels and anticipation of record harvest being confirmed in the US.

 

Commodity futures markets are highly volatile. Broad and rapid price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility for profit or loss. The profitability of the Fund (and the Master Fund) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends.  Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Fund (and the Master Fund) expects to increase capital through operations.

 

Brokerage fees are calculated as a percentage of the Fund’s capital account balance at the Master Fund as of the end of each month and are affected by trading performance and redemptions.  Brokerage, clearing and transaction fees of the Master Fund for the three months ended June 30, 2015 and 2014 were $1,325,385 and $649,600, respectively.  Brokerage, clearing and transaction fees of the Master Fund for the six months ended June 30, 2015 and 2014 were $2,490,387 and $1,142,310, respectively. The increase in brokerage, clearing and transaction fees for the three and six months ended June 30, 2015 is due to higher average net assets as compared to the corresponding periods in 2014.

 

Advisory fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

 

Advisory fees of the Fund for the three months ended June 30, 2015 and 2014 were $548,211 and $270,264, respectively.  The calculation of advisory fees for the three months ended June 30, 2015 and 2014 was based on a monthly average net asset value of $146,189,662 and $72,070,388, respectively.  The increase in advisory fees for the three months ended June 30, 2015 as compared to the corresponding period in 2014 is due to an increase in the average net assets.

 

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Table of Contents

 

Advisory fees of the Fund for the six months ended June 30, 2015 and 2014 were $1,033,878 and $474,685, respectively.  The calculation of advisory fees for the six months ended June 30, 2015 and 2014 was based on a monthly average net asset value of $137,850,464 and $63,291,371, respectively.  The increase in advisory fees for the six months ended June 30, 2015 as compared to the corresponding period in 2014 is due to an increase in the average net assets.

 

Administrative fees are paid to Sydling for administering the business and affairs of the Fund.  These fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

 

Administrative fees of the Fund for the three months ended June 30, 2015 and 2014 were $182,737 and $90,088, respectively.  The calculation of administrative fees for the three months ended June 30, 2015 and 2014 was based on a monthly average net asset value of $146,189,662 and $72,070,388, respectively.  The increase in administrative fees for the three months ended June 30, 2015 as compared to the corresponding period in 2014 is due to an increase in the average net assets.

 

Administrative fees of the Fund for the six months ended June 30, 2015 and 2014 were $344,626 and $158,228, respectively.  The calculation of administrative fees for the six months ended June 30, 2015 and 2014 was based on a monthly average net asset value of $137,850,464 and $63,291,371, respectively.  The increase in administrative fees for the six months ended June 30, 2015 as compared to the corresponding period in 2014 is due to an increase in the average net assets.

 

Incentive fees to the Advisor are based on the new trading profits generated by the Advisor, paid at the end of each quarter, as defined in the Trading Advisory Agreement between the Fund, Sydling and the Advisor. Incentive fees of $2,112,137 and $724,094 were earned for the six months ended June 30, 2015 and 2014, respectively.

 

In allocating substantially all of the assets of the Fund to the Master Fund, Sydling considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. Sydling may modify or terminate the allocation of assets to the Advisor at any time.

 

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Table of Contents

 

Item 3.                     Quantitative and Qualitative Disclosures about Market Risk

 

All of the Fund’s assets are subject to the risk of trading loss through its investment in the Master Fund.

 

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

 

The risk to the Members that have purchased Redeemable Units is limited to the amount of their capital contributions to the Fund and their share of Fund assets and undistributed profits.  This limited liability is a consequence of the organization of the Fund as a limited liability company under Delaware law.

 

Market movements result in frequent changes in the fair value of the Master Fund’s open positions and, consequently, in its earnings and cash balances. The Master Fund’s and 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 Master Fund’s open contracts and the liquidity of the markets in which the Master Fund trades.

 

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

 

“Value at Risk” is a measure of the maximum amount which the Master Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master Fund’s speculative trading and the recurrence in the markets traded by the Master 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 Master 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 inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Master Fund’s losses in any market sector will be limited to Value at Risk or by the Master Fund’s attempts to manage its market risk.

 

Exchange maintenance margin requirements have been used by the Master Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

 

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master Fund’s open positions by market category as of June 30, 2015 and December 31, 2014, and the highest, lowest and average value during the three months ended June 30, 2015 and the twelve months ended December 31, 2014. All open position trading risk exposures of the Master Fund have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Fund’s Annual Report on Form 10-K.

 

As of June 30, 2015, the Master Fund’s total capitalization was $151,652,425 and the Fund owned 100% of the Master Fund. The Fund invests substantially all of its assets in the Master Fund. The Master Fund’s Value at Risk as of June 30, 2015 was as follows:

 

 

 

 

 

 

 

Three Months ended June 30, 2015 (unaudited)

 

Market Sector

 

Value
at Risk

 

% of Total
Capitalization

 

High Value
at Risk

 

Low Value
at Risk

 

Average Value
at Risk*

 

Currencies

 

$

1,956,464

 

1.29

%

$

1,981,377

 

$

853,041

 

$

1,510,564

 

Energy

 

645,351

 

0.43

 

849,931

 

468,444

 

608,970

 

Grains

 

837,604

 

0.55

 

989,962

 

336,437

 

670,554

 

Index

 

3,146,531

 

2.07

 

4,178,890

 

2,960,210

 

3,703,447

 

Interest Rate Non-U.S.

 

2,179,490

 

1.44

 

5,019,800

 

1,345,612

 

3,696,941

 

Interest Rate U.S.

 

5,237,112

 

3.45

 

7,137,134

 

5,078,786

 

6,425,797

 

Livestock

 

171,843

 

0.11

 

188,307

 

131,022

 

156,239

 

Lumber

 

4,910

 

**

4,980

 

3,190

 

3,551

 

Metals

 

659,549

 

0.43

 

756,019

 

439,136

 

585,576

 

Softs

 

538,874

 

0.36

 

561,707

 

405,967

 

465,235

 

Total

 

$

15,377,728

 

10.13

%

 

 

 

 

 

 

 


*Average daily Value at Risk.

** Due to rounding

 

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Table of Contents

 

As of December 31, 2014, the Master Fund’s total capitalization was $105,608,724 and the Fund owned 100% of the Master Fund. The Fund invests substantially all of its assets in the Master Fund. The Master Fund’s Value at Risk as of December 31, 2014 was as follows:

 

December 31, 2014

(Unaudited)

 

Market Sector

 

Value
at Risk

 

% of Total
Capitalization

 

High Value
at Risk

 

Low Value
at Risk

 

Average Value
at Risk*

 

Currencies

 

$

1,458,554

 

1.38

%

$

1,665,541

 

$

861,809

 

$

1,285,835

 

Energy

 

 

353,802

 

0.34

 

 

528,352

 

 

104,006

 

 

281,776

 

Grains

 

 

384,627

 

0.36

 

 

708,335

 

 

259,298

 

 

434,700

 

Index

 

 

1,695,276

 

1.61

 

 

2,679,134

 

 

869,800

 

 

1,706,797

 

Interest Rate Non-U.S.

 

 

2,581,922

 

2.44

 

 

3,180,143

 

 

1,071,640

 

 

2,332,233

 

Interest Rate U.S.

 

 

3,337,784

 

3.16

 

 

4,140,880

 

 

1,064,136

 

 

2,747,830

 

Livestock

 

 

110,448

 

0.10

 

 

138,483

 

 

29,017

 

 

101,681

 

Lumber

 

 

1,872

 

**

 

1,872

 

 

 

 

1,468

 

Metals

 

 

355,681

 

0.34

 

 

462,623

 

 

95,376

 

 

241,850

 

Softs

 

 

265,804

 

0.25

 

 

290,703

 

 

158,380

 

 

221,572

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

10,545,772

 

9.99

%

 

 

 

 

 

 

 


*Average daily Value at Risk.

** Due to rounding

 

Item 4.                     Controls and Procedures

 

The Fund’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Fund on the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Fund in the reports it files is accumulated and communicated to Sydling, including the President and Chief Financial Officer (“CFO”) of Sydling, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

 

Sydling is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Fund’s external disclosures.

 

Sydling’s President and CFO have evaluated the effectiveness of the Fund’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2015 and, based on that evaluation, Sydling’s President and CFO have concluded that, at that date, the Fund’s disclosure controls and procedures were effective.

 

The Fund’s internal control over financial reporting is a process under the supervision of Sydling’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. These controls include policies and procedures that:

 

·                                          pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Fund;

 

·                                          provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and (ii) the Fund’s receipts are handled and expenditures are made only pursuant to authorizations of Sydling; and

 

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

 

There were no changes in the Fund’s internal control over financial reporting process during the fiscal quarter ended June 30, 2015 that materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

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Table of Contents

 

PART II. OTHER INFORMATION

 

Item 1.                     Legal Proceedings

 

There are no material legal proceedings against the Fund and Sydling.

 

There are no material changes to the discussion set forth under Item 3. “Legal Proceedings” in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as updated by the Fund’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

 

Item 1A.            Risk Factors

 

There have been no material changes to the risk factors set forth under Part 1, Item 1A. “Risk Factors” in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and under Part II, Item 1A. “Risk Factors”  in the Fund’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

 

Item 2.                     Unregistered Sales of Equity Securities and Use of Proceeds

 

For the three months ended June 30, 2015, there were additional subscriptions of 24,190.162 Redeemable Units totaling $29,784,994. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act of 1933 and Section 506 of Regulation D promulgated thereunder. These Redeemable Units were purchased by accredited investors as defined in Regulation D. In determining the applicability of the exemption, Sydling relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

 

Proceeds of net offering were used for the trading of commodity interests, including futures and option contracts.

 

The following chart sets forth the purchases of Redeemable Units by the Fund.

 

Period

 

(a) Total Number
of Redeemable
Units Purchased*

 

(b) Average Price
Paid per
Redeemable
Unit**

 

(c) Total Number
of Redeemable
Units Purchased as
Part of Publicly
Announced Plans
or Programs

 

(d) Maximum
Number (or
Approximate
Dollar Value) of
Redeemable Units
that May Yet Be
Purchased Under
the Plans or
Programs

 

April 1, 2015 — April 30, 2015

 

89.427

 

$

1,210.68

 

N/A

 

N/A

 

May 1, 2015 — May 31, 2015

 

23.986

 

$

1,209.05

 

N/A

 

N/A

 

June 1, 2015 — June 30, 2015

 

130.285

 

$

1,151.32

 

N/A

 

N/A

 

Total

 

243.698

 

$

1,190.35

 

 

 

 

 

 


* Generally, Members are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to Sydling. Under certain circumstances, Sydling can compel redemption, although to date, it has not exercised this right. Purchases of Redeemable Units by the Fund reflected in the chart above were made in the ordinary course of the Fund’s business in connection with effecting redemptions for Members.

** Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day.

 

Item 3.                     Defaults Upon Senior Securities — None

 

Item 4.                     Mine Safety Disclosures — Not Applicable

 

Item 5.                     Other Information — None

 

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Table of Contents

 

Item 6.                     Exhibits

 

Exhibit 3.1

 

Certificate of Formation (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

 

(a)

Certificate of Amendment of the Certificate of Formation (filed as Exhibit 3.1(a) to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 3.2

 

Application for Authority (filed as Exhibit 3.2 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 3.3

 

LLC Agreement (filed as Exhibit 3.3 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 10.1

 

Customer Agreement between the Master Fund and UBS Securities (filed as Exhibit 10.1 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 10.2

 

Agency Agreement between the Fund and UBS Financial Services (filed as Exhibit 10.2 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 10.3

 

Trading Manager Agreement among the Fund, the Master Fund and Sydling (filed as Exhibit 10.3 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 10.4

 

Trading Advisory Agreement between the Fund and the Advisor (filed as Exhibit 10.4 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

 

(a)

Letter from Sydling extending the Trading Advisory Agreement for 2015, dated June 29, 2014 (filed as Exhibit 10.4(a) to the Form 10-Q filed on August 14, 2014 and incorporated herein by reference).

 

 

 

 

(b)

Letter from Sydling extending the Trading Advisory Agreement for 2016, dated June 26, 2015 (filed herewith).

 

 

 

Exhibit 10.5

 

Fee Arrangement Agreement among Sydling, the Master Fund and UBS Securities (filed as Exhibit 10.5 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 31.1

 

Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director filed herewith).

 

 

 

Exhibit 31.2

 

Rule 13a-14(a)/15d-14(a) Certification (Certification of CFO filed herewith).

 

 

 

Exhibit 32.1

 

Section 1350 Certification (Certification of President and Director filed herewith).

 

 

 

Exhibit 32.2

 

Section 1350 Certification (Certification of CFO filed herewith).

 

 

 

Exhibit 99.1

 

Annual Report of the Fund for the period ended December 31, 2013 (filed as Exhibit 99.1 to the general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 99.2

 

Organization Chart (filed as Exhibit 99.2 to the amended general form for registration of securities on Form 10 filed on May 29, 2014 and incorporated herein by reference).

 

 

 

Exhibit 101.INS

 

XBRL Instance Document.

 

 

 

Exhibit 101.SCH

 

XBRL Taxonomy Extension Schema Document.

 

 

 

Exhibit 101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

Exhibit 101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

Exhibit 101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

Exhibit 101.DEF

 

XBRL Taxonomy Extension Definition Document.

 

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Table of Contents

 

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.

 

CAVENDISH FUTURES FUND LLC

 

(Registrant)

 

 

 

 

 

 

 

By:

Sydling Futures Management LLC

 

 

 

 

 

 

 

By:

/s/ Jerry Pascucci

 

 

Jerry Pascucci

 

 

President and Director

 

 

 

 

Date:

August 14, 2015

 

 

24