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EX-32.1 - AlphaMetrix Managed Futures LLCc73034_ex32-1.htm
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EX-32.2 - AlphaMetrix Managed Futures LLCc73034_ex32-2.htm
EX-31.2 - AlphaMetrix Managed Futures LLCc73034_ex31-2.htm
EX-13.02 - AlphaMetrix Managed Futures LLCc73034_ex13-02.htm

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-K

 

 

 

(Mark One)

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

 

For the fiscal year ended December 31, 2012

or

 

¨ 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: 000-52192

 

 

 

ALPHAMETRIX MANAGED FUTURES LLC

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 03-0607985

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

c/o ALPHAMETRIX, LLC
181 West Madison
34th Floor
Chicago, Illinois 60602

(Address of principal executive offices)

 

(312)267-8400

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No ý

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No ý

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No o

 

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Xo

 

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

 

Large accelerated filer o Accelerated filer o  
Non-accelerated filer   o (Do not check if a smaller reporting company) Smaller reporting company ý

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No ý

 

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

 

As of December 31, 2012 and 2011, units of limited liability company interest of the registrant with an aggregate net asset value of $75,382,045 and $80,083,121, respectively were outstanding and held by non-affiliates; units of limited liability company interest of the registrant with an aggregate net asset value of $9,210 and $10,547, respectively, were outstanding and held by AlphaMetrix, LLC, the sponsor of the registrant.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The Financial Statements and Report of Independent Registered Public Accounting Firm for the registrant’s master fund (the “Master Fund”) for the years ended December 31, 2012 and December 31, 2011 are incorporated by reference and filed as Exhibit 13.02 herewith.

 

 
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ALPHAMETRIX FUTURES LLC

 

ANNUAL REPORT FOR 2012 ON FORM 10-K

 

Table of Contents

 

  Page
PART I  
Item 1. BUSINESS 1
Item 1A. RISK FACTORS 8
Item 1B. UNRESOLVED STAFF COMMENTS 8
Item 2. PROPERTIES 8
Item 3. LEGAL PROCEEDINGS 8
Item 4. MINE SAFETY DISCLOSURES 8
     
PART II  
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 9
Item 6. SELECTED FINANCIAL DATA 10
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 26
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 43
Item 9A. Controls and Procedures 43
Item 9B. Other Information 44
     
PART III  
Item 10. Directors, Executive Officers AND CORPORATE GOVERNANCE 44
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 46
Item 13. Certain Relationships and Related Transactions, AND DIRECTOR INDEPENDENCE 47
Item 14. Principal AccountING Fees and Services 47
     
PART IV  
Item 15. Exhibits, Financial Statement Schedules 48
     
SIGNATURES S-1
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PART I

 

Item 1:Business

 

(a)General Development of Business

 

As of November 1, 2008, AlphaMetrix, LLC (the “Sponsor”) is the sponsor of AlphaMetrix Managed Futures LLC (the “Platform”). The Sponsor is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and commodity trading advisor, with the Securities and Exchange Commission (“SEC”) as a Registered Investment Advisor (“RIA”) and Registered Transfer Agent (“RTA”), and is a member of the National Futures Association (“NFA”). The Platform was formed on July 25, 2006 as a Delaware series limited liability company pursuant to the Delaware Limited Liability Company Act. AlphaMetrix Managed Futures LLC (Aspect Series) (the “Aspect Series”) is a “segregated series” of the Platform. On November 1, 2008, the Sponsor was assigned sponsorship in the Platform and managerial interest in the Aspect Series from the former sponsor of the Platform, UBS Managed Fund Services, Inc. (“UBS MFS” or the “former sponsor”) and the name of the Platform and Aspect Series were changed from UBS Managed Futures LLC and UBS Managed Futures LLC (Aspect Series) to AlphaMetrix Managed Futures LLC and AlphaMetrix Managed Futures LLC (Aspect Series), respectively. The Platform and Aspect Series are governed in accordance with the Confidential Offering Memorandum. All capitalized terms used herein are defined in the Confidential Offering Memorandum.

 

The Aspect Series invests a portion of its assets in AlphaMetrix Aspect Fund – MT0001 (the “Master Fund”) which is advised by Aspect Capital Limited (the “Trading Advisor”). Prior to December 31, 2010 the Aspect Series and the Master Fund were consolidated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). As of December 1, 2009, another fund operated by the Sponsor invested in the Master Fund. Subsequently, beginning with the 2010 financial statements, the Aspect Series and Master Fund are no longer consolidated.

 

The Series, through its investment in the Master Fund, engages in the speculative trading of certain forwards, futures and other derivatives contracts on various bonds, currencies, interest rates, equities, equity indices, debt securities and selected physical commodities. Until October 1, 2009, UBS Securities LLC was the Series’ futures clearing broker (the “Clearing Broker”) and until October 13, 2009, UBS AG was the foreign exchange clearing broker of the Master Fund. On and after October 1, 2009 for general futures clearing brokerage, excluding foreign currency, and on and after October 13, 2009 including foreign currency, Credit Suisse Securities (USA) LLC acts as the Master Fund’s clearing broker (reference to the “Clearing Broker” shall be UBS Securities LLC if involving matters prior to October 1, 2009 and to Credit Suisse Securities (USA) LLC for matters on or after October 1, 2009), although the Master Fund may execute foreign exchange trades through another foreign exchange clearing broker at any time. The Sponsor, over time, intends to offer investors a selection of different trading advisors, each managing a different segregated series of the Platform. There can be no assurance, however, that any series other than the Series will be offered or that the Series will continue to be offered. The Series was organized on October 26, 2006 and commenced trading on March 16, 2007. The Series filed a Form 10, under the Securities Exchange Act of 1934, as amended, with the SEC to register the units of limited liability company interest (“Units”), and such registration became effective October 17, 2006.

 

On March 16, 2007, the Series issued 5,000.00 Units to the Trading Advisor for $5,000,000 (the “Trading Advisor Investment”) and issued 2,760.62 Units for $2,760,620 to third parties. On April 1, 2007, the Series issued 9.94 Units to the former sponsor, UBS MFS, for $10,000. On December 31, 2007, the Trading Advisor redeemed the full value of the Trading Advisor Investment. On October 31, 2008, UBS MFS redeemed the full value of their Units in conjunction with the assignment of the Sponsor and on November 1, 2008, the Series issued 8.12 Units to the Sponsor for $10,000.

 

At the sole discretion of the Sponsor, the Series may terminate for any reason (for the avoidance of doubt, the Sponsor shall be entitled, without any violation of any contractual or fiduciary obligation to any investor in the Series (a “Member”), to dissolve the Series at any time).

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(b)Financial Information about Segments

 

The Series’ business constitutes only one segment for financial reporting purposes, i.e. a speculative “commodity pool.” The Series does not engage in sales of goods or services. Financial information regarding the Series’ business is set forth in Item 6 “Selected Financial Data” and incorporated into Part II, Item 8.

 

(c)Narrative Description of Business

 

General

 

The Series invests a portion of its assets in the Master Fund. The Trading Advisor manages the assets of the Master Fund pursuant to its Aspect Diversified Program (the “Program”). The Program is a broadly diversified global trading system that deploys multiple trading strategies that seek to identify and exploit directional moves in market behavior of a broad range of global financial instruments including but not limited to forwards, futures and other derivatives contracts on certain bonds, currencies, interest rates, equities, equity indices, debt securities and selected physical commodities. By maintaining comparatively small exposure to any individual market, the aim is to achieve real diversification. The Program seeks to maintain positions in a variety of markets. Market concentration varies according to the strength of signals, volatility and liquidity, amongst other factors.

 

The Program employs a fully automated system to collect, process and analyze market data (including current and historical price data) and identify and exploit directional moves, or “trends”, in market behavior, trading across a variety of frequencies to exploit trends over a range of timescales. Positions are taken according to the aggregate signal and are adjusted to control risk.

 

The investment objective of the Program is to generate significant medium term capital growth independent of overall movements in traditional stock and bond markets within a rigorous risk management framework. This investment objective is intended to be achieved via the investment policy for the Program, which is to trade relevant asset classes applying the Program.

 

The core objectives of the Program are:

 

(i)to produce strong medium-term capital appreciation; (“medium-term” generally referring to a three- to five-year time period);

 

(ii)to seek and exploit profit opportunities in both rising and falling markets using a disciplined quantitative investment process;

 

(iii)to seek non-correlation with the broad bond and stock markets and thereby play a valuable role in enhancing the risk/return profile of traditional investment portfolios; and

 

(iv)to minimize risk by operating in a diverse range of markets and sectors using a consistent investment process that adheres to pre-defined and monitored risk limits and determines market exposure in accordance with factors including (but not limited to) market correlation, volatility, liquidity and the cost of market access.

 

The Master Fund’s account traded pursuant to the Program may experience returns that differ from other Trading Advisor accounts traded pursuant to the same Program due to, among other factors: (a) regulatory constraints on the ability of the Series to have exposure to certain contracts; (b) the Sponsor’s selection of the Clearing Broker, which affects access to markets; (c) the effect of intra-month adjustments to the trading level of the account; (d) the manner in which the account’s cash reserves are invested; (e) the size of the Series’ account; (f) the Series’ functional currency, the U.S. dollar; (g) the particular futures contracts traded by the Series’ account: (h) the leverage implemented; and (i) the interest rate earned on invested cash. Additionally, certain markets may not be liquid enough to be traded for the Series’ account.

 

The investment approach that underpins the Program is proprietary. The Trading Advisor’s investment philosophy has remained consistent and involves a scientific approach to investment driven by the Trading Advisor’s belief that market behavior is not random but rather contains statistically measurable and predictable price movements and

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anomalies which, through sophisticated quantitative research and a disciplined approach, can be successfully identified and exploited for profit.

 

Allocation Methodology

 

Allocations to the strategy, markets and asset classes traded by the Program are reviewed on a regular basis using a robust and stable quantitative methodology which takes into account a range of factors that may include liquidity, risk and expected returns. The Program, subject to applicable investment policies, does not have any inherent preference for, or bias towards, any market, asset class or instrument but rather aims to maximize returns within liquidity constraints, such as speculative position limits or market disruptions.

 

Market Access and Trading Costs

 

The Trading Advisor appreciates the importance of executing trades in a cost efficient manner and the significance of market impact and trading costs on the Series’ performance. The Trading Advisor takes into account the liquidity of the markets in which it executes trades so as to endeavor to provide optimal market execution results (including executing electronically wherever beneficial).

 

Risk Management

 

A fundamental principle of the Trading Advisor’s investment approach is the importance of a robust risk management framework. The Trading Advisor employs a value-at-risk methodology and other risk management procedures to monitor the risk of the Program within pre-defined guidelines. Additionally, the Trading Advisor has developed mechanisms to control risk at both an individual market and portfolio level. In order to monitor and respond to changes in the trading conditions in a market at all times, the Trading Advisor believes a high level of transparency is required. This transparency is achieved by generally investing in liquid instruments with real time pricing, although this may not be possible in all markets or for all instruments.

 

The Master Fund engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively “derivatives”). These derivatives include both financial and non-financial contracts held as part of a diversified trading strategy. The Master Fund and the Series, via its investment in the Master Fund, are exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk with the Clearing Broker, the risk of failure by another party to perform according to the terms of a contract. Market risk is the potential for changes in the value of derivatives due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity and security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The market risk of the Master Fund is managed by the Trading Advisor according to its trading program. Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk due to exchange traded financial instruments is significantly reduced by the regulatory requirements of the individual exchanges on which the instruments are traded.

 

The purchase and sale of futures contracts are executed on an exchange and requires margin deposits with a Futures Commission Merchant (“FCM”). Additional deposits may be necessary for any loss on contract value. The U.S. Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM’s proprietary activities. A customer’s cash and other property, such as U.S. Treasury Bills, deposited with an FCM are considered commingled with all other customer funds subject to the FCM’s segregation requirements. In the event of an FCM’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited. The Clearing Broker is an FCM.

 

Due to forward currency contracts being traded in unregulated markets between principals, the Master Fund and the Series, via its investment in the Master Fund, also assume a credit risk and the risk of loss from counterparty non-performance with respect to its currency trading. Funds and property deposited as margin in connection with the transactions is not required to be, and typically is not, segregated. Accordingly, the Master Fund and the Series is exposed to the creditworthiness of the Clearing Broker on these trades facilitated by the Clearing Broker. In the event of the Clearing Broker’s bankruptcy, the Master Fund could lose all or substantially all assets not located in

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segregated funds. The Series exposure to credit risk is limited to its investment in or receivable from the Master Fund.

 

To evaluate and monitor counterparty risk of the Clearing Broker or any trading counterparty, the AlphaMetrix Risk Department initially evaluates their credit ratings from the major agencies: Moody’s, Standard & Poor’s and Fitch Ratings. Credit ratings and outlooks are monitored daily for downgrades and an investigation is initiated upon any adverse change. Further, any large decline in the daily stock price also triggers an investigation. Lastly, quarterly reports on earnings and future outlooks from counterparties are reviewed and analyzed by the AlphaMetrix Risk Department for unfavorable results.

 

For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Master Fund is exposed to market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short. The Series exposure to market risk is limited to its investment in or receivable from the Master Fund.

 

The Series, via its investment in the Master Fund, is designed to take on market risk on a systematic basis across a broad portfolio of liquid markets and to monitor and minimize exposure to all other risks, such as credit and liquidity risks. The trading systems used by the Master Fund’s Trading Advisor include various proprietary systems that are designed to control the risk taken at the individual position level as well as at the overall portfolio level. The Trading Advisor monitors and controls market risk within limits at both sector and portfolio levels.

 

Net trading results arising from the Master Fund’s speculative trading of derivatives for the year ended December 31, 2012 and 2011 are reflected in the Master Fund’s Statements of Operations and equals the Net realized and unrealized gain/(loss) on investments and foreign currency less trading costs.

 

The Members bear the risk of loss only to the extent of the fair value of their respective investment in the Series.

 

Research Commitment and Program Development

 

The Trading Advisor retains the right to develop and make changes to the Program at its sole discretion, including (without limitation) the incorporation of new markets, instruments, strategies and asset classes into the Program. The Master Fund will be notified of such changes only if they amount to material changes to the investment objective or investment policy of the Program.

 

The Program is proprietary and highly confidential to the Trading Advisor. Accordingly, the description of the Program as contained herein is general only and is not intended to be exhaustive or absolute.

 

Custody of Assets

 

The Series invests a portion of its assets in the Master Fund. At December 31, 2012 and 2011, the Series’ investment in the Master Fund was 79.69% and 83.06%, respectively, of the Series’ total assets. A substantial amount of the Master Fund’s assets are held in customer accounts at the Clearing Broker, an indirect, wholly-owned subsidiary of an affiliate of the former sponsor, although they may be held at other affiliates of the Clearing Broker or other third-party clearing brokers selected by the Sponsor.

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Only assets held to margin CFTC-regulated futures contracts may be held in CFTC-regulated “segregated funds” accounts. “Segregated funds” accounts are insulated from liability for any claims against a broker other than those of other customers. As of December 31, 2012 and 2011, 89.90% and 90.99%, respectively, of the net assets of the Master Fund was held in cash, of which 14.78% and 14.26% of the cash is restricted cash for margin requirements. As of December 31, 2012 and 2011, 1.76% and 2.54% of net assets, representing the fair values of futures, was held at the Clearing Broker. Some of the Series’ capital is not held in segregation, but rather in custody or other client accounts maintained by affiliates of the Clearing Broker. Subject to any applicable regulatory restrictions, these affiliates may make use of such capital, which is treated as a liability or deposit owed by such affiliates to the Series. However, if such an affiliate were to incur financial difficulties, the Series’ assets could be lost (the Series becoming only a general creditor of such affiliate) and, even if not lost, could be unavailable to the Series for an extended period.

 

The Sponsor considers the Clearing Broker’s policies regarding the safekeeping of the Series’ assets to be fully consistent with industry practices.

 

Interest Income/Expense

 

Interest income and expense is recognized on an accrual basis. Interest income or expense may include (1) the allocation from the Master Fund of the Master Fund’s interest income/expense from its broker, or (2) interest income from the Series’ bank account.

 

Interest

 

The Series generally earns interest on its cash at bank and on its proportionate share of the cash actually held by the Master Fund, (the “Cash Assets”). The Master Fund does not earn interest income on the Master Fund’s gains or losses on open forward, commodity option and certain non-U.S. futures positions because such gains and losses are not collected or paid until such positions are closed out. Interest is earned only on funds actually held in the Master Fund’s account.

 

The Clearing Broker pays interest as of the end of each month on the Master Fund’s average daily Cash Assets at a rate corresponding to an annual rate equal to the prevailing Federal Funds Rate. The Clearing Broker will retain any returns on the Master Fund’s Cash Assets in excess of the Federal Funds Rate. The Clearing Broker retains the additional economic benefit (which may be significant) derived from possession of the Master Fund’s Cash Assets.

 

The Clearing Broker, in the course of acting as commodity broker for the Master Fund, lends certain currencies to, and holds certain non-U.S. currency balances. If, for example, the Master Fund needed to make a margin deposit in Swiss Francs, the Clearing Broker would lend the Master Fund the Swiss Francs, charging a local short-term rate plus a spread of up to 1.0% per annum (at current rates). Should the Master Fund hold Swiss Franc balances in its account, the Clearing Broker will credit the Master Fund with interest at the same local short-term rate less a spread of up to 2.0% per annum (at current rates).

 

The Clearing Broker follows its standard procedures for crediting and charging interest to the Master Fund. The Clearing Broker is able to generate significant economic benefit from doing so, especially as the Clearing Broker is able to meet the margin requirements imposed on its customers as a group, whereas each customer must margin its account on a stand-alone basis with the Clearing Broker. Consequently, the Clearing Broker may record a loan of Swiss Francs (in the above example) to the Master Fund’s account which the Clearing Broker charges interest even though the Clearing Broker itself does not have to deposit any Swiss Francs at the applicable clearinghouse.

 

Description of Current Expenses

 

The Trading Advisor receives a 2% per annum management fee of the Series’ net asset value for all other purposes as defined below. Such fee is calculated and paid on a monthly basis. The Trading Advisor has agreed to share 0.50% of such management fee with UBS Financial Services Inc., a selling agent for the Series (“UBS FS”). The Trading Advisor also will receive a performance fee equal to 20% of the new net trading profits of the Series for each quarter. New net trading profits during each quarter refers to the excess, if any, of the cumulative level of net trading profits attributable to the Series at the end of such quarter over the highest level of cumulative net trading profits as of the end of any preceding quarter (the “High Water Mark”). Performance fees do not, while losses do, reduce cumulative net trading profits. New net trading profits do not include interest income. To the extent that any

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redemptions are made from the Series, the High Water Mark is proportionately reduced and a proportionate performance fee paid (if accrued). The management and performance fees due to the Trading Advisor are paid by the Master Fund via redemptions by the Series from the Master Fund.

 

Members are subject to an ongoing sales commission paid to UBS FS and Credit Suisse Securities LLC, equal to 2% per annum of the month-end net asset value for all other purposes (see below). The Series incurred sales commissions of $1,701,154 and $1,471,300 for the years ended December 31, 2012 and 2011, respectively, and accrued $131,554 and $134,044 owed to UBS FS and Credit Suisse Securities at December 31, 2012 and 2011, respectively. UBS FS or Credit Suisse Securities LLC, in consultation with the Sponsor, may waive or reduce the sales commission for certain Members without entitling any other Member to such waiver or reduction.

 

The Sponsor receives a monthly sponsor fee of 0.04166 of 1% (a 0.50% annual rate) of the Series’ month-end net asset value for all other purposes which take into account interest income, of each Member’s investment in the Series for such month. The Sponsor reserves the right to waive or reduce the fee at its sole discretion.

 

AlphaMetrix360 LLC (the “Administrator”), a related party to the Sponsor, receives a monthly fee as to be determined by the Sponsor and the Administrator up to 0.0067 of 1% of the Series’ net asset value for all other purposes as of the beginning of each month (a 0.10% annual rate), subject to a monthly minimum of $3,300.

 

The Master Fund’s brokerage commissions are paid upon completion or liquidation of one-half of a trade and are referred to as “per side” commissions, which cover either the initial purchase (or sale) or the subsequent offsetting sale (or purchase) of a single commodity futures contract. The principal operating costs of the Master Fund are the per side brokerage commissions paid to the Clearing Broker (a portion of which is paid to the Master Fund’s executing brokers, which may or may not include the Clearing Broker, as commissions for their execution services) and the currency forward contract (“F/X”) dealer spreads paid to the Clearing Broker and others. The “per side” commissions for U.S. markets paid by the Master Fund are approximately $5.00 per side plus fees (except in the case of certain non-U.S. contracts on which the rates may be as high as $50 per side plus fees due, in part, to the large size of the contracts traded).

 

Many of the Master Fund’s currency trades are executed in the spot and forward non-U.S. exchange markets (the “F/X Markets”) in which there are no direct execution costs. Instead, the banks and dealers in the F/X Markets, including the Clearing Broker, take a “spread” between the prices at which they are prepared to buy and sell a particular currency, and such spreads are built into the pricing of the spot or forward contracts with the Master Fund. In general, the Sponsor estimates that aggregate brokerage commission charges (including F/X spreads) will not exceed 3.5%, and should range between approximately 0.5% and 3% per annum of the Series’ average month-end assets (meaning the average month-end net asset value for all other purposes for the then-current fiscal year).

 

The former sponsor advanced expenses incurred in connection with the organization of the Platform and the organization and initial offering of the Units of the Series. The Series reimbursed the former sponsor for these costs. For financial reporting purposes in conformity with U.S. generally accepted accounting principles, the Series expensed the total organizational costs of $208,820 when incurred and deducted the initial offering costs of $119,732 from Members’ capital as of March 16, 2007, the date of commencement of operations of the Series (“net asset value for financial reporting” or the “net asset value per Unit for financial reporting” – see Item 6 “Selected Financial Data”. For all other purposes, the Series amortizes organizational and initial offering costs over a 60 month period (“net asset value for all other purposes” or the “net asset value per Unit for all other purposes”). The amortization of such costs reduce the net asset value for all other purposes of the Units for purposes of determining subscriptions, redemptions and any fees based on the Units’ net asset value for all other purposes and for reporting performance for all purposes other than as related to financial reporting. However, the amount of such costs attributable to the Platform’s organization that are not already amortized may be allocated to and amortized by other series on the Platform for net asset value for all other purposes when and if such other series are added to the Platform or in a manner as the Sponsor may otherwise determine.

 

Each Member or Member-related account is subject to an upfront, waivable placement fee of 0% to 2% of the subscription price of the Units, which will be paid once by the relevant Member, not by the Platform, the Series or the Sponsor, on such Member’s initial subscription to the Series during any twelve month period. No placement fee will be charged in connection with an exchange. The placement fee payable on such initial subscription is deducted

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from the subscription amount. The placement fee to which Members are subject will vary among Members. Each Member also will pay an ongoing sales commission (the “Sales Commission”) equal to 2% per annum of the month-end net asset value for all other purposes, including interest income, of a Member’s investment in the Series. UBS FS, in consultation with the Sponsor, may waive or reduce such sales commission for certain Members without entitling any other Member to any such waiver or reduction.

 

The Series will pay its own operating costs plus its proportionate share of the Master Fund’s expenses, including, without limitation: ongoing offering expenses; trading costs (including execution and clearing brokerage commissions); forward and other over the counter trading spreads; administrative, transfer, exchange and redemption processing, legal, regulatory, reporting, filing, tax, audit, escrow, accounting and printing fees and expenses, as well as extraordinary expenses. Such operating costs are allocated pro rata among the Units based on their respective net asset values for all other purposes. These expenses are paid in addition to the other expenses described below.

 

The Sponsor has retained outside service providers to supply certain services, including, without limitation, tax reporting, accounting and escrow services. Operating costs include the Series’ allocable share of the fees and expenses of such outside service providers.

 

The following table summarizes the expenses incurred by the Series for the years ended December 31, 2012 and December 31, 2011:

 

   2012   2011 
Expenses  Dollar Amount   % of Average
Month-End Net
Asset Value for
Financial
Reporting
   Dollar Amount   % of Average
Month-End Net
Asset Value for
Financial
Reporting
 
                 
Performance fee  $173,293    0.21%  $1,151,168    1.60%
Management fee   1,704,284    2.04%   1,475,678    2.05%
Sales Commissions   1,701,154    2.03%   1,471,300    2.05%
Allocated trading costs   153,172    0.18%   102,436    0.14%
Sponsor fee   425,289    0.51%   367,825    0.51%
Other expenses   494,153    0.59%   469,855    0.65%
Total  $4,651,345    5.56%  $5,038,262    7.00%

 

The Series’ average month-end net asset value for financial reporting during 2012 and 2011 equaled $83,699,130 and $71,869,666, respectively.

 

During 2012 and 2011, interest expense allocated from the Master Fund (included in Other expenses in the table above) to the Series was $47,800 and $45,617, respectively or approximately (0.06) % and (0.06) %, respectively, of the Series’ average month-end net asset value for financial reporting for 2012 and 2011.

 

Regulation

 

The Sponsor and the Trading Advisor are registered with the CFTC as commodity pool operators and commodity trading advisors (“CTAs”) and are members of the National Futures Association (“NFA”) in such capacities. The CFTC may suspend a commodity pool operator’s or trading advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the

7

Sponsor or of the Trading Advisor as a commodity pool operator or a commodity trading advisor were terminated or suspended, the Sponsor or Trading Advisor, as applicable, would be unable to continue to manage the business of the Series or the trading of its assets. Should the Sponsor’s or Trading Advisor’s registration be suspended, termination of the Series might result. In addition to such registration requirements, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short positions that any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day. Forward currency contracts are not subject to regulation by any U.S. government agency.

 

Other than in respect of the registration requirements pertaining to the Series’ securities under Section 12(g) of the Securities Exchange Act of 1934, as amended, the Platform and the Series are generally not subject to regulation by the Securities and Exchange Commission. The Trading Advisor is also regulated by the Financial Service Authority of the United Kingdom.

 

(i) through (xii) – not applicable.

 

(xiii) the Series has no employees.

 

(d)Financial Information About Geographic Areas

 

Neither the Master Fund nor the Series engage in material operations in foreign countries, nor is a material portion of the Master Fund’s and the Series’ revenue derived from customers in foreign countries. The Master Fund will trade on a number of U.S. and non-U.S. commodities exchanges. The Master Fund will not engage in the sales of goods or services.

 

Item 1A: Risk Factors

 

Not applicable

 

Item 1B: Unresolved Staff Comments

 

Not applicable

 

Item 2: Properties

 

The Master Fund and the Series do not own or use any physical properties in the conduct of their businesses.

 

The Master Fund and the Series’ administrative office is the administrative office of the Sponsor (181 West Madison, 34th Floor, Chicago, IL 60602). The Sponsor performs administrative services for the Series from the Sponsor’s offices.

 

Item 3: Legal Proceedings

 

The Sponsor is not aware of any pending legal proceedings to which either the Master Fund or the Series is a party or to which any of its assets are subject.

 

Item 4: Mine Safety Disclosures

 

Not applicable

8

PART II

 

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

 

(a)Market Information

 

There is no trading market for the Units, and none is likely to develop. Units may be redeemed at the net asset value per Unit for all other purposes as of the end of any calendar month. Redemption requests must be submitted on or prior to the 15th day of the calendar month (or the following business day) in which such Units are to be redeemed.

 

(b)Holders

 

As of December 31, 2012 and 2011, there were 893 and 801 holders of Units, including the Sponsor.

 

(c)Dividends

 

No distributions or dividends have been made on the Units, and the Sponsor has no present intentions to make any.

 

(d)Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

(e)Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

The Series did not sell any unregistered securities since it commenced operations on March 16, 2007 that have not previously been included in the Series’ Quarterly Reports on Form 10-Q or in a Current Report on Form 8-K.

 

(f)Issuer Purchases of Equity Securities

 

Pursuant to the Platform’s Amended and Restated Limited Liability Company Agreement and the Series’ Amended and Restated Separate Series Agreement, Members may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit for all other purposes, i.e. reflecting the amortization of organizational and initial offering costs. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed. The following table summarizes the redemptions by Members during the fourth quarter of 2012 and 2011:

 

Month  Units
Redeemed
   Redemption Date Net Asset Value
per Unit for All Other Purposes
 
October 31, 2012   486.899   $1,144.905 
November 30, 2012   425.167   $1,127.150 
December 31, 2012   2,976.809   $1,134.271 
Total   3,888.875      

 

Month  Units
Redeemed
   Redemption Date Net Asset Value
per Unit for All Other Purposes
 
October 31, 2011   294.663   $1,256.124 
November 30, 2011   934.563   $1,273.392 
December 31, 2011   116.498   $1,299.122 
Total   1,345.724      
9

Item 6: Selected Financial Data

 

The following selected data has been derived from the audited Financial Statements of the Series.

 

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Financial Condition

 

   AlphaMetrix Managed   AlphaMetrix Managed   AlphaMetrix Managed   AlphaMetrix Managed 
   Futures LLC (Aspect Series)   Futures LLC   Futures LLC (Aspect Series)   Futures LLC 
   December 31, 2012   December 31, 2012   December 31, 2011   December 31, 2011 
ASSETS                    
Investment in AlphaMetrix Aspect Fund - MT0001, at fair value  $ 63,194,749   $ 63,194,749   $69,103,283   $69,103,283 
Cash at bank   16,104,735    16,104,735    14,093,440    14,093,440 
                     
Total Assets  $ 79,299,484   $ 79,299,484   $83,196,723   $83,196,723 
                     
LIABILITIES                    
                     
REDEMPTIONS PAYABLE  $3,376,506   $3,376,506   $151,345   $151,345 
                     
SUBSCRIPTIONS RECEIVED IN ADVANCE   259,715    259,715    2,558,453    2,558,453 
                     
PAYABLES:                    
Accrued sales commission   131,554    131,554    134,044    134,044 
Accrued sponsor fee   10,120    10,120    11,402    11,402 
Accrued operating costs    130,334     130,334    247,811    247,811 
                     
Total Liabilities    3,908,229     3,908,229    3,103,055    3,103,055 
                     
MEMBERS’ CAPITAL                    
Members (66,458.60 and 61,654.52 units outstanding at December 31, 2012 and December 31, 2011, respectively, unlimited units authorized)   75,382,045    75,382,045    80,083,121    80,083,121 
Sponsor (8.12 units outstanding at December 31, 2012 and December 31, 2011, respectively, unlimited units authorized)   9,210    9,210    10,547    10,547 
Total Members’ Capital   75,391,255    75,391,255    80,093,668    80,093,668 
                     
Total Liabilities and Members’ Capital  $79,299,444   $79,299,444   $83,196,723   $83,196,723 

 

See notes to financial statements.

10

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Operations

For the years ended December 31, 2012 and 2011

 

   AlphaMetrix Managed
Futures LLC (Aspect Series)
2012
   AlphaMetrix Managed
Futures LLC
2012
   AlphaMetrix Managed
Futures LLC (Aspect Series)
2011
   AlphaMetrix Managed
Futures LLC
2011
 
NET INVESTMENT INCOME/(LOSS) ALLOCATED FROM ALPHAMETRIX ASPECT FUND - MT0001:                    
Interest income  $16,727   $16,727   $26,040   $26,040 
Trading costs   (153,172)   (153,172)   (102,436)   (102,436)
Interest expense   (47,800)   (47,800)   (45,617)   (45,617)
Bank fees           (103)   (103)
                     
Net investment income/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (184,245)   (184,245)   (122,116)   (122,116)
                     
SERIES NET INVESTMENT INCOME/(LOSS):                    
Operating expenses   (446,353)   (446,353)   (424,135)   (424,135)
Management fee   (1,704,284)   (1,704,284)   (1,475,678)   (1,475,678)
Performance fee   (173,293)   (173,293)   (1,151,168)   (1,151,168)
Sales commissions   (1,701,154)   (1,701,154)   (1,471,300)   (1,471,300)
Sponsor fee   (425,289)   (425,289)   (367,825)   (367,825)
                     
Series net investment income/(loss)   (4,450,373)   (4,450,373)   (4,890,106)   (4,890,106)
                     
Total net investment income/(loss)   (4,634,618)   (4,634,618)   (5,012,222)   (5,012,222)
                     
REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM ALPHAMETRIX ASPECT FUND - MT0001                    
Net realized gain/(loss)   (6,377,197)   (6,377,197)   8,257,867    8,257,867 
Net increase/(decrease) in unrealized appreciation/(depreciation)   (637,456)   (637,456)   (1,432,173)   (1,432,173)
                     
Total realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001     (7,014,653 )     (7,014,653 )     6,825,694       6,825,694  
                     
Net increase/(decrease) in net assets resulting from operations  $(11,649,271)  $(11,649,271)  $1,813,472   $1,813,472 
                     
Weighted average number of units outstanding   66,989    66,989    56,210    56,210 
                     
Net income/(loss) per weighted average unit  $(173.90)  $(173.90)  $32.26   $32.26 

 

See notes to financial statements.

11

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Changes in Members’ Capital

For the years ended December 31, 2012 and 2011

 

For the year ended December 31, 2012  AlphaMetrix Managed Futures LLC (Aspect Series)   AlphaMetrix Managed 
     Members   Sponsor   Total   Futures LLC Total 
     Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2012  $80,083,121    61,654.52   $10,547    8.12   $80,093,668    61,662.64   $80,093,668    61,662.64 
Members’ subscriptions   17,342,258    13,421.99            17,342,258    13,421.99    17,342,258    13,421.99 
Members’ redemptions   (10,395,400)   (8,617.91)           (10,395,400)   (8,617.91)   (10,395,400)   (8,617.91)
Net investment income/(loss)   (4,634,062)       (556)       (4,634,618)       (4,634,618)    
Net realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (7,013,872)       (781)       (7,014,653)       (7,014,653)    
Members’ capital at December 31, 2012  $75,382,045    66,458.60   $9,210    8.12   $75,391,255    66,466.72   $75,391,255    66,466.72 
                                         
Net asset value per unit at January 1, 2012  $1,298.901        $1,298.901                          
Change in net asset value per unit   (164.630)        (164.630)                         
Net asset value per unit at December 31, 2012  $1,134.271        $1,134.271                          
                                         
For the year ended December 31, 2011  AlphaMetrix Managed Futures LLC (Aspect Series)   AlphaMetrix Managed 
   Members   Sponsor   Total   Futures LLC Total 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2011  $63,839,812    50,277.92   $10,310    8.12   $63,850,122    50,286.04   $63,850,122    50,286.04 
Members’ subscriptions   24,390,322    19,173.21            24,390,322    19,173.21    24,390,322    19,173.21 
Members’ redemptions   (9,960,248)   (7,796.61)           (9,960,248)   (7,796.61)   (9,960,248)   (7,796.61)
Net investment income/(loss)   (5,011,512)       (710)       (5,012,222)       (5,012,222)    
Net realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   6,824,747        947        6,825,694        6,825,694     
Members’ capital at December 31, 2011  $80,083,121    61,654.52   $10,547    8.12   $80,093,668    61,662.64   $80,093,668    61,662.64 
                                         
Net asset value per unit at January 1, 2011  $1,269.739        $1,269.739                          
Change in net asset value per unit   29.162         29.162                          
Net asset value per unit at December 31, 2011  $1,298.901        $1,298.901                          

 

See notes to financial statements.

12

The former sponsor paid all expenses incurred in connection with the organizational and initial offering of the Units of the Series. As described in the Series’ current Confidential Disclosure Document, the Series reimbursed the former sponsor for these costs in 2008. For financial reporting purposes in conformity with U.S. generally accepted accounting principles, the Series expensed the total organizational costs of $208,820 when incurred and deducted the initial offering costs of $119,732 from Members’ capital as of March 16, 2007 (the date of commencement of operations of the Series) (“net asset value for financial reporting” or the “net asset value per Unit for financial reporting”). For all other purposes, including determining the net asset value per Unit for subscription and redemption purposes, the Series amortizes organizational and initial offering costs over a 60 month period (“net asset value for all other purposes” or the “net asset value per Unit for all other purposes”). The net asset value and net asset value per Unit are as follows:

 

   Net Asset Value       Net Asset Value per Unit 
   All Other Purposes   Financial Reporting   Number of Units   All Other Purposes   Financial Reporting 
Price at Commencement*                 $1,000.000   $1,000.000 
March 31, 2007  $7,805,411   $7,479,686    7,760.62    1,005.772    963.801 
June 30, 2007   13,409,546    13,100,248    11,988.08    1,118.573    1,092.773 
September 30, 2007   18,932,687    18,639,817    18,241.85    1,037.871    1,021.816 
December 31, 2007   16,034,264    15,757,821    14,700.02    1,090.765    1,071.959 
March 31, 2008   20,507,363    20,247,348    17,025.49    1,204.509    1,189.237 
June 30, 2008   50,168,558    49,924,971    40,063.82    1,252.216    1,246.136 
September 30, 2008   59,013,279    58,786,119    52,463.77    1,124.839    1,120.509 
December 31, 2008   71,216,262    71,005,529    53,002.45    1,343.641    1,339.665 
March 31, 2009   66,062,490    65,868,185    50,663.64    1,303.950    1,300.108 
June 30, 2009   48,597,098    48,419,221    43,344.52    1,121.182    1,117.074 
September 30, 2009   65,446,804    65,285,354    55,797.55    1,172.933    1,170.040 
December 31, 2009   59,653,082    59,508,061    52,355.78    1,139.379    1,136.609 
March 31, 2010   61,712,630    61,584,035    52,710.17    1,170.792    1,168.352 
June 30, 2010   58,685,934    58,573,769    50,598.99    1,159.824    1,157.607 
September 30, 2010   62,864,771    62,769,033    51,344.51    1,224.372    1,222.507 
December 31, 2010   63,929,433    63,850,122    50,286.04    1,271.316    1,269.739 
March 31, 2011   69,735,670    69,672,788    55,107.50    1,265.448    1,264.307 
June 30, 2011   70,137,681    70,091,226    57,603.59    1,217.592    1,216.786 
September 30, 2011   75,178,811    75,148,782    56,985.40    1,319.265    1,318.738 
December 31, 2011   80,107,270    80,093,668    61,662.64    1,299.122    1,298.901 
March 31, 2012   85,002,471    85,002,471    65,074.13    1,306.241    1,306.241 
June 30, 2012   85,311,103    85,311,103    68,261.85    1,249.763    1,249.763 
September 30, 2012   83,552,421    83,552,421    69,662.23    1,199.393    1,199.393 
December 31, 2012   75,391,255    75,391,255    66,466.72    1,134.271    1,134.271 
                          
Total return after performance fee, from the commencement of operations through the period ended December 31, 2012.  13.43%   13.43%

 

* Commencement of operations of the Series was March 16, 2007.

 

13

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Reference is made to Item 6 “Selected Financial Data” and Item 8 “Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.

 

All figures and performance returns noted in this Item 7 are based on the net asset value and/or the net asset value per Unit for all other purposes, which complies with U.S. generally accepted accounting principles, except with respect to organizational and initial offering costs (which are being amortized over 60 months) as described in Item 6 “Selected Financial Data.” All figures and performance returns communicated to Members are based on the net asset value and/or the net asset value per Unit for all other purposes.

 

Operational Overview

 

This performance summary describes the manner in which the Series has performed in the past and is not an indication of future performance. While certain market movements are attributable to various market factors, such factors may or may not have caused such movements but they may have simply occurred at or about the same time.

 

The Series is unlikely to be profitable in markets in which trends do not occur. Static or erratic prices are likely to result in losses. Similarly, sharp trend reversals, which can be caused by many unexpected events, can lead to major short-term losses, as well as gains.

 

While there is no assurance the Series will profit in any market condition, markets having substantial and sustainable price movements offer the best profit potential for the Series.

 

Liquidity

 

The Series invests a portion of its assets in the Master Fund. Virtually all of the Master Fund’s capital is held in cash or cash equivalents at the Clearing Broker and is used to margin the Master Fund’s futures and forward currency positions and is withdrawn, as necessary, to pay redemptions and expenses. The Master Fund does not maintain any sources of financing other than that made available by the Clearing Broker to fund foreign currency settlements for those instruments transacted and settled in foreign currencies. The Master Fund pays prevailing market rates for such borrowings.

 

A portion of the assets maintained at the Master Fund’s Clearing Broker is restricted cash required to meet maintenance margin requirements. Included in cash deposits with the Clearing Broker as of December 31, 2012 and 2011 was restricted cash for margin requirements of $9,766,809 and $10,298,501, respectively. This cash becomes unrestricted if the underlying positions it supports are liquidated.

 

Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures and forward currency trading, the Master Fund’s and the Series’ assets are highly liquid and are expected to remain so. Because the Master Fund’s assets are held in cash, it expects to be able to liquidate all of its open positions or holdings quickly and at prevailing market prices, except in unusual circumstances. This generally permits the Trading Advisor to enter and exit markets, leverage and deleverage in accordance with its strategy. From its commencement of operations on March 16, 2007 through December 31, 2012, the Master Fund experienced no meaningful periods of illiquidity in any of the markets in which it traded.

 

The Series processes Member redemptions on a monthly basis, with approximately corresponding redemptions out of the Master Fund. The Series incurred redemptions of $10,395,400 (8,617.91 Units) and $9,960,248 (7,796.61 Units) for the years ended December 31, 2012 and December 31, 2011 respectively, and accrued $3,376,506 and $151,345 in redemptions payable to Members at December 31, 2012 and 2011, respectively.

14

Capital Resources

 

The Series’ Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.

 

The amount of capital raised for the Series is not expected to have a significant impact on its operations, as the Series has no significant capital expenditures or working capital requirements other than for investment in the Master Fund and Member redemptions. The amount of capital invested in the Master Fund is not expected to have a significant impact on the Master Fund’s operations, as the Master Fund has no significant capital expenditures or working capital requirements other than for monies to pay trading losses, trading costs and expenses. Within broad ranges of capitalization, the Master Fund’s trading positions should increase or decrease in approximate proportion to the size of the Series’ investment in the Master Fund.

 

The Series raises additional capital only through the sale of Units and capital is increased through the Series’ pro rata share of the Master Fund’s trading profits (if any). The Series does not maintain any sources of financing. The Master Fund does not maintain any sources of financing other than that made available by the Clearing Broker to fund foreign currency settlements for those instruments transacted and settled in foreign currencies.

 

The Master Fund may trade a variety of futures-related instruments, including (but not limited to) instruments related to bonds, currencies, interest rates, equities, equity indices, debt securities and selected physical commodities and derivatives. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally to be measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions (“OTC”), because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In OTC transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins that may be subject to loss in the event of a default are generally required in exchange trading, and counterparties may require margin or collateral in the OTC markets.

 

The Trading Advisor attempts to control risk in all aspects of the investment process, although there can be no assurance that it will, in fact, succeed in doing so. The Master Fund is designed to take market risk on a systematic basis across a broad portfolio of liquid markets and to monitor and minimize exposure to all other risks, such as credit and liquidity risks. The trading systems used include various proprietary systems that are designed to control the risk taken at the individual position level as well as at the overall portfolio level. The Trading Advisor monitors and controls market risk within limits at both sector and portfolio levels.

 

The financial instruments traded by the Master Fund contain varying degrees of risk whereby changes in the fair values of the futures and forward contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.

 

Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash and, at times, U.S. government obligations, while the Master Fund maintains its market exposure through open futures and forward contract positions.

 

The Master Fund’s futures contracts are settled by offset and are generally cleared by the exchange clearinghouse function. Open futures positions are marked to market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.

 

The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of debt securities to decline, but only to a limited extent. More importantly, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Fund’s profit potential generally increases. However, inflation can also

15

give rise to markets which have numerous short price trends followed by rapid reversals, in which the Master Fund is likely to suffer losses.

 

Results of Operations

 

General

 

The Trading Advisor manages the assets of the Master Fund pursuant to the Program (see Item 1(c) “Narrative Description of Business”). The Trading Advisor was established in 1997 by Anthony Todd, Dr. Eugene Lambert, Martin Lueck and Michael Adam, all of whom were involved in the development of AHL (Adam, Harding and Lueck), now part of Man Group plc, where they advanced the application of systematic quantitative techniques in managed futures investment. The Trading Advisor has grown to a team of over 148 employees and manages approximately $6 billion as of December 31, 2012. The Trading Advisor is a limited liability company registered in England and Wales, which is regulated in the United Kingdom by the Financial Services Authority. Since October 1999, the Trading Advisor has been a member of NFA and has been registered with the CFTC as a commodity trading advisor and commodity pool operator. The Trading advisor has also been registered with NFA as a principal of its commodity trading advisor subsidiary Aspect Capital Inc. since August 2004. The Trading Advisor has also been registered with the Securities and Exchange Commission as an investment adviser since October 2003.

 

The Series commenced trading activities March 16, 2007 with an initial capitalization of $7,760,620, of which $5,000,000 was contributed by the Trading Advisor as seed capital. On December 31, 2007 the Trading Advisor redeemed the full value of its seed capital. As of December 31, 2012 and 2011, the Series had a capitalization of $75,391,255 and $80,107,270, respectively, based on the net asset value for all other purposes.

 

Performance Summary

 

Quarter ended December 31, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended December 31, 2012, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended December 31, 2012 with a year-to-date loss of (12.67%), based on the net asset value for all other purposes.

 

The following discussion is based on the underlying performance of the Master Fund in which the Series invests.

 

October 1, 2012 to December 31, 2012

 

The Series posted a 0.63% gain for the month ended December 31, 2012, losses of (5.43%) and (12.67%) for the three and twelve months ended December 31, 2012 and an overall gain of 13.43% for the Series from the inception of trading on March 16, 2007 through December 31, 2012 (not annualized and based on net asset value per unit for all other purposes).

 

The Series returned 0.63% in December. Negotiations concerning the fiscal cliff of tax increases and spending cuts in the US rumbled on throughout the month. Markets were initially confident that a deal would be struck before the end of the year, but this confidence faltered somewhat when a ‘Plan B’ deal fell apart and eleventh-hour negotiations continued. However, the Series’ performance was driven more by Japanese markets, following the landslide election victory of a new Liberal Democratic Party-led government determined to introduce inflation targeting and provide increased fiscal stimulus. The Series’ long positions in Japanese equity indices and short exposure to the Yen profited from the resulting moves, although this was slightly reduced by the long exposure to Japanese Government Bonds which finished as the worst performing market for the month. There were similar patterns in performance elsewhere in the portfolio. Long positions in stock indices were nearly almost all profitable as markets ended the year positively, while global government bond markets (other than Germany) sold off, making this the worst sector for the month. In commodity markets, the energies sector finished the month close to flat as

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gains from a growing short position in natural gas were offset by small losses from the oils complex. The losses in the metals sector came from long positions across the precious metals, with silver especially suffering as the price dropped 8% in the third week.

 

In agricultural markets the short coffee exposure continued to profit following news of favorable harvesting conditions in South America. The rest of the sector struggled however, especially grains markets where prices fell following forecasts of higher supply levels.

 

The Series posted a (1.55%) loss for the month ended November 30, 2012, a (13.22%) loss for the year to date as of November 30, 2012 and an overall gain of 12.72% for the Series from the inception of trading on March 16, 2007 to November 30, 2012 (not annualized).

 

The Series returned (1.55%) in November. Following Obama’s re-election as US President, market sentiment was dominated by concerns over the US fiscal cliff of tax increases and spending cuts and the provision of aid to Greece. The safe haven of government bonds attracted demand amid the uncertainty, leading to gains from most long positions held in the bonds sector. Stock markets fell during the first half of the month, but later hopes that an agreement would be reached to provide aid to Greece led to a resurgence of risk appetite. Additionally, strong global economic data boosted stock markets, leading to profits from the Series’ net long exposure to stock indices over the month. The currencies sector also performed positively. In particular, the Series’ short exposure to the Yen against the US Dollar made gains following the Japanese government’s decision to dissolve parliament and call an early election in December. Additional gains came from the Series’ short Euro positions against other European currencies. However the commodities sectors all proved more difficult in the month, most notably short positions in industrial metals saw losses as prices rose following strong Chinese export data and as risk appetite started to return to markets in the second half of the month. Whilst gains came from some long positions in precious metals, losses came from gold, which sold off amid the pessimism surrounding the US budget talks. Short positions in oil markets made losses too as prices rose due to unrest in the Middle East, while in the agriculturals sector long soy positions were negatively affected by expectations of high supplies. One highlight amongst commodities was the Series’ short position in coffee, which made gains on forecasts of high production in Brazil and Vietnam.

 

The Series posted a (4.54%) loss for the month ended October 31, 2012, a (11.86%) loss for the year to date as of October 31, 2012 and an overall gain of 14.49% for the Series from the inception of trading on March 16, 2007 to October 31, 2012 (not annualized).

 

The Series returned (4.54%) in October. The month began with a strong US jobs report, which led to equity markets making gains while bonds sold off. However, equity markets later fell after the IMF cut its growth forecasts for most developed countries and focus turned to a disappointing US earnings season. As a result losses came from the Series’ net long exposure to stock indices, in particular from its long position in the NASDAQ 100. Positive sentiment regarding the Eurozone also drove markets, causing bond markets to continue to fall and making the bonds sector the worst performing sector for the Series. The US Dollar strengthened against commodity currencies, leading to losses from the currencies sector. Additionally, the long position in the Swedish Krona against the Euro suffered from uncertainty over the economic outlook for Sweden. Oil markets fell amid concerns over global demand and high WTI crude oil inventory levels, causing losses from long positions in oil products but gains from the short position in crude oil itself. Short positions in some industrial metals such as aluminum and nickel profited, while the Series’ long position in gold struggled as metals prices fell on uncertainty about demand, in particular from China. Finally, in agriculturals long positions in grains saw losses, but short positions in sugar and coffee gained from falling prices.

 

Quarter ended September 30, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended September 30, 2012, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended September 30, 2012 with a year-to-date loss of (7.68%), based on the net asset value for all other purposes (see “Notes to Condensed Financial Statements – (3) Related Party Transactions”).

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July 1, 2012 to September 30, 2012

 

The Series posted a (3.72%) loss for the month ending September 30, 2012, a loss of (4.03%) and (7.68%) for the three and nine months ended September 30, 2012 and an overall gain of 19.94% for the Series from the inception of trading on March 16, 2007 through September 30, 2012 (not annualized and based on net asset value per unit for all other purposes).

 

The Series returned a loss of (3.72%) in September. Central bank action in Europe, US and China provided the necessary liquidity to drive equities and industrial commodities higher. In Europe, a ratification of the European Stability Mechanism by Germany and a strengthening of the pro-Euro political landscape helped increase risk appetite. As a result, the Series generally incurred losses from long fixed income exposures, short exposures to industrial metals and the remaining short stock indices exposures. The strong regional effect of the signaled increase in Chinese infrastructure spending contributed to the price appreciation in both Chinese stock indices and industrial metals. Short exposures to industrial metals were therefore the Series’ worst performers, but the long exposure in gold made strong gains. The US dollar depreciated mid-month, as the Fed initiated an open-ended quantitative easing program, thus benefitting the Series’ short exposures especially against the New Zealand and Singapore Dollar. However, some of these currency gains were offset by losses from a stronger Euro where the Series still holds a net short exposure. In North America, the Series’ long exposures to stock indices proved profitable, but the short natural gas exposure incurred losses as the onset of colder weather drove prices higher. In addition, the established trends in grains such as soy and corn reversed following improved conditions for the new planting season.

 

The Series posted a (3.28%) loss for the month ending August 31, 2012, a (4.11%) loss for the year to date as of August 31, 2012 and an overall gain of 24.57% for the Series from the inception of trading on March 16, 2007 to August 31, 2012 (not annualized).

 

The Series returned a loss of (3.28%) in August. Increased optimism surrounding Euro zone issues, the prospect of further quantitative easing by global central banks and strong US economic data helped boost risk appetite during the month. As a result, losses arose from the Series’ long exposure to fixed income and the remaining short positions within the stock indices sector. The Euro also had a strong month, advancing against both the US Dollar and the Japanese Yen, causing further losses for the Series. The weakening Australian Dollar and strengthening Swiss Franc also led to negative performance from the Series’ positioning in these currencies relative to the US Dollar. On the commodities side, short positions in the energies sector mostly contributed negatively. Oil prices rose on the back of strong US economic data as well as bullish inventory statistics. However some gains were made from the Series’ short natural gas positions amid forecasts of milder weather in the US. Metals also proved difficult: worst performing were the Series’ short positions in platinum, as prices rose following violent disturbances at South African mines. Finally, in agricultural, the impact of the worst US drought in more than half a century pushed soy prices higher, to the benefit of the Series’ long positions. Short positions in sugar also made gains as prices fell due to declining demand from India and an acceleration of harvesting in Brazil.

 

The Series posted a 3.05% gain for the month ending July 31, 2012, a (0.87%) loss for the year to date as of July 31, 2012 and an overall gain of 28.79% for the Series from the inception of trading on March 16, 2007 to July 31, 2012 (not annualized).

 

The Series returned 3.05% in July. The frailty of the world economic recovery was readily apparent in July. Spain’s worsening credit conditions tested the Eurozone’s ability to contain the situation, while the UK economy contracted for a third consecutive quarter. Chinese economic growth continued to slow and in the US, weaker labor and growth statistics completed the bearish picture. In keeping with this, the Bank of England extended their Quantitative Easing program while central banks in the Eurozone, China, Korea and South Africa cut rates in July. Accordingly, the Series made gains across its long fixed income positions, except in Australia where the Reserve Bank surprised markets and kept rates on hold. The Series’ short Euro position, especially against the Swedish Krona, made the currencies sector the top performer for the month. However, energies were the only negative sector. The Series also made gains from its short positions in base metals, reflecting a weakened demand outlook. Natural gas appreciated in price as a result of hot weather in the US and the Series’ short exposures in the oils complex caused losses as geopolitical tensions and potential supply disruptions resulted in higher oil prices. Finally, the agricultural sector contributed positively, driven by long positions in grains where prices rallied as a result of drought in the US.

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Quarter ended June 30, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended June 30, 2012, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended June 30, 2012 with a year-to-date loss of (3.80%), based on the net asset value for all other purposes (see “Notes to Condensed Financial Statements – (3) Related Party Transactions”).

 

April 1, 2012 to June 30, 2012

 

The Series posted a (5.04%) loss for the month ending June 30, 2012, losses of (4.32%) and (3.80%) for the three and six months ended June 30, 2012 and an overall gain of 24.98% for the Series from the inception of trading on March 16, 2007 through June 30, 2012 (not annualized and based on net asset value per unit for all other purposes).

 

The Series saw a (5.04%) loss in June. The majority of the month’s losses occurred on the last trading day as European leaders agreed to ease repayment rules for Spanish banks and help reduce Italy’s borrowing costs. Broadly, the month was characterised by a return of risk appetite amid expectations that central banks would act to help spur growth. Most stock indices, metals and agriculturals prices rose over the month, while fixed income and the US Dollar declined, resulting in losses for the Series. In currencies, losses came from the Series’ short Euro position against the US Dollar. However gains were made from other Euro based cross pairs as currencies such as the Swedish Krona, Polish Zloty and Hungarian Forint continued to be supported by Eurozone uncertainty. Fixed income sectors contributed negatively with losses dominated by long positions in German government bonds. US Treasuries also declined following the Federal Reserve’s decision to extend ‘Operation Twist’ rather than provide a more aggressive form of easing. The Series’ long position in Short Sterling performed well following the Bank of England’s plans to ease credit conditions. In energies, natural gas prices surged following reports of smaller than expected inventories and above average temperatures in the US. The Series’ losses from natural gas were slightly offset by gains from short positions in crude oil as prices declined following weak US and European employment data. Finally, in agriculturals, losses sustained from the net short position in the sector were lessened by long positions held in the soy complex which gained as news of low soil-moisture levels in the US drove grain prices higher.

 

The Series posted a 0.36% return for the month ending May 31, 2012, a 1.31% gain for the year to date as of May 31, 2012 and an overall gain of 31.61% for the Series from the inception of trading on March 16, 2007 to May 31, 2012 (not annualized).

 

The Series returned 0.36% in May. Risk aversion dominated markets following poor US labor market data at the start of the month, increasing concerns about Greece exiting the Euro and the health of banks in Spain. Against this backdrop, equity and energy markets sold off and the US Dollar strengthened. The Series responded to these sharp reversals and switched to a net short position in stock indices and energies by the middle of the month. In currencies, the short US Dollar exposure was significantly reduced and switched to long towards the end of the month. Notably, reduced expectations of an interest rate hike in Canada and a reduction of growth forecast by the Bank of England placed further downward pressure on their currencies, resulting in losses for the Series. However, the Series’ short positioning in the Euro helped offset this somewhat. Safe haven appeal pushed fixed income yields to new lows. In addition, central bank action also drove the Series’ positive performance in fixed income. The Reserve Bank of Australia signaled the possibility of further rate cuts, thus driving the prices of Australian fixed income higher and benefiting the Series’ long positioning. In energies, oil prices were further pushed downwards by increasing inventories in the US and a potential increase in supply by Saudi Arabia. Natural gas experienced a strong rally following short covering to the detriment of the Series’ short positioning. Lastly, metals contributed positively to performance, with gains being derived from short positions across both industrial and precious metals as prices declined with the general selloff in risky assets.

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The Series posted a 0.40% return for the month ending April 30, 2012, a 0.95% gain for the year to date as of April 30, 2012 and an overall gain of 31.14% for the Series from the inception of trading on March 16, 2007 to April 30, 2012 (not annualized).

 

The Series returned 0.40% in April. Economic and political uncertainty in Europe, concerns about slowing growth in China and some disappointing US data releases combined to create risk aversion in markets. Fixed income advanced, leading to gains from the Series’ long bond and interest rate positions, while losses came from the Series’ mainly long positions in stock indices. Nevertheless, one of the top performers was the Series’ short position in the IBEX, which fell to a three-year low amid concerns about the Spanish economy. The Japanese markets were also of particular note. Japanese stock indices fell sharply, and in an effort to boost the country’s economy the Bank of Japan expanded its asset purchase program. Meanwhile the Series’ long position in USD/JPY made losses as the US Dollar fell following a weaker-than-expected US GDP growth figure towards the end of the month. Oil markets fell as the International Energy Agency gave signs that the oil supply and demand imbalance has started to ease, while talks between Iran and the West progressed, resulting in losses from the energies sector. However, agricultural sector was positive, with gains coming in particular from long positions in the soy complex as news of strong demand, combined with poor weather in South America, pushed prices higher.

 

Quarter ended March 31, 2012

 

This performance description is a brief summary of how the Series performed during the quarter ended March 31, 2012, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended March 31, 2012 with a year-to-date gain of 0.55%, based on the net asset value for all other purposes (see “Notes to Condensed Financial Statements – (3) Related Party Transactions”).

 

January 1, 2012 to March 31, 2012

 

The Series posted a (1.95%) loss for the month ending March 31, 2012, a gain of 0.55% for the three months ended March 31, 2012 and an overall gain of 30.62% for the Series from the inception of trading on March 16, 2007 through March 31, 2012 (not annualized and based on net asset value per unit for all other purposes).

 

The Series returned (1.95%) in March. As US labor data continued to surprise on the upside the US dollar strengthened, in particular against commodity currencies, leading to losses for the Series. Mid-month, the Fed upwardly revised the economic outlook for the US leading to a global sell-off in bonds which amounted to losses from the Series’ fixed income exposures. However, against this optimistic economic background, the Series made gains from its long stock index exposures. In Australia, as interest rates were left unchanged with rhetoric suggesting potential monetary easing in the near future, the Australian Dollar fell making it the Series’ worst performer. In commodities, the Series’ short position in natural gas made gains as continued warm weather and reports of high supplies pushed prices lower. This made energies the top sector for the month despite WTI crude falling following weak Chinese data and expectations of a coordinated release of strategic reserves. In agriculturals, the Series’ short position in coffee made gains as prices fell on signs that output from Brazil and Vietnam will increase.

 

The Series posted a 1.60% return for the month ending February 29, 2012, a 2.55% gain for the year to date as of February 29, 2012 and an overall gain of 33.22% for the Series from the inception of trading on March 16, 2007 to February 29, 2012 (not annualized).

 

The Series returned positive 1.60% gain in February. The energies sector was the outstanding performer this month as increased global demand and Iranian-induced supply-stresses meant the oil complex rallied strongly. In financial markets, better than expected US labour data, lessening fears of European systemic risk and further liquidity provision by central banks created a bullish sentiment amongst market participants. In Europe, the Bank of England provided yet more quantitative easing with rhetoric suggesting the potential for further rounds. Meanwhile, the European Central Bank’s long-term refinancing operation was much anticipated and over-subscribed when it finally occurred. As a result, world equity markets rallied to the Series’ benefit. However, bonds traded lower incurring

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losses from the Series’ reducing long exposures. The Reserve Bank of Australia surprised markets by not cutting rates, leading to the Series making losses from its Australian bond exposures. However, gains were made from the Series’ short exposure to the Australian Bank Bills. Elsewhere in Asia, the Bank of Japan also began a liquidity operation, focusing on purchasing longer maturity Japanese government bonds in an effort to bring about some much needed inflation. This led the Yen to weaken sharply against its longer term trend making it the Series’ worst performer. However, higher yielding currencies contributed to making the currencies sector a positive performer overall despite reversals in the Yen and Euro.

 

The Series posted a 0.93% gain for the month of January 2012 and an overall gain of 31.13% for the Series from the inception of trading on March 16, 2007 to January 31, 2012 (not annualized).

 

The Series returned a positive 0.93% in January. Attempts to resolve the Eurozone sovereign debt situation drove market sentiment for most of the month. Uncertainty stemming from the struggle by European leaders to reach agreement was punctuated by successful debt auctions, better than expected earnings from US banks and encouraging global economic data. Towards the end of the month the Federal Reserve forecast that US interest rates would remain low until the end of 2014, boosting US Treasuries, stock indices and gold. The US Dollar fell in response, to the benefit of the Series’ positions. Gains were also made on long fixed income positions. In particular, Euribor futures rose amid the prospect of further liquidity injections by the ECB. The rise in global stock markets resulted in losses from short positions, especially in Asian indices. Notably, Chinese indices were also driven upwards by speculation of further monetary easing by The People’s Bank of China. In commodities, losses were made from short positions in agriculturals and metals. Cocoa and wheat prices rose amid forecasts of unfavorable weather, while zinc and aluminium prices rallied following encouraging Chinese trade data and the prospect of output reductions. Natural gas meanwhile continued to trend lower, making the Series’ short position the top performer. Additional gains in energies came from the Series’ long position in Reformulated Gasoline, the price of which rallied on reports of US refinery shutdowns.

 

Quarter ended December 31, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended December 31, 2011, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended December 31, 2011 with a year-to-date gain of 2.19%, based on the net asset value for all other purposes.

 

October 1, 2011 to December 30, 2011

 

The Series posted a 2.02% gain for the month ended December 31, 2011, a gain/(loss) of (1.53%) and 2.19% for the three and twelve months ended December 31, 2011 and an overall gain of 29.91% for the Series from the inception of trading on March 16, 2007 through December 31, 2011 (not annualized and based on net asset value per unit for all other purposes).

 

The Series returned 2.02% in December. The Eurozone crisis dominated newsflow throughout the month and spurred a broad flight to safety, resulting in notable gains from the Series’ long bond positions. In addition the Series benefited from the Euro falling against both the US Dollar and the Swedish Krona. The ECB followed up a rate cut early in the month by allocating a record amount in a single liquidity operation. Euribor prices rallied ahead of the fresh liquidity and this helped offset losses from Australian interest rate positions. Having cut rates twice in the quarter, the Reserve Bank of Australia commented on the strong domestic growth, decreasing expectations of further interest rate cuts. Precious metals meanwhile lost some of their lustre as safe-haven assets and sold off sharply, making the Series’ long positions in gold and silver the worst performers for the month. In agriculturals, losses came from short positions in wheat and the soy complex amid expectations of dry weather, however cocoa contracts continued to generate positive performance as prices fell further in December. Lastly, the Series’ short position in natural gas was the best performer for the month as mild weather and high supplies pushed prices lower.

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The Series posted a 1.37% gain for the month ended November 30, 2011, a 0.16% gain for the year to date as of November 30, 2011 and an overall gain of 27.34% for the Series from the inception of trading on March 16, 2007 to November 30, 2011 (not annualized).

 

The Series returned 1.37% in November. Heightened Eurozone concerns, prompted by the announcement of a possible Greek referendum on the proposed EU bail-out package, resulted in broad risk aversion early in the month. Stock markets traded lower resulting in gains from the Series’ short positions in Asian and European indices, but the Series saw small losses from long positions in US indices. Positive performance came from the Series’ long positions in bonds, in particular from Australian bonds, which were boosted by the Reserve Bank of Australia’s decision to cut interest rates. The US Dollar performed strongly over the month, in particular against the Australian Dollar resulting in losses from the Series’ initially long AUD/USD position. Towards the end of the month the Series’ long position in Japanese government bonds made losses as yields rose due to concern about Japan’s finances and the possibility of a credit rating downgrade. Some encouraging housing and inflation data from the UK pushed Short Sterling lower, making it the Series’ worst performer for the month. However, short positions in cocoa, wheat and the soy complex made gains as agricultural commodity prices fell, and mild weather in the US and reports of increased supplies of natural gas made the Series’ short position here the best performing contract overall.

 

The Series posted a (4.79%) loss for the month ended October 31, 2011, a (1.19%) loss for the year to date as of October 31, 2011 and an overall gain of 25.61% for the Series from the inception of trading on March 16, 2007 to October 31, 2011 (not annualized).

 

The European debt crisis drove market sentiment throughout October and the Series had a difficult month with (4.79%) loss. Early on, strong US economic data and the announcement of further quantitative easing by the Bank of England boosted risk appetite. This was compounded as Eurozone governments reached an agreement to help resolve the sovereign debt crisis and its impact on European banks. Elsewhere, encouraging data from Asia boosted Chinese and Hong Kong stock markets. These drivers saw equity markets rally while fixed income markets sold off, rewarding the Series’ long US stock indices exposure but resulting in losses from the Series’ long fixed income and net short stock indices exposure. Improving sentiment also caused the US Dollar to sell off and the Series reduced its net long exposure, ending the month with a net short position. The Euro in particular responded strongly to the European rescue plans, causing losses for the Series. Meanwhile commodity markets recovered somewhat from last month’s falls. Notably, WTI crude oil was driven higher by supply concerns, making this short position the Series’ worst performing instrument.

 

Quarter ended September 30, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended September 30, 2011, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended September 30, 2011 with a year-to-date gain of 3.77%, based on the net asset value for all other purposes.

 

July 1, 2011 to September 30, 2011

 

The Series posted a (0.09%) loss for the month ended September 30, 2011, a gain of 8.35% and 3.77% for the three and nine months ended September 30, 2011 and an overall gain of 31.93% for the Series from the inception of trading on March 16, 2007 through September 30, 2011 (not annualized and based on net asset value per unit for all other purposes).

 

The Series posted a (0.09%) loss in September. Gains were made from the Series’ long positions in fixed income and from its net short exposure to energies and stock indices. The price action in these broad asset classes reflected ongoing widespread concern over both weakening global growth and the European sovereign debt crisis. Following a downbeat assessment of the risks to the US economy, the Federal Reserve launched ‘Operation Twist’. Subsequently, equity and commodity markets sold off while fixed income prices rallied. By contrast, the Series suffered losses in the currencies sector, driven by a strengthening US Dollar. However the positioning responded

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and switched to a net long towards the end of the month. In commodities, both oils and natural gas prices fell, making the energies sector a positive contributor. However, gold and silver prices reversed sharply to the detriment of the Series’ positions, making them the worst contributors for the month. Finally, the poor return from the agricultural sector was driven by falls in coffee and grains prices following particularly strong harvest yields.

 

The Series posted a 1.43% gain for the month ended August 31, 2011, a 3.86% gain for the year to date as of August 31, 2011 and an overall gain of 32.04% for the Series from the inception of trading on March 16, 2007 to August 31, 2011 (not annualized).

 

The Series returned 1.43% in August. Bearish sentiment gripped markets for most of the month driven by a succession of bad news reports. Following S&P’s downgrade of the United States’ sovereign credit rating from AAA to AA+, data pointed to poor growth, employment and confidence in the US and markets remained concerned about the European sovereign crisis. Despite the downgrade, investors sought the safety of US Treasuries, which rallied, benefiting the Series’ long positions in fixed income. Following central bank interventions in the Yen and Swiss Franc, safe haven demand saw the US Dollar strengthen and commodity currencies sell off against the Series’ positions. Gold reached new records, making it the Series’ second best performer. Lastly, stock indices, oils and industrial metals sold off for most of the month. Following the downgrade, the Fed announced that it would keep interest rates at their current low levels for another two years. However, Bernanke’s Jackson Hole speech late in the month did boost stock markets and commodities as he reiterated the Fed’s focus on maintaining the economy on a growth trajectory. This resulted in some performance give-back on the Series’ growing short stock index positions.

 

The Series posted a 6.92% gain for the month ended July 31, 2011, a 2.40% gain for the year to date as of July 31, 2011 and an overall gain of 30.19% for the Series from the inception of trading on March 16, 2007 to July 31, 2011 (not annualized).

 

The Series returned 6.92% in July. Investor sentiment in the month was dominated by sovereign debt concerns, both in the Eurozone and the US. A poor US non-farm payrolls number at the beginning of July and a surprisingly weak US GDP report at the end of the month added to the deteriorating outlook. Even as the market weighed up the possibility of a US debt downgrade, fixed income markets rose around the globe in a flight to safety. The Series made strong gains from its long positions in both short term interest rates and bonds, with UK fixed income and German 10-year government bonds being the strongest markets overall. Returns from commodities were also positive with profits from long positions in oils and metals offsetting small losses in the agriculturals markets. Notably, the Series profited from its long position in gold, which reached an all-time high at the end of the month. Lastly, gains were made in the currencies sector. The Series benefited from its net short exposure to the US Dollar despite losses from a long Euro position as the Japanese Yen and New Zealand Dollar strengthened against the US Dollar and the Swiss Franc rose to record levels.

 

Quarter ended June 30, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended June 30, 2011, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended June 30, 2011 with a year-to-date loss of (4.23%), based on the net asset value for all other purposes.

 

April 1, 2011 to June 30, 2011

 

The Series posted a (3.12%) loss for the month ended June 30, 2011, a loss of (3.78%) and (4.23%) for the three and six months ended June 30, 2011 and an overall gain of 21.76% for the Series from the inception of trading on March 16, 2007 through June 30, 2011 (not annualized and based on net asset value per unit for all other purposes).

 

The Series lost 3.12% in June. Greek sovereign debt concerns combined with the US Federal Reserve’s downward revision of growth forecasts led to broad risk aversion towards the middle of the month. Disappointing European and Chinese data further added to bearish market sentiment. Against this backdrop the Series made losses as stock

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markets and commodities declined and the US Dollar strengthened. The losses were partly offset by gains from the Series’ long positions in fixed income markets, particularly German, US and Japanese government bonds, as prices rallied. In the UK, the most recent minutes of the Monetary Policy Committee reinforced the Bank of England’s commitment to a low interest rate environment. Consequently, Sterling fell against the US Dollar while Short Sterling rallied. The International Energy Agency’s decision to release strategic oil reserves added to the downward pressure on oil prices. In agricultural, the worst performer was corn as prices fell following reports of an unexpectedly large planting season in the US. Towards the end of the month, the Series gave back some of its gains from its long fixed income positions as optimism returned to the markets following the avoidance of default by Greece and the release of strong economic data from the US and Asia.

 

The Series posted a (4.52%) loss for the month ended May 31, 2011, a (1.14%) loss for the year to date as of May 31, 2011 and an overall gain of 25.68% for the Series from the inception of trading on March 16, 2007 to May 31, 2011 (not annualized).

 

The Series lost 4.52% in May. Key themes for the month were sell-offs in the commodity markets and continued concerns surrounding Eurozone sovereign debt and global growth. The Series made losses from its long positions in risk-seeking assets with gains coming from the fixed income sectors. Oil prices fell from their recent highs following the release of bearish inventory statistics at the start of the month and moves by investors to take profits in the commodity sector. Agricultural and metals markets also retraced from their previous highs. Global equities meanwhile declined amid poor global growth data, to the detriment of the Series’ long positions. Risk aversion boosted demand for the US Dollar, to the detriment of the Series’ net short exposure. The Euro fell due to the Eurozone worries, resulting in losses from the Series’ long EUR/USD position. In fixed income, global bond and interest rate futures rose due to safe-haven appeal, to the benefit of the Series’ growing long bond positions. Positive performance from the interest rates sector was driven by profits from the Series’ long Eurodollar position.

 

The Series posted a 4.02% return for the month ended April 30, 2011, a 3.54% gain for the year to date as of April 30, 2011 and an overall gain of 31.63% for the Series from the inception of trading on March 16, 2007 to April 30, 2011 (not annualized).

 

The Series returned 4.02% in April, driven by a combination of US Dollar weakness and robust performance from energies and precious metals. The US Dollar fell against major currencies, benefiting the Series’ net short positioning, amid continued expectations that the US Federal Reserve will keep interest rates low. Long positions in oil and its products made gains at the start of the month as military action in Libya and the civil unrest in the wider region continued. Events on both sides of the Atlantic prompted investors to switch to safe haven assets. Standard & Poor’s cut its outlook on US sovereign debt from stable to negative, driving investors to precious metals, which rallied as a result. Concerns about peripheral European debt boosted the prices of core European fixed income, resulting in losses from the Series’ short positions in Euro Bund and Euribor. Towards the end of the month a series of positive US earnings announcements and successful European government bond auctions helped increase risk appetite. As a result the Series made strong gains from risky assets despite a temporary mid-month energy price correction. Performance from agricultural was mixed. Cotton futures fell amid uncertainty over demand, while the Series made gains from its long position in coffee as the cost of Arabica rose to a 34-year high following increased demand from developing countries.

 

Quarter ended March 31, 2011

 

This performance description is a brief summary of how the Series performed during the quarter ended March 31, 2011, and not necessarily an indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply may have occurred at or about the same time. The Series’ past results are not necessarily indicative of future results.

 

The Series ended March 31, 2011 with a year-to-date loss of (0.46%), based on the net asset value for all other purposes.

 

24

January 1, 2011 to March 31, 2011

 

The Series posted a (1.15%) loss for the month ending March 31, 2011, a loss of (0.46%) for the three months ended March 31, 2011 and an overall gain of 26.54% for the Series from the inception of trading on March 16, 2007 through March 31, 2011 (not annualized and based on net asset value per unit for all other purposes).

 

The Series returned (1.15%) in March. The month began positively with long positions in oil and the products making gains as the Libyan turmoil continued. However, sentiment turned bearish following European sovereign downgrades and weak Chinese trade and inflation data. On March 11, 2011, the worst earthquake and tsunami in Japanese history devastated the country. Japanese equities sold off sharply, resulting in the Series’ long positions in the Nikkei and Topix being the month’s worst performers. The sell-off in equities spread across the globe on worries about the implications for global growth. In response to these events, positions in the portfolio were systematically reduced. Agricultural markets also sold off to the detriment of the Series’ long positions. Signs that the political turmoil in Ivory Coast may be easing caused the cocoa price to tumble from near 33-year highs. Strong US economic data released later in the month enabled the Series to recoup some of its earlier losses from stock indices and commodities. Expectations of an interest rate increase by the European Central Bank resulted in the Euro strengthening against the USD, to the benefit of the Series. These expectations also resulted in gains from the Series’ short position in Euribor, which were partly offset by losses from long exposure to Eurodollar after the US Federal Reserve announced that they would begin unwinding some stimulus measures.

 

The Series posted a 2.28% return for the month ending February 28, 2011, a 0.70% gain for the year to date as of February 28, 2011 and an overall gain of 28.02% for the Series from the inception of trading on March 16, 2007 to February 28, 2011 (not annualized).

 

The Series returned 2.28% in February. Following robust economic and earnings data, global stock markets rose at the start of the month with the S&P 500 pushing above the 1,300 level and doubling the low achieved in March 2009. However, tension in North Africa and the Middle East increased towards the end of the month, causing the oil price to soar. The Series made gains from its long positions in oil and its products, making energies the top sector for the month. In response to the geopolitical concerns, stock markets sold off and the Series gave back some of its earlier profits from stock indices. Metals prices generally increased during the month. Some industrial metals rose due to supply concerns and rising global demand, while precious metals rose as safe-haven appeal returned to the market, with silver hitting a 30-year high. Gains were partly offset by losses from the fixed income sectors. Bonds rallied amid the flight to safety, to the detriment of the Series’ short positions in the sector. Commodity-linked currencies found support as the political turmoil boosted raw materials prices. Profits were also seen from the Series’ net short exposure to the USD as it lost ground against several currencies including Sterling, which was supported by speculation that the Bank of England may raise interest rates earlier than the US Federal Reserve.

 

The Series posted a (1.55%) loss for the month of January 2011 and an overall gain of 25.16% for the Series from the inception of trading on March 16, 2007 to January 31, 2011 (not annualized).

 

The Series returned (1.55%) in January. There were two main themes that drove markets during the month: civil unrest in North Africa and increased concerns about inflation. The People’s Bank of China raised its reserve ratio requirement for the fourth time in two months in an effort to prevent its economy from overheating. Meanwhile, in Europe, ECB President Jean-Claude Trichet signaled a potential for interest rate increases in the Eurozone after inflation data exceeded forecasts. The Series incurred losses from its long Euribor and Schatz holdings but benefited from a weaker Euro. In addition, the bonds sector saw losses from the short positions in Australian instruments as the severe flooding saw prices rally on safe haven demand. In commodities, the main losses came from silver and gold which were both affected by profit-taking after silver hit multi-decade highs and gold reached all-time highs, reinforced by some stronger economic news during the month. By contrast, the energies sector was the month’s best performer. Concerns about the Egyptian crisis drove Brent crude, gas oil and heating oil higher, to the benefit of the Series’ long positions across the oils complex. In agricultural, the Series’ long positions continued to generate positive performance as prices in grains and softs moved upwards, further fuelling the inflation debate.

25

Variables Affecting Performance

 

The principal variables that determine the net performance of the Series are gross profitability from the Master Fund’s trading activity and interest income.

 

The Series’ assets invested in the Master Fund are maintained at the Clearing Broker. On assets held in U.S. dollars, the Clearing Broker credits the Master Fund with interest at the prevailing Federal Funds Rate. In the case of non-U.S. dollar instruments, the Clearing Broker lends to the Master Fund all required non-U.S. currencies at a local short-term interest rate plus a spread of up to 100 basis points per annum (at current rates). For deposits held in non-U.S. currencies, the Clearing Broker credits the local short-term interest rate less a spread of up to 200 basis points per annum (at current rates).

 

The Series’ management, Sponsor and operating expenses and the sales commissions are a constant percentage of the Series’ net asset value for all other purposes. Trading costs allocated from the Master Fund (based on the Series pro rata investment in the Master Fund), which are not based on a percentage of the Series’ net assets, are based on the volume of trades executed and cleared on behalf of the Master Fund. Trading costs are based on the actual number of contracts traded. The performance fees payable to the Trading Advisor are based on the new net trading profits, if any, generated from the Series’ investment in the Master Fund, excluding interest income and after reduction for trading costs and certain other fees and expenses.

 

For the Master Fund, there is generally no meaningful distinction between realized and unrealized profits. Most of the instruments traded by the Master Fund are highly liquid and can be closed out immediately.

 

Off-balance Sheet Arrangements

 

The Series has no applicable off-balance sheet arrangements of the type described in Items 3.03(a)(4) of Regulation S-K.

 

Contractual Obligations

 

The Series does not enter into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. Via its investment in the Master Fund, the Series’ sole business is trading futures and forward currency contracts, both long (contracts to buy) and short (contracts to sell). All such contracts are settled by the Master Fund by offset, not delivery. The Master Fund’s Financial Statements filed as Exhibit 13.02 herewith present a Condensed Schedule of Investments setting forth net unrealized appreciation (depreciation) of the Series’ open future and forward currency contracts, both long and short, at December 31, 2012 and 2011.

 

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable; the Series is a smaller reporting company

26

Item 8: Financial Statements and Supplementary Data

 

Supplementary Data

 

Net Income by Quarter (unaudited)

Four Quarters through December 31, 2012

 

    First     Second     Third     Fourth        
    Quarter     Quarter     Quarter     Quarter        
    2012     2012     2012     2012     Total  
Total Income (Loss)   $ 1,722,911     $ (2,777,928 )   $ (2,433,858 )   $ (3,509,051 )   $ (6,997,926 )
Total Expenses     (1,286,864 )     (1,162,198 )     (1,151,467 )     (1,050,816 )     (4,651,345 )
Net Income (Loss)   $ 436,047     $ (3,940,126 )   $ (3,585,325 )   $ (4,559,867 )   $ (11,649,271 )
Net Income (Loss) per Unit1   $ 6.87     $ (58.20 )   $ (51.34 )   $ (66.33 )   $ (173.90 )

 

1 Based on average number of Units for the year.

 

Net Income by Quarter (unaudited)

Four Quarters through December 31, 2011

 

    First
Quarter
2011
    Second
Quarter
2011
    Third
Quarter
2011
    Fourth
Quarter
2011
    Total  
Total Income (Loss)   $ 687,622     $ (1,845,662 )   $ 8,045,785     $ (36,011 )   $ 6,851,734  
Total Expenses     (978,294 )     (966,597 )     (2,068,669 )     (1,024,702 )     (5,038,262 )
Net Income (Loss)   $ (290,672 )   $ (2,812,259 )   $ 5,977,116     $ (1,060,713 )   $ 1,813,472  
Net Income (Loss) per Unit1   $ (5.50 )   $ (49.65 )   $ 105.17     $ (18.03 )   $ 32.26  

 

1 Based on average number of Units for the year.

 

As the Platform is classified as a Smaller Reporting Company, as defined by Rule 229.10(f)(1) of Regulation S-K, the supplementary financial information required by Item 302 of Regulation S-K is not applicable.

27

ALPHAMETRIX MANAGED FUTURES LLC

(A Limited Liability Company)

 

Financial Statements as of December 31, 2012 and 2011

and for Each of the Two Years Ended December 31, 2012 and 2011,

and Report of Independent Registered Public Accounting Firm

28

AFFIRMATION OF ALPHAMETRIX, LLC.

 

In compliance with the Commodity Futures Trading Commission’s regulations, I hereby affirm that to the best of my knowledge and belief, the information contained in the statements of financial condition of AlphaMetrix Managed Futures LLC as of December 31, 2012 and 2011, and the related statements of operations and changes in members’ capital for each of the two years ended December 31, 2012, are accurate and complete.

 

/s/ Aleks Kins  
Aleks Kins  
President and Chief Executive Officer  
AlphaMetrix, LLC.  
Manager of AlphaMetrix Managed Futures LLC  
29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Members of AlphaMetrix Managed Futures LLC:

 

We have audited the accompanying statements of financial condition of AlphaMetrix Managed Futures LLC, comprising of AlphaMetrix Managed Futures LLC (Aspect Series), (a series of a Delaware Series Limited Liability Company) (collectively the “Platform”), as of December 31, 2012 and 2011, and the related statements of operations and changes in members’ capital for the years then ended. These financial statements are the responsibility of the Platform’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Platform is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Platform’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of the Platform at December 31, 2012 and 2011, and the results of its operations and the changes in its members’ capital for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ DELOITTE & TOUCHE LLP  
   
Chicago, Illinois  
April 11, 2013  
30

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Financial Condition

 

   AlphaMetrix Managed
Futures LLC (Aspect Series)
December 31, 2012
   AlphaMetrix Managed
Futures LLC
December 31, 2012
   AlphaMetrix Managed
Futures LLC (Aspect Series)
December 31, 2011
   AlphaMetrix Managed
Futures LLC
December 31, 2011
 
ASSETS                    
Investment in AlphaMetrix Aspect Fund - MT0001, at fair value  $63,194,749   $63,194,749   $69,103,283   $69,103,283 
Cash at bank   16,104,735    16,104,735    14,093,440    14,093,440 
                     
Total Assets  $79,299,484   $79,299,484   $83,196,723   $83,196,723 
                     
LIABILITIES                    
                     
REDEMPTIONS PAYABLE  $3,376,506   $3,376,506   $151,345   $151,345 
                     
SUBSCRIPTIONS RECEIVED IN ADVANCE   259,715    259,715    2,558,453    2,558,453 
                     
PAYABLES:                    
Accrued sales commission   131,554    131,554    134,044    134,044 
Accrued sponsor’s fee   10,120    10,120    11,402    11,402 
Accrued operating costs   130,334    130,334    247,811    247,811 
                     
Total Liabilities   3,908,229    3,908,229    3,103,055    3,103,055 
                     
MEMBERS’ CAPITAL                    
Members (66,458.60 and 61,654.52 units outstanding at December 31, 2012 and December 31, 2011, respectively, unlimited units authorized)   75,382,045    75,382,045    80,083,121    80,083,121 
Sponsor (8.12 units outstanding at December 31, 2012 and December 31, 2011, respectively, unlimited units authorized)   9,210    9,210    10,547    10,547 
Total Members’ Capital   75,391,255    75,391,255    80,093,668    80,093,668 
                     
Total Liabilities and Members’ Capital  $79,299,484   $79,299,484   $83,196,723   $83,196,723 

 

See notes to financial statements.

31

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Operations

For the years ended December 31, 2012 and 2011

 

   AlphaMetrix Managed
Futures LLC (Aspect Series)
2012
   AlphaMetrix Managed
Futures LLC
2012
   AlphaMetrix Managed
Futures LLC (Aspect Series)
2011
   AlphaMetrix Managed
Futures LLC
2011
 
NET INVESTMENT INCOME/(LOSS) ALLOCATED FROM ALPHAMETRIX ASPECT FUND - MT0001:                    
Interest income  $16,727   $16,727   $26,040   $26,040 
Trading costs   (153,172)   (153,172)   (102,436)   (102,436)
Interest expense   (47,800)   (47,800)   (45,617)   (45,617)
Bank fees           (103)   (103)
                     
Net investment income/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (184,245)   (184,245)   (122,116)   (122,116)
                     
SERIES NET INVESTMENT INCOME/(LOSS):                    
Operating expenses   (446,353)   (446,353)   (424,135)   (424,135)
Management fee   (1,704,284)   (1,704,284)   (1,475,678)   (1,475,678)
Performance fee   (173,293)   (173,293)   (1,151,168)   (1,151,168)
Sales commissions   (1,701,154)   (1,701,154)   (1,471,300)   (1,471,300)
Sponsor fee   (425,289)   (425,289)   (367,825)   (367,825)
                     
Series net investment income/(loss)   (4,450,373)   (4,450,373)   (4,890,106)   (4,890,106)
                     
Total net investment income/(loss)   (4,634,618)   (4,634,618)   (5,012,222)   (5,012,222)
                     
REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM ALPHAMETRIX ASPECT FUND - MT0001                    
Net realized gain/(loss)   (6,377,197)   (6,377,197)   8,257,867    8,257,867 
Net increase/(decrease) in unrealized appreciation/(depreciation)   (637,456)   (637,456)   (1,432,173)   (1,432,173)
                     
Total realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (7,014,653)   (7,014,653)   6,825,694    6,825,694 
                     
Net increase/(decrease) in net assets resulting from operations  $(11,649,271)  $(11,649,271)  $1,813,472   $1,813,472 
                     
Weighted average number of units outstanding   66,989    66,989    56,210    56,210 
                     
Net income/(loss) per weighted average unit  $(173.90)  $(173.90)  $32.26   $32.26 

 

See notes to financial statements.

32

ALPHAMETRIX MANAGED FUTURES LLC

Statements of Changes in Members’ Capital

For the years ended December 31, 2012 and 2011

 

For the year ended December 31, 2012  AlphaMetrix Managed Futures LLC (Aspect Series)   AlphaMetrix Managed 
   Members   Sponsor   Total   Futures LLC Total 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2012  $80,083,121    61,654.52   $10,547    8.12   $80,093,668    61,662.64   $80,093,668    61,662.64 
Members’ subscriptions   17,342,258    13,421.99            17,342,258    13,421.99    17,342,258    13,421.99 
Members’ redemptions   (10,395,400)   (8,617.91)           (10,395,400)   (8,617.91)   (10,395,400)   (8,617.91)
Net investment income/(loss)   (4,634,062)       (556)       (4,634,618)       (4,634,618)    
Net realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (7,013,872)       (781)       (7,014,653)       (7,014,653)    
Members’ capital at December 31, 2012  $75,382,045    66,458.60   $9,210    8.12   $75,391,255    66,466.72   $75,391,255    66,466.72 
                                         
Net asset value per unit at January 1, 2012  $1,298.901        $1,298.901                          
Change in net asset value per unit   (164.630)        (164.630)                         
Net asset value per unit at December 31, 2012  $1,134.271        $1,134.271                          

 

For the year ended December 31, 2011  AlphaMetrix Managed Futures LLC (Aspect Series)   AlphaMetrix Managed 
   Members   Sponsor   Total   Futures LLC Total 
   Amount   Units   Amount   Units   Amount   Units   Amount   Units 
Members’ capital at January 1, 2011  $63,839,812    50,277.92   $10,310    8.12   $63,850,122    50,286.04   $63,850,122    50,286.04 
Members’ subscriptions   24,390,322    19,173.21            24,390,322    19,173.21    24,390,322    19,173.21 
Members’ redemptions   (9,960,248)   (7,796.61)           (9,960,248)   (7,796.61)   (9,960,248)   (7,796.61)
Net investment income/(loss)   (5,011,512)       (710)       (5,012,222)       (5,012,222)    
Net realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   6,824,747        947        6,825,694        6,825,694     
Members’ capital at December 31, 2011  $80,083,121    61,654.52   $10,547    8.12   $80,093,668    61,662.64   $80,093,668    61,662.64 
                                         
Net asset value per unit at January 1, 2011  $1,269.739       $1,269.739                          
Change in net asset value per unit   29.162        29.162                          
Net asset value per unit at December 31, 2011  $1,298.901       $1,298.901                          

 

See notes to financial statements.

33

ALPHAMETRIX MANAGED FUTURES LLC

 

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

 

(1) Organization

 

As of November 1, 2008, AlphaMetrix, LLC (the “Sponsor”) is the sponsor of AlphaMetrix Managed Futures LLC (the “Platform”). The Sponsor is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and commodity trading advisor, with the Securities and Exchange Commission (“SEC”) as a Registered Investment Advisor (“RIA”) and Registered Transfer Agent (“RTA”), and is a member of the National Futures Association (“NFA”). The Platform was formed on July 25, 2006 as a Delaware series limited liability company pursuant to the Delaware Limited Liability Company Act. AlphaMetrix Managed Futures LLC (Aspect Series) (the “Aspect Series” or “Series”) is the only “segregated series” of the Platform. Since the Aspect Series is the Platform’s only segregated series, references to Aspect Series also include the Platform unless otherwise noted. On November 1, 2008, the Sponsor was assigned sponsorship in the Platform and managerial interest in the Aspect Series from the former sponsor of the Platform, UBS Managed Fund Services, Inc. (“UBS MFS” or the “former sponsor”) and the name of the Platform and Aspect Series were changed from UBS Managed Futures LLC and UBS Managed Futures LLC (Aspect Series) to AlphaMetrix Managed Futures LLC and AlphaMetrix Managed Futures LLC (Aspect Series), respectively. The Platform and Aspect Series are governed in accordance with the Confidential Offering Memorandum dated October 31, 2011 (the “Confidential Disclosure Memorandum”). All capitalized terms used herein are defined in the Confidential Offering Memorandum.

 

The Aspect Series invested substantially all of its assets in AlphaMetrix Managed Futures (Aspect) LLC, previously UBS Managed Futures (Aspect) LLC (the “Trading Fund”). The Trading Fund then invested a substantial portion of its assets in AlphaMetrix Aspect Fund – MT0001 (the “Master Fund”) which is advised by Aspect Capital Limited (the “Trading Advisor”). On August 30, 2009, the Trading Fund ceased operations and as of September 1, 2009, the Aspect Series invested directly into the Master Fund. As of December 1, 2009, another fund operated by the Sponsor invested in the Master Fund. Prior to December 31, 2010 the Aspect Series and the Master Fund were consolidated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). Subsequent to December 31, 2010, the Aspect Series and Master Fund are no longer consolidated.

 

The Master Fund engages in the speculative trading of U.S. and foreign futures and forward currency contracts (collectively, “derivatives”) whose values are based upon an underlying asset, indices, or reference rates, and generally represent future commitments to exchange cash flows, or to purchase or sell other financial instruments at specified future dates. Until October 1, 2009, UBS Securities LLC was the Series’ futures clearing broker (the “Clearing Broker”) and until October 13, 2009, UBS AG was the foreign exchange clearing broker of the Master Fund. On and after October 1, 2009 for general futures clearing brokerage, excluding foreign currency, and on and after October 13, 2009 including foreign currency, Credit Suisse Securities (USA) LLC acts as the Master Fund’s clearing broker (reference to the “Clearing Broker” shall be UBS Securities LLC if involving matters prior to October 1, 2009 and to Credit Suisse Securities (USA) LLC for matters on or after October 1, 2009). The Sponsor, over time, intends to offer investors a selection of different trading advisors, each managing a different segregated series of the Platform. There can be no assurance, however, that any series other than the Series will be offered or that the Series will continue to be offered. The Series was organized on October 26, 2006 and commenced trading on March 16, 2007. The Series filed a Form 10, under the Securities Exchange Act of 1934, as amended, with the SEC to register the units of limited liability company interest (“Units”), which registration became effective October 17, 2006.

 

On March 16, 2007, the Series issued 5,000.00 Units to the Trading Advisor for $5,000,000 (the “Trading Advisor Investment”) and issued 2,760.62 Units for $2,760,620 to third parties. On April 1, 2007, the Series issued 9.94 Units to the former sponsor, UBS MFS, for $10,000. On December 31, 2007, the Trading Advisor redeemed the full value of the Trading Advisor Investment. On October 31, 2008, UBS MFS redeemed the full value of their Units in conjunction with the assignment of the Sponsor and on November 1, 2008, the Series issued 8.12 Units to the Sponsor for $10,000.

34

At the sole discretion of the Sponsor, the Series may terminate for any reason (for the avoidance of doubt, the Sponsor shall be entitled, without any violation of any contractual or fiduciary obligation to any investor in the Series (a “Member”), to dissolve the Series at any time).

 

(2) Summary of Significant Accounting Policies

 

The accounting records for the Platform and Series are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Following is a summary of significant accounting policies consistently followed in the preparation of the financial statements. The Platform includes the accounts of the Aspect Series.

 

Investment

 

The Series invests substantially all of its assets in the Master Fund. The Series’ investment in the Master Fund is carried at fair value and represents the Series’ pro rata interest in the net assets of the Master Fund as of the close of business on the relevant valuation date. At December 31, 2012 and 2011, the Series’ investment in the Master Fund was $63,194,749 and $69,103,283, approximately 85.98% and 87.07% of the Master Fund’s net assets. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946 Financial Services – Investment Companies, the Series and the Master Fund are not consolidated. The Master Fund’s assets are carried at fair value. At each valuation date, the Master Fund’s income, expenses, net realized gain/(loss) and net increase /(decrease) in unrealized appreciation/(depreciation) are allocated to the Series based on the Series’ pro rata interest in the net assets of the Master Fund, and recorded in the Series’ Statements of Operations. The Master Fund provides the Series with daily estimated net asset valuations. The financial statements of the Master Fund are attached to this report and should be read in conjunction with the Series’ financial statements.

 

Basis of Presentation

 

Pursuant to rules and regulations of the SEC, financial statements are presented for the Platform as a whole and for the Aspect Series. The accompanying financial statements and notes thereto include financial statements and footnote totals for the Platform as a whole. For the avoidance of doubt, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular segregated series shall be enforceable only against the assets of such series and not against the assets of the Platform generally or any other segregated series. Accordingly, the assets of one segregated series of the Platform include only those funds and other assets that are paid to, held by or distributed to the Platform on account of and for the benefit of that segregated series, including, without limitation, funds delivered to the Platform for the purchase of Units in that segregated series. As of December 31, 2012 and 2011, the Aspect Series exists as the only segregated series on the Platform.

 

Use of Estimates

 

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

 

Cash

 

Cash is maintained in the custody of commercial banks and includes cash received related to subscriptions received in advance.

 

Subscriptions received in advance

 

Subscriptions received in advance are subscriptions received for the purchase of units effective subsequent to year end.

35

Redemptions payable

 

Redemptions payable are share redemptions effective December 31, 2012 and 2011 but paid subsequent to year end.

 

Income Taxes

 

The Platform follows the provisions of FASB ASC Topic 740, Income Taxes (“ASC 740”), related to accounting for uncertainty in income taxes. ASC 740 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. ASC 740 requires the evaluation of tax positions taken in the course of preparing the tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. As of December 31, 2012 and 2011, no liability was recognized in connection with ASC 740. The Platform is subject to income tax examinations by tax authorities for all tax years since their respective inception date.

 

As the Series is a partnership for tax purposes, the Series’ Members are individually responsible for reporting income or loss based on such Member’s share of the Series’ income and expenses as reported for income tax purposes.

 

Interest Income/Expense

 

Interest income and expense is recognized on an accrual basis. Interest income or expense may include (1) the allocation from the Master Fund of the Master Fund’s interest income/expense from its broker, or (2) interest income from the Series’ bank account.

 

Allocation of Operating Costs

 

The Series bears its own operating and investment costs and expenses.

 

Fair Value Measurement and Disclosure

 

FASB ASC 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active market. Under ASC 820, fair value measurements are disclosed by level within that hierarchy, as follows:

 

Level 1 — Values for investments classified as Level 1 are based on unadjusted quoted prices for identical investments in an active market. Since valuations are based on quoted prices that are readily accessible at the measurement date, valuation of these investments does not entail a significant degree of judgment.

 

Level 2 — Values for investments classified as Level 2 are based on quoted prices for similar investments in an active or non-active markets for which all significant inputs are observable either directly or indirectly. Level 2 inputs may also include discounts related to restrictions on the investments.

 

Level 3 — Values for investments categorized as Level 3 are based on prices or valuation techniques that require inputs that are both significant to the fair value and unobservable, including valuations by the Sponsor in the absence of readily ascertainable fair values.

 

The Series invests its assets in the Master Fund. The classification of the Master Fund’s investments in accordance with ASC 820 is discussed in the notes to the attached financial statements of the Master Fund.

36

Derivative Instruments

 

FASB ASC 815, Derivatives and Hedging (“ASC 815”) requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The Series invests substantially all of its assets in the Master Fund which engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively “derivatives”). The disclosures required by ASC 815 for the Master Fund are discussed in the notes to the financial statements of the Master Fund. The Series does not directly trade derivatives.

 

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for recognized derivative instruments and financial instruments that are either offset in the Statement of Financial Condition or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Sponsor is currently evaluating the impact of the ASU’s adoption on the Master Fund’s financial statement disclosures.

 

Distributions

 

The Sponsor does not intend to make any distributions. Consequently, in order to pay the taxes attributable to their investment in the Series, Members must either redeem Units or pay such taxes from other sources.

 

Subscriptions

 

Units are purchased generally at the beginning of each calendar month based on the net asset value per Unit for all other purposes (see Note 3) calculated for the prior month-end.

 

Completed Subscription Agreements relative to each Series must be received by the appropriate Selling Agent no later than seven calendar days prior to the first day of any month in which a Member intends to invest. Members are initially issued units at $1,000 per unit as of the date of the commencement of operations and at the current Net Asset Value (“NAV”) for all dates thereafter.

 

Existing Members may make an additional investment by completing, and submitting to the Selling Agents, a short-form Subscription Agreement, as provided by the Sponsor.

 

The Sponsor, in its sole discretion and for any reason, may decline to accept the subscription of any prospective Member.

 

Redemptions

 

Units may be redeemed as of the end of any calendar month (each, a “Redemption Date”) at the Net Asset Value per Unit at such Redemption Date. Redemption requests must be received by the 15th day of the calendar month of such Redemption Date or the following business day if the 15th is not a business day. The Sponsor may permit redemptions at other times and on shorter notice.

 

The Net Asset Value of redeemed Units is determined as of the Redemption Date for purposes of determining the redemption proceeds due to Members. Members will remain subject to fluctuations in such Net Asset Value during the period between submission of their redemption requests and the applicable Redemption Date. The Net Asset Value of Units on the designated Redemption Date may differ materially from the Net Asset Value of such Units as of the date on which an irrevocable redemption request must be submitted.

 

When Units are redeemed (or exchanged), any accrued fees (including performance fees) and expenses reduce the redemption proceeds paid to members.

37

Indemnifications

 

In the normal course of business, the Series enters into contracts and agreements that contain a variety of representations and warranties and which would provide general indemnifications. The maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Series that have not yet occurred. However, the Series expects the risk of any future obligation under these indemnifications to be remote.

 

(3) Related Party Transactions

 

Each Member or Member-related account is subject to an upfront, waivable placement fee of 0%-2% of the subscription price of the Units, which will be paid once by the relevant Member (not by the Platform or by the Aspect Series) on each of such Member’s subscriptions to the Series to UBS Financial Services Inc. (“UBS FS”), an affiliate of the former sponsor (see Note 1). The placement fee payable on such initial subscription is deducted from the subscription amount by UBS FS. Upfront placement fees of $174,311 and $178,638 for the years ended December 31, 2012 and 2011, respectively, were deducted from proceeds received from the Members.

 

Members are subject to an ongoing sales commission paid to UBS FS or Credit Suisse Securities LLC equal to 2% per annum of the month-end net asset value for all other purposes (see below). The Series incurred sales commissions of $1,701,154 and $1,471,300 for the years ended December 31, 2012 and 2011, respectively, and accrued $131,554 and $134,044 to Credit Suisse Securities at December 31, 2012 and 2011, respectively. UBS FS or Credit Suisse Securities LLC, in consultation with the Sponsor, may waive or reduce the sales commission for certain Members without entitling any other Member to such waiver or reduction.

 

Additionally, effective January 1, 2008, 0.50% of the 2.0% management fee is shared by the Trading Advisor with UBS FS (refer to Note (4) for further details on the management fee).

 

Service provider fees are part of operating cost. Unlike other retails, operating cost are a fixed number and not regarded on a basis point.

 

The Sponsor receives a monthly sponsor fee of 0.04167 of 1% (a 0.50% annual rate) of the Series’ month-end net asset value for all other purposes, including interest income after deducting the management fee and accrued performance fee, if any, of a Member’s investment in the Series for such month. The Sponsor reserves the right to waive or reduce the fee at its sole discretion. The Series incurred Sponsor’s fees of $425,289 and $367,825 for the years ended December 31, 2012 and 2011, respectively, and accrued $10,120 and $11,402 to the Sponsor at December 31, 2012 and 2011, respectively.

 

The former sponsor paid all expenses incurred in connection with the organizational and initial offering of the Units at the Series level. As described in the Series’ current Confidential Disclosure Memorandum (including Parts One and Two, the “Disclosure Document”), the Series reimbursed the former sponsor for these costs. For financial reporting purposes in conformity with GAAP, the Series expensed the total organizational costs of $208,820 when incurred and deducted the initial offering costs of $119,732 from Members’ capital as of March 16, 2007 (the date of commencement of operations of the Series) (“net asset value for financial reporting” or the “net asset value per Unit for financial reporting”). For all other purposes, including determining the net asset value per Unit for subscription and redemption purposes, the Series amortizes organizational and initial offering costs over a 60 month period (“net asset value for all other purposes” or the “net asset value per Unit for all other purposes”). Beginning March 31, 2012, all organizational costs have been amortized and as such the net asset value for financial reporting mirrors the net asset value for all other purposes.

 

38

The net asset value and net asset value per Unit are as follows:

 

   Net Asset Value      Net Asset Value per Unit
   All Other
Purposes
  Financial
Reporting
  Number of
Units
  All Other
Purposes
  Financial
Reporting
Price at Commencement*                  1,000.000    1,000.000 
March 31, 2007   7,805,411    7,479,686    7,760.62    1,005.772    963.801 
June 30, 2007   13,409,546    13,100,248    11,988.08    1,118.573    1,092.773 
September 30, 2007   18,932,687    18,639,817    18,241.85    1,037.871    1,021.816 
December 31, 2007   16,034,264    15,757,821    14,700.02    1,090.765    1,071.959 
March 31, 2008   20,507,363    20,247,348    17,025.49    1,204.509    1,189.237 
June 30, 2008   50,168,558    49,924,971    40,063.82    1,252.216    1,246.136 
September 30, 2008   59,013,279    58,786,119    52,463.77    1,124.839    1,120.509 
December 31, 2008   71,216,262    71,005,529    53,002.45    1,343.641    1,339.665 
March 31, 2009   66,062,490    65,868,185    50,663.64    1,303.950    1,300.108 
June 30, 2009   48,597,098    48,419,221    43,344.52    1,121.182    1,117.074 
September 30, 2009   65,446,804    65,285,354    55,797.55    1,172.933    1,170.040 
December 31, 2009   59,653,082    59,508,061    52,355.78    1,139.379    1,136.609 
March 31, 2010   61,712,630    61,584,036    52,710.17    1,170.792    1,168.352 
June 30, 2010   58,685,934    58,573,769    50,598.99    1,159.824    1,157.607 
September 30, 2010   62,864,771    62,769,032    51,344.51    1,224.372    1,222.507 
December 31, 2010   63,929,433    63,850,122    50,286.04    1,271.316    1,269.739 
March 31, 2011   69,735,670    69,672,788    55,107.50    1,265.448    1,264.307 
June 30, 2011   70,137,681    70,091,226    57,603.59    1,217.592    1,216.786 
September 30, 2011   75,178,811    75,148,782    56,985.40    1,319.265    1,318.738 
December 31, 2011   80,107,270    80,093,668    61,662.64    1,299.122    1,298.901 
March 31, 2012   85,002,471    85,002,471    65,074.13    1,306.241    1,306.241 
June 30, 2012   85,311,103    85,311,103    68,261.84    1,249.763    1,249.763 
September 30, 2012   83,552,421    83,552,421    69,662.22    1,199.393    1,199.393 
December 31, 2012   75,391,255    75,391,255    66,466.72    1,134.271    1,134.271 
                          
Total return after performance fee, from the commencement of operations through the period ended December 31, 2012.    13.43%   13.43%

 

* Commencement of operations of the Series was March 16, 2007.

 

AlphaMetrix360, LLC (“AlphaMetrix360”), an affiliate of the Sponsor, acquired the assets of Spectrum Global Fund Services, LLC (“Spectrum US”) as of December 9, 2010. The Sponsor has hired AlphaMetrix360 to provide administration services for the Platform and Series.

 

(4) Advisory Agreement

 

The Series will pay its own operating costs plus its proportionate share of the Master Fund’s expenses, including, without limitation: ongoing offering expenses; trading costs (including execution and clearing brokerage commissions); forward and other over the counter trading spreads; administrative, transfer, exchange and redemption processing, legal, regulatory, reporting, filing, tax, audit, escrow, accounting and printing fees and expenses, as well as extraordinary expenses. Such operating costs are allocated pro rata among the Units based on their respective net asset values for all other purposes. These expenses are paid in addition to the other expenses described below.

 

The Sponsor has retained outside service providers to supply certain services, including, without limitation, tax reporting, accounting and escrow services. Operating costs include the Series’ allocable share of the fees and expenses of such outside service providers.

39

Under signed agreement, the Trading Advisor for the Series receives a monthly management fee at the rate of 0.167% (a 2% annual rate) of the Series’ month-end net asset value for all other purposes (see Note 3) calculated before reduction for any management fees, performance fees, Sponsor’s fees, sales commission or extraordinary fees accrued (including performance fees accrued in a prior month) as of such month-end and before giving effect to any capital contributions made as of the beginning of the month immediately following such month-end and before any distributions or redemptions accrued during or as of such month-end, but after all expenses as of such month-end. The Series incurred management fees of $1,704,284 and $1,475,678 for the years ended December 31, 2012 and 2011, respectively, and accrued $0 to the Trading Advisor at December 31, 2012 and 2011.

 

Also, under signed agreement the Series pays to the Trading Advisor a quarterly performance fee equal to 20% of the new net trading profits, if any, of the Series calculated before deducting the administrative fee, the Sponsor’s fee and sales commission but after deducting the management fee. The Series incurred performance fees of $173,293 and $1,151,168 during the years ended December 31, 2012 and 2011, respectively, and accrued $0 to the Trading Advisor at December 31, 2012 and 2011.

 

As the management and performance fees are paid out of the Master Fund, via a redemption by the Series from the Master, the amounts of management and performance Fees owed to the Trading Advisor as of December 31, 2012 and 2011 are reflected on the Master Fund’s Statement of Financial Condition as payable to trading advisor.

 

(5) Administration

 

AlphaMetrix360, LLC (“AlphaMetrix360”), a related party to the Sponsor, serves as the administrator. The Administrator is responsible for certain clerical and administrative functions of the Platform and Series, including acting as registrar and transfer agent, calculation of the NAV based on valuations provided by the Trading Advisor and the Sponsor (although the Sponsor is ultimately responsible for determining the NAV).

 

(6) NAV Verification Agent

 

Beginning in November 2011, Custom House Fund Services (Chicago) LLC (“Custom House”), was retained by the Platform to serve as a NAV Verification Agent and perform certain net asset value verification procedures for the Master Fund and the Series pursuant to a NAV Verification Agreement (the “Custom House Agreement”), entered into by Custom House, the Sponsor, the Platform and the Administrator.

 

(7) Financial Instruments with Off-balance sheet and Concentration of Credit Risk

 

At December 31, 2012 and 2011, the Series did not have direct commitments to buy or sell financial instruments, including derivative instruments. The Series has indirect commitments that arise through the positions held by the Master Fund in which the Series invests. However, as an investor in a Master Fund, the Series’ risk at December 31, 2012 and 2011 is limited to the fair value of its investment in the Master Fund.

 

(8) Financial Highlights

 

The following financial highlights show the Series’ financial performance for the years ended December 31, 2012 and 2011. All performance returns noted are calculated based on the net asset value per Unit for financial reporting, with organizational costs incurred prior to issuance of Units being expensed at the commencement of the operations of the Series. Total return is calculated as the change in a theoretical Member’s investment over the entire year - a percentage change in the Member’s capital value for the year. The information has been derived from information presented in the financial statements.

 

Regarding the information shown in the table below:

 

  · Per unit operating performance is computed based upon the weighted-average net Units for the years ended December 31, 2012 and 2011. Total return is calculated as the change in the net asset value per Unit for the years ended December 31, 2012 and 2011.
40

  · The net investment loss and total expense ratios are computed based upon the weighted average net assets for the years ended December 31, 2012 and 2011. Net investment loss and expenses include the Series’ proportionate share of the Master Fund’s investment income (loss) and expenses, respectively.

 

An individual Member’s total return and ratios may vary from those below based on the timing of capital transactions.

 

   Year Ended   Year Ended 
   December 31, 2012   December 31, 2011 
Members’ capital per Unit at beginning of the year  $1,298.90   $1,269.74 
           
Per unit data (for a Unit outstanding throughout the year):          
Net investment loss   (68.51)   (88.23)
Net realized and unrealized gain/(loss) allocated from AlphaMetrix Aspect Fund - MT0001   (96.12)   117.39 
Total from investment operations   (164.63)   29.16 
           
Members’ capital per Unit at end of the year  $1,134.27   $1,298.90 
           
Total return:          
Total return before performance fee   (12.47)%   3.89%
Performance fee   (0.20)%   (1.59)%
Total return after performance fee   (12.67)%   2.30%
           
Ratios to average Members’ capital          
Net investment loss   (5.48)%   (6.90)%
           
Expenses:          
Expenses   5.30%   5.35%
Performance fee   0.21%   1.58%
Total expenses   5.51%   6.93%
41

(9) Subsequent Events

 

In accordance with FASB ASC 855, Subsequent Events, the Sponsor has evaluated all subsequent events requiring recognition and disclosure in the financial statements through the date the financial statements were issued. The Sponsor has determined that there are no material events that would require recognition or disclosure in the financial statements.

42

 

Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A: Controls and Procedures

 

The Sponsor, with the participation of the Sponsor’s principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Platform and Series as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the Sponsor’s internal controls with respect to the Platform or Series or in other factors applicable to the Platform or Series that could materially affect these controls subsequent to the date of their evaluation.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The Sponsor is responsible for establishing and maintaining adequate internal control over the financial reporting of the Master Fund and the Series. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a

43

company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Sponsor’s internal control over financial reporting includes those policies and procedures that:

 

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

·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements of the Master Fund and the Series in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Master Fund and the Series are being made only in accordance with authorizations of management and directors of the Sponsor; and

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

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The principal executive and financial officers of the Sponsor assessed the effectiveness of its internal control over financial reporting with respect to the Master Fund and the Series as of December 31, 2012. In making this assessment, the principal executive and financial officers used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its assessment, they have concluded that, as of December 31, 2012, the Sponsor’s internal control over financial reporting with respect to the Series is effective based on those criteria.

 

This annual report does not include an attestation report of the Series’ registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Series’ registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Sponsor to provide only management’s report in this annual report.

 

Item 9B: Other Information

 

None.

 

PART III

 

Item 10: Directors, Executive Officers and Corporate Governance

 

(a) and (b) Identification of Directors and Executive Officers

 

The Series, as a segregated series of a limited liability company, and the Master Fund themselves have no officers or directors and are managed by the Sponsor.

 

The following are the principal officers and managers of the Sponsor.

 

Aleks Kins. Mr. Kins founded AlphaMetrix in May 2005, became listed as a principal and licensed as an associated person on July 6, 2005, and is currently its President and Chief Executive Officer. In such capacity, Mr. Kins has overseen the development of AlphaMetrix’s proprietary software and electronic managed account platforms that provide transparency, advanced risk monitoring and efficient access to professional futures and derivatives traders. On July 21, 2008, Mr. Kins founded AlphaMetrix360, LLC, which registered with the CFTC as a CTA and became a member of NFA in August 2008. AlphaMetrix360, LLC did not conduct any business as a CTA and subsequently terminated its registration and membership on December 18, 2008. AlphaMetrix360, LLC subsequently changed its name to AlphaMetrix Financial Investigations, LLC and currently conducts business as a

44

licensed private detective agency. On September 30, 2010, Mr. Kins founded a new limited liability company named AM 360°, LLC, of which he is its Chief Executive Officer. In October 2010, AM 360°, LLC changed its name to AlphaMetrix 360°, LLC. AlphaMetrix 360°, LLC acquired the assets of Spectrum Global Fund Administration in December 9, 2010. In February 2011, AlphaMetrix 360°, LLC changed its name to AlphaMetrix360, LLC. AlphaMetrix360, LLC has been retained by the Platform to perform administrative services for the Platform, the Series, the Underlying Funds and the Master Funds, among other funds sponsored by the Sponsor. Mr. Kins is also the founder of AlphaMetrix Alternative Investment Advisors, LLC (“AlphaMetrix AIA”), an independent research affiliate of AlphaMetrix. Mr. Kins was approved as a principal and associated person of AlphaMetrix AIA in November 2007. AlphaMetrix AIA is a registered CTA that performs research, trading advisor due diligence and certain investment management and portfolio services. Mr. Kins was a principal and an associated person of Dekla Financial, LLC (“Dekla”), an affiliate of AlphaMetrix AIA from September 2005 and December 2005, respectively, until October 2010. Dekla was registered with the NFA as an Introducing Broker on December 7, 2005, and as a Notice Broker-Dealer on January 17, 2007. Dekla recently de-registered as an Introducing Broker and Notice Broker-Dealer, which became effective as of October 16, 2010. Dekla served as the introducing broker for various commodity pools sponsored by AlphaMetrix AIA and other futures trading accounts until its de-registration as an Introducing Broker and Notice Broker-Dealer. Dekla is not currently serving as an Introducing Broker or a Notice Broker-Dealer since it withdrew its registration with CFTC.

 

David Young. Mr. Young joined AlphaMetrix in March 2010 as its Chief Operations Officer. Mr. Young’s registration as a principal of AlphaMetrix was approved on March 19, 2010. Mr. Young previously held the position of President at Spectrum Global Fund Administration from March 2002 through March 2010. Spectrum Global Fund Administration provides middle and back office outsourcing and administration services to hedge funds and funds of funds through its proprietary technology platform. He was also the President and COO of Midland Trading, LLC, an options specialist firm trading at the Chicago Board of Options Exchange, from March 2000 until March 2002. Midland Trading, LLC was formed in March of 2000 through a restructuring of The Arbitrage Group, LLC, an options specialist firm trading at the Chicago Board of Options Exchange. Mr. Young was the Chief Financial Officer of The Arbitrage Group, LLC from August 1998 until March 2000. Prior to working at Midland Trading, LLC, Mr. Young was the Chief Financial Officer of Fenchurch Capital Management, LLC, a hedge fund in Chicago trading in fixed income arbitrage, from August of 1989 until August of 1998. From August of 1987 until August of 1989, Mr. Young was a Senior Accountant with First Options of Chicago, an options trading firm. Mr. Young received a Bachelor of Science degree in Accounting from North Central College, Naperville, Illinois, in 1987.

 

George Brown. Mr. Brown, age 54, joined AlphaMetrix in March 2008 and is its Chief Financial Officer. Mr. Brown served as a consultant for Nature’s Best, a sports nutrition and protein beverages producer, from December 2007 to February 2008, as Chief Financial Officer of Ultraguard Corporation, a manufacturer of dual smoke/carbon monoxide detectors and wireless monitor systems, from September 2005 to August 2007 and as Chief Financial Officer for Old London Foods, Inc., a producer of branded crackers and co-packed private label bread crumbs, from July 1997 until August 2005. From September 2007 to December 2007, Mr. Brown was self-employed as a financial consultant. Mr. Brown received an M.B.A. in Finance from the University of Chicago in 1979 and a B.A. in Economics (Morehead Scholarship) from the University of North Carolina in 1977.

 

Franz Gildemeister. Mr. Gildemeister joined AlphaMetrix in July 2010, was approved as a Principal on June 22, 2011, and is currently its Chief Fund Accountant and Controller. In such capacity, Mr. Gildemeister oversees the accounting for AlphaMetrix’s fund structures, including the semimonthly net asset values for the funds, audited annual financial statements, any required financial filings with the SEC, and K-1s for all U.S. clients. From July 2010 to June 24, 2011 Mr. Gildemeister held the position of Director of Fund Accounting and, in such capacity he acted as liaison between AlphaMetrix and their fund administrator to ensure the timely and accurate calculation of the semi-monthly nets asset values for the funds. Prior to joining AlphaMetrix, Mr. Gildemeister was the Controller for Sky Road LLC, a front-office solutions provider for hedge funds from November 2008 through June 2010. His primary responsibilities were maintaining the books and records for the company and assisting in the preparation of the company’s foreign and domestic tax filings. From August 2006 through October 2008, Mr. Gildemeister was the Director of Accounting for VARA Capital Management, LLC, a hedge fund manager, employing a global macro strategy. His primary responsibilities were to prepare the monthly and year-end financial statements under U.S. GAAP for the hedge funds managed by the company. Prior to joining VARA Capital Management, LLC, Mr. Gildemeister was a Senior Client Relationship Manager at Spectrum Global Fund Administration from July 2003 through August 2006. He managed the day to day back office operations for hedge

45

fund clients employing a variety of strategies including, fixed income arbitrage, distressed debt, global macro and emerging markets. Mr. Gildemeister received a B.S. degree in Accounting from Hartwick College, Oneonta, New York in 1997 and is a registered CPA in the state of Vermont.

 

(c)Identification of Certain Significant Employees

 

None.

 

(d)Family Relationships

 

Mr. Kins and Mr. Brown are brothers-in-law.

 

(e)Business Experience

 

See Item 10(a) and (b) above.

 

(f)Involvement in Certain Legal Proceedings

 

None.

 

(g)Section 16(a) Beneficial Ownership Reporting Compliance

 

None

 

(h)Code of Ethics

 

The Master Fund and the Series have no employees, officers or directors and are managed by the Sponsor. The Sponsor has adopted an Executive Code of Ethics that applies to its principal executive officers, principal financial officer and principal accounting officer. A copy of this Executive Code of Ethics may be obtained at no charge by written request to AlphaMetrix, LLC, 181 West Madison, 34th floor, Chicago, Illinois 60602.

 

(i)Audit Committee Financial Expert

 

Because the Master Fund and the Series have no employees or officers, the Master Fund and the Series have no audit committee. The Master Fund and the Series is managed by the Sponsor. George Brown serves as the Sponsor’s “audit committee financial expert.” George Brown is not independent of the management of the Sponsor. The Sponsor is a privately owned limited liability company. It has no independent directors.

 

Item 11: Executive Compensation

 

The Series has no directors, officers or employees. None of the directors, officers or employees of the Sponsor receives compensation from the Series. The Sponsor receives a monthly sponsor fee of 0.04166 of 1% (a 0.50% annual rate) of the Series’ month-end net asset value for all other purposes, taking into account interest income, of each Member’s investment in the Series for such month. The officers of the Sponsor receive no “other compensation” from the Series. There are no compensation plans or arrangements relating to a change in control of any of the Series, the Platform or the Sponsor.

 

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

(a)Security Ownership of Certain Beneficial Owners

 

Not applicable. All of the Platform’s manager interest is held by the Sponsor.

46
(b)Security Ownership of Management

 

As of December 31, 2012 and 2011, the Trading Advisor and the executive officers and the principals of the Sponsor did not own directly or indirectly any Units. As of December 31, 2012 and 2011, the Sponsor owned directly 8.120 Units, which constituted 0.01% of the total Units outstanding, and did not own any Units indirectly.

 

(c)Changes in Control

 

None.

 

(d)Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

Item 13: Certain Relationships and Related Transactions, and Director Independence

 

(a)Transactions With Related Persons

 

See Item 11 “Executive Compensation,” Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” and “Item 1(c) “Narrative Description of Business.” As of December 31, 2012 and 2011, the Series had paid the following: (a) Sponsor fees of $425,289 and $367,825 to the Sponsor;

 

The Sponsor controls the management of the Master Fund and the Series and serves as its sponsor. Although the Sponsor will not sell any assets, directly or indirectly, to the Master Fund or the Series, affiliates of the Sponsor will make substantial profits from the Master Fund and the Series due to the foregoing arrangements. No loans have been, are or will be, outstanding between the Sponsor or any of its principals and the Master Fund and the Series.

 

(b)Review, Approval or Ratification of Transactions with Related Persons

 

None.

 

(c)Director Independence

 

The Master Fund has two directors who are independent. The Series does not have directors. None of the directors of the Sponsor are independent. See Item 10(a) and (b) “Identification of Directors and Executive Officers.”

 

Item 14: Principal Accounting Fees and Services

 

(1)Audit Fees

 

Aggregate fees billed for professional services rendered by Deloitte & Touche, LLP (“D&T”) in connection with the audit of the Series’ financial statements and reviews of financial statements included in the Series’ Form 10-Q or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements as of and for the years ended December 31, 2012 and 2011 were $166,200 and $161,100, respectively.

 

(2)Audit-Related Fees

 

There were no fees for audit related services rendered by D&T for the years ended December 31, 2012 and 2011 related to the Series.

 

(3)Tax Fees

 

Aggregate fees billed for professional services rendered by Arthur F. Bell, Jr & Associates, L.L.C. in connection with tax compliance, tax advice and tax planning for the years ended December 31, 2012 and 2011, were approximately $13,522 and $7,310, respectively.

47
(4)All Other Fees

 

No fees were incurred by D&T, or any member firms of D&T and their respective affiliates, during the years ended December 31, 2012 and 2011 for any other professional services in relation to the Series.

 

(5)Pre-Approval Policies

 

The Sponsor’s principal executive and financial officers review the estimated audit and tax fees prior to engaging an auditor or tax services for the Series.

 

PART IV

 

Item 15: Exhibits, Financial Statement Schedules

 

(a)(1)Financial Statements

 

See Financial Statements for the Master Fund filed herewith as Exhibit 13.02 and Financial Statements for the series incorporated into Part II, Item 8.

 

Affirmation of AlphaMetrix, LLC

Report of Independent Registered Public Accounting Firm

Statements of Financial Condition

Statements of Operations

Statements of Changes in Members’ Capital

Notes to Financial Statements

 

(a)(2)Financial Statement Schedules

 

Financial statement schedules not included in this Form 10-K have been omitted because they are not required or are not applicable or because equivalent information has been included in the Financial Statements incorporated into Part II, Item 8.

 

(a)(3)Exhibits Required by Item 601 of Regulation S-K

 

The following exhibits are included herewith.

 

Exhibit
Number
  Description of Document
**1.1   Selling Agreement.
*3.1   Certificate of Formation of AlphaMetrix Managed Futures LLC.
****4.1   Amended and Restated Limited Liability Company Operating Agreement
****4.2   Amended and Restated Separate Series Agreement for the Series.
****10.1   Advisory Agreement.
****10.2   Representation Letter.
**10.3   Administration Agreement.
*10.4   Form of Customer Agreement.
**10.5   Form of Subscription Agreement.
***10.6   Assignment Agreement
****10.7   General Assignment and Assumption Agreement

48

Exhibit
Number
  Description of Document
****10.8   Administration Agreement Assignment
13.02   2012 and 2011 AlphaMetrix Aspect Fund – MT0001 Financial Statements and Report of Independent Registered Public Accounting Firm.
*21.1   List of Subsidiaries.
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*****101.INS   XBRL Instance Document
*****101.SCH   XBRL Taxonomy Extension Schema
*****101.CAL   XBRL Taxonomy Extension Calculation Linkbase
*****101.DEF   XBRL Taxonomy Extension Definition Linkbase
*****101.LAB   XBRL Taxonomy Extension Label Linkbase
*****101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

* Incorporated by reference to the Series’ Form 10/A previously filed on November 2, 2006.

** Incorporated by reference to the Series’ Form 10/A previously filed on January 30, 2007.

*** Incorporated by reference to the Series’ Form 8-K previously filed on October 1, 2008.

**** Incorporated by reference to the Series’ Form 8-K previously filed on November 6, 2008.

***** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

49

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 on the 11th day of April, 2013.

 

Dated: April 11, 2013

 

ALPHAMETRIX MANAGED FUTURES LLC (ASPECT SERIES)

 

By: AlphaMetrix, LLC

Sponsor

 

By:  /s/ Aleks Kins      
Name: Aleks Kins      
Title: President and Chief Executive Officer      

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Sponsor of the registrant in the capacities and on the date indicated.

 

Signature   Title with Managing Owner Date
       
       
/s/ George Brown   Chief Financial Officer April 11, 2013
George Brown      
       
/s/ David Young   Chief Operations Officer April 11, 2013
David Young      

 

AlphaMetrix, LLC

Sponsor of Registrant

April 11, 2013

S-1