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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2013

 

OR

 

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

 

For the transition period from        to       

 

Commission File Number 0-28928

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(Exact Name of Registrant as
specified in its charter)

 

Delaware

 

13-3887922

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 11th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

 

212-449-3517

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer  x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

As of September 30, 2013, 552,091 units of limited partnership interest were outstanding.

 

 

 



 

ML TREND-FOLLOWING FUTURES FUND L.P.

 

QUARTERLY REPORT FOR SEPTEMBER 30, 2013 ON FORM 10-Q

 

Table of Contents

 

 

 

PAGE

PART I—FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

12

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

 

 

 

Item 4.

Controls and Procedures

29

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

30

 

 

 

Item 1A.

Risk Factors

30

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

 

 

Item 3.

Defaults Upon Senior Securities

30

 

 

 

Item 4.

 Mine Safety Disclosures

31

 

 

 

Item 5.

 Other Information

31

 

 

 

Item 6.

Exhibits

31

 



 

PART I - FINANCIAL INFORMATION

 

Item 1.   Financial Statements

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

Cash

 

$

350,043

 

$

347,871

 

Investments in Portfolio Funds (cost $77,008,052 for 2013 and cost $99,498,961 for 2012)

 

83,626,441

 

118,389,845

 

Due from Portfolio Funds

 

2,628,562

 

4,494,805

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

86,605,046

 

$

123,232,521

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Wrap fee payable

 

$

288,998

 

$

410,773

 

Redemptions payable

 

2,339,330

 

4,083,733

 

 

 

 

 

 

 

Total liabilities

 

2,628,328

 

4,494,506

 

 

 

 

 

 

 

PARTNERS’ CAPITAL:

 

 

 

 

 

General Partner (9 Units and 9 Units)

 

1,369

 

1,517

 

Limited Partners (552,091 Units and 704,577 Units)

 

83,975,349

 

118,736,498

 

 

 

 

 

 

 

Total partners’ capital

 

83,976,718

 

118,738,015

 

 

 

 

 

 

 

TOTAL LIABILITIES AND PARTNERS’ CAPITAL:

 

$

86,605,046

 

$

123,232,521

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT

 

 

 

 

 

(Based on 552,100 and 704,586 Units outstanding; unlimited Units authorized)

 

$

152.1042

 

$

168.5217

 

 

See notes to financial statements.

 

1



 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three

 

For the three

 

For the nine

 

For the nine

 

 

 

months ended

 

months ended

 

months ended

 

months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

TRADING PROFIT (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized, net

 

$

1,192,504

 

$

2,057,567

 

$

5,836,036

 

$

7,940,703

 

Change in unrealized, net

 

(5,093,039

)

(1,047,292

)

(12,272,495

)

(9,676,144

)

Total trading profit (loss), net

 

(3,900,535

)

1,010,275

 

(6,436,459

)

(1,735,441

)

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Wrap fee

 

906,306

 

1,454,943

 

3,148,755

 

4,707,107

 

Total expenses

 

906,306

 

1,454,943

 

3,148,755

 

4,707,107

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(906,306

)

(1,454,943

)

(3,148,755

)

(4,707,107

)

 

 

 

 

 

 

 

 

 

 

NET PROFIT (LOSS)

 

(4,806,841

)

$

(444,668

)

$

(9,585,214

)

$

(6,442,548

)

 

 

 

 

 

 

 

 

 

 

NET PROFIT (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

Weighted average number of General Partner and Limited Partner Units outstanding

 

583,845

 

807,066

 

$

634,515

 

861,304

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per weighted average General Partner and Limited Partner Unit

 

$

(8.23

)

$

(0.55

)

$

(15.11

)

$

(7.48

)

 

See notes to financial statements.

 

2



 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

 

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(unaudited)

 

 

 

Units

 

General
Partner

 

Limited
Partners

 

Total

 

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL, December 31, 2011

 

931,842

 

$

1,650

 

$

170,827,390

 

$

170,829,040

 

 

 

 

 

 

 

 

 

 

 

Subscriptions

 

3,999

 

 

730,304

 

730,304

 

 

 

 

 

 

 

 

 

 

 

Net Profit (Loss)

 

 

(72

)

(6,442,476

)

(6,442,548

)

 

 

 

 

 

 

 

 

 

 

Redemptions

 

(165,163

)

 

(29,987,544

)

(29,987,544

)

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL, September 30, 2012

 

770,678

 

$

1,578

 

$

135,127,674

 

$

135,129,252

 

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL, December 31, 2012

 

704,586

 

$

1,517

 

$

118,736,498

 

$

118,738,015

 

 

 

 

 

 

 

 

 

 

 

Subscriptions

 

220

 

 

37,000

 

37,000

 

 

 

 

 

 

 

 

 

 

 

Net Profit (Loss)

 

 

(148

)

(9,585,066

)

(9,585,214

)

 

 

 

 

 

 

 

 

 

 

Redemptions

 

(152,706

)

 

(25,213,083

)

(25,213,083

)

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL, September 30, 2013

 

552,100

 

$

1,369

 

$

83,975,349

 

$

83,976,718

 

 

See notes to  financial statements.

 

3



 

ML TREND-FOLLOWING FUTURES FUND L.P.

(A Delaware Limited Partnership)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 (unaudited)

 

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

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 2013

 

September 30, 2013

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

160.3068

 

$

168.5217

 

 

 

 

 

 

 

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

 

(6.6510

)

(11.4706

)

Expenses (1)

 

(1.5516

)

(4.9469

)

 

 

 

 

 

 

Net asset value, end of period

 

$

152.1042

 

$

152.1042

 

 

 

 

 

 

 

Total Return: (2)

 

 

 

 

 

 

 

 

 

 

 

Total return

 

-5.12

%

-9.74

%

 

 

 

 

 

 

Ratios to Average Net Assets: (1)

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

0.99

%

2.99

%

 

 

 

 

 

 

Net investment profit (loss)

 

-0.99

%

-2.99

%

 


(1) The ratios do not reflect the proportionate share of income and expense of the Portfolio Funds.

(2) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole. An individual partners’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

4



 

ML TREND-FOLLOWING FUTURES FUND L.P.

(A Delaware Limited Partnership)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 (unaudited)

 

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

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 2012

 

September 30, 2012

 

Per Unit Operating Performance:

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

176.1164

 

$

183.3240

 

 

 

 

 

 

 

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

 

1.0236

 

(2.5251

)

Expenses (1)

 

(1.8019

)

(5.4608

)

 

 

 

 

 

 

Net asset value, end of period

 

$

175.3381

 

$

175.3381

 

 

 

 

 

 

 

Total Return: (2)

 

 

 

 

 

 

 

 

 

 

 

Total return

 

-0.44

%

-4.36

%

 

 

 

 

 

 

Ratios to Average Net Assets: (1)

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

1.00

%

3.00

%

 

 

 

 

 

 

Net investment profit (loss)

 

-1.00

%

-3.00

%

 


(1) The ratios do not reflect the proportionate share of income and expense of the Portfolio Funds.

(2) The total return calculations are based on compounded monthly returns and is calculated for each class taken as a whole. An individual partners’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

5



 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML Trend-Following Futures Fund L.P. (the “Partnership”), a Merrill Lynch FuturesAccessSM Program (the “FuturesAccess”) fund, was organized under the Delaware Revised Uniform Limited Partnership Act on December 11, 1995 and commenced trading on July 15, 1996.  The Partnership operates as a “fund of funds”, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (“MLAI” or “General Partner” or “Sponsor”), the sponsor and general partner of the Partnership, among underlying FuturesAccess Funds (each a “Portfolio Fund”, and collectively the “Portfolio Funds”) (See Note 2).  Presently there are five Portfolio Funds.  MLAI is the sponsor and manager of the Portfolio Funds.

 

MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as “BAC”. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) is currently the exclusive clearing broker for the Portfolio Funds.  The Sponsor may select other parties as clearing broker(s). Merrill Lynch International Bank Ltd. (“MLIB”) is the primary foreign exchange (“F/X”) forward prime broker for the Portfolio Funds.  The Sponsor may select other parties as F/X or other over-the-counter (“OTC”) prime brokers, including Bank of America N.A. (“BANA”).  MLPF&S, MLIB and BANA are BAC affiliates.  The Royal Bank of Scotland Plc acts as the primary OTC prime broker for one of the Portfolio Funds, Man AHL FuturesAccess LLC,  only in respect of precious metals OTC forward transactions, which are not expected to exceed 5% of the overall risk of Man AHL FuturesAccess LLC.

 

FuturesAccess is a group of managed futures funds sponsored by MLAI (“FuturesAccess Funds”).  FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors.  Each FuturesAccess Fund is generally similar in terms of fees, although redemption terms vary among FuturesAccess Funds.  Each trading advisor participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.

 

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

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of  the financial position of the Partnership as of September 30, 2013 and December 31, 2012 and the results of its operations for the three and nine month periods ended September 30, 2013  and  2012. However, the operating results for the interim periods may not be indicative of the results for the full year.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership’s report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2012.

 

6



 

Estimates

 

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

 

2.              INVESTMENTS IN PORTFOLIO FUNDS

 

The five Portfolio Funds in which the Partnership is invested in as of September 30, 2013 and December 31, 2012 are: Aspect FuturesAccess LLC (“Aspect”) (formerly ML Aspect FuturesAccess LLC), ML BlueTrend FuturesAccess LLC (“BlueTrend”), Man AHL FuturesAccess LLC (“Man AHL”), ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) and ML Winton FuturesAccess LLC (“Winton”). The strategy of these Portfolio Funds is to be trend followers. MLAI may, in its discretion, change Portfolio Funds at any time. MLAI may vary the percentage of the Partnership’s total portfolio allocated to the different Portfolio Funds at MLAI’s discretion. There is no pre-established range for the minimum and maximum allocations that may be made to any individual Portfolio Funds.

 

The investment transactions were accounted for on trade date. The investments in the Portfolio Funds were valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, MLAI utilized the net asset value of the underlying Portfolio Funds which approximates fair value. The fair value was net of all fees relating to the Portfolio Funds, paid or accrued. Additionally, MLAI monitored the performance of the Portfolio Funds. Such monitoring procedures included, but were not limited to: monitoring market movements in Portfolio Funds’ investments, comparing performance to industry benchmarks, and in-depth conference calls and site visits with the respective Portfolio Funds’ trading advisors (“Trading Advisors”).

 

The details of investments in Portfolio Funds at and for the period ended September 30, 2013 are as follows:

 

September 30, 2013

 

 

 

Fair Value

 

Percentage of
Partners’ Capital

 

Profit (Loss)

 

Cost @ 9/30/13

 

Management
Fee

 

Performance
Fee

 

Redemptions
Permitted

 

Winton

 

$

16,744,283

 

19.94

%

$

464,147

 

$

11,126,823

 

$

(238,444

)

$

(6,965

)

Semi -Monthly

 

Aspect

 

16,649,309

 

19.83

%

(1,507,374

)

14,259,789

 

(236,276

)

 

Semi -Monthly

 

Transtrend

 

16,744,283

 

19.94

%

(1,156,861

)

14,049,563

 

(157,775

)

 

Semi -Monthly

 

Bluetrend

 

16,744,284

 

19.94

%

(1,923,306

)

16,187,779

 

(157,071

)

(36,727

)

Monthly

 

Man AHL

 

16,744,282

 

19.94

%

(2,313,065

)

21,384,098

 

(156,174

)

 

Monthly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investment in Portfolio Funds at fair value

 

$

83,626,441

 

99.59

%

$

(6,436,459

)

$

77,008,052

 

$

(945,740

)

$

(43,692

)

 

 

 

The details of investments in Portfolio Funds at and for the year ended December 31, 2012 are as follows:

 

December 31, 2012

 

 

 

Fair Value

 

Percentage of
Partners’ Capital

 

Profit (Loss)

 

Cost @ 12/31/12

 

Management
Fee

 

Performance
Fee

 

Redemptions
Permitted

 

Winton

 

$

23,677,969

 

19.94

%

$

(1,252,467

)

$

15,896,089

 

$

(447,194

)

$

(519

)

Semi -Monthly

 

Aspect

 

23,677,968

 

19.94

%

(2,759,516

)

18,338,732

 

(446,670

)

(15,340

)

Semi -Monthly

 

Transtrend

 

23,677,970

 

19.94

%

421,627

 

18,172,896

 

(300,227

)

(37,953

)

Semi -Monthly

 

Bluetrend

 

23,677,970

 

19.94

%

60,564

 

20,519,264

 

(299,709

)

(57,205

)

Monthly

 

Man AHL

 

23,677,968

 

19.94

%

(2,228,170

)

26,571,980

 

(297,337

)

 

Monthly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investment in Portfolio Funds at fair value

 

$

118,389,845

 

99.70

%

$

(5,757,962

)

$

99,498,961

 

$

(1,791,137

)

$

(111,017

)

 

 

 

7



 

There are no investments held by the Portfolio Funds that in the aggregate exceed 5% of the Fund’s members’ capital. These investments are recorded at fair value. In accordance with Regulation S-X, a prescribed regulation by the Securities and Exchange Commission, there are specific formats and contents of financial reports. The following is summarized financial information for each of the significant Portfolio Funds:

 

 

 

As of September 30, 2013

 

 

 

Total Assets

 

Total Liabilities

 

Total Capital

 

Winton

 

$

1,047,583,695

 

$

24,070,760

 

$

1,023,512,935

 

Aspect

 

216,721,536

 

13,010,164

 

203,711,372

 

Transtrend

 

109,232,785

 

3,379,938

 

105,852,847

 

Bluetrend

 

152,070,208

 

8,484,288

 

143,585,920

 

Man AHL

 

25,401,242

 

2,767,949

 

22,633,293

 

 

 

 

 

 

 

 

 

Total

 

$

1,551,009,466

 

$

51,713,099

 

$

1,499,296,367

 

 

 

 

As of December 31, 2012

 

 

 

Total Assets

 

Total Liabilities

 

Total Capital

 

Winton

 

$

1,111,588,919

 

$

19,201,742

 

$

1,092,387,177

 

Aspect

 

279,441,442

 

7,200,449

 

272,240,993

 

Transtrend

 

154,050,850

 

4,998,418

 

149,052,432

 

Bluetrend

 

177,358,085

 

7,053,649

 

170,304,436

 

Man AHL

 

35,278,824

 

1,853,473

 

33,425,351

 

 

 

 

 

 

 

 

 

Total

 

$

1,757,718,120

 

$

40,307,731

 

$

1,717,410,389

 

 

 

 

For the nine months ended September 30, 2013

 

 

 

 

 

 

 

 

 

Net

 

 

 

Income (Loss)

 

Commissions

 

Other

 

Income (Loss)

 

Winton

 

$

762,253

 

$

(20,009

)

$

(278,097

)

$

464,147

 

Aspect

 

(1,068,818

)

(54,200

)

(384,356

)

(1,507,374

)

Transtrend

 

(832,441

)

(101,292

)

(223,128

)

(1,156,861

)

Bluetrend

 

(1,608,989

)

(76,985

)

(237,332

)

(1,923,306

)

Man AHL

 

(1,784,724

)

(164,294

)

(364,047

)

(2,313,065

)

 

 

 

 

 

 

 

 

 

 

Total

 

$

(4,532,719

)

$

(416,780

)

$

(1,486,960

)

$

(6,436,459

)

 

 

 

For the nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

Net

 

 

 

Income (Loss)

 

Commissions

 

Other

 

Income (Loss)

 

Winton

 

$

(767,505

)

$

(31,900

)

$

(388,831

)

$

(1,188,236

)

Aspect

 

(978,714

)

(63,031

)

(432,640

)

(1,474,385

)

Transtrend

 

2,412,633

 

(131,726

)

(350,983

)

1,929,924

 

Bluetrend

 

1,248,847

 

(90,870

)

(417,235

)

740,742

 

Man AHL

 

(1,301,360

)

(74,356

)

(367,770

)

(1,743,486

)

 

 

 

 

 

 

 

 

 

 

Total

 

$

613,901

 

$

(391,883

)

$

(1,957,459

)

$

(1,735,441

)

 

The income statement information presented above is the Fund’s proportionate ownership of the Portfolio Fund.

 

3.              FAIR VALUE OF INVESTMENTS

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any

 

8



 

change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.

 

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

 

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

 

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

 

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

 

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

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

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

 

Investments in Portfolio Funds are valued using the net asset value reported by the investment company, which management believes approximates fair value. These net asset values are the prices used to execute trades with these Portfolio Funds.

 

Although there are monthly transactions in these Portfolio Funds interests, the NAV’s are materially based on portfolios of Level I and Level II assets and liabilities for which the Portfolio Funds have transparency.  As such, the Partnership determined that its investments in these Portfolio Funds in this case, would be classified as Level II. There were no transfers to or from Level II during the three and nine month period ended September 30, 2013.

 

9



 

The following table summarizes the valuation of the Partnership’s investments by the above fair value hierarchy levels as of September 30, 2013 and December 31, 2012:

 

Investment in 

 

 

 

 

 

 

 

 

 

Portfolio Funds

 

Total

 

Level I

 

Level II

 

Level III

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

$

83,626,441

 

$

 

$

83,626,441

 

$

 

December 31, 2012

 

$

118,389,845

 

$

 

$

118,389,845

 

$

 

 

4.              MARKET, CREDIT AND CONCENTRATION RISKS

 

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

 

Market Risk

 

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

 

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

 

Credit Risk

 

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

 

The credit risk associated with these instruments from counterparty nonperformance is the net unrealized profit (loss) on open contracts, if any, included in the Portfolio Funds’ Statements of Financial Condition.

 

10



 

MLAI, as sponsor of the Portfolio Funds, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLIB, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Portfolio Funds.

 

The Portfolio Funds, in their normal course of business, enter into various contracts, with MLPF&S acting as their clearing broker. Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), MLPF&S has the right to net receivables and payables.

 

Concentration Risk

 

The Partnership’s investments in the Portfolio Funds are subject to the market and credit risk of the Portfolio Funds. Because the majority of the Partnership’s capital is invested in the Portfolio Funds, any changes in the market conditions that would adversely affect the Portfolio Funds could significantly impact the solvency of the Partnership.

 

Indemnifications

 

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

 

5.              RELATED PARTY TRANSACTIONS

 

MLAI and the Partnership entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Transfer Agent”), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other serviced related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI.  The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets. During the quarter ended September 30, 2013, the rate was 0.02%.  The fee is payable monthly in arrears.  MLAI allocates the Transfer Agent fees to each of the managed/sponsored funds, including the Partnership, on a monthly basis based on the each fund’s net assets. The Transfer Agent fee, which was 0.02% of aggregate asset level, allocated to the Partnership for the three and nine months ended September 30, 2013 is paid on behalf of the Partnership by the Sponsor. These fees are included in the wrap fee and are not separately charged to the Fund.

 

Wrap fees as presented on the Statements of Operations are paid to related parties.

 

6.              RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2013, the Financial Accounting Standards Board (“FASB”) issued an update relating to the criteria used in defining an investment company under US GAAP. It also sets forth certain measurement and disclosure requirements.   Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis.  The standard also reaffirms that a noncontrolling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company.   Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees.  The requirements of the standard are effective for

 

11



 

interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited.  The Sponsor is currently evaluating the standard and does not believe it will have a material impact to the Fund’s financial statements.

 

7.              SUBSEQUENT EVENTS

 

The General Partner has evaluated the impact of subsequent events on the Partnership through the date the financials were able to be issued and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.

 

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

 

MONTH-END NET ASSET VALUE PER UNIT

 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to report performance to investors throughout the period is a useful performance measure for the investors of the Partnership.  Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes.

 

The Partnership calculates the Net Asset Value per Unit as of the last business day of each month (each, a “Calculation Date”). The Partnership’s “Net Asset Value” as of any Calculation Date generally equals the value of the Partnership’s interests in the Portfolio Funds as of such date plus any other assets held by the Partnership, minus accrued Sponsor wrap fees and all other liabilities of the Partnership.  MLAI or its delegates are authorized to make all Net Asset Value determinations.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT

 

 

 

Jan.

 

Feb.

 

Mar.

 

Apr.

 

May

 

June

 

Jul.

 

Aug.

 

Sept.

 

2012

 

$

183.7531

 

$

185.8545

 

$

181.1093

 

$

182.0269

 

$

185.1992

 

$

176.1164

 

$

183.6088

 

$

179.9176

 

$

175.3381

 

2013

 

$

171.6601

 

$

168.4627

 

$

171.8005

 

$

176.8050

 

$

166.2503

 

$

160.3068

 

$

158.1637

 

$

153.5721

 

$

152.1042

 

 

Liquidity and Capital Resources

 

The Partnership and the Portfolio Funds borrow only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Partnership’s and the Portfolio Funds’ U.S. dollar deposits.  These borrowings are at a prevailing short-term rate in the relevant currency.

 

Inflation by itself does not affect profitability, but it can cause price movements that do so.

 

The Partnership’s and the Portfolio Funds’ assets and open positions are generally highly liquid.

 

The Partnership and the Portfolio Funds changes its positions and market focus frequently.  Consequently, the fact that the Partnership and the Portfolio Funds realized gains or incurred losses in certain markets (gold, stock indices, currencies, etc.) in the past is not necessarily indicative of whether the Partnership and the Portfolio Funds will do so in the future.

 

Investors in the Partnership generally may redeem any or all of their Units at Net Asset Value, effective as of the last day of any calendar month, upon providing notice at least 10 calendar days prior to month-end.

 

As a commodity pool, the Partnership maintains an extremely large percentage of its assets in cash at the underlying Portfolio Funds, which they must have available to post initial and variation margin on futures contracts.  This cash is also used to fund redemptions.  While the Portfolio Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions.  In the event that positions were

 

12



 

liquidated to fund redemptions, MLAI, as the sponsor of the Portfolio Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the respective Trading Advisors would determine, in its discretion which investments should be liquidated.

 

For the nine month period ended September 30, 2013 Partnership’s capital decreased 29.28% from $118,738,015 to $83,976,718.  This decrease was attributable to the net loss from operations of $9,585,214, coupled with the redemption of 152,706 Redeemable Units resulting in an outflow of $25,213,083. The cash outflow was offset with cash inflow of $37,000 due to subscriptions of 220 Units. Future redemptions could impact the amount of funds available for investment in the Portfolio Funds in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

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

 

Investments

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at measurement date (i.e. the exit price). Purchases and sales of investments are recorded on trade date. Realized profits and losses on investments is recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period is reported on the Statements of Operations.

 

Fair Value Measurements

 

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

 

Income Taxes

 

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

 

The Partnership follows the Accounting Standards Codification guidance on accounting for uncertainty in income taxes.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Partnership, including reducing the net asset value of the Partnership to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Partnership. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Partnership. The General Partner has analyzed the Partnership’s tax positions and has concluded that a provision for income tax of $94,973 is required in the Partnership’s financial statements. The following is the major tax jurisdiction for the Partnership and the earliest tax year subject to examination: United States — 2010.

 

Reform Act

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was signed into law on July 21, 2010. The Reform Act enacts financial regulatory reform, and may alter the way in which the

 

13



 

Partnership conducts certain trading activities. The Reform Act includes measures to broaden the scope of derivative instruments subject to regulation, including requiring clearing and exchange trading of certain derivatives, imposing new capital and margin reporting, registration and business conduct requirements for certain market participants and imposing position limits on certain over-the-counter derivatives. The Reform Act grants the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission substantial new authority and requires numerous rulemakings by these agencies. The ultimate impact of these derivatives regulations, and the time it will take to comply, remains uncertain. The final regulations may impose additional operational and compliance costs on the Partnership.

 

Results of Operations

 

January 1, 2013 to September 30, 2013

 

January 1, 2013 to March 31, 2013

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of March 31, 2013:

 

March 31, 2013

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

$

251,046

 

10.98

%

Currencies

 

(175,489

)

-7.67

%

Energy

 

17,919

 

0.78

%

Interest rates

 

1,756,786

 

76.81

%

Metals

 

222,506

 

9.73

%

Stock indices

 

214,374

 

9.37

%

 

 

 

 

 

 

Total

 

$

2,287,142

 

100.00

%

 

The Partnership experienced a net trading profit for the quarter ended March 31, 2013 of $3,425,527.

 

References herein to the Partnership’s trading and portfolio refer to such trading conducted, and portfolio held, through the Partnership’s Portfolio Funds.  References herein to the trading and portfolio of the Portfolio Funds refer to such trading and portfolios generally.

 

The Partnership started the year with a long bias in both risk assets and fixed income. The only meaningful short exposures were in the Japanese yen, natural gas, grains and soft commodities.  This posture shifted partially over the course of the first quarter. The biggest changes took place in currencies and commodities. These two asset classes were most affected by rising risk aversion in February and March. The portfolio got short many foreign currencies as well as metals and livestock. The only market where the shift went the other way was natural gas, as the Portfolio Funds adopted a long posture as prices rose sharply in March.

 

Equity indices drove performance. The Portfolio Funds came into the year with long positions across geographies given that stock prices have generally been rising since the summer of 2012. With the fiscal cliff issue resolved in the early days of the first quarter, markets continued to rise, even picking up some momentum. Gains came from diverse positions during January. In February and March, there was some divergence in markets, with U.S. and Japanese equities continuing to rise while those in Europe and China saw some downward moves due to inconclusive elections in Italy, a banking crisis in Cyprus and signs of slowing growth in China. Despite this divergence, the asset class was positive each month of the quarter.

 

14



 

Currencies also contributed positively to performance over the first quarter. At the start of the year, the Portfolio Funds had long positions in most foreign currencies, balanced by significant short exposure in the Japanese yen. This positioning performed positively in January given a pro-risk investment environment. In February, risk aversion returned to markets to some extent. A contracting euro-zone economy coupled with Italian elections where no single group of parties won enough votes to form a coalition government disrupted the stability for the continent. Many foreign currencies depreciated against the U.S. dollar and the Portfolio Funds generally adopted a short posture. The general trend of a strong U.S. dollar continued into March. At this point, the Portfolio Funds were decidedly long the U.S. dollar and generally made back the February losses. Overall, the asset class was positive for the quarter. Short yen positions performed best, generating gains each month of the quarter.

 

In fixed income, the Portfolio Funds had long positions throughout the first quarter resulting in losses. In January, these positions lost money. Risk assets were rallying while fixed income was selling off. Many even questioned whether a new period of rising interest rates was already upon us. These worries turned out to be premature as problems in Europe led to a renewed push into fixed income. Yields came back down and the Portfolio Funds made back some, though not all, of their January losses during February and March.

 

Commodities also performed poorly. Coming into the first quarter, the Portfolio Funds had long exposure in the oil complex and metals coupled with short exposure in natural gas and agricultural markets. Many commodities initially rallied, generating some gains. That changed in February as markets generally fell due to slowing growth and the potential for less demand from China as well as from a contracting Europe. These moves hurt the Portfolio Funds. The Portfolio Funds generally adopted a short posture in all sectors except for oil.

 

April 1, 2013 to June 30, 2013

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of June 30, 2013:

 

June 30, 2013

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

$

152,087

 

12.16

%

Currencies

 

116,763

 

9.34

%

Energy

 

(41,753

)

-3.34

%

Interest rates

 

122,070

 

9.76

%

Metals

 

1,063,576

 

85.05

%

Stock indices

 

(162,234

)

-12.97

%

 

 

 

 

 

 

Total

 

$

1,250,509

 

100.00

%

 

The Partnership experienced a net trading loss for the second quarter ended June 30, 2013 of $5,961,451.

 

April was a positive month, but reversals in May and June resulted in negative performance. The reversals were concentrated in fixed income markets in May and in equity and fixed income markets in June.

 

References herein to the Partnership’s trading and portfolio refer to such trading conducted, and portfolio held, through the Partnership’s Portfolio funds. References herein to the trading and portfolio of the Portfolio Funds refer to such trading and portfolios generally.

 

15



 

In fixed income, the Portfolio Funds came into the second quarter positioned long across almost all markets they traded given the downward trend in yields. Their positioning performed well in April as the economic outlook was not especially strong and central banks seemed committed to quantitative easing. This changed abruptly in May and June as markets were concerned by comments made by U.S. Federal Reserve officials. Yields rose universally. Profits made in April were given back and the asset class ended the quarter with losses. The losses were especially severe in May given that the Portfolio Funds Trading Advisors had large positions. As yields rose, they significantly cut long exposure through the end of the quarter.

 

The Portfolio Funds were also long equity indices at the start of the quarter. As global equity markets had generally been rising since late summer of 2012, with increased momentum in the first quarter of 2013, the Portfolio Funds had large long positions, with concentrations in U.S., European and Japanese equity indices. These positions generally made money in April and May, but suffered offsetting losses in June when markets reversed due to the possible withdrawal of monetary stimulus sooner than expected. Most trend followers were able to finish the quarter with small profits in the asset class.

 

In currencies, choppiness took a toll on returns. Some big reversals (in the Australian dollar, for example) and a lack of clear direction in many other currencies resulted in the Portfolio Funds Trading Advisors losing money each month during the quarter. In April, European currencies rallied against short positions held in the Portfolio Funds; this happened even as poor economic numbers indicated further deterioration in the eurozone economy, but expectations of additional stimulus from the European Central Bank boosted many currencies. The Portfolio Funds tried to adapt by shifting direction and getting long these currencies, only to see the U.S. dollar rally. In June, it was the Japanese yen’s turn to reverse, ending multiple months of declines against the U.S. dollar and other currencies and hurting short positions. Currencies were the second worst performing asset class in the second quarter after fixed income.

 

Performance in commodities was mixed. The gains came primarily from metals. After some declines in the first quarter, the Portfolio Funds came into April positioned short both industrial and precious metals. As prices fell sharply over the course of the quarter, the Portfolio Funds were able to book significant profits in markets like gold, silver and copper. Trends were not as strong in the energy and agricultural markets. The Portfolio Funds saw muted gains and losses that generally canceled each other out. Due to the big trends in metals, commodities were the best performing asset class for most Portfolio Funds.

 

In summary, big reversals in fixed income starting in May resulted in losses for the quarter. In currencies, some choppiness and more mild reversals also led to negative performance. There were small gains in equity indices due to the continuing rally in April and May. Commodities performed well as a result of the downward trend in metals which the Portfolio Funds Trading Advisors took advantage of well.

 

July 1, 2013 to September 30, 2013

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of September 30, 2013:

 

16



 

September 30, 2013

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

$

380,668

 

-75.62

%

Currencies

 

(223,737

)

44.45

%

Energy

 

(185,903

)

36.93

%

Interest rates

 

131,416

 

-26.11

%

Metals

 

(217,761

)

43.26

%

Stock indices

 

(388,076

)

77.09

%

 

 

 

 

 

 

Total

 

$

(503,393

)

100.00

%

 

The Partnership experienced a net trading loss for the third quarter ended September 30, 2013 of $3,900,535.

 

References herein to the Partnership’s trading and portfolio refer to such trading conducted, and portfolio held, through the Partnership’s Portfolio funds. References herein to the trading and portfolio of the Portfolio Funds refer to such trading and portfolios generally.

 

Multiple reversals in metals, fixed income, equity indices and oil markets resulted in losses for the Partnership at different points in the quarter.

 

In fixed income, the Portfolio Funds came into the third quarter positioned short bonds and neutral rates. With the U.S. Federal Reserve hinting at tapering, fixed income markets had abruptly reversed in May and June, ending a prolonged period where falling yields had been the norm. With yields rising sharply during those two months, trend followers had gotten short many markets. The reversals in rates had been less severe and most Portfolio Funds had a neutral and balanced posture in that sector. Given the recent reversals, risk taking was generally minimal in the asset class. The uncertainty regarding tapering introduced volatility into markets. Central bank officials generally were able to calm markets in July and yields came back down some, only to rise further in August as the next Federal Open Market Committee meeting approached and then fall again in September when the U.S. Federal Reserve decided not to taper its bond purchases. This environment proved too choppy for most medium and longer term trend followers. Losses were sustained as the Trading Advisors tried to maneuver their portfolios based on the frequently shifting market direction. Given relatively low exposures, the losses were not too severe.

 

The Portfolio Funds were long equity indices at the start of the third quarter. The downward moves in markets in June had not been large enough to force the Portfolio Funds to get short. The Portfolio Funds continued to maintain a long bias with respect to global equity indices. July was a positive month for the asset class. With fewer near-term policy worries, equity markets recovered from their June losses when fears of tapering had led to downward moves. In August, concerns over Syria made headlines and markets tumbled as the possibility of military intervention grew. These concerns eased in early September and the U.S. Federal Reserve’s decision not to taper buoyed markets. Despite these mixed moves, equities finished the quarter higher and long positions held by trend followers generated profits. Equity indices were the only profitable asset class for the Portfolio Funds.

 

Currencies continued to prove difficult to trade. The Portfolio Funds had a long U.S. dollar bias at the start of the quarter. This positioning lost money in July and August. At first, dovish reassurances by central bankers pushed back market expectations on tapering and pointed towards policy remaining accommodative. This led to the U.S. dollar losing value, but only to strengthen again in August as a more risk averse-environment took hold. Finally, at quarter end, the U.S. dollar weakened after the U.S. Federal Reserve’s non-tapering decision. Thus, the direction in currency markets changed each month, too frequently for medium term trend followers to navigate. Losses were felt across all Portfolio Funds.

 

17



 

Commodities were the worst performing asset class, generating the bulk of losses. The Portfolio Funds came into the quarter with a short bias in metals, energies and agriculturals but significant whipsawing resulted in poor performance. First, metals reversed, rising against the trend in what could be deemed a relief rally. Large short positions held by trend followers saw losses. The new upward trend lasted only a few months and precious metals saw sharp down moves in September just as the Portfolio Funds were getting long. At the same time, oil markets were seeing appreciation early in the quarter as geopolitical tensions rose in the Middle East, first in Egypt and then in Syria. The Portfolio Funds saw some losses initially but repositioned their portfolios to be long oil and oil product markets by the end of August. In September, oil reversed sharply after an apparent diplomatic solution was reached with Syria. This time, losses were felt in long positions. Agricultural markets also failed to produce strong gains. Thus, losses were seen across the commodity spectrum due to big reversals in several sectors.

 

In summary, continuing upward trends in equity indices led to some gains in the third quarter but significant reversals and choppy moves in all other asset classes resulted in losses, overwhelming any profits made in equities. In an environment without sufficient sustained trends, all Portfolio Funds saw losses. Those with larger commodity allocations fared worse. The Portfolio Funds with larger equity allocations and those with longer time horizons performed slightly better.

 

January 1, 2012 to September 30, 2012

 

January 1, 2012 to March 31, 2012

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of March 31, 2012:

 

March 31, 2012

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

$

521,147

 

-810.03

%

Currencies

 

(728,043

)

1131.62

%

Energy

 

(48,746

)

75.77

%

Interest rates

 

(114,326

)

177.70

%

Metals

 

(229,882

)

357.31

%

Stock indices

 

535,514

 

-832.37

%

 

 

 

 

 

 

Total

 

$

(64,336

)

100.00

%

 

The Partnership experienced a net trading loss for the quarter ended March 31, 2012 of $252,058.

 

The Partnership returned an estimated -2.6% in March, bringing its quarter and year to date performance to -1.2%. In comparison, the DJ CS AllHedge Managed Futures Index was down an estimated -2.4% in March and is up 0.7% YTD. Performance was negative for all the Portfolio Funds. Returns ranged from -1.0% to -4.3%.

 

Coming into March, the Partnership continued to be long most markets and asset classes. In equity indices, the year started with a strong rally that spanned several global equity markets. Following strong up moves in both January and February, the Portfolio Funds built up large long equity index positions across several geographies. These positions tended to be the biggest in the U.S. and Europe, with somewhat smaller long positions in Japan and Asia. Commodities represented another significant risk allocation. The Portfolio Funds tended to have large long positions in oil and oil products as well as precious metals and short positions in natural gas. In crops, grains and industrial metals, positions were close to neutral, with longs and short balancing each other. Within

 

18



 

currencies, a few large positions dominated, including shorts in the euro and longs in the Australian dollar. In other currencies, the Portfolio Funds generally had small long exposure. Finally, fixed income exposure was on the long side, in both rates and bonds.

 

This positioning produced negative results in March and the Partnership swung from positive performance in the first two months to being negative for the quarter. March saw reversals in many markets and the Portfolio Funds posted losses as a result. The biggest reversals came mid-month in the bonds sector. With the U.S. Federal Reserve raising its U.S. economic outlook, bonds sold off globally. Given that the Portfolio Funds had large long positions, they suffered losses and moved to cut positions. Currencies also saw losses. Foreign currencies generally depreciated against the U.S. dollar following good economic numbers in the U.S. The euro, where the Portfolio Funds were short, ended the month slightly higher, adding to losses and profits in equity indices. The Portfolio Funds had large long positions in U.S. and Asian indices which proved profitable. European indices generally fell in March due to the negative impact from the debt crisis and recessions, offsetting some profits and commodities generally proved profitable. Short natural gas positions made money when the price of natural gas fell over -20%. There were some profits in industrial metals and agricultural markets from short positions.

 

April 1, 2012 to June 30, 2012

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of June 30, 2012:

 

June 30, 2012

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

(211,450

)

26.37

%

Currencies

 

(691,462

)

86.24

%

Energy

 

(638,715

)

79.66

%

Interest rates

 

885,268

 

-110.41

%

Metals

 

103,153

 

-12.86

%

Stock indices

 

(248,571

)

31.00

%

 

 

 

 

 

 

Total

 

$

(801,777

)

100.00

%

 

The Partnership experienced a net trading loss for the quarter ended June 30, 2012 of $2,493,658.

 

The Partnership returned an estimated -2.8% for the second quarter, bringing its year to date performance to -3.9%. In comparison, the DJ CS AllHedge Managed Futures Index was down an estimated -1.4% in Q2 and is down -1.8% YTD. 4 out of 5 managers in the Fund had negative returns.  Returns ranged from +2.1% to -4.3%.

 

The Partnership started the second quarter long risk assets and long fixed income. April and May were positive months, thanks to strong gains in fixed income, small gains in currencies and relatively smaller losses in equity indices and commodities. The Portfolio Funds repositioned their portfolios during these two months to match the prevailing investment environment, shorting risk assets and increasing long positions in fixed income. June saw reversals in every asset class causing significant losses across asset classes that erased the gains from April and May.

 

In fixed income, the Portfolio Funds started the second quarter long most markets. As the economic outlook began to deteriorate in April, yields started to head lower. In response, Portfolio Funds pushed their bets by adding to their long positions, resulting in strong gains as yields continued to make new lows. Gains were

 

19



 

especially strong in May, as many fixed income markets reached new lows in yields. June saw a slight give back of these profits as yields backed-up due to improving sentiment.

 

In the three remaining asset classes, trend followers generally lost money, with equities posting the worst returns. As a result of strong upward trends in the first quarter, the Portfolio Funds were positioned long equities in several geographies. In April, global equity indices were down, driven by growing debt related concerns in Europe as well as signs of slowing in various economies. These downward moves continued during May, accelerating in many markets. As the Portfolio Funds posted losses, they started to reduce their long positions.  Given that most trend-followers in the Partnership use medium- to long-term signals, their reaction to reversals is not immediate and it takes some time to fully switch direction. It was not until late May that most Portfolio Funds had finally exited most of their losing long positions and to go short. In June, equities recovered some, just as the Portfolio Funds had established short positioning, adding to losses in this asset class.

 

Commodities suffered losses as well and followed a similar path as equity indices. The Portfolio Funds started the quarter with a long bias. The big reversals in May caused losses and the Portfolio Funds spent the month repositioning for a new bearish environment. As the markets recovered in June, the Portfolio Funds sustained further losses on the newly initiated short positions. The biggest losses came in May from long positions in oil, metals and agricultural markets. Smaller losses were sustained in June in a choppy market environment.

 

Foreign exchange trading was also unprofitable. Starting the quarter, exposure to currencies was relatively low. In May, as the U.S. dollar rallied in a safe-haven play, Portfolio Funds adopted a long bias. Initially, this served them well in May as several currencies depreciated against the U.S. dollar. However, June saw a reversal as the European Union moved in a positive direction. As risk seeking returned to markets, the euro rallied against the U.S. dollar. The Portfolio Funds had accumulated sizeable euro shorts in May, as it had exhibited a strong downward trend. With most currencies rallying against the U.S. dollar in June, losses were sustained. The asset class as a whole ended the quarter with negative performance, primarily due to euro losses.

 

July 1, 2012 to September 30, 2012

 

The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund Level and the allocation to each underlying Portfolio Fund as of September 30, 2012:

 

September 30, 2012

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agriculture

 

(196,362

)

-49.16

%

Currencies

 

384,103

 

96.16

%

Energy

 

(263,007

)

-65.84

%

Interest rates

 

1,910,326

 

478.25

%

Metals

 

(351,830

)

-88.08

%

Stock indices

 

(1,083,791

)

-271.33

%

 

 

 

 

 

 

Total

 

$

399,439

 

100.00

%

 

The Partnership experienced a net trading gain for the quarter ended September 30, 2012 of $1,010,275.

 

The Partnership returned an estimated -0.4% for the third quarter, bringing its year to date performance to -4.4%. Four out of the five Portfolio Funds had negative returns for the quarter, ranging from +5.2% to -2.1%.

 

20



 

The Partnership started the quarter with a bearish, risk-off posture. Overall exposure levels were moderate and the largest exposures were in long fixed income positions.  In foreign exchange, short positions in the euro were the dominant exposure.  Other foreign exchange exposure included small shorts in the Canadian dollar, British pound, and Swiss franc and small long positions in the Japanese yen and Australian dollar.  Equity exposure was short biased.  Net long positions in the U.S. were offset by net short positions in Europe and Asia.  Commodity exposure was short biased in most sectors except grains.

 

Fixed income was the largest exposure and best performing asset class during the third quarter.  Within fixed income, the most common exposures and largest contributors to performance were long positions. In July, long positions in both bonds and shorter term interest rates were profitable. As yields backed-up later in the third quarter, long bond positions resulted in losses in both August and September.  On the whole, gains in this sector were still greater than losses, but the retracement in August and September were costly.  The Partnership remained long biased throughout the quarter, but the size of positions was reduced as reversals made this a more challenging sector to trade.

 

Equities, on the other hand, offered a very different exposure and return profile.  The Partnership came into the quarter with limited equity exposure and a net short bias. While fixed income exposure was reduced over the course of the quarter, equity exposure increased in response to accommodative Central Bank policy.  The Portfolio Funds moved to a net long bias over the quarter and equities generated gains in September.

 

Foreign exchange was another positive contributor to performance early in the quarter that suffered losses on the heels of reversals later in the quarter.  Within foreign exchange, the most common trade was short positions in the euro.  These trades were positive contributors in July, but incurred losses in August in connection with European Central Bank President Draghi’s comment “to do whatever it takes to preserve the euro” propelled the single currency higher.   Short euro positions, in fact, were one of the largest detractors in August. By the quarter’s end, short euro positions still remained in the portfolio, but they had been significantly reduced.

 

Commodity trading positively contributed to performance in July, but the sector had the greatest impact on the Partnership in September.  During that month a series of reversals resulted in sizeable losses.  While long positions in precious metals generated gains as the U.S. Fed’s QE3 and the European Central Bank’s Outright Monetary Transactions program fueled currency debasement concerns, the Partnership experienced losses in other sectors.  Long positions in oil were hurt by September’s sell-off.  Conversely, short positions in natural gas were hurt by rising prices in that sector.  Short positions in industrial metals suffered losses as accommodative central bank policy diminished global growth concerns.  Finally, long positions in grains which had been profitable earlier in the quarter were hurt as signs that the U.S. harvest might be better than originally expected resulted in a steep retracement.

 

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

 

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

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

 

Market movements result in frequent changes in the fair market value of the Portfolio Funds’ open positions and, consequently, in its earnings and cash flow.  The Portfolio Funds’ market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of

 

21



 

financial instruments and contracts, the diversification effects among the Portfolio Funds’ open positions and the liquidity of the markets in which it trades.

 

The Portfolio Funds’ under the direction of their respective Trading Advisors rapidly acquire and liquidate both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a possible future market scenario will affect performance, and the Partnership’s and the Portfolio Funds’ past performance is not necessarily indicative of its future results.

 

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

 

Quantifying the Partnership’s Trading Value At Risk

 

Quantitative Forward-Looking Statements

 

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

 

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

 

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

 

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

 

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

 

22



 

The following information with respect to Value At Risk (“VAR”) is set forth in respect of the Portfolio Funds separately, rather than for the Partnership on a stand-alone basis.

 

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

 

The following tables indicate the average, highest, and lowest trading Value at Risk associated with the Portfolio Funds’ open positions by market category for nine month periods ended September 30, 2013 and 2012.

 

Aspect Class DT (1) 

 

 

 

September 30, 2013

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector 

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

187,310

 

0.90

%

$

485,338

 

$

37,540

 

Energy

 

151,468

 

0.73

%

263,867

 

85,318

 

Interest Rates

 

426,050

 

2.04

%

738,420

 

134,207

 

Metals

 

639,054

 

3.07

%

930,279

 

352,132

 

Stock Indices

 

126,243

 

0.61

%

280,536

 

2,325

 

Currencies

 

359,961

 

1.73

%

651,837

 

54,574

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

1,890,086

 

9.08

%

$

3,350,277

 

$

666,096

 

 


(1) Average Capitalization of Aspect Class DT is $20,835,111.

 

Aspect Class DT (1)

 

 

 

September 30, 2012

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector 

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

547,456

 

1.77

%

$

787,524

 

$

258,269

 

Energy

 

597,903

 

1.93

%

1,025,263

 

323,512

 

Interest Rates

 

454,312

 

1.47

%

780,276

 

236,467

 

Metals

 

154,547

 

0.50

%

219,370

 

65,957

 

Stock Indices

 

624,743

 

2.02

%

983,450

 

76,736

 

Currencies

 

161,979

 

0.52

%

404,953

 

38,425

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

2,540,940

 

8.21

%

$

4,200,836

 

$

999,366

 

 


(1) Average Capitalization of Aspect Class DT is $30,918,004.

 

23



 

Bluetrend Class DT (2) 

 

 

 

September 30, 2013

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector 

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

57,986

 

0.28

%

$

82,170

 

$

20,536

 

Energy

 

166,096

 

0.81

%

222,852

 

43,803

 

Interest Rates

 

980,362

 

4.76

%

1,579,776

 

310,565

 

Metals

 

229,630

 

1.12

%

549,661

 

29,717

 

Stock Indices

 

209,373

 

1.02

%

421,158

 

5,894

 

Currencies

 

241,168

 

1.17

%

608,931

 

114,363

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

1,884,615

 

9.16

%

$

3,464,548

 

$

524,878

 

 


(2) Average capitalization of Bluetrend Class DT is $20,578,924.

 

Bluetrend Class DT (2) 

 

 

 

September 30, 2012

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector 

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

265,903

 

0.86

%

$

537,550

 

$

51,306

 

Energy

 

534,148

 

1.73

%

1,059,886

 

101,170

 

Interest Rates

 

813,509

 

2.63

%

2,660,775

 

72,322

 

Metals

 

401,819

 

1.30

%

533,889

 

257,439

 

Stock Indices

 

439,824

 

1.42

%

1,522,509

 

10,635

 

Currencies

 

903,219

 

2.92

%

1,765,866

 

37,637

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

3,358,422

 

10.86

%

$

8,080,475

 

$

530,509

 

 


(2) Average capitalization of Bluetrend Class DT is $30,917,920.

 

24



 

Transtrend Class DT (3)

 

 

 

September 30, 2013

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

114,504

 

0.55

%

$

304,647

 

$

39,884

 

Energy

 

66,286

 

0.32

%

99,168

 

37,306

 

Interest Rates

 

1,282,586

 

6.15

%

2,377,361

 

428,805

 

Metals

 

684,630

 

3.28

%

1,475,306

 

256,247

 

Stock Indices

 

110,924

 

0.53

%

178,137

 

37,826

 

Currencies

 

87,546

 

0.42

%

250,785

 

4,390

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

2,346,476

 

11.25

%

$

4,685,404

 

$

804,458

 

 


(3) Average capitalization of Transtrend Class DT is $20,853,799.

 

Transtrend Class DT (3)

 

 

 

September 30, 2012

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

507,105

 

1.64

%

$

798,195

 

$

22,509

 

Energy

 

1,164,282

 

3.77

%

1,954,475

 

17,328

 

Interest Rates

 

466,290

 

1.51

%

948,815

 

181,539

 

Metals

 

458,280

 

1.48

%

722,010

 

270,818

 

Stock Indices

 

731,782

 

2.37

%

1,679,516

 

137,345

 

Currencies

 

306,694

 

0.99

%

489,822

 

144,357

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

3,634,433

 

11.76

%

$

6,592,833

 

$

773,896

 

 


(3) Average capitalization of Transtrend Class DT is $30,915,932.

 

25



 

Man AHL LLC Class DT (4)

 

 

 

September 30, 2013

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

120,328

 

0.58

%

$

207,592

 

$

44,358

 

Energy

 

39,409

 

0.19

%

90,781

 

10,071

 

Interest Rates

 

1,122,419

 

5.44

%

1,879,617

 

352,004

 

Metals

 

247,743

 

1.20

%

438,914

 

87,254

 

Stock Indices

 

82,303

 

0.40

%

209,967

 

16,064

 

Currencies

 

465,208

 

2.25

%

858,681

 

157,854

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

2,077,410

 

10.06

%

$

3,685,552

 

$

667,605

 

 


(4) Average capitalization of Man AHL LLC Class DT is $20,630,944.

 

Man AHL LLC Class DT (4)

 

 

 

September 30, 2012

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

221,402

 

0.72

%

$

455,133

 

$

20,831

 

Energy

 

234,993

 

0.76

%

424,393

 

159,527

 

Interest Rates

 

546,744

 

1.77

%

858,790

 

310,300

 

Metals

 

313,307

 

1.01

%

635,680

 

16,943

 

Stock Indices

 

465,469

 

1.51

%

895,709

 

154,514

 

Currencies

 

838,953

 

2.71

%

1,619,296

 

106,249

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

2,620,868

 

8.48

%

$

4,889,001

 

$

768,364

 

 


(4) Average capitalization of Man AHL LLC Class DT is $30,909,892.

 

26



 

Winton Class DT (5)

 

 

 

September 30, 2013

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

125,373

 

0.60

%

$

249,177

 

$

50,560

 

Energy

 

75,784

 

0.36

%

103,988

 

47,597

 

Interest Rates

 

313,771

 

1.50

%

450,821

 

204,242

 

Metals

 

292,580

 

1.40

%

516,456

 

11,098

 

Stock Indices

 

109,621

 

0.52

%

174,963

 

76,133

 

Currencies

 

255,340

 

1.22

%

377,154

 

157,544

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

1,172,469

 

5.60

%

$

1,872,559

 

$

547,174

 

 


(5) Average capitalization of Winton Class DT is $20,901,840.

 

Winton Class DT (5)

 

 

 

September 30, 2012

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

Market Sector

 

Value at Risk

 

Capitalization

 

At Risk

 

At Risk

 

 

 

 

 

 

 

 

 

 

 

Agricultural Commodities

 

$

168,416

 

0.54

%

$

241,896

 

$

60,909

 

Energy

 

137,533

 

0.44

%

246,888

 

62,895

 

Interest Rates

 

488,479

 

1.58

%

1,211,389

 

80,565

 

Metals

 

336,282

 

1.09

%

459,300

 

264,043

 

Stock Indices

 

508,021

 

1.64

%

969,848

 

133,556

 

Currencies

 

261,296

 

0.85

%

518,122

 

63,750