KMP Futures Fund I LLC - FORM 10-Q

KMP Futures Fund I LLC - FORM 10-Q - November 14, 2012

Attached files

Attached files

KMP Futures Fund I LLC Reports

file	filename
EXCEL - IDEA: XBRL DOCUMENT - KMP Futures Fund I LLC	Financial_Report.xls
EX-31.1 - EX-31.1 - KMP Futures Fund I LLC	d398374dex311.htm
EX-32.2 - EX-32.2 - KMP Futures Fund I LLC	d398374dex322.htm
EX-31.2 - EX-31.2 - KMP Futures Fund I LLC	d398374dex312.htm
EX-32.1 - EX-32.1 - KMP Futures Fund I LLC	d398374dex321.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 quarter ended: September 30, 2012

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

For the transition period from to

Commission File Number: 000-53816

KMP FUTURES FUND I LLC

(Exact name of registrant as specified in its charter)


Delaware		20-5914530
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

900 King Street, Suite 100, Rye Brook, New York		10573
(Address of principal executive offices)		(Zip Code)

(914) 307-7000

(Registrant’s telephone number, including area code)

N/A

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

Indicate by check mark whether 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

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

KMP FUTURES FUND I LLC

INDEX TO QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2012


		Page

PART I – FINANCIAL INFORMATION		3

Item 1.	Condensed Financial Statements	4
	*KMP Futures Fund I LLC*

	Condensed Statements of Financial Condition as of September 30, 2012 (Unaudited) and December 31, 2011	5

	Condensed Schedules of Investments as of September 30, 2012 (Unaudited) and December 31, 2011	6-7

	Condensed Statements of Operations (Unaudited) for the Three Months and Nine Months Ended September 30, 2012 and 2011	8

	Condensed Statements of Changes in Members’ Capital (Net Asset Value) (Unaudited) for the Nine Months Ended September 30, 2012 and 2011	9

	Notes to Condensed Financial Statements (Unaudited)	10-27

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	48

PART II – OTHER INFORMATION		50

Item 1.	Legal Proceedings	50

Item 1.A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults Upon Senior Securities	50

Item 5.	Other Information	50

Item 6.	Exhibits:	50

PART I – FINANCIAL INFORMATION

Item 1.

Condensed Financial Statements

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

FINANCIAL STATEMENTS TO FOLLOW]

KMP FUTURES FUND I LLC

CONDENSED FINANCIAL STATEMENTS

September 30, 2012 (Unaudited)

KMP FUTURES FUND I LLC

CONDENSED STATEMENTS OF FINANCIAL CONDITION

September 30, 2012 (Unaudited) and December 31, 2011


	September 30,		December 31,
	2012		2011
ASSETS
Cash and cash equivalents (see Note 2)	$	2,985,447	$	17,885,213
Investment in Affiliated Investment Funds, at fair value (cost $4,694,582 and $0 at September 30, 2012 and December 31, 2011, respectively)		3,920,996		0
Investment in securities, at fair value (cost $14,088,784 and $8,622,642 at September 30, 2012 and December 31, 2011, respectively)		14,199,534		8,622,642
Commodity options owned, at fair value (premiums paid $0 and $260 at September 30, 2012 and December 31, 2011, respectively)		0		44
Net unrealized gain on open futures contracts		0		345,472
Net unrealized gain on open forward contracts		0		130,463

Total assets	$	21,105,977	$	26,983,834

LIABILITIES
Commodity options written, at fair value (premiums received $0 and $530 at September 30, 2012 and December 31, 2011, respectively)	$	0	$	120
Management fees payable to Managing Member		22,716		27,620
Interest payable to Managing Member		10,241		0
Accrued expenses payable		106,755		98,939
Service fees payable		61,353		75,036
Redemptions payable		141,688		754,541
Trading Advisors’ management fees payable		0		38,351
Trading Advisors’ incentive fees payable		0		0

Total liabilities		342,753		994,607

MEMBERS’ CAPITAL (Net Asset Value)		20,763,224		25,989,227

Total liabilities and members’ capital	$	21,105,977	$	26,983,834

See accompanying notes.

KMP FUTURES FUND I LLC

CONDENSED SCHEDULES OF INVESTMENTS

September 30, 2012 (Unaudited) and December 31, 2011


	September 30, 2012					December 31, 2011
	Net Unrealized Gain/(Loss) as a % of Members’ Capital			Net Unrealized Gain/(Loss)		Net Unrealized Gain/(Loss) as a % of Members’ Capital			Net Unrealized Gain/(Loss)
Futures and Forward Contracts
Futures contracts purchased:
Commodities		0.00	%	$	0		(0.03	)%	$	(6,909	)
Currencies		0.00	%		0		0.14	%		35,767
Energies		0.00	%		0		0.02	%		6,400
Interest rates		0.00	%		0		0.66	%		167,118
Metals		0.00	%		0		0.12	%		31,968
Stock indices		0.00	%		0		0.04	%		11,297

Net unrealized gain on futures contracts purchased		0.00	%		0		0.95	%		245,641

Futures contracts sold:
Commodities		0.00	%		0		(0.04	)%		(14,714	)
Currencies		0.00	%		0		0.38	%		99,721
Energies		0.00	%		0		0.09	%		24,522
Interest rates		0.00	%		0		(0.01	)%		(1,370	)
Metals		0.00	%		0		(0.05	)%		(11,709	)
Stock indices		0.00	%		0		0.01	%		3,381

Net unrealized gain on futures contracts sold		0.00	%		0		0.38	%		99,831

Net unrealized gain on open futures contracts		0.00	%	$	0		1.33	%	$	345,472

Forward currency contracts purchased:
Net unrealized gain on forward currency contracts purchased		0.00	%	$	0		0.41	%	$	106,903

Forward currency contracts sold:
Net unrealized gain on forward currency contracts sold		0.00	%	$	0		0.09	%	$	23,560

Net unrealized gain on forward currency contracts		0.00	%	$	0		0.50	%	$	130,463

Purchased Options on Futures Contracts
Fair value of options purchased		0.00	%	$	0		0.00	%	$	44

Commodity options owned, at fair value (premiums paid $0 and $260 at September 30, 2012 and December 31, 2011, respectively)		0.00	%	$	0		0.00	%	$	44

Written Options on Futures Contracts
Fair value of options written		0.00	%	$	0		0.00	%	$	(120	)

Commodity options written, at fair value (premiums received $0 and $530 at September 30, 2012 and December 31, 2011, respectively)		0.00	%	$	0		0.00	%	$	(120	)

The condensed schedules of investments continue on page 4.

KMP FUTURES FUND I LLC

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)

September 30, 2012 (Unaudited) and December 31, 2011


	September 30, 2012					December 31, 2011
	Fair Value as a % of Members’ Capital			Fair Value		Fair Value as a % of Members’ Capital			Fair Value
Investment in Securities:
Publicly-traded mutual funds:
Fidelity Instl Shrt-Interm Govt (shares 698,097.56 and 0 at September 30, 2012 and December 31, 2011, respectively)		34.19	%	$	7,099,652		0.00	%	$	0
T. Rowe Price Short-Term Bond Fund (shares 1,460,881.01 and 1,792,649.060 at September 30, 2012 and December 31, 2011, respectively)		34.19	%		7,099,882		33.18	%		8,622,642

Total investment in Securities (cost $14,088,784 and $8,622,642 at September 30, 2012 and December 31, 2011, respectively)		68.38	%	$	14,199,534		33.18	%	$	8,622,642

Investment in Affiliated Investment Funds:
CTA Choice GRM		12.87	%	$	2,671,714		0.00	%	$	0
CTA Choice WTN		6.02	%		1,249,282		0.00	%		0

Total investment in Affiliated Investment Funds (cost $4,694,582 and $0 at September 30, 2012 and December 31, 2011, respectively)		18.89	%	$	3,920,996		0.00	%	$	0

See accompanying notes.

KMP FUTURES FUND I LLC

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
REVENUE
Realized	$	7,576		$	(141,779	)	$	487,364		$	345,472
Change in unrealized		50,828			451,225			(365,378	)		(369,792	)
Dividend income		43,618			46,072			145,612			320,242
Interest income		320			1,498			2,093			1,498

Net gain from trading assets		102,342			357,016			269,691			297,420
Net realized gain on investments in Affiliated Investment Funds		34,671			0			93,792			0
Net change in unrealized appreciation / depreciation on investments in Affiliated Investment Funds		79,582			0			(773,586	)		0

Net gain (loss) from investments in Affiliated Investment Funds		114,253			0			(679,794	)		0

Total gain (loss) on investments		216,595			357,016			(410,103	)		297,420

EXPENSES
Interest expenses		0			238			0			3,514
Brokerage commissions		0			41,480			0			152,849
Management fees to Managing Member		144,070			200,315			459,811			655,281
ClariTy Managed Account fees		0			19,443			0			63,374
Managing Member interest earned on investment funds		50,956			13,037			104,441			87,264
Services fees (see Note 6)		185,744			266,323			615,382			865,705
Trading Advisors’ management fees		0			135,377			0			438,361
Trading Advisors’ incentive fees		0			51,407			0			59,880
Operating expenses		75,896			60,606			248,217			246,024

Total expenses ⁽¹⁾		456,666			788,226			1,427,851			2,572,252

Net loss	$	(240,071	)	$	(431,210	)	$	(1,837,954	)	$	(2,274,832	)

(1)

Brokerage commissions, ClariTy Managed Account fees, Trading Advisors’ management and incentive fees, and administrator fees which were paid directly and are a part of the operating expenses during 2011, are now paid indirectly and are included in net gain (loss) from investments in Affiliated Investment Funds starting January 1, 2012.

See accompanying notes.

KMP FUTURES FUND I LLC

CONDENSED STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL (NET ASSET VALUE)

For the Nine Months Ended September 30, 2012 and 2011 (Unaudited)


	Members’ Capital
Nine months ended September 30, 2012
Members’ capital at December 31, 2011	$	25,989,227
Redemptions		(3,388,049	)
Net loss for the nine months ended September 30, 2012		(1,837,954	)

Members’ capital at September 30, 2012	$	20,763,224

Nine months ended September 30, 2011
Members’ capital at December 31, 2010	$	33,257,071
Additions		4,412,339
Redemptions		(6,111,376	)
Net loss for the nine months ended September 30, 2011		(2,274,832	)

Members’ capital at September 30, 2011	$	29,283,202

See accompanying notes.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1. ORGANIZATION

General Description of the Company

KMP Futures Fund I LLC (the “Company”) is a limited liability company organized under the laws of Delaware on November 20, 2006 which commenced operations on January 1, 2007. The Company will terminate on December 31, 2056 unless terminated sooner under the provisions of the limited liability company agreement of the Company (the “Operating Agreement”). The Company was formed to engage in the direct or indirect speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time, engage in cash and spot transactions. The fiscal year end of the Company is December 31.

Effective July 1, 2012, Kenmar Preferred Investments Corp. changed its name and form of entity to Kenmar Preferred Investments, L.P. (“Kenmar Preferred” or the “Managing Member”). Kenmar Preferred or Managing Member refers to either Kenmar Preferred Investments Corp. or Kenmar Preferred Investments, L.P., depending on the applicable period discussed. Kenmar Preferred is the managing owner of each of the Company’s fund members (through their dissolution), is the Managing Member of the Company, and has been delegated administrative authority over the operations of the Company.

The Company is a reporting company pursuant to the Securities Exchange Act of 1934. Moreover, as a commodity pool, the Company is subject to the record keeping and reporting requirements of the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”).

On July 1, 2010, World Monitor Trust II-Series E (“Member Series E”) contributed all of its assets into the Company and received a voting membership interest. Member Series E together with Diversified Futures Trust I (“Member DFT I”), Futures Strategic Trust (“Member FST”), Kenmar Global Trust (“Member KGT”), World Monitor Trust II Series D (“Member Series D”), World Monitor Trust II Series F (“Member Series F”), and subsequent to the dissolution of each of the fund members, the investors holding interests in the Company, are collectively (the “Members” or the “Individual Members”).

On July 30, 2010, pursuant to Section 13.1(h) of the Trust Agreement of World Monitor Trust II, the Board of Directors of Kenmar Preferred, in its capacity as managing owner of Member Series E, determined to dissolve Member Series E effective as of the close of business on September 30, 2010. Investors in Member Series E who elected not to redeem as of September 30, 2010 received a pro rata distribution of their interest in Member Series E on September 30, 2010 and replaced it with a direct ownership interest in the Company on October 1, 2010.

On December 1, 2010, Member KGT became a member of the Company and received a voting membership interest in the Company. On December 10, 2010, pursuant to Member KGT’s Fifth Amended and Restated Declaration of Trust and Trust Agreement, the Board of Directors of Kenmar Preferred, in its capacity as managing owner of Member KGT, determined to dissolve Member KGT effective as of the close of business on December 31, 2010.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 1. ORGANIZATION (CONTINUED)

General Description of the Company (Continued)

Investors in Member KGT who elected not to redeem as of December 31, 2010 received a pro rata distribution of their interest in Member KGT on December 31, 2010 and replaced it with a direct ownership interest in the Company on January 1, 2011. Subsequent to the liquidation of Member KGT on December 31, 2010, the payables to and receivables from KGT were amalgamated. Final liquidation payments were made to Member KGT in February 2011.

Member Series E and Member KGT filed with the Securities Exchange Commission (“SEC”) on October 5, 2010 and January 6, 2011, respectively, to de-register their respective interests under Section 12(g) of the Securities Exchange Act of 1934. Member Series E and Member KGT are no longer subject to the reporting requirements of the SEC and the CFTC upon their dissolution on September 30, 2010 and December 31, 2010, respectively.

Prior to July 1, 2010, pursuant to the Company’s Trading Advisory Agreement with Winton Capital Management Limited (“Winton”), Winton invested a portion of the Company’s assets pursuant to Winton’s Diversified Program. Beginning July 1, 2010, the Company entered into a second Trading Advisory Agreement with Graham Capital Management, L.P. (“Graham”), under which Graham invested a portion of the Company’s assets pursuant to Graham’s K4D-15V Program (collectively, Winton and Graham are referred to as the “Trading Advisors”). Effective July 1, 2010, the Company allocated approximately one-half of its net assets to each Trading Advisor’s managed account (collectively, the “Managed Accounts”) with such allocations to be re-balanced quarterly.

The Managing Member terminated the Trading Advisory Agreements with Winton and Graham effective December 31, 2011. The Managing Member may terminate any current Managed Account agreement with an Advisor or select new Trading Advisors including affiliated investment funds, from time-to-time, in its sole discretion, in order to achieve the goals of the Company.

Effective January 1, 2012, the Company allocated approximately one-half of its net assets to each of the following Affiliated Investment Funds: CTA Choice GRM (“GRM”) and CTA Choice WTN (“WTN”), both segregated series of CTA Choice Fund LLC (“CTA Choice”), a Delaware limited liability company. Graham is the Trading Advisor for GRM and manages the assets pursuant to its K4D-15V Program. Winton is the Trading Advisor for WTN and manages the assets pursuant to its Winton’s Diversified Program. Any loss carry forward from the Company’s Graham and Winton managed accounts were transferred over to the Company’s member interests in GRM and WTN, respectively, effective January 1, 2012.

Effective July 1, 2012, ClariTy Managed Account & Analytics Platform LLC changed its name and form of entity to ClariTy Managed Account & Analytics Platform, L.P. (“ClariTy”). ClariTy refers to either ClariTy Managed Account & Analytics Platform LLC or ClariTy Managed Account & Analytics Platform L.P., depending on the applicable period discussed. ClariTy, an affiliate of Kenmar Preferred, serves as the managing member for CTA Choice. CTA Choice consists of multiple segregated series, each established pursuant to a separate Certificate of Designation prepared by the CTA Choice’s managing member.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 1. ORGANIZATION (CONTINUED)

General Description of the Company (Continued)

Each series maintains separate and distinct records. The assets associated with each series, and the liabilities and obligations incurred with respect to a particular series are enforceable only against the assets of that series.

Effective July 1, 2012, Kenmar Global Investment Management LLC changed its name and form of entity to Kenmar Global Investment Management L.P. (“Asset Allocator”). Asset Allocator refers to either Kenmar Global Investment Management LLC or Kenmar Global Investment Management, L.P., depending on the applicable period discussed. The Asset Allocator, an affiliate of the Managing Member, is the Asset Allocator of CTA Choice. Pursuant to the Asset Allocation Agreements between the Managing Member, the Asset Allocator, and each interestholder, the Asset Allocator determines the trading level of each interestholder’s assets and reallocates among the separate series of CTA Choice as agreed upon with the Trading Advisors. While the Asset Allocator receives no fees for such services from the Company, the Asset Allocator is paid management and incentive fees directly from the interestholders pursuant to each interestholder’s Asset Allocation Agreement.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The condensed statements of financial condition, including the condensed schedules of investments, as of September 30, 2012, the condensed statements of operations for the three months ended September 30, 2012 (“Third Quarter 2012”) and for the nine months ended September 30, 2012 (“Year-To-Date 2012”) and for the three months ended September 30, 2011 (“Third Quarter 2011”) and for the nine months ended September 30, 2011 (“Year-To-Date 2011”), and the condensed statements of changes in members’ capital for the Year-To-Date 2012 and Year-To-Date 2011, are unaudited.

In the opinion of the Managing Member, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial position of the Company as of September 30, 2012 and the results of its operations for the interim period Third Quarter 2012, Third Quarter 2011, Year-To-Date 2012 and Year-To-Date 2011. The operating results for these interim periods may not be indicative of the results expected for a full year.

The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Such principles require the Managing Member 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 condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with a U.S. GAAP have been omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the SEC for the year ended December 31, 2011.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Accounting (Continued)

Commodity futures and foreign exchange transactions are reflected in the accompanying condensed statements of financial condition, as at December 31, 2011, on the trade date. Net unrealized gain or loss on open contracts (the difference between contract trade price and market price) are offset when reflected in the financial statements since the contracts are executed with the same counterparty under a master netting arrangement. The market value of futures (exchange-traded) contracts is based upon the closing quotation on the various futures exchanges on which the contract is traded. The values which will be used by the Company for open forward and option positions will be provided by its administrator, who obtains market quotes from independent data vendors and third parties. Any change in net unrealized gain or loss during the current period is reported in the statements of operations. Realized gains and losses on transactions are recognized in the period in which the contracts are closed. Brokerage commissions include other trading fees and are charged to expense when incurred.

The investments in the Affiliated Investment Funds are reported in the Company’s condensed statement of financial condition at fair value. Fair value ordinarily is the value determined for the Affiliated Investment Funds in accordance with the fund’s valuation policies and reported at the time of the Company’s valuation by the management of the funds.

Generally, the net asset value of the Company’s investments in the Affiliated Investment Funds represents the fund’s fair value which is the amount that the Company could reasonably expect to receive from the funds if the Company’s investments were redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that the Company believes to be reliable.

Investments in securities consist of publicly-traded mutual funds. Publicly-traded mutual funds are valued using the net asset value on the last day of the period. Realized gains and losses from investment securities are determined using the identified cost method. Any change in net unrealized gain or loss from the preceding period is reported in the condensed statements of operations. Dividends are recorded on the ex-dividend date.

The Company has elected not to provide a statement of cash flows since substantially all of the Company’s investments are highly liquid and carried at fair value, the Company has little or no debt and a condensed statement of changes in members’ capital (net asset value) is provided.

Consistent with standard business practice in the normal course of business, the Company has provided general indemnifications to Kenmar Preferred, its Trading Advisors and others when they act, in good faith, in the best interests of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Accounting (Continued)

The Company accounts for financial assets and liabilities using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels: quoted market prices in active markets for identical assets and liabilities (Level 1), inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly (Level 2), and unobservable inputs for the asset or liability (Level 3).

The Company considers its investments in publicly-traded mutual funds, prices for exchange traded commodity futures and options contracts to be based on quoted prices in active markets for identical assets (Level 1). The values of forwards, swaps and certain options contracts for which market quotations are not readily available are priced by independent third party data vendors or pricing services who derive fair values for those assets from observable inputs (Level 2). In determining the level, the Company considers the length of time until the investment is redeemable, including notice and lock-up periods or any other restriction on the disposition of the investment. The Company also considers the nature of the portfolios of the underlying Affiliated Investment Funds and their ability to liquidate their underlying investments. The Company has the ability to redeem its investments at the reported net asset valuation as of the measurement date (see Note 7) and classified its investments in Affiliated Investment Funds as Level 2 using the fair value hierarchy. The Affiliated Investment Funds are valued at the net asset value as reported by the underlying investment funds’ capital balance using the expedient method. The carrying value of the underlying investments in Affiliated Investment Funds is at fair value.

The market values of forward currency (non-exchange traded) contracts (Level 2) was extrapolated on a forward basis from the spot prices quoted as of 4:00 P.M. (EST) on the last business day of the reporting period from an independent third party data provider (Level 2).

The market value of option (non-exchange traded) (Level 2) contracts are calculated by applying an industry-standard adaptation of the Black-Scholes options valuation model to foreign currency options, using as input, the spot prices, interest rates and option implied volatilities quoted as of 4:00 P.M. (EST) on the last business day of the reporting period from its independent third-party data provider. Any change in net unrealized gain or loss from the preceding period is reported in the condensed statements of operations. When the Company writes an option, an amount equal to the premium received by the Company is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of option written.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Accounting (Continued)

There are no Level 3 investments on September 30, 2012 or December 31, 2011, nor any portion of the interim periods.

The following table summarizes the assets and liabilities measured at fair value using the fair value hierarchy:


September 30, 2012	Level 1		Level 2			Level 3		Total
Assets:
Investment in Affiliated Investment Funds, at fair value	$	0	$	3,920,996		$	0	$	3,920,996
Investment in securities, at fair value	$	14,199,534	$	0		$	0	$	14,199,534

December 31, 2011	Level 1		Level 2			Level 3		Total
Assets:
Net unrealized gain on open futures contracts	$	345,472	$	0		$	0	$	345,472
Net unrealized gain on open forward contracts	$	0	$	130,463		$	0	$	130,463
Investment in securities, at fair value	$	8,622,642	$	0		$	0	$	8,622,642
Commodity options owned, at fair value	$	0	$	44		$	0	$	44

Liabilities:
Commodity options owned, at fair value	$	0	$	(120	)	$	0	$	(120	)

Cash and Cash Equivalents

Cash and cash equivalents represents amounts deposited with a bank and clearing broker, a portion of which was restricted prior to January 1, 2012 when the Company engaged the Trading Advisors, for purposes of meeting margin requirements which typically ranged from 0% to 35% of the notional amounts of the derivatives traded. A portion of the cash deposited with a bank is deposited in an off-shore sweep account facility daily. The Company receives interest at prevailing interest rates on all cash balances held by the clearing broker and bank. As of September 30, 2012 and December 31, 2011, $0 and $303,663 are held in various foreign currencies, which are subject to fluctuations based on changes in the foreign exchange rates as compared to the Company’s functional currency.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents (Continued)

The Company has cash and investments in securities on deposit with financial institutions and their related brokerage entities which may exceed insured balance limits. In the event of a financial institution’s insolvency, recovery of cash and investments in securities on deposit may be limited to account insurance or other protection afforded such deposits.

Income Taxes

The Company is treated as a partnership for U.S. federal income tax purposes. As such, the Company is not required to provide for, or pay, any U.S. federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the Members. The Company may be subject to other state and local taxes in jurisdictions in which it operates.

The Company recognizes tax benefits or expenses of uncertain tax positions in the year such determination is made when the positions are “more likely than not” to be sustained assuming examination by tax authorities. The Managing Member has reviewed the Company’s tax positions for all open years and concluded that no provision for unrecognized tax benefits or expense is required in these financial statements. The Company has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as interest or other expense. The 2009 through 2011 tax years generally remain subject to examination by U.S. federal and most state tax authorities.

There have been no differences between the tax basis and book basis of assets, liabilities or members’ capital since inception of the Company.

Capital Accounts

The Company accounts for subscriptions, allocations and redemptions on a per Member capital account basis. The Company allocates profits and losses, for both financial and tax reporting purposes to its Members monthly on a pro rata basis based on each Member’s pro rata capital in the Company during the month. Distributions (other than redemptions of capital) may be made at the sole discretion of the Managing Member on a pro rata basis in accordance with the Members’ respective capital balances. The Managing Member has not and does not presently intend to make any distributions.

Foreign Currency Transactions

The Company’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the condensed statements of financial condition. Income and expense items denominated in currencies other than U.S. dollars are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in the condensed statements of operations under the caption realized.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interest Income and Dividend Income

Interest is recorded on an accrual basis. Dividends are recorded on the ex-dividend date.

Redemptions Payable

For purposes of both financial reporting and calculation of redemption value, net asset value is calculated per each Member’s capital account balance after allocations of net income/(loss) to such Member’s account.

Investments in Affiliated Investment Funds

The investments in Affiliated Investment Funds are reported at fair value in the Company’s condensed statements of financial condition. Fair value ordinarily is the fund’s net asset value as determined for the Affiliated Investment Funds in accordance with the fund’s valuation policies and reported at the time of the Company’s valuation by the management of the fund. Generally, the fair value of the Company’s investments in the Affiliated Investment Funds represents the amount that the Company could reasonably expect to receive from the funds if the Company’s investment was redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that the Company believes to be reliable.

Note 3. FEES

Operating Expenses

Operating expenses of the Company are paid for by the Company, subject to an operating expense cap of 1.5% of the Company’s net asset value per annum. Operating expenses include legal, accounting, registrar, transfer and assignment functions, investor communications, printing, and other administrative services.

Management and Incentive Fees

Through December 31, 2011, the Company directly paid Winton and Graham monthly management fees at annual rates of 1.5% and 2.0% respectively, of their Managed Accounts’ allocated assets as defined in their respective Trading Advisory Agreements. Additionally, the Company directly paid Winton and Graham incentive fees accrued monthly and paid quarterly of 20% and 22%, respectively, for achieving “New High Net Trading Profits” in their specific Managed Accounts as defined in their respective Trading Advisory Agreements.

Effective January 1, 2012, the Company indirectly pays its pro-rata share of WTN and GRM’s monthly management fees at annual rates of 1.5% and 2% respectively, as defined in their respective Trading Advisory Agreements. Additionally, the Company also indirectly pays WTN and GRM’s incentive fees accrued monthly and paid quarterly of 20% and 20%, respectively, for achieving “New High Net Trading Profits” in the Company’s capital accounts with WTN and GRM as defined in their respective Trading Advisory Agreements.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 3. FEES (CONTINUED)

Management and Incentive Fees (Continued)

For the Third Quarter 2012 and Year-To-Date 2012, management fees earned indirectly as discussed above, totaled $96,394 and $313,401, respectively. For the Third Quarter 2011 and Year-To Date 2011, management fees earned directly as discussed above, totaled $135,377 and $438,361, respectively.

For the Third Quarter 2012 and Year-To-Date 2012, incentive fees earned indirectly as discussed above, totaled $0 and $0, respectively. For the Third Quarter 2011 and Year-To-Date 2011, incentive fees earned directly as discussed above, totaled $51,407 and $59,880, respectively.

Commissions

The Company is obligated to pay all floor brokerage expenses, give-up charges and NFA clearing and exchange fees incurred in connection with the Company’s commodity trading activities. Through December 31, 2011, these activities were paid directly by the Company. Effective January 1, 2012, these activities are now charged indirectly through the Company’s Affiliated Investment Funds and are reflected within the respective Net Asset Values of each of the Affiliated Investment Funds.

Note 4. MANAGING MEMBER AND AFFILIATES

The Company’s management fees to Kenmar Preferred (previously administrative services fees paid by the Members at the Member level) and operating expense cap are both calculated on the net assets of the Company at rates of 6.0% and 1.5% per annum, respectively. In addition, the Service Fees, which are paid by the Company, are deducted from the management fee to be paid by the Company to the Managing Member.

The Managing Member has determined that it is in the best interest of the Company to invest a portion of its non-margin assets, either directly or indirectly through certain investment funds, in (i) U.S. government securities (which include any security issued or guaranteed as to principal or interest by the United States), (ii) any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, (iii) corporate bonds or notes, or (iv) other instruments permitted by applicable rule and regulations. Effective January 1, 2011, the Managing Member is paid monthly 1/12 of 50% of the first 1% of the positive returns earned on the Company’s investment of non-margin assets. The calculation is based on the average annualized net asset value, and any losses related to returns on the non-margin assets must first be recovered through subsequent positive returns prior to the Managing Member receiving a payment. After the calculation of the amount payable to the Managing Member, the Company will be credited with all additional positive returns (or 100% of any losses) on the Company’s investment of non-margin assets. If at the end of any calendar year, a loss has been incurred on the returns for the non-margin assets, then the loss carry forward will reset to zero for the next calendar year with regards to the calculation of the Managing Member’s portion of the non-margin asset’s income. For the Third Quarter 2012, Third Quarter 2011, Year-To-Date 2012 and Year-To-Date 2011, the Managing Member’s portion of interest earned on the non-margin assets amounted to $50,956, $13,037, $104,441 and $87,264, respectively.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 4. MANAGING MEMBER AND AFFILIATES (CONTINUED)

From January 1, 2011 to December 31, 2011, the Company paid a monthly managed account fee in the amount of 1/12 of 0.25% of the Company’s beginning net asset value directly to ClariTy for risk management and related services with respect to monitoring the Trading Advisors. Effective January 1, 2012, the Company pays this fee indirectly through its investments in WTN and GRM based on their respective beginning of month Allocated Assets. For the Third Quarter 2012 and Year-To-Date 2012, the managed account fees earned indirectly as discussed in Note 3B, totaled $13,736, $44,685, respectively. For the Third Quarter 2011 and Year-To-Date 2011, the managed account fees earned directly as discussed in Note 3B, totaled $19,443 and $63,374, respectively.

Note 5. ADMINISTRATOR

Spectrum Global Fund Administration, L.L.C. (“Spectrum” or the “Administrator”), a Delaware limited liability company, was the administrator of the Company and provided certain administration and accounting services pursuant to the terms of a Services Agreement with the Company dated as of May 23, 2007. On December 10, 2010, AlphaMetrix360, LLC purchased the assets of Spectrum.

Effective June 1, 2011, the Company replaced AlphaMetrix 360, LLC with GlobeOp Financial Services LLC (“GlobeOp” or the “Administrator”), a Delaware limited liability company. AlphaMetrix 360, LLC’s Service Agreement with the Company was terminated effective close of business on May 31, 2011.

The Administrator performs or supervises the performance of services necessary for the operation and administration of the Company (other than making investment decisions), including administrative and accounting services. The Administrator also calculates the Company’s Net Asset Value. In addition, the Administrator maintains certain books and records of the Company, including certain books and records required by CFTC Rule 4.23(a). “Administrator” refers to Spectrum, AlphaMetrix 360, LLC, or GlobeOp depending on the applicable period discussed.

Through December 31, 2011, the Company directly paid the administrator fees. Effective January 1, 2012, the Company indirectly pays its pro-rata share of administrator fees through its investments in WTN and GRM. For the Third Quarter 2012, Year-To-Date 2012, the Company paid administration fees indirectly as discussed above, totaling $7,205 and $23,458, respectively. For the Third Quarter 2011 and Year-To-Date 2011, the Company paid administration fees directly as discussed above, totaling $12,686 and $35,305, respectively.

Note 6. SERVICE FEES

Starting January 1, 2011, the service fee disclosed on the condensed statements of operations represents the monthly on-going trailing compensation paid to the service providers. With respect to investors in the Company that were formerly investors in Member KGT, a monthly fee in the amount of 1/12 of 3.5% (3.5% per annum) of the beginning of the month net asset value of such outstanding Interests serviced by the service provider are paid to the aforementioned service providers. With respect to investors in the Company that were formerly investors in Series E, Member DFT I, Member FST, Member D and Member F, a monthly fee in the amount of 1/12^th of 4.0% (4.0% per annum) of the beginning of month net asset value of such outstanding Interests serviced by the service provider are paid to the aforementioned service providers. The Services Fees are paid by the Company and are deducted from the management fee to be paid by the Company to the Managing Member.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 7. INVESTMENTS IN AFFILIATED INVESTMENT FUNDS

Effective January 1, 2012, the Company invested a portion of its assets in Affiliated Investment Funds. The Company’s investments in Affiliated Investment Funds represent approximately 18.89% of the net asset value of the Company at September 30, 2012. The investments in the Affiliated Investment Funds are reported in the Company’s condensed statements of financial condition at their fair value and are subject to the terms of the organizational and offering documents of the Affiliated Investment Funds.

The following table summarizes the change in net asset value (fair value) of the Company’s investment in Affiliated Investment Funds as of September 30, 2012.


	Net Asset Value December 31, 2011		Purchases⁽¹⁾		(Loss)			Redemptions			Net Asset Value September 30, 2012
CTA Choice GRM	$	0	$	5,260,098	$	(201,444	)	$	(2,386,940	)	$	2,671,714
CTA Choice WTN		0		5,160,810		(478,350	)		(3,433,178	)		1,249,282

Total	$	0	$	10,420,908	$	(679,794	)	$	(5,820,118	)	$	3,920,996

(1)	Included in the purchases are contributions of open futures, open forwards, and options contracts with a fair value of $475,859.

The Affiliated Investment Funds are redeemable semi-monthly and require a redemption notice of 1-5 days. The Company may make additional contributions or redemptions from the Affiliated Investment Funds on a standard allocation date. The Affiliated Investment Funds engage in trading of commodity futures, forwards and option contracts.

The Company records its proportionate share of income or loss in the condensed statements of operations.

The Company’s investments in the Affiliated Investment Funds are notionally funded, and the following table sets out the total capital commitment split between net asset value (amount funded) and the remaining capital commitment. The remaining capital commitment is the amount that can be requested from the Company if requested by the Affiliated Investment Funds to meet margin calls in accordance with the governing documents. The Company’s capital commitment to the Affiliated Investment Funds is disclosed below.


	Total Capital Commitment September 30, 2012		Net Asset Value September 30, 2012		Remaining Capital Commitment September 30, 2012
CTA Choice GRM	$	10,476,620	$	2,671,714	$	7,804,906
CTA Choice WTN		10,572,825		1,249,282		9,323,543

Total	$	21,049,445	$	3,920,996	$	17,128,449

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 7. INVESTMENTS IN AFFILIATED INVESTMENT FUNDS (CONTINUED)

The Company’s investments in the Affiliated Investment Funds are subject to the market and credit risks of securities held or sold short by their respective Affiliated Investment Fund. ClariTy has established procedures to monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The interest holders within CTA Choice bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

Note 8. RELATED PARTIES

The Company reimburses Kenmar Preferred and its affiliates for services it performs for the Company, which include, but are not limited to: management, legal, accounting, registrar, transfer and assignment functions, investor communications, printing, and other administrative services.

The expenses incurred by the Company for services performed by Kenmar Preferred and its affiliates for the Company was as follows:


	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Management fees to Managing Member	$	144,070	$	200,315	$	459,811	$	655,281
ClariTy Managed Account fees to affiliate ⁽¹⁾		0		19,443		0		63,374
General and administrative (operating expense)		11,677		33,324		69,569		79,419
Managing Member interest on investment funds payable		50,956		13,037		104,441		87,264

Total	$	206,703	$	266,119	$	642,253	$	885,338

(1)	ClariTy Managed Account fees, which were paid directly to the Managing Member during 2011, are now paid indirectly through its investments in Affiliated Investment Funds, starting January 1, 2012.

Expenses payable to the Managing Member and its affiliates (which are included in accrued expenses payable on the condensed statements of financial condition) as of September 30, 2012 and December 31, 2011 were $26,673 and $33,324, respectively.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 9. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS

Investments in the Company are made subject to the terms of the Operating Agreement.

A Member is able to request and receive redemption of capital, subject to the terms in the Operating Agreement.

Note 10. DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS

The fair value of the Company’s derivative assets by instrument type, as well as the location of those instruments on the condensed statements of financial condition as of December 31, 2011 are included in the condensed schedules of investments. As of December 31, 2011, all of the derivatives held were not designated as hedging instruments. No derivative instruments were directly held by the Company as of September 30, 2012. Derivative trading activity is now conducted indirectly within the Affiliated Investment Funds.

Specific derivative instruments

The following presents the fair value of derivative contracts at September 30, 2012 and December 31, 2011. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the derivative contracts qualify for net presentation in the condensed statements of financial condition.


	September 30, 2012						December 31, 2011
Description	Assets		Liabilities		Net		Assets		Liabilities			Net
Futures Contracts	$	0	$	0	$	0	$	491,080	$	(145,608	)	$	345,472
Forward Contracts		0		0		0		624,559		(494,096	)		130,463
Option Contracts		0		0		0		44		(120	)		(76	)

Total gross fair value of derivatives	$	0	$	0	$	0	$	1,115,683	$	(639,824	)	$	475,859

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 10. DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)

The trading revenue of the Company’s derivatives by instrument type, as well as the location of those gains and losses on the condensed statements of operations, for the Third Quarter 2012, Third Quarter 2011, Year-To-Date 2012 and Year-To-Date 2011 is as follows:


	Trading Revenue for the
Type of Instrument	Third Quarter 2012		Third Quarter 2011			Year-To-Date 2012			Year-To-Date 2011
Commodities Contracts	$	0	$	353,228		$	0		$	301,885
Currencies Contracts		0		(91,050	)		0			(29,709	)
Interest Rate Contracts		0		1,735,851			0			1,498,146
Stock Indices Contracts		0		(1,000,720	)		0			(1,154,350	)
Purchased Options on Futures Contracts		0		1,098			0			(305	)
Written Options on Futures Contracts		0		(955	)		0			1,725
Forward Currency Contracts		0		(647,207	)		0			(762,802	)

Total	$	0	$	350,245		$	0		$	(145,410	)

Condensed Statements of Operations

Realized	$	0	$	129,633		$	476,129		$	662,596
Change in unrealized		0		220,612			(476,129	)		(808,006	)

Total	$	0	$	350,245		$	0		$	(145,410	)

For the Third Quarter 2011 and Year-To-Date 2011, the total number of closed futures contracts was approximately 8,444 and 30,303, respectively, the total number of closed option contracts was 6 and 20, respectively, and the average monthly notional value of forwards contracts closed was approximately $602,941,342 and $593,913,270, respectively.

The average monthly notional value of contracts closed represents the average monthly U.S. dollar notional value of futures, options and forward contracts closed and settled in cash during the Third Quarter 2011 and Year-To-Date 2011.

No derivative instruments were held directly by the Company during the Third Quarter 2012 and Year-To-Date 2012.

The Company has cash on deposit with financial institutions. In the event of a financial institution’s insolvency, recovery of cash on deposit may be limited to account insurance or other protections afforded such deposits.

The Company is exposed to various types of risks associated with investments in securities, Affiliated Investment Funds and derivative instruments and related markets in which it invests. These risks include, but are not limited to, risk of loss from fluctuations in the value of financial instruments held (market risk) and the inability of counterparties to perform under the terms of the Company’s investment activities (credit risk).

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 10. DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)

Market Risk

Trading in futures and forward contracts (including foreign exchange) involves entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The gross or face amount of the contracts, which is typically many times that of the Company’s net assets being traded, significantly exceeds the Company’s future cash requirements since the Company intends to close out its open positions prior to settlement. As a result, the Company was generally subject only to the risk of loss arising from the change in the value of the contracts.

As such, the Company considers the “fair value” of its derivative instruments, and other financial instruments, to be the net unrealized gain or loss on the contracts.

Market risk is influenced by a wide variety of factors, including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effect among the derivative instruments the Company holds and the liquidity and inherent volatility of the markets in which the Company trades.

Credit Risk

When entering into futures, forward and option contracts, the Company was exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearinghouse associated with the particular exchange. In general, clearinghouses are backed by its corporate members who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions.

Kenmar Preferred attempts to minimize both credit and market risks by requiring the Company and its Trading Advisors to abide by various trading limitations and policies. Kenmar Preferred monitors compliance with these trading limitations and policies, which include, but are not limited to, executing and clearing all trades with creditworthy counterparties; limiting the amount of margin or premium required for any one commodity or all commodities combined; and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions.

Additionally, pursuant to the Trading Advisory Agreement between the Company, Kenmar Preferred and the Trading Advisors, the Company shall automatically terminate the Trading Advisory Agreement if the net asset value allocated to the Trading Advisors declines by 40% from the value at the beginning of any year or since the effective date of the Trading Advisory Agreement. The decline in net asset value is after giving effect for distributions, subscriptions and redemptions.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 10. FINANCIALS INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)

Credit Risk (Continued)

The Company’s futures commission merchant, in accepting orders for the purchase or sale of domestic futures contracts, was required by CFTC regulations to separately account for and segregate as belonging to the Company all assets of the Company relating to domestic futures trading and is not allowed to commingle such assets with its other assets.

At September 30, 2012 and December 31, 2011, such segregated assets totaled $0 and $4,630,391, respectively, which are included in cash and cash equivalents on the condensed statements of financial condition. Part 30.7 of the CFTC regulations also requires the Company’s futures commission merchant to secure assets of the Company related to foreign futures trading which totaled $0 and $217,318 at September 30, 2012 and December 31, 2011, respectively. There are no segregation requirements for assets related to forward trading.

As of September 30, 2012, the Company had no open futures or forward currency contracts as the Company has transitioned from investments in direct Managed Accounts to accessing the Trading Advisors through CTA Choice’s managed account platform.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 11. FINANCIAL HIGHLIGHTS

The following information presents the financial highlights of the Company for the Third Quarter 2012, Third Quarter 2011, Year-To-Date 2012 and Year-To-Date 2011. This information has been derived from information presented in the financial statements.


	Third Quarter			Year-To-Date			Third Quarter			Year-To-Date
	2012						2011
	Member			Member			Member			Member
Total return: ^(1),(³⁾

Total return before incentive fee		(1.20	)%		(7.82	)%		(1.37	)%		(6.72	)%
Incentive fee		0.00	%		0.00	%		(0.16	)%		(0.15	)%

Total return after incentive fee		(1.20	)%		(7.82	)%		(1.53	)%		(6.87	)%

Ratios to average net asset values:

Expenses prior to incentive fee ⁽⁴⁾^,⁽⁵⁾		8.43	%		8.08	%		9.62	%		10.18	%
Incentive fee ⁽³⁾		0.00	%		0.00	%		0.17	%		0.18	%

Total expenses and incentive fee ⁽⁵⁾		8.43	%		8.08	%		9.79	%		10.36	%

Net investment loss ^{(2), (4)}^{, (5)}		(7.62	)%		(7.25	)%		(8.99	)%		(8.88	)%

Total returns are calculated based on the change in value of Members’ capital during the period. An individual Member’s total returns and ratios may vary from the above total returns and ratios based on the timing of subscriptions and redemptions.

⁽¹⁾	Includes realized and unrealized gains (losses) on securities transactions.

⁽²⁾	Represents interest and dividend income less total expenses (exclusive of incentive fee).

⁽³⁾	Not annualized (This represents incentive fees charged by the Trading Advisors for the 2011 periods presented).

⁽⁴⁾	Annualized.

⁽⁵⁾	Beginning January 1, 2012, trading advisor management and incentive fees and various other operating expenses charged indirectly within the Company’s investments in Affiliated Investment Funds are now included in total return.

KMP FUTURES FUND I LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Note 12. SUBSEQUENT EVENTS

The following table sets out the total capital commitment split between net asset value (amount funded) and the remaining capital commitment as of October 31, 2012:


	Total Capital Commitment October 31, 2012		Net Asset Value October 31, 2012		Remaining Capital Commitment October 31, 2012
CTA Choice GRM	$	9,818,803	$	0	$	9,818,803
CTA Choice WTN		10,103,271		1,204,700		8,898,571

Total	$	19,922,074	$	1,204,700	$	18,717,374

From October 1, 2012 through November 13, 2012, there were estimated redemptions of $790,927 effective October 31, 2012.

Effective October 31, 2012, the Company fully redeemed from CTA Choice GRM. Effective November 1, 2012, KMP now allocates approximately one-half of its net assets to each of CTA Choice WTN and CTA Choice EGLG (“EGLG”), a segregated series of the Company. Eagle Trading Systems Inc. is the Trading Advisor for EGLG and will manage the assets pursuant to its Eagle Global Program. The Company will pay EGLG a management fee indirectly through its investment in EGLG at a monthly rate equal to 0.1666% (2.00% per annum) of the Company’s allocated assets as of each standard allocation date, as adjusted on a time weighted basis for any increase or decrease to the Company’s allocated assets on any non-standard allocation date. The Company will also indirectly pay a quarterly incentive fee of 25% for achieving “New High Net Trading Profits” as defined in EGLG’s trading advisory agreement.

Item 2.

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

This report on Form 10-Q (the “Report”) for the quarter ending September 30, 2012 (“Third Quarter 2012”) includes forward-looking statements that reflect the current expectations of Kenmar Preferred Investments, L.P., the managing member of KMP Futures Fund I LLC, about the future results, performance, prospects and opportunities of Registrant. The managing member has tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “should,” “estimate” or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the managing member and are subject to a number of risks, uncertainties and other factors, both known, such as those described in this Report, and unknown, that could cause Registrant’s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the managing member undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

Introduction

General

KMP Futures Fund I LLC (the “Registrant”) is a limited liability company organized under the laws of Delaware on November 20, 2006 which commenced operations on January 1, 2007. The Registrant will terminate on December 31, 2056 unless terminated sooner under the provisions of the limited liability company agreement of the Registrant (the “Operating Agreement”). The Registrant was formed to engage in the direct or indirect speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time, engage in cash and spot transactions. The fiscal year end of the Registrant is December 31.

Effective July 1, 2012, Kenmar Preferred Investments Corp. changed its name and form of entity to Kenmar Preferred Investments, L.P. (“Kenmar Preferred” or the “Managing Member”). Kenmar Preferred or Managing Member refers to either Kenmar Preferred Investments Corp. or Kenmar Preferred Investments, L.P., depending on the applicable period discussed. Kenmar Preferred is the managing owner of each of the Registrant’s fund members (through their dissolution), is the Managing Member of the Registrant, and has been delegated administrative authority over the operations of the Registrant.

The Registrant is a reporting company pursuant to the Securities Exchange Act of 1934. Moreover, as a commodity pool, the Registrant is subject to the record keeping and reporting requirements of the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”).

On July 1, 2010, World Monitor Trust II-Series E (“Member Series E”) contributed all of its assets into the Registrant and received a voting membership interest. Member Series E together with Diversified Futures Trust I (“Member DFT I”), Futures Strategic Trust (“Member FST”), Kenmar Global Trust (“Member KGT”), World Monitor Trust II Series D (“Member Series D”), World Monitor Trust II Series F (“Member Series F”), and subsequent to the dissolution of each of the fund members, the investors holding interests in the Registrant, are collectively (the “Members” or the “Individual Members”).

On December 1, 2010, Member KGT became a member of the Registrant and received a voting membership interest in the Registrant. On December 10, 2010, pursuant to Member KGT’s Fifth Amended and Restated Declaration of Trust and Trust Agreement, the Board of Directors of Kenmar Preferred, in its capacity as managing owner of Member KGT, determined to dissolve Member KGT effective as of the close of business on December 31, 2010.

Investors in Member KGT who elected not to redeem as of December 31, 2010 received a pro rata distribution of their interest in Member KGT on December 31, 2010 and replaced it with a direct ownership interest in the Registrant on January 1, 2011. Subsequent to the liquidation of Member KGT on December 31, 2010, the payables to and receivables from KGT were amalgamated. Final liquidation payments were made to Member KGT in February 2011.

Member Series E and Member KGT, filed with the Securities and Exchange Commission (“SEC”) on October 5, 2010 and January 6, 2011, respectively, to de-register their respective interests under Section 12(g) of the Securities Exchange Act of 1934. Member Series E and Member KGT are no longer subject to the reporting requirements of the SEC and the CFTC upon their dissolution on September 30, 2010 and December 31, 2010, respectively.

Prior to July 1, 2010, pursuant to the Registrant’s Trading Advisory Agreement with Winton Capital Management Limited (“Winton”), Winton invested a portion of the Registrant’s assets pursuant to Winton’s Diversified Program. Beginning July 1, 2010, the Registrant entered into a second Trading Advisory Agreement with Graham Capital Management, L.P. (“Graham”), under which Graham invested a portion of the Registrant’s assets pursuant to Graham’s K4D-15V Program (collectively, Winton and Graham are referred to as the “Trading Advisors”). Effective July 1, 2010, the Registrant allocated approximately one-half of its net assets to each Trading Advisor’s managed account (collectively, the “Managed Accounts”) with such allocations to be re-balanced quarterly.

Effective January 1, 2012, the Registrant allocated approximately one-half of its net assets to each of the following affiliated investments funds: CTA Choice GRM (“GRM”) and CTA Choice WTN (“WTN”), both segregated series of CTA Choice Fund LLC (“CTA Choice”), a Delaware limited liability company. Graham is the Trading Advisor for GRM and manages the assets pursuant to its K4D-15V Program. Winton is the Trading Advisor for WTN and manages the assets pursuant to its Winton’s Diversified Program. Any loss carry forward from the Registrant’s Graham and Winton managed accounts were transferred over to the Registrant’s member interests in GRM and WTN, respectively, effective January 1, 2012.

Effective July 1, 2012, ClariTy Managed Account & Analytics Platform LLC changed its name and form of entity to ClariTy Managed Account & Analytics Platform, L.P. (“ClariTy”). ClariTy refers to either ClariTy Managed Account & Analytics Platform LLC or ClariTy Managed Account & Analytics Platform, L.P., depending on the applicable period discussed. ClariTy, an affiliate of Kenmar Preferred, serves as the managing member for CTA Choice. CTA Choice consists of multiple segregated series, each established pursuant to a separate Certificate of Designation prepared by the CTA Choice’s managing member.

Effective July 1, 2012, Kenmar Global Investment Management LLC changed its name and form of entity to Kenmar Global Investment Management, L.P. (“Asset Allocator”). Asset Allocator refers to either Kenmar Global Investment Management LLC or Kenmar Global Investment Management, L.P., depending on the applicable period discussed. The Asset Allocator, an affiliate of the Managing Member, is the Asset Allocator of CTA Choice. Pursuant to the Asset Allocation Agreements between the Managing Member, the Asset Allocator, and each interestholder, the Asset Allocator determines the trading level of each interestholder’s assets and reallocates among the separate series of CTA Choice as agreed upon with the Trading Advisors. While the Asset Allocator receives no fees for such services from the Registrant, the Asset Allocator is paid management and incentive fees directly from the interestholders pursuant to each interestholder’s Asset Allocation Agreement.

Registrant’s Objectives

Registrant’s objectives are:

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Significant profits over time;

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Performance volatility commensurate with profit potential;

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Controlled risk of loss; and

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Diversification within a traditional portfolio, typically consisting entirely of “long” equity and debt positions and reduced dependence on a single nation’s economy, by accessing global financial, commodity and other non-financial futures markets.

Registrant’s potential for aggressive capital growth arises from the profit possibilities offered through its investments in CTA Choice segregated series which invest in the global futures, forward and options markets and the skills of the professional trading organization(s) selected to manage the assets of Registrant. The fact that Registrant can profit from both rising and falling markets adds an element of profit potential that is not present in long-only strategies. However, Registrant can also incur losses from both rising and falling markets that adds to the risk of loss. In addition to its profit potential and risk of loss, Registrant also could help reduce the overall volatility, or risk, of a portfolio. By investing in markets that operate independently from U.S. stock and bond markets (and therefore, may be considered as non-correlated), Registrant may provide positive returns even when U.S. stock and bond markets are experiencing flat to negative performance and may provide negative returns even when U.S. stock and bond markets are experiencing flat to positive performance. Non-correlation should not be confused with negative correlation, where the performance would be exactly opposite between Registrant and U.S. stock and bond markets.

The managing member makes no guarantee that the investment objectives for Registrant will be achieved.

Past performance is not necessarily indicative of future results.

Managing Member and its Affiliates

The Managing Member’s predecessor and affiliates have been sponsoring and managing single and multi-advisor funds for over two decades. The principal office of the Registrant is c/o Kenmar Preferred Investments, L.P., 900 King Street, Suite 100, Rye Brook, New York 10573. The telephone number of the Registrant and the Managing Member is (914) 307-7000.

The Managing Member has substantial experience in selecting and monitoring trading advisors, asset allocation and overall portfolio design using quantitative and qualitative methods.

The Managing Member monitors the trading activity and performance of the trading advisors and adjusts the overall leverage at which the Registrant trades. The commitment of the Registrant to the trading advisors may exceed 100% of the Registrant’s total equity if the Managing Member decides to strategically allocate notional equity to such trading advisors. This may result in increased profits or larger losses than would otherwise result. There likely will be periods in the markets during which it is unlikely that the trading advisors will be profitable. By having the ability to deleverage the Registrant’s market commitment to below its actual equity during such periods, the Managing Member could help preserve capital while awaiting more favorable market cycles. The Managing Member currently does not intend to use notional equity.

The Managing Member also performs ongoing due diligence with respect to the trading advisors. If the Managing Member determines that the trading advisors have departed from its program or stated trading methodology or has exceeded its stated risk parameters, the Managing Member, on behalf of the Registrant, will take such actions as it deems appropriate, which may include terminating the trading advisors. Similarly, if the Managing Member’s ongoing due diligence leads the Managing Member to determine that it is in the best interests of the Registrant to add an additional trading advisor; it will do so in its sole discretion. If the Managing Member concludes, based upon its perception of market or economic conditions, that it is appropriate to allocate assets of the Registrant to a different trading program run by the trading advisors, it will do so. The Managing Member may select a replacement if any of the trading advisors resign or are terminated, or may select additional advisors at its discretion.

The Trading Advisors

Trading for the Registrant is directed by Winton pursuant to its Diversified Program and Graham pursuant to its K4D-15V Program. The Managing Member terminated the Trading Advisory Agreements with Graham and Winton effective December 31, 2011. Effective January 1, 2012, the Registrant transitioned from investments in direct managed accounts to accessing the Trading Advisors through ClariTy.

The Managing Member may terminate any current Managed Account agreement with an Advisor or select new Trading Advisors including Affiliated Investment Funds, from time-to-time, in its sole discretion, in order to achieve the goals of the Registrant.

Background of Winton and its Trading and Operational Principals

Winton, a limited liability company registered in England and Wales, became registered with the CFTC as a commodity trading advisor (“CTA”), in January 1998 and as a commodity pool operator in December 1998. It is also a member of the NFA and is authorized and regulated by the Financial Services Authority in the United Kingdom (the “FSA”).

Winton has its principal office and maintains all books and records at 1-5 St. Mary Abbot’s Place, London W8 6LS, United Kingdom. Its telephone number is 011-44-20-7610-5350 and its fax number is 011-44-20-7610-5301.

Winton’s principals are David W. Harding, Martin J. Hunt, Anthony H. Daniell, Matthew Beddall, Rajeev Patel, Andrew Bastow, Osman Murgian and two of his family-owned companies, Amur (Jersey) Limited and Samur (Jersey) Limited.

On July 31, 2007, a company affiliated with Goldman Sachs International purchased a 9.99 per cent shareholding interest in Winton. This shareholding is currently held by Goldman Sachs Petershill Non-U.S. Master Fund, L.P. (the “GS Shareholder”), a fund managed by Goldman Sachs Asset Management International. The GS Shareholder is not involved in the day-to-day management of Winton but, pursuant to a shareholders’ agreement, has the right to approve certain limited matters relating to Winton’s operations.

The biographies of its principals follow:

David Winton Harding, Founder and Chairman. Winton was founded by David Winton Harding, Martin Hunt and Osman Murgian and started trading in October 1997. Mr. Harding is one of the pioneers of trend-following systematic trading in Europe. Whilst at Winton, Mr. Harding has been registered with the National Futures Association as an Associated Person, Associate Member and Principal of Winton from January 1998.

Mr. Harding was born in Oxford in 1961 and graduated from Cambridge University with a First Class Honours degree in Natural Sciences specializing in Theoretical Physics. In September 1982, he joined stockbroker Wood MacKenzie as a graduate trainee and became involved with futures trading just as the London International Financial Futures Exchange (“LIFFE”), opened. A year later, in September 1983, he left Wood MacKenzie and moved to Johnson Matthey & Wallace, a commodity futures broker, where he was involved in gilt trading and sales. When that company closed due to the failure of its parent company, in November 1984 Mr. Harding left it and joined Sabre Fund Management, one of the UK’s first CTAs where he was registered with the NFA as an Associate Member from April 1986 until July 1988 and as an Associated Person from May 1986 until July 1988. In his new position, for the first time, Mr. Harding was able to apply his scientific training to develop techniques for trading a wide variety of futures markets.

In November 1986, Mr. Harding left Sabre Fund Management and joined Brockham Securities, the Adam Family sugar trading company, where he assisted in development and marketing of futures fund management services. In February 1987, he left to form Adam, Harding and Lueck Ltd (“AHL”). AHL brought together the programming and system development abilities of Michael Adam and Martin Lueck with Mr. Harding’s research and marketing skills. AHL rapidly became the UK’s most successful CTA and in 1989, The Man Group PLC (formerly ED&F Man PLC) acquired a 51% stake and began distributing AHL’s products globally. Over the next five years, the three principals built a firm with assets under management of $300 million and a staff of nearly 100, including research teams developing mathematical and statistical trading strategies. AHL is still the flagship fund of The Man Group which is a FTSE 100 Company. Mr. Harding was registered with the National Futures Association as an Associate Member and Associated Person of Man AHL USA Corp from July 1988 until January 1996. He was also registered as a Principal of Man AHL USA Corp from July 1988 until February 1995.

In 1993, David Harding was invited to present a paper to a special symposium of London’s prestigious Royal Society, on the subject “Making Money from Mathematical Models.” This paper was subsequently incorporated into two books.

In 1994, ED&F Man Group floated on the London Stock Exchange and acquired the remaining 49% of AHL. Mr. Harding then formed and ran Man Quantitative Research, an in-house advanced statistical research team until August 1996.

In August 1996, Mr. Harding left ED&F Man Group and took leave until February 1997. In February 1997, he co-founded Winton with Martin Hunt and Osman Murgian, one of AHL’s early shareholders. Mr. Harding continues to lead Winton’s research efforts.

Mr. Harding is also a trustee of the Winton Charitable Foundation, which in 2007 endowed the Winton Professorship of the Public Understanding of Risk in the Department of Pure Mathematics and Mathematical Statistics at Cambridge University. Similarly, in 2008, the David Harding Foundation endowed the David Harding Centre for Risk Literacy at the Max Planck Institute in Berlin, Germany.

Osman Murgian, Director. Mr. Murgian, born in 1934, is a founding director of Winton. Educated at Brighton College in England, Mr. Murgian was also one of the original shareholders and directors of AHL. Mr. Murgian lives in Nairobi, Kenya, and is the owner of or an investor in a number of international businesses ranging from real estate to transportation. Mr. Murgian has a beneficial interest of more than 10% of Winton’s share capital. This interest is held by Samur (Jersey) Ltd and Amur (Jersey) Ltd, both of which are investment holding companies ultimately owned by Mr. Murgian’s family foundation.

Martin John Hunt, Director. Mr. Hunt, born in 1962, first became involved in managed futures in October 1983, at which time he was employed as a trainee trader for a CTA called Futures Fund Management Ltd. In December 1985, Mr. Hunt left Futures Fund Management and in January 1986, he moved to Sabre Fund Management, a UK-based CTA, as operations manager. In February 1988, he left Sabre and joined AHL and from this time until 1991 he was responsible for managing their trading operations and establishing a trading facility in Switzerland. In July 1991 Mr. Hunt left AHL.

In August 1991, Mr. Hunt assumed responsibility for marketing and back office operations at Royston Investments Ltd, which at the time was a CFTC-registered CTA. Whilst at Royston Investments Limited, Mr. Hunt was registered with the National Futures Association as an Associated Person and Associate Member from October 1991. In March 1994, he left Royston and his status as an Associate Member and Associated Person was subsequently terminated in January 1996. In March 1994 Mr. Hunt established himself as an independent marketing and compliance consultant to firms in the UK managed futures industry before working at Palatinate Investment Management Limited, a London-based CTA, from August 1994 until January 1997 as Director of Marketing, Operations and Compliance.

In January 1997, David Harding recruited Mr. Hunt to handle the formation, structuring and subsequent day-to-day running of Winton. At Winton, Mr. Hunt supervised the company’s operations as well as being directly responsible for the firm’s regulatory compliance and finance divisions until October 2010. Whilst at Winton, Mr. Hunt has been registered with the National Futures Association as an Associated Person, Associate Member and Principal of Winton from January 1998.

Anthony Hamilton Daniell, Director and Chief Executive Officer. Mr. Daniell, born in 1954, spent ten years in the British Army during which time he achieved a civil engineering degree from Bristol University. In March 1983, Mr. Daniell began his career in the financial sector at David Allsopp and Partners, a UK stockbroker, as an equity analyst following U.S. defense companies. He moved to Rowe and Pitman, also a UK stockbroker, in April 1986, where he became Co-Head of U.S. Equity Sales.

From March 1994 to December 2001, Mr. Daniell was Co-Head of Emerging Markets and then Head of Latin American Equities. During this time, Mr. Daniell was responsible for cash and derivative sales, trading and research. He was promoted to Managing Director in January 1999. During the period April 1986 to December 2001, as a result of a series of mergers and acquisitions Rowe and Pitman changed its name several times and ultimately became part of UBS Warburg. Mr. Daniell left UBS Warburg in December 2001.

In January 2002, he started at Eday Ltd, an FSA-registered private limited company which marketed absolute return funds. In 2003, Winton engaged Eday Ltd and Mr. Daniell to market its products. In October 2004, Mr. Daniell joined Winton as Head of Global Marketing and Sales and became a director in October 2006 and Chief Executive Officer in October 2010.

Mr. Daniell has been registered with the National Futures Association as an Associated Person of Winton since April 2005 and a Principal of Winton since October 2006.

Matthew Beddall, Director and Chief Investment Officer. Mr. Beddall is the Chief Investment Officer of the Trading Advisor. He graduated from the University of Southampton with a first class honors degree in Mathematics and Computer Science in 2001. He initially joined Winton in 2000 as a summer intern, returning after graduation from university as a full time researcher in July 2001. Throughout his employment with Winton, Mr. Beddall has been extensively involved in the research process and has lead the development of much of the software that underlies the design and running of Investment Advisor’s trading strategy. Mr. Beddall was appointed as CIO in 2008 and his responsibilities are now principally focused on managing the investment process behind the Fund and the oversight of a large part of the Investment Advisor’s research department. Mr. Beddall also holds an MSc in Applied Statistics from Birkbeck College University of London which he was awarded in 2003. Mr. Beddall became registered with the National Futures Association as a Principal of Winton on 28 January 2009 and an Associated Person of Winton on 12 February 2009.

Rajeev Patel, Director and Chief Operating Officer. Rajeev Patel graduated from Trinity and All Saints College, Leeds with a degree in Economics and Business Administration. Mr. Patel joined Winton in April 1997. Initially working as an execution trader and settlements analyst, over the last 12 years Mr. Patel has been centrally involved in Winton’s trading and operations functions. He has overseen the development and implementation of a number of automated accounting and reconciliation processes at Winton as it has moved from external to proprietary systems. He is currently responsible for the Operations department covering operations IT, fund accounting and settlements. Mr. Patel was originally registered with the SFA and was “grandfathered” into the new regime as an FSA Approved Person in December 2001. He has been an NFA Associated Person since May 1998 and was appointed Associate Director at Winton in April 2007 and Chief Operating Officer in October 2010. Mr. Patel became registered with the NFA as a principal of Winton on 9^th June 2009.

Andrew Bastow, Director and General Counsel. Andrew Bastow was appointed as a Director in October 2010. Mr. Bastow has been Winton Capital’s General Counsel since October 2005 and is responsible for spearheading Winton’s increasing engagement with regulatory bodies and lawmakers in Europe, the USA and the Far East. He was elected to the General Council of the Alternative Investment Management Association in September 2010 and is a member of the Hedge Fund Lawyers Association.

Mr. Bastow is a solicitor of England and Wales and is also admitted as a Barrister and Solicitor of the Supreme Court of Western Australia. Prior to joining Winton he was employed by the Treasury Solicitor’s Department of the Government of the United Kingdom

from March 2005 through October 2005 and, from February 2001 through December 2004, with the State Solicitor’s Office in Western Australia where he was engaged in a wide range of practice areas including public law, employment, regulation, prosecution and enforcement. He is a British Chevening Scholar and holds a First Class Master of Laws degree from the London School of Economics and Political Science as well as degrees in Law, Arts and Economics obtained in Australia.

Overview of the Winton Diversified Trading Program

Winton’s investment process is probably best understood by starting with the founding principle and philosophy of Winton laid down by its founder David Harding. This is the belief that robust statistical and other mathematical research provides the richest and most reliable source of information on market behavior. David Harding has spent the past 25+ years leading research into market behavior and built an investment process that seeks to identify trends and patterns.

In short, the investment process is best described as quantitative, systematic and research-driven, which seeks to identify explanatory variables that have some predictive power over future returns in markets within a carefully developed risk driven process.

The investment objective is to achieve long-term capital appreciation through compound growth. This goal is achieved by pursuing a diversified trading scheme that does not rely upon favorable conditions in any particular market, nor on market direction.

The Diversified Trading Program (the “Diversified Program”) seeks to combine liquid Financial Instruments offering positive but low Sharpe ratios (meaning that profits have been achieved with a certain level of risk) and generally low correlations over the long term to other markets such as equities and fixed income*. The Diversified Program employs what is traditionally known as a “systematic” approach to trading Financial Instruments. In this context, the term “systematic” implies that the vast majority of the trading decisions are executed, without discretion, either electronically or by a team responsible for the placement of orders (the “Trading Team”), based upon the instructions generated by the Winton Computer Trading System (the “Trading System”). The Diversified Program blends short-term trading with long-term trend following, using multiple time frames in addition to multiple models. [*Please note that although the Diversified Program’s historic correlations have been low in relation to major asset classes over the long-term, over shorter timeframes the Diversified Program can be significantly correlated.]

Background of Graham and its Trading and Operational Principals

Graham was organized as a Delaware limited partnership in May 1994. The general partner of Graham is KGT, Inc., a Delaware corporation of which Kenneth G. Tropin is the President and sole shareholder. The limited partner of Graham is KGT Investment Partners, L.P., a Delaware limited partnership of which KGT, Inc. is also a general partner and in which Mr. Tropin is the principal investor. Graham became registered as a commodity pool operator and commodity trading advisor with the CFTC under the CEA and a member of the NFA on July 27, 1994.

Since December 2005, Graham has traded its Global Diversified Program at 150% Leverage for the Fund. As of January 2009, this program has been renamed the K4D-15V Program.

Graham is an investment manager that actively trades worldwide on a 24-hour basis in the equity, fixed income, currency and commodity markets utilizing securities, futures, forwards and other financial instruments. On behalf of the Fund, Graham offers a quantitative global macro trading program that trades in one or more of those markets. Graham’s quantitative trading programs or models produce trading signals on a largely automated basis when applied to market data. Graham’s investment objective is to provide clients with significant potential for capital appreciation in both rising and falling markets during expanding and recessionary economic cycles.

Principals

Kenneth G. Tropin is the Chairman and the founder of Graham. In May 1994, he founded Graham and became registered as an associated person and listed as a principal effective July 27, 1994. Mr. Tropin has developed the majority of the firm’s core trading programs and he is responsible for the overall management of the organization, including the investment of its proprietary trading capital.

Paul Sedlack is Chief Executive Officer and the General Counsel of Graham. He joined Graham in June 1998 and became registered as an associated person of Graham effective November 20, 1998 and listed as a principal on August 21, 1998. He oversees the operation of the finance and administration departments and is also responsible for all legal and compliance matters. Mr. Sedlack received a J.D. from Cornell Law School in 1986 and an M.B.A. in Finance in 1983 and B.S. in Engineering in 1982 from State University of New York at Buffalo.

Robert E. Murray is the Chief Operating Officer of Graham and is responsible for the management and oversight of client services, quantitative trading, technology and risk management at Graham. He joined Graham in June 2003 and became registered as an associated person and listed as a principal of Graham effective June 27, 2003. Mr. Murray received a Bachelor’s Degree in Finance from Geneseo State University in 1983.

Pablo Calderini is the Chief Investment Officer of Graham and is responsible for the management and oversight of the discretionary trading business at Graham. He joined Graham in August 2010 and became registered as an associated person and listed as a principal of Graham effective August 13, 2010. Prior to joining Graham, Mr. Calderini worked at Deutsche Bank from June 1997 to July 2010 where he held positions of increasing responsibility, most recently the Global Head of Equity Proprietary Trading. Mr. Calderini commenced his career at Deutsche Bank as Global Head of Emerging Markets. During his tenure at Deutsche Bank, Mr. Calderini also helped manage several groups across the fixed income and equity platforms, including the Global Credit Derivatives Team. Mr. Calderini received a B.A. in Economics from Universidad Nacional de Rosario in 1987 and a Masters in Economics from Universidad del Cema in 1988, each in Argentina.

Thomas P. Schneider is an Executive Vice President, and the Chief Trader of Graham. He joined Graham in June 1994 and became registered as an associated person of Graham effective September 12, 1994 and listed as a principal on November 30, 1995. He is responsible for managing Graham’s quantitative futures and foreign exchange trade execution, including all of its core and short term quantitative trading strategies, and developing and maintaining relationships with independent executing brokers and futures commission merchants (“FCMs”). Mr. Schneider graduated from the University of Notre Dame in 1983 with a B.B.A. in Finance and received his Executive M.B.A. from the University of Texas at Austin in 1997.

Robert G. Griffith is an Executive Vice President of the Trading Advisor, responsible for evaluating and implementing research-related initiatives. He joined the Trading Advisor in June 1994 and became registered as an associated person and listed as a principal of the Trading Advisor effective March 8, 1996. He received his B.B.A. in Management Information Systems from the University of Iowa in 1979.

Jeff Baisley, C.P.A., is the Chief Financial Officer of Graham. In March 2004 he joined Graham as Manager of Financial Reporting and became registered as an associated person effective March 17, 2008 and listed as a principal on April 8, 2008. He received his B.S. in accounting from Fordham University in 1991.

Fred J. Levin is the Chief Economist and a Senior Discretionary Trader of Graham specializing in fixed income markets with particular emphasis on short-term interest rates. He joined Graham in March 1999 and became registered as an associated person of Graham effective December 8, 1999 and listed as a principal on March 11, 2000. Mr. Levin received an M.A. in economics from the University of Chicago in 1968 and a B.S. from the University of Pennsylvania, Wharton School in 1964.

William Pertusi is the Chief Risk Officer of Graham, responsible for identifying, monitoring and acting upon financial risks relative to financial returns in Graham’s diverse trading strategies. He became registered as an associated person of Graham effective July 24, 2006 and listed as a principal on November 28, 2006. Mr. Pertusi received a B.S. in Electrical Engineering from Lehigh University in 1983, an M.B.A. from Harvard in 1987, and an M.S. in Mathematics from Fairfield University in 2006.

Barry S. Fox is Director of Research of Graham. He became registered as an associated person of Graham effective November 10, 2000 and listed as a principal on November 15, 2007. Mr. Fox joined Graham in August 2000 as a portfolio manager and developed several quantitative trading programs. In May 2005, he joined Graham’s Research Department, and in October 2005 was appointed Co-Associate Director of Research. Mr. Fox was appointed Director of Research in April 2007. Mr. Fox received a B.S. in Business Administration from State University of New York at Buffalo in 1986.

Isaac Finkle is Chief Legal Officer of Graham. He joined the Manger in May 2003 and became registered as an associated person of Graham effective April 16, 2004 and listed as a principal on June 5, 2007. As Chief Legal Officer, he oversees the legal aspects related to the firm’s futures activities. Mr. Finkle received a J.D. from New York University School of Law in 1985, a Ph.D. from the University of Pennsylvania in 1998 specializing in sociological theory, and a B.A. with honors in philosophy from Haverford College in 1973.

Gavin Gilbert is a discretionary trader of Graham, specializing in fixed income markets. He became registered as an associated person and listed as a principal of Graham effective June 24, 2008. Prior to joining Graham in March 2008, Mr. Gilbert was senior trader at Brevan Howard Asset Management, an investment management firm, where he was employed from April 2004 to March 2008.

Sanjeev Gupta is a discretionary trader of Graham, specializing in the global fixed income and foreign exchange markets. He became registered as an associated person of Graham effective August 20, 2007 and listed as a principal on October 11, 2007. Prior to joining Graham in May 2007, Mr. Gupta worked as a Fund Manager and Senior Trader at Proxima Alfa Investments USA LLC, a commodity trading advisor, and Vega Asset Management USA LLC, an investment management firm, from June 2002 to April 2007. Mr. Gupta was an associated person of Proxima from May 2004 to March 2007 and a principal from May 2004 to August 2004 and from January 2005 to November 2005. Mr. Gupta was an associated person of Vega from October 2003 to July 2004 and from October 2005 to April 2006. Mr. Gupta earned a Bachelor’s degree from The Indian Institute of Technology in May 1986 and an M.B.A. from The Wharton School of the University of Pennsylvania in May 1992.

Steven H. Jacolow is a discretionary trader of Graham specializing in global macro markets with a focus on global foreign exchange, fixed income and equity indices. He became registered as an associated person of Graham effective February 15, 2007 and listed as a principal on June 5, 2007. From March 2004 through September 2005, Mr. Jacolow worked as a proprietary trader at Deutsche Bank in New York. Mr. Jacolow received a B.A. in Economics in 1987 and a M.B.A. in Accounting from Rutgers University in 1989.

Peter Jepsen is a discretionary trader of Graham, specializing in global macro markets with a focus on fixed income and currencies. He became registered as an associated person of Graham effective June 12, 2006 and listed as a principal on June 22, 2006. Mr. Jepsen graduated from Bucknell University in June 1993 where he received his B.A. in Economics.

David E. Keelan is a discretionary trader of Graham, specializing in long/short credit strategies. He became registered as an associated person and listed as a principal of Graham effective, respectively, March 16, 2007 and May 11, 2007. Prior to joining Graham in February 2007, Mr. Keelan was a Senior Portfolio Manager at Exis Capital, an investment management firm, from May 2006 to January 2007 and from September 2002 to August 2005, where he ran a long/short credit strategy. Mr. Keelan received a M.B.A in finance from New York University in 1995 and a B.A. from Colgate University in 1988. Mr. Keelan received the designation Chartered Financial Analyst in 2002.

Jon Tiktinsky is a discretionary trader of Graham, specializing in the U.S. fixed income markets. He became registered as an associated person of Graham effective May 23, 2008 and listed as a principal on May 30, 2008. Prior to joining Graham in May 2008, Mr. Tiktinsky held positions of increasing responsibility, including Managing Director, Head of U.S. Treasury Dealership, at RBS Greenwich Capital, an investment bank, where he was employed from July 2004 to March 2008. For the period of April 2008, Mr. Tiktinsky was unemployed. Mr. Tiktinsky was President and Founder of Hulls Farm Capital LLC, an investment management firm, from February 2002 to June 2004. He was an associated person and principal of Hulls Farm Capital LLC from August 2002 to May 2005. Mr. Tiktinsky received his B.A. in economics from Colgate University in 1982.

Marwan Younes is a discretionary trader of Graham, specializing in the commodities markets. He became registered as an associated person of Graham effective April 18, 2008 and listed as a principal on May 1, 2008. Prior to joining Graham in November 2007, Mr. Younes worked as an associate in the commodities department of the investment bank Morgan Stanley in New York from July 2006 to October 2007, where he designed foreign exchange and commodities trading strategies and models. Mr. Younes attained his engineering degree in May 2006 from École Nationale Supérieure de Techniques Avancées (“ENSTA”) in Paris, France where he was enrolled from September 2002 through May 2006. In May 2006, Mr. Younes also received his Masters of Science in Financial Engineering from Columbia University where he was enrolled from July 2005 to May 2006. During his enrollment at ENSTA, Mr. Younes completed a corporate internship at the Paris, France office of the investment bank Lazard Frères where he worked as an analyst in the Equities and Capital Markets Department from July 2004 through June 2005.

Shannon Bass is a discretionary trader of Graham, specializing in capital structure credit trading. He became registered as an associated person of Graham effective June 1, 2009 and listed as a principal on May 14, 2010. Prior to joining Graham in January 2009, Mr. Bass was at R3 Capital Partners, an investment management firm, from June 2008 to January 2009, where he was a Senior Partner and Portfolio Manager focusing on capital structure credit trading. From November 2002 to May 2008, Mr. Bass held positions of increasing responsibility including Managing Director at the investment bank, Lehman Brothers, Inc. He was an associated person of Lehman Brothers, Inc. from January 2003 to May 2008. Mr. Bass received his M.B.A. from New York University in 1989 and his B.S. in Electrical Engineering from the University of California, San Diego in 1986.

Melanie Lynch is Senior Economist and a discretionary trader at Graham, specializing in fixed income markets with particular emphasis on short-term interest rates. Ms. Lynch joined Graham in December 2001 and became registered as an associated person of Graham effective May 30, 2002 and listed as a principal on August 3, 2010. Ms. Lynch received her B.S. in economics from the University of Maryland at College Park in 1989.

Rita Nagle is a discretionary trader of Graham, specializing in energy commodity markets. She became registered as an associated person of Graham effective June 29, 2010 and listed as a principal on July 1, 2010. Prior to joining Graham in April 2010, Ms. Nagle was a Senior Trader at Bunge North America, a large grain merchandising firm, from January 2009 to April 2010. She held the position of Vice President of Trading at Louis Dreyfus Highbridge Energy LLC, a merchant energy company, from November 2007 to December 2008. She was on sabbatical from July 2007 until November 2007. From July 2005 to June 2007, Ms. Nagle was Managing Director of Fixed Income, Energy Trading and Marketing for the investment bank, Credit Suisse Group AG. Ms. Nagle received a B.A. in Economics and Psychology from Trinity College in 1989.

Cameron Crise is a discretionary trader of Graham, specializing in multi-asset global macro markets. He became registered as an associated person of Graham effective August 18, 2010 and listed as a principal on September 1, 2010. Prior to joining Graham in May 2010, Mr. Crise was employed as a portfolio manager at Nylon Capital LLP, an investment management firm, in London from April 2008 to March 2010. He moved back to the United States in April 2010 in order to take on the position with Graham the following month. He was between employment from February 2008 through March 2008. Mr. Crise worked as a currency portfolio manager at Fortis Investments, the global asset management arm of Fortis Group, the investment bank, from August 2004 to January 2008. Mr. Crise graduated from Duke University in 1993 where he received his B.A. in Public Policy Studies and History.

Timothy Every is a discretionary trader of GCM, specializing in global foreign exchange, fixed income, and equity indices. He became registered as an associated person of Graham effective August 4, 2010 and listed as a principal on October 1, 2010. Prior to joining Graham in April 2010, Mr. Every was a proprietary trader and Vice President in the Foreign Exchange Division of Citibank, an investment bank, from October 2007 to April 2010. From July 2000 to October 2007, Mr. Every held positions of increasing responsibility including Executive Director of U.S. Products Trading for the investment bank, Goldman Sachs. He was an associated person of Citibank from July 2008 to April 2010 and an associated person of Goldman Sachs from February 2001 to October 2007. Mr. Every received a B.A. in Economics from Stanford University in June 2000.

Joshua D. Alpert is a discretionary trader of the Trading Advisor, specializing in equities with a focus on thematic macro investing. He became an Associated Person of the Trading Advisor effective June 2, 2011 and a Principal on September 1, 2011. Prior to joining the Trading Advisor in March 2011, Mr. Alpert was a portfolio manager at Moore Capital Management, L.P., an investment management firm, from February 2002 to March 2011. Mr. Alpert received a B.A. in Economics and International Relations from Tufts University in May 1996 and a M.B.A. from Columbia Business School in May 2001.

Martin A. Brennan III is a discretionary trader of Graham, specializing in US fixed income and other liquid sovereign markets. He became an Associated Person of Graham effective May 26, 2011 and a Principal on May 27, 2011. Prior to joining Graham in January 2011, Mr. Brennan was an original Partner and Senior Portfolio Manager at Sailfish Capital Partners, LLC, an investment management firm, from March 2005 to February 2007. From January 2010 to January 2011, Mr. Brennan was between employment. Mr. Brennan received a B.A. in Accounting from Michigan state University in June 1983.

Daren McCullough is a discretionary trader of Graham, specializing in agricultural and energy options. Prior to joining Graham in March 2011, Mr. McCullough was a portfolio manager at Yannix Capital, an investment management firm, from February 2007 to March 2011. Mr. McCullough was a Senior Trader, global Options Strategist with Louis Dreyfus Corporation, an investment management firm, from May 2003 to January 2007. Mr. McCullough received a M.B.A. from the University of Kansas in October 1991. Mr. McCullough received the designation Chartered Financial Analyst in 1991.

Christopher J. Marich is a discretionary trader of the Trading Advisor, specializing in energy commodity markets. He became an Associated Person of the Trading Advisor effective July 22, 2011 and a Principal on August 1, 2011. Prior to joining the Trading Advisor in April 2011, Mr. Marich worked as a commodity trader for the investment management firm, MBF Trading LLC, from January 2009 to December 2010. From June 2004 to January 2009, Mr. Marich worked as a proprietary energy trader for the investment bank, Goldman Sachs. He was between employment from January 2011 to March 2011. Mr. Marich received a B.A. in Business Management from Loyola University Maryland in May 2003.

KGT, Inc. and KGT Investment Partners, L.P. are entity principals of Graham.

Graham and its principals may, from time to time, trade futures, forwards and option contracts and securities for their own proprietary accounts. If Graham or its principals engage in such trading, investors will not be able to inspect such records.

Graham and its principals do not own an Interest in the Registrant.

There have been no material administrative, civil or criminal proceedings against Graham, its affiliates, or its principals, any of which are pending, are on appeal or have concluded at any time during the last five years.

Overview of the K4D-15V Program

The K4D-15V quantitative investment program has its origin in Graham’s legacy trend-following systems, dated as far back as 1995. Graham’s trend systems are designed to participate selectively in potential profit opportunities that can occur during periods of price trends in a diverse number of U.S. and international markets. The trend systems establish positions in markets where the price action of a particular market signals the computerized systems used by Graham that a potential trend in prices is occurring. The trend systems are designed to analyze mathematically the recent trading characteristics of each market and statistically compare such characteristics to the historical trading patterns of the particular market. The trend systems also employ proprietary risk management and trade filter strategies that seek to benefit from sustained price trends while reducing risk and volatility exposure.

The K4D-15V Program utilizes multiple computerized trading models and offers broad diversification in both financial and non-financial markets, trading in approximately 100 global markets. It is intended to generate significant returns over time with an acceptable degree of risk and volatility. The computer models on a daily basis analyze the recent price action, the relative strength and the risk characteristics of each market and compare statistically the quantitative results of this data to years of historical data on each market. In addition to the trend system or systems at its base, the K4D-15V quantitative investment program has added substantial other trading strategies developed by Graham’s research department. Graham believes strongly in the importance of research and development activity and particularly in the development of new trading strategies. As one example of such efforts, Graham has incorporated a proprietary multi-factor leverage model within each of its trend-following programs to adjust the program’s exposure to key market sectors systematically based on proprietary factors that assess the potential of prices to trend in the near term. Other trading strategies developed by Graham research and added to Graham investment programs include not only a broad array of trend systems with varying time horizons, but also counter-trend trading systems and trading systems that do not seek to identify or follow price trends at all. Such systems generally are based on computerized mathematical models and rely primarily on technical rather than fundamental information as the basis for their trading decisions. Graham intends to add new trading strategies to its investment programs as well as to modify the systems currently in place in such programs in its ongoing efforts to keep pace with changing market conditions and it anticipates that the constellation of trading strategies comprising each investment program will continue to grow and evolve over time. The decision to add or subtract systems or strategies from any investment program shall be at the sole discretion of Graham. Clients will not be informed of these changes as they occur.

The Administrative Account Broker

UBS Securities LLC serves as the administrative account broker to the Registrant. Margin requirements are satisfied by the deposit of cash with such broker. Accordingly, assets used to meet margin and other regulatory requirements, as applicable are partially restricted. The Registrant earns interest income on credit balances and pays interest expense on debit balances with the broker.

The Administrator

Spectrum Global Fund Administration, L.L.C. (“Spectrum” or the “Administrator”), a Delaware limited liability company, was the administrator of the Registrant and provided certain administration and accounting services pursuant to the terms of a Services Agreement with the Registrant dated as of May 23, 2007. On December 10, 2010, AlphaMetrix360, LLC purchased the assets of Spectrum.

Effective June 1, 2011, the Registrant replaced AlphaMetrix 360, LLC with GlobeOp Financial Services LLC (“GlobeOp” or the “Administrator”), a Delaware limited liability company. AlphaMetrix 360, LLC’s Service Agreement with the Registrant was terminated effective close of business on May 31, 2011.

The Administrator performs or supervises the performance of services necessary for the operation and administration of the Registrant (other than making investment decisions), including administrative and accounting services. The Administrator also calculates the Registrant’s Net Asset Value. In addition, the Administrator maintains certain books and records of the Registrant, including certain books and records required by CFTC Rule 4.23(a). “Administrator” refers to Spectrum, AlphaMetrix 360, LLC, or GlobeOp depending on the applicable period discussed.

Fees and Expenses

Management Fee

Beginning January 1, 2010, Registrant pays to the Managing Member in advance a monthly management fee equal to 1/12^th of 6.00% (6.00% per annum) of the Net Asset Value (defined below) of Registrant as of the beginning of the month, See Note 4 of Registrant’s 2011 Annual Report filed as an exhibit to Registrant’s Form 10-K for the fiscal year ended December 31, 2011.

“Net Asset Value” is the total assets in Registrant less total liabilities of Registrant, each determined on the basis of accounting principles generally accepted in the United States of America.

From January 1, 2011 to December 31, 2011, the Registrant paid a monthly managed account fee in the amount of 1/12 of 0.25% of the Registrant’s beginning net asset value directly to ClariTy for risk management and related services with respect to monitoring the Trading Advisors. Effective January 1, 2012, the Registrant pays this fee indirectly through its investments in WTN and GRM based on their respective beginning of month Allocated Assets.

Trading Advisors’ Fees

Through December 31, 2011, the Registrant directly paid Winton and Graham monthly management fees at annual rates of 1.5% (2.0% prior to 10/1/10) and 2.0% respectively, of their Managed Accounts’ allocated assets as defined in their respective Trading Advisory Agreements. Additionally, the Registrant paid Winton and Graham incentive fees accrued monthly and paid quarterly of 20% and 22%, respectively, for achieving “New High Net Trading Profits” in their specific Managed Accounts as defined in their respective Trading Advisory Agreements.

Effective January 1, 2012, the Registrant indirectly pays WTN and GRM’s monthly management fees at annual rates of 1.5% and 2% respectively, as defined in their respective Trading Advisory Agreements. Effective January 1, 2012, the Registrant also pays its pro-rata share of WTN and GRM’s incentive fees accrued monthly and paid quarterly of 20% and 20%, respectively, for achieving “New High Net Trading Profits” in the Registrant’s capital accounts with WTN and GRM as defined in their respective advisory agreements.

“New High Net Trading Profits” (for purposes of calculating an Trading Advisor’s incentive fees) will be computed as of the close of business of the last day of each calendar quarter, or the Incentive Measurement Date, and will include such profits (as outlined below) since the immediately preceding Incentive Measurement Date (or, with respect to the first Incentive Measurement Date, since commencement of operations of the Registrant or the date the Trading Advisor commenced trading activities for the Registrant), or each an Incentive Measurement Period. New High Net Trading Profits for any Incentive Measurement Period will be the net profits, if any, from the Trading Advisor’s trading during such period (including (i) realized trading profit (loss) plus or minus (ii) the change in unrealized trading profit (loss) on open positions), and will be calculated after the determination of certain transaction costs attributable to the Trading Advisor’s trading activities and the Trading Advisor’s management fee, but before deduction of any incentive fees payable during the Incentive Measurement Period. New High Net Trading Profits will not include interest earned or credited on the assets allocated to the Trading Advisor.

New High Net Trading Profits will be generated only to the extent that the cumulative New High Net Trading Profits achieved by the Trading Advisor exceed the highest level of cumulative New High Net Trading Profits achieved by such Trading Advisor as of a previous Incentive Measurement Date. Except as set forth below, net losses from prior quarters must be recouped before New High Net Trading Profits can again be generated.

If a withdrawal or distribution occurs or if the Trading Advisory Agreement is terminated at any date that is not an Incentive Measurement Date, the date of the withdrawal or distribution or termination will be treated as if it were an Incentive Measurement Date. New High Net Trading Profits for an Incentive Measurement Period shall exclude capital contributions allocated to the Trading Advisor in an Incentive Measurement Period, distributions or redemptions paid or payable from the Trading Advisor’s account during an Incentive Measurement Period and any loss carry-forward attributable to the Trading Advisor will be reduced in the same proportion that the value of the assets allocated away from the Trading Advisor comprises of the value of the assets allocated to the Trading Advisor prior to such allocation away from the Trading Advisor). In calculating New High Net Trading Profits, incentive fees paid for a previous Incentive Measurement Period will not reduce cumulative New High Net Trading Profits in subsequent periods.

Through December 31, 2009, the Trading Advisors’ incentive fees were calculated at the Member level. Beginning January 1, 2010, the Trading Advisors’ incentive fees have been calculated at the Registrant level. The Managing Member has determined that any difference in each Member’s loss carryforward in the Registrant as of December 31, 2009 was immaterial. As such, to reduce administrative costs, the Managing Member determined to allocate the loss carryforward equally based on each Member’s pro rata interest in the Registrant as of December 31, 2009.

Brokerage Commissions and Fees

The Registrant is obligated to pay all floor brokerage expenses, give-up charges and NFA clearing and exchange fees incurred in connection with the Company’s commodity trading activities. Through December 31, 2011, these activities were paid directly by the Registrant. Effective January 1, 2012, these activities are now charged indirectly through the Registrant’s Affiliated Investment Funds and are reflected within the respective Net Asset Values of each of the Affiliated Investment Funds. On average, total charges paid to the clearing brokers are expected to be less than $10.00 per round-turn trade, although the clearing broker’s brokerage commissions and trading fees will be determined on a contract-by-contract basis. The exact amount of such brokerage commissions and trading fees to be incurred is impossible to estimate and will vary based upon a number of factors including the trading frequency of each advisor, the types of instruments traded, transaction sizes, degree of leverage employed and transaction rates in effect from time to time.

Routine Operational, Administrative and Other Ordinary Expenses

The Registrant pays all of its routine operational, administrative and other ordinary expenses, including, but not limited to, (i) legal, bookkeeping, accounting, custodial, administration (including, without limitation, the costs and expenses of the Administrator), auditing, tax preparation charges and related charges of the Registrant (including reimbursement of the Managing Member on a reasonable time-spent basis, for certain legal, accounting, administrative and registrar and transfer agent work performed by certain of the Managing Member’s personnel for and on behalf of the Registrant), as well as printing and other related expenses, (ii) investment related expenses, including, but not limited to brokerage commissions, “bid-ask” spreads, mark-ups, margin interest and other transactional charges and clearing fees, as well as banking, sales and purchase commissions and charges and exchange fees, fees and charges of other custodians and clearing agencies, interest and commitment fees on loans and debit balances, income taxes, withholding taxes, transfer taxes and other governmental charges and duties, and other transactional charges and clearing fees incurred by the Trading Advisor on behalf of the Registrant, The Registrant’s pro rata share of the expenses of any Access Fund into which it invests, and any due diligence expenses incurred in selecting and monitoring the Trading Advisor and any Access Funds, (iii) operational and overhead expenses of the Registrant, including but not limited to, photocopying, postage, and telephone expenses, (iv) preparation of monthly, quarterly, annual and other reports required by applicable Federal and state regulatory authorities, (v) Registrant meetings and preparing, printing and mailing of proxy statements and reports to Members, (vi) client relations and services, and (vii) computer equipment, system maintenance and other technology-related expenses.

Extraordinary Fees and Expenses

Registrant pays all its extraordinary fees and expenses, if any, and its allocable portion of all extraordinary fees and expenses of Registrant generally, if any, as determined by the Managing Member. Extraordinary fees and expenses are fees and expenses that are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs and any permitted indemnification payments related thereto. Extraordinary fees and expenses shall also include material expenses that are not currently anticipated obligations of Registrant or of managed futures funds in general, such as the payment of partnership taxes or governmental fees associated with payment of such taxes. Routine operational, administrative and other ordinary expenses will not be deemed extraordinary expenses. Any fees and expenses imposed on Registrant due to the status of an individual shall be paid by such individual or Registrant, not the Managing Member.

Expense Cap

Beginning January 1, 2010, routine operational, administrative and other ordinary expenses, other than the Managing Member’s management fee, the fees to be paid to the Registrant’s Trading Advisor(s), Brokerage Commissions and extraordinary fees and expenses, are limited to 1.50% of average Net Asset Value per annum, See Note 3 of the Registrant’s 2011 Annual Report, which is filed as an exhibit to Registrant’s Form 10-K for the fiscal year ended December 31, 2011. In the event fees and expenses for such items exceed such amount, the Managing Member will pay such amounts.

Redemption Charge

There is no redemption charge in respect of Interests.

Competition

Registrant competes with other private and publicly offered commodity pools, as well as other alternative investments such as REITs and oil and gas limited partnerships and hedge funds. Registrant operates in a competitive environment in which it faces several forms of competition, including, without limitation:

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Registrant competes with other commodity pools and other investment vehicles for investors.

•

The Trading Advisor may compete with other traders in the markets in establishing or liquidating positions on behalf of Registrant.

Employees

The Registrant has no employees. Management and administrative services for Registrant are performed by the Managing Member or third parties pursuant to the LLC Operating Agreement, as further discussed in Notes 3 and 4 of the Registrant’s 2011 Annual Report, which is filed as an exhibit to Registrant’s Form 10-K for the fiscal year ended December 31, 2011.

Critical Accounting Policies

Preparation of the financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the application of appropriate accounting rules and guidance. Applying these policies requires the Managing Member to make judgments, estimates and assumptions in connection with the preparation of Registrant’s financial statements. Actual results may differ from the estimates used.

The Managing Member has evaluated Registrant’s financial statements and related disclosures and has determined that the policies discussed below are critical accounting policies because they involve estimates, judgments and assumptions that are particularly complex, subjective or uncertain. For further discussion of Registrant’s significant accounting policies, see Note 2 of Registrant’s 2011 Annual Report filed as an exhibit to Registrant’s Form 10-K for the fiscal year ended December 31, 2011.

The valuation of Registrant’s investments that are not traded on a United States (“U.S.”) or internationally recognized futures exchange is a critical accounting policy. The market values of futures (exchange traded) contracts is verified by Registrant’s administrator, which obtains valuation data from third party data providers such as Bloomberg, Reuters and Super Derivatives and compares those prices with Registrant’s clearing broker. The market value of currency swap and forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 4 p.m. on the last business day of the reporting period. All values assigned by the administrator and confirmed by the Managing Member are final and conclusive as to all of Registrant’s Members. As such, if actual results vary from estimates used, they are not anticipated to have a material impact on the financial statements and related disclosures.

Registrant records all investments at fair value in its financial statements, with changes in fair value reported as a component of revenue in the statements of operations. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in the absence of an active market closing price. Registrant considers its investments in publicly-traded mutual funds, prices for exchange traded commodity futures and options contracts to be based on quoted prices in active markets for identical assets (Level 1). The values of forwards, swaps, and certain option contracts for which market quotations are not readily available are priced by independent third party data vendors or pricing services who derive fair values for those assets from observable inputs (Level 2). Level 3 inputs reflect Registrant’s assumptions that it believes market participants would use in pricing the asset or liability. Registrant develops Level 3 inputs based on the best information available in the circumstances, which may include indirect correlation to a market value, combinations of market values or Registrant’s proprietary data. Level 3 inputs generally include information derived through extrapolation or interpolation of observable market data. Registrant does not currently have any investments valued using Level 3 inputs.

The investments in Affiliated Investment Funds are reported in Registrant’s statements of financial condition and are considered Level 2 investments. In determining the level, the Registrant considers the length of time until the investment is redeemable, including notice and lock-up periods or any other restriction on the disposition of the investment. The Registrant also considers the nature of the portfolios of the underlying Affiliated Investment Funds and their ability to liquidate their underlying investments. The Registrant has the ability to redeem its investments at the reported net asset valuation as of the measurement date (see Note 7 of the condensed financial statements) and classified its investments in Affiliated Investment Funds as Level 2 using the fair value hierarchy. Fair value ordinarily is the value determined for the Affiliated Investment Funds in accordance with the fund’s valuation policies and reported at the time of Registrants valuation by the management of the fund. Generally, the fair value of

Registrant’s investments in the funds represents the amount that Registrant could reasonably expect to receive from the funds if Registrant’s investment was redeemed at the time of the valuation, based on information reasonably available at the time the valuation is made and that Registrant believes to be reliable.

Of the Registrant’s investments at September 30, 2012, $14,199,534 or 78.36% of the Registrant’s investments are classified as Level 1 and $3,920,996 or 21.64% as Level 2. Of the Registrant’s investments at December 31, 2011, $8,968,114 or 98.57% of the Registrant’s investments are classified as Level 1 and $130,387 or 1.43% as Level 2. There are no Level 3 investments at September 30, 2012 or December 31, 2011, nor any portion of the interim periods.

The Managing Member has determined that it is in the best interest of the Registrant to invest a portion of its non-margin assets, either directly or indirectly through certain investment funds, in (i) U.S. government securities (which include any security issued or guaranteed as to principal or interest by the United States), (ii) any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, (iii) corporate bonds or notes, or (iv) other instruments permitted by applicable rule and regulations. Effective January 1, 2011, the Managing Member is paid monthly 1/12 of 50% of the first 1% of the positive returns earned on the Registrant’s investment of non-margin assets. The calculation is based on the average annualized net asset value, and any losses related to returns on the non-margin assets must first be recovered through subsequent positive returns prior to the Managing Member receiving a payment. After the calculation of the amount payable to the Managing Member, the Registrant will be credited with all additional positive returns (or 100% of any losses) on the Registrant’s investment of non-margin assets. If at the end of any calendar year, a loss has been incurred on the returns for the non-margin assets, then the loss carry forward will reset to zero for the next calendar year with regards to the calculation of the Managing Member’s portion of the non-margin asset’s income.

Liquidity and Capital Resources

Registrant commenced operations on January 1, 2007. Contributions were raised and redemptions paid through new members’ investments in and redemptions out of the aggregate trading vehicle through December 31, 2009. Beginning January 1, 2010, individual members may redeem from the direct investment vehicle. Interests in Registrant may be redeemed on a monthly basis.

Subscriptions and Redemptions

Third Quarter 2012

Subscriptions of Interests for the Third Quarter 2012 were $0. Redemptions of Interests for the Third Quarter 2012 were $535,831.

Third Quarter 2011

Subscriptions of Interests for the Third Quarter 2011 were $0. Redemptions of Interests for the Third Quarter 2011 were $1,570,289.

Liquidity

A portion of the Registrant’s net assets has been held in cash, which was used as margin for trading in commodities. In as much as the sole business of the Registrant is to trade in commodities through its investments in CTA Choice segregated series, the Registrant continues to own such liquid assets to be used as margin. The clearing broker and bank credit the Registrant with interest income on 100% of its average daily equity maintained in its accounts with the clearing broker and bank during each month at competitive interest rates.

Commodities contracts presented directly or indirectly may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as “daily limits.” During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Registrant from promptly liquidating its commodity futures positions.

Since the Registrant’s business is to trade futures, forward and options contracts through its investments in CTA Choice segregated series, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to

perform under the terms of the contracts (credit risk). The Registrant’s exposure to market risk is influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Registrant’s speculative trading as well as the development of drastic market occurrences could result in losses considerably beyond the Registrant’s experience to date and could ultimately lead to a loss of all or substantially all of investors’ capital. The Managing Member attempts to minimize these risks by requiring the Registrant and the Trading Advisor to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting the use of stop loss provisions. See Note 10 of the Registrant’s unaudited condensed financial statements for a further discussion on the credit and market risks associated with the Registrant’s futures, forwards and option contracts.

There are no known material trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Registrant’s liquidity increasing or decreasing in a material way.

Capital Resources

Registrant does not intend to raise additional capital through the sale of Interests offered or through any borrowing. Due to the nature of Registrant’s business, Registrant does not contemplate making capital expenditures. Registrant does not have, nor does it expect to have, any capital assets. Redemptions and exchanges in the future will affect the amount of funds available for investments in futures interests in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows of Interests. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, Registrant’s capital resource arrangements at the present time.

Market Overview

Following is a market overview for Third Quarter 2012 and Third Quarter 2011:

Third Quarter 2012

The third quarter was marked by a dramatic turnaround in global financial markets sparked by bold actions of the ECB and turbocharged by the Fed’s announcement of open-ended quantitative easing (QE). Amid rising stress in the sovereign debt markets, the ECB President Mario Draghi came out and made a forceful statement committing the ECB to unlimited support for the sovereign bond markets in the eurozone. Meanwhile, the global economy continued to weaken in the third quarter. Global PMIs dropped to their lowest levels since 2009. In the United States, the economy outside of manufacturing actually showed some glimpses of life—notably in housing and auto sales. However, the expansion broadly remained lackluster and shaky, vulnerable to adverse developments. Europe remained stalled in its slump, with no sign of bottoming in the periphery countries. Emerging markets showed more broad-based signs of deceleration in economic growth. However, the softening global economic growth picture was overshadowed by the reduction of tail risk brought about by central bank actions, making risk assets soar.

Treasuries experienced a roller-coaster ride during the third quarter, but ended not far from where they began. Early in the quarter, amid a deepening crisis in the eurozone, Treasury yields plunged to new record lows. The yield on the 10-year fell below 1.40% in July, and the yield on the 30-year plummeted below 2.50%. However, Draghi’s announcement sparked a turnaround. Yields on the long end of the curve surged, with the 30-year rising past 3%. However, the spike proved short-lived, especially as the Fed extended its promise to keep rates low until 2015 and announced an open-ended QE. The yield curve steepened as rates fell at the shorter end of the curve. The 10-year yield edged down 2 basis points to end the quarter at 1.65%. The 30-year yield edged up by 6 basis points to reach 2.82%. The yield on the 5-year note dropped 10 basis points to 62 basis points, a new record low, and the yield on the 2-year note also declined by 10 basis points to 23 basis points. The ECB cut rates to 75 basis points. The Bank of England and the Bank of Japan maintained status quo.

The greenback declined as flight to safety receded, and QE added to the weakness. The Dollar Index declined 2.07%. The euro climbed 1.48%; however, this masks the sharp moves during the quarter. The British pound also gained against the dollar, rising 2.84%. Despite the risk-on environment, the yen actually rose 2.37% against the greenback. The commodity currencies gained as the QE boosted commodity prices. The Australian and the Canadian dollars appreciated 1.48% and 3.46%, respectively.

US equities experienced a solid rally in the third quarter. The gains were broad-based, although transportation was a notable exception. The Dow, the S&P 500, and NASDAQ gained approximately 9.69%, 6.35% and 6.17%, respectively, for the quarter. European stocks experienced even stronger rallies. The STOXX 600, a broad measure of European equities, surged 8.56%, in dollar terms. The CAC, the DAX and the FTSE 100 closed the quarter with gains of approximately 4.95%, 12.47%, and 3.07%, respectively. Asian markets were no different, although the Nikkei was an exception, declining 1.52%. The Hang Seng gained 7.20%, and the Korean Kospi increased 7.67%. The Australian All Ordinaries Index rose 6.55%.

Commodities experienced broad-based gains in the third quarter as the easing of monetary policy overcame global industrial weakness. Much of the commodity complex rallied, but lean hogs, sugar, and cotton were notable exceptions. Brent crude surged 15.46% during the quarter as the Iranian sanctions loomed over the market. Gasoline, heating oil, and natural gas outperformed crude oil, gaining 27.37%, 18.44%, and 17.56%, respectively.

With central banks’ accommodative policy, gold gained 10.85% and silver soared 25.88%. Base metal prices rose across the board. Copper, nickel, aluminum, and zinc recorded gains of 8.46%, 10.23%, 10.63%, and 11.97%, respectively.

Grains were among the better performers within the agricultural complex, as the drought continues to weigh on prospective supplies. Wheat, soybeans, and corn gained 19.62%, 4.49%, and 9.21%, respectively. Tropicals bucked the broader trend and experienced losses, with sugar leading the way with an 8.50% loss.

Third Quarter 2011

The third quarter of 2011 brought the most significant risk aversion in financial markets since late 2008. The circumspection that reared its head in the second quarter mushroomed in the third quarter as the next leg of the European crisis unfolded and was compounded by growing indications of a sharp deceleration in global economic activity. The latest episode of the Eurozone crisis brought forth new complications as the sovereign debt problem spread to more countries placing increased stress on the fragile banking system and making it difficult for policymakers to come up with quick fixes. US GDP growth in the second quarter came in at a disappointing 1.33%, annual rate, and the first quarter growth was revised down to a 0.36%, annual rate. Data released so far for the Third Quarter indicates a modest pickup in GDP growth. Meanwhile, job growth slowed sharply in the Third Quarter and the unemployment rate stubbornly remained above the 9% mark. The housing market remained in the doldrums. Global economic data was even weaker with Europe leading the way and emerging markets also showing signs of significant slowdown.

Treasuries experienced their biggest rally since the fourth quarter of 2008 as confidence in the economic recovery faltered and concerns about Eurozone fueled safe haven demand. The 10-year yield easily breached the 2008 low, broke the 2% mark, and fell to its lowest level in six decades. The yield plunged by 126 basis points to end the quarter at 1.9%. The 30-year yield also fell sharply, by 148 basis points, to end the quarter at 2.9%. The 5-year experienced a substantial rally, although the yield curve flattened noticeably. The yield on the 5-year note fell 80 basis points to 0.96%. The two year yield declined to 25 basis points, the lowest on record. The Fed made two moves during the quarter—one announcing its intentions to keep interest rates low until 2013 and the other announcing the so-called Operation Twist. The European Central Bank maintained status quo on rates even as it intensified its firefighting by stepping up its purchase of Italian and Spanish government bonds. The Bank of England continued to be divided over elevated inflation but the fragile and stalling economy prevented any action. The Bank of Japan kept key rates unchanged throughout the quarter as well.

The greenback experienced a rally resulting from the euro’s travails and the global flight to safety. The Dollar Index surged 5.7% and rose to its highest level since early 2011. The euro fell 7.4%, its biggest quarterly decline since the second quarter of 2010. The Swiss franc reversed its meteoric climb as the Swiss Central Bank intervened to cap the franc’s rise against the euro. The British pound was more subdued but still declined 2.76% against the greenback. Not surprisingly, the Japanese yen appreciated 4.46% amid global risk aversion. Declining commodity prices, fears about Chinese slowdown, and the global risk aversion dented the Australian and Canadian dollars, which dropped 9.2% and 7.8%, respectively.

US equities suffered their biggest quarterly loss since the fourth quarter of 2008. The declines were broad-based. Financial and transportation led the way down. The Dow^SM, the S&P 500^®, and the Nasdaq^® declined approximately 12.1%, 13.9% and 12.9%, respectively for the quarter. European stocks fared much worse. The STOXX 600^®, a broad measure of European equities, plunged 23.3%, in dollar terms. The CAC, the DAX^® and the FTSE 100^® closed the quarter with losses of approximately 25.4%, 25.1%, and 13.7%, respectively. Asian markets were hard hit as well. The Nikkei declined 11.4%, the Hang Seng dropped 21.5%, and the Kospi^® fell 15.8%. The Australian All Ordinaries Index declined 12.7%.

Commodities slipped for the second consecutive quarter as global industrial activity appeared to be decelerating and the risks of US and European recession loomed larger and fears of a hard landing in China gained some credence. While much of the commodity complex declined during the quarter, gold, lean hogs, live cattle, and wheat were the notable exceptions. Crude fell 17.2% during the quarter and heating oil declined 4.7%. Gasoline dropped 4.6%. Natural gas declined 14.1%.

Gold breached the $1,900 mark during the quarter but fell sharply in September, paring the gains to 9.2% for the quarter. Silver declined 10.9%. Base metals were hit hard. Copper, zinc, aluminum, and nickel recorded declines of 26.8%, 21.4%, 13.8%, and 23.5%, respectively.

Grains were among the better performers within the commodity complex and their losses were largely restricted to September when the financial markets exhibited symptoms of liquidity squeeze. Wheat actually gained 1.1%, while corn and soybean declined 5.3% and 10.2%, respectively. Cotton continued to correct sharply, falling 26.5%. Lean hogs and live cattle bucked the trend within commodities and in the broader financial markets by registering solid gains of 12.6% and 7.3%, respectively.

Sector Performance

Due to the nature of Registrant’s direct and indirect trading activities, a period-to-period comparison of its trading results is not meaningful. However, set forth below are the following:

(a)

the major sectors to which Registrant’s assets were allocated as of the Third Quarter 2012 and Third Quarter 2011, measured as a percentage of the “gross speculator margin” (i.e., the minimum amount of cash or marginable securities a speculator must post when buying or selling futures assets); and

(b)

a discussion of Registrant’s direct and indirect trading results for the major sectors in which Registrant traded for the Third Quarter 2012 and Third Quarter 2011.

Third Quarter 2012

As of September 30, 2012, the allocation of Registrant’s assets indirectly, through its investments in CTA Choice segregated series, to major sectors was as follows:


Sector	Allocation
Currencies		22.80	%
Energies		7.90	%
Grains		5.43	%
Indices		27.16	%
Interest Rates		28.73	%
Meats		0.21	%
Metals		4.66	%
Tropicals		3.11	%

TOTAL		100.00	%

Trading results for the major sectors in which Registrant traded indirectly for Third Quarter 2012 were as follows:

Currencies: (-) The Registrant experienced a majority of its gains in the Australian dollar, the Canadian dollar, the New Zealand dollar, and the Swedish krona. The majority of its losses were incurred in the euro, the Japanese yen, and the Swiss franc.

Energies: (-) The Registrant experienced gains in gasoline RBOB futures. The majority of its losses were incurred in natural gas, heating oil, and crude oil.

Grains: (+) The Registrant experienced the majority of its gains in soybeans, corn, wheat, and soybean meal. Losses were incurred in bean oil and cotton.

Indices: (+) The Registrant experienced gains in the S&P 500 Mini Index, the NASDAQ E-mini, the DAX, and the Dow Jones. The majority of the losses were incurred in the Heng Seng, the Nikkei, and the Tokyo Stock Index.

Interest Rates: (+) The Registrant experienced a majority of its gains in the euribor, the eurodollar, and the U.S. Treasury 5-Year note. The majority of losses were incurred in the U.S. Treasury bond and the Australian 10-year bond.

Meats: (-) The Registrant experienced gains in feeder cattle. Losses were incurred in live hogs.

Metals: (-) The Registrant experienced gains in gold. The majority of losses were incurred in copper, aluminum, silver, and zinc.

Softs: (-) The Registrant experienced gains in cocoa. Losses were incurred in coffee and sugar.

Third Quarter 2011

As of September 30, 2011, the allocation of Registrant’s assets to major sectors was as follows:


Sector	Allocation
Currencies		31.74	%
Energies		16.09	%
Grains		6.44	%
Indices		15.13	%
Interest Rates		23.26	%
Meats		0.50	%
Metals		4.69	%
Tropicals		2.15	%

TOTAL		100.00	%

Trading results for the major sectors in which the Registrant traded for Third Quarter 2011 were as follows:

Currencies: (-) The Registrant experienced the majority of its losses in the Australian and Canadian dollars. The majority of its gains were incurred in the Swiss franc and Japanese yen.

Energies: (-) The Registrant experienced the majority of its losses in gasoline, heating oil and brent crude. Gains were generated from natural gas.

Grains: (-) The Registrant experienced most of its losses in corn and soybeans. Small gains were generated in wheat and soybean oil.

Indices: (-) The Registrant experienced losses in the S&P 500^® Mini Index, the Nikkei and NASDAQ 100 and the Dow Jones Industrial Average. Small gains were incurred in the DJ STOXX^® and the S&P TSE 60^® Index.

Interest Rates: (+) The Registrant experienced the majority of its gains in Treasury Notes, Treasury Bonds, the London Gilt and the German Bund. Small losses were incurred in the Aussie Bank Bill.

Meats: (-) The Registrant experienced the majority of its losses in live cattle and live hogs.

Metals: (+) The Registrant experienced the majority of its gains in gold, aluminum, copper and nickel. Losses were realized in silver and lead.

Tropicals: (-) The Registrant experienced the majority of its losses in cocoa and coffee. Small gains were generated in sugar.

Third Quarter 2012

The Net Asset Value of Registrant as of September 30, 2012 was $20,763,224, a decrease of $775,902 from the June 30, 2012 Net Asset Value of $21,539,126, primarily due to investor redemptions and negative performance during the quarter.

Registrant’s performance for the Third Quarter 2012 was (1.20)%. Performance includes the percentage change in Registrant’s Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of trading gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.

Registrant’s total trading gains on investments before commissions and related fees for Third Quarter 2012 were approximately $58,000.

Registrant’s total gains from its investments in Affiliated Investment Funds were approximately $114,000.

Dividend income for the Third Quarter 2012 was approximately $44,000, a decrease of approximately $2,000, as compared to the Third Quarter 2011.

Brokerage Commissions and other transaction fees, which are now paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Third Quarter 2012 were approximately $18,000, a decrease of approximately $23,000 as compared to the Third Quarter 2011, primarily due to the decrease in net asset value discussed above.

Trading Advisor’s management fees, which are now paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Third Quarter 2012 were approximately $96,000, a decrease of approximately $39,000 as compared to the Third Quarter 2011, primarily due to the decrease in net asset value discussed above.

Management fees to the Managing Member for the Third Quarter 2012 were approximately $144,000, a decrease of approximately $56,000 as compared to the Third Quarter 2011, primarily due to investor redemptions and negative trading performance.

Incentive fees are based on the “New High Net Trading Profits” generated by the Trading Advisors, as defined in the trading advisory Agreements between the Registrant and the Trading Advisors. Incentive fees, which are now paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Third Quarter 2012 were $0.

ClariTy Managed Account fees, which are now paid indirectly through the Affiliated Investment Funds and are reflected within the respective net asset values of each of the Affiliated Investment Funds, for the Third Quarter 2012 were $14,000, a decrease of approximately $5,000 as compared to the Third Quarter 2011, primarily due to the decrease in net asset value discussed above.

Service Fees for the Third Quarter 2012 were approximately $186,000, a decrease of approximately $80,000 as compared to the Third Quarter 2011, primarily due to investor redemptions and negative performance.

Managing Member interest earned on investment funds for the Third Quarter 2012 were approximately $51,000, an increase of approximately $38,000 as compared to the Third Quarter 2011.

Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the Third Quarter 2012 were approximately $76,000.

Third Quarter 2011

The Net Asset Value of the Registrant as of September 30, 2011 was $29,283,202, a decrease of $2,001,499 from the June 30, 2011 Net Asset Value of $31,284,701. The Registrant’s average net asset level during the Third Quarter 2011 was approximately $30,652,000. The Registrant’s average net assets decreased during the Third Quarter 2011 in comparison to the Third Quarter 2010 decreased by approximately $2,839,000, primarily due the net effect of redemptions and negative trading performance in 2011.

The Registrant’s performance for the Third Quarter 2011 was (1.53)%. Performance includes the percentage change in the Registrant’s Net Asset Value excluding the effect of any subscriptions and redemptions and includes the percentage impact of trading gains/(losses) less any commissions and related fees and expenses. Past performance is not necessarily indicative of future results.

The Registrant’s trading gains before commissions and related fees for the Third Quarter 2011 were approximately $309,000.

Dividend income for the Third Quarter 2011 was approximately $46,000, an increase of approximately $46,000, as compared to the Third Quarter 2010, as the Registrant started earning dividend income on the investment of non-margin assets in investment funds starting October 2010. For a further discussion of these investments, see Note 4 of the Registrant’s 2010 Annual Report, which is filed as an exhibit to the Registrant’s Form 10-K for the fiscal year ended December 31, 2010.

Commissions and other transaction fees for the Third Quarter 2011 were approximately $41,000, an increase of approximately $18,000 as compared to the Third Quarter 2010, primarily due to increased trading volumes.

Trading Advisors’ management fees for the Third Quarter 2011 were approximately $135,000, a decrease of approximately $33,000 as compared to the Third Quarter 2010, primarily due to the decreased average net asset levels described above.

Management Fees to the Managing Member for the Third Quarter 2011 were approximately $200,000, a decrease of approximately $123,000 as compared to the Third Quarter 2010, primarily due to the change in service fee structure as discussed in Note 6 of the Registrant’s Condensed Financial Statements, attached herein.

ClariTy Managed Account fees for the Third Quarter 2011 were approximately $19,000, an increase of approximately $19,000 as compared to the Third Quarter 2010, as the Registrant started paying a fee to ClariTy Managed Account & Analytics Platform LLC, an affiliate of the Managing Member, in January 2011. For a further discussion of this fee, see Note 9 of the Registrant’s 2010 Annual Report, which is filed as an exhibit to the Registrant’s Form 10-K for the fiscal year ended December 31, 2010.

Service Fees for the Third Quarter 2011 were approximately $266,000, an increase of approximately $266,000 as compared to the Third Quarter 2010, primarily due to the change in fee structure discussed in Note 6 of the Registrant’s Condensed Financial Statements, attached herein.

Managing Member interest earned on investment funds for the Third Quarter 2011 were approximately $13,000, an increase of approximately $13,000 as compared to the Third Quarter 2010, as the Managing Member started earning interest on the return of the investment of non-margin assets in January 2011. For a further discussion of this fee, see Note 9 of the Registrant’s 2010 Annual Report, which is filed as an exhibit to the Registrant’s Form 10-K for the fiscal year ended December 31, 2010.

Operating expenses include accounting, audit, tax, and legal fees. Operating expenses for the Third Quarter 2011 were approximately $61,000.

Inflation

Inflation has had no material impact on the operations or on the financial condition of Registrant from inception through September 30, 2012.

Off-Balance Sheet Arrangements and Contractual Obligations

Registrant does not have any off-balance-sheet arrangements (as defined in Regulation S-K 303(a)(4)(ii)) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Registrant’s contractual obligations are with the Managing Member, the Trading Advisors through the CTA Choice Segregated Series and its commodity broker. Management fees payable by Registrant to the Trading Advisors through the CTA Choice Segregated Series and commencing January 1, 2010, management fees to the Managing Member, are calculated as a fixed percentage of Registrant’s Net Asset Value or allocated assets as defined. Incentive fees payable by the Registrant to the Trading Advisors through the CTA Choice Segregated Series are at a fixed rate, calculated as a percentage of Registrant’s “New High Net Trading Profits” (as defined in the Advisory Agreement). As such, the Managing Member cannot anticipate the amounts to be paid for future periods as Net Asset Values and “New High Net Trading Profits” are not known until a future date. Commissions payable to Registrant’s commodity broker are based on a cost per executed trade and, as such, the Managing Member cannot anticipate the amount that will be required under the brokerage agreement, as the level of executed trades are not known until a future date. These agreements are effective for one-year terms, renewable automatically for additional one-year terms unless terminated. Additionally, these agreements may be terminated by either party thereto for various reasons. Additionally, since the Registrant does not enter into other long-term debt obligations, capital lease obligations, operating lease obligations or other long-term liabilities that would otherwise be reflected on the Registrant’s Statements of Financial Condition, therefore a table of contractual obligations has not been presented. For a further discussion of Registrant’s contractual obligations, see Notes 1, 3, 4 and 5 to Registrant’s 2011 Annual Report filed as an exhibit to Registrant’s Form 10-K.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding Registrant’s market risk exposures—except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how Registrant 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 Exchange Act. Registrant’s primary market risk exposures as well as the strategies used and to be used by the Managing Member and the Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks are one of which could cause the actual results of Registrant’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 Registrant. There can be no assurance that Registrant’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 their investment in Registrant.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

The means by which the Managing Member and the Trading Advisors through the CTA Choice Segregated Series, severally, attempt to manage the risk of Registrant’s open positions is essentially the same in all market categories traded.

The Trading Advisors attempt to minimize market risk exposure by applying their own risk management trading policies that include the diversification of trading assets into various market sectors. Additionally, the Trading Advisors have an oversight committee broadly responsible for evaluating and overseeing the Trading Advisors’ trading policies. The oversight committee meets periodically to discuss and analyze issues such as liquidity, position size, capacity, performance cycles, and new product and market strategies.

The Managing Member attempts to minimize market risk exposure by requiring the Trading Advisors to abide by various trading limitations and policies. The Managing Member monitors compliance with these trading limitations and policies which include, but are not limited to, limiting the amount of margin or premium required for any one commodity or all commodities combined and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, the Managing Member shall automatically terminate the Trading Advisors through termination of the CTA Choice Segregated Series if the Net Asset Value of Registrant declines by 40% during any year or since the commencement of trading activities. Furthermore, the Trust Agreement provides that Registrant will liquidate its positions, and eventually dissolve, if Registrant experiences a decline in the net asset value of 50% in any year or since the commencement of trading activities. In each case, the decline in Net Asset Value is after giving effect for contributions, distributions and redemptions. The Managing Member may impose additional restrictions (through modifications of such trading limitations and policies) upon the trading activities of the Trading Advisors as it, in good faith, deems to be in the best interest of Registrant.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Registrant’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended under the Exchange Act, are designed to ensure that information required to be disclosed by Registrant in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to Registrant’s management, including the Managing Member’s Co-Chief Executive Officers and Director of Fund Administration (who, in these capacities, function as the Principal Executive Officers and Principal Financial/Accounting Officer, respectively, of Registrant), as appropriate to allow for timely decisions regarding required disclosure.

In designing and evaluating Registrant’s disclosure controls and procedures, the Managing Member recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can prove absolute assurance that all control issues and instances of fraud, if any, within Registrant have been detected.

The Managing Member’s management, under the supervision and with the participation of certain officers of the Managing Member (including the Managing Member’s Co-Chief Executive Officers and Director of Fund Administration), has evaluated the effectiveness of Registrant’s disclosure controls and procedures during Third Quarter 2012. Based upon such evaluation, the Managing Member’s Co-Chief Executive Officers and Director of Fund Administration have concluded that, as of September 30, 2012, Registrant’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in Registrant’s internal control over financial reporting (as defined in Rules 13a – 15(f) and 15d – 15(f) under the Exchange Act) during the Third Quarter of 2012 that have materially affected, or are reasonably likely to materially affect, Registrant’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

There are no material legal proceedings pending, on appeal, or concluded to which Registrant is a party or to which any of its assets are subject.

Item 1.A.

Risk Factors

There have been no changes from risk factors as previously disclosed in Registrant’s Form 10-K for the fiscal year ended December 31, 2011.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

From January 1, 2012 to September 30, 2012, Registrant sold Interests which resulted in aggregate proceeds to Registrant of $0.

Item 3.

Defaults Upon Senior Securities

None

Item 5.

Other Information

None

Item 6.

Exhibits:



3.1		Certificate of Formation of KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 3.1 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

3.2		Certificate of Amendment of Certificate of Formation of KMP Futures Fund I LLC (incorporated by reference from Exhibit 3.2 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

3.3		Amended and Restated Limited Liability Company Operating Agreement of KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 3.3 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.1		Advisory Agreement among KMP Futures Fund I LLC (f/k/a WCM Pool LLC), Kenmar Preferred Investments Corp. (f/k/a Preferred Investment Solutions Corp.) and Winton Capital Management Limited (incorporated by reference from Exhibit 10.1 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.2		Services Agreement between Spectrum Global Fund Administration, L.L.C. and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.2 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)



10.3		Customer Agreement between the KMP Futures Fund I LLC (f/k/a WCM Pool LLC) and UBS Securities LLC (incorporated by reference from Exhibit 10.3 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.4		Amendment No. 1 to Customer Agreement between KMP Futures Fund I LLC (f/k/a WCM Pool LLC) and UBS Securities LLC (incorporated by reference from Exhibit 10.4 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.5		FX Prime Brokerage Agreement between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.5 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.6		ISDA Master Agreement, Schedule and Credit Support Annex between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.6 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.7		Amendment to ISDA Maser Agreement between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.7 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.8		Master Confirmation Agreement for Non-Deliverable Forward FX Transactions between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.8 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

10.9		Master Confirmation for Exotic Options between UBS AG and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference from Exhibit 10.9 of Registrant’s Registration Statement on Form 10, File No. 000-53816, filed with the Commission on November 2, 2009)

31.1		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)

31.2		Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)

32.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.2		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

99.1		Notice to Unitholders regarding certain changes to the ownership and structure of the Registrant’s underlying managers (incorporated by reference to Exhibit 99.1 to Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on August 17, 2012)

99.3		Notice to Unitholders of Administration Agreement and Middle/Back Office Agreement between GlobeOp Financial Services LLC and KMP Futures Fund I LLC (f/k/a WCM Pool LLC) (incorporated by reference to Exhibit 99.3 to Registrant’s Form 8-K, File No. 000-53816, filed with the Commission on February 28, 2011)

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to the Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

[Remainder of page left blank intentionally.]

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


KMP FUTURES FUND I LLC

By:	Kenmar Preferred Investments, L.P.,
	its Managing Member

	By:	/s/ Kenneth A. Shewer	Date: November 14, 2012
	Name:	Kenneth A. Shewer
	Title:	Co-Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ David K. Spohr	Date: November 14, 2012
	Name:	David K. Spohr
	Title:	Senior Vice President and Director of Fund Administration
		(Principal Financial/Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company