Attached files
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EX-31.1 - EXHIBIT 31.1 - MLM INDEX FUND | ex31_1.htm |
EX-31.2 - EXHIBIT 31.2 - MLM INDEX FUND | ex31_2.htm |
EX-32.2 - EXHIBIT 32.2 - MLM INDEX FUND | ex32_2.htm |
EX-32.1 - EXHIBIT 32.1 - MLM INDEX FUND | ex32_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
x
|
Annual
report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31,
2009
|
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 0-49767
MLM
INDEX™ FUND
(Exact
name of registrant as specified in its charter)
Delaware
|
Unleveraged
Series: 22-2897229
|
Leveraged
Series: 22-3722683
|
|
Commodity
L/S Unleveraged Series 20-8806944
|
|
Commodity
L/N Unleveraged Series 27-1198002
|
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
405
South State Street
|
|
Newtown,
PA
|
18940
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (267) 759-3500
Securities
registered pursuant to Section 12 (b) of the Act:
Title
of Each Class
|
Name
of Exchange on Which Registered
|
None
|
None
|
Securities
registered pursuant to Section 12 (g) of the Act:
Business Trust Interests – Unleveraged
Series
Business Trust Interests – Leveraged
Series
Business Trust Interests – Commodity
L/S Unleveraged Series
Business Trust Interests – Commodity
L/N Unleveraged Series
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes o. No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes o. No x.
Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under
those Sections.
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of “accelerated filer”, “large 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). o Yes x No
As of
June 30, 2009 the aggregate fair value of the business trust units of the
Unleveraged Series of the registrant held by non-affiliates of the registrant
was approximately $69.3 million, the aggregate fair value of the business trust
units of the Leveraged Series of the registrant held by non-affiliates of the
registrant was approximately $43.9 million, the aggregate fair value of the
business trust units of the Commodity L/S Unleveraged Series of the registrant
held by non-affiliates of the registrant was approximately $0 million, and the
aggregate fair value of the business trust units of the Commodity L/N
Unleveraged Series of the registrant held by non-affiliates of the registrant
was approximately $0 million.
As of
February 15, 2010 there were 917,775 units outstanding.
Documents
Incorporated by Reference: Certain exhibits in Item 15 are incorporated by
reference in this Form 10-K, as specifically set forth in Item 15.
Forward
Looking Statements
This
Annual Report on Form 10-K contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995 and other
Federal Securities Laws. These forward-looking statements are based on our
present intent, beliefs and expectations as well as assumptions made by and
information currently available to us, but they are not guaranteed to occur and
they may not occur. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, such statements are subject to known
and unknown risks and uncertainties that may be beyond our control, which could
cause actual performance or results to differ materially from projected
performance or results expressed or implied by the forward-looking statements.
Additional information concerning the factors that could cause actual results to
differ materially from those in the forward-looking statements is contained in
Item 1, “Business”, and Item 1A, “Risk Factors”. You should not place undue
reliance upon forward-looking statements. Except as required by law, we
undertake no obligation to update or release any forward-looking statements as a
result of new information, future events or otherwise.
Table of Contents
Page
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Item
1.
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4
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Item
1B.
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18
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Item
2.
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18
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Item
3.
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18
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Item
4.
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18
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Item
5.
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19
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Item
6.
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22
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Item
7.
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23
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Item
7A.
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26
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Item
8.
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27
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Item
9.
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29
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Item
9A.
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29
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Item
10.
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29
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Item
11.
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31
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Item
12.
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31
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Item
13.
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32
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Item
14.
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32
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Item
15.
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F1
|
Item 1.
|
Business
|
General
and Business Segments
The MLM
Index™ Fund (the “Trust”) is a business trust organized under the laws of
Delaware. The MLM Index Fund has one reportable segment which trades futures
contracts on various futures exchanges in the U.S. and foreign
markets. The Trust engages primarily in the speculative trading of a
diversified portfolio of futures contracts using the MLM Index™ Trading Program
(the “Trading Program”). Futures contracts are standardized contracts made on or
through a commodity exchange and provide for future delivery of commodities,
precious metals, foreign currencies or financial instruments and, in the case of
certain contracts such as stock index futures contracts and Eurodollar futures
contracts, provide for cash settlement. The Trust's objective is the
appreciation of its assets through speculative trading. The Trust began trading
on January 4, 1999.
The Trust
consists of several separate series of interests (each, a “Series”), each with
its own assets and liabilities. Under the Trust Agreement, the Trust may
issue multiple Series of Interests. The Trust maintains separate and
distinct records for each Series and the assets associated with each such Series
are held and accounted for separately from the other assets of the Trust and of
any other Series thereof. The debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series are enforceable against the assets of such Series only and not against
the assets of the Trust generally or the assets of any other Series. The
schedules on pages F5-F8 are the sum of the individual schedules for each Series
and are presented for reporting purposes only. A Statement of Financial
Condition and Statement of Operations for each Series can be found on pages
F25-F27.
Mount
Lucas Management Corporation (the “Manager”), a Delaware corporation, acts as
the manager and trading advisor of the Trust. The Manager was formed in 1986 to
act as an investment manager. As of December 31, 2009, the Manager had
approximately $1.7 billion of assets under advisement. The Manager is a
registered investment adviser under the Investment Advisers Act of 1940, a
registered commodity trading advisor and commodity pool operator with the
Commodity Futures Trading Commission (the "CFTC") and a member of the National
Futures Association (the "NFA"). The Manager may from time to time operate other
investment vehicles.
The Trust
and the Manager maintain their principal business office at 405 South Street,
Newtown, PA 18940 and their telephone number is
267-759-3500.
Wilmington
Trust Company, a Delaware banking corporation, acts as trustee for the Trust.
The Trustee's office is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890. The Trustee is unaffiliated with the
Manager. The Trustees duties and liabilities are limited to its express
obligations under the Amended and Restated Declaration of Trust and Trust
Agreement, dated as of August 31, 1998, among the Trustee, the Manager and the
Interest Holders from time to time thereunder, as amended (the "Trust
Agreement").
Citigroup
Global Markets currently acts as clearing broker for the Trust. A clearing
broker accepts orders to trade futures on behalf of another party and accepts
money to support such orders. The clearing broker is a futures commission
merchant registered with the CFTC and is a member of the NFA.
Trading
Program
The Trust trades speculatively in a
wide range of futures contracts traded on U.S. and foreign exchanges using the
Trading Program, which is based upon the MLM Index™. The MLM Index™ and the
Trading Program are both proprietary products of the Manager. The Trading
Program attempts to replicate the MLM Index™, before fees and expenses.
Currently the Trust has four series of interests; the Unleveraged Series, the
Leveraged Series, the Commodity L/S Unleveraged Series and the Commodity L/N
Unleveraged Series. The Unleveraged Series attempts to replicate the MLM Index™
without any leverage, while the Leveraged Series trades the Trading Program at
three times leverage. Leverage is the ability to control large dollar amounts of
a commodity with a comparatively small amount of capital. The Leveraged Series
purchases or sells $3 fair value of contracts for every $1 invested in the
Series. The Commodity L/S Unleveraged Series and Commodity L/N Unleveraged
Series attempt to replicate the MLM Commodity Long/Short Index and MLM Commodity
Long/Neutral Index respectively, without
leverage. . The MLM Commodity Long/Short Index is a
subset of the MLM Index and contains only the commodity futures contracts of the
entire MLM Index. The MLM Commodity Long/Neutral Index contains the
same commodity futures contracts, but does not have short positions when the MLM
Index algorithm indicates a short position in a particular
contract.
In
attempting to replicate the MLM Index™, the Manager will invest in the same
markets as the MLM Index™; use the same algorithm to determine long versus short
positions; make the same allocations to each market; and generally execute
positions at almost the same time. The Manager may also use swaps in attempting
to replicate the MLM Index™. These swaps would be agreements with dealers to
provide the returns which are the same as holding a specific number of futures
contracts in a specific market, without holding the actual contracts. The
economic effect on the Trust would be substantially identical to holding futures
contracts. However, since the holder of swaps assumes additional counterparty
risk, swaps are only held infrequently. For the year ended and as of December
31, 2009, the Trust neither held nor holds any swap positions.
The
MLM Index™
In 1988,
the Manager created the MLM Index™ as a benchmark of the returns to speculation
in futures markets. Broadly speaking, the futures markets have two classes of
participants, hedgers and speculators. Hedgers are the commercial businesses
that use the futures markets to transfer unwanted or excessive price risk to
those more willing to absorb that risk. Speculators are position holders who
absorb this price risk. In essence, they provide "insurance" to the commercial
interest so that the commercial interests can focus on their basic business
while being protected from unforeseen changes in commodity prices, interest
rates or foreign exchange rates. Basic finance theory argues that the reduction
in risk experienced by the hedgers exacts a cost, or risk premium, that is
earned by those holding the risk. The intent of the MLM Index™ is to measure
this risk premium. In this general sense it is analogous to an index of stocks
that measures the premium to holding equity risk.
Price
risk in futures markets exists when markets rise and when they fall. For
example, an operator of a wheat storage facility is damaged by a fall in the
price of wheat in that the value of the inventory in their facility falls. On
the other hand, a consumer of wheat, like a baker, incurs financial risk if the
price of wheat rises, as the cost of future operations increases. In both cases,
steady prices are favorable. Thus, an index designed to capture the risk premium
earned must capture returns as markets move up and move down, yet suffer when
markets are stable. The MLM Index™ is designed to measure this effect by taking
long and short positions in the constituent markets. The existence of the long
and short positions in the construction of the MLM Index™ is a significant
innovation and important difference from other risk premium
measurements.
The MLM
Index™ currently invests in futures contracts on the following: Chicago corn,
Chicago soybeans, New York sugar, Chicago wheat, Canadian Government Bonds, Euro
Bunds, Japanese Government Bonds, Long Gilts, 10-year Treasury Notes, crude oil,
heating oil, natural gas, unleaded gasoline, live cattle, New York gold, New
York copper, Australian Dollar, British Pound, Canadian Dollar, Swiss Franc,
Japanese Yen, and Euro Currency. The selection of the markets in the MLM Index™
is made by the Manager. The selection is based on a variety of factors,
including liquidity of the underlying futures contract, the relationship with
the other markets in the MLM Index™, and the reasonableness of including the
market in the MLM Index™. The choice of markets for a calendar year is made in
the December preceding the start of the year, and, except in unusual
circumstances, markets are not normally added to or deleted from the MLM Index™
during a year. An extraordinary event that may lead to the removal of a contract
during the year might be the permanent suspension of normal trading or an abrupt
permanent change in the liquidity of the contract. For example, the Chicago
Mercantile Exchange suspended floor trading of the Deutsche Mark contract in
August of 2000, ahead of the announced schedule. If a commodity is traded on
more than one futures exchange, only the one with the largest open interest is
included in the MLM Index™. The open interest is the number of all long or short
futures contracts in one delivery month for one market that have been entered
into and not yet liquidated by an offsetting transaction or fulfilled by
delivery. For example, Chicago Board of Trade wheat has larger open interest
than Kansas City Board of Trade wheat; consequently, Chicago Board of Trade
wheat is included in the MLM Index™ but Kansas City Board of Trade wheat is
not.
In
addition to the markets in the MLM Index™, the Manager determines which delivery
months will be traded for each market in the MLM Index™. Generally, for each
market, four deliveries are chosen that are both liquid and spaced throughout
the calendar year. For example, for the Wheat market, the deliveries traded are
March, May, July and December. The choice of deliveries is set for each calendar
year, but can change due to similar extraordinary circumstances as with the
market selection.
The
calculation of the MLM Index™ is explained below.
Calculation
of the MLM Index™
1.
Determination of long or short futures position for each market.
The rate
of return of an individual market depends on whether the market position is long
or short. Since a futures contract eventually expires, the MLM Index™ is based
on the unit asset value of a market, rather than on the actual futures price.
This month's unit asset value of a futures market is determined by multiplying
last month's value by 1 plus the percentage change in this month's nearby
futures price. The market position is long during the current month if the
market's closing value on the next-to-last trading day of the prior month is
greater than or equal to the market's 252 business day moving average of closing
values; otherwise, the market position is short.
2.
Calculation of the monthly rate of return for each market.
If the
market position is long, then the market monthly rate of return equals the
percentage change in the market price during the month, i.e., the market monthly
rate of return (%) equals the closing price of the current month divided by the
closing price of the prior month, minus 1, times 100. If the market position is
short, then the market monthly rate of return (%) equals -1 (minus one) times
the percentage change in the market price during the month, i.e., the market
monthly rate of return equals the closing price of the current month divided by
the closing price of the prior month, minus 1, times -100 (minus
100).
3.
Calculation of the monthly rate of return for the MLM Index™.
The
monthly rate of return of the MLM Index™ equals the weighted average of the
individual market monthly rates of return plus the Treasury Bill rate of
return.
4.
Determination of the MLM Index™ value.
The value
of the MLM Index™ is computed by compounding the MLM Index™ monthly rates of
return. The beginning value of the MLM Index™ is defined to be 1000 in January
1961. Each month thereafter, the MLM Index™ is changed by the monthly rate of
return. That is, each month's MLM Index™ value is determined by multiplying the
prior month's value by 1 plus the current percentage monthly rate of
return.
The
annual performance of the MLM Index™ for each of the past ten years is set forth
below.
Year
|
Annual
Return
|
2000
|
16.20%
|
2001
|
3.67
|
2002
|
-1.63
|
2003
|
3.92
|
2004
|
3.52
|
2005
|
3.75
|
2006
|
0.40
|
2007
|
2.87
|
2008
|
13.60
|
2009
|
-2.71
|
The MLM
Index™ is published daily on the Bloomberg system and is available from the
Manager. Since the development of the MLM Index™, other firms have computed
similar indices, including the CMI of AssetSight Corporation and an index
computed by SAIS in Switzerland. Both indices are variations on the construction
of the MLM Index™, either in the derivation of the long and short positions or
the relative weights of the markets. In addition, there are many "commodity"
indexes, such as the GSCI from Goldman Sachs and AIG Commodity Index. These
indexes are long only, and do not include currencies or financial
instruments.
Fees
and Expenses
Set forth
below is a summary of the basic fees that the each of the Series and Classes is
subject to.
Brokerage
Fee
Each
Series of the Trust pays the Manager a brokerage fee at the annual rates set
forth below.
Classes
A and B Unleveraged Series
|
0.85%
of net asset value
|
Classes
C and D Unleveraged Series
|
0.40%
of net asset value
|
Classes
A and B Commodity L/S Unleveraged Series
|
0.85%
of net asset value
|
Classes
C and D Commodity L/S Unleveraged Series
|
0.40%
of net asset value
|
Classes
A and B Commodity L/N Unleveraged Series
|
0.85%
of net asset value
|
Classes
C and D Commodity L/N Unleveraged Series
|
0.40%
of net asset value
|
Classes
A and B Leveraged Series
|
1.75%
of net asset value
|
Classes
C and D Leveraged Series
|
0.90%
of net asset value
|
The
brokerage fee is based on net asset value as of the first day of each
month. The net asset value of the Trust equals the sum of all cash,
the fair value (or cost of liquidation) of all futures positions and the fair
value of all other assets of the Trust, less all liabilities of the Trust
(including accrued liabilities), in each case determined per Series by the
Manager in accordance with U.S. generally accepted accounting principles. For
purposes of determining the brokerage fee, there is no reduction
for:
|
(1)
|
the
accrued brokerage or management
fees,
|
|
(2)
|
any
allocation or reallocation of assets effective as of the day the brokerage
fee is being calculated, or
|
|
(3)
|
any
distributions or redemptions as of the day the brokerage fee is being
calculated.
|
No
assurance can be given that the brokerage fee will be competitive with the
charges of other brokerage firms.
The
Manager is responsible for paying all of the Trust's costs of executing and
clearing futures trades, including floor brokerage expenses and give-up charges,
as well as the NFA, exchange and clearing fees incurred in connection with the
Trust's futures trading activities. The Manager may also pay from the brokerage
fees, custody fees or amounts necessary for certain administrative and marketing
assistance provided by broker/dealers who are also authorized selling agents.
NFA fees equal $0.04 per round-turn trade of a futures contract.
Management
Fee
Each
Series is divided into Class A Interests, Class B Interests, Class C Interests
and Class D interests. Class A and C Interests are generally sold through
registered broker-dealers and Class B and D Interests are generally offered
through fee-only advisors. The Trust pays the Manager a monthly management fee
at the annual rates set forth below.
Unleveraged
Series, Commodity L/S Unleveraged Series and Commodity L/N Unleveraged
Series
Class
A
|
1.50%
of net asset value
|
Class
B
|
0.50%
of net asset value
|
Class
C
|
1.00%
of net asset value
|
Class
D
|
0.50%
of net asset value
|
Leveraged
Series
|
|
Class
A
|
2.80%
of net asset value
|
Class
B
|
1.30%
of net asset value
|
Class
C
|
2.05%
of net asset value
|
Class
D
|
1.30%
of net asset value
|
The
management fee is determined and paid as of the first day of each calendar
month. For purposes of determining the management fee, there is no reduction
for:
|
(1)
|
accrued
management fees,
|
|
(2)
|
any
allocation or reallocation of assets effective as of the day the
management fee is being calculated,
or
|
|
(3)
|
any
distributions or redemptions as of the day the management fee is being
calculated.
|
The
Manager pays from the management fee an annual fee for interests sold by
authorized selling agents appointed by the Manager for the Class A Series, in
the amount of 100 basis points for the Unleveraged Series, Commodity L/S
Unleveraged Series and Commodity L/N Unleveraged Series and 150 basis
points for the Leveraged Series of the Trust's net asset value for each
respective series; and for the Class C Series, in the amount of 50 basis points
for the Unleveraged Series, Commodity L/S Unleveraged Series and Commodity L/N
Unleveraged Series and 50 basis points for the Leveraged Series, L/S
Leveraged Series and Commodity L/N Leveraged Series of the Trust's net asset
value for each respective series. As of December 31, 2009, the L/S
Leveraged Series and Commodity L/N Leveraged Series of the Trust have not
commenced trading and have no assets.
Organizational
Fee
Investors
in Classes A and B of each Series will pay an organizational fee of 0.50% of
their initial and any subsequent investment(s) (excluding exchanges) to the
Manager to cover expenses associated with the organization of the Trust and the
offering of interests. This fee will be deducted from each investment in
determining the number of interests purchased. An organizational fee will be
charged until an investor’s total contribution is greater than or equal to
$1,000,000. If the organizational expenses exceed the organizational fees
collected by the Manager, the Manager will pay any costs above the collected
fees. If the organizational fees paid to the Manager exceed actual
organizational expenses, any excess will be retained by the Manager and may be
shared with consultants that the Manager may engage from time to time.
Specifically, consultants who assist the Trust in distributing the interests may
be paid a share of the organizational fees.
Operating
and Administrative Expenses
The Trust
pays the Manager an annual fee of 0.35% of the net asset value as reimbursement
for its legal, accounting and other routine administrative expenses and fees,
including fees to the Trustee. The Trustee is paid an annual fee and reimbursed
for out-of-pocket expenses. Each Series pays its own cash manager
fees, banking fees, and the New Jersey partnership tax. The relevant
series generally pays any extraordinary expenses, including legal claims and
liabilities and litigation costs and any indemnification related thereto. To the
extent the extraordinary expenses arise as a result of the gross negligence or
willful misconduct of the Manager, the Manager may be deemed responsible to pay
the extraordinary expenses to that extent.
Selling
Commission
Investors
who subscribe for Class A Interests and Class C Interests will be charged a
sales commission of 0% to 4% of the subscription amount, payable to the selling
agent from the investor's investment. The amount of the sales commission is
determined by the selling agent. Investors who subscribe for Class B Interests
and Class D Interests will generally not be charged a sales
commission.
Futures
Trading
Futures
Contracts
Futures
contracts are contracts made on or through a commodity exchange and provide for
future delivery of agricultural and industrial commodities, precious metals,
foreign currencies or financial instruments and, in the case of certain
contracts such as stock index futures contracts and Eurodollar futures
contracts, provide for cash settlement. Futures contracts are uniform for each
commodity on each exchange and vary only with respect to price and delivery
time. A contract to buy or sell may be satisfied either by taking or making
delivery of the commodity and payment or acceptance of the entire purchase price
thereof, or by offsetting the obligation with a contract containing a matching
contractual obligation on the same (or a linked) exchange prior to delivery.
United States commodity exchanges individually or, in certain limited
situations, in conjunction with certain foreign exchanges, provide a clearing
mechanism to facilitate the matching of offsetting trades. Once trades made
between members of an exchange have been confirmed, the clearinghouse becomes
substituted for the clearing member acting on behalf of each buyer and each
seller of contracts traded on the exchange and in effect becomes the other party
to the trade. Thereafter, each clearing member firm party to the trade looks
only to the clearinghouse for performance. Clearinghouses do not deal with
customers, but only with member firms, and the guarantee of performance under
open positions provided by the clearinghouse does not run to customers. If a
customer’s commodity broker becomes bankrupt or insolvent, or otherwise defaults
on such broker’s obligations to such customer, the customer in question may not
receive all amounts owed to such customer in respect of his trading, despite the
clearinghouse fully discharging all of its obligations.
Hedgers
and Speculators
Two broad
classifications of persons who trade in commodity futures are (1) hedgers and
(2) speculators. Commercial interests, including banks and other financial
institutions, and farmers, who market or process commodities, use the futures
markets for hedging. Hedging is a protective procedure designed to minimize
losses which may occur because of price fluctuations. The commodity markets
enable the hedger to shift the risk of price fluctuations to the speculator. The
usual objective of the hedger is to protect the expected profit from financial
or other commercial operations, rather than to profit strictly from futures
trading.
The
speculator, such as the Trust, risks its capital with the expectation of making
profits from the price fluctuations in futures contracts. The hedger seeks to
offset any potential loss (measured as the difference between the price at which
he had expected to buy or sell and the price at which he is eventually able to
buy or sell) in the purchase or sale of the commodity hedged. Likewise, losses
in futures trading might be offset by unexpected gains on transactions in the
actual commodity. The speculator assumes the risks which the hedger seeks to
avoid.
Speculators
rarely expect to take or make delivery of the cash or actual physical commodity
in the futures market. Rather, they generally close out their futures positions
by entering into offsetting purchases or sales of futures contracts. Because the
speculator may take either a long or short position in the futures markets, it
is possible for the speculator to earn profits or incur losses regardless of the
direction of price trends.
Trading
Approaches
Commodity
traders generally may be classified as either systematic or discretionary. A
systematic trader will rely primarily on trading programs or models to generate
trading signals. A systematic trader will also rely, to some degree, on
judgmental decisions concerning, for example, what markets to follow and
commodities to trade, when to liquidate a position in a contract month which is
about to expire and how large a position to take in a particular commodity. The
systems utilized to generate trading signals are changed from time to time, but
the trading instructions generated by the then-current systems are generally
followed without significant additional analysis or
interpretation.
In
contrast, discretionary traders, while sometimes utilizing a variety of price
charts and computer programs to assist them in making trading decisions, make
these decisions on the basis of their own judgment. It is possible to describe a
discretionary trader's experience, the type of information which he consults,
the number of commodities he follows or trades and the degree to which he
leverages his accounts. However, in assessing the potential for future
profitability in the case of a discretionary trader, the talents and abilities
of the individual, rather than the profitability of any particular system or
identifiable method, must be evaluated.
Margins
Margins
are good faith deposits which must be made with a commodity broker in order to
initiate or maintain an open position in a futures contract. When futures
contracts are traded in the United States and on most exchanges abroad, both
buyer and seller are required to post margins with the broker handling their
trades as security for the performance of their buying and selling undertakings,
and to offset losses on their trades due to daily fluctuations in the markets.
Minimum margins usually are set by the exchanges.
A
customer's margin deposit is treated as equity in his account. A change in the
market price of the futures contract will increase or decrease the equity. If
this equity decreases below the maintenance margin amount (generally 75% of the
initial margin requirement), the broker will issue a margin call requiring the
customer to increase the account's equity to the initial margin. Failure to
honor such a margin call generally will result in the closing out of the open
position. If, at the time such open position is closed, the account equity is
negative, then the equity in the customer's remaining open positions, if any, in
excess of the required margins, as well as the customer's cash reserves will be
used to offset such debit balance, and if such equities and reserves are not
sufficient the customer will be liable for the remaining unpaid
balance.
United
States Regulations
Commodity
Exchange Act (“the CE Act”). The United States Congress enacted the CE Act to
regulate trading in commodities, the exchanges on which they are traded, the
individual brokers who are members of the exchanges, and commodity professionals
and commodity brokerage houses that trade in these commodities in the United
States.
Commodity
Futures Trading Commission (the “CFTC”). The CFTC is an independent governmental
agency which administers the CE Act and is authorized to promulgate rules
thereunder. A function of the CFTC is to implement the objectives of the CE Act
in preventing price manipulation and excessive speculation and promoting orderly
and efficient commodity futures markets. The CFTC has adopted regulations
covering, among other things:
|
·
|
the
designation of contract markets;
|
|
·
|
the
monitoring of United States commodity exchange
rules;
|
|
·
|
the
establishment of speculative position
limits;
|
|
·
|
the
registration of commodity brokers and brokerage houses, floor brokers,
introducing brokers, leverage transaction merchants, commodity trading
advisors, commodity pool operators and their principal employees engaged
in non-clerical commodities activities (associated persons);
and
|
|
·
|
the
segregation of customers funds and record keeping by, and minimum
financial requirements and periodic audits of, such registered commodity
brokerage houses and professionals.
|
Under the
CE Act, the CFTC is empowered, among other things, to:
|
·
|
hear
and adjudicate complaints of any person (e.g., an Interest Holder) against
all individuals and firms registered or subject to registration under the
CE Act (reparations),
|
|
·
|
seek
injunctions and restraining orders,
|
|
·
|
issue
orders to cease and desist,
|
|
·
|
initiate
disciplinary proceedings,
|
|
·
|
revoke,
suspend or not renew registrations
and
|
|
·
|
levy
substantial fines.
|
The CE
Act also provides for certain other private rights of action and the possibility
of imprisonment for certain violations.
The CFTC
has adopted extensive regulations affecting commodity pool operators and
commodity trading advisors such as the Manager and their associated persons.
These regulations, among other things, require the giving of disclosure
documents to new customers and the retention of current trading and other
records, prohibit pool operators from commingling pool assets with those of the
operators or their other customers and require pool operators to provide their
customers with periodic account statements and an annual report. Upon request by
the CFTC, the Manager will also furnish the CFTC with the names and addresses of
the interest holders, along with copies of all transactions with, and reports
and other communications to, the interest holders.
United
States Commodity Exchanges. United States commodity exchanges are given certain
latitude in promulgating rules and regulations to control and regulate their
members and clearing houses, as well as the trading conducted on their floors.
Examples of current regulations by an exchange include establishment of initial
and maintenance margin levels, size of trading units, daily price fluctuation
limits and other contract specifications. Except for those rules relating to
margins, all exchange rules and regulations relating to terms and conditions of
contracts of sale or to other trading requirements currently must be reviewed
and approved by the CFTC.
National
Futures Association (the “NFA”). Substantially all commodity pool operators,
commodity trading advisors, futures commission merchants, introducing brokers
and their associated persons are members or associated members of the NFA. The
NFA's principal regulatory operations include:
|
·
|
auditing
the financial condition of futures commission merchants, introducing
brokers, commodity pool operators and commodity trading
advisors;
|
|
·
|
arbitrating
commodity futures disputes between customers and NFA
members;
|
|
·
|
conducting
disciplinary proceedings; and
|
|
·
|
registering
futures commission merchants, commodity pool operators, commodity trading
advisors, introducing brokers and their respective associated persons, and
floor brokers.
|
The
regulation of commodities transactions in the United States is a rapidly
changing area of law and the various regulatory procedures described herein are
subject to modification by United States congressional action, changes in CFTC
rules and amendments to exchange regulations and NFA regulations.
Item
1A.
|
Risk
Factors
|
Historical
Results of the MLM Index™ may not be indicative of future results
The MLM
Index™ historical results may not be indicative of future results. The MLM
Index™ results are based on the analysis of a particular period of time. The
future performance of the MLM Index™ is entirely unpredictable.
Performance
of the Trust May be Different than the MLM Index™
The Trust
attempts to replicate the MLM Index™. In doing so, the Trust will establish
positions in the futures markets. The prices at which the Trust executes these
positions may be significantly different than the prices used to calculate the
MLM Index™. In addition, the Trust charges various fees and commissions which
will lower the return of the Trust vs. the MLM Index™. All these factors mean
that the Trust performance will be different and in all likelihood lower than
the results of the MLM Index™.
Futures
Trading Involves Substantial Leverage
Futures
contracts are typically traded on margin. This means that a small amount of
capital can be used to invest in contracts of much greater total value. The
resulting leverage means that a relatively small change in the market price of a
futures contract can produce a substantial profit or loss. Leverage enhances the
Trust's sensitivity to market movements that can result in greater profits when
the Trading Program anticipates the direction of the move correctly, or greater
losses when the Trading Program is incorrect. The Unleveraged Series, Commodity
L/S Unleveraged Series and Commodity L/N Unleveraged Series attempt to replicate
the MLM Index™, the MLM Commodity Long/Short Index and the MLM Commodity
Long/Neutral Index respectively without leverage and the Leveraged Series trades
the MLM Index™ at three times leverage.
Futures
Trading Is Speculative, Highly Volatile and Can Result in Large
Losses
A
principal risk in futures trading is the rapid fluctuation in the market prices
of futures contracts. The Trust's profitability depends greatly on the Trading
Program correctly anticipating trends in market prices. If the Trading Program
incorrectly predicts the movement of futures prices, large losses could result.
Price movements of futures contracts are influenced by such factors as: changing
supply and demand relationships; government trade, fiscal, monetary and exchange
control programs and policies; national and international political and economic
events; and speculative frenzy and the emotions of the market place. The Manager
has no control over these factors.
Illiquid
Markets Could Make It Impossible for the Trust to Realize Profits or Limit
Losses
Although
the Trust trades in ordinarily highly liquid markets, there may be circumstances
in which it is not possible to execute a buy or sell order at the desired price,
or to close out an open position, due to market conditions. Daily price
fluctuation limits are established by the exchanges and approved by the CFTC.
When the market price of a futures contract reaches its daily price fluctuation
limit, no trades can be executed at prices outside such limit. The holder of a
commodity futures contract (including the Trust) may be locked into an adverse
price movement for several days or more and lose considerably more than the
initial margin put up to establish the position. Another possibility is the
unforeseen closure of an exchange due to accident or government
intervention.
Speculative
Position Limits May Require the Manager to Modify Its Trading to the Detriment
of the Trust
The
exchanges have established and the CFTC has approved speculative position limits
(referred to as position limits) on the maximum futures position which any
person, or group of persons acting in concert, may hold or control in particular
futures contracts. In addition, certain exchanges, in lieu of speculative
position limits, have adopted position accountability requirements that could
require a person whose positions in a contract exceed a specified level to
provide information to the exchange relating to the nature of such person's
trading strategy. The Manager may be required to reduce the size of the future
positions which would otherwise be taken to avoid exceeding such limits or
requirements. Such modification of the Trust's trades, if required, could
adversely affect the operations and profitability of the Trust.
Trading
of Swaps Could Subject the Trust to Substantial Losses
The Trust
may enter into swap and similar transactions. Swap contracts are not traded on
exchanges and are not subject to the same type of government regulation as
exchange markets. As a result, many of the protections afforded to participants
on organized exchanges and in a regulated environment are not available in
connection with these transactions. The swap markets are "principals' markets,"
in which performance with respect to a swap contract is the responsibility only
of the counterparty which the participant has entered into a contract, and not
of any exchange or clearinghouse. As a result, the Trust is subject to the risk
of the inability or refusal to perform with respect to such contracts on the
part of the counterparties with which the Trust trades. Any such failure or
refusal, whether due to insolvency, bankruptcy, default, or other cause, could
subject the Trust to substantial losses. There are no limitations on daily price
movements in swap transactions. Speculative position limits do not apply to swap
transactions, although the counterparties with which the Trust deals may limit
the size or duration of positions available to the Trust as a consequence of
credit considerations. Participants in the swap markets are not required to make
continuous markets in the swap contracts they trade. Participants could refuse
to quote prices for swap contracts or quote prices with an unusually wide spread
between the price at which they are prepared to buy and the price at which they
are prepared to sell.
Substantial
Expenses Will Cause Losses for the Trust Unless Offset by Profits and Interest
Income
The Trust
is subject to substantial fees and expenses, including brokerage fees,
management fees and operating and administrative expenses. In addition, certain
investors are subject to an organizational charge and/or a selling commission.
Set forth below are tables which set forth the basic fees that each of the
Series and Classes is subject to.
Leveraged
Series
|
||||||||||||||||||||||||
Brokerage
Fee
|
Management
Fee
|
Organizational
Fee
|
Admin
Fee
|
Selling
Expense
|
Total
Fees and Commissions
|
|||||||||||||||||||
Class
A
|
1.75 | % | 2.80 | % | 0.50 | % | 0.35 | % | 4.00 | % | 9.40 | % | ||||||||||||
Class
B
|
1.75 | % | 1.30 | % | 0.50 | % | 0.35 | % | N/A | 3.90 | % | |||||||||||||
Class
C
|
0.90 | % | 2.05 | % | N/A | 0.35 | % | 4.00 | % | 7.30 | % | |||||||||||||
Class
D
|
0.90 | % | 1.30 | % | N/A | 0.35 | % | N/A | 2.55 | % |
Unleveraged
Series, Commodity L/S Unleveraged Series and Commodity L/N Unleveraged
Series
|
||||||||||||||||||||||||
Brokerage
Fee
|
Management
Fee
|
Organizational
Fee
|
Admin
Fee
|
Selling
Expense
|
Total
Fees and Commissions
|
|||||||||||||||||||
Class
A
|
0.85 | % | 1.50 | % | 0.50 | % | 0.35 | % | 4.00 | % | 7.20 | % | ||||||||||||
Class
B
|
0.85 | % | 0.50 | % | 0.50 | % | 0.35 | % | N/A | 2.20 | % | |||||||||||||
Class
C
|
0.40 | % | 1.00 | % | N/A | 0.35 | % | 4.00 | % | 5.75 | % | |||||||||||||
Class
D
|
0.40 | % | 0.50 | % | N/A | 0.35 | % | N/A | 1.25 | % |
The
Brokerage Fee, the Management Fee and the Organizational Fee shall be paid to
the Manager. It will be necessary for the Trust to achieve gains from trading
and interest income in excess of its charges for investors to realize increases
in the net asset value of their interests. The Trust may not be able to achieve
any appreciation of its assets.
The
Manager Alone Makes the Trust's Trading Decisions
The
Manager makes all commodity trading decisions for the Trust and, accordingly,
the success of the Trust largely depends upon the Manager's judgment and
abilities to make the necessary adjustments to the Trading Program. There is no
guarantee that the Trading Program's trading on behalf of the Trust will prove
successful under all or any market conditions. The performance record of the
Trading Program also reflects significant variations in profitability from
period to period.
You
Have No Right to Remove the Manager
Under the
Trust Agreement, interest holders have no right to remove the Manager as manager
of the Trust for cause or for any other reason.
The
Manager Advises Other Clients
The
Manager may be managing and advising large amounts of other funds for other
clients at the same time as it is managing Trust assets and, as a result, the
Trust may experience increased competition for the same contracts.
Limited
Ability To Liquidate Investment In Interests
You can
only redeem your interests at month-end upon 10 business days advance notice.
The net asset value per interest may vary significantly from month-to-month. You
will not know at the time you submit a redemption request what the redemption
value of your interests will be. The restrictions imposed on redemptions limit
your ability to protect yourself against major losses by redeeming part or all
of your interests.
The
Manager must consent before you can transfer or assign your interests and the
securities laws provide additional restrictions on the transferability of
interests. There will not be a secondary market for interests.
You
Have No Rights Of Control
You will
be unable to exercise any control over the business of the Trust. In addition,
the Manager can cause the Trust to redeem your interests upon 10 business days
prior written notice for any reason in the Manager's sole discretion. The
Manager may elect to cause the Trust to redeem your interests when your
continued holding of interests would or might violate any law or constitute a
prohibited transaction under ERISA or the Internal Revenue Code and a statutory,
class or individual exemption from the prohibited transaction provisions of
ERISA for such transaction or transactions does not apply or cannot be obtained
from the Department of Labor (or the Manager determines not to seek such an
exemption).
You
Have Limited Rights to Inspect Books and Records
You will
have only limited rights to inspect the books and records of the Trust and the
Manager. You will generally only have the right to inspect the books and records
of the Trust and the Manager as are specifically granted under the Delaware
Business Trust Act. In particular, information regarding positions held by a
Series, to the extent deemed proprietary or confidential by the Manager, will
not be made available to you except as required by law.
Limited
Arms-Length Negotiation
The
initial offering price per interest was established arbitrarily. Except for the
agreements with the Trustee, the terms of this offering and the structure of the
Trust have not been established as the result of arms-length
negotiation.
The
Trust Could Lose Assets and Have Its Trading Disrupted Due to the Bankruptcy of
its Clearing Broker or Others
The Trust
is subject to the risk of clearing broker, exchange or clearinghouse insolvency.
Trust assets could be lost or impounded in such an insolvency during lengthy
bankruptcy proceedings. Were a substantial portion of the Trust's capital tied
up in a bankruptcy, the Manager might suspend or limit trading, perhaps causing
the Trust to miss significant profit opportunities.
The
Trust Is Subject to Certain Conflicts of Interest
The
Manager and the clearing broker are subject to certain actual and potential
conflicts of interests.
Although
the Manager is not affiliated with a commodity broker, the Manager may have a
conflict of interest in selecting brokers because of long-standing business
dealings with certain brokers. In addition, the Manager, its principals and
affiliates may have commodity accounts at the same brokerage firms as the Trust,
and, because of the amount traded through such brokerage firms, may pay lower
commissions than the Trust.
The
Manager, the clearing broker, their respective affiliates and each of their
principals, directors, officers, employees and families may be trading and
directing other futures accounts, including their own accounts. Each will not be
aware of what others are doing on behalf of the Trust, and they may take
positions similar or opposite to those of the Trust or in competition with the
Trust. Generally, the Trust will enter orders only once a month. The Manager
will allocate transactions among the Trust and other clients in a manner
believed by the Manager to be equitable to each.
In
certain instances, the clearing broker may have orders for trades from the Trust
and orders from its own employees and it might be deemed to have a conflict of
interest between the sequence in which such orders are transmitted to the
trading floor.
The
Manager and its principals are engaged in substantial activities, including
managing other accounts not involving the Trust, and will devote to the Trust
such amount of their time as they determine reasonable and necessary. The
compensation received by the Manager and its principals from such other accounts
and entities may differ from the compensation it receives from the
Trust.
Investment
advisers and broker-dealers receiving continuing compensation from the Manager
on interests sold by them will have a financial incentive to encourage investors
to purchase and not to redeem their interests.
The
Trust could be Taxed as a Corporation
In the
opinion of the Trust's counsel, under current federal income tax law, the
Unleveraged Series and the Leveraged Series each will be classified as a
partnership and not as an association taxable as a corporation for federal
income tax purposes, and each such Series should not be subject to federal
income taxation as a corporation under the provisions applicable to so-called
publicly traded partnerships. However, you should note that the Trust has not
and will not request a ruling from the Internal Revenue Service to this effect.
If the Trust or a Series were taxed as a corporation for federal income tax
purposes, the net income of the Trust or a Series would be taxed to the Trust or
a Series at corporate income tax rates, no losses of the Trust or a Series would
be allowable as deductions to the interest holders, and all or a portion of any
distributions by the Trust or a Series to the interest holders, other than
liquidating distributions, would constitute dividends to the extent of the
Trust's or a Series' current or accumulated earnings and profits and would be
taxable as such.
You
Are Taxed Every Year on Your Share of a Series' Profits Not Only When You Redeem
as Would Be the Case if You Held Stocks or Bonds
You will
be taxed each year on your investment in a Series, irrespective of whether you
receive distributions or redeem any interests. In contrast, an investor holding
stocks or bonds generally pays no tax on their capital appreciation until the
securities are sold. Over time, the deferral of tax on stock and bond
appreciation has a compounding effect.
Deductibility
of Expenses May be Limited
You could
be required to treat the management fees, as well as certain other expenses of a
Series, as investment advisory fees, which are subject to substantial
restrictions on deductibility for individual taxpayers. The Manager has not, to
date, been classifying the management fee or such expenses as investment
advisory fees, a position to which the Internal Revenue Service might object.
Should the Internal Revenue Service re-characterize the management fee or other
expenses as investment advisory fees, you may be required to pay additional
taxes, interest and penalties.
The
Series' Trading Gains May Be Taxed at Higher Rates
You will
be taxed on your share of any trading profits of a Series at both short- and
long-term capital gain rates. These tax rates are determined irrespective of how
long you hold Interests. Consequently, the tax rate on a Series' trading gains
may be higher than those applicable to other investments you hold for a
comparable period.
Tax
Could Be Due from You on Your Share of a Series' Interest Income Despite Overall
Losses
You may
be required to pay tax on your allocable share of a Series' interest income,
even though the Series incurs overall losses. Trading losses can only be used by
individuals to offset trading gains and $3,000 of interest income each year.
Consequently, if you were allocated $5,000 of interest income net of expenses
and $10,000 of net trading losses, you would owe tax on $2,000 of interest
income even though you would have a $5,000 loss for the year. The $7,000 capital
loss would carry forward, but subject to the same limitation on its
deductibility against interest income.
Possibility
of Tax Audit
There can
be no assurance that tax returns of a Series will not be audited by the Internal
Revenue Service or that such audits will not result in adjustments to such
returns. If an audit results in an adjustment, you may be required to file
amended returns and to pay additional taxes plus interest.
Employee
Benefit Plan Considerations
Although
the Manager will be a fiduciary to the ERISA investors with respect to the
assets of such investors invested in the Trust, neither the Manager, nor the
Trustee, nor any of their affiliates, agents, or employees will act as a
fiduciary to any ERISA investor with respect to the ERISA investor's decision to
invest assets in the Trust. Fiduciaries of prospective ERISA investors, in
consultation with their advisors, should carefully consider the application of
ERISA and the regulations issued there under on an investment in the
Trust.
Absence
of Certain Statutory Registrations
The Trust
is not registered as an investment company or mutual fund, which would subject
it to extensive regulation under the Investment Company Act of 1940, as amended.
If the Trust were required to register as an investment company, it would be
subject to additional regulatory restrictions. Some of these restrictions would
be fundamentally inconsistent with the operation of the Trust, including among
other things, restrictions relating to the liquidity of portfolio investments,
to the use of leverage, to custody requirements, and to the issuance of senior
securities. As a result, it would be impractical for the Trust to continue its
current operations. Consequently, you will not benefit from certain of the
protections afforded by the Investment Company Act of 1940, as amended. However,
the Manager is registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940, as amended, and thus is an investment manager
for purposes of ERISA. In addition, the Manager is registered as a commodity
pool operator and a commodity trading advisor with the CFTC, is a member of the
NFA and is subject to extensive regulation under the Commodity Exchange
Act.
No
Independent Counsel
No
independent counsel has been selected to represent the interests of the interest
holders and there have been no negotiations between the Manager and any interest
holders in connection with the terms of the offering or the terms of the Trust
Agreement.
Item 1B.
|
Unresolved
Staff Comments
|
None
Item 2.
|
Properties
|
The Trust
does not own or lease any physical properties. The Trust's office is located
within the office of the Manager at 405 South Street, Newtown, PA 18940.
|
Item 3.
|
Legal
Proceedings
|
There are
no pending legal proceedings to which the Trust or the Manager is a party or to
which any of their assets are subject.
Item 4.
|
Submission
of Matters to a Vote of Security
Holders
|
Not
applicable.
Item 5.
|
Market
For Registrant's Common Equity and Related Stockholder
Matters
|
There
currently is no established public trading market for the interests. As of
December 31, 2009, approximately $105 million interests were held by 867
owners.
The
interests are "restricted securities" within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be sold unless registered under the Securities Act or sold in accordance with an
exemption therefrom, such as Rule 144. The Trust has no plans to register any of
the interests for resale. In addition the Trust Agreement provides that an
interest holder may transfer its interests only upon the approval of the Manager
in the Manager's sole and absolute discretion.
Pursuant
to the Trust Agreement, the Manager has the sole discretion to determine whether
distributions (other than on redemption of interests), if any, will be made to
interest holders. The Trust has never paid any distribution and does not
anticipate paying any distributions of interest holders in the foreseeable
future.
Recent
Sales of Unregistered Securities
From
October 1, 2009 to December 31, 2009, a total of 102,417 interests were sold for
the aggregate net subscription amount of $10,687,204. Total number of purchasers
was 36. There were no non-accredited investors during this period.
Details of the sale of these interests are as follows:
Series
|
Date
|
Subscriptions
|
Units
|
Price
|
#
of Purchasers
|
||||||||||||
Leveraged
A Units
|
10/31/2009
|
$ | 0 | 0 | $ | ||||||||||||
Leveraged
B Units
|
10/31/2009
|
325,143 | 3,066 | 105.51 | 7 | ||||||||||||
Leveraged
C Units
|
10/31/2009
|
0 | 0 | ||||||||||||||
Leveraged
D Units
|
10/31/2009
|
25,000 | 234 | 107.02 | 1 | ||||||||||||
Unleveraged
A Units
|
10/31/2009
|
33,123 | 282 | 113.54 | 2 | ||||||||||||
Unleveraged
B Units
|
10/31/2009
|
646,760 | 5,091 | 126.41 | 5 | ||||||||||||
Unleveraged
C Units
|
10/31/2009
|
0 | 0 | ||||||||||||||
Unleveraged
D Units
|
10/31/2009
|
115,000 | 1,015 | 113.34 | 2 | ||||||||||||
Commodity
L/S D Units
|
11/30/2209
|
1,000 | 9 | 106.68 | 1 | ||||||||||||
Commodity
L/N D Units
|
11/30/2009
|
5,001,000 | 50,010 | 100.00 | 2 | ||||||||||||
Leveraged
A Units
|
11/30/2009
|
35,000 | 358 | 94.44 | 1 | ||||||||||||
Leveraged
B Units
|
11/30/2009
|
29,355 | 266 | 109.71 | 2 | ||||||||||||
Leveraged
C Units
|
11/30/2009
|
0 | 0 | ||||||||||||||
Leveraged
D Units
|
11/30/2009
|
200,000 | 1,796 | 111.36 | 3 | ||||||||||||
Unleveraged
A Units
|
11/30/2009
|
564,000 | 4,815 | 114.91 | 4 | ||||||||||||
Unleveraged
B Units
|
11/30/2009
|
16,823 | 131 | 128.03 | 1 | ||||||||||||
Unleveraged
C Units
|
11/30/2009
|
0 | 0 | ||||||||||||||
Unleveraged
D Units
|
11/30/2009
|
0 | 0 | ||||||||||||||
Leveraged
A Units
|
12/31/2009
|
0 | 0 | ||||||||||||||
Leveraged
B Units
|
12/31/2009
|
60,000 | 566 | 105.32 | 1 | ||||||||||||
Leveraged
C Units
|
12/31/2009
|
0 | 0 | ||||||||||||||
Leveraged
D Units
|
12/31/2009
|
50,000 | 466 | 107.20 | 1 | ||||||||||||
Commodity
L/N D Units
|
12/31/2009
|
3,500,000 | 34,312 | 102.00 | 1 | ||||||||||||
Unleveraged
A Units
|
12/31/2009
|
0 | 0 | ||||||||||||||
Unleveraged
B Units
|
12/31/2009
|
0 | 0 | ||||||||||||||
Unleveraged
C Units
|
12/31/2009
|
0 | 0 | ||||||||||||||
Unleveraged
D Units
|
12/31/2009
|
85,000 | 750 | $ | 113.35 | 2 | |||||||||||
Total
|
$ | 10,687,204 | 102,417 | 36 |
The price
of the interests of each Class reflects the net asset value of interests in the
Class. The interests were sold pursuant to Rule 506 of Regulation D and the
sales were exempt from registration under the Securities Act of 1933. Purchasers
of the interests completed subscription documents in which they represented that
they were accredited investors as defined in Regulation D and a Form D was filed
with the Securities and Exchange Commission in the time periods prescribed by
Regulation D.
Five
Year Cumulative Performance of the Trust
Since the
Trust does not deal in equities, it cannot compare its return against an
equivalent broad-based equities market index. As set forth below, the Trust has
selected the MLM Index™, with which to compare its cumulative five-year return.
Although the Trust contains multiple classes of interests, it has taken as a
representative example, the highest fee classes in both the Leveraged and
Unleveraged Series. In both cases, the Trust has indicated the cumulative total
return for Class A interests for the Leveraged and Unleveraged
Series.
So as to
comply as much as possible with the promulgated rules, the Trust has used the
MLM Index™ to compare its cumulative total return. Created in 1988, the MLM
Index™ is a benchmark of the returns available to a futures
investor. It is based on daily closing prices of the nearby contract
month of a portfolio chosen from among the most active futures
markets. The Index Committee of Mount Lucas Management Corporation
makes the choice of markets for a calendar year in the December preceding the
start of the year, and, except in unusual circumstances, markets are not
normally added to or deleted from the MLM Index™ during a year. The MLM Index™
is a widely recognized benchmark for evaluating managed futures performance that
is frequently discussed in periodicals such as the Wall Street Journal,
Institutional Investor, Pension World and Pensions & Investments.
Performance of the MLM Index™ is available through Bloomberg™, LP and
Morningstar.
The MLM
Index™ is unique in the industry in that the Index contains long and short
positions in the various futures contracts. Since no other publicly
available, widely distributed, transparent index in the market place has this
feature it is not possible to compare the performance of the MLM Index Fund with
another index.
The
Comparison of Five-Year Cumulative Total Returns Graph, set forth below, assumes
that an investment in units in the Trust, and the MLM Index™, was $100 on
December 31, 2004. The Cumulative Total Return is based on unit price
appreciation (there were no dividends declared or paid during the period) from
December 31, 2004 through December 31, 2009.
12/31/05
|
12/31/06
|
12/31/07
|
12/31/08
|
12/31/09
|
||||||||||||||||
MLM
Index™
|
103.75 | 104.16 | 107.16 | 121.73 | 118.41 | |||||||||||||||
MLM
Index Fund - Leveraged Series, Class A
|
99.91 | 88.21 | 82.69 | 110.26 | 101.72 | |||||||||||||||
MLM
Index Fund - Unleveraged Series, Class A
|
100.88 | 99.03 | 99.33 | 111.08 | 104.92 |
Item
6. Selected
Financial Data
The Trust
began trading on January 4, 1999. Set forth below is certain selected historical
data for the Trust for the 5 years ended December 31, 2009. The selected
historical financial data were derived from the financial statements of the
Trust, which were audited by Grant Thornton LLP for 2005 and Eisner
LLP for years 2006 through 2009. The information set forth below should be read
in conjunction with the Financial Statements and notes thereto contained
elsewhere in this document.
Years Ended December 31, | ||||||||||||||||||||
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||||||
Operations
Data:
|
||||||||||||||||||||
Realized
Gains (Losses)
|
$ | 731,923 | $ | 19,104,468 | $ | (6,797,301 | ) | $ | (16,393,552 | ) | $ | (7,520,356 | ) | |||||||
Net
Change in Unrealized Gains (Losses)
|
(7,344,607 | ) | 4,488,606 | (484,953 | ) | (7,285,240 | ) | 11,898,155 | ||||||||||||
Interest
Income
|
159,900 | 2,923,714 | 8,483,981 | 14,168,270 | 11,572,093 | |||||||||||||||
Brokerage
Commissions
|
961,240 | 977,593 | 1,444,771 | 3,089,477 | 4,114,687 | |||||||||||||||
Management
Fees
|
1,143,229 | 1,115,615 | 1,536,273 | 3,148,863 | 4,106,132 | |||||||||||||||
Operating
Expenses
|
672,497 | 506,440 | 1,399,451 | 1,825,940 | 2,232,080 | |||||||||||||||
Net
Income (Loss)
|
$ | (9,229,750 | ) | $ | 23,917,140 | $ | (3,178,768 | ) | $ | (17,574,802 | ) | $ | 5,496,993 | |||||||
Financial
Condition Data
|
||||||||||||||||||||
Investors'
Interest
|
104,578,954 | 136,196,734 | 117,385,731 | 229,224,557 | 344,124,895 | |||||||||||||||
Total
Assets
|
$ | 129,799,051 | $ | 139,610,404 | $ | 120,016,936 | $ | 245,261,022 | $ | 351,371,644 | ||||||||||
Net
Asset Value Per Class A Leveraged Series Interest
|
90.73 | 105.12 | 78.88 | 83.94 | 95.09 | |||||||||||||||
Net
Asset Value Per Class B Leveraged Series Interest
|
105.53 | 120.43 | 89.06 | 93.36 | 104.18 | |||||||||||||||
Net
Asset Value Per Class C Leveraged Series Interest
|
86.24 | 98.31 | 72.63 | 76.06 | 84.79 | |||||||||||||||
Net
Asset Value Per Class D Leveraged Series Interest
|
107.20 | 121.29 | 88.95 | 92.46 | 102.30 | |||||||||||||||
Net
Asset Value Per Class A Unleveraged Series Interest
|
113.28 | 119.60 | 106.89 | 106.39 | 108.38 | |||||||||||||||
Net
Asset Value Per Class B Unleveraged Series Interest
|
126.32 | 132.04 | 116.85 | 115.15 | 116.13 | |||||||||||||||
Net
Asset Value Per Class C Unleveraged Series Interest
|
110.99 | 116.06 | 102.77 | 101.32 | 102.23 | |||||||||||||||
Net
Asset Value Per Class D Unleveraged Series Interest
|
113.35 | 117.94 | 103.92 | 101.94 | 102.35 | |||||||||||||||
Net
Asset Value Per Class D Commodity L/S Unleveraged Series
Interest
|
108.17 | - | - | - | - | |||||||||||||||
Net
Asset Value Per Class D Commodity L/N Unleveraged Series
Interest
|
102.00 | - | - | - | - |
Item 7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
General
The
purpose of the Trust is to replicate the results of the MLM Index™, an index
designed to measure the risk premium available to futures traders. Designed as
such, the results of the Trust depend on two factors, the results of the MLM
Index™ itself, and the Manager's ability to replicate that Index. It is
important to note that the Manager also calculates the results of the MLM
Index™. Thus, their role is twofold - to calculate the results of the MLM
Index™, and to replicate the results of the MLM Index™ for the Trust. Any
changes made to the composition of the MLM Index™ by the MLM Index™ Committee of
the Manager will affect the trading of the Trust, since the object of the Trust
is to replicate the MLM Index™ as published.
Results
of the MLM Index™
The MLM
Index™ is calculated from the prices of 22 liquid futures markets. These markets
are traded on domestic and foreign exchanges. For each market, the MLM Index™
generally uses the price of 4 different delivery months each year. For example,
in the Japanese Yen futures market, the MLM Index™ uses the March, June,
September and December delivery months. On the day before trading day, the MLM
Index™ determines whether to hold a long or short position in each constituent
contract based on the calculation methodology of the MLM Index™. Once
established, that position is held for the subsequent period, at which time it
is re-evaluated. The monthly results of each constituent market are then used to
calculate the MLM Index™ return. The objective of the Trust is to replicate this
monthly return. The MLM Commodity L/S Index is a subset of the MLM
Index and contains only the commodity futures markets of the entire MLM
Index. The MLM Commodity L/N Index contains the same commodity
futures contracts, but does not have short positions when the MLM Index
algorithm indicates a short position in a particular contract.
Clearly,
the volatility of the constituent markets in the MLM Index™ can affect the
results of the Trust. The influences on this volatility are varied and
unpredictable. However, since the object of the Trust is to replicate the MLM
Index™, the Manager takes no unusual action to mitigate this volatility. The
role of the Manager is to buy or sell the appropriate number of futures
contracts in each constituent market such that the aggregate return of those
positions replicates as closely as possible the results of the MLM Index™ and
its subsets.
In order
to accomplish this objective, the Manager must calculate the number of contracts
based on both the assets in the Trust and the distribution of the assets between
the Series of the Trust. Since the MLM Index™ rebalances positions each month,
at that time the Manager must ascertain the asset level and execute orders to
achieve the desired allocations. This is achieved by adding the performance
results of the Trust for the month to the assets at the beginning of the month,
and adding additions of capital from new subscriptions and subtracting
redemptions in order to determine the asset level at the end of the
period.
Summary
of Critical Accounting Policies
The
financial statements have been prepared in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Other than accruals maintained in the normal course of
business, neither management or the Trust prepares, maintains or updates any
estimates. Management believes that the estimates utilized in
preparing the financial statements are reasonable and prudent; however, actual
results could differ from those estimates. The Trust's significant accounting
policies are described in detail in Note 2 of the Notes to Financial
Statements.
The Trust
records all investments at fair value in its financial statements, with changes
in fair value reported as a component of realized and unrealized gain (loss) on
investments in the Statements of Operations. Generally, fair values are based on
market prices; however, in certain circumstances, significant judgments and
estimates are involved in determining fair value in the absence of an active
market closing price.
Financial
Condition
To
replicate the results of the MLM Index™, the Trust must effect trades on
domestic or foreign futures exchanges. Since inception of operations the Trust
had used Refco, LLC as its futures commission merchant. In October of
2005, the Trust moved its clearing accounts to Citigroup Global Markets. The
Manager deposits a percentage of the assets of the Trust in two separate
accounts at Citigroup Global Markets, one for the Unleveraged Series and one for
the Leveraged Series. The amount deposited is determined by the margin
requirement established by the exchanges to hold the positions in the Trust. The
margin requirement varies, but is generally about 2.4% of assets for the
Unleveraged Series and 7.1% of assets for the Leveraged Series.
The
Trust’s assets are held in separate custodial accounts at State Street Bank and
Trust (the “Bank”), one for each Series. The Trust has
contracted with Credit Suisse Asset Management (CSAM) to manage the money in
these accounts so as to maximize the interest income which accrues to the Trust,
while maintaining strict credit controls as determined by the CE Act. When
Citigroup Global Markets requires additional assets to maintain the positions
for the Trust, the Bank makes a wire transfer to Citigroup Global Markets. If
Citigroup Global Markets has surplus assets in the accounts, Citigroup Global
Markets makes a wire transfer to the accounts at the Bank.
The Trust
owns no capital assets and does not borrow money. Since the objective of the
Trust is to replicate the results of the MLM Index™, its entire asset base
participates in the speculative trading of futures contracts. As such, all the
assets of the Trust are at risk. The level of assets will be determined by the
results of the Trust, and the effect of addition of capital and the redemption
of Trust interests. These variables are impossible to predict with any
certainty.
Liquidity
The
majority of the Trust's assets are held in liquid short-term interest rate
instruments. The Trust takes substantial exposure in futures markets, which
require relatively small deposits, called margin, to hold the positions. As at
December 31, 2009, increases (decreases) in cash and cash equivalents and due
from broker amounted to approximately $(7.3) and $3.8 million respectively and
net cash used from operations amounted to approximately $5.9 million, of which
$9.2 million represents net loss from operations in the current year. In
general, the Trust will have about 5% of its assets on deposit with brokers as
margin, with the balance held in accounts with a major financial
institution.
A holder
of interests in the Trust may liquidate that holding at the end of any month at
the net asset value of the interests, upon 10 days written notice to the
Manager. While the Manager generally must honor all requests for redemption if
presented in proper form, the Manager may suspend temporarily any redemption if
the effect of such redemption, either alone or in conjunction with other
redemptions, would impair the relevant Series' ability to operate if the
impairment would be caused by a third party other than the Manager. Further, the
right to obtain redemption is contingent upon the relevant Series having
property sufficient to discharge its liabilities on the date of redemption.
Under certain circumstances, the Manager may find it advisable to establish a
reserve for contingent liabilities. In such event, the amount receivable by a
redeeming holder of interests will be reduced by his proportionate share of the
reserve. There is no secondary market for interests in the Trust, and none is
anticipated. There are restrictions for transfer of interests.
Although
the Trust trades in futures contracts which are in general liquid, the exchanges
impose daily trading limits, which act to suspend trading when a particular
market or contract trades up or down to a pre-determined price level. Should
this happen, and the Trust was attempting to execute trades in that situation,
the Trust may not be able to accurately replicate the results of the MLM Index™.
These rules have not had a material impact on the operation of the Trust to
date. The Trust generally trades only in the largest and most liquid
futures contracts, and generally has available approximately 95% of its assets
in the form of highly liquid money market securities. The Trust
believes that, except in extreme market conditions, all open positions can be
liquidated in an efficient, orderly fashion.
Off-Balance Sheet
Arrangements
The Trust
has no off-balance sheet arrangements that it believes does or will be
reasonably likely to have a material current or future effect on the Trust’s
results of operations, financial condition, liquidity, capital expenditures or
capital resources.
Market
and Credit Risks
The
nature of the Trust is such that it undertakes substantial market risk in
following its mandate to replicate the MLM Index™ and its subsets. Although the
Manager monitors the intraday and daily valuation of the portfolio, no
extraordinary measures are taken to reduce market risk. Specifically, the
Manager maintains positions required to match, as closely as possible, the
return of the MLM Index™ and its subsets. One could imagine certain
circumstances where the Manager might be called upon to make a change to this
policy, such as the closing of an exchange or some other emergency
situation. In such case, management would use its best efforts to
respond to such circumstances with the interests of the investors in
mind.
The MLM
Index™ and its subsets are not designed to predict which market will exhibit
positive performance in any given year. The Manager does not select
the constituent markets based on expectations of future
performance. The MLM Index™ and its subsets are designed to represent
participation in a diverse basket of future contracts using a trend-following
algorithm. The MLM Index™ and its subsets are a diversified Index
producing different levels of return in the various sectors from year to
year.
The Trust
incurs various kinds of credit risk in its operations. In order to facilitate
the trading of the Trust, assets must be placed with both Futures Commission
Merchants and Broker/Dealers. Management of the Trust deals only with
established registered firms in both capacities, and monitors their financial
condition on an ongoing basis. In addition, if the Trust were to enter into over
the counter transactions, additional counterparty risk would be incurred. There
were no OTC transactions during 2009.
Results
of Operations
For the
Fiscal Year ending December 31, 2009 the Trust had assets of $129,799,051
compared with assets of $139,610,404 on December 31, 2008 and assets of
$120,016,936, on December 31, 2007. Liabilities of the Trust totaled
$25,220,097as of December 31, 2009, compared with $3,413,670 at December 31,
2008 and $2,631,205 at December 31, 2007. Net income (loss) from operations was
$(9,229,750) for the year ended December 31, 2009 compared with $23,917,140 in
2008 and $(3,178,768) in 2007.
The
Trust’s net income is usually directly related to the performance of the MLM
Index™, which the Trust is designed to replicate. For the 12 months ending
December 31, 2009, MLM Index™ performance was -2.71%, lower than the +13.60%
recorded in 2008, and lower than the +2.87% recorded in 2007. Trust performance
may be negative in years when the MLM Index™ is positive or have greater losses
when the MLM Index™ is negative due to the timing of subscriptions and
redemptions, the fees charged, and the allocation of assets between the
Unleveraged and Leveraged Series of the Trust. Since inception of the Trust, the
correlation of monthly results between the Unleveraged Series of the Trust and
the MLM Index™ adjusted for fees is 0.99. The correlation between the Leveraged
Series of the Trust and the MLM Index™ adjusted for leverage and fees is
0.99.
The
components of the return of the MLM Index™ are the capital gains earned from the
changes in futures market prices, and the interest income earned on cash
balances. The mechanics and rules of futures markets allow the Trust to earn
interest on approximately 100% of the assets in the Trust. The interest income
takes two forms, directly from the Trust's futures broker paid on the margin
deposits held by them, and excess cash.
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
The
following is a discussion of the quantification of market risk for the Trust.
Such calculations are often referred to as Value-at-Risk, or VAR. The method
used here may or may not differ from other methods used for VAR calculations by
other firms. There is no one fixed method of VAR calculation, and this method
may not be comparable to other methods.
The
market risk, or VAR of the Trust is directly related to the composition of the
MLM Index™ and its subsets, and the ratio of each. Each month, the position of
the MLM Index™ can be either long or short based on a 252 business day moving
average rule. Since positions can be offset inside of sectors (one contract long
in a particular commodity and one contract short in a related commodity),
specific sector risk is less relevant than the historical risk of the MLM Index™
as a whole. Since the object of the Trust is to replicate the MLM Index™, it is
reasonable to use the historic values of that Index to estimate market
risk.
The VAR
of the Fund is calculated as follows:
|
1.
|
The
manager calculates the standard deviation of the historical returns of the
MLM Index™ and its subsets on an asset-weighted basis over two time
periods, using daily returns over the preceding 1 year ending at the date
of this report, and using monthly returns over the preceding 10
years. Those results for the period ended December 31, 2009 are
0.46% and 2.13% respectively. It is important to note that this
calculation is made on the historical data of the MLM Index™ and its
subsets. It is not based on the actual trading of the Trust and does
not include any operational risk. The standard deviation is used to
measure the dispersion of the returns of the MLM Index™ and its
subsets.
|
|
2.
|
For
the purposes of VAR, one attempts to estimate the size of a loss that may
occur with some small probability. It does not estimate the
possibility of some total loss, only the probability of a loss of some
magnitude. The calculation is complicated by the fact that the
standard deviation of the distribution assumes a normal distribution,
which may or may not be a good estimate of the actual distribution.
For the purposes of this estimate, the Manager has chosen to calculate the
size of a daily and monthly loss that might occur with a probability of 1%
(1 chance in 100). To do this, the standard deviation is multiplied
by 2.35 to the standard 99% confidence interval, and by 1.5 to adjust for
the possibility of a non-normal distribution. For daily returns,
this estimate is a loss of 1.62%. For monthly returns the estimate
is loss of 7.48%.
|
|
3.
|
To
ascertain a dollar loss amount for the Trust, the assets of the Trust as
of December 31, 2009 are multiplied by the estimate of the risk calculated
in step 2 above. The risk estimate is based on the unleveraged and
leveraged series of the Trust, with the leveraged assets having three
times the risk of the unleveraged assets. Based on the asset levels
as of December 31, 2009, the manager estimates that the Trust could expect
to lose approximately $3.1 million in any given day and $14.1 in any given
month.
|
The
estimate above, though reasonable, should not be taken as an assurance that
losses in the Trust could not be greater than these amounts. This is
simply a quantitative estimate based on the historical performance of the MLM
Index™ and its subsets. The loss that occurs with small probability
may be substantially greater than the loss indicted above. Also,
market conditions could change dramatically from the conditions that prevailed
over the period used to calculate the estimate, affecting the realized
volatility of the market. Furthermore, other factors could affect
trading, such as the inability to execute orders in a particular market, due to
operational or regulatory restrictions that may alter the pattern of the Trust’s
returns. Specifically, the Manager advises other funds in addition to
the Trust. In certain markets there is a limit to the size a position
that one entity can control (speculative limits). Since positions
cannot exceed speculative limits, the Manager may have to allocate positions
across accounts and funds, resulting in a less than complete replication of the
MLM Index™ and its subsets. It is best to remember the
fact that, as outlined in the offering for the Trust, that all the assets
invested are at risk of loss.
Since the
calculation of the VAR does not look at the specific instrument risks, but
rather the results of the MLM Index™ and its subsets as a whole, risks related
to actual execution are not included in the calculation. For example,
counter-party risks from OTC transactions are not factored into the
calculation.
Additional
market risk may be attributed to the actual execution of the orders for the
Trust. The Trust executes the majority of its orders on the last day of each
month. As assets of the Trust grow, large orders may be placed in periods of
reduced liquidity. Such orders may move the markets in which they are executed,
adversely affecting the performance of the Trust. The Manager makes every effort
to execute all orders efficiently, but general levels of liquidity are beyond
the control of management. In certain circumstances, markets may move to the
daily trading limits imposed by the exchanges, and the Trust may be unable to
execute the necessary orders to replicate the MLM Index™ and its subsets,
causing extensive slippage.
Non-Market
Risk
Risk from
Brokers - The Trust's futures commission merchant, Citigroup Global Markets,
holds some portion of the assets of the Trust as margin deposits for futures
trading. A failure of Citigroup Global Markets could cause the portion of the
Trust’s assets held there to be at risk or unavailable for an undetermined
period of time.
Speculative
Limits - Certain futures exchanges require that positions deemed speculative in
nature (as opposed to commercial hedge positions) cannot exceed certain
pre-defined levels. All positions in the control of the Manager must be
aggregated to determine compliance with these rules. Should the assets of the
Manager reach a level such that positions may be capped, accurate replication of
the MLM Index™ for the Trust may be difficult or impossible. The Manager may
also use certain "Over The Counter" derivatives to achieve the same exposure
without exceeding speculative limits. These OTC products would involve taking
additional counter-party risk for the Trust in order to achieve accurate
replication of the MLM Index™. For example, if it was determined that the Trust
must hold 10 contracts of Soybeans for a specific delivery, the Trust could
execute the appropriate futures contracts on the appropriate futures exchange.
Also, the Manager of the Trust may choose to enter into a swap agreement, which
would have substantially the same economic effect of the futures position, but
would be executed in the over-the-counter market. The swap contract would change
the nature of the counter-party from an organized exchange to a single dealer,
and would materially increase the non-market risk of holding the position. The
Trust has not yet utilized OTC swap contracts.
Item 8.
|
Financial
Statements and Supplementary Data
|
The
Fund's financial statements, together with the independent registered public
accounting firm’s report thereon, appear on pages F1 through F25 hereof.
Selected
Quarterly Data is as follows:
2009
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
Full Year
|
|||||||||||||||
Net
realized and unrealized gain (loss) on investments
|
$ | 650,738 | $ | (15,245,735 | ) | $ | 8,163,550 | $ | (181,237 | ) | $ | (6,612,684 | ) | |||||||
Net
income (loss)
|
$ | (48,948 | ) | $ | (15,895,480 | ) | $ | 7,554,909 | $ | (840,230 | ) | $ | (9,229,750 | ) | ||||||
Net
income (loss) per Investors’ Interest
|
||||||||||||||||||||
Leveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | (0.65 | ) | $ | (21.08 | ) | $ | 8.97 | $ | (1.63 | ) | |||||||||
Class
B
|
$ | (0.30 | ) | $ | (23.85 | ) | $ | 10.74 | $ | (1.49 | ) | |||||||||
Class
C
|
$ | (0.22 | ) | $ | (19.46 | ) | $ | 8.79 | $ | (1.19 | ) | |||||||||
Class
D
|
$ | (0.04 | ) | $ | (23.85 | ) | $ | 11.09 | $ | (1.28 | ) | |||||||||
Unleveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | (0.35 | ) | $ | (8.59 | ) | $ | 3.59 | $ | (0.96 | ) | |||||||||
Class
B
|
$ | (0.06 | ) | $ | (9.20 | ) | $ | 4.29 | $ | (0.75 | ) | |||||||||
Class
C
|
$ | (0.07 | ) | $ | (8.10 | ) | $ | 3.76 | $ | (0.67 | ) | |||||||||
Class
D
|
$ | (0.08 | ) | $ | (8.10 | ) | $ | 3.97 | $ | (0.55 | ) | |||||||||
Commodity
L/N Unleveraged Series
|
||||||||||||||||||||
Class
D
|
$ | 0.00 | $ | 0.00 | $ | 6.90 | $ | 1.27 | ||||||||||||
Commodity
Unleveraged Series
|
||||||||||||||||||||
Class
D
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 2.00 | ||||||||||||
Net
Asset Value per Investors’ Interest, at the end of period
|
||||||||||||||||||||
Leveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 104.47 | $ | 83.39 | $ | 92.35 | $ | 90.73 | ||||||||||||
Class
B
|
$ | 120.14 | $ | 96.28 | $ | 107.02 | $ | 105.53 | ||||||||||||
Class
C
|
$ | 98.09 | $ | 78.64 | $ | 87.43 | $ | 86.24 | ||||||||||||
Class
D
|
$ | 121.25 | $ | 97.40 | $ | 108.48 | $ | 107.20 | ||||||||||||
Unleveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 119.24 | $ | 110.65 | $ | 114.24 | $ | 113.28 | ||||||||||||
Class
B
|
$ | 131.98 | $ | 122.78 | $ | 127.07 | $ | 126.32 | ||||||||||||
Class
C
|
$ | 116.00 | $ | 107.90 | $ | 111.66 | $ | 110.99 | ||||||||||||
Class
D
|
$ | 118.02 | $ | 109.92 | $ | 113.89 | $ | 113.35 | ||||||||||||
Commodity
L/N Unleveraged Series
|
||||||||||||||||||||
Class
D
|
$ | 0.00 | $ | 0.00 | $ | 106.90 | $ | 108.17 | ||||||||||||
Commodity
Unleveraged Series
|
||||||||||||||||||||
Class
D
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 102.00 |
2008
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
Full Year
|
|||||||||||||||
Net
realized and unrealized gain (loss) on investments
|
$ | 7,552,705 | $ | 3,337,042 | $ | (12,722,002 | ) | $ | 25,425,329 | $ | 23,593,074 | |||||||||
Net
income (loss)
|
$ | 7,851,155 | $ | 3,260,648 | $ | (12,666,383 | ) | $ | 25,471,720 | $ | 23,917,140 | |||||||||
Net
Increase (decrease) per Investors’ Interest
|
||||||||||||||||||||
Leveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 8.88 | $ | 3.31 | $ | (15.73 | ) | $ | 29.79 | |||||||||||
Class
B
|
$ | 10.38 | $ | 4.14 | $ | (17.56 | ) | $ | 34.42 | |||||||||||
Class
C
|
$ | 8.48 | $ | 3.39 | $ | (14.31 | ) | $ | 28.11 | |||||||||||
Class
D
|
$ | 10.57 | $ | 4.36 | $ | (17.42 | ) | $ | 34.83 | |||||||||||
Unleveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 4.31 | $ | 1.53 | $ | (6.57 | ) | $ | 13.44 | |||||||||||
Class
B
|
$ | 5.01 | $ | 1.98 | $ | (6.93 | ) | $ | 15.12 | |||||||||||
Class
C
|
$ | 4.39 | $ | 1.73 | $ | (6.11 | ) | $ | 13.28 | |||||||||||
Class
D
|
$ | 4.57 | $ | 1.89 | $ | (6.06 | ) | $ | 13.62 | |||||||||||
Net
Asset Value per Investors’ Interest, at the end of period
|
||||||||||||||||||||
Leveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 87.75 | $ | 91.06 | $ | 75.33 | $ | 105.12 | ||||||||||||
Class
B
|
$ | 99.44 | $ | 103.57 | $ | 86.02 | $ | 120.43 | ||||||||||||
Class
C
|
$ | 81.11 | $ | 84.50 | $ | 70.20 | $ | 98.31 | ||||||||||||
Class
D
|
$ | 99.52 | $ | 103.88 | $ | 86.46 | $ | 121.29 | ||||||||||||
Unleveraged
Series
|
||||||||||||||||||||
Class
A
|
$ | 111.20 | $ | 112.73 | $ | 106.15 | $ | 119.60 | ||||||||||||
Class
B
|
$ | 121.86 | $ | 123.84 | $ | 116.91 | $ | 132.04 | ||||||||||||
Class
C
|
$ | 107.16 | $ | 108.89 | $ | 102.78 | $ | 116.06 | ||||||||||||
Class
D
|
$ | 108.49 | $ | 110.38 | $ | 104.32 | $ | 117.94 |
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
There
were no changes in or disagreements between the Trust and their auditors
respecting matters of accounting or financial disclosure in the current
year.
Item 9A.
|
Controls
and Procedures
|
(a) Evaluation of disclosure controls
and procedures. As of the end of the period covered by this Annual
Report, we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). We have
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission and that such information is accumulated and communicated to
our management to allow timely decisions regarding required
disclosures. Based on such evaluation we have concluded these
disclosure controls are effective as of December 31, 2009.
(b) Changes in internal control over
financial reporting. There has been no change in the Company's internal
control over financial reporting that occurred in the fourth fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
(c) Management's Report on Internal
Control over Financial Reporting. The management of the Company is
responsible for establishing and maintaining adequate internal control over
financial reporting for the Company as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934. A company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States. A company's internal control over financial
reporting includes policies and procedures that (1) pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (3)provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on the financial
statements. Our internal control system is designed to provide
reasonable assurance regarding the preparation and fair presentation of
published financial statements. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's independent registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to
provide only management's report in this annual report. The Company's
management assessed its internal control over financial reporting as of December
31, 2007 using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management, based on
their evaluation of the Company's internal control over financial reporting (as
defined in Securities Exchange Act Rule 13a-15(f)), have concluded that the
Company's internal control over financial reporting was effective as of December
31, 2009.
Item 10.
|
Directors,
Executive Officers and Corporate
Governance
|
The Trust
has no directors or officers. The Manager manages and conducts the business of
the Trust.
The
principals of the Manager are Roger E. Alcaly, Paul R. DeRosa, Raymond E. Ix,
Jr., James A. Mehling, John R. Oberkofler and Timothy J. Rudderow
.
Roger E.
Alcaly, age 68, became a principal and Director of the Manager when it merged
with CA Partners, Inc., a company he formed with Messrs. Timothy Rudderow and
Frank Vannerson in 1990 which engaged primarily in convertible arbitrage
trading. Prior to helping form CA Partners, Mr. Alcaly was active in leveraged
acquisitions, merger arbitrage and value-oriented equity investing, first as a
partner of Kellner DiLeo & Co. and KD Equities, each of which engaged in
risk-arbitrage trading, and then at Riverside Capital, a company he formed after
leaving those firms in May 1987 which engaged in risk-arbitrage trading. Before
joining Kellner DiLeo, Mr. Alcaly served as Assistant Director of the Council on
Wage and Price Stability and as a Senior Economist at the Federal Reserve Bank
of New York, and taught Economics at Columbia University. Mr. Alcaly holds a
B.A. from Amherst College and a Ph.D. in Economics from Princeton
University.
Paul R.
DeRosa, age 68, became a principal and Director of the Manager when it merged
with CA Partners, Inc., which he joined in January 1999. Mr. DeRosa began his
career in the securities industry as the money market economist in Citibank's
bond trading division. He later became the bank's chief proprietary bond trader
and subsequently head of Citibank's financial derivative and capital markets
businesses in North America. In 1986 Mr. DeRosa joined E.F. Hutton Co. as
co-head of bond trading with particular responsibility for mortgage trading and
finance. In 1989 he helped to establish Eastbridge Holdings Inc., a bond and
currency trading company in New York, and served as President and CEO from June
1995 to June 1998. Mr. DeRosa holds a Ph.D. in Economics from Columbia
University.
Raymond
E. Ix, Jr., age 46, is a Senior Vice President and a Director of the Manager.
Mr. Ix joined Mount Lucas in 1992 and is responsible for institutional marketing
and client service. From 1989 to 1992, Mr. Ix was employed by Little Brook
Corporation of New Jersey, a commodity trading advisor, where he was involved in
implementing the firm's technical trading systems. Before joining Little Brook,
Mr. Ix was the Fixed Income Administrative Manager at Delaware Management
Company, a company which advised institutional and individual investors. Mr. Ix
received a B.S. in accounting from Saint Joseph's University in
1986.
James A.
Mehling, age 60, is a Vice President and Chief Operating Officer of the Manager.
Before joining Mount Lucas in June 1999, Mr. Mehling had served as President and
Chief Investment Officer of Monitor Capital Advisors, a company which managed
institutional stock and bond portfolios and mutual funds, beginning in 1991. Mr.
Mehling started his career in financial services with Merrill Lynch in 1976 and
eventually managed a trading desk for Merrill Lynch Government Securities. He is
a CFA charter holder and has served as a volunteer on the CFA examination
grading committee. Mr. Mehling received a B.S. in Aviation Engineering from
Western Michigan University in 1970.
John R.
Oberkofler, age 50, is a Vice President and Director of Trading for the Manager
since 1999. From 1986 to 1999, he was employed as Senior Trader by Little Brook
Corporation of New Jersey. Mr. Oberkofler received a B.S. in Finance from Seton
Hall University in 1982.
Timothy
J. Rudderow, age 54, is President and a Director of the Manager, which he helped
to establish in 1986. Prior to the mergers that took place in October 1999, Mr.
Rudderow was also a principal of Little Brook Corporation of New Jersey, which
he joined in 1983 as Director of Research and Development, and of CA Partners,
Inc., a company he helped form in 1990. Prior to joining Little Brook, Mr.
Rudderow was employed by Commodities Corporation, a company which was a
commodity trading advisor, with responsibilities for the design and management
of technical trading systems. Before joining Commodities Corporation, Mr.
Rudderow taught Economics at Drexel University. Mr. Rudderow received a B.A. in
Mathematics from Rutgers University in 1977 and an M.B.A. in Management Analysis
from Drexel University in 1979.
Code
of Ethics
The Trust
does not have any officers; therefore, it has not adopted a code of ethics
applicable to the Trust’s principal executive officer, principal financial
officer, principal accounting officer and persons performing similar
functions. The Manager is primarily responsible for the day to day
administrative and operational aspects of the Trust’s
business. The Manager has adopted a code of ethics that applies to
its principal executive officer, principal financial officer, principal
accounting officer and persons performing similar functions and a copy of such
code is included in Exhibit 14.1.
Item 11.
|
Executive
Compensation
|
The Trust
has no directors or executive officers. The Manager receives management and
other fees from the Trust as described in Item 1 - Fees and
Expenses.
Item 12.
|
Security
Ownership of Certain Beneficial Owners and
Management
|
The Trust
has no directors or officers. The Manager manages and conducts the business of
the Trust. As of December 31, 2009, the Manager had an initial investment of
$1,000 in each of the Leveraged Series (Class C), the Unleveraged Series (Class
C), the Commodity L/S Unleveraged Series (Class D) and Commodity L/N Unleveraged
Series (Class D).
Item 13.
|
Certain
Relationships and Related
Transactions
|
The
Manager manages and conducts the business of the Trust. The Manager receives
management and other fees from the Trust as described in Item 1 - Fees and
Expenses.
For the
years ended December 31, 2009, 2008, and 2007, the Manager received from the
Trust:
|
(1)
|
management
fees in the amount of $1,143,229, $1,115,615 and $1,536,273,
respectively;
|
|
(2)
|
brokerage
fees in the amount of $961,240, $977,593 and $1,444,771,
respectively.
|
|
(3)
|
organizational
fees in the amounts of $13,850, $8,623 and
$24,972, respectively.
|
Item 14.
|
Principal
Accountant Fees and Services
|
Audit
Fees. The aggregate fees billed to the Trust for the year ended December 31,
2009 by the independent registered public accounting firm, Eisner LLP (“Eisner”)
for professional services rendered in connection with the audit of the Trust’s
financial statements included in this Annual Report on Form 10-K, and for the
review of the interim financial information included in the Trust’s 1st,
2nd,
and 3rd
Quarter Report on Form 10-Q, totaled approximately $208,900.
The
aggregate fees billed to the Trust for the year ended December 31, 2008 by
Eisner for professional services rendered in connection with the audit of the
Trust’s financial statements included in this Annual Report on Form 10-K, and
for the review of the statements included in the Trust’s 2nd, and
3rd
Quarter Report on Form 10-Q, totaled approximately $90,000.
The
aggregate fees billed to the Trust by the independent registered public
accounting firm, Grant Thornton LLP (“GT”), for professional services rendered
in connection with the review of the statements included in the Trust’s 1st
Quarter Report of 2008 on Form 10-Q, totaled approximately $42,250
Audit-Related
Fees. There were no fees billed to the Trust by GT and Eisner for assurance and
related services that are reasonably related to the performance of the audit and
review of the Trust’s financial statements that are not already reported in the
paragraph immediately above for the years 2009 and 2008
respectively.
Tax Fees.
The aggregate fees billed to the Trust by GT for professional services rendered
by GT for tax compliance totaled approximately $12,832 and $37,000 for the years
2009 and 2008, respectively. These services included review of the Trust’s
domestic tax compliance information.
All Other
Fees. There were no fees billed to the Trust by Eisner or GT for products and
services other than as set forth above for the years 2009 and 2008.
Engagement
of the Independent Registered Public Accounting Firm. During the year ended
December 31, 2008, the Manager appointed Eisner as the Trust’s auditors. The
Manager considers provisions of the independence rules for both audit and
non-audit services.
Item 15.
|
Exhibits,
Financial Statement Schedules
|
FINANCIAL
STATEMENTS AND REPORT OF
INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING
FIRM
MLM
INDEX™ FUND
December
31, 2009 and 2008
AFFIRMATION
OF THE COMMODITY POOL OPERATOR
I affirm
that, to the best of my knowledge and belief, the information contained in the
attached financial statements of MLM Index™ Fund for the years ended December
31, 2009 and 2008 are accurate and complete.
/s/ Timothy J.
Rudderow
|
||
Timothy
J. Rudderow
|
||
President
|
||
Mount
Lucas Management Corporation
|
||
Manager
|
||
MLM
Index™ Fund
|
February
25, 2010
Table
of Contents
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-4
|
Financial
Statements
|
|
Statements
of Financial Condition
|
F-5
|
Condensed
Schedules of Investments
|
F-6
|
Statements
of Operations
|
F-8
|
Statements
of Changes in Investors’ Interest
|
F-9
|
Statements
of Cash Flows
|
F-16
|
Notes
to Financial Statements
|
F-17
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Investors of
MLM
IndexTM
Fund
We have
audited the accompanying statement of financial condition, including the
condensed schedule of investments, of MLM IndexTM Fund
(the "Trust") as of December 31, 2009 and 2008, and the related statements
of operations, changes in investors' interest, and cash flows and the financial
highlights for each of the years in the three-year period ended
December 31, 2009. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. The Trust is not required to have, nor were we engaged
to perform, an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements and financial highlights referred to above
present fairly, in all material respects, the financial condition of MLM
IndexTM Fund
at December 31, 2009 and 2008, and the results of its operations, changes
in investors' interest, and cash flows and the financial highlights for each of
the years in the three-year period ended December 31, 2009, in conformity
with accounting principles generally accepted in the United States of
America.
/s/
Eisner LLP
New York,
New York
February 25,
2010
MLM
INDEX™ FUND
STATEMENTS
OF FINANCIAL CONDITION
December
31,
ASSETS
|
2009
|
2008
|
||||||
Cash
and cash equivalents
|
$ | 91,417,211 | $ | 98,799,819 | ||||
Due
from broker
|
38,376,426 | 34,554,803 | ||||||
Net
unrealized gain on open futures contracts, at fair value
|
─ | 6,190,476 | ||||||
Interest
receivable
|
5,414 | 65,278 | ||||||
Other
assets
|
─ | 28 | ||||||
Total
assets
|
$ | 129,799,051 | $ | 139,610,404 | ||||
LIABILITIES
AND INVESTORS’ INTEREST
|
||||||||
Liabilities
|
||||||||
Redemptions
payable
|
$ | 23,834,370 | $ | 2,881,096 | ||||
Net
unrealized loss on open futures contracts, at fair value
|
1,134,488 | ─ | ||||||
Brokerage
commissions payable
|
65,124 | 88,976 | ||||||
Management
fee payable
|
95,998 | 103,234 | ||||||
Accrued
expenses
|
90,117 | 340,364 | ||||||
Total
liabilities
|
25,220,097 | 3,413,670 | ||||||
Investors’
interest
|
104,578,954 | 136,196,734 | ||||||
Total
liabilities and investors’ interest
|
$ | 129,799,051 | $ | 139,610,404 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
CONDENSED
SCHEDULE OF INVESTMENTS
December
31, 2009
Unrealized
|
Percentage
of
|
|||||||||||
Number
of
|
gain
|
investors’
|
||||||||||
Description
|
contracts
|
(loss)
|
interest
|
|||||||||
Futures*
|
||||||||||||
Long
futures contracts
|
||||||||||||
Financial
|
900 | $ | (2,233,254 | ) | (2.14 | )% | ||||||
Commodity
|
379 | 1,081,653 | 1.03 | |||||||||
1,279 | (1,151,601 | ) | (1.11 | ) | ||||||||
Short
futures contracts
|
||||||||||||
Financial
|
84 | 120,124 | 0.11 | |||||||||
Commodity
|
81 | (103,011 | ) | (0.10 | ) | |||||||
165 | 17,113 | 0.01 | ||||||||||
Net
unrealized loss on open futures contracts, at fair value
|
$ | (1,134,488 | ) | (1.10 | )% |
*
Derivatives are not designated as hedging instruments.
The
accompanying notes are an integral part of this schedule.
MLM
INDEX™ FUND
CONDENSED
SCHEDULE OF INVESTMENTS
December
31, 2008
Unrealized
|
Percentage
of
|
|||||||||||
Number
of
|
gain
|
investors’
|
||||||||||
Description
|
contracts
|
(loss)
|
interest
|
|||||||||
Futures*
|
||||||||||||
Long
futures contracts
|
||||||||||||
Financial
|
720 | $ | 6,039,956 | 4.44 | % | |||||||
720 | 6,039,956 | 4.44 | ||||||||||
Short
futures contracts
|
||||||||||||
Financial
|
698 | (3,493,494 | ) | (2.57 | ) | |||||||
Commodity
|
1872 | 3,644,014 | 2.68 | |||||||||
2,570 | 150,520 | 0.11 | ||||||||||
Net
unrealized gain on open futures contracts, at fair value
|
$ | 6,190,476 | 4.55 | % |
*
Derivatives are not designated as hedging instruments.
The
accompanying notes are an integral part of this schedule.
MLM
INDEX™ FUND
STATEMENTS
OF OPERATIONS
Year
ended December 31,
2009
|
2008
|
2007
|
||||||||||
Investment
income
|
||||||||||||
Interest
|
$ | 159,900 | $ | 2,923,714 | $ | 8,483,981 | ||||||
Expenses
|
||||||||||||
Brokerage
commissions
|
961,240 | 977,593 | 1,444,771 | |||||||||
Management
fee
|
1,143,229 | 1,115,615 | 1,536,273 | |||||||||
Operating
expenses
|
672,497 | 506,440 | 1,399,451 | |||||||||
Total
expenses
|
2,776,966 | 2,599,648 | 4,380,495 | |||||||||
Net
investment income (loss)
|
(2,617,066 | ) | 324,066 | 4,103,486 | ||||||||
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
|
||||||||||||
Net
realized gain (loss) on investments
|
731,923 | 19,104,468 | (6,797,301 | ) | ||||||||
Net
change in unrealized appreciation (depreciation) on
investments
|
(7,344,607 | ) | 4,488,606 | (484,953 | ) | |||||||
Net
realized and unrealized gain (loss) on investments
|
(6,612,684 | ) | 23,593,074 | (7,282,254 | ) | |||||||
Net
income (loss)
|
$ | (9,229,750 | ) | $ | 23,917,140 | $ | (3,178,768 | ) |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST
Year
ended December 31, 2009
Leveraged Series
|
||||||||||||||||||||
Total
|
||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Leveraged
|
||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
||||||||||||||||
Investors’
interest at December 31, 2008
|
$ | 6,903,329 | $ | 13,796,085 | $ | 1,327 | $ | 31,281,480 | $ | 51,982,221 | ||||||||||
Subscriptions
|
90,000 | 990,903 | ─ | 5,960,000 | 7,040,903 | |||||||||||||||
Redemptions
|
(1,464,701 | ) | (1,623,951 | ) | ─ | (3,855,018 | ) | (6,943,670 | ) | |||||||||||
Transfers
|
(29,000 | ) | (1,655 | ) | ─ | 536,934 | 506,279 | |||||||||||||
Other
(selling commissions)
|
(1,500 | ) | (4,931 | ) | ─ | ─ | (6,431 | ) | ||||||||||||
Net
Loss
|
(859,550 | ) | (1,686,557 | ) | (163 | ) | (3,737,146 | ) | (6,283,416 | ) | ||||||||||
Investors’
interest at December 31, 2009
|
$ | 4,638,578 | $ | 11,469,894 | $ | 1,164 | $ | 30,186,250 | $ | 46,295,886 | ||||||||||
Shares
at December 31, 2008
|
65,670 | 114,555 | 14 | 257,908 | ||||||||||||||||
Subscriptions
|
1,020 | 9,170 | ─ | 52,801 | ||||||||||||||||
Redemptions
|
(15,251 | ) | (15,029 | ) | ─ | (34,642 | ) | |||||||||||||
Transfers
|
(312 | ) | (11 | ) | ─ | 5,513 | ||||||||||||||
Shares
at December 31, 2009
|
51,127 | 108,685 | 14 | 281,580 | ||||||||||||||||
Net
asset value per share
|
||||||||||||||||||||
December
31, 2009
|
$ | 90.73 | $ | 105.53 | $ | 86.24 | $ | 107.20 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2009
Unleveraged Series
|
||||||||||||||||||||
Total
|
||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Unleveraged
|
||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
||||||||||||||||
Investors’
interest at December 31, 2008
|
$ | 4,293,290 | $ | 12,404,908 | $ | 1,320 | $ | 67,514,995 | $ | 84,214,513 | ||||||||||
Subscriptions
|
597,123 | 1,096,633 | ─ | 3,440,000 | 5,133,756 | |||||||||||||||
Redemptions
|
(35,000 | ) | (3,916,119 | ) | ─ | (35,146,090 | ) | (39,097,209 | ) | |||||||||||
Transfers
|
29,000 | 1,655 | ─ | (536,934 | ) | (506,279 | ) | |||||||||||||
Other
(selling commissions)
|
(11,895 | ) | (5,483 | ) | ─ | ─ | (17,379 | ) | ||||||||||||
Net
Loss
|
(236,104 | ) | (457,002 | ) | (58 | ) | (2,598,548 | ) | (3,291,711 | ) | ||||||||||
Investors’
interest at December 31, 2009
|
$ | 4,636,414 | $ | 9,124,592 | $ | 1,262 | $ | 32,673,423 | $ | 46,435,691 | ||||||||||
Shares
at December 31, 2008
|
35,898 | 93,951 | 11 | 572,449 | ||||||||||||||||
Subscriptions
|
5,096 | 8,603 | ─ | 30,278 | ||||||||||||||||
Redemptions
|
(318 | ) | (30,332 | ) | ─ | (309,583 | ) | |||||||||||||
Transfers
|
254 | 12 | ─ | (4,885 | ) | |||||||||||||||
Shares
at December 31, 2009
|
40,930 | 72,234 | 11 | 288,259 | ||||||||||||||||
Net
asset value per share
|
||||||||||||||||||||
December
31, 2009
|
$ | 113.28 | $ | 126.32 | $ | 110.99 | $ | 113.35 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2009
Commodity
L/S
|
Commodity
L/N
|
Total
|
||||||||||
Unleveraged
|
Unleveraged
|
Investors’
|
||||||||||
Series
|
Series
|
Interest
|
||||||||||
Class
D
|
Class
D
|
($100
par
|
||||||||||
Shares
|
Shares
|
value/share)
|
||||||||||
Investors’
interest at December 31, 2008
|
─ | ─ | $ | 136,196,734 | ||||||||
Subscriptions
|
3,001,000 | 8,501,000 | 23,676,659 | |||||||||
Redemptions
|
─ | ─ | (46,040,879 | ) | ||||||||
Transfers
|
─ | ─ | ─ | |||||||||
Other
(selling commissions)
|
─ | ─ | (23,810 | ) | ||||||||
Net
income (loss)
|
245,160 | 100,217 | (9,229,750 | ) | ||||||||
Investors’
interest at December 31, 2009
|
$ | 3,246,160 | $ | 8,601,217 | $ | 104,578,954 | ||||||
Shares
at December 31, 2008
|
─ | ─ | ||||||||||
Subscriptions
|
30,009 | 84,322 | ||||||||||
Redemptions
|
─ | ─ | ||||||||||
Transfers
|
─ | ─ | ||||||||||
Shares
at December 31, 2009
|
30,009 | 84,322 | ||||||||||
Net
asset value per share
|
||||||||||||
December
31, 2009
|
$ | 108.17 | $ | 102.00 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2008
Leveraged Series
|
||||||||||||||||||||
Total
|
||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Leveraged
|
||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
||||||||||||||||
Investors’
interest at December 31, 2007
|
$ | 7,227,407 | $ | 15,754,642 | $ | 981 | $ | 15,463,453 | $ | 38,446,483 | ||||||||||
Subscriptions
|
519,000 | 1,081,545 | ─ | 10,380,000 | 11,980,545 | |||||||||||||||
Redemptions
|
(2,860,296 | ) | (7,372,119 | ) | ─ | (1,984,397 | ) | (12,216,812 | ) | |||||||||||
Transfers
|
26,495 | (15,736 | ) | ─ | ─ | 10,759 | ||||||||||||||
Other
(selling commissions)
|
(2,595 | ) | (2,899 | ) | ─ | ─ | (5,494 | ) | ||||||||||||
Net
Income
|
1,993,318 | 4,350,652 | 346 | 7,422,424 | 13,766,740 | |||||||||||||||
Investors’
interest at December 31, 2008
|
$ | 6,903,329 | $ | 13,796,085 | $ | 1,327 | $ | 31,281,480 | $ | 51,982,221 | ||||||||||
Shares
at December 31, 2007
|
91,630 | 176,908 | 14 | 173,842 | ||||||||||||||||
Subscriptions
|
6,077 | 11,297 | ─ | 103,628 | ||||||||||||||||
Redemptions
|
(32,301 | ) | (73,462 | ) | ─ | (19,562 | ) | |||||||||||||
Transfers
|
264 | (188 | ) | ─ | ─ | |||||||||||||||
Shares
at December 31, 2008
|
65,670 | 114,555 | 14 | 257,908 | ||||||||||||||||
Net
asset value per share
|
||||||||||||||||||||
December
31, 2008
|
$ | 105.12 | $ | 120.43 | $ | 98.31 | $ | 121.29 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2008
Unleveraged Series
|
||||||||||||||||||||||||
Total
|
||||||||||||||||||||||||
Investors’
|
||||||||||||||||||||||||
Total
|
Interest
|
|||||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Unleveraged
|
($100
par
|
|||||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
value/share)
|
|||||||||||||||||||
Investors’
interest at December 31, 2007
|
$ | 4,770,141 | $ | 13,224,027 | $ | 1,168 | $ | 60,943,912 | $ | 78,939,248 | $ | 117,385,731 | ||||||||||||
Subscriptions
|
20,000 | 606,116 | ─ | 2,150,000 | 2,776,116 | 14,756,661 | ||||||||||||||||||
Redemptions
|
(953,309 | ) | (2,969,229 | ) | ─ | (3,714,826 | ) | (7,637,364 | ) | (19,854,176 | ) | |||||||||||||
Transfers
|
(51,471 | ) | 40,712 | ─ | ─ | (10,759 | ) | ─ | ||||||||||||||||
Other
(selling commissions)
|
(100 | ) | (3,028 | ) | ─ | ─ | (3,128 | ) | (8,622 | ) | ||||||||||||||
Net
income
|
508,029 | 1,506,310 | 152 | 8,135,909 | 10,150,400 | 23,917,140 | ||||||||||||||||||
Investors’
interest at December 31, 2008
|
$ | 4,293,290 | $ | 12,404,908 | $ | 1,320 | $ | 67,514,995 | $ | 84,214,513 | $ | 136,196,734 | ||||||||||||
Shares
at December 31, 2007
|
44,626 | 113,169 | 11 | 586,472 | ||||||||||||||||||||
Subscriptions
|
180 | 4,956 | ─ | 19,844 | ||||||||||||||||||||
Redemptions
|
(8,458 | ) | (24,516 | ) | ─ | (33,867 | ) | |||||||||||||||||
Transfers
|
(450 | ) | 342 | ─ | ─ | |||||||||||||||||||
Shares
at December 31, 2008
|
35,898 | 93,951 | 11 | 572,449 | ||||||||||||||||||||
Net
asset value per share
|
||||||||||||||||||||||||
December
31, 2008
|
$ | 119.60 | $ | 132.04 | $ | 116.06 | $ | 117.94 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2007
Leveraged Series
|
||||||||||||||||||||
Total
|
||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Leveraged
|
||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
||||||||||||||||
Investors’
interest at December 31, 2006
|
$ | 15,191,126 | $ | 58,458,477 | $ | 1,319,634 | $ | 30,659,083 | $ | 105,628,320 | ||||||||||
Subscriptions
|
508,700 | 1,635,654 | ─ | 1,720,000 | 3,864,354 | |||||||||||||||
Redemptions
|
(7,548,737 | ) | (41,842,738 | ) | (1,263,093 | ) | (15,617,711 | ) | (66,272,279 | ) | ||||||||||
Transfers
|
─ | (113,724 | ) | 984 | ─ | (112,740 | ) | |||||||||||||
Other
(selling commissions)
|
(4,545 | ) | (8,109 | ) | ─ | ─ | (12,654 | ) | ||||||||||||
Net
loss
|
(919,137 | ) | (2,374,918 | ) | (56,544 | ) | (1,297,919 | ) | (4,648,518 | ) | ||||||||||
Investors’
interest at December 31, 2007
|
$ | 7,227,407 | $ | 15,754,642 | $ | 981 | $ | 15,463,453 | $ | 38,446,483 | ||||||||||
Shares
at December 31, 2006
|
180,974 | 626,170 | 17,350 | 331,595 | ||||||||||||||||
Subscriptions
|
6,182 | 18,197 | ─ | 19,407 | ||||||||||||||||
Redemptions
|
(95,526 | ) | (466,157 | ) | (17,350 | ) | (177,160 | ) | ||||||||||||
Transfers
|
─ | (1,302 | ) | 14 | ─ | |||||||||||||||
Shares
at December 31, 2007
|
91,630 | 176,908 | 14 | 173,842 | ||||||||||||||||
Net
asset value per share
|
||||||||||||||||||||
December
31, 2007
|
$ | 78.88 | $ | 89.06 | $ | 72.63 | $ | 88.95 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CHANGES IN INVESTORS’ INTEREST (CONTINUED)
Year
ended December 31, 2007
Unleveraged Series
|
||||||||||||||||||||||||
Total
|
||||||||||||||||||||||||
Investors’
|
||||||||||||||||||||||||
Total
|
Interest
|
|||||||||||||||||||||||
Class
A
|
Class
B
|
Class
C
|
Class
D
|
Unleveraged
|
($100
par
|
|||||||||||||||||||
Shares
|
Shares
|
Shares
|
Shares
|
Series
|
value/share)
|
|||||||||||||||||||
Investors’
interest at December 31, 2006
|
$ | 11,046,115 | $ | 42,824,216 | $ | 1,153 | $ | 69,724,753 | $ | 123,596,237 | $ | 229,224,557 | ||||||||||||
Subscriptions
|
499,000 | 2,775,143 | ─ | 425,000 | 3,699,143 | 7,563,497 | ||||||||||||||||||
Redemptions
|
(6,050,182 | ) | (33,473,810 | ) | ─ | (10,391,306 | ) | (49,915,298 | ) | (116,187,577 | ) | |||||||||||||
Transfers
|
(698,080 | ) | 810,820 | ─ | ─ | 112,740 | ─ | |||||||||||||||||
Other
(selling commissions)
|
(9,495 | ) | (13,829 | ) | ─ | ─ | (23,324 | ) | (35,978 | ) | ||||||||||||||
Net
income (loss)
|
(17,217 | ) | 301,487 | 15 | 1,185,465 | 1,469,750 | (3,178,768 | ) | ||||||||||||||||
Investors’
interest at December 31, 2007
|
$ | 4,770,141 | $ | 13,224,027 | $ | 1,168 | $ | 60,943,912 | $ | 78,939,248 | $ | 117,385,731 | ||||||||||||
Shares
at December 31, 2006
|
103,829 | 371,905 | 11 | 683,959 | ||||||||||||||||||||
Subscriptions
|
4,613 | 23,969 | ─ | 4,181 | ||||||||||||||||||||
Redemptions
|
(57,209 | ) | (289,748 | ) | ─ | (101,668 | ) | |||||||||||||||||
Transfers
|
(6,607 | ) | 7,043 | ─ | ─ | |||||||||||||||||||
Shares
at December 31, 2007
|
44,626 | 113,169 | 11 | 586,472 | ||||||||||||||||||||
Net
asset value per share
|
$ | 106.89 | $ | 116.85 | $ | 102.77 | $ | 103.92 |
The
accompanying notes are an integral part of these statements.
MLM
INDEX™ FUND
STATEMENTS
OF CASH FLOWS
Year
ended December 31,
2009
|
2008
|
2007
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
income (loss)
|
$ | (9,229,750 | ) | $ | 23,917,140 | $ | (3,178,768 | ) | ||||
Adjustments
to reconcile net income (loss) to net cash and cash equivalents provided
by (used in)operating activities
|
||||||||||||
Net
change in operating assets and liabilities
|
||||||||||||
Due
from broker
|
(3,821,623 | ) | (31,267,602 | ) | 4,561,476 | |||||||
Purchase
of investments in securities
|
─ | (135,482,078 | ) | (128,861,477 | ) | |||||||
Proceeds
from sale of investments in securities
|
─ | 135,482,078 | 205,864,848 | |||||||||
Net
unrealized gain on open futures contracts
|
7,324,964 | (4,443,047 | ) | 695,144 | ||||||||
Interest
receivable
|
59,864 | 85,840 | 1,259,662 | |||||||||
Other
assets
|
28 | 1,240 | (1 | ) | ||||||||
Brokerage
commissions payable
|
(23,852 | ) | 18,329 | (117,740 | ) | |||||||
Management
fee payable
|
(7,236 | ) | 14,641 | (117,050 | ) | |||||||
Accrued
expenses
|
(250,247 | ) | (125,059 | ) | 167,876 | |||||||
Net
cash and cash equivalents provided by (used in) operating
activities
|
(5,947,852 | ) | (11,798,518 | ) | 80,273,970 | |||||||
Cash
flows from financing activities
|
||||||||||||
Subscriptions
received, net of selling commissions
|
23,652,849 | 14,248,039 | 7,987,519 | |||||||||
Redemptions
paid
|
(25,087,605 | ) | (18,479,622 | ) | (129,985,923 | ) | ||||||
Net
cash and cash equivalents used in financing activities
|
(1,434,756 | ) | (4,231,583 | ) | (121,998,404 | ) | ||||||
Net
decrease in cash and cash equivalents
|
(7,382,608 | ) | (16,030,101 | ) | (41,724,434 | ) | ||||||
Cash
and cash equivalents at beginning of year
|
98,799,819 | 114,829,920 | 156,554,354 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 91,417,211 | $ | 98,799,819 | $ | 114,829,920 | ||||||
Supplemental
disclosure of non-cash financing activities:
|
||||||||||||
Subscriptions
recorded which were received in advance
|
$ | ─ | $ | 500,000 | $ | 40,000 |
The accompanying notes are an integral
part of these statements.
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS
December
31, 2009 and 2008
1.
Organization
MLM
Index™ Fund (the “Trust”) was formed under the Business Trust Statute of the
State of Delaware as a business trust in December 1997 and commenced operations
on January 4, 1999. The Trust was organized for the primary purpose of seeking
capital appreciation through the speculative trading of a diversified portfolio
of futures contracts using the MLM Index™ Trading Program, which is based upon
the MLM Index™ (the “Index”). The Index is a benchmark of the hypothetical
returns available to a futures investor. The Index is comprised of a diverse
portfolio of futures markets, including both financial and tangible
markets.
Mount
Lucas Management Corporation (the “Manager”) is the investment manager of the
Trust and is responsible for the allocation of the Trust’s interest among a mix
of trading strategies. The Manager is a registered investment advisor under the
Investment Advisers Act of 1940, is registered as a commodity pool operator and
a commodity-trading advisor with the Commodity Futures Trading Commission and is
a member of the National Futures Association.
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (US
GAAP). The following is a summary of the significant accounting and
reporting policies used in preparing the financial statements.
Use
of Estimates
The
preparation of the accompanying financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
and Cash Equivalents
Cash and
cash equivalents consist of highly liquid financial instruments with maturities
of three months or less, when purchased.
Due
From Brokers
The
Trust’s trading activities utilize one broker located in the United States. Due
from broker represents cash balances held, unrealized profit or loss on futures
contracts, and amounts receivable or payable for transactions not settled at
December 31, 2009 and 2008.
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
2.
Summary of Significant Accounting Policies (continued)
Fair
Value Measurements
The Trust
has categorized its financial instruments, based on the priority of the inputs
to the valuation technique, into a three-level fair value hierarchy. The fair
value hierarchy gives the highest priority to quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). If the inputs used to measure the financial
instruments fall within different levels of the hierarchy, the categorization is
based on the lowest level input that is significant to the fair value
measurement of the instrument.
Financial
assets and liabilities recorded on the statement of assets and liabilities are
categorized based on the inputs to the valuation techniques as
follows:
Level
1:
Financial
assets and liabilities whose values are based on unadjusted quoted prices for
identical assets or liabilities in an active market (examples include active
exchange-traded equity securities, listed derivatives, most U.S. government and
agency securities, and certain other sovereign government
obligations).
Level
2:
Financial
assets and liabilities whose values are based on the following:
a)
|
Quoted
prices for similar assets or liabilities in active markets (for example,
restricted stock);
|
b)
|
Quoted
prices for identical or similar assets or liabilities in non-active
markets (examples include corporate and municipal bonds, which trade
infrequently);
|
c)
|
Pricing
models whose inputs are observable for substantially the full term of the
asset or liability (examples include most over-the-counter derivatives,
including interest rate and currency swaps);
and
|
d)
|
Pricing
models whose inputs are derived principally from or corroborated by
observable market data through correlation or other means for
substantially the full term of the asset or liability (for example,
certain mortgage loans).
|
Level
3:
Financial
assets and liabilities whose values are based on prices or valuation techniques
that require inputs that are both unobservable and significant to the overall
fair value measurement. These inputs reflect management's own assumptions about
the assumptions a market participant would use in pricing the asset or liability
(examples include private equity investments, certain commercial mortgage whole
loans and long-dated or complex derivatives, including certain foreign exchange
options and long-dated options on gas and power).
As
required by US GAAP, financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair
value measurement. As of December 31, 2009 and December 31, 2008, all of the
derivative instruments held by the Trust are fair valued based on quoted prices
in active markets (Level 1).
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
2.
Summary of Significant Accounting Policies (continued)
Fair
Value Measurements (continued)
The
Trust’s trading positions are valued at fair value and cash equivalents are
carried at their net asset value per share including accrued interest, as
applicable. All positions including the net unrealized appreciation or
depreciation are included under the caption “net unrealized gain/(loss) on open
futures contracts” on the statements of financial condition. Fair value is
principally based on listed market prices or broker or dealer price quotations.
The resulting change in unrealized profit or loss is reflected in net gain
(loss) on change in unrealized appreciation (depreciation) on investments on the
statements of operations.
Investment
Transactions and Investment Income
All
securities transactions are recorded on a trade-date basis. Realized gain and
loss are recorded using specific identification method. Interest income is
recorded using the accrual basis of accounting.
Income
Taxes
All of
the Series of the Trust are classified for Federal income tax purposes as
separate partnerships. Investors in each Series will reflect their proportionate
share of realized profit or loss on their separate tax returns. Accordingly, no
provisions for income taxes are required for the Trust.
The Trust
has elected an accounting policy to classify interest and penalties related to
unrecognized tax benefits as interest or other expense.
Redemptions
Payable
For
purposes of both financial reporting and calculation of redemption value, Net
Asset Value per unit is calculated by dividing Net Asset Value by the number of
outstanding investors’ interests.
3.
Cash and Cash Equivalents
The
Trust’s cash and cash equivalents consisted of:
December 31, 2009
|
December 31, 2008
|
|||||||
Overnight
money market s
|
$ | 10,001,000 | $ | 1,893,000 | ||||
U.S.
Government Agency Securities
|
81,011,771 | 96,557,403 | ||||||
Cash
in Checking Account
|
404,440 | 349,416 | ||||||
Total
|
$ | 91,417,211 | $ | 98,799,819 |
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
4.
Investors’ Interest
The Trust
is comprised of four series: the Unleveraged Series, which attempts to replicate
the Index without leverage, the Leveraged Series, which attempts to replicate
the Index at three times leverage, the MLM Commodity L/S Unleveraged Series
which attempts to replicate the MLM Commodity Long/Short Index without leverage
and the Commodity L/N Unleveraged Series which attempts to replicate the MLM
Commodity Long/Neutral Index without leverage (collectively, the
“Series”). . The MLM Commodity L/S Index is a
subset of the MLM Index and contains only the commodity futures contracts of the
entire MLM Index. The MLM Commodity L/N Index contains the same
commodity futures contracts, but does not have short positions when the MLM
Index algorithm indicates a short position in a particular
contract. Prior to December 2004, each Series had five classes of
shares: Class A, Class A-1, Class B, Class B-1 and Class C. On December 1, 2004,
Class D shares were offered in each Series. On December 31, 2004, the Manager
elected to close Class A-1 and Class B-1. Class A, Class B, Class C and Class D
shares are sold by authorized selling agents appointed by the Manager to
accredited investors at a price equal to each Class’s net asset value. Shares
may be redeemed at net asset value as of the last day of any month upon at least
ten business days’ written notice to the Manager.
The
Manager allocates profits and losses among the investors of a Series based on
the balance in each investor’s capital account.
The
Manager paid all of the expenses associated with the organization of the Trust
and the offered shares. As a result, each shareholder of Class A and Class B
shares pays the Manager an organizational fee in the amount of 0.5% of their
aggregate investment, net of any selling commission. Class A and Class B
shareholders are not charged an organizational fee once they have contributed a
total of $1,000,000 or more. Class C and Class D shareholders are not charged an
organizational fee.
The Class
A and Class C shares of the Unleveraged and Leveraged Series are subject to a
sales commission of 0% to 4% of the subscription amount, payable to the selling
agent from the investor’s investment for each series. The amount of the sales
commission will be determined by the selling agent.
5.
Margin Requirements
The Trust
had margin requirements of approximately $5,914,588 and $14,404,026 at December
31, 2009 and 2008, respectively, which were satisfied by net unrealized profits
and cash at the broker.
6.
Management Fee and Other Fees and Expenses
The Trust
pays the Manager a management fee and the introducing broker a brokerage fee as
a percentage of net assets, as of the first day of each month at the annualized
rates as follows:
Leveraged Series
|
||||||||||||||||||||||||
Total
fees
|
||||||||||||||||||||||||
Brokerage
|
Management
|
Organizational
|
Operating
|
Selling
|
and
|
|||||||||||||||||||
fee
|
fee
|
fee
|
expense
|
expense
|
commissions
|
|||||||||||||||||||
Class
A
|
1.75 | % | 2.80 | % | 0.50 | % | 0.35 | % | 4.00 | % | 9.40 | % | ||||||||||||
Class
B
|
1.75 | % | 1.30 | % | 0.50 | % | 0.35 | % | N/A | 3.90 | % | |||||||||||||
Class
C
|
0.90 | % | 2.05 | % | N/A | 0.35 | % | 4.00 | % | 7.30 | % | |||||||||||||
Class
D
|
0.90 | % | 1.30 | % | N/A | 0.35 | % | N/A | 2.55 | % |
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
6.
Management Fee and Other Fees and Expenses (continued)
Unleveraged, Commodity L/S Unleveraged Series, and
Commodity L/N Unleveraged Series
|
||||||||||||||||||||||||
Total
fees
|
||||||||||||||||||||||||
Brokerage
|
Management
|
Organizational
|
Operating
|
Selling
|
and
|
|||||||||||||||||||
fee
|
fee
|
fee
|
expense
|
expense
|
commissions
|
|||||||||||||||||||
Class
A
|
0.85 | % | 1.50 | % | 0.50 | % | 0.35 | % | 4.00 | % | 7.20 | % | ||||||||||||
Class
B
|
0.85 | % | 0.50 | % | 0.50 | % | 0.35 | % | N/A | 2.20 | % | |||||||||||||
Class
C
|
0.40 | % | 1.00 | % | N/A | 0.35 | % | 4.00 | % | 5.75 | % | |||||||||||||
Class
D
|
0.40 | % | 0.50 | % | N/A | 0.35 | % | N/A | 1.25 | % |
The Trust
pays 0.35% of average net assets for the Trust’s legal, accounting, auditing and
other operating expenses and fees. The Trust also pays the cash manager, banking
fees and State of New Jersey K-1 filing fees directly.
7.
Derivative Financial Instruments
Derivatives
are subject to various risks similar to non-derivative financial instruments
including market, credit, liquidity and operational risk. The risks of
derivatives should not be viewed in isolation but rather should be considered on
an aggregate basis along with the Trust’s other trading-related
activities.
The Trust
purchases and sells futures in financial instruments and
commodities. The Trust records its derivative activities on a
mark-to-market basis with realized and unrealized gains (losses) recognized
currently in the statements of operations and in due from brokers on the
statements of financial condition.
The
following table reflects the fair value of the Trust’s derivative financial
instruments.
Fair value at December 31
|
||||||||
2009
|
||||||||
Assets
|
Liabilities
|
|||||||
Financial
futures
|
$ | 187,104 | $ | (2,300,234 | ) | |||
Commodity
futures
|
1,626,318 | (647,676 | ) | |||||
Total
|
$ | 1,813,422 | $ | (2,947,910 | ) |
For the year ended December 31,
2009
|
||||||||||||
Change in
|
||||||||||||
Realized P&L
|
Unrealized
|
Total
|
||||||||||
Financial
futures
|
$ | 1,563,649 | $ | (4,659,592 | ) | $ | (3,095,943 | ) | ||||
Commodity
futures
|
(832,170 | ) | (2,665,372 | ) | (3,497,542 | ) | ||||||
Total
|
$ | 731,479 | $ | (7,324,964 | ) | $ | (6,593,485 | ) |
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
8.
Financial Highlights
The
following represents the per share operating performance ratios to average
investors’ interest and other supplemental information for the year ended
December 31, 2009:
Commodity
Unleveraged
|
Commodity
L/N Unleveraged
|
|||||||||||||||||||||||||||||||||||||||
Leveraged
Series
|
Unleveraged
Series
|
Series
|
Series
|
|||||||||||||||||||||||||||||||||||||
Class
A
shares
|
Class
B
shares
|
Class
C
shares
|
Class
D
shares
|
Class
A
shares
|
Class
B
shares
|
Class
C
shares
|
Class
D
shares
|
Class
D*
shares
|
Class
D*
shares
|
|||||||||||||||||||||||||||||||
Per
share operating performance
|
||||||||||||||||||||||||||||||||||||||||
Net
asset value per share, December 31, 2008
|
$ | 105.12 | $ | 120.43 | $ | 98.31 | $ | 121.29 | $ | 119.60 | $ | 132.04 | $ | 116.06 | $ | 117.94 | $ | 100.00 | $ | 100.00 | ||||||||||||||||||||
Income
(loss) from investment operations
|
||||||||||||||||||||||||||||||||||||||||
Net
investment income (loss)
|
(3.10 | ) | (1.93 | ) | (2.25 | ) | (1.96 | ) | (2.18 | ) | (1.14 | ) | (1.55 | ) | (1.01 | ) | (0.41 | ) | (0.07 | ) | ||||||||||||||||||||
Net
realized and unrealized gain (loss) on investment
transactions
|
(11.29 | ) | (12.97 | ) | (9.82 | ) | (12.13 | ) | (4.14 | ) | (4.58 | ) | (3.52 | ) | (3.58 | ) | 8.58 | 2.07 | ||||||||||||||||||||||
Total
from investment operations
|
(14.39 | ) | (14.90 | ) | (12.07 | ) | (14.09 | ) | (6.32 | ) | (5.72 | ) | (5.07 | ) | (4.59 | ) | 8.17 | 2.00 | ||||||||||||||||||||||
Net
asset value per share, December 31, 2009
|
$ | 90.73 | $ | 105.53 | $ | 86.24 | $ | 107.20 | $ | 113.28 | $ | 126.32 | $ | 110.99 | $ | 113.35 | $ | 108.17 | $ | 102.00 | ||||||||||||||||||||
Total
return
|
(13.69 | )% | (12.37 | )% | (12.28 | )% | (11.61 | )% | (5.28 | )% | (4.33 | )% | (4.37 | )% | (3.89 | )% | 8.17 | % | 2.00 | % | ||||||||||||||||||||
Ratio
to average net assets
|
||||||||||||||||||||||||||||||||||||||||
Net
investment income (loss)
|
(3.25 | )% | (1.75 | )% | (2.51 | )% | (1.76 | )% | (1.88 | )% | (0.88 | )% | (1.38 | )% | (0.88 | )% | (0.39 | )% | (0.05 | )% | ||||||||||||||||||||
Expenses
|
(3.36 | )% | (1.81 | )% | (2.61 | )% | (1.86 | )% | (2.03 | )% | (1.03 | )% | (1.53 | )% | (1.03 | )% | (0.39 | )% | (0.05 | )% |
Total
return is calculated as the change in the net asset value per share for the
year. The per share operating performance and ratios are computed
based upon the weighted-average shares outstanding and weighted-average
investors’ interest, respectively, for each class, for the year ended December
31, 2009. An individual investor’s return may vary from the above
based upon the timing of capital transactions.
*Total
return and ratios not annualized.
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
8.
Financial Highlights (continued)
The
following represents the per share operating performance ratios to average
investors’ interest and other supplemental information for the year ended
December 31, 2008:
Leveraged
Series
|
Unleveraged
Series
|
|||||||||||||||||||||||||||||||
|
Class
A
shares
|
Class
B
shares
|
Class
C
shares
|
Class
D
shares
|
Class
A
shares
|
Class
B
shares
|
Class
C
shares
|
Class
D
shares
|
||||||||||||||||||||||||
Per
share operating performance
|
||||||||||||||||||||||||||||||||
Net
asset value per share, December 31, 2007
|
$ | 78.88 | $ | 89.06 | $ | 72.63 | $ | 88.95 | $ | 106.89 | $ | 116.86 | $ | 102.77 | $ | 103.92 | ||||||||||||||||
Income
from investment operations
|
||||||||||||||||||||||||||||||||
Net
investment income (loss)
|
(0.87 | ) | 0.47 | (0.21 | ) | 0.47 | 0.60 | 1.87 | 1.11 | 1.66 | ||||||||||||||||||||||
Net
realized and unrealized gain on investment transactions
|
27.11 | 30.90 | 25.89 | 31.87 | 12.11 | 13.32 | 12.18 | 12.36 | ||||||||||||||||||||||||
Total
from investment operations
|
26.24 | 31.37 | 25.68 | 32.34 | 12.71 | 15.19 | 13.29 | 14.02 | ||||||||||||||||||||||||
Net
asset value per share, December 31, 2008
|
$ | 105.12 | $ | 120.43 | $ | 98.31 | $ | 121.29 | $ | 119.60 | $ | 132.04 | $ | 116.06 | $ | 117.94 | ||||||||||||||||
Total
return
|
33.27 | % | 35.22 | % | 35.36 | % | 36.36 | % | 11.89 | % | 13.00 | % | 12.93 | % | 13.49 | % | ||||||||||||||||
Ratio
to average net assets
|
||||||||||||||||||||||||||||||||
Net
investment loss
|
(1.02 | )% | 0.49 | % | (0.26 | )% | 0.48 | % | 0.57 | % | 1.56 | % | 1.04 | % | 1.54 | % | ||||||||||||||||
Expenses
|
(3.28 | )% | (1.79 | )% | (2.45 | )% | (1.61 | )% | (1.93 | )% | (0.93 | )% | (1.41 | )% | (0.91 | )% |
Total
return is calculated as the change in the net asset value per share for the
year. The per share operating performance and ratios are computed
based upon the weighted-average shares outstanding and weighted-average
investors’ interest, respectively, for each class, for the year ended December
31, 2007. An individual investor’s return may vary from the above
based upon the timing of capital transactions.
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
9.
New Accounting Pronouncements
Effective
for the quarter ending June 30, 2009, The Trust adopted ASC Topic 855,
“Subsequent Events” which provides guidance to establish general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. The adoption of ACS Topic 855 did not have a material
impact on the Trust financial statements.
Effective
July 1, 2009, the Trust adopted ASC Topic 105, “Generally Accepted Accounting
Principles”. ASC Topic 105 establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles recognized by
the FASB to be applied by non-governmental entities in the preparation of
financial statements in conformity with US GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative US GAAP for SEC registrants. The
Codification did not change US GAAP but reorganizes the existing literature into
Topics. References to FASB guidance throughout this document have
been updated for the Codification.
On
January 1, 2009, the Trust adopted certain provisions of ASC Topic 815 with
respect to disclosures about derivative instruments and hedging activities and
the provision of certain tabular disclosures of the effects of such instruments
and related hedged items on our financial position, financial performance, and
cash flows. See Note 7. Derivative financial instruments. The adoption of these
provisions did not have a material impact on the Trust’s financial
statements.
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
10.
Statements of Financial Condition and Operations by Series
December
31, 2009
Assets
|
Commodity L/N Unleveraged
Series
|
Commodity unleveraged
Series
|
Leveraged Series
|
Unleveraged Series
|
Trust Total
|
|||||||||||||||
Cash
and cash equivalents
|
$ | 7,999,557 | $ | 186,896 | $ | 27,107,971 | $ | 56,122,787 | $ | 91,417,211 | ||||||||||
Due
from broker
|
504,578 | 3,004,023 | 20,992,597 | 13,875,228 | 38,376,426 | |||||||||||||||
Net
unrealized gain on open futures contracts, at fair value
|
100,833 | 57,043 | - | - | 157,876 | |||||||||||||||
Interest
receivable
|
- | - | 1,773 | 3,641 | 5,414 | |||||||||||||||
Total
assets
|
8,604,968 | 3,247,962 | 48,102,341 | 70,001,656 | 129,956,927 | |||||||||||||||
Liabilities
and investors’ interest
|
||||||||||||||||||||
Redemptions
payable
|
- | - | 684,794 | 23,149,576 | 23,834,370 | |||||||||||||||
Net
unrealized loss on open futures contracts, at fair value
|
- | - | 976,564 | 315,800 | 1,292,364 | |||||||||||||||
Brokerage
commissions payable
|
1,667 | - | 39,138 | 24,319 | 65,124 | |||||||||||||||
Management
fee payable
|
2,084 | 1,334 | 59,315 | 33,265 | 95,998 | |||||||||||||||
Accrued
expenses
|
- | 468 | 46,644 | 43,005 | 90,117 | |||||||||||||||
Total
liabilities
|
3,751 | 1,802 | 1,806,455 | 23,565,965 | 25,377,973 | |||||||||||||||
Investors’
interest
|
8,601,217 | 3,246,160 | 46,295,886 | 46,435,691 | 104,578,954 | |||||||||||||||
Total
liabilities and investors’ interest
|
$ | 8,604,968 | $ | 3,247,962 | $ | 48,102,341 | $ | 70,001,656 | $ | 129,956,927 |
December
31, 2008
Assets
|
Leveraged Series
|
Unleveraged Series
|
Trust Total
|
|||||||||
Cash
and cash equivalents
|
$ | 30,024,522 | $ | 68,775,297 | $ | 98,799,819 | ||||||
Due
from broker
|
20,944,096 | 13,610,707 | 34,554,803 | |||||||||
Net
unrealized gain on open futures contracts, at fair value
|
3,957,127 | 2,233,349 | 6,190,476 | |||||||||
Interest
receivable
|
18,502 | 46,776 | 65,278 | |||||||||
Other
assets
|
28 | - | 28 | |||||||||
Total
assets
|
54,944,275 | 84,666,129 | 139,610,404 | |||||||||
- | ||||||||||||
Liabilities
and investors’ interest
|
- | |||||||||||
Redemptions
payable
|
2,628,482 | 252,614 | 2,881,096 | |||||||||
Brokerage
commissions payable
|
75,342 | 13,634 | 88,976 | |||||||||
Management
fee payable
|
65,011 | 38,223 | 103,234 | |||||||||
Accrued
expenses
|
193,219 | 147,145 | 340,364 | |||||||||
Total
liabilities
|
2,962,054 | 451,616 | 3,413,670 | |||||||||
Investors’
interest
|
51,982,221 | 84,214,513 | 136,196,734 | |||||||||
Total
liabilities and investors’ interest
|
$ | 54,944,275 | $ | 84,666,129 | $ | 139,610,404 |
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
10.
Statements of Financial Condition and Operations by Series
(continued)
Year
ended December 31, 2009
|
Commodity L/N Unleveraged
Series*
|
Commodity unleveraged
Series**
|
Leveraged Series
|
Unleveraged Series
|
Trust Total
|
|||||||||||||||
Investment
income
|
||||||||||||||||||||
Interest
|
$ | - | $ | - | $ | 51,086 | $ | 108,814 | $ | 159,900 | ||||||||||
Expenses
|
||||||||||||||||||||
Brokerage
commissions
|
5,270 | 1,667 | 592,105 | 362,198 | 961,240 | |||||||||||||||
Management
fee
|
6,588 | 2,084 | 720,477 | 414,080 | 1,143,229 | |||||||||||||||
Operating
expenses
|
5,574 | 1,459 | 273,557 | 391,907 | 672,497 | |||||||||||||||
Total
expenses
|
17,432 | 5,210 | 1,586,139 | 1,168,185 | 2,776,966 | |||||||||||||||
Net
investment (loss) income
|
(17,432 | ) | (5,210 | ) | (1,535,053 | ) | (1,059,371 | ) | (2,617,066 | ) | ||||||||||
Realized
and unrealized gain (loss) on investments
|
||||||||||||||||||||
Net
realized gain
|
205,095 | 4,594 | 198,011 | 324,223 | 731,923 | |||||||||||||||
Net
(loss) gain on change in unrealized appreciation on investments and
foreign currency
|
57,497 | 100,833 | (4,946,374 | ) | (2,556,563 | ) | (7,344,607 | ) | ||||||||||||
Net
realized and unrealized gain (loss) on investments
|
262,592 | 105,427 | (4,748,363 | ) | (2,232,340 | ) | (6,612,684 | ) | ||||||||||||
Net
(loss ) income
|
$ | 245,160 | $ | 100,217 | $ | (6,283,416 | ) | $ | (3,291,711 | ) | $ | (9,229,750 | ) |
*
Period from December 1, 2009 (commencement of operations) to December 31,
2009
**
Period from August 1, 2009 (commencement of operations) to December 31,
2009
Year
ended December 31, 2008
Investment
income
|
Leveraged
Series
|
Unleveraged
Series
|
Trust
Total
|
|||||||||
Interest
|
$ | 949,382 | $ | 1,974,332 | $ | 2,923,714 | ||||||
Expenses
|
||||||||||||
Brokerage
commissions
|
579,037 | 398,556 | 977,593 | |||||||||
Management
fee
|
668,846 | 446,769 | 1,115,615 | |||||||||
Operating
expenses
|
173,994 | 332,446 | 506,440 | |||||||||
Total
expenses
|
1,421,877 | 1,177,771 | 2,599,648 | |||||||||
Net
investment (loss) income
|
(472,495 | ) | 796,561 | 324,066 | ||||||||
Realized
and unrealized gain (loss) on investments
|
||||||||||||
Net
realized gain
|
11,308,833 | 7,795,635 | 19,104,468 | |||||||||
Net
gain on change in unrealized appreciation on investments and foreign
currency
|
2,930,402 | 1,558,204 | 4,488,606 | |||||||||
Net
realized and unrealized gain on investments
|
14,239,235 | 9,353,839 | 23,593,074 | |||||||||
Net
(loss ) income
|
$ | 13,766,740 | $ | 10,150,400 | $ | 23,917,140 |
MLM
INDEX™ FUND
NOTES
TO FINANCIAL STATEMENTS (continued)
December
31, 2009 and 2008
10.
Statements of Financial Condition and Operations by Series
(continued)
Year
ended December 31, 2007
Investment
income
|
Leveraged
Series
|
Unleveraged
Series
|
Trust
Total
|
|||||||||
Interest
|
$ | 3,120,223 | $ | 5,363,758 | $ | 8,483,981 | ||||||
Expenses
|
||||||||||||
Brokerage
commissions
|
860,634 | 584,137 | 1,444,771 | |||||||||
Management
fee
|
930,244 | 606,029 | 1,536,273 | |||||||||
Operating
expenses
|
718,369 | 681,082 | 1,399,451 | |||||||||
Total
expenses
|
2,509,247 | 1,871,248 | 4,380,495 | |||||||||
Net
investment (loss) income
|
610,976 | 3,492,510 | 4,103,486 | |||||||||
Realized
and unrealized gain (loss) on investments
|
||||||||||||
Net
realized loss
|
(4,646,746 | ) | (2,150,555 | ) | (6,797,301 | ) | ||||||
Net
gain on change in unrealized appreciation (depreciation) on investments
and foreign currency
|
(612,748 | ) | 127,795 | (484,953 | ) | |||||||
Net
realized and unrealized loss on investments
|
(5,259,494 | ) | (2,022,760 | ) | (7,282,254 | ) | ||||||
Net
(loss) income
|
$ | (4,648,518 | ) | $ | 1,469,750 | $ | (3,178,768 | ) |
11. Subsequent
Events
From
January 1, 2010 through February 25, 2010, the Trust
had subscriptions received or pending of $283,805 and $170,165 for the Leveraged
and Unleveraged Series respectively. In addition, the Trust had
redemptions received or pending of $6,142,630 and $438,998 for the Leveraged and
Unleveraged Series respectively.
Item
15.
|
Exhibits,
Financial Statement Schedules
|
(b)
Exhibits
Exhibit
Number
|
Item
Description
|
3.1
|
Restated
Certificate of Trust for MLM Index™ Trust, filed 1/14/98 (Filed as Exhibit
3.1 to the Registrant's Form 10-K and incorporated by reference
herein.)
|
3.2
|
Amended
and Restated Declaration of Trust and Trust Agreement of MLM Index™ Fund
(Filed as Exhibit 3.2 to the Registrant's Form 10-K and incorporated by
reference herein).
|
3.3
|
Amendment
Nos. 1 to 6 the Amended and Restated Declaration of Trust and Trust
Agreement of MLM Index™ Fund (Filed as Exhibit 3.3 to the Registrant's
Form 10-K and incorporated by reference herein).
|
14.1
|
Code
of Ethics (Filed as Exhibit 14.1 to the Registrant's Form 10-K and
incorporated by reference herein)..
|
Certification
of President of the Manager Pursuant to Rule 13A-15(e) and Rule 15D-15(e),
of the Securities Exchange Act.
|
|
Certification
of Vice President and Chief Operating Officer of the Manager Pursuant to
Rule 13A-15(e) and Rule 15D-15(e), of the Securities Exchange
Act.
|
|
Certification
of President of the Manager Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
Certification
of Vice President and Chief Operating Officer of the Manager Pursuant to
18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, MLM Index™ Fund has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: February
25, 2010
MLM
INDEX™ FUND
By: /s/ Timothy
J. Rudderow
Timothy
J. Rudderow, President
Mount
Lucas Management Corporation
Manager
31