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EX-31.01 - EX-31.01 - ML Winton FuturesAccess LLCa10-9768_7ex31d01.htm
EX-32.02 - EX-32.02 - ML Winton FuturesAccess LLCa10-9768_7ex32d02.htm
EX-31.02 - EX-31.02 - ML Winton FuturesAccess LLCa10-9768_7ex31d02.htm
EX-32.01 - EX-32.01 - ML Winton FuturesAccess LLCa10-9768_7ex32d01.htm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period  ended  March 31, 2010

 

OR

 

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

 

For the transition period from                  to

 

Commission File Number 0-51084

 

ML WINTON FUTURESACCESS LLC

(Exact Name of Registrant as

specified in its charter)

 

Delaware

 

20-1227904

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 6th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

 

212-449-3517

(Registrant’s telephone number, including area code)

 

Two World Financial Center, 7th Floor

New York, New York 10281

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o  No o

 

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

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Small reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes o  No x

 

As of March 31, 2010, 510,839,946 units of limited liability company interest were outstanding.

 

 

 



 

ML WINTON FUTURESACCESS LLC

 

QUARTERLY REPORT FOR MARCH 31, 2010 ON FORM 10-Q

 

Table of Contents

 

 

 

PAGE

 

PART I

 

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

15

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

 

 

 

Item 4T.

Controls and Procedures

25

 

 

 

 

PART II

 

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

Item 1A.

Risk Factors

25

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

 

 

 

Item 3.

Defaults Upon Senior Securities

26

 

 

 

Item 4.

(Removed and Reserved)

27

 

 

 

Item 5.

Other Information

27

 

 

 

Item 6.

Exhibits

27

 



 

PART I - FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

ML WINTON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2010

 

2009

 

ASSETS:

 

 

 

 

 

Equity in commodity futures trading accounts:

 

 

 

 

 

Cash (including restricted cash of $73,072,899 for 2010 and $53,748,925 for 2009)

 

$

767,236,736

 

$

761,893,194

 

Net unrealized profit on open contracts

 

30,711,148

 

3,305,166

 

Cash and cash equivalents

 

239,065

 

1,102,160

 

Accrued interest receivable

 

347

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

798,187,296

 

$

766,300,520

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Brokerage commissions payable

 

$

 

$

115,138

 

Sponsor and Advisory fees payable

 

2,076,395

 

3,146,710

 

Redemptions payable

 

9,931,035

 

12,610,951

 

Other liabilities

 

429,674

 

391,254

 

 

 

 

 

 

 

Total liabilities

 

12,437,104

 

16,264,053

 

 

 

 

 

 

 

MEMBERS’ CAPITAL:

 

 

 

 

 

Sponsor’s Interest (19,470 Units and 19,470 Units)

 

29,762

 

28,686

 

Members’ Interest (510,820,476 Units and 506,821,001 Units)

 

785,720,430

 

750,007,781

 

Total members’ capital

 

785,750,192

 

750,036,467

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS’ CAPITAL

 

$

798,187,296

 

$

766,300,520

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT (SEE NOTE 4)

 

 

 

 

 

(Based on 510,839,946 and 506,840,471 Units outstanding; unlimited Units authorized)

 

 

 

 

 

 

See notes to financial statements.

 

1



 

WINTON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three

 

For the three

 

 

 

months ended

 

months ended

 

 

 

March 31,

 

March 31,

 

 

 

2010

 

2009

 

TRADING PROFIT (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized, net

 

$

9,493,753

 

$

9,292,135

 

Change in unrealized, net

 

27,405,982

 

(16,097,643

)

Brokerage commissions

 

(215,593

)

(181,189

)

 

 

 

 

 

 

Total trading profit (loss)

 

36,684,142

 

(6,986,697

)

 

 

 

 

 

 

INVESTMENT INCOME:

 

 

 

 

 

Interest

 

(2,323

)

55,697

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

Management fee

 

3,774,461

 

3,999,305

 

Sponsor fee

 

2,253,164

 

2,626,833

 

Performance fee

 

 

583

 

Other

 

251,642

 

295,838

 

Total expenses

 

6,279,267

 

6,922,559

 

 

 

 

 

 

 

NET INVESTMENT LOSS

 

(6,281,590

)

(6,866,862

)

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

30,402,552

 

$

(13,853,559

)

 

 

 

 

 

 

NET INCOME (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding

 

 

 

 

 

Class A

 

47,770,151

 

47,560,872

 

Class C

 

202,126,577

 

216,536,584

 

Class D

 

82,273,356

 

77,522,038

 

Class I

 

37,631,692

 

43,458,423

 

Class DS

 

107,476,448

 

72,859,473

 

Class DT

 

40,038,225

 

52,578,873

 

 

 

 

 

 

 

Net income (loss) per weighted average Unit

 

 

 

 

 

Class A

 

$

0.0583

 

$

(0.0295

)

Class C

 

$

0.0518

 

$

(0.0311

)

Class D

 

$

0.0662

 

$

(0.0229

)

Class I

 

$

0.0608

 

$

(0.0272

)

Class DS

 

$

0.0634

 

$

(0.0238

)

Class DT

 

$

0.0648

 

$

(0.0197

)

 

See notes to financial statements.

 

2



 

ML WINTON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the three months ended March 31, 2010 and 2009

(unaudited in Units)

 

 

 

Members’ Capital
December 31,2008

 

Subscriptions

 

Redemptions

 

Members’ Capital
March 31, 2009

 

Members’ Capital
December 31, 2009

 

Subscriptions

 

Redemptions

 

Members’ Capital
March 31, 2010

 

Class A

 

45,849,416

 

4,268,304

 

(2,143,990

)

47,973,730

 

47,207,338

 

1,595,411

 

(1,603,745

)

47,199,004

 

Class C

 

215,169,073

 

10,389,224

 

(19,428,207

)

206,130,090

 

198,836,141

 

11,484,962

 

(11,559,369

)

198,761,734

 

Class D

 

73,051,567

 

5,500,229

 

 

78,551,796

 

76,481,524

 

7,342,726

 

(2,979,453

)

80,844,797

 

Class I

 

43,073,827

 

3,041,521

 

(4,061,573

)

42,053,775

 

37,155,502

 

2,241,298

 

(1,608,544

)

37,788,256

 

Class DS

 

69,186,442

 

5,990,030

 

(1,590,610

)

73,585,862

 

106,138,162

 

1,604,680

 

(362,381

)

107,380,461

 

Class DT

 

53,758,785

 

 

(2,240,582

)

51,518,203

 

41,002,334

 

 

(2,156,110

)

38,846,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Units

 

500,089,110

 

29,189,308

 

(29,464,962

)

499,813,456

 

506,821,001

 

24,269,077

 

(20,269,602

)

510,820,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

9,713

 

 

 

9,713

 

9,713

 

 

 

9,713

 

Class C

 

9,757

 

 

 

9,757

 

9,757

 

 

 

9,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Sponsor’s Units

 

19,470

 

 

 

19,470

 

19,470

 

 

 

19,470

 

 

See notes to financial statements.

 

3


 


 

ML WINTON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the three months ended March 31, 2010 and 2009

(unaudited)

 

 

 

Members’ Capital
December 31, 2008

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
March 31, 2009

 

Members’ Capital
December 31, 2009

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ Capital
March 31, 2010

 

Class A

 

$

75,377,293

 

$

7,031,067

 

$

(3,519,272

)

$

(1,403,459

)

$

77,485,629

 

$

71,227,277

 

$

2,378,246

 

$

(2,437,850

)

$

2,785,540

 

$

73,953,213

 

Class C

 

340,542,258

 

16,472,281

 

(30,563,973

)

(6,723,540

)

319,727,026

 

285,929,558

 

16,257,242

 

(16,588,150

)

10,472,428

 

296,071,078

 

Class D

 

117,366,051

 

8,857,523

 

 

(1,772,631

)

124,450,943

 

114,447,349

 

10,850,321

 

(4,647,328

)

5,450,411

 

126,100,753

 

Class I

 

71,357,222

 

5,066,718

 

(6,729,030

)

(1,180,424

)

68,514,486

 

56,724,216

 

3,394,288

 

(2,436,486

)

2,286,617

 

59,968,635

 

Class DS

 

111,018,099

 

9,666,212

 

(2,579,492

)

(1,737,149

)

116,367,670

 

158,630,745

 

2,382,891

 

(540,635

)

6,812,399

 

167,285,400

 

Class DT

 

88,296,222

 

 

(3,705,795

)

(1,035,767

)

83,554,660

 

63,048,636

 

 

(3,301,366

)

2,594,081

 

62,341,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Interest

 

$

803,957,145

 

$

47,093,801

 

$

(47,097,562

)

$

(13,852,970

)

$

790,100,414

 

$

750,007,781

 

$

35,262,988

 

$

(29,951,815

)

$

30,401,476

 

$

785,720,430

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

15,971

 

$

 

$

 

$

(281

)

$

15,690

 

$

14,655

 

$

 

$

 

$

568

 

$

15,223

 

Class C

 

15,444

 

 

 

(308

)

15,136

 

14,031

 

 

 

508

 

14,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Sponsor’s Interest

 

$

31,415

 

$

 

$

 

$

(589

)

$

30,826

 

$

28,686

 

$

 

$

 

$

1,076

 

$

29,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Capital

 

$

803,988,560

 

$

47,093,801

 

$

(47,097,562

)

$

(13,853,559

)

$

790,131,240

 

$

750,036,467

 

$

35,262,988

 

$

(29,951,815

)

$

30,402,552

 

$

785,750,192

 

 

See notes to financial statements.

 

4


 


 

ML WINTON FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

For the three months ended March 31, 2010 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.5088

 

$

1.4380

 

$

1.4964

 

$

1.5267

 

$

1.4946

 

$

1.5377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

0.0722

 

0.0687

 

0.0718

 

0.0731

 

0.0718

 

0.0739

 

Brokerage commissions

 

(0.0004

)

(0.0004

)

(0.0004

)

(0.0004

)

(0.0004

)

(0.0004

)

Interest income

 

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

(0.0000

)

Expenses

 

(0.0138

)

(0.0167

)

(0.0080

)

(0.0124

)

(0.0081

)

(0.0064

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.5668

 

$

1.4896

 

$

1.5598

 

$

1.5870

 

$

1.5579

 

$

1.6048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

3.85

%

3.95

%

4.24

%

3.95

%

4.24

%

4.37

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Total return after Performance fees

 

3.85

%

3.95

%

4.24

%

3.95

%

4.24

%

4.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

1.17

%

0.81

%

0.54

%

0.81

%

0.54

%

0.41

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

0.00

%

Expenses (including Performance fees)

 

1.17

%

0.81

%

0.54

%

0.81

%

0.54

%

0.41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-1.17

%

-0.81

%

-0.54

%

-0.81

%

-0.54

%

-0.41

%

 


(a) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole.

An individual members’ return may vary from these returns based on timing of capital transactions.

See notes to financial statements.

 

5



 

ML WINTON FUTURESACCESS LLC

(A Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

For the three months ended March 31, 2009 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class DS

 

Class DT

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.6440

 

$

1.5827

 

$

1.6066

 

$

1.6566

 

1.6046

 

1.6425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit(loss)

 

(0.0136

)

(0.0130

)

(0.0134

)

(0.0137

)

(0.0133

)

(0.0137

)

Brokerage commissions

 

(0.0004

)

(0.0003

)

(0.0004

)

(0.0004

)

(0.0004

)

(0.0004

)

Interest income

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

0.0001

 

Expenses

 

(0.0146

)

(0.0182

)

(0.0087

)

(0.0129

)

(0.0088

)

(0.0068

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.6155

 

$

1.5513

 

$

1.5842

 

$

1.6297

 

$

1.5822

 

$

1.6217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return before Performance fees

 

-1.76

%

-2.00

%

-1.39

%

-1.66

%

-1.39

%

-1.26

%

Performance fees

 

0.00

%

0.00

%

-0.01

%

0.00

%

-0.01

%

0.00

%

Total return after Performance fees

 

-1.76

%

-2.00

%

-1.40

%

-1.66

%

-1.40

%

-1.26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding Performance fees)

 

0.91

%

1.16

%

0.54

%

0.81

%

0.54

%

0.41

%

Performance fees

 

0.00

%

0.00

%

0.00

%

0.00

%

0.01

%

-0.01

%

Expenses (including Performance fees)

 

0.91

%

1.16

%

0.54

%

0.81

%

0.55

%

0.40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

-0.91

%

-1.15

%

-0.53

%

-0.80

%

-0.54

%

-0.40

%

 


(a) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole.

An individual members’ return may vary from these returns based on timing of capital transactions.

See notes to financial statements.

 

6



 

ML WINTON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML Winton FuturesAccess LLC (the “Fund”) was organized under the Delaware Limited Liability Company Act on May 17, 2004 and commenced trading activities on February 1, 2005. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 2 for discussion of net asset value and net asset value per unit for subscriptions and redemptions purposes hereinafter referred to as Net Asset Value and Net Asset Value per Unit) as of the beginning of each calendar month. The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Winton Capital Management Limited (“Winton” or the “Trading Advisor”), is the Trading Advisor of the Fund.

 

Merrill Lynch Alternative Investments LLC (“MLAI”) is the sponsor (“Sponsor”) and manager (“Manager”) of the Fund. MLAI is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”).  Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch, is the Fund’s commodity broker. On September 15, 2008, Merrill Lynch (or the “Company”) entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 dated as of October 21, 2008, the “Merger Agreement”) with Bank of America Corporation (“Bank of America”). Pursuant to the Merger Agreement, on January 1, 2009, a wholly-owned subsidiary of Bank of America (“Merger Sub”) merged with and into Merrill Lynch, with Merrill Lynch continuing as the surviving corporation and a subsidiary of Bank of America (the “Merger”).

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Fund as of March 31, 2010 and the results of its operations for the three months ended March 31, 2010 and 2009.  However, the operating results for the interim periods may not be indicative of the results for the full year.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read  in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2009.

 

The Fund offers six Classes of Units:  Class A, Class C, Class D, Class DT, Class DS, and Class I.  Each Class of Units except for Class DT and Class DS was offered at $1.00 per Unit during the initial offering period and subsequently is offered at Net Asset Value per Unit (see Note 4).  Class DS commenced on April 2, 2007 and was offered at $1.0733 and Class DT commenced on June 1, 2007 and was offered at $1.1914.  The six Classes of Units are subject to different Sponsor fees.

 

7



 

Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority.  Interests are not deposits or other obligations of, and are not guaranteed by, Bank of America or any of its affiliates or by any bank.  Interests are subject to investment risks, including the possible loss of the full amount invested.

 

Estimates

 

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

 

8


 


 

2.               CONDENSED SCHEDULES OF INVESTMENTS

 

The Fund’s investments, defined as Net unrealized profit (loss) on open contracts in the Statements of Financial Condition, as of March 31, 2010 and December 31, 2009 are as follows:

 

March 31, 2010

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

409

 

$

231,673

 

0.03

%

(2,439

)

$

3,303,564

 

0.42

$

3,535,237

 

0.45

%

April 2010 - December 2010

 

Currencies

 

3,993

 

2,739,449

 

0.35

%

(3,717

)

1,696,056

 

0.22

%

4,435,505

 

0.57

%

June 2010

 

Energy

 

1,083

 

1,384,411

 

0.18

%

(283

)

1,134,532

 

0.14

%

2,518,943

 

0.33

%

April 2010 - July 2010

 

Interest rates

 

11,434

 

6,864,578

 

0.87

%

(1,447

)

(83,734

)

-0.01

%

6,780,844

 

0.86

%

April 2010 - June 2012

 

Metals

 

1,785

 

8,687,007

 

1.11

%

(297

)

(1,952,917

)

-0.25

%

6,734,090

 

0.86

%

May 2010 - July 2010

 

Stock indices

 

6,531

 

6,706,637

 

0.85

%

(4

)

(108

)

0.00

%

6,706,529

 

0.85

%

April 2010 - June 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

26,613,755

 

3.39

%

 

 

$

4,097,393

 

0.53

$

30,711,148

 

3.92

%

 

 

 

December 31, 2009

 

 

 

Long Positions

 

Short Positions

 

Net Unrealized

 

 

 

 

 

Commodity Industry

 

Number of

 

Unrealized

 

Percent of

 

Number of

 

Unrealized

 

Percent of

 

Profit (Loss)

 

Percent of

 

 

 

Sector

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

Contracts

 

Profit (Loss)

 

Members’ Capital

 

on Open Positions

 

Members’ Capital

 

Maturity Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

1,102

 

$

1,087,413

 

0.14

%

(989

)

$

(286,832

)

-0.04

$

800,581

 

0.10

%

January 10 - November 10

 

Currencies

 

2,892

 

(2,562,251

)

-0.34

%

(302

)

(169,839

)

-0.02

%

(2,732,090

)

-0.36

%

March 10

 

Energy

 

106

 

134,142

 

0.02

%

(255

)

(642,428

)

-0.09

%

(508,286

)

-0.07

%

January 10 - December 10

 

Interest rates

 

7,633

 

(179,602

)

-0.03

%

(460

)

17,539

 

0.00

%

(162,063

)

-0.03

%

January 10 - June 10

 

Metals

 

1,420

 

3,027,127

 

0.40

%

(106

)

(880,988

)

-0.13

%

2,146,139

 

0.27

%

January 10 - April 10

 

Stock indices

 

5,218

 

3,774,920

 

0.50

%

(16

)

(14,035

)

0.00

%

3,760,885

 

0.50

%

January 10 - March 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

5,281,749

 

0.69

%

 

 

$

(1,976,583

)

-0.28

$

3,305,166

 

0.41

%

 

 

 

No individual contract’s unrealized gain or loss comprised greater than 5% of the Members’ Capital as of March 31, 2010 and December 31, 2009.

 

9


 


 

3.               FAIR VALUE OF INVESTMENTS

 

The Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”) which provides authoritative guidance on fair value measurement. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). All investments (including derivative financial instruments and derivative commodity instruments) are held for trading purposes.  The investments are recorded on trade date and open contracts are recorded at fair value (described below) at the measurement date. Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included in Equity in commodity futures trading account.  Any change in net unrealized gain or loss from the preceding period is reported in the Statement of Operations.

 

The fair value measurement guidance established a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

 

Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.

 

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.

 

Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level

 

10



 

of input that is significant to the fair value measurement. MLAI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

Following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.

 

Exchange traded investments are fair valued by the Fund by using the reported closing price on the primary exchange where it trades such investments.  These closing prices are observed through the clearing broker and third party pricing services. For non-exchange traded investments, quoted values and other data provided by nationally recognized independent pricing sources are used as inputs into its process for determining fair values.

 

The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair market value.

 

The Fund has determined that Level I securities would include all of its futures and options contracts where it believes that quoted prices are available in an active market.

 

Where the Fund believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of securities with similar characteristics, pricing models or matrix pricing and these are generally classified as Level II securities. The Fund determined that Level II securities would include its forward contracts.

 

The Fund’s net unrealized profit (loss) on open forward and futures contracts as of March 31, 2010 and December 31, 2009 are as follows:

 

March 31, 2010

 

Unrealized Long Positions

 

Unrealized Short Positions

 

Total

 

Futures

 

$

26,613,755

 

$

4,097,393

 

$

30,711,148

 

Forwards

 

 

 

 

Total

 

$

26,613,755

 

$

4,097,393

 

$

30,711,148

 

 

December 31, 2009

 

Unrealized Long Positions

 

Unrealized Short Positions

 

Total

 

Futures

 

$

5,281,749

 

$

(1,976,583

)

$

3,305,166

 

Forwards

 

 

 

 

Total

 

$

5,281,749

 

$

(1,976,583

)

$

3,305,166

 

 

The Fund’s volume of trading forward and futures as of the quarter and year ended March 31, 2010 and the December 31, 2009, respectively are representative of the activity throughout these periods.

 

11



 

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of March 31, 2010 and December 31, 2009:

 

Net unrealized

 

 

 

 

 

 

 

 

 

profit (loss)

 

 

 

 

 

 

 

 

 

on open contracts

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

March 31, 2010

 

$

30,711,148

 

$

25,714,800

 

$

4,996,348

 

$

 

December 31, 2009

 

$

3,305,166

 

$

986,304

 

$

2,318,862

 

$

 

 

There were no significant transfers to or from Level 1or II during the quarter ended March 31, 2010.

 

The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. Such contracts meet the definition of a derivative as noted in the guidance for accounting for derivative and hedging activities. The fair value amounts of and the gains and losses on derivative instruments is disclosed in the statements of financial condition and statements of operations, respectively. There are no credit related contingent features embedded in these derivative contracts.

 

The following table indicates the trading gains and losses, by commodity industry sector, on derivative instruments for each of the three month periods ended March 31, 2010 and 2009:

 

 

 

For the three months ended

 

For the three months ended

 

 

 

March 31, 2010

 

March 31, 2009

 

Commodity Industry Sector

 

Gain (loss) from trading

 

Gain (loss) from trading

 

 

 

 

 

 

 

Agriculture

 

$

4,113,927

 

3,053,537

 

Currencies

 

11,663,862

 

(10,372,414

)

Energy

 

741,807

 

2,240,462

 

Interest rates

 

11,045,343

 

(3,305,336

)

Metals

 

3,643,121

 

(2,316,083

)

Stock indices

 

5,691,675

 

3,894,326

 

 

 

 

 

 

 

Total

 

$

36,899,735

 

(6,805,508

)

 

The Fund is subject to the risk of insolvency of a counterparty, an exchange, a clearinghouse or MLPF&S.  Fund assets could be lost or impounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Fund’s capital tied up in a bankruptcy or other similar types of proceedings, MLAI might suspend or limit trading, perhaps causing the Fund to miss significant profit opportunities.  There are increased risks in dealing with unregulated trading counterparties including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated dealers and brokers.

 

12



 

4.               NET ASSET VALUE PER UNIT

 

The Net Asset Value per Unit of the different Classes at March 31, 2010 and December 31, 2009 are as follows:

 

March 31, 2010

 

Net Asset Value

Class A

 

$

1.5668

 

Class C

 

1.4896

 

Class D

 

1.5598

 

Class I

 

1.5870

 

Class DS

 

1.5579

 

Class DT

 

1.6048

 

 

December 31, 2009

 

Net Asset Value

Class A

 

$

1.5088

 

Class C

 

1.4380

 

Class D

 

1.4964

 

Class I

 

1.5267

 

Class DS

 

1.4946

 

Class DT

 

1.5377

 

 

5.               MARKET AND CREDIT RISK

 

The nature of this Fund has certain risks, which cannot be presented on the financial statements.  The following summarizes some of those risks.

 

Market Risk

 

Derivative instruments involve varying degrees of market risk.  Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Fund’s Net unrealized profit (loss) on such derivative instruments as reflected in the Statements of Financial Condition.  The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Fund as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.

 

MLAI, has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily on monitoring the trading of Winton, calculating the Net Asset Value of the Fund as of the close of business on each day and reviewing outstanding positions for over-concentrations.  While MLAI does not intervene in the markets to hedge or diversify the Fund’s market exposure, MLAI may urge Winton to reallocate positions in an attempt to avoid over-concentrations.  However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk control procedures consist simply of the ongoing process of advisor monitoring, with the market risk controls being applied by Winton.

 

13



 

Credit Risk

 

The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange.  In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties.  Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may also require margin in the over-the-counter markets.

 

The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit on open contracts, if any, included in the Statements of Financial Condition. The Fund attempts to mitigate this risk by dealing exclusively with Merrill Lynch entities as clearing brokers.

 

The Fund, in its normal course of business, enters into various contracts with MLPF&S acting as its commodity broker.  Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable and included in Equity in commodity futures trading accounts in the Statements of Financial Condition.

 

Indemnifications

 

In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify third parties, including affiliates of the Fund, for breach of certain representations and warranties made by the Fund. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Fund’s experience, MLAI expected the risk of loss to be remote and, therefore, no provision has been recorded.

 

6.               RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2010, the FASB issued an update to the fair value measurements disclosure. Pursuant to this update, additional disclosures in the financial statements relating to transfers in and out of Levels 1 and 2 fair value measurements and separate disclosure of purchases, sales, issuances, and settlements in Level 3 rollforward, will be required. In addition, this update provides clarifications on i) the level of aggregation of classes of assets and liabilities disclosed in the fair value measurement disclosures and ii) disclosures relating to the inputs and valuation techniques for Level 2 and Level 3 fair value measurements. The new disclosures and clarifications of existing disclosures are effective for annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the Level 3 roll forward which are effective for fiscal years beginning after December 15, 2010. This update further enhances the fair value disclosures and the Manager has determined that the adoption of this update on January 1, 2010, did not have a material impact to the Fund’s financial statements.

 

14



 

7.               SUBSEQUENT EVENTS

 

Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.

 

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

 

MONTH-END NET ASSET VALUE PER UNIT

 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to    report performance to investors throughout the year is a useful performance measure for the investors of the Fund.   Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes, as discussed in Note 4 to the financial statements.

 

The Fund calculates the Net Asset Value per unit of each class of units as of the close of business on the last business day of each calendar month and such other dates as MLAI may determine in its discretion. The Fund’s “Net Asset Value” as of any calculation date will generally equal the value of the Fund’s account under the management of its trading advisor as of such date, plus any other assets held by the Fund, minus accrued brokerage commissions, sponsor’s, management and performance fees, organizational expense amortization and any operating costs and other liabilities of the Fund.  MLAI is authorized to make all net asset value determinations.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.6553

 

$

1.6464

 

$

1.6155

 

2010

 

$

1.4713

 

$

1.5023

 

$

1.5668

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.5921

 

$

1.5822

 

$

1.5513

 

2010

 

$

1.4011

 

$

1.4295

 

$

1.4896

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.6193

 

$

1.6126

 

$

1.5842

 

2010

 

$

1.4610

 

$

1.4937

 

$

1.5598

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.6687

 

$

1.6603

 

$

1.6297

 

2010

 

$

1.4892

 

$

1.5211

 

$

1.5870

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.6173

 

$

1.6106

 

$

1.5822

 

2010

 

$

1.4592

 

$

1.4919

 

$

1.5579

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

Jan.

 

Feb.

 

Mar.

 

2009

 

$

1.6568

 

$

1.6500

 

$

1.6217

 

2010

 

$

1.5020

 

$

1.5362

 

$

1.6048

 

 

15



 

Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods or services.  The Fund’s assets are its (i) equity in its trading account, consisting of cash and cash equivalents and (ii) interest receivable.  Because of the low margin deposits normally required in commodity futures trading relatively small price movements may result in substantial losses to the Fund.  While substantial losses could lead to a material decrease in liquidity, no such material losses occurred during the first quarter of 2010 and there was no impact on the Fund’s liquidity.

 

The Fund’s capital consists of the capital contributions of the members as increased or decreased by gains or losses on trading, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the three months ended March 31, 2010, Fund capital increased 4.76% from $750,036,467 to $785,750,192.  This increase was attributable to the net gain from operations of $30,402,552, coupled with the redemption of 20,269,602 Redeemable Units resulting in an outflow of $29,951,815.  The cash outflow was offset with cash inflow of $35,262,988 due to subscription of 24,269,077 units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

The Fund is not required to provide a Statement of Cash Flows.

 

Investments

 

All investments (including derivatives) are held for trading purposes.  Investments are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date.  Investments denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date.  Gains or losses are realized when contracts are liquidated.  Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition.  Realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Operations and Statements of Changes in Members’ Capital.

 

Cash and Cash Equivalents

 

The Fund considered all highly liquid investments, with a maturity of three months or less when acquired,to be cash equivalents. Cash equivalents were recorded at amortized cost which approximated fair value (Level II see Note 3). Cash was held at a nationally recognized financial institution.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  For more information on our treatment of fair value, see Note 3, Fair Value of Investments.

 

16



 

Futures Contracts

 

The Fund trades futures contracts.  A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as S&P 500 Index), whereby such contract is settled in cash.  Payments (“variation margin”) may be made or received by the Fund each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Fund.  When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.  Because transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded, credit exposure is limited.  Realized gains (losses) and changes in unrealized gains (losses) on futures contracts are included in the Statement of Operations and Statements of Changes in Members’ Capital.

 

Forward Foreign Currency Contracts

 

Foreign currency contracts are those contracts where the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date.  Foreign currency contracts are valued daily, and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statements of Financial Condition.  Realized gains (losses) and changes in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively and are included in the Statements of Operations and Statement of Changes in Members’ Capital.

 

Interest Rates and Income

 

The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.

 

Income Taxes

 

No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Member’s share of the Fund’s income and expenses as reported for income tax purposes.

 

The Fund follows the ASC guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following are the major tax jurisdictions for the Fund and the earliest tax year subject to examination: United States — 2007.

 

17



 

Results of Operations

 

January 1, 2010 through March 31, 2010

 

The Fund experienced a net trading profit of $36,899,735 before brokerage commissions and related fees in the first quarter of 2010. Profits were attributable to currencies, interest rates, stock indices, agriculture, metals and agriculture sectors.

 

The currency sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. The Fund reintroduced currency forwards trading on the Brazilian real and the Russian ruble due to the fact the Fund’s intentions to only use currency forwards when the Fund is unable to gain satisfactory liquidity in the futures markets. Profits were posted to the Fund in the middle of the quarter. Concerns over Greek Sovereign Debt and its impact on the euro formed the backdrop to this month’s trading as the euro continued its January fall against the U.S. dollar and the short euro positions. Profits were posted to the Fund at the end of the quarter due to the continued concern over the economic situation in Greece with the risk of a similar story playing out in other European countries. The euro rallied for the first two weeks of March before reversing resulting in new lows for the year plus the weakness in the British sterling resulting in profits being posted to the Fund.

 

The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter due to gains in the short term interest rates.  Losses were posted to the Fund at the end of the quarter due to the lack of clear direction in the bond markets.

 

The stock indices sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. January started well through the middle of the month. The Obama administration’s announcement of its intention to reduce speculative activities by banks started a sharp sell-off in equity markets, wiping out earlier gains. These losses occurred in long equity positions. Profits were posted to the Fund in the middle of the quarter. Stock Index futures posted modest gains, with positions sizably reduced from the previous month.  Profits were posted to the Fund at the end of the quarter. The stock markets put in a strong performance with the Dow Jones up, reaching a level not seen since September 2008.

 

The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the quarter due to long positions in the sugar markets, whose price rallied due to supply concerns. Losses were posted to the Fund in the middle of the quarter. The longer term bull market in sugar reversed sharply from multi-year highs as output in both Brazil and India rose. Profits were posted to the Fund at the end of the quarter. Crops were up in March and the center of the action in the commodities markets has been sugar, where over the course of the last two months it has gone from a 25 year high of around $29 down to $16.

 

The metals sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the quarter. Poorer growth outlook resulted in many commodities markets selling off. The month of February was, to a large degree, dominated by news flow relating to the debt crisis within the Euro zone. The prevailing macroeconomic sentiment oscillated between risk aversion and inflationary concerns with the former being marginally dominant. As a result, the Fund posted profits in the middle of the quarter. Profits were seen in industrial metals in March, especially nickel which reached a twenty two month high. The quarter ended with profits being posted to the Fund.

 

18



 

The energy sector posted profits to the Fund. Losses were posted to the Fund at the beginning through the middle of the quarter due to poorer growth outlook resulting in many commodities markets selling off.  Also, oil prices faced additional downward pressure due to an increase in inventories and milder weather in the United States. The quarter ended with profits being posted to the Fund as commodity markets generally follow the direction of stock markets and finished the month of March higher.

 

January 1, 2009 through March 31, 2009

 

The Fund experienced a net trading loss before brokerage commissions and related fees in the first quarter of 2009 of $6,805,508.  The Fund posted overall losses for the quarter with the stock indices, agriculture and the energy sectors posting gains while the metals, interest rates and currencies sectors posting losses.

 

The stock indices sector posted profits for the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter as the global financial and commodity markets worsened. No regions, countries, sectors or companies appeared to be immune from the recessionary conditions. Against this recessionary background and with volatility levels still elevated, the Fund kept its low margin exposure as profits were made in short positions in equities with most stock indices falling more than 10% in February. March proved a difficult month to navigate as markets either reversed previous direction or simply became range bound resulting in losses being posted to the Fund.

 

The agriculture sector posted profits for the Fund. Profits were posted to the Fund at the beginning through the middle of the quarter. The continued plunge in demand and concomitant build up in stock levels kept a lid on prices in February. Grain markets came under renewed price pressure as the Fund profited from short positions in grains. Losses were posted to the Fund at the end of the quarter due to volatility in the markets.

 

The energy sector posted profits for the Fund throughout the quarter as a rally in energy derived from crude oil prices.

 

The metals sector posted losses for the Fund. Profits were posted to the Fund at the beginning of the quarter. Losses were posted for the Fund from the middle to the end of the quarter due to the commodity sector mixed with the main features being the vacillations in the gold price making it hard to gain headway.

 

The interest rates sector posted losses for the Fund. Losses were posted to the Fund at the beginning of the quarter due to losses in Bonds as yields rose in the United States. Yields in the 10 year bond markets firmed up fractionally but not enough to offset losses posted to the Fund in the middle of the quarter. The macro economic background continues to weigh heavily on sentiment, and the discussion or implementation of aggressive “quantitative easing” by governments created sharp moves during the month of March. The short term rates continue to decline at the end of the quarter resulting in profits being posted to the Fund.

 

The currency sector posted losses for the Fund. Profits were posted to the Fund at the beginning of the quarter as the U.S. dollar and the Japanese yen remain strong while the British sterling remained under pressure. Losses were posted to the Fund in the middle of the quarter from the fluctuating currency markets where losses occurred from the weakening of the U.S. dollar. The long exposure in the U.S. dollar was damaged by both the increasing indebtedness of the United States following President

 

19


 


 

Obama’s latest fiscal stimulus package and rumors of it being sidelined as the reserve currency and the Japanese yen position also suffered posting losses as the quarter ended.

 

The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 303(a)(4) and 303(a)(5) of Regulation S-K.

 

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

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

 

Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.

 

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

 

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s speculative trading and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Fund’s losses in any market sector will be limited to Value at Risk or by the Fund’s attempts to manage its market risk.

 

Quantifying The Fund’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statement” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

 

The Fund’s risk exposure in the various market sectors traded by Winton is quantified below in terms of Value at Risk.  Due to the Fund’s fair value accounting, any loss in the fair value of the Fund’s open positions is directly reflected in the Fund’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

 

20



 

Maintenance margin requirements have been used by the Fund as the measure of its Value at Risk.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels.  The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

 

In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk.  In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

 

100% positive correlation in the different positions held in each market risk category has been assumed.  Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk.  The diversification effects resulting from the fact that the Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.

 

21



 

The Fund’s Trading Value at Risk in Different Market Sectors

 

The following table indicates the average, highest and lowest trading Value at Risk associated with the Fund’s open positions by market category for the fiscal period. For the three months ended March 31, 2010 and 2009, the Fund’s average Month-end Net Asset Value for all other purposes was approximately $756,311,117 and $803,126,683 respectively.

 

March 31, 2010

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

6,347,997

 

0.84

%

$

7,364,790

 

$

5,458,203

 

Currencies

 

7,694,909

 

1.02

%

8,927,444

 

6,616,319

 

Energy

 

4,155,059

 

0.55

%

4,820,597

 

3,572,647

 

Interest Rates

 

11,763,706

 

1.56

%

13,647,963

 

10,114,795

 

Metals

 

11,682,597

 

1.54

%

13,553,862

 

10,045,055

 

Stock Indices

 

11,634,781

 

1.54

%

13,498,387

 

10,003,942

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

53,279,049

 

7.05

%

$

61,813,043

 

$

45,810,961

 

 

March 31, 2009

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

451,324

 

0.06

%

$

1,353,972

 

$

366,479

 

Currencies/FX

 

948,326

 

0.12

%

2,844,978

 

509,255

 

Energy

 

82,457

 

0.01

%

247,371

 

34,560

 

Interest Rates

 

28,442,500

 

3.54

%

85,327,500

 

27,456,396

 

Metals

 

86,972

 

0.01

%

260,917

 

38,385

 

Stock Indices

 

238,284

 

0.03

%

714,853

 

196,419

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

30,249,863

 

3.77

%

$

90,749,591

 

$

28,601,494

 

 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the Fund is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund.  The magnitude of the Fund’s open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund to incur severe losses over a short period of time.   The foregoing Value at Risk table — as well as the past performance of the Fund — gives no indication of this “risk of ruin.”

 

22



 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial.

 

The Fund also has non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S or BlackRock. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by MLAI and Winton for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.

 

The following were the primary trading risk exposures of the Fund as of March 31, 2010, by market sector.

 

Interest Rates

 

Interest rate risk is the principal market exposure of the Fund.  Interest rate movements directly affect the price of derivative sovereign bond positions held by the Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries.  However, the Fund also takes positions in the government debt of smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.

 

Currencies

 

The Fund trades in a number of currencies. The Fund does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.

 

23



 

Stock Indices

 

The Fund’s primary equity exposure is due to various equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.

 

Metals

 

The Fund’s metals market exposure is to fluctuations in both the price of precious and non-precious metals.

 

Agricultural Commodities

 

The Fund’s primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, livestock, cotton, corn and coffee accounted for the substantial bulk of the Fund’s agricultural commodities exposure as of March 31, 2010.

 

Energy

 

The Fund’s primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

 

Qualitative Disclosures Regarding Non-Trading Risk Exposure

 

The following were the only non-trading risk exposures of the Fund as of  March 31, 2010.

 

Foreign Currency Balances

 

The Fund’s primary foreign currency balances are in Australian dollars, British pounds and Euros.

 

U.S. Dollar Cash Balance

 

The Fund holds U.S. dollars only in cash at MLPF&S and BlackRock. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.

 

24



 

Item 4T. Controls and Procedures

 

MLAI, the Sponsor of ML Winton FuturesAccess LLC, with the participation of the Sponsor’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Fund as of the end of the period of this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective.  No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.         Legal Proceedings

 

None.

 

Item 1A.   Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 31, 2010.

 

25



 

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

 

(a)              Issuance to accredited investors pursuant to Regulation D and Section 4 (6) under the Securities Act.  The selling agent of the following Class of Units was MLPF&S.

 

CLASS A

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

556,716

 

368,979

 

$

1.5088

 

Feb-10

 

993,760

 

675,430

 

1.4713

 

Mar-10

 

827,770

 

551,002

 

1.5023

 

Apr-10

 

1,429,934

 

912,646

 

1.5668

 

 

CLASS C

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

2,840,699

 

1,975,452

 

$

1.4380

 

Feb-10

 

8,747,139

 

6,243,051

 

1.4011

 

Mar-10

 

4,669,404

 

3,266,459

 

1.4295

 

Apr-10

 

4,488,838

 

3,013,452

 

1.4896

 

 

CLASS D

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

4,627,153

 

3,092,190

 

$

1.4964

 

Feb-10

 

5,623,168

 

3,848,849

 

1.4610

 

Mar-10

 

600,000

 

401,687

 

1.4937

 

Apr-10

 

44,999

 

28,849

 

1.5598

 

 

CLASS I

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

582,776

 

381,723

 

$

1.5267

 

Feb-10

 

797,710

 

535,664

 

1.4892

 

Mar-10

 

2,013,802

 

1,323,911

 

1.5211

 

Apr-10

 

213,824

 

134,735

 

1.5870

 

 

CLASS DS

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

1,745,510

 

1,167,878

 

$

1.4946

 

Feb-10

 

637,381

 

436,802

 

1.4592

 

Mar-10

 

 

 

1.4919

 

Apr-10

 

1,372,782

 

881,175

 

1.5579

 

 

CLASS DT

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

 

 

$

1.5377

 

Feb-10

 

 

 

1.5020

 

Mar-10

 

 

 

1.5362

 

Apr-10

 

 

 

1.6048

 

 


(1) Beginning of the month Net Asset Value

 

(b)   None.

(c)   None.

 

Item 3.            Defaults Upon Senior Securities

 

None.

 

26



 

Item 4.            (Reserved and Removed)

 

Item 5.            Other Information

 

None.

 

Item 6.            Exhibits

 

The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:

 

31.01 and

31.02               Rule 13a-14(a)/15d-14(a) Certifications

 

Exhibit 31.01

and 31.02       Are filed herewith.

 

32.01 and

32.02               Section 1350 Certifications

 

Exhibit 32.01

and 32.02       Are filed herewith.

 

27



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

ML WINTON FUTURESACCESS LLC

 

 

 

 

 

 

 

By:

MERRILL LYNCH ALTERNATIVE

 

 

INVESTMENTS LLC

 

 

(Manager)

 

 

 

 

 

 

Date: May 14, 2010

By:

/s/ JUSTIN C. FERRI

 

 

Justin C. Ferri

 

 

Chief Executive Officer, President and Manager

 

 

(Principal Executive Officer)

 

 

 

 

 

 

Date: May 14, 2010

 

 

 

By:

/s/ BARBRA E. KOCSIS

 

 

Barbra E. Kocsis

 

 

Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

28