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EX-31.01 - EX-31.01 - ML Transtrend DTP Enhanced FuturesAccess LLCa11-7503_6ex31d01.htm
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EX-32.01 - EX-32.01 - ML Transtrend DTP Enhanced FuturesAccess LLCa11-7503_6ex32d01.htm
EX-31.02 - EX-31.02 - ML Transtrend DTP Enhanced FuturesAccess LLCa11-7503_6ex31d02.htm
EX-32.02 - EX-32.02 - ML Transtrend DTP Enhanced FuturesAccess LLCa11-7503_6ex32d02.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

 

x      Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the fiscal year ended: December 31, 2010

 

or

 

o         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission file number: 0-52384

 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(Exact name of registrant as specified in its charter)

 

Delaware

 

30-0408288

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 10th 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)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Units of Limited Liability Company Interest

 

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 15(d) of the Act. Yes o  No x

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 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 the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes o  No x

 

The Units of the limited liability company interest of the registrant are not publicly traded. Accordingly, there is no aggregate market value for the registrant’s outstanding equity that is readily determinable.

 

As of February 28, 2011 Units of limited liability company interest with an aggregate Net Asset Value of $261,045,883 were outstanding and held by non-affiliates.

 

Documents Incorporated by Reference

 

The registrant’s 2010 Annual Report and Reports of Independent Registered Public Accounting Firms, the annual report to security holders for the year ended December 31, 2010, is incorporated by reference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.

 

 

 



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

 

ANNUAL REPORT FOR 2010 ON FORM 10-K

 

Table of Contents

 

 

PAGE

 

PART I

 

 

 

 

Item 1.

Business

1

 

 

 

Item 1A.

Risk Factors

9

 

 

 

Item 1B.

Unresolved Staff Comments

11

 

 

 

Item 2.

Properties

11

 

 

 

Item 3.

Legal Proceedings

11

 

 

 

Item 4.

Removed and Reserved

11

 

 

 

 

PART II

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

12

 

 

 

Item 6.

Selected Financial Data

14

 

 

 

Item 7.

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

22

 

 

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

Item 8.

Financial Statements and Supplementary Data

38

 

 

 

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

38

 

 

 

Item 9A.

Controls and Procedures

39

 

 

 

Item 9B.

Other Information

39

 

 

 

 

PART III

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

40

 

 

 

Item 11.

Executive Compensation

43

 

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

43

 

 

 

Item 13.

Certain Relationships and Related Transactions and Director Independence

43

 

 

 

Item 14.

Principal Accounting Fees and Services

44

 

 

 

 

PART IV

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

45

 



 

PART I

 

Item 1:   Business

 

(a)          General Development of Business:

 

ML Transtrend DTP Enhanced FuturesAccess LLC (the “Fund”) , a Merrill Lynch FuturesAccess Program (the “Program”) Fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced trading activities on April 2, 2007. The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 6 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. Transtrend B.V. (“Transtrend”) is the Trading Advisor of the Fund (“Trading Advisor”).

 

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.  Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.

 

The Program is a group of commodity pools sponsored by MLAI (each pool is a “Program Fund” or FuturesAccess Fund” or collectively, “Program Funds”) each of which places substantially all of its assets in a managed futures or forward trading account managed by a single or multiple commodity trading advisors. Each Program Fund is generally similar in terms of fees, Classes of Units and redemption rights.  Each of the Program Funds implements a different trading strategy.

 

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.

 

As of December 31, 2010, the Net Asset Value of the Fund was $255,959,800. As of December 31, 2010, the Net Asset Value per Unit was $1.3296 for Class A, $1.2436 for Class C, $1.0733 for Class D, $1.3268 for Class I, $1.6443 for Class DS and $1.7338 for Class DT.

 

Since the Fund began trading activities, the highest month-end Net Asset Value per Unit  for Class A was $1.3886 (February 28, 2009) and the lowest was $1.0780 (September 30, 2007).  The highest month-end Net Asset Value per Unit for Class C was $1.3228 (February 28, 2009) and the lowest was $0.9228 (August 31, 2007).  The highest month-end Net Asset Value per Unit for Class D was $1.2380 (February 28, 2009) and the lowest was $0.8612 (January 31, 2010).  The highest month-end Net Asset Value per Unit for Class I was $1.3760 (February 28, 2009) and the lowest was $1.0475 (November 30, 2007). The highest month-end Net Asset Value per Unit for Class DS was $1.6705 (February 28, 2009) and the lowest was $1.0532 (April 30, 2007).  The highest month-end Net Asset Value per Unit for Class DT was $1.7338 (December 31, 2010) and the lowest was $1.0950 (August 31, 2007).

 

(b)          Financial Information about Segments:

 

The Fund’s business constitutes only one segment for financial reporting purposes, i.e., a speculative “commodity pool”. The Fund does not engage in sales of goods or services.

 

(c)          Narrative Description of Business:

 

Trading Advisor’s Trading Model

 

The Fund trades in the futures and forward markets with the objective of achieving substantial capital appreciation.

 

1



 

The Fund and MLAI have entered into an Advisory Agreement with Transtrend whereby Transtrend trades the Fund’s assets through a managed account using the Transtrend DTP Enhanced Diversified Program.  Transtrend trades in the U.S. and international futures and forwards markets pursuant to the Transtrend DTP Enhanced Diversified Program. - Enhanced Risk Profile (USD) (the “Trading Program”).  The Diversified Trend Program has two risk profiles: the Standard Risk Profile and the Enhanced Risk Profile, investable in various currencies.  The Enhanced Risk Profile is approximately 1.5 times the leverage of the Standard Risk Profile.

 

The Trading Advisor of the Fund, may exercise discretion in connection with its technical trading program in order to enforce risk parameters, address extraordinary market events or as otherwise determined by the Trading Advisor. Although the Trading Advisor’s trading program is continually evolving, there were no fundamental or material charges to the trading program during the 2010 fiscal year.

 

The Trading Advisor trades the following instruments on U.S. and non-U.S. exchanges and markets: (a) futures, options, options on futures, and forward contracts on currencies, interest rates, interest rate instruments, commodities, individual stocks, stock indices and other indices; and (b) spot currencies, in all cases ((a) and (b)) traded on regulated markets and/or OTC markets.  The Trading Advisor does not, however, currently trade futures, options, options on futures or forward contracts on individual stocks for the Fund.  Over time, the underlying values of futures, options, options on futures and forward contracts traded may also include other economic variables which are now or may hereafter become the subject of organized futures, options or forward trading.  Over time, the instruments that the Trading Advisor trades may also include swaps or other derivative, margined instruments, in each case traded on regulated and/or OTC markets.

 

The applied principles of risk management play a dominant role in the Trading Advisor’s trading methodology.  The Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance.  The Trading Program is entirely based on quantitative analysis of signaled price behavior of outright markets and of intra-market and/or inter-market combinations of the instruments concerned, and therefore not on fundamental analysis.

 

The Trading Program may enter into both long and short positions in any of the instruments involved, or it may have no position.  Long and short positions are likely to be leveraged and unhedged and/or uncovered.  The degree of leverage is implicitly determined by the risk/reward profile selected by the Fund.  The degree of leverage can be expressed as the number of contracts traded or held in position per millions of U.S. dollars under management.  A higher degree of leverage represents a higher degree of risk as it goes hand in hand with a higher number of contracts held in a position for each U.S. dollar under management.  As such, a selected risk profile has a consequence for the number of contracts traded and/or held in a position for each U.S. dollar under management.

 

The Trading Program is systematic by nature and requires a consistent application.  Therefore, discretionary inputs are not essential to the effectiveness of the Trading Program.  Exceptional market circumstances of the observed past, both favorable and unfavorable, are integrally reflected in the presented performance profile of the Trading Program.  While the Trading Advisor generally will not use discretionary inputs in trading client accounts, in the event of exceptional market circumstances the Trading Advisor may use discretion in an attempt to limit risk to a position or an account.  The use of discretion by the Trading Advisor may have a positive or negative impact on performance of the Fund.

 

The portfolio composition and the relative weighting of instruments within each portfolio is defined irrespective of the outcome of historical trades.  The guiding principle is strategic diversification in pursuit of a maximum attainable risk spreading, taking correlation analysis and degrees of profit expectancy into account.

 

As the applied strategies require particular transaction sizes to allow for multiple entry and exit points and because certain minimum transaction sizes may be required or recommendable, the attainable degree of diversification is, among others, a function of the amount under management.  Generally, larger accounts have a higher degree of diversification.

 

Specific risk provisions are computed for each market exposure.  The risk provisions are designed to have a pre-defined reliability.  In all trading systems the assessment of price volatility plays a prominent role.  Risk assessments are determined on the basis of a regular or continuous evaluation of daily price behavior, possibly leading to regular adjustments during the lifetime of exposures.

The applied market approach does not forecast markets or price levels but participates in a systematic and dynamic way in signaled price patterns.  The Trading Program exploits directional price movement of outright prices, of time spreads in one or more time frames and of inter-market and -product combinations.

 

2



 

Although the Trading Advisor’s Trading Program is continually evolving, there were no fundamental or material changes to the Trading Program during the 2010 fiscal year.

 

Employees

 

The Fund has no employees.

 

Use of Proceeds and Cash Management Income

 

Subscription Proceeds

 

The Fund’s cash is used as security for and to pay the Fund’s trading losses as well as its expenses and redemptions. The primary use of the proceeds of the sale of the Units is to permit Transtrend to trade on a speculative basis in a wide range of different futures and forwards markets on behalf of the Fund.  While being used for this purpose, the Fund’s assets are also generally available for cash management, as more fully described below under “Cash Assets”.

 

Market Sectors

 

Transtrend applies its proprietary systems to a broadly-diversified portfolio of futures and forward markets pursuant to their Transtrend DTP Enhanced Diversified Program. The Transtrend DTP Enhanced Diversified Program may trade in the following markets:  CBOT, CME, EUREX, IME, LME, LIFFE, MATIF, ME, MEFF, NYMEX, NZFOE, SFE, SIMEX, TIFFE, TSE and may expand to include trading in other markets.

 

The Fund’s commitments to different types of markets — U.S. and non-U.S., regulated and non-regulated — differ substantially from time to time, as well as over time.  The Fund has no policy restricting its relative commitment to any of these different types of markets.

 

3



 

CONDENSED SCHEDULE OF INVESTMENTS

 

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

 

December 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

 

1,833

 

$

2,141,844

 

0.84

%

(103

)

$

(88,116

)

-0.03

%

$

2,053,728

 

0.81

%

February 11 - February 12

 

Currencies

 

1,694

 

2,107,599

 

0.82

%

(1,210

)

2,412,863

 

0.94

%

4,520,462

 

1.76

%

March 11

 

Energy

 

657

 

1,274,637

 

0.50

%

(396

)

(1,182,550

)

-0.46

%

92,087

 

0.04

%

January 11 - November 11

 

Interest rates

 

2,190

 

174,275

 

0.07

%

(1,729

)

(474,801

)

-0.19

%

(300,526

)

-0.12

%

January 11 - December 13

 

Metals

 

667

 

5,050,247

 

1.97

%

(271

)

(2,467,106

)

-0.96

%

2,583,141

 

1.01

%

January 11 - October 11

 

Stock indices

 

2,533

 

189,573

 

0.07

%

(128

)

128,171

 

0.05

%

317,744

 

0.12

%

January 11 - May 11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

10,938,175

 

4.27

%

 

 

$

(1,671,539

)

-0.65

%

$

9,266,636

 

3.62

%

 

 

 

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

 

675

 

$

512,058

 

0.22

%

(292

)

$

(132,212

)

-0.06

%

$

379,846

 

0.16

%

February 10 - December 10

 

Currencies

 

1,308

 

(670,422

)

-0.28

%

(854

)

1,521,277

 

0.64

%

850,855

 

0.36

%

April 10

 

Energy

 

494

 

(135,491

)

-0.06

%

(67

)

(277,177

)

-0.12

%

(412,668

)

-0.18

%

February 10 - December 10

 

Interest rates

 

4,183

 

(1,938,988

)

-0.82

%

(1,837

)

429,159

 

0.18

%

(1,509,829

)

-0.64

%

March 10 - December 12

 

Metals

 

759

 

3,324,393

 

1.41

%

(376

)

(3,024,951

)

-1.28

%

299,442

 

0.13

%

January 10 - April 10

 

Stock indices

 

2,214

 

1,538,851

 

0.65

%

 

 

0.00

%

1,538,851

 

0.65

%

January 10 - March 10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

2,630,401

 

1.12

%

 

 

$

(1,483,904

)

-0.63

%

$

1,146,497

 

0.49

%

 

 

 

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

 

4



 

Market Types

 

The Fund trades on a variety of United States and foreign futures exchanges.  Substantially all of the Fund’s off-exchange trading takes place in the highly liquid, institutionally-based currency forward markets.

 

Many of the Fund’s currency trades are executed in the spot and forward foreign exchange markets (the “FX Markets”) where there are no direct execution costs.  Instead, the participants, banks and dealers in the FX Markets, take a “spread” between the prices at which they are prepared to buy and sell a particular currency and such spreads are built into the pricing of the spot or forward contracts with the Fund.

 

Custody of Assets

 

Substantially, all of the Fund’s assets are currently held in one or more Commodity Futures Trading Commission (“CFTC”) regulated customer accounts at MLPF&S.

 

Cash Assets

 

The Fund will generally earn interest, as described below, on its “Cash Assets”, which can be generally described as the cash actually held by the Fund plus its “open trade equity” (unrealized gain and loss marked to market daily on open positions).   Cash Assets are held primarily in U.S. dollars, and to a lesser extent in foreign currencies, and are comprised of the Fund’s cash balances held in the offset accounts (as described below) — which include “open trade equity” (unrealized gain and loss on open positions) on United States futures contracts, which is paid into or out of the Fund’s account on a daily basis; the Fund’s cash balance in foreign currencies derived from its trading in non-U.S. dollar denominated futures and options contracts, which includes open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions.  Cash Assets do not include, and the Fund does not earn interest income on the Fund’s gains or losses on its open forward, commodity option and certain foreign futures positions since such gains and losses are not collected or paid until such positions are closed out.

 

The Fund’s Cash Assets may be greater than, less than or equal to the Fund’s Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.

 

Interest Earned on the Fund’s U.S. Dollar Cash Assets

 

The Fund’s U.S. dollar Cash Assets are held in cash at MLPF&S, which utilizes offset accounts.

 

Certain of the Fund’s U.S. dollar “Cash Assets” are held by MLPF&S in customer segregated accounts and primarily invested in CFTC-eligible investments (including, without limitation, commercial paper, U.S. government and government agency securities, prime non-U.S. government securities, corporate notes and money market funds). Cash Assets may also be maintained in “offset accounts” at major U.S. banks, interest bearing savings accounts maintained with major U.S. banks unaffiliated with Merrill Lynch and/or money market investment funds that are managed by third party managers, including affiliates of Merrill Lynch.

 

Offset accounts are non-interest bearing demand deposit accounts maintained with banks unaffiliated with Merrill Lynch. MLPF&S may in the future elect to maintain accounts of this nature with one or more of its affiliates. Offset account deposits reduce Merrill Lynch’s borrowing costs with such banks. An integral feature of the offset arrangements is that the participating banks specifically acknowledge that the offset accounts are for the benefit of MLPF&S’ customers, not subject to any Merrill Lynch liability.

 

To the extent that Cash Assets are placed with affiliates of Merrill Lynch, Merrill Lynch indirectly receives certain economic benefits and therefore has a conflict of interest in selecting such third parties. For example, Merrill Lynch may invest in money market funds managed by BlackRock, Inc. or its affiliates (“BlackRock”). Merrill Lynch is a stockholder in BlackRock and, therefore, potentially benefits from its economic interest in BlackRock whenever BlackRock receives compensation for managing Cash Assets invested in money market investment funds managed by BlackRock.

 

5



 

Interest Paid by Merrill Lynch on the Fund’s Non-U.S. Dollar Cash Assets

 

The Fund will generally earn interest, as described below, on its Cash Assets, which can be generally described as the cash actually held by the Fund, plus its “open trade equity” (unrealized gain and loss marked to market daily on open positions). Cash Assets are held primarily in U.S. dollars, and to a lesser extent in non-U.S. currencies, and comprise the following: (a) the Fund’s cash balances, plus open trade equity on U.S. futures; and (b) the Fund’s cash balances held in non-U.S. currencies as a result of realized profits and losses derived from its trading in non-U.S. dollar-denominated futures and options contracts, plus open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions. Cash Assets do not include, and the Fund does not earn interest income on, the Funds’ gains or losses on its open forward, commodity option and certain non-U.S. futures positions as such gains and losses are not collected or paid until such positions are closed out.

 

The Fund’s Cash Assets may be greater than, less than or equal to such FuturesAccess Fund’s Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.

 

MLPF&S intends to pay interest on the Funds’ Cash Assets (irrespective of how such Cash Assets are held or invested) at the most favorable rate payable by MLPF&S to accounts of Merrill Lynch affiliates, from time to time, although the actual rate paid to the Fund may be lower. In no event, however, will the rate so paid on such Cash Assets be less than 75% of such prevailing rate. MLPF&S retains the additional economic benefit derived from possession of the Funds’ Cash Assets.

 

MLPF&S, in the course of acting as commodity broker for the Fund, lends certain currencies to, and borrows certain currencies from, the Fund. In the course of doing so, MLPF&S both retains certain amounts of interest and receives other economic benefits. In doing so, MLPF&S follows its standard procedures (as such procedures may change over time) for paying interest on the assets of the commodity pools sponsored by MLAI and other MLPF&S affiliates and traded through MLPF&S.

 

Charges

 

The following table summarizes the charges incurred by the Fund for the years ended December 31, 2010, 2009 and 2008.

 

 

 

2010

 

2009

 

2008

 

Charges

 

Dollar
Amount

 

% of Average
Month-End
Net Assets (1)

 

Dollar
Amount

 

% of Average
Month-End
Net Assets (1)

 

Dollar
Amount

 

% of Average
Month-End
Net Assets (1)

 

Other Expenses

 

$

671,538

 

0.28

%

$

572,395

 

0.25

%

$

626,258

 

0.39

%

Sponsor fees

 

471,939

 

0.19

%

453,477

 

0.20

%

255,504

 

0.16

%

Management fees

 

4,406,382

 

1.82

%

3,904,212

 

1.70

%

2,462,288

 

1.56

%

Performance fees

 

1,574,502

 

0.65

%

326

 

0.00

%

14,415,123

 

9.12

%

Total

 

$

7,124,361

 

2.94

%

$

4,930,410

 

2.16

%

$

17,759,173

 

11.23

%

 


(1) Not annualized

 

The foregoing table does not reflect the bid-ask spreads paid by the Fund on its forward trading, or the benefits which may be derived by Merrill Lynch from the deposit of certain of the Fund’s U.S. dollar assets maintained at MLPF&S.

 

The Fund’s average month-end Net Asset Values during 2010, 2009 and 2008 equaled $242,489,189, $229,728,184 and $158,124,764, respectively.

 

During 2010, the Fund earned $474 in interest income, or approximately 0.00% of the Fund’s average month-end Net Asset Values. During 2009, the Fund earned $17,531 in interest income, or approximately 0.01% of the Fund’s average month-end Net Asset Values. During 2008, the Fund earned $2,502,184 in interest income, or approximately 1.58% of the Fund’s average month-end Net Asset Values.

 

6



 

Description of Current Charges

 

Recipient

 

Nature of Payment

 

Amount of Payment

MLPF&S

 

Brokerage Commissions

 

During 2010, 2009 and 2008 the round-turn (each purchase and sale or sale and purchase of a single futures contract) rate of the Fund’s flat-rate Brokerage Commissions were approximately $5.64, $9.58 and $10.37, respectively.

 

 

 

 

 

MLPF&S

 

Use of assets

 

Merrill Lynch may derive an economic benefit from the deposit of certain of the Fund’s U.S. dollar assets in accounts maintained at MLPF&S.

 

 

 

 

 

MLAI

 

Sponsor Fees

 

A flat-rate monthly charge of 0.125 of 1% (1.50% annual rate) on Class A units, flat-rate monthly charge of 0.2083 of 1% (2.50% annual rate) on Class C units, a flat-rate monthly charge of 0.0917 of 1% (1.10% annual rate) on Class I units (including the monthly interest credit and before reduction for accrued month-end redemptions, distributions, brokerage commissions, sponsor fees, management fees or performance fees, in each case as of the end of the month of determination). Class D, Class DS and Class DT do not pay sponsor fees.

 

 

 

 

 

MLPF&S

 

Sales Commissions

 

Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.5%. Sales commissions are deducted from proceeds prior to entering the fund. Shares purchased and reflected in the fund records are net of any commissions charged by MLPF&S. Class C, Class DS and Class DT Units are not subject to any sales commissions.

 

 

 

 

 

Merrill Lynch International Bank (“MLIB”) (or an affiliate); Other counterparties

 

Bid—ask spreads

 

Bid—ask spreads are not accounted for separately as an accounting item because bid-ask spreads are an integral part of the price paid or received on all contracts for generally accepted accounting principles.

 

 

 

 

 

MLIB (or an affiliate); Other counterparties

 

EFP differentials

 

Certain of the Fund’s currency trades may be executed in the form of “exchange of futures for physical” transactions, in which a counterparty (which may be MLIB or an affiliate) receives an additional “differential” spread for exchanging the Fund’s cash currency positions for equivalent futures positions.

 

 

 

 

 

TRANSTREND

 

Annual Performance Fees

 

25% of any New Trading Profits, as defined, generated by the Fund as a whole, as of the end of each calendar year. “New Trading Profits” equal any increase in the Net Asset Value of the Fund, prior to reduction for any accrued performance fee, as of the current performance fee calculation date over the Fund’s “High Water Mark.” The “High Water Mark” attributable to the Fund equals

 

7



 

 

 

 

 

the highest Net Asset Value after reduction for the performance fee then paid, as of any preceding performance fee calculation date. Net Asset Value, solely for purposes of calculating the performance fee, does not include any interest income earned by the Fund.

 

 

 

 

 

TRANSTREND and MLAI

 

Management fees

 

Class DT pays 1% while all other Classes pay a flat-rate monthly charge of 0.1667 of 1% of the Fund’s month-end assets (a 2.0% annual rate). MLAI receives 50% of the 2% annual rate.

 

 

 

 

 

Others

 

Operating expense of Fund including audit, legal and tax services

 

Actual payments to third parties.

 

 

 

 

 

MLAI; Others

 

Initial Offering Costs reimbursed

 

Actual costs incurred.

 

Regulation

 

The CFTC has delegated to the National Futures Association responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “introducing brokers” and their respective associated persons, and “floor brokers” and “floor traders.”  The Commodity Exchange Act requires commodity pool operators such as MLAI, commodity trading advisors such as the Trading Advisor and commodity brokers or futures commission merchants (“FCMs”) such as MLPF&S to be registered and to comply with various reporting and record keeping requirements.  CFTC regulations also require FCMs to maintain a minimum level of net capital.  In addition, the CFTC and certain commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  All accounts owned or managed by the Trading Advisor will be combined for position limit purposes.  The Trading Advisor could be required to liquidate positions in order to comply with such limits.  Any such liquidation could result in substantial costs to the Fund.  In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to reach its daily price limit for several days in a row, making it impossible for the Trading Advisor to liquidate a position and thereby experiencing dramatic losses.  Currency forward contracts currently are not subject to regulation by any U.S. government agency.

 

Other than in respect of the registration requirements pertaining to the Fund’s securities under Section 12(g) of the Securities Exchange Act of 1934, the Fund is generally not subject to regulation by the Securities and Exchange Commission (the “SEC”).  However, MLAI is registered as an “investment adviser” under the Investment Advisers Act of 1940.  MLPF&S is also regulated by the SEC and the Financial Industry Regulatory Authority (“FINRA”).

 

(d)          Financial Information about Geographic Areas

 

The Fund does not engage in material operations in foreign countries, nor is a material portion of the Fund’s revenue derived from customers in foreign countries.

 

The Fund trades on a number of foreign commodity exchanges.  The Fund does not engage in the sales of goods or services.

 

8



 

Item 1A:  Risk Factors

 

Past Performance Not Necessarily Indicative of Future Results

 

Past performance is not necessarily indicative of future results.  The trading advisor’s past performance may not be representative of how it may trade in the future for the Fund.

 

Volatile Markets; Highly Leveraged Trading

 

Futures and forward trading is highly leveraged, and market price levels are volatile and materially affected by unpredictable factors such as weather and governmental intervention.  The combination of leverage and volatility creates a high degree of risk.

 

Importance of General Market Conditions

 

Overall market or economic conditions — which neither MLAI nor the trading advisor can predict or control — have a material effect on the performance of any managed futures strategy.

 

Possibility of Additional Government or Market Regulation.

 

Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during recent years have led to increased governmental as well as self-regulatory scrutiny of the alternative investment funds industry in general.  In addition, certain legislation proposing greater regulation of the industry periodically is considered by the U.S. Congress, as well as the governing bodies of foreign jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Fund, its Manager (MLAI), the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future. Any such regulation could have a material adverse impact on the profit potential of the Fund, as well as require increased transparency as to the identity of the Fund’s members.

 

Forward Trading

 

The Fund will trade in the forward markets, in addition to trading in the future markets.  None of the CFTC, the NFA, futures exchanges or banking authorities currently regulates the forward markets, and accordingly such markets are not subject to the breadth of regulation applicable to the futures markets. The forward markets are over-the-counter, non-exchange traded markets, and in trading in these markets, the Fund will be dependent on the credit standing of the counterparties with which they trade, without the financial support of any clearinghouse system, as well as on the continued operation of the counterparties.  This results in the risk that a counterparty may not settle a transaction with the Fund in accordance with its terms, because the counterparty is either unwilling or unable to do so, for example, because of a credit or liquidity problem affecting the counterparty, potentially resulting in significant loss.  In addition, the prices offered for the same forward contract may vary significantly among different forward market participants.  Forward markets counterparties are under no obligation to enter into forward transactions with the Fund, including transactions through which the Fund is attempting to liquidate open positions.

 

Effects of Speculative Position Limits

 

The CFTC and the U.S. commodities exchanges have established limits referred to as speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  For example, the CFTC currently imposes speculative position limits on a number of agricultural commodities (e.g., corn, oats, wheat, soybeans and cotton). All commodity accounts controlled by the Trading Advisors and its principals and their affiliates are combined for speculative position limit purposes. The Trading Advisor could be required to liquidate positions held for the Fund, or may not be able to fully implement trading instructions generated by its trading models, in order to comply with such limits.  Any such liquidation or limited implementation could result in substantial costs to the Fund.

 

9



 

Regulatory Change Could Restrict the Fund’s Operations

 

The Fund implements speculative, highly leveraged strategies.  From time to time there is governmental scrutiny of these types of strategies and political pressure to regulate their activities.  The CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading.  The regulation of futures, forward and option transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action.  In addition, several U.S. legislators and the CFTC have expressed the concern that speculative futures traders, and commodity funds in particular, may be responsible for unwarranted and dramatic swings in the prices of commodities.  Non-U.S. governments have from time to time blamed the declines of their currencies on speculative currency trading and imposed restrictions on speculative trading in certain markets.

 

Regulatory changes could adversely affect the Fund by restricting its markets, limiting its trading and/or increasing the taxes to which investors are subject.  Adverse regulatory initiatives could develop suddenly and without notice.

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was enacted in July 2010.  The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time.  The Reform Act requires that a substantial portion of over-the-counter derivatives be executed in regulated markets and submitted for clearing to regulated clearinghouses.  Those over-the-counter derivatives may include over-the-counter foreign exchange forwards and swaps which are traded by the Fund, although the U.S. Treasury has the discretion to exclude foreign exchange forwards and swaps from certain of the new regulatory requirements.  If these forwards and swaps are not so excluded, the Reform Act may require them to be cleared and may subject the Fund, the Trading Advisor, the Sponsor and/or the Fund’s counterparties to additional regulatory requirements including minimum initial and variation margin requirements, minimum capital requirements, registration with the SEC and/or the CFTC, new business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest and other regulatory burdens.  Some or all of these requirements may apply even if forwards and swaps are excluded by the U.S. Treasury.  These new regulatory burdens would further increase the dealers’ costs, which costs are expected to be passed through to other market participants such as the Fund in the form of higher fees and less favorable dealer marks.  They may also render certain strategies in which Trading Advisor might otherwise engage impossible, or so costly that they will no longer be economical, to implement.

 

Additionally, the Reform Act, under what is commonly referred to as the “Volcker Rule,” may restrict banking entities or their affiliates, such as MLAI and certain other financial entities, from (i) purchasing units or other ownership interests in, or sponsoring, hedge funds or private equity funds (such as the Fund), with the exception of maintaining a de minimis investment, subject to certain other conditions and/or exceptions, (ii) engaging in proprietary trading and (iii) certain transactions involving conflicts of interest.  The regulations and interpretations with respect to the Reform Act have yet to be issued, and the full import of the Reform Act is not yet clear.  Once such regulations are issued and become effective, MLAI may take certain actions that it determines, in its sole discretion, to be necessary or advisable to comply with the Reform Act.  Such changes may include, but are not limited to, the complete or partial redemption or transfer of any Units held by MLAI and/or the compulsory redemption of U.S. persons from the Fund.  These actions may have a material adverse effect on the Fund and investors.

 

Increased Assets Under Management

 

There appears to be a tendency for the rates of return achieved by managed futures advisors to decline as assets under management increase.  The Trading Advisor has not agreed to limit the amount of additional equity which it may manage.

 

Trading Advisor Risk

 

The Fund is subject to the risk of the bad judgment, negligence or misconduct of its Trading Advisor.  There have been a number of instances in recent years in which private investment funds have incurred substantial losses due to Trading Advisor misconduct.

 

10



 

Changes in Trading Strategy

 

The Trading Advisor may make material changes in its trading strategies without the knowledge or seeking the approval of MLAI.

 

Illiquid Markets

 

Certain positions held by the Fund may become illiquid, preventing the Fund’s Trading Advisor from acquiring positions otherwise indicated by its strategy or making it impossible for the Trading Advisor to close out positions against which the market is moving.

 

Certain futures markets are subject to “daily price limits,” restricting the maximum amount by which the price of a particular contract can change during any given trading day.  Once a contract’s price has moved “the limit,” it may be impossible or economically non-viable to execute trades in such contract.  From time to time, prices have moved “the limit” for a number of consecutive days, making it impossible for traders against whose positions the market was moving to prevent large losses.

 

Trading on Non-U.S. Exchanges

 

The Trading Advisor may trade extensively on non-U.S. exchanges.  These exchanges are not regulated by any United States governmental agency.  The Fund could incur substantial losses trading on foreign exchanges to which it would not have been subject had its Trading Advisor limited its trading to U.S. markets.

 

The profits and losses derived from trading foreign futures and forwards will generally be denominated in foreign currencies; consequently, the Fund will be subject to a certain degree of exchange-rate risk in trading such contracts.

 

Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Brokers and Exchanges

 

The Fund is subject to the risk of the insolvency of its counterparties (such as broker-dealers, futures commission merchants, exchanges, clearinghouses, banks or other financial institutions, including MLPF&S).  Consequently, losses to the Fund could develop and substantially affect performance if insolvency of any of these counterparties occurs.  The Fund’s assets could be lost or impounded during a counterparty’s bankruptcy or insolvency proceedings and a substantial portion or all of the Fund’s assets may become unavailable to it either permanently or for a matter of years.  Were any such bankruptcy or insolvency to occur or were the threat of such bankruptcy or insolvency here to occur, MLAI might decide to liquidate the Fund or suspend  limit or otherwise alter trading, perhaps causing the Fund to miss significant profit opportunities. In connection with offshore futures and over-the-counter forward trading, there are increased risks in dealing with offshore brokers and unregulated trading counterparties, including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated brokers and dealers.

 

Item 1B: Unresolved Staff Comments

 

Not applicable.

 

Item 2:   Properties

 

The Fund does not use any physical properties in the conduct of its business.

 

The Fund’s sponsor offices are the administrative offices of MLAI (Merrill Lynch Alternative Investments LLC, Four World Financial Center, 10th Floor, 250 Vesey Street New York, New York 10080).  MLAI performs administrative services for the Fund from MLAI’s offices.

 

Item 3:   Legal Proceedings

 

None.

 

Item 4:   Removed and Reserved

 

11



 

PART II

 

Item 5:   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Item 5(a)

 

(a)           Market Information:

 

There is no established public trading market for the Units, and none is likely to develop.  Members may redeem Units on ten days written notice to MLAI as of the last day of each month at their Net Asset Value, subject to certain early redemption charges.

 

(b)           Holders:

 

As of December 31, 2010, there were 627 holders of Units including MLAI, none of whom owned 5% or more of the Fund’s Units.

 

(c)           Dividends:

 

MLAI has not made and does not contemplate making any distributions on the Units.

 

(d)           Securities Authorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

(e)           Performance Graph:

 

Not applicable.

 

12



 

(f)            Recent Sales of Unregistered Securities:

 

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

 

$

48,749

 

42,613

 

$

1.1440

 

Feb-10

 

119,923

 

110,876

 

1.0816

 

Mar-10

 

65,325

 

59,521

 

1.0975

 

Apr-10

 

68,247

 

56,221

 

1.2139

 

May-10

 

210,735

 

169,879

 

1.2405

 

Jun-10

 

367,568

 

314,645

 

1.1682

 

Jul-10

 

97,835

 

83,914

 

1.1659

 

Aug-10

 

205,720

 

178,934

 

1.1497

 

Sep-10

 

43,875

 

36,746

 

1.1940

 

Oct-10

 

243,749

 

197,640

 

1.2333

 

Nov-10

 

476,552

 

369,420

 

1.2900

 

Dec-10

 

124,799

 

97,606

 

1.2786

 

Jan-11

 

248,623

 

186,991

 

1.3296

 

Feb-11

 

133,573

 

100,947

 

1.3232

 

 

CLASS C

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

343,994

 

318,307

 

$

1.0807

 

Feb-10

 

102,999

 

100,890

 

1.0209

 

Mar-10

 

572,145

 

552,744

 

1.0351

 

Apr-10

 

358,997

 

313,836

 

1.1439

 

May-10

 

1,087,992

 

931,500

 

1.1680

 

Jun-10

 

265,855

 

241,906

 

1.0990

 

Jul-10

 

483,993

 

441,640

 

1.0959

 

Aug-10

 

548,794

 

508,237

 

1.0798

 

Sep-10

 

200,884

 

179,280

 

1.1205

 

Oct-10

 

295,997

 

255,986

 

1.1563

 

Nov-10

 

344,582

 

285,132

 

1.2085

 

Dec-10

 

219,276

 

183,203

 

1.1969

 

Jan-11

 

534,604

 

429,884

 

1.2436

 

Feb-11

 

756,992

 

612,205

 

1.2365

 

 

CLASS D

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

 

 

$

0.9097

 

Feb-10

 

 

 

0.8612

 

Mar-10

 

 

 

0.8749

 

Apr-10

 

 

 

0.9689

 

May-10

 

 

 

0.9914

 

Jun-10

 

 

 

0.9348

 

Jul-10

 

 

 

0.9341

 

Aug-10

 

 

 

0.9223

 

Sep-10

 

 

 

0.9590

 

Oct-10

 

 

 

0.9918

 

Nov-10

 

 

 

1.0387

 

Dec-10

 

 

 

1.0308

 

Jan-11

 

 

 

1.0733

 

Feb-11

 

 

 

1.0694

 

 

CLASS I

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

 

 

$

1.1369

 

Feb-10

 

9,999

 

9,298

 

1.0754

 

Mar-10

 

 

 

1.0915

 

Apr-10

 

90,544

 

74,972

 

1.2077

 

May-10

 

 

 

1.2346

 

Jun-10

 

79,998

 

68,780

 

1.1631

 

Jul-10

 

40,000

 

34,447

 

1.1612

 

Aug-10

 

 

 

1.1454

 

Sep-10

 

19,999

 

16,808

 

1.1899

 

Oct-10

 

349,999

 

284,691

 

1.2294

 

Nov-10

 

25,000

 

19,434

 

1.2864

 

Dec-10

 

20,000

 

15,680

 

1.2755

 

Jan-11

 

199,823

 

150,605

 

1.3268

 

Feb-11

 

14,999

 

11,356

 

1.3208

 

 

CLASS DS

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

8,164,872

 

5,858,835

 

$

1.3936

 

Feb-10

 

5,399,875

 

4,092,985

 

1.3193

 

Mar-10

 

468,128

 

349,271

 

1.3403

 

Apr-10

 

 

 

1.4843

 

May-10

 

 

 

1.5188

 

Jun-10

 

6,014,301

 

4,199,637

 

1.4321

 

Jul-10

 

173,268

 

121,082

 

1.4310

 

Aug-10

 

 

 

1.4129

 

Sep-10

 

385,800

 

262,592

 

1.4692

 

Oct-10

 

 

 

1.5194

 

Nov-10

 

 

 

1.5912

 

Dec-10

 

 

 

1.5792

 

Jan-11

 

2,447,633

 

1,488,556

 

1.6443

 

Feb-11

 

 

 

1.6383

 

 

CLASS DT

 

 

 

Subscription

 

 

 

 

 

Amount

 

Units

 

NAV (1)

 

Jan-10

 

$

 

 

$

1.4551

 

Feb-10

 

116,743

 

84,676

 

1.3787

 

Mar-10

 

 

 

1.4019

 

Apr-10

 

 

 

1.5538

 

May-10

 

 

 

1.5912

 

Jun-10

 

400,047

 

266,414

 

1.5016

 

Jul-10

 

 

 

1.5017

 

Aug-10

 

 

 

1.4839

 

Sep-10

 

 

 

1.5443

 

Oct-10

 

 

 

1.5984

 

Nov-10

 

 

 

1.6754

 

Dec-10

 

 

 

1.6642

 

Jan-11

 

 

 

1.7338

 

Feb-11

 

 

 

1.7290

 

 


(1) Beginning of the month Net Asset Value

 

Class A Units are subject to sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.50%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amount. Class C, Class DS and Class DT Units are not subject to any sales commissions.

 

13



 

Item 5(b)

Not applicable.

Item 5(c)

Not applicable.

 

Item 6:   Selected Financial Data

 

The following selected financial data has been derived from the financial statements of the Fund.

 

Statements of Operations

 

For the year
ended 
December 31, 
2010

 

For the year ended
 December 31, 2009

 

For the year ended
 December 31, 2008

 

For the period
April 2, 2007
(commencement of 
operations) to
December 31,2007

 

 

 

 

 

 

 

 

 

 

 

Trading profit (loss)

 

 

 

 

 

 

 

 

 

Realized, net

 

$

41,966,162

 

$

(30,087,116

)

$

58,391,558

 

$

18,830,414

 

Change in unrealized, net

 

8,120,139

 

(5,594,032

)

2,997,703

 

3,742,826

 

Brokerage commissions

 

(1,332,262

)

(1,209,739

)

(642,724

)

(580,731

)

Total trading profit (loss)

 

48,754,039

 

(36,890,887

)

60,746,537

 

21,992,509

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

Interest

 

474

 

17,531

 

2,502,184

 

3,463,933

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Management fees

 

4,406,382

 

3,904,212

 

2,462,288

 

862,994

 

Performance fees

 

1,574,502

 

326

 

14,415,123

 

5,282,368

 

Sponsor fees

 

471,939

 

453,477

 

255,504

 

9,750

 

Other

 

671,538

 

572,395

 

626,258

 

155,223

 

Total Expenses

 

7,124,361

 

4,930,410

 

17,759,173

 

6,310,335

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(7,123,887

)

(4,912,879

)

(15,256,989

)

(2,846,402

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

41,630,152

 

$

(41,803,766

)

$

45,489,548

 

$

19,146,107

 

 

Balance Sheet Data

 

December 31,
 2010

 

December 31, 2009

 

December 31, 2008

 

December 31, 2007

 

 

 

 

 

 

 

 

 

 

 

Members’ Capital

 

$

255,959,800

 

$

235,900,686

 

$

217,335,124

 

$

112,656,278

 

Net Asset Value per Series A Unit

 

1.3296

 

1.1440

 

1.3842

 

1.0998

 

Net Asset Value per Series C Unit

 

1.2436

 

1.0807

 

1.3209

 

1.0608

 

Net Asset Value per Series D Unit

 

1.0733

 

0.9097

 

1.2310

 

0.9354

 

Net Asset Value per Series I Unit

 

1.3268

 

1.1369

 

1.3707

 

1.0609

 

Net Asset Value per Series DS Unit

 

1.6443

 

1.3936

 

1.6610

 

1.3022

 

Net Asset Value per Series DT Unit

 

1.7338

 

1.4551

 

1.7165

 

1.2896

 

 

14



 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and report performance to investors throughout the year is useful financial information for the Members of the Fund.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.0780

 

$

1.1716

 

$

1.1141

 

$

1.0999

 

2008

 

$

1.0964

 

$

1.1567

 

$

1.1632

 

$

1.1633

 

$

1.1945

 

$

1.2163

 

$

1.1875

 

$

1.1684

 

$

1.2284

 

$

1.3201

 

$

1.3532

 

$

1.3842

 

2009

 

$

1.3808

 

$

1.3886

 

$

1.3368

 

$

1.3365

 

$

1.3550

 

$

1.3301

 

$

1.2825

 

$

1.2892

 

$

1.2623

 

$

1.1991

 

$

1.2292

 

$

1.1440

 

2010

 

$

1.0816

 

$

1.0975

 

$

1.2139

 

$

1.2405

 

$

1.1682

 

$

1.1659

 

$

1.1497

 

$

1.1940

 

$

1.2333

 

$

1.2900

 

$

1.2786

 

$

1.3296

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

0.9522

 

$

0.9228

 

$

0.9940

 

$

1.0795

 

$

1.0530

 

$

1.0610

 

2008

 

$

1.0567

 

$

1.1139

 

$

1.1208

 

$

1.1141

 

$

1.1465

 

$

1.1724

 

$

1.1390

 

$

1.1189

 

$

1.1751

 

$

1.2616

 

$

1.2923

 

$

1.3208

 

2009

 

$

1.3165

 

$

1.3228

 

$

1.2724

 

$

1.2710

 

$

1.2876

 

$

1.2629

 

$

1.2166

 

$

1.2219

 

$

1.1954

 

$

1.1346

 

$

1.1621

 

$

1.0807

 

2010

 

$

1.0209

 

$

1.0351

 

$

1.1439

 

$

1.1680

 

$

1.0990

 

$

1.0959

 

$

1.0798

 

$

1.1205

 

$

1.1563

 

$

1.2085

 

$

1.1969

 

$

1.2436

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

0.9391

 

$

0.9355

 

2008

 

$

0.9336

 

$

0.9862

 

$

0.9960

 

$

1.0015

 

$

1.0470

 

$

1.0743

 

$

1.0468

 

$

1.0313

 

$

1.0859

 

$

1.1684

 

$

1.2020

 

$

1.2311

 

2009

 

$

1.2296

 

$

1.2380

 

$

1.1935

 

$

1.1946

 

$

1.2127

 

$

1.1919

 

$

1.1507

 

$

1.1581

 

$

1.0000

 

$

0.9511

 

$

0.9762

 

$

0.9097

 

2010

 

$

0.8612

 

$

0.8749

 

$

0.9689

 

$

0.9914

 

$

0.9348

 

$

0.9341

 

$

0.9223

 

$

0.9590

 

$

0.9918

 

$

1.0387

 

$

1.0308

 

$

1.0733

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.0691

 

$

1.0475

 

$

1.0610

 

2008

 

$

1.0579

 

$

1.1165

 

$

1.1325

 

$

1.1384

 

$

1.1761

 

$

1.2054

 

$

1.1727

 

$

1.1542

 

$

1.2143

 

$

1.3061

 

$

1.3396

 

$

1.3707

 

2009

 

$

1.3678

 

$

1.3760

 

$

1.3246

 

$

1.3247

 

$

1.3435

 

$

1.3193

 

$

1.2725

 

$

1.2795

 

$

1.2533

 

$

1.1909

 

$

1.2212

 

$

1.1369

 

2010

 

$

1.0754

 

$

1.0915

 

$

1.2077

 

$

1.2346

 

$

1.1631

 

$

1.1612

 

$

1.1454

 

$

1.1899

 

$

1.2294

 

$

1.2864

 

$

1.2755

 

$

1.3268

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

$

1.0532

 

$

1.1117

 

$

1.1922

 

$

1.1542

 

$

1.1218

 

$

1.2109

 

$

1.3177

 

$

1.2928

 

$

1.3023

 

2008

 

$

1.2998

 

$

1.3730

 

$

1.3922

 

$

1.3951

 

$

1.4378

 

$

1.4701

 

$

1.4266

 

$

1.4021

 

$

1.4726

 

$

1.5798

 

$

1.6218

 

$

1.6611

 

2009

 

$

1.6591

 

$

1.6705

 

$

1.6103

 

$

1.6119

 

$

1.6363

 

$

1.6082

 

$

1.5526

 

$

1.5626

 

$

1.5320

 

$

1.4571

 

$

1.4955

 

$

1.3936

 

2010

 

$

1.3193

 

$

1.3403

 

$

1.4843

 

$

1.5188

 

$

1.4321

 

$

1.4310

 

$

1.4129

 

$

1.4692

 

$

1.5194

 

$

1.5912

 

$

1.5792

 

$

1.6443

 

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

July

 

Aug.

 

Sept.

 

Oct.

 

Nov.

 

Dec.

 

2007

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

$

1.1598

 

$

1.1255

 

$

1.0950

 

$

1.1829

 

$

1.2891

 

$

1.2678

 

$

1.2900

 

2008

 

$

1.2885

 

$

1.3623

 

$

1.3854

 

$

1.3980

 

$

1.4479

 

$

1.4882

 

$

1.4508

 

$

1.4320

 

$

1.5102

 

$

1.6300

 

$

1.6749

 

$

1.7170

 

2009

 

$

1.7163

 

$

1.7296

 

$

1.6688

 

$

1.6719

 

$

1.6986

 

$

1.6709

 

$

1.6144

 

$

1.6262

 

$

1.5956

 

$

1.5189

 

$

1.5602

 

$

1.4551

 

2010

 

$

1.3787

 

$

1.4019

 

$

1.5538

 

$

1.5912

 

$

1.5016

 

$

1.5017

 

$

1.4839

 

$

1.5443

 

$

1.5984

 

$

1.6754

 

$

1.6642

 

$

1.7338

 

 

15



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS A UNITS) (5)

December 31, 2010

 

Type of Pool:  Single Advisor Non-“Principal Protected” (1)

Inception of Trading: September 1, 2007

Aggregate Subscriptions: $5,302,875

Current Capitalization:   $4,597,909

Worst Monthly Drawdown (2):  (6.93)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (22.12)%  ( March 2009 — January 2010)

 

Net Asset Value per Unit for Class A, December 31, 2010:   $1.3296

 

Monthly Rates of Return (4)

 

Month

 

2010

 

2009

 

2008

 

2007

 

January

 

(5.45

)%

(.25

)%

(0.32

)%

 

February

 

1.47

 

0.56

 

5.50

 

 

March

 

10.61

 

(3.73

)

0.56

 

 

April

 

2.19

 

(0.02

)

0.01

 

 

May

 

(5.83

)

1.38

 

2.68

 

 

June

 

(0.20

)

(1.84

)

1.83

 

 

July

 

(1.39

)

(3.58

)

(2.37

)

 

August

 

3.85

 

0.52

 

(1.61

)

 

September

 

3.29

 

(2.09

)

5.14

 

7.80

%

October

 

4.60

 

(5.01

)

7.46

 

8.68

 

November

 

(0.88

)

2.51

 

2.51

 

(4.91

)

December

 

3.99

 

(6.93

)

2.29

 

(1.27

)

Compound Annual Rate of Return

 

16.22

%

(17.37

)%

25.85

%

9.99

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”. The Fund has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since September 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since September 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 32.96%.

 

16



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS C UNITS) (5)

December 31, 2010

 

Type of Pool:  Single Advisor Non-“Principal Protected” (1)

Inception of Trading: July 1, 2007

Aggregate Subscriptions:    $26,488,148

Current Capitalization:   $18,827,816

Worst Monthly Drawdown (2):  (7.00)% (December 2009)

Worst Peak-to-Valley Drawdown (3):  (22.82% (March 2009 —January 2010)

 

Net Asset Value per Unit for Class C, December 31, 2010:   $1.2436

 

Monthly Rates of Return (4)

 

Month

 

2010

 

2009

 

2008

 

2007

 

January

 

(5.53

)%

(.33

)%

(0.41

)%

 

February

 

1.39

 

0.48

 

5.41

 

 

March

 

10.51

 

(3.81

)

0.62

 

 

April

 

2.11

 

(0.11

)

(0.60

)

 

May

 

(5.91

)

1.31

 

2.91

 

 

June

 

(0.28

)

(1.92

)

2.26

 

 

July

 

(1.47

)

(3.67

)

(2.85

)

-4.78

%

August

 

3.77

 

0.44

 

(1.76

)

(3.09

)

September

 

3.20

 

(2.17

)

5.02

 

7.71

 

October

 

4.51

 

(5.09

)

7.36

 

8.60

 

November

 

(0.96

)

2.42

 

2.43

 

(2.45

)

December

 

3.90

 

(7.00

)

2.21

 

0.76

 

Compound Annual Rate of Return

 

15.07

%

(18.19

)%

24.49

%

6.10

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”. The Fund has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since July 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since July 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 23.20%.

 

17



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS D UNITS) (5)

December 31, 2010

 

Type of Pool:  Single Advisor Non-“Principal Protected” (1)

Inception of Trading: November 1, 2007

Aggregate Subscriptions:    $6,224,999

Current Capitalization:   $2,146,621

Worst Monthly Drawdown (2):  (6.81)% (December 2009)

Worst Peak-to-Valley Drawdown (3):  (21.85)%  ( March  2009-January 2010)

 

Net Asset Value per Unit for Class D, December 31, 2010:   $1.0733

 

Monthly Rates of Return (4)

 

Month

 

2010

 

2009

 

2008

 

2007

 

January

 

(5.33

)%

(.12

)%

(0.19

)%

 

February

 

1.59

 

0.68

 

5.63

 

 

March

 

10.74

 

(3.59

)

0.99

 

 

April

 

2.32

 

0.09

 

0.55

 

 

May

 

(5.71

)

1.52

 

4.54

 

 

June

 

(0.07

)

(1.72

)

2.61

 

 

July

 

(1.26

)

(3.46

)

(2.56

)

 

August

 

3.98

 

0.64

 

(1.48

)

 

September

 

3.42

 

 

5.29

 

 

October

 

4.73

 

(4.89

)

7.60

 

 

November

 

(0.76

)

2.64

 

2.88

 

-6.09

%

December

 

4.12

 

(6.81

)

2.42

 

(0.39

)

Compound Annual Rate of Return

 

17.98

%

(14.43

)%

31.61

%

-6.46

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”. The Fund has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since November 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since November 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 7.33%.

 

18



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS I UNITS) (5)

December 31, 2010

 

Type of Pool:  Single Advisor Non-“Principal Protected” (1)

Inception of Trading: October 1, 2007

Aggregate Subscriptions:  $2,755,023

Current Capitalization:   $1,209,298

Worst Monthly Drawdown (2):  (6.90)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (21.85)%  ( March 2009 —January 2010)

 

Net Asset Value per Unit for Class I, December 31, 2010:   $1.3268

 

Monthly Rates of Return (4)

 

Month

 

2010

 

2009

 

2008

 

2007

 

January

 

(5.41

)%

(.21

)%

(0.29

)%

 

February

 

1.50

 

0.60

 

5.54

 

 

March

 

10.65

 

(3.74

)

1.43

 

 

April

 

2.23

 

0.01

 

0.52

 

 

May

 

(5.79

)

1.42

 

3.31

 

 

June

 

(0.16

)

(1.80

)

2.49

 

 

July

 

(1.36

)

(3.55

)

(2.71

)

 

August

 

3.89

 

0.55

 

(1.58

)

 

September

 

3.32

 

(2.05

)

5.21

 

 

October

 

4.64

 

(4.98

)

7.56

 

6.91

%

November

 

(0.85

)

2.54

 

2.56

 

(2.03

)

December

 

4.02

 

(6.90

)

2.32

 

1.29

 

Compound Annual Rate of Return

 

16.70

%

(17.07

)%

29.18

%

6.10

%

 


(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”. The Fund has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since October 1, 2007 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since October 1, 2007 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.

 

(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 32.68%.

 

19



 

ML TRANSTREND DTP ENHANCED FUTURESACCESS LLC

(CLASS DS UNITS) (5)

December 31, 2010

 

Type of Pool:  Single Advisor Non-“Principal Protected” (1)

Inception of Trading: April 2, 2007

Aggregate Subscriptions:   $183,873,453

Current Capitalization:   $183,611,518

Worst Monthly Drawdown (2):  (6.81)% ( December 2009)

Worst Peak-to-Valley Drawdown (3):  (21.03)%  ( March 2009 — January 2010)

 

Net Asset Value per Unit for Class DS, December 31, 2010:   $1.6443

 

Monthly Rates of Return (4)

 

Month